Clock is ticking on print advertising: Gottliebsen

It’s clear from the reports from a variety of print, radio and TV groups that while there has been no surge of new advertising the signs are getting much better.

When improvement does come, we will then see just how far employment, housing and car advertising has moved from print to electronic during the tough times.

Yesterday, Seek claimed that they have substantially lifted their jobs market share, while in both the car and property area, leaders like carsales.com and real estate.com claim that like Seek that they have gained market share. Whereas Fairfax sees the 29% decline in classified advertising of the Sydney Morning Herald and The Age as being much more related to the economy.

Seek’s profit contains a chilling tale for newspapers. It shows that in the US, just short of 60% of online job advertising revenue is via the internet. In Australia while the number of online jobs is 79%, compared with just 21% for print, print’s share of revenue, according to Seek, is a massive 61%. Online attracts only 39% of advertising revenue. Seek say that if current trends continue Australia will duplicate current US figures in two years. We would then see print’s share of job advertising revenue fall from the current level of 61% to around 40%. This would be a massive blow.

But to determine whether any advertising shift is temporary or permanent requires an improvement in the market. If the shift is permanent then there will be considerable strategic thinking among Fairfax and News executives.

Both companies have substantial interests outside newspapers so the companies themselves are not at stake.

But in Sydney and Melbourne the earnings before interest depreciation and amortization of (EBITDA) of the Sydney Morning Herald and The Age fell 46% from $179.3 million to $6.9 million and earnings before interest and tax (EBIT) fell a massive 62% from $136.2 million to $51.6 million. The fall would have been worse but for a 10.5% reduction in costs at The Age and the Sydney Morning Herald. But even after that cost pruning the mighty Sydney Morning Herald and The Age organisations would be struggling to reach $40 million profit after tax, which makes the mastheads worth very low figures unless there is a dramatic improvement.

And if Seek, realestate.com.au and carsales.com.au have lifted market share and the extra share sticks then they will make much larger profits as the recovery phase.

This article first appeared on Business Spectator.