• by Erik Sass  @eriksass1, October 19, 2011

For at least a decade, newspaper publishers have been looking to the huge potential growth offered by digital advertising revenues -- but now, 10 years on, digital revenues still make up a relatively small part of the business. Worse, slow growth in digital advertising means it’s unable to offset the precipitous, ongoing decline in print revenues.

In the second quarter of 2011, total online advertising revenues came to $803 million, according to the Newspaper Association of America, or just 13.4% of total advertising revenues of $6 billion. While it’s true this represents an increase from the second quarter of 2006, when online revenues of $667 million were just 5.4% of total revenues of $12.36 billion, much of the apparent proportional increase is due to the steep decline in print ad revenues over the same period. 

Total print ad revenues tumbled 55.6% from $11.7 billion in the second quarter of 2006 to $5.2 billion in the second quarter of 2011. If print revenues had remained even over this period, the 2011 online ad revenue figure ($803 million) would represent just 6.4% of total revenues of $12.5 billion.

What’s more, the growth rate for online newspaper ad revenues remains anemic. Following seven straight quarters of declines from the second quarter of 2008 to the fourth quarter of 2009, online ad revenues grew 10.9% from $2.74 billion in 2009 to $3.04 billion in 2010 -- compared to overall online ad industry growth of 15% (to $26 billion), according to the Interactive Advertising Bureau.

More recently, in the first and second quarters of 2011, newspapers’ online ad revenues grew 10.6% and 8%, respectively, compared to quarterly growth rates of 23% and 24.1% for the online ad sector overall -- again per the IAB. 

Part of the problem for newspapers has been their reliance on online “upsells” from print classified listings, which collapsed in the face of dire economic conditions and competition from online-only listing services, like Craigslist. There is little hope of print or online classifieds reviving anytime soon; the main classifieds categories -- automotive, recruitment, and real estate -- are all heavily affected by ongoing economic woes.

Newspapers, which deal mostly in display ads, appear to have little stake in search engine marketing. Still the fastest-growing part of the online ad market, search engine marketing accounted for 49% of total online ad revenues in the second quarter of 2011, versus 37% for display, according to the IAB.