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Henry Blodget analyzed the future of newspaper advertising this week, concluding that “the $42 billion that was spent on print newspapers in 2007 isn’t going to vaporize–it’s just going to go somewhere else.” By 2017, $10 billion of it will go to surviving newspapers, $2 billion to outdoor, and $30 billion to digital — of which, he predicts, $5 billion will go to newspaper web sites and $25 billion will go to “Google (GOOG), Yahoo (YHOO), Craigslist, eBay (EBAY), Amazon (AMZN), job sites, blogs, mobile ads, video ads, etc.”

But I disagree. Much of the advertising that is still in newspapers will vaporize. Much of it already has vaporized. Papers in top markets are down tens upon tens of millions of dollars each in classified revenue that has disappeared. Those former advertisers are using free or near-free substitutes to bring in and serve customers: craigslist, real estate agents’ own sites, car dealers’ own sites, and other new competitors. That’s not even to mention the cheaper sites — Monster (MNST), et al — that took real market share but at lower revenue. That newspaper revenue is gone forever. I’m not whining about that. It’s the new reality of the post-scarcity economy. This will only continue.

Now add Google and its power to get more and more targeted in a more efficient and transparent (well, translucent) marketplace. That is to say, the same marketing power will be bought for less.

Now add more changes in the marketplace itself. There has been a tremendous consolidation in retail with all department stores becoming one — Macy’s (M)— and big-box and mall retailers that spend more on national than local budgets and Wal-Mart (WMT) killing stores but not advertising locally itself. Yellow Pages will also migrate to mobile Google maps, I predict.

And there is the overall trend of advertisers replacing ad dollars when they create instead direct relationships with their consumers. Bob Garfield identified that in his Chaos Scenario 2.0 and I wrote about that here.

So you see plenty of revenue vaporizing. It’s not a zero-sum game. It’s a minus-sum game.

Now at the same time, if papers are smart, they can use online and its laser targeting to serve a new population of hyperlocal advertisers that never could afford high-priced papers before. But as I can tell you from first-hand experience, papers are not built for high-volume, low-cost advertising like this. So those advertisers will go to Google and local blogs.

Gallows humor: Friend Steve Gorelick sends me the Onion’s analysis:

A recent glut of feature stories on the death of the American newspaper has temporarily made the outmoded form of media appealing enough to stave off its inevitable demise for an additional 21 days, sources reported Monday. “People really seem to identify with these moving, ‘end-of-an-era’-type pieces,” Washington Post editor-in-chief Leonard Downie, Jr. said. “It’s nice to see that the printed word is still, at least for now, the most powerful medium for reporting on the death of the printed word.” Downie added that the poignant farewell Op-Ed he recently penned was so well received that he will be able to hold onto his job for up to six more days.
Source: Newspapers: Not a Zero-Sum Game - A Minus-Sum Game