Google decodes what actually led to fall in newspaper revenue

As print media houses struggle to sustain in the digital news era, a Google-led study has revealed that the decline of newspaper revenue is not happening because of Search or social advertising but from the loss of newspaper classifieds to specialist online players.

Some critics have argued that if Google and Facebook didn't exist, much of the revenue from print newspapers would have stayed with news publishers - that these tech platforms directly disrupted the newspaper business model.

According to Eero Korhonen, Head of News and Publisher Partnerships, Google, Europe, Middle East and Africa, new research looks at the facts which disprove that theory.

The analysis from economists at Accenture, commissioned by Google, looks at the revenues of newspapers in Western Europe over nearly two decades to reveal exactly what broke the old business model for newspapers.

"The data is clear: Almost half of the overall decline of newspaper revenue has come not from Search or social advertising, but from the loss of newspaper classifieds to specialist online players," Korhonen said in a blog post on Wednesday.

While digital reader revenues are growing at a promising rate, there is no doubt that the publishers' business model has been challenged over the past several decades.

Today, four out of five of consumers now access news online.

As a result, many publishers are using the latest technologies, including artificial intelligence, to reach readers and grow subscriptions.

While many readers are not in the habit of paying for access to news, between 2013 and 2018, digital circulation volumes increased by 307 per cent to reach 31.5 million paying subscribers in the Western Europe region, more than offsetting the decline in paid print subscriptions.

"Since 2018, the pace of publishers launching digital subscription models has accelerated further, which is a promising sign," the Google-led research pointed out.

However, the growth in online revenue has not been enough to offset the loss from newspaper print advertising.

As people move online, regular display advertising in newspapers became less popular, with revenue in this segment decreasing from 13.8 billion euros to 8 billion euros between 2003 and 2019.

The majority of advertising in newspapers was made of classifieds like selling cars and homes, or listing jobs, and births and deaths notices.

These advertisements, or "classifieds," contributed 9.9 billion euros -- almost a quarter -- of newspaper revenues, and newspapers collected 93 per cent of all classified advertising in 2003.

"However, by 2019, only 32 per cent of that revenue was going to newspapers, generating just 2.8 billion euros, with the drop accounting for 44 per cent of newspapers' total revenue decline over the period," the research noted.

Over the same period, there has been transformative development of search and social media platforms.

In turn, the value of online advertising has grown significantly, from 2.2 billion euros in 2003 to 50.5 billion euros in 2019, along with growth in all advertising sectors.

"But this did not come at the expense of newspaper revenues. In fact, the research shows that Internet advertising as a whole has grown predominantly from new opportunities," the study argued.

However, there are green shoots of growth amid traditional newspapers, too, with paywall strategies to convert readers to paid subscribers.

"Google is significantly contributing to that growth. Over the past 20 years, Google has collaborated closely with the news industry and is one of the world's biggest financial supporters of journalism, providing billions of dollars to support the creation of quality journalism in the digital age," the company said.