Newspaper Websites Need To Change Ad Models
UK newspaper websites are not maximising their revenue earning potential because of the advertising models they use, according to a report from Ernst & Young.
Brands need to revamp their online advertising models, target younger age groups and find alternatives to expensive giveaway promotions such as free CDs and DVDs if they want to safeguard their future, according to the report.
It says the CPM (cost per thousand impressions) ad model, used by newspapers online, is not generating the necessary growth and looks to lessons from the way Google makes money.
The consultancy estimates that had the main newspaper websites generated the same revenue per UK unique user in 2007 as Google, which uses a cost-per-click (CPC) ad model, they would have earned online ad revenues of between £120 million and £250 million each, just from their UK traffic. Many nationals’ total online revenues barely reach a fifth of that, the report adds.
E&Y estimates top newspaper websites generated £15 million to £20 million each in ad revenue in 2007, compared with Google’s UK ad revenue of £1.3 billion.
“This gap is an opportunity for newspapers as it shows that monetising online services in the UK is possible,” said the consultancy’s media analyst, Luca Mastrodonato. “But to do so, newspapers need to move away from the volume-based CPM model towards more interactive ad models such as CPC [cost-per-click] or CPL [cost-per-lead].”
The research also criticises giveaways such as cover-mounted films and albums as short-term measures that fail to address a fundamental issue facing the industry: that more than half of the UK’s 15-44-year-olds use the internet for their daily information and most of the content they access is free.
“Younger age groups may never acquire the ‘paid-for newspaper habit’,” says the report. “Publishers will have to find other means of attracting their attention.”
Changing trends among younger audiences are reflected, E&Y says, in the fact that national titles have lost an average of 330,000 daily copies each year since 2003. Free titles, however, have been relatively successful in attracting young readers.
“Whether publishers decide their future will remain paid-for or free, the internet will play a central role in all newspapers’ future business models and online revenue will have to offset any losses on the print side,” said Mastrodonato.
Ernst & Young: www.ey.com