Ad Growth Vanishes for Newspaper Web Sites

Already facing a grim economic forecast, U.S. newspapers are digesting another piece of bad news: The growth in online advertising they saw as their salvation has slowed to a crawl.

Newspaper companies have been rapidly expanding their Web presence — adding blogs, slide shows and podcasts — in the belief that if they built it, advertisers would come. But after 17 quarters of ballooning growth, online revenue at newspaper sites is falling. In the second quarter, it was down 2.4 percent from a year earlier, to $777 million, according to the Newspaper Association of America. It was the only year-on-year decline since the association began measuring online revenue in 2003.

The decline in revenue came even as overall online advertising increased. Display advertising, the graphics-rich ads that newspapers carry, grew 7.6 percent in the second quarter, according to TNS Media Intelligence.

Newspaper executives say the new features have drawn bigger, more engaged audiences, which they hope will translate to more advertisers. Unique readers this August were 17 percent higher than a year earlier, at 69.3 million. They also point out other factors for the decline, like the economic downturn and the continued flight of classified advertisers away from newspapers and their sites.

But the advertising glut, particularly in display advertising, on which companies based their optimistic projections, has shrunk. As newspapers keep adding pages, they are required to sell ads at cut-rate prices.

While large papers like The Washington Post, The Miami Herald or The New York Times (whose global edition is the International Herald Tribune) can sell premium ad space on, for example, a newspaper’s homepage, for $15 to $50 for every thousand impressions, other papers have increasingly relied on middlemen — known as ad networks — to auction less desirable space, typically for 60 cents to $1 for every thousand impressions, and…