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The Globe and Mail

Help wanted: newspapers seek new savings as digital ad sales slow

Quebecor Inc. president and CEO Pierre Karl Peladeau, right, greets former prime minister Brian Mulroney at the company's annual general meeting in Montreal Wednesday, May 9, 2012.


Long seen as the source of future growth of Canadian newspapers, digital advertising sales are slowing to a crawl just as publishers need the revenue the most.

Print advertising is falling as large national companies reduce their ad budgets and turn to online services, and publishers have worked to develop digital strategies to replace the lost revenue.

But advertisers have opted to direct more money toward advertising services offered by companies such as Google Inc. and Facebook Inc., which offer advertisers the ability to reach tens of millions of possible customers, albeit in a less targeted way than news agencies.

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"The ad pie is certainly shifting and when that happens all ad mediums are affected one way or another," said Bob Bek, an analyst at CIBC World Markets. "Right now, all of the momentum is away from newspapers."

Toronto Star publisher Torstar Corp. said Wednesday that digital ad revenue accounted for 11.2 per cent of the media division's revenue in the first quarter, down from 11.5 per cent a year ago.

It was a similar story at Postmedia Network Canada Corp. , with digital revenue increasing by only 0.5 per cent from the same quarter last year. (The Globe and Mail Inc. is a private company, and does not publicly report its financial results.)

Advertisers looking for new ways to reach consumers are a problem for newspaper publishers. A recent study of U.S. newspapers suggested that for every $7 publishers lose in print advertising, they earn only $1 in digital revenue.

With revenue falling, many news organizations, including The Globe and Mail, are looking to the example set by The New York Times and implementing paywalls in an attempt to make money from those who currently read their content for free online.

Companies are also looking to cut anything that isn't core to their operations. Postmedia is selling its headquarters, while Torstar and the Globe have joined their Ontario distribution networks. Torstar said it expects to gain annual savings of up to $5-million a year from that deal.

But they aren't willing to give up online revenue yet. Many are hoping the shift toward search engines and social media is temporary, and that advertisers will turn their attention back to news sites because of the engaged audiences they can deliver.

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That hope was behind a recent deal between the Canadian Broadcasting Corp. and the media units of Shaw Communications Inc. and Rogers Media Inc. this month that saw the companies package their websites together to advertisers who want to reach a "premium" Canadian reader.

Meanwhile, Postmedia's 10 daily newspapers – including the National Post, Ottawa Citizen and Edmonton Journal – have seen national advertising decrease, but are encouraged by steep gains in local sales.

The gains have been fuelled by a focus on a measurable audience, said Postmedia's chief transformation and revenue officer, Wayne Parrish, rather than the promise of millions of dollars of eyeballs.

"It's taken forever to newspapers to realize that just selling space and impressions as a way to make money is a race to the bottom," he said. "We need to think more about selling our audiences, because that is something that is sincere and heartfelt and resonates with advertisers."

Postmedia has tried to attract advertisers by packaging all its websites and newspapers together, most recently selling front-page wraps to Hyundai Canada.

At Quebecor Inc. , advertising fell about 30 per cent year-over-year on its web portals, prompting it to shift its strategy. It is encouraging advertisers to buy packages that include not only newspapers and websites, but the company's television networks as well.

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"All of the industry has fairly low visibility," said chief executive officer Pierre Karl Peladeau. "But advertisers like the fact that we are positioned quite favourably because of the capability to offer multiple platforms."

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