Online Revenue Business Model Has Changed Little Since 1996

Newspaper Research Journal, Spring 2007 by Mensing, Donica

Internet access fees were the second most important revenue source, providing 23 percent of total revenue. Classified advertising contributed only 15 percent of total revenue, with all other sources (subscriptions, premium services and other) each contributing 5 percent or less of total revenue on average for each newspaper site.

By comparison, the percentage of revenue derived from these different sources changed quite significantly in 2005. First, revenue from Internet access fees dropped precipitously, from 23 percent of revenue to 1 percent. An independent samples f-test showed that 1996 respondents (M=23.47, SD=41.6) received a significantly greater percentage of revenue from Internet access fees than did 2005 respondents (M=.833, SD=3.8), t (125)=4.2, p

A second significant change is an increase in the importance of revenue from classified advertising between 1996 and 2005; 1996 respondents (M=UA, SD=28.11) received far less total revenue from classified advertising than did 2005 respondents (M=48.11, SD=27), t (182)=8.02, p

A third significant trend is the increase in importance of "other" sources of revenue. In 1996, other sources only accounted for 3 percent of total revenue (M=2.97, SD=I 1.57), but by 2005, these sources accounted for 19 percent of total revenue (M=18.84, SD=.21.57), f(117)=5.1, p

Revenue sources that remained relatively constant between 1996 and 2005 in terms of the percentage of total revenue included display advertising (38 percent of total revenue in 1996, and 32 percent in 2006), as well as subscription fees, transaction fees and premium services, such as archives.

With the elimination of Internet access fees as a major source of revenue, it is clear that Web site news managers are focusing on four primary sources of revenue: display and classified advertising, subscriptions and other sources of revenue. Of those four, classified advertising is by far the most important, followed by display advertising. Revenue from subscriptions and other revenue sources is much less important than advertising revenue. Other services - transaction fees, customization services and premium content - are relatively minor contributors to the overall financial health of online newspaper Web sites. The following section provides more detail about the contributions of various revenue sources to the overall economic strength of online newspapers in 1996 and 2005.

Classified Advertising

Reliance on classified advertising revenue in the past nine years has grown significantly. In 1996, just 13 percent of the online newspaper sites reported receiving half or more of their revenue from classified advertising, while in 2005, 48 percent of respondents reported that half or more of their revenue was from classified advertising.

Display Advertising

The total percentage of revenue earned from display advertising did not change much between 1996 and 2005. In the earlier survey, the mean percentage of revenue generated by display advertising was 38 percent for all respondents. However, there were significant differences between sites in the use of display advertising with more than half of the group reporting one-half or less of total revenue coming from display ads and almost a quarter of the group reporting 75 percent or more of revenue from display advertising. In 2005, the mean percentage of revenue earned from display advertising was 32 percent with much less variability between sites. More than 80 percent of sites reported earning one-half or less of all revenue from display advertising, and less than 10 percent of the sites earned more than 75 percent of their revenue from display advertising.