Will the Online News IndustryWill the Online News IndustryBe Able to Finance Quality Be Able to Finance Quality

Journalism?Journalism?

Vin CrosbieVin CrosbieDigital Deliverance LLC Digital Deliverance LLC

www.digitaldeliverance.comwww.digitaldeliverance.com

Are We Winning?Are We Winning?

Or Are We Missing the Or Are We Missing the Target?Target?

• New York TimesNew York Times

• Cox Radio InteractiveCox Radio Interactive

• MediaNews GroupMediaNews Group

• Tribune InteractiveTribune Interactive

• Lee EnterprisesLee Enterprises

• Cox NewspapersCox Newspapers

• Google Inc.Google Inc.

• Autotrader.comAutotrader.com

• Hearst NewspapersHearst Newspapers

• Capital BroadcastingCapital Broadcasting

• Morgan StanleyMorgan Stanley

• Interactive Advertising Bureau

• Television Advertising Bureau

• Independent Newspaper/Ireland

• Deutsche Bank

• Ottaway Newspapers

• Landmark Communications

• Gray Television & Newspapers

• Times Shamrock

• Trinity Mirror Regionals

• NBC Universal Television• Suburban Newspapers

Local ad spending data from any U.S. market.

Local online ad revenue data from 2,300 newspaper, TV, radio and ‘pure-play’ sites.

More than 250 individual local market audits.

Panel of 400 local advertising experts.

Plus, regular consultationwith national and local advertisers,and media and Internet companies.

Sources: Universal McCann, Ad Audit Services

0%

5%

10%

15%

20%

25%

30%

35%

40%

1949 1951 1953 1955 1957 1959 1961 1963 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005

Newspapers Broadcast TV Radio Cable Internet

Advertising Share: 1949-2005

Radio

Broadcast TV

Newspapers

Cable

Internet

Internet Advertising in Internet Advertising in USAUSA

© Copyright 2006, Borrell Associates Inc.

• Surpassed $17 billion last year

• Will surpass yellow page advertising this year

• Will pass radio circa 2007-8 (already has in UK)

• Has surpassed outdoor billboard advertising

• Has surpassed magazine advertising

Newspapers’ Online Ad Newspapers’ Online Ad ShareShare

Newspapers’ Online Ad Newspapers’ Online Ad ShareShare

MediaMediaEstimated Estimated

2005 Totals2005 Totals Total ShareTotal Share Local ShareLocal Share

NewspapersNewspapers $3,859,536,00$3,859,536,0000

22.8%22.8% 41.0%41.0%

Other PrintOther Print $370,432,000$370,432,000 2.2%2.2% 1.8%1.8%TelevisionTelevision $2,205,243,00$2,205,243,00

0014.7%14.7% 4.6%4.6%

RadioRadio $117,904,000$117,904,000 2.4%2.4% 1.0%1.0%DirectoriesDirectories $1,088,642,00$1,088,642,00

006.4%6.4% 19.6%19.6%

‘‘Pure Play’Pure Play’ $9,612,143,00$9,612,143,0000

52.9%52.9% 31.9%31.9%

Market TotalMarket Total $17,253,900,0$17,253,900,00000

100%100% 100%100%© Copyright 2006, Borrell Associates Inc.

2001 2002 2003 2004 CAGRAskJeeves 51,569$ 65,048$ 107,292$ 261,326$ 71.7%Yahoo^ 594,332$ 806,598$ 1,355,153$ 2,653,437$ 64.7%Media General 3,200$ 6,100$ 9,663$ 13,900$ 63.2%Housevalues.com 11,224$ 21,748$ 25,103$ 47,691$ 62.0%AutoTrader.com 55,100$ 102,000$ 134,000$ 200,000$ 53.7%Lee Enterprises 3,891$ 4,982$ 8,383$ 12,000$ 45.5%Gannett 68,000$ 86,000$ 124,700$ 199,500$ 43.2%Knight Ridder 42,300$ 55,300$ 79,737$ 114,600$ 39.4%McClatchy 16,339$ 18,300$ 27,000$ 40,100$ 35.0%Belo Corp. 13,100$ 19,500$ 24,600$ 31,100$ 33.4%eBay^ 617,011$ 816,596$ 1,062,834$ 1,399,848$ 31.4%Tribune Co. 59,500$ 76,700$ 94,100$ 125,000$ 28.1%Washington Post 30,254$ 35,700$ 46,900$ 62,000$ 27.0%New York Times 60,336$ 71,800$ 88,000$ 118,000$ 25.1%Journal Register 3,540$ 4,000$ 4,700$ 6,200$ 21.0%Autobytel 71,068$ 80,855$ 88,943$ 122,250$ 19.8%Monster 533,830$ 402,453$ 412,796$ 593,909$ 3.6%CNET^^ 241,199$ 183,313$ 196,990$ 256,245$ 0.7%Homestore 292,449$ 251,025$ 205,922$ 216,860$ -9.5%

Newspaper/TV Cos. 300,460$ 378,382$ 507,783$ 722,400$ 34.0%Pure-Plays 2,467,782$ 2,729,636$ 3,589,033$ 5,751,566$ 32.5%

GROUP TOTALS

Total Online Revenues in $ Millions

("Newspaper/TV" Companies Highlighted in Yellow)

Online Revenue CAGR 2001-Online Revenue CAGR 2001-20042004

© Copyright 2006, Borrell Associates Inc.

Local50.9%

National49.1%

Local22.6%

National77.4%

National-to-Local Ad Ratio in U.S.Will Move to ‘Equilibrium’

Online Advertising

All Advertising

What Propels the GrowthWhat Propels the GrowthWhat Propels the GrowthWhat Propels the Growth

© Copyright 2006, Borrell Associates Inc.

All Seems Good!All Seems Good!We’d like it to Grow This Way We’d like it to Grow This Way

ForeverForever

But Look Beneath the But Look Beneath the SurfaceSurface

Although They Might Appear the Same,There are Fundamental Differences Between

the Traditional and the Online

Years Ago,Most U.S.

ConsumersHad Access to

Only OneNewspaper

and 3 TV channels

Consumers’ Access to News Consumers’ Access to News TodayToday

A CornucopiaA Cornucopia

Fundamental Fundamental DifferencesDifferences

• The Supply & Demand Equation: Consumers’ increased access reduces the economic value of general news. Your news organization used to be its market’s only source of all types of news in traditional media, but it isn’t that online. It’s reduced in overall value, and thus gets less use in this new medium.

PrintPrint54 Million 54 Million

dailydaily

Average Average reader uses reader uses

23X monthly,23X monthly,sees 460+ sees 460+

pages pages monthly, monthly, spendsspends10 hrs10 hrs

44 minutes.44 minutes.per monthper month

WebWeb52 Million 52 Million monthlymonthly

Average Average reader uses reader uses

6X to 8X 6X to 8X monthly,monthly,

sees <29 Web sees <29 Web pages pages

monthly, and monthly, and spendsspends

28 minutes.28 minutes.per monthper month

Fundamental Fundamental DifferencesDifferences

• The Supply & Demand Equation: Consumers’ increased access reduces the economic value of general news. Your news organization used to be its market’s only source of all types of news in traditional media, but it isn’t that online. It’s reduced in overall value, and thus gets less use in this new medium.

• Ten years into Web Publishing: News Sites are Seen by Fewer People, much Less Often and much Less Thoroughly, than in their traditional media counterparts.

PrintPrintEconomics of ScarcitySells scarce ad

space per edition

Increases in traffic= increases in

CPM

WebWebEconomics of Surplus

Sells infinite adpages per edition

Increases in Traffic Increases in CPM

If Daily Usage DoublesIf Daily Usage Doubles

Print Edition

50 Pages(20 of adverts)

100 Pages(40 of adverts)

Doublethe adCPM rate!

If Daily Usage DoublesIf Daily Usage Doubles

Print Edition Web Edition

50 Pages(20 of adverts)

50 Pages(20 of adverts)

Double the ad rate

5M page/views

5M ads to sell

10M page/views10M ads to

sellDouble the ad rate?

Must Find Buyers for Twice the Number of Ads!

Fundamental Fundamental DifferencesDifferences

• The Supply & Demand Equation: Consumers’ increased access reduces the economic value of general news. Your news organization used to be its market’s only source of all types of news in traditional media, but it isn’t that online. It’s reduced in overall value, and thus gets less use in this new medium.

• Ten years into Web Publishing: News Sites are Seen by Fewer People, much Less Often and much Less Thoroughly, than in their traditional media counterparts.

• Unlike with Traditional Media, Increased Traffic online does not lead to increases in ad rates. Increased Online Traffic leads to CPM stasis.

PrintPrintAdvertiser

pays for entire press

circulation, regardless of

how many people actually

see his ad

Web

Advertiserpays only for

how many people actually

see his ad (exposures)

Fundamental Fundamental DifferencesDifferences

• The Supply & Demand Equation: Consumers’ increased access reduces the economic value of general news. Your news organization used to be its market’s only source of all types of news in traditional media, but it isn’t that online. It’s reduced in overall value, and thus gets less use in this new medium.

• Ten years into Web Publishing: News Sites are Seen by Fewer People, much Less Often and much Less Thoroughly, than in their traditional media counterparts.

• Unlike with Traditional Media, Increased Traffic online does not lead to increases in ad rates. Increased Online Traffic leads to CPM stasis.

• In Traditional Media, the Advertiser pays for the entire printed circulation or entire estimated/potential broadcast audience, not how many people actually see the page or hear the minute featuring his ad. But Online, the Advertiser pays only for the number of people who were actually exposed to the ad – Resulting in revenues much less than in Traditional Media.

$5.89

$9.39

$14.81$17.09 $17.87

$25.17

$35.94

$0

$10

$20

$30

$40

2-10k 10-20k 20-50k 50-75k 75-100k 100-200k >200k

Daily Print Circulation

$ P

er U

nit

of

Pri

nt

Cir

cula

tio

n

Newspaper Website Annual RevenuesPer Unit of Print Circulation (2004)

But Print Revenues are Much Higher

$500 to $900 per print edition user

As readers switch from print to online, we mustgreatly increase our online revenues or go out of business!

2-10K 10-20K 20-50K 50-75K 75-100K 100-200K >200K

$5.89

$9.39

$14.81$17.09 $17.87

$25.17

$35.94

$0

$10

$20

$30

$40

2-10k 10-20k 20-50k 50-75k 75-100k 100-200k >200k

Daily Print Circulation

$ P

er U

nit

of

Pri

nt

Cir

cula

tio

n

New Media = New TechnologiesNew Technologies = More Efficient

MarketsA More Efficient Market for the

Advertisers

2-10K 10-20K 20-50K 50-75K 75-100K 100-200K >200K

Lower Costs for Advertisers,Lower Revenues for Middlemen (Media Companies)

Online: Dependent on TraditionalOnline: Dependent on Traditional

Online gets its News as a result of the Traditional Medium’s

Production

Gets Most of its Revenues as a result of ‘Upsells’ from the

Traditional Media’s ad sales(73 Percent of U.S. Newspapers’

Website Revenue is from ‘upsells’ by from print classified ad sales.)

For every print edition reader lost, the newspaper’s website

must gain 20 to 100 new users to recoup the company’s lost revenue because of that loss.

Online gets its News as a result of the Traditional Medium’s

Production

Gets Most of its Revenues as a result of ‘Upsells’ from the

Traditional Media’s ad sales(73 Percent of U.S. Newspapers’

Website Revenue is from ‘upsells’ by from print classified ad sales.)

For every print edition reader lost, the newspaper’s website

must gain 20 to 100 new users to recoup the company’s lost revenue because of that loss.

Online: Dependent on TraditionalOnline: Dependent on Traditional

Speed of Change is Essential

Source: Newspaper Association of America.

Local22.6%

National77.4%

More Local & More National

Online Advertising

Geometric Growth for How Long?Geometric Growth for How Long?Geometric Growth for How Long?Geometric Growth for How Long?

© Copyright 2006, Borrell Associates Inc.

Local50.9%

National49.1%

Sources: Universal McCann, Ad Audit Services

0%

5%

10%

15%

20%

25%

30%

35%

40%

1949 1951 1953 1955 1957 1959 1961 1963 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005

Newspapers Broadcast TV Radio Cable Internet

Advertising Share: 1949-2005

Radio

Broadcast TV

Newspapers

Cable

Internet

Newspapers’ Online Ad Newspapers’ Online Ad ShareShare

Newspapers’ Online Ad Newspapers’ Online Ad ShareShare

MediaMediaEstimated Estimated

2005 Totals2005 Totals Total ShareTotal Share Local ShareLocal Share

NewspapersNewspapers $3,859,536,00$3,859,536,0000

22.8%22.8% 41.0%41.0%

Other PrintOther Print $370,432,000$370,432,000 2.2%2.2% 1.8%1.8%TelevisionTelevision $2,205,243,00$2,205,243,00

0014.7%14.7% 4.6%4.6%

RadioRadio $117,904,000$117,904,000 2.4%2.4% 1.0%1.0%DirectoriesDirectories $1,088,642,00$1,088,642,00

006.4%6.4% 19.6%19.6%

‘‘Pure Play’Pure Play’ $9,612,143,00$9,612,143,0000

52.9%52.9% 31.9%31.9%

Market TotalMarket Total $17,253,900,0$17,253,900,00000

100%100% 100%100%© Copyright 2006, Borrell Associates Inc.

How can Online be How can Online be Independent?Independent?

Jobs

Autos

Others

Property

80 Percent of Newspaper Website 80 Percent of Newspaper Website Revenues are FromRevenues are From

the 3 Traditional Classified the 3 Traditional Classified CategoriesCategories

80 Percent of Newspaper Website 80 Percent of Newspaper Website Revenues are FromRevenues are From

the 3 Traditional Classified the 3 Traditional Classified CategoriesCategories

43%15%

12%

JobsAutosProperty

Other

Yet Those 3 TraditionalYet Those 3 TraditionalClassified Categories are onlyClassified Categories are only10 Percent of Local Online Ad 10 Percent of Local Online Ad

SpendingSpending

Yet Those 3 TraditionalYet Those 3 TraditionalClassified Categories are onlyClassified Categories are only10 Percent of Local Online Ad 10 Percent of Local Online Ad

SpendingSpending

90%

How can Online be How can Online be Independent?Independent?

Go After the Other 90% of Local Online Ad Spending before

Google and Yahoo! beat You to It.

Begin to offer Individualized News Services that Better Match

Each Individual Consumer’s Needs & Interests. (You can still give them Serendipity and the

Bulletin Stories). People will be willing to pay for such service:

Packaging the News

Vin CrosbieVin CrosbieDigital Deliverance LLC Digital Deliverance LLC

www.digitaldeliverance.comwww.digitaldeliverance.com