In late January the Charleston Gazette-Mail and other West Virginia news publications filed a lawsuit in federal court against Google and Facebook, accusing the companies of profiting from “anticompetitive and monopolistic practices” that have damaged newspaper revenues so much that “it threatens the extinction of local newspapers across the country.”
Many newspaper publishers have expressed concern over how Google and Facebook are directly hurting their bottom line as more and more businesses opt to advertise through these giants instead of directly with a publication. Some have even used paywalls to make up for the revenue losses. The Source has resisted over and over again putting up a paywall, and thanks to our advertisers, we haven’t had to. Fortunately, with hundreds of thousands of readers visiting our sites each year, the Source has been able to sustain itself (mostly) for 22 years, while hundreds of newspapers of general circulation – large and small – have disappeared. It is with this in mind that we thank our loyal advertisers, readers and supporters, while also offering some insights into the financial state of the newspaper industry and how essential local advertising is to the survival of local media outlets like the Source.
While news stories seemingly abound in our digital age of continuously updated mobile news apps and social media feeds where the articles just keep appearing, the average person gives little thought to how newsgathering is paid for or to the financial health of their own local newspaper – if their community still has one.
Between 2004 and 2018, the United States lost nearly 1,800 papers, including 1,700 weeklies and more than 60 dailies, according to a University of North Carolina School of Media and Journalism report. Most of the remaining 7,100 or so newspapers have a circulation of less than 15,000 and half of them are located in small and rural communities. Given its small population of roughly 100,000 people, the Virgin Islands is fortunate to have more than one newspaper of general circulation (the Source is one of them).
Many of the country’s now-closed local papers, which were often the only source of community news, went under because they couldn’t financially survive. Print and digital publications alike rely on ad revenue and subscriptions, though some publications remain freely accessible and therefore rely solely on advertising for funding. Yet, advertising revenue has been on a steady decline for a number of years. According to the Pew Research Center, newspaper revenues declined dramatically between 2008 and 2018 with revenue falling from $37.8 billion in 2008 to $14.3 billion in 2018 – a 62% decline.
Circulation is falling but so too is direct advertising revenue, meaning what a company pays directly to a newspaper for ads its runs. Many businesses now pay Google and Facebook to post their ads and target consumers based on metrics like age, location and search history. Some businesses in the Virgin Islands have told the Source that they are going to spend their advertising dollars on social media advertising. Since 2019, digital advertising behemoths like Google and Facebook have overtaken traditional advertising businesses like television, radio and newspapers in annual spending.
In a nutshell, Google and Facebook now siphon off millions and millions in advertising revenue that would otherwise be spent, at least in part, on direct advertising with legitimate news outlets – like newspapers. While Google does pay websites, including newspapers, for running these low-cost ads with payments based on how many times they are seen or clicked on, this revenue stream usually can’t support the operating costs of an original newsgathering publication, especially if it has a very small readership.
If you’re a local business owner with an advertising budget, it’s critical for you to consider how and where you are spending those funds. Not only could you be jeopardizing the health of your community’s local news industry by not spending your money with another local business – a local newspaper or local radio station, for example – but you are likely not getting as much return as you think on your digital ad buy through Google or Facebook. While digital marketing can help grow your business, currently the majority of impressions and clicks come from bot activity, meaning a computer running an automated task or command and doesn’t necessarily represent a real-life potential customer.
Forbes recently reported that when the company P&G reduced its digital ad spending by $200 million, the company saw no change in business outcomes, as was the case when Chase reduced its reach from 400,000 sites programmatically showing its ads to only 5,000 sites. Programmatic advertising refers to automatically buying digital ad campaigns with software rather than directly from a publisher. The big takeaway here is that low-cost ads that are just being cast haphazardly onto the internet don’t typically increase business since the ads might end up on a site that has a lot of bot traffic, for instance. Facebook has also come under fire for allegedly inflating its “potential reach” figures with a recent lawsuit claiming that Facebook’s senior executives knew the numbers were misleading for years. Local newspapers, on the other hand, typically have a dedicated readership with a well-documented reach based mostly on geographical parameters in addition to a place’s diaspora (i.e. Virgin Islanders living on the mainland) or other interested groups (i.e. tourists or part-time residents that spend time in the Virgin Islands).
Where businesses put their advertising monies matters, and it matters even more where local businesses spend their advertising dollars, which should most often be with local media outlets. The survival of local news publications like the Source – and all of the good they do for communities – depends on it. We are grateful to our loyal readers and advertisers who understand this.