1. Will the Online News Industry Be Able to Finance Quality Journalism? Vin Crosbie Digital Deliverance LLC www.digitaldeliverance.com

2. Are We Winning? Or Are We Missing the Target?

4. New York Times New York Times Cox Radio Interactive Cox Radio Interactive MediaNews Group MediaNews Group Tribune Interactive Tribune Interactive Lee Enterprises Lee Enterprises Cox Newspapers Cox Newspapers Google Inc. Google Inc. Autotrader.com Autotrader.com Hearst Newspapers Hearst Newspapers Capital Broadcasting Capital Broadcasting Morgan Stanley Morgan Stanley Interactive Advertising Bureau Television Advertising Bureau Independent Newspaper/Ireland Deutsche Bank Ottaway Newspapers Landmark Communications Gray Television & Newspapers Times Shamrock Trinity Mirror Regionals NBC Universal Television Suburban Newspapers

5. Local ad spending data from any U.S. market. Local online ad revenue data from 2,300 newspaper, TV, radio and ‘pure-play’ sites. More than 250 individual local market audits. Panel of 400 local advertising experts. Plus, regular consultation with national and local advertisers, and media and Internet companies.

6. Sources: Universal McCann, Ad Audit Services Advertising Share: 1949-2005 Radio Broadcast TV Newspapers Cable Internet

7. Internet Advertising in USA © Copyright 2006, Borrell Associates Inc. Surpassed $17 billion last year Will surpass yellow page advertising this year Will pass radio circa 2007-8 (already has in UK) Has surpassed outdoor billboard advertising Has surpassed magazine advertising

8. Newspapers’ Online Ad Share Media Estimated 2005 Totals Total Share Local Share Newspapers$3,859,536,00022.8%41.0% Other Print $370,432,0002.2%1.8% Television$2,205,243,00014.7%4.6% Radio$117,904,0002.4%1.0% Directories$1,088,642,0006.4%19.6% ‘Pure Play’ $9,612,143,00052.9%31.9% Market Total $17,253,900,000100%100% © Copyright 2006, Borrell Associates Inc.

9. Online Revenue CAGR 2001-2004 © Copyright 2006, Borrell Associates Inc.

10. National-to-Local Ad Ratio in U.S. Will Move to ‘Equilibrium’ Online Advertising All Advertising What Propels the Growth © Copyright 2006, Borrell Associates Inc.

11. All Seems Good! We’d like it to Grow This Way Forever But Look Beneath the Surface

12. Although They Might Appear the Same, There are Fundamental Differences Between the Traditional and the Online

13. Years Ago, Most U.S. Consumers Had Access to Only One Newspaper and 3 TV channels

14. Consumers’ Access to News Today A Cornucopia

15. Fundamental Differences The Supply & Demand Equation: Consumers’ increased access reduces the economic value of general news. Your news organization used to be its market’s only source of all types of news in traditional media, but it isn’t that online. It’s reduced in overall value, and thus gets less use in this new medium.

16. Print 54 Million daily Average reader uses 23X monthly, sees 460+ pages monthly, spends 10 hrs 44 minutes. per month

17. Web 52 Million monthly Average reader uses 6X to 8X monthly, sees <29 Web pages monthly, and spends 28 minutes. per month

18. Fundamental Differences The Supply & Demand Equation: Consumers’ increased access reduces the economic value of general news. Your news organization used to be its market’s only source of all types of news in traditional media, but it isn’t that online. It’s reduced in overall value, and thus gets less use in this new medium. Ten years into Web Publishing: News Sites are Seen by Fewer People, much Less Often and much Less Thoroughly, than in their traditional media counterparts.

19. Print Economics of Scarcity Sells scarce ad space per edition Increases in traffic = increases in CPM

20. Web Economics of Surplus Sells infinite ad pages per edition Increases in Traffic  Increases in CPM

21. If Daily Usage Doubles Print Edition 50 Pages (20 of adverts) 100 Pages (40 of adverts) Double the ad CPM rate!

22. If Daily Usage Doubles Print Edition Web Edition 50 Pages (20 of adverts) 50 Pages (20 of adverts) Double the ad rate 5M page/views 5M ads to sell 10M page/views 10M ads to sell Double the ad rate? Must Find Buyers for Twice the Number of Ads!

23. Fundamental Differences The Supply & Demand Equation: Consumers’ increased access reduces the economic value of general news. Your news organization used to be its market’s only source of all types of news in traditional media, but it isn’t that online. It’s reduced in overall value, and thus gets less use in this new medium. Ten years into Web Publishing: News Sites are Seen by Fewer People, much Less Often and much Less Thoroughly, than in their traditional media counterparts. Unlike with Traditional Media, Increased Traffic online does not lead to increases in ad rates. Increased Online Traffic leads to CPM stasis.

24. Print Advertiser pays for entire press circulation, regardless of how many people actually see his ad

25. Web Advertiser pays only for how many people actually see his ad (exposures)

26. Fundamental Differences The Supply & Demand Equation: Consumers’ increased access reduces the economic value of general news. Your news organization used to be its market’s only source of all types of news in traditional media, but it isn’t that online. It’s reduced in overall value, and thus gets less use in this new medium. Ten years into Web Publishing: News Sites are Seen by Fewer People, much Less Often and much Less Thoroughly, than in their traditional media counterparts. Unlike with Traditional Media, Increased Traffic online does not lead to increases in ad rates. Increased Online Traffic leads to CPM stasis. In Traditional Media, the Advertiser pays for the entire printed circulation or entire estimated/potential broadcast audience, not how many people actually see the page or hear the minute featuring his ad. But Online, the Advertiser pays only for the number of people who were actually exposed to the ad – Resulting in revenues much less than in Traditional Media.

27. $5.89 $9.39 $14.81 $17.09 $17.87 $25.17 $35.94 $0 $10 $20 $30 $40 2-10k10-20k20-50k50-75k75-100k100-200k>200k Daily Print Circulation $ Per Unit of Print Circulation Newspaper Website Annual Revenues Per Unit of Print Circulation (2004 ) But Print Revenues are Much Higher $500 to $900 per print edition user As readers switch from print to online, we must greatly increase our online revenues or go out of business! 2-10K10-20K20-50K50-75K 75-100K100-200K >200K

28. $5.89 $9.39 $14.81 $17.09 $17.87 $25.17 $35.94 $0 $10 $20 $30 $40 2-10k10-20k20-50k50-75k75-100k100-200k>200k Daily Print Circulation $ Per Unit of Print Circulation New Media = New Technologies New Technologies = More Efficient Markets A More Efficient Market for the Advertisers 2-10K10-20K20-50K50-75K 75-100K100-200K >200K Lower Costs for Advertisers, Lower Revenues for Middlemen (Media Companies)

29. Online: Dependent on Traditional Online gets its News as a result of the Traditional Medium’s Production Gets Most of its Revenues as a result of ‘Upsells’ from the Traditional Media’s ad sales (73 Percent of U.S. Newspapers’ Website Revenue is from ‘upsells’ by from print classified ad sales.) For every print edition reader lost, the newspaper’s website must gain 20 to 100 new users to recoup the company’s lost revenue because of that loss.

30. Online gets its News as a result of the Traditional Medium’s Production Gets Most of its Revenues as a result of ‘Upsells’ from the Traditional Media’s ad sales (73 Percent of U.S. Newspapers’ Website Revenue is from ‘upsells’ by from print classified ad sales.) For every print edition reader lost, the newspaper’s website must gain 20 to 100 new users to recoup the company’s lost revenue because of that loss. Online: Dependent on Traditional

31. Speed of Change is Essential Source: Newspaper Association of America.

32. More Local & More National Online Advertising Geometric Growth for How Long? © Copyright 2006, Borrell Associates Inc.

33. Sources: Universal McCann, Ad Audit Services Advertising Share: 1949-2005 Radio Broadcast TV Newspapers Cable Internet

34. Newspapers’ Online Ad Share Media Estimated 2005 Totals Total Share Local Share Newspapers$3,859,536,00022.8%41.0% Other Print $370,432,0002.2%1.8% Television$2,205,243,00014.7%4.6% Radio$117,904,0002.4%1.0% Directories$1,088,642,0006.4%19.6% ‘Pure Play’ $9,612,143,00052.9%31.9% Market Total $17,253,900,000100%100% © Copyright 2006, Borrell Associates Inc.

35. How can Online be Independent?

36. 80 Percent of Newspaper Website Revenues are From the 3 Traditional Classified Categories 43% 15% 12%

37. Yet Those 3 Traditional Classified Categories are only 10 Percent of Local Online Ad Spending 90%

40. How can Online be Independent? Go After the Other 90% of Local Online Ad Spending before Google and Yahoo! beat You to It. Begin to offer Individualized News Services that Better Match Each Individual Consumer’s Needs & Interests. (You can still give them Serendipity and the Bulletin Stories). People will be willing to pay for such service: Packaging the News

41. Vin Crosbie Digital Deliverance LLC www.digitaldeliverance.com