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Shares of The New York Times Company (NYSE:NYT) have joined a few others in tripping over a cliff this earnings season. The stock price dropped as much as 16.6 percent in early afternoon trading. Third quarter 2012 earnings came in at -$0.01 per share, missing estimates by about $0.09. Revenue dropped 0.6 percent year over year to $449 million, missing estimates by $30 million.
“While our results for the third quarter reflect continued pressure on advertising revenues, total circulation revenues rose, led by the ongoing expansion of our digital subscription base,” said CEO Arthur Sulzberger. Total advertising revenue dropped 8.9 percent — print dropped 10.9 percent while digital dropped 2.2 percent — “largely due to the challenging economic environment,” and, “increasingly complex and fragmented digital advertising marketplace.”
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The McClatchy Company (NYSE:MNI) reported third quarter 2012 earnings at $0.06 per share, missing estimates by $0.02. Revenue fell 4.2 percent year over year to $287.5 million, missing estimates by $2.5 million. Shares dropped as much as 4 percent in early afternoon trading.
Advertising revenues for McClatchy were down 5.4 percent from the quarter a year ago, with digital advertising gaining about 1.8 percent more share of total ad dollars. Ad revenues for the first 9 months of the year were down 6 percent. “It’s noteworthy that a growing percentage of our advertising revenues are now coming from sources outside of our traditional newspapers,” said CEO Pat Talamantes in the release.
Gannett (NYSE:GCI) fell as much as 3.7 percent in the afternoon. The company reported third quarter 2012 earnings on Monday that came in at $0.56 per share, beating estimates by $0.03. Revenue grew 3.4 percent year over year to $1.31 billion, beating estimates by $20 million.
Publishing advertising revenues for Gannett dropped 6.6 percent compared to the quarter a year ago, even despite the presidential campaign.
Print media isn’t dead, but the struggle is clear. Print publications have been fighting an uphill battle for years as digital content publishers and distributors gain market share. Recent earnings support this trend, and point to interesting shifts in that “increasingly complex and fragmented digital advertising marketplace” that New York Times boss Arthur Sulzberger spoke about.
Broadly, there are two ways that advertisers can pursue a marketing strategy. They can look at how big their audience is, or how targeted their audience is. Traditional news media like The New York Times provides an advertiser with access to a massive, diverse audience. Political campaigns, the auto industry, real estate, massive retail chains like Sears (NASDAQ:SHLD) — or even e-commerce giants like Amazon (NASDAQ:AMZN) — benefit from scale like this. But there are two problems here.
One is that the size of this audience is diminishing. As more and more news media outlets emerge, the total audience for any given one decreases. Putting a single ad into the New York Times won’t go as far today as it did 10 or 20 years ago. A successful ad stretches across many platforms, decreasing the once highly lucrative display space in newspapers.
Two is that they are comparatively non-targeted. While news media is bleeding advertising revenue, Facebook (NASDAQ:FB), Google (NASDAQ:GOOG), Microsoft (NASDAQ:MSFT), and Yahoo (NASDAQ:YHOO) duke it out for more and more market share. Facebook’s most recent earnings are testament to a shifting model that traditional news media is apparently slow to catch on to. The paradigm is increasingly targeted as more data is leveraged to put ads right in front of the people who are most likely to respond.
Compounding the issues that news media faces are aggregation services like Google News, which has been accused of pulling traffic away from news websites and commercially benefiting from content that it does not pay for.
In the race to claim advertising dollars, news media seems to be losing out. Social platforms are more lucrative for advertisers than news platforms, and big names in Internet and tech are taking advantage of that. It may make a lot of sense for news websites to build relationships with Facebook et al and let them navigate that “complex and fragmented” advertising world instead.
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