The growth in online advertising may not turn out to be the saviour newspaper publishers were hoping for as their print revenues decline.
Goldman Sachs JBWere analysts yesterday slashed growth forecasts for the online advertising sector, predicting growth of the $1.5 billion industry will slow from 27 per cent to just 10 per cent in the year to June, as companies rein in spending. ABN Amro has forecast growth will fall to 14 per cent.
The estimates come after US reports of online revenues at newspapers falling 2.4 per cent in the second quarter.
The publisher of The New York Times posted a quarterly loss from continuing operations this week and had its credit rating cut to junk as it couldn't slash costs fast enough to make up for falling revenues. Its online newspaper earnings rose just 2.5 per cent. Executives warned they expected internet display ads to weaken.
Concerns that Australian newspapers will follow have weighed on share prices. Fairfax Media's stock has fallen 58 per cent this year, closing yesterday at $1.97. APN News & Media is down 52 per cent and News Corp has lost 46 per cent since January.
News and Fairfax executives said Australian publishers hadn't yet seen a marked slowdown in ad dollars moving online.
"I was really surprised to see the Goldman Sachs number. There is no evidence in our business that our clients are looking to cut back," said Ed Smith, News Digital Media's chief commercial officer. He was "very comfortable with a 15 to 20 per cent growth forecast" because consumer goods makers and retailers had only just started using the internet for brand campaigns and online videos were growing.
Online classifieds, however, are a different story. Real estate and automotive ads are holding up but employment classifieds have been falling since April.
Fairfax Media's chief executive, David Kirk, confirmed last week that there was a trend in display online ads to performance-based advertising, rather than the more lucrative brand campaigns which make up the majority of newspaper ads online. "In tougher times people tend to do that because it's cheaper and it's more response-based," he said. But "we'll continue to see solid growth" online.
Jack Matthews, the head of Fairfax Digital, said Fairfax was holding market share, dismissing reports it slashed rates to fill inventory. "I don't think the Australian market is showing the same kinds of performance as the US market," he said.
Despite bearish forecasts, online remains the fastest-growing media sector. It is uncertain if that will make up for falling print revenues, with Goldman forecasting advertising sales at metropolitan newspapers to fall 7.9 per cent in the year to June.
Media Man Australia Profiles
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