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In the past, financial analysts covering the newspaper industry haven't paid much attention to online results. They're more focused on quarterly results, which don't have much to do with online. Indeed, despite several years of strong growth from online services, newspapers are still, typically, just getting 5 percent or so from online.

A new report from Merrill Lynch's Lauren Rich Fine — covered by E&P's Jennifer Saba — reinforces the lack of enthusiasm. Fine figures she'll be long retired from crunching numbers before newspapers get even half their money from online.

"Even if the rapid [online] growth continues for the next few years, we don't see online representing over 50 percent of newspaper ad revenues for at least a couple of decades," says Fine (per Saba). Fine's back-of-the-envelope projection assumes double-digit growth for online ad revenues through 2012, eventually slowing to 5 percent. Meanwhile, print advertising is estimated to decline 1.5 percent annually.

The only problem with Fine's calculation, of course, is that she can't responsibly incorporate a "tipping point" scenario, where online reaches such a level that print drastically falls off. It is a real problem that is looming over newspapers — especially considering that a single print user continues to be worth 10 to 20 online users. Such a tipping point is bound to happen within 10 years, don't you think?

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  1. Peter, I think it’s also important to note the low overall percentage of newspaper online revenue that’s from direct sales. The majority of most newspaper’s online revenue continues to come from what’s called the "upsell." When I say the majority I mean close to 80% or more.

    That upsell is in fact a forced buy. When a person places a classified ad their sale into online is considered "assumed." When an advertiser purchases a contract or a retail display ad the online portion of their buy often isn’t disclosed to them and/or is merged into their rate.

    I think it’s going to be eight years or less, but it won’t happen without all of us selling online advertising building the value of what we sell.

    Andy Vogel

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