Huge Growth in Online Ads Enough for Newspaper Industry?

If memory serves, when Putin took the helm at the Kremlin, his goal was to get Russia’s economic ball rolling with an annual growth rate of 10 percent, which hasn’t exactly happened. When established companies grow at rates of even a few percentage points quarter over quarter, they’re usually relatively pleased. So, imagine growing revenues 148 percent between 2005 and 2010. Not too shabby, eh?

Well, it depends on what business you’re in. That 148 percent growth rate is Outsell’s “Hit the Wall” ad revenue outlook scenario (read: gloomy) for the online newspaper industry, according to its new foreboding report, “Deadline With Destiny: Newspaper Industry Faces $20 Billion Gap.” The rose-colored projection (they call it the “Blue Sky” projection) amounts to a 40 percent annual rate, or a boost of 437 percent over five years.

“Outsell believes that the industry will have a hard time meeting the higher targets as growth inevitably slows. In addition, the industry’s fragmentary approach — in product, platform, and marketing — is an open invitation for fleet-of-foot national competitors to take online share.” Those national competitors the report refers to are the big portals that can easily facilitate geographically-targeted high frequency and big reach buys. These are the guys the online newspaper industry is hoping to compete with for national ad dollars through initiatives like the one the NAA is working on, and outfits like DotConnect and Centro are trying for.

According to the report, successful revenue growth is contingent upon a number of things:
– Online ad prices “rapidly increasing” to catch up with higher print ad prices
– Increasing frequency of site visits to compete with the likes of portals
– Altering the approach to selling classifieds
– Developing flexible pricing models beyond CPM
– Getting distribution deals with portals to “pay off more richly”
– Maybe the biggest one: counteracting an upcoming recession