Newspapers, Losing Readers To Web, Urged To Emulate Google

Paid-for newspapers are haemorrhaging readers to their free web editions – but only making about a fifth of the money they could online, according to a report out Wednesday morning from auditor-accountant Ernst & Young. They’ve got the wrong advertising strategy for the web, Media & Entertainment By Numbers says.

CPM v CPC: The report criticises papers for using the CPM (cost per thousand ad impressions) model and urges them to switch to CPC (cost per click), estimating titles could make “£120 million to £250 million” revenue each from the latter but have only earned “barely a fifth” that from the former. Top papers’ sites made £0.10 to £0.13 per UK user per month last year but could have made £2.40, the report says.

Contextual, cost per click adverts like those shown by Google (NSDQ: GOOG) are often considered more relevant to readers because they relate to the text on a page. The report sets up a rather unfair comparison with Google, however, noting that, “by circulating millions of untargeted adverts”, top newspaper sites got £15 million to £20 million ad revenue last year, against the £1.26 billion Google reaped from contextual ads. Switching tack would require not just a change of mindset (newspapers are firmly wedded to industrial-scale display ad sales) but also a Herculean effort to build such a platform.

Lost generation: Paid-for papers are struggling to attract new readers, the report says, noting over half of 15- to 44-year-olds now use the web for news. Not even free covermount giveaways like albums are proving a significant draw – the Mail On Sunday spent £1 million to get Prince’s recent album but only added 4.4 percent to circulation so papers should share costs with covermount partners, the report says. As in the migration of paying customers to free options in the music world, the success of freesheet papers and the web raises the prospect of “a generation could be lost to paid-for print forever”.