MEDIA FORUM: Newspapers bask in afterglow of dotcom boom - Newspaper publishers seem to carry on as if the dotcom bubble had never burst. They are still taking in ad revenue by the barrowload. Why? And how long will it last?

A year ago, when Campaign asked a range of media owners to reflect on their prospects for the new year, the most surprising responses came from newspaper people. Weren't they depressed, pessimistic, down at heart and, in fact, ready to swallow a whole thesaurus of gloom and doom?

Not a bit of it, they responded cheerfully. No, but seriously, we suggested, the future is all about the new economy and newspapers personify the 'dead tree' media economy. Philosophically, they were surely bankrupt - as purveyors of news they can't compete with the instancy of electronic information flow and if they move any further into titillation and entertainment (the tabloids) or features and fine writing (the broadsheets), they stray ever more deeply into the territory of the big magazine publishers.

And then there were the numbers. The circulation trends in newspapers have not been good for years - now was perhaps time for push to come to shove and maybe we'd lose a couple of titles. Several Sunday titles looked tired at best, for one thing. And all of United News & Media's titles had been starved of investment for years, for another.

No, they said. You don't understand. It's going to be a bumper year in terms of ad revenue. Dotcom, they added, was a double-edged sword. A threat, yes, but an opportunity too. Dotcom ad revenue was going to pour in. OK, we conceded, maybe the odd bit of dotcom spend might seem like temporary reprieve. But no way was this going to be a good year for the Fleet Street Diaspora.

Wrong. Last week, The Guardian claimed its best ad revenue week. Ever Other groups admit, almost shamefacedly, that they've never had it so good either. What's going on? Is the market as buoyant as everyone is suggesting? Yes, Stephen Miron, the commercial director of The Independent says, but it's not just a newspaper thing - the whole media marketplace has been strong. He states: 'There is a view that the catalyst to exceptional growth in the first half of the year within the newspaper market has been the dotcom revenues. However, we're still seeing strong growth in the second half of the year largely fuelled by one key component - colour. Within the quality broadsheets this year, we'll see double-digit growth in colour volumes and, unfortunately, while demand exceeds supply there will be some agencies that won't like the pricing policies of some titles. The situation isn't going to change overnight unless you can buy lots of plug-and-play colour presses, so we have to look at different ways to trade with those clients who find themselves priced out of the market within the traditional format.'

Colin Gottlieb, a managing partner of Manning Gottlieb Media, agrees that while dotcoms were important earlier this year, this is now a broader phenomenon. He comments: 'Press advertising for financial services, computers and utilities are all up. It's true that cars are static and retail is down but the market as a whole is up 14 per cent this year. For me, the most interesting thing is that finance is now a bigger category than cars and retail combined. They were once the medium's dominant categories. There are other strong categories such as mobile technologies emerging too and I think they are poised for strong growth.'

So what's happening? Gottlieb points out that advertisers have reappraised what they want from advertising - and press advertising, in particular.

For many, it's now their most effective high-street shop window and they are applying direct marketing models. They're in newspapers because the return on investment - whether it be response rates or the cost of customer acquisition - is good. Gottlieb adds: 'The only possible problem is that, with everyone in there, their visibility is reducing and we may be about to invoke the law of diminishing returns.'

Other observers agree. They argue that newspapers have experienced an Indian summer, a prolonged afterglow from the dotcom boom. But that will now fade. And we may also see some of the 'hotspots' disappearing from the market. A year ago the perception was that dotcom budgets were best spent on the papers whose readership scored highest in terms of personal computer ownership - Financial Times, The Independent, The Guardian and The Times. Now, the thinking is that internet access is much more widespread and is not dictated merely by home PC ownership. The players who've survived and still have budgets see this as a more broad-based, mass-market proposition.

Steve Goodman, the director of press at MediaCom TMB, believes that the good times can't last for ever. He comments: 'There was significant television advertising inflation earlier this year and some advertisers and agencies will have considered moving money out of TV and into press, especially newspapers. But that's changing now. TV inflation is falling away and we're now looking at a far more stable situation and it could well improve into the new year. That's bound to affect newspapers.'

And Goodman argues that some newspapers will come to regret the way that they elbowed aside loyal, long-term clients in order to get their hands on dotcom money: 'Dotcom clients had a disproportionate effect because they were prepared to pay whatever it took to get what they wanted. On top of that, some papers have made it clear that they would charge a premium to any advertiser with even the most tenuous of dotcom connections. So now we have advertisers who are not happy with the situation in press and there will be some fall-out.'

Is that true? Sue Dear, the ad director of the Mail on Sunday, can confirm she's heard stories to that effect: 'It's not something we've done here but some papers have given in to the temptation to drive yield to such an extent that traditional advertisers have become upset.'

But the boom is set to continue, she asserts: 'Dotcom start-ups made many traditional advertisers re-examine what they were doing and it has spurred them to set up their own presence on the web. They then have to compete to get their message across. So activity has been stimulated across the board. The financial sector is a good one to highlight because dotcom start-ups have provoked a lot of the traditional financial services companies to respond. So the picture is not at all simple but, yes, we have been doing exceptionally well and, yes, I expect it to continue. I think people realise that if you want to hit a big audience, there is no more effective way of doing it than through newspapers.'

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