Dismal report on news industry offers insights on digital ads

March 19, 2013: 7:19 AM ET

Lots of grim statistics in a new report for magazines and newspapers from the Pew Project for Excellence in Journalism - with a few rays of hope.

<> on February 13, 2013 in New York City.FORTUNE -- The Pew Project for Excellence in Journalism's report, "The State of the News Media 2013" contains plenty of grim news about an industry that appears in some respects to be falling apart at the seams (along with a few rays of hope). But it also offers a few notable tidbits about the state of the online-advertising business:

  • Digital advertising continues to eat into the total share of advertising in the U.S. In 2012, digital ads represented 23% of all ad dollars spent, up from 20% in 2011. Digital ads generated $37.3 billion, a rise of 17% from 2011.
  • Mobile advertising, though it continues to be a challenge due to low prices, grew by 80% in 2012, to $2.6 billion.
  • The market for mobile display ads is growing fast and is expected to surpass search ads in terms of revenue by 2016. Six companies dominate the mobile-display market: Pandora (P), Google (GOOG), Millenial Media, Apple (AAPL), Facebook (FB), and Twitter.
  • Facebook ran its first mobile-only display ad only in August of 2012, but those ads generated nearly a quarter of its revenues in the fourth quarter of 2012.

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While there are some signs of hope for the news media, the incursion of digital giants into the ad business -- particularly in local ads -- continues to diminish hopes that local and regional news organizations will see new growth in advertising revenue, which remains anemic at best. "Once again, in key revenue areas, it appears the news industry may have been outflanked by technology giants," the report states.

About 450 newspaper sites have erected paywalls, which have seen some success, but which are still far from proving to be a panacea for the industry. According to the report, the "rise of digital paid content could also have a positive impact on the quality of journalism as news organizations strive to produce unique and high-quality content that the public believes is worth paying for."

Coincidentally providing a case in point, Time magazine -- which like Fortune is owned by Time-Warner (TWX) -- says its March 4 issue featuring a 25,000-word report explaining why health care costs so much appears on track to being the magazine's top-selling issue in nearly two years, selling more than double the magazine's usual. Crucially (and perhaps somewhat surprisingly), the article apparently appealed as much to younger people as to older ones: It was shared 100 times more on social media than Time's average for 2013.

The question now is whether it is sinking in with print-news executives that people are hungry for serious, deeply reported coverage of public affairs, and that journalism aimed at mass audiences, such as celebrity coverage and other fluff, is best left to TV and to publications that specialize in such material.

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