Journal Blazes Newspapers' New Trail

The revamped Wall Street Journal is a harbinger of what's ahead for papers as advertisers shift more money online

by Catherine Holahan

Online editions of newspapers were once the unwanted stepchildren of print publications. They had to exist, if only to increase interest in the family franchise. But print companies didn't want to invest too much time or money in them.

Often, Web versions of printed papers were treated as little more than online archives, a place to dump the daily paper's contents and back issues in hopes of generating more print subscriptions and incremental revenue from the occasional banner ad. When a publication did hire staff to cover online-only stories, the writers and page designers were frequently separated from the more prestigious (and typically better paid) print journalists.

In some cases, the online staffers worked in entirely different buildings than their print counterparts. "Newspapers have unfortunately treated their online operations as distant cousins, not to be touched and admired," says Christine Tatum, assistant business editor at The Denver Post and national president of the Society of Professional Journalists. "A lot of these companies have invested very little in technology."

Analytical Approach

The once-ignored stepchild is getting a lot more attention lately, both from Internet-savvy audiences and deep-pocketed advertisers. Perhaps the biggest evidence of this change is the redesigned Wall Street Journal and WSJ.com (DJ), launched on Jan. 2. The narrower, more colorful print edition now concentrates on analysis stories, leaving the breaking news that once made up nearly half the newspaper for the online edition, which publishes throughout the day. "Business news, in particular, is very sensitive to the time cycle," says Bill Grueskin, managing editor of The Wall Street Journal Online, explaining the impetus for the redesign. "The value of a story that you break" diminishes as more publications publish their own online versions within minutes, he says.

Industry executives and analysts say the paper is going in the right direction and that other publications will have to follow suit or risk folding. The newspaper industry is expected to lose roughly $890 million annually in advertising revenue to the Internet through 2007, according to a March, 2006, report by Citigroup Investment Research (C). And much of the 1.4% growth in advertising overall this year is expected to come from a more than 15% gain in online revenue. Without the online increase, eMarketer reckons total ad spending will inch up just 0.6% this year.

David Hallerman, eMarketer's senior analyst, says the numbers are only going to get worse for the print newspaper industry, whose stocks largely declined as the Standard & Poor's 500-stock index rose 14% in 2006. He expects that more advertising dollars will move from print to online as papers continue to lose subscriptions due to increased competition for users' time, both from broadcast and online media outlets such as Yahoo! (YHOO). He also expects that classified advertisers will continue to favor online services like Monster Worldwide (MNST) and craigslist.com.

Classifieds' Tipping Point

Such online services won more classified advertising dollars than newspapers for the first time in 2006, generating $5.9 billion in help-wanted ads, vs. newspapers' $5.4 billion, according to a December study by Borrell Associates. "The losses are not going to taper off," says Hallerman. "For virtually every newspaper, their only growth area is online."