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A new report from the Newspaper Association of America (written up in the New York Times) shows that growth in online advertising has slowed and revenues at newspapers are, once again, on the decline.  Online advertising as an industry is still strong, but hopes that online advertising can, on its own, provide the needed financial support for newspapers going in to the future are now in doubt.

Obviously, for an industry that is already finding it challenging to compete in the digital age, this is especially bad news.

Keep in mind, newspapers - and the news industry in general - are experiencing a resurgence.  Newspapers are adding new features, like blogs and video, and with the help of citizen journalists and more distributed online networks, have increased their reach and influence in recent years.  The audiences for online newspapers and the traffic to newspaper sites are both growing in as well.

Where is the disconnect?

I think newspapers, and those who analyze the media industry, are looking at this challenge the wrong way.  

First, the industry folks see larger, more engaged audiences as an invitation to serve more advertising.  It's not.  Readers are flocking to online news sites because the content is interesting, the discussion is compelling, or the site offers something of value in their news experience.  There is plenty of opportunity to generate revenue starting with content — offer information, experiences, or stuff of such high quality and value that readers want to pay for it.  

Second, there is no doubt that the level of sophistication in online advertising continues to rise.  You can target users based on demographic, psychographic, and behavioral information.   The ads themselves feature video, some are interactive.  Still, when you look at the content of the advertising, something is missing — the content of the ads is unrelated to the content of the news, the experience following the click-through is blah, or the ad itself intrudes on the news experience of the user (by expanding over the story or similar).  The venues and advertisers alike should focus on creating and serving better advertising, that meets users interests or needs.

Finally, the strategy for generating revenue in the news industry - and for most groups that operate online for that matter - has shifted too much towards single transactions, and away from building relationships.  The goal for any organization that operates online should be to develop a long-term relationship with their audience.  The analogy I always use is dating: when you meet someone who you think you want to date, the appropriate next step is to strike up a conversation, maybe ask for a phone number, and over time go out on a few dates, remember their birthday, shower them with affection, or whatever.  Online, the equivalent is to collect an email address and then start to converse with them, offer access to special content or create an experience that is unique for your subscribers.  Unfortunately, too many groups take an email sign up as a sign that you are ready for a commitment — and begin pushing some transaction that benefits the group (and not as much the user).  The equivalent in the dating world would introducing yourself and then almost immediately propositioning them follow you home to 'close the deal' (fill in your verbiage).  I suppose its possible that strategy will work, but its far from a sustainable model.  There is plenty of revenue out there for newspapers operating online if they focus on building their subscriber base, and then look at the opportunities that creates.

So much attention in the newspaper space is given to the advertising, unfortunately at the expense of content, relationship building and so on.  I know what I am willing to pay for, and I know there are many others like me — so I also know there is revenue out there for newspapers, and even larger and more engaged audiences as well.  But here is a hint: its not the advertising I am interested in seeing when I log on to get the news or find out what is happening in the world.  So don't take the news that advertising revenues are slowing as a sign of bad news, but rather an opportunity to explore more and better options for serving audiences that will result in financial success.