I have never seen in an election and Olympic year advertising revenue actually declined. I think we will be expecting a 8-9% reduction (excluding digital) through out 08. The biggest threat to newspaper is ‘classified ads.’ Barclays Capital forecasting that “classified ads as a percentage of newspapers’ revenue will decline to 26% next year from 36% in 06. Meanwhile, newspapers’ share of total U.S. ad spends…will have declined to 10% next year from 20% ten years ago. I think we can expect to see it reduced to 5% in 5 years. This is really hurting newspaper publishers and don’t expect many of them can survive the next 12 months.
While newspapers are in a panic mode and laying off half their people in order to stay afloat (like those 75 at LA Times) and magazines like Radar and CosmoGirl! are closing left and right, The Huffington Post is doing just fine. For a start, it helps to have a bunch of writers who really put the free in freelance. According to their CEO, "we don't have enough people on the payroll to do layoff," in case you were wondering.
In fact, they took $25 million in new funding at a $100 million valuation. It's a healthy sum given the company has aggregated a huge audience -- 8.8 million people a month (according to Quantcast).
What this means? This blog publisher is now considered more valuable by the market than quite a few publicly traded newspaper companies, (such as Lee Enterprises, owner of the St. Louis Post-Dispatch and 52 other papers with a market cap: $36 mm, A.H. Belo, owner of the Dallas Morning News and the Providence Journal with a market cap: $35 mm, and Media General, owner of the Tampa Tribune and Richmond Times-Dispatch with a market cap at $34.6 mm).
Wow.
They are really taking advantage of the web as many readers hardly follow the summaries back to the original story. They are capturing value from the content creator as well as the free-lancers. That’s a good business model.
Granted, Huffington Post has few of the costs of running a daily newspaper and none of the debt carried by many of these companies. Like The Drudge Report, The Huffington Post built a business linking to content; unlike Drudge, Huffington Post has only a few employees (46).
Despite the downturn crippling media, and especially newspaper stocks, Huffington Post is a shinning stars and on its ways to catch up with New York Times Co. (market cap: $1 billion). Think about it, Huffington Post is a perfect example of business model innovation.
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