Online advertising now counts for a 27 percent share of the New York Times (NYSE: NYT) Company’s over all ad revenue, as its web ads rose 14.6 percent. That represents significant turnaround from Q309, when the NYTCo’s online ads fell 7.2 percent. Within the News Media Group, the main newspaper unit, digital dollars jumped 21.6 percent, helping to offset a 5.8 percent decline in total print ad revenue, all of which the company told investors to expect last month.
At the About Group, revenues gained 5.5 percent to $32.5 million. Looking ahead to Q4, online is expected to rise to 10 percent, while print declines continue to narrow. For the most part, About weathered the ad recession pretty well, as it sought to balance declining display with its cost-per-click advertising, a natural model for the About.com site, which relies heavily on search traffic, as opposed to regular readers visiting the website on a daily basis.
But now, it’s worth pointing out that About Group display advertising were offset in part by lower cost-per-click advertising, suggesting that stagnating paid search dollars may require a change in strategy from the one that served the unit so well in ’09. The signs of a slight shift started to appear this summer, when it began running an ad campaign with the tagline, “Need to Know.” For the most part, About.com has been working diligently to make sure it doesn’t get lumped in with the “content farms” that currently make up much of the “how-to” sites, by focusing the ad campaign at advertisers as well as consumers.
Aside from better news on the ad front, but the NYTCo’s main struggles to manage costs and a heavy debt load, ultimately served to prevent it from swinging to a profit in Q3, despite largely successful efforts to reduce its burdens.
Specifically, operating costs were up just 0.8 percent. The NYTCo lowered its debt and capital lease obligations by more than one-third to approximately $646 million.
The NYTCo’s ad comeback, in the form of rising online dollars and slimming print declines, were largely thanks to the improving national ad recovery. At the local papers, any notion of an ad comeback were blunted by a weak economy, which continued to batter classified ad sales. Unlike its local brethren, the flagship paper is not as heavily reliant on classifieds. Secondly, digital ads are not doing enough to offset continuing print losses.
For example, the Regional Media Group, which houses Florida’s Sarasota Herald-Tribune and California’s Press Democrat, posted a 4.5 percent revenue drop. Meanwhile, the New England Media Group, which includes The Boston Globe, saw revenue fall 6.2 percent.
The company knows that it even with an uneven advertising comeback, it will have to rely more on direct payment from its online readers if it ever hopes to see more plus signs in the revenue column. In addition to its long-anticipated metered paywall that’s set to arrive early next year, in the second half of 2011, The Boston Globe will launch its own paywall gambit with a separate paid subscription site at BostonGlobe.com.
At the same time, it hopes to hold on to the ad supported model at its existing Boston.com site, which will remain free. On a much smaller scale, the experiment in paid content has begun at its other New England Media Group property, the Worcester Telegram & Gazette, which introduced a its metered model for its site during the third quarter.
Interestingly, the NYTCo pointed to other areas of activity on the digital front. It noted the recent investment in social news startup Ongo, along with Gannett (NYSE: GCI) and The Washington Post Company (NYSE: WPO). During the company’s earnings, call Janet Robinson said the NYTCo contributed about $4 million to the Cupertino venture’s $12 million total funding. WaPo and Gannett contributed the same amount each.
Other highlights from the quarter included:
— Total revenues fell 2.7 percent to $554.3 million. Advertising revenues declined 1.0 percent; circulation revenues declined 4.8 percent; and other revenues declined 1.5 percent.
— Total News Media Group revenues decreased 3.1 percent to $521.9 million.
— Total Internet revenues increased 13.3 percent to $89.4 million (including online ads’ 14.6 percent growth to $78.3 million). For the first nine months of 2010, the NYTCo’s internet revenues rose 16.5 percent to $274.1 million. During that same period, online ad dollars were up 18.1 percent to $240.7 million.
— About Group operating costs increased 9.1 percent to $18.6 million, primarily because of higher compensation costs and marketing expenses, including the major ad campaign it unveiled over the summer and runs through the end of the year. Operating profit rose 1.1 percent to $13.9 million.
— Income from unspecified joint ventures fell 26 percent to $5.5 million.