Research: Advertising in Newspapers Online: a Promising Market (Part 1)

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A lecture presented at the Inter American Press Association (IAPA) by Francisco Vazquez, President and founding partner of E&P Research, and Rafael Bonnelly, Director of Digital Strategy and Social Marketing at NCA & Associates, expressed the view that there is still a long way to go in reaping advertising profits from online newspapers.

Online Advertising Expenditures: A Growing Market

In the United States, online ad spending increased by 11.1% and in Spain by 20% during the first half of 2010 compared to the previous year, according to a recent IAB study. In the U.S., online searches accounted for 47% of ad spending, while garnering 52% in Spain, 60% in England, and only 40% in Germany. Worldwide, search engines accounted for 50% of all online advertising.

In Spain, total online ad spending reached 377.4 million euro during the first half of 2010, according to the IAB study. Of that total, 52% went to search engine advertising, with Google reaping 95% of the pie. The remaining 48% of online ad spending amounted to 181 million euro.

In Latin America, the data in some markets shows online ad growth exceeding 50%, such as in Colombia, Argentina, or Mexico. Other markets such as Chile and Peru grew by 45%, and although the percentage of total online ad spending in Latin America is much lower than in the U.S. and some European countries, that figure is expected to reach the same level in the near future. (In Latin America, online ad spending tops out at 5%, compared with U.S. or European countries where online ad sales amount to approximately 20% of all ad spending.)

The breakdown in online ad spending worldwide is 51% for search engines, and 49% for display advertising. In Latin America, the percentage breakdown is 59% for search engine advertising and 41% for display advertising.

However, considering newspapers' total revenues, online advertising revenue is still well below the level expected for its audience size.

Only 6% of publishers reported that their online revenues accounted for up to 10% of their total income, while 68.9% reported that their digital revenues account for only 1% to 2% of total income, which is still a very low figure.

It is significant to note that in Latin America, the percentage of online ad spending is 3% to 5% (in markets such as Chile, Peru, Argentina, and Mexico), and that newspapers have managed to capitalize only less than half of this percentage from their online income. Compared to the 28% in online ad spending that The New York Times has managed to monetize on its total revenues, we are looking at a market that is still in its early stages, with many possibilities for growth.

Survey: Share of Online Revenues from Total Newspaper Advertising Revenues

– 68.9% of publishers had online revenues that amounted to between 1%-2% of total revenues

– 19.8% of publishers online revenues' were between 3%-5% of total revenues

– 5.1%  of publishers online revenues' were between 6%-9% of total revenues

– 5.1%
of publishers online revenues' were between 10%+ of total revenues

SOURCE: Lecture presented at the Inter American Press Association (IAPA) by Francisco Vazquez, President and founding partner of E&P Research, and Rafael Bonnelly, Director of Digital Strategy and Social Marketing at NCA & Associates