An open question for newspapers as the industry struggles with declining revenues and profits is whether online ads cannibalize print advertising.
Sales representatives at newspapers often worry that the lower-priced online ads steal revenue from the more profitable print ads.
New research from Stephen M. Ross School of Business professor S. Sriram shows that’s not the case. Analyzing five years of data from a top newspaper showed less than 8 percent of the print advertising decline was due to a shift to online ads on the paper’s website.
Instead, most of the decline in print was due to outside media options, particularly search advertising, according to the paper “Is Online Newspaper Advertising Cannibalizing Print Advertising?”
Sriram’s paper, written with co-author Shrihari Sridhar of Penn State’s Smeal College of Business, suggests some strategies for newspaper advertising managers to try to recapture some of that lost revenue.
“The print advertising decline for newspapers has been huge,” says Sriram, assistant professor of marketing. “We’re talking a decline of 51 percent from 2006-2010. There are all kinds of theories about what’s driving it, including the question of whether there’s cannibalization from the online version. This is a classic dilemma in marketing when you launch new products and run the risk of taking sales away from an existing product that’s seen as the bread and butter. But we didn’t find that here.”
The question of cannibalization has been unanswered due to a lack of data on specific spending within a newspaper. But Sriram and Sridhar obtained information from a top newspaper that covers a large U.S. metropolitan area. It contains account-level ad spending from January 2007 through December 2011 and allows them to see each advertiser’s total spending on media outside of the newspaper.
They also analyzed surveys by Scarborough Research and numbers from Kantar Media’s Adspender database.
Most of the decline, they found, is due to advertisers spending on other media options outside both print ads and the newspapers website. Newspapers are losing much of the revenue to search advertising.
Sriram suggests a few strategies to try to reverse the trend:
• Direct sales efforts toward print advertisers who have gone elsewhere
• Use new technology to make online advertising more attractive, such as including the ability to track and target customers.
• Re-train the sales force to sell the advantages of the online newspaper to stem the loss to search advertising.
• Changing commission structures that disproportionately reward print sales.
• Offer more bundles of print and online deals.
“The good news for newspapers is that advertising technology is getting smarter in multiple ways,” Sriram says. “You can do more targeting based on a user’s browsing history. There are also systems that can accurately measure online ad effectiveness. The catch is if you use the targeting technology, it might cannibalize print advertising. But they are losing a lot more to outside search advertising, so it would still be a gain for them.”