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by CareyBot

Online real estate ads accounted for about 12 percent of newspaper companies’ online revenue in 2006, and the share of revenue from all types of online ads is expected to grow from a current level of 5.5 percent to 6 percent to a 10 percent share by 2008-09, according to a report released this month by media research and consulting firm Borrell Associates.

The report, based on surveys conducted by Borrell Associates and the World Association of Newspapers, states, “While online threatens print, the Internet pure-plays such as Google and Yahoo now threaten local newspaper online advertising to an alarming degree.” Participants cited challenges to ad revenues from craiglist.org and other free classified listings sites, as well as Monster.com, eBay.com and non-newspaper, online-only sites.

The Newspaper Association of America reported that total advertising in U.S. newspapers fell 0.3 percent in 2006 compared to 2005, with print advertising falling 1.7 percent, while online advertising rose 31.5 percent to $2.7 billion in 2006.

Meanwhile, a report released last month by consulting company Classified Intelligence LLC and media company Realty Times revealed that real estate professionals still devote more advertising dollars to newspaper print ads vs. online ads at newspaper Web sites, while a growing share of ad dollars is going to national Web sites.

The online advertising landscape is fast-changing, with several real estate Web sites that launched within the past few years offering a variety of free and paid marketing and advertising opportunities for real estate professionals.

Decisions about advertising budgets can be especially important to real estate professionals facing a slow real estate market, as agents typically participate in fewer deals and have less income, and properties may require more time, effort and marketing dollars to sell.

“Online is now a significant contributor to operating profit” for newspaper companies, according to the Borrell report, and is growing at about 40 percent per year, on average. “The largest media companies reported growth exceeding 60 percent, although that likely isn’t sustainable. The same companies are estimating 25 percent and more in 2007 and 2008.”

The operating profits for online operations, which many newspapers in the survey reported as 30 percent to 40 percent before interest, taxes and other costs, “is encouraging not just in itself but because it holds the promise of online being able to replace the profit lost from static or declining circulation and print advertising in an industry where margins are now not much more than 20 percent,” the report states.

The report states that real estate-related ads account for about 12 percent of newspapers’ Web site revenues, compared with 15 percent for automotive ads, 48 percent for recruitment ads and 25 percent for other forms of online ads.

Newspapers’ online revenues are expected to rise to $3.2 billion in the 2007 fiscal year, up 18.5 percent compared to last year, while national online advertising spending is projected to reach $22.1 billion this year, up 20.8 percent compared with $18.3 billion last year.

Among a group of U.S. newspaper companies tracked in the Borrell report, revenue from online operations is projected to account for an average of 6.2 percent of total gross revenues this year, compared with 5.4 percent in 2006, 4.3 percent in 2005 and 3.2 percent in 2004.

“The newspaper groups reporting the greatest growth from online have been running their digital divisions as separate and largely autonomous profit centers,” the report states, and there is a general trend toward autonomy between online and print divisions.

Also, the report found a continued “clear correlation between circulation and online advertising revenue, with the highest revenue per unit of circulation earned by the larger circulation newspapers. This is consistent across all of the countries surveyed.”