Google advertising revenue

Newspaper advertising revenue. You would expect the trend to show that it is getting worse and not better, but Byron shows that it is a little more alarming than you think. Like we say in the office, this notion that newspapers are dead is nonsense, those fast enough are just changing their model.



Sasha drew my attention to an interesting piece in the Wall Street Journal which pointed out that newspaper advertising has sunk to a 25 year low. Clearly the internet has completely crippled the industry. Newspaper ads were at this very same level in 1985 with $26 billion dollars being spent on ads last year. $25bn was spent in 1985 and if you adjust that for inflation it equates to about $49bn today. So in real terms the industry has actually halved. So far this year revenue is down 4.7% from last year.

So why is this happening? Why buy a newspaper when you can buy an iPad and get the newspaper's app. As an advertiser you would have been looking to shift your attention from print ages ago. It's no secret that the internet is the present and the future. As a good comparison let's look at Google's advertising revenues.



Last year Google's advertising revenue was $28bn. Yes, that one company brought in more revenue than the entire newspaper industry. Google have been responsible for 20% of the growth in worldwide advertising over the last 15 years. In fact without Google web advertising growth has been pretty flat. I think that is because Google have completely dominated the industry and without them someone else would have done it. Check the graph below which I got from this interesting article which talks about advertising since Google's IPO ---> Has the growth in online advertising flat lined since Google's IPO?.

These are the kind of trends that us as investors need to pay close attention to. Firstly we need to decipher which industries are dying so as to not put money in them. So for example we would not invest in Sappi (even though they make paper for magazines - Sasha) because we feel iPads, Kindles, emails and the internet are going to decrease the use of paper going forward. Then we'd have to pick up which trends are going to grow and where this money is shifting to. This would obviously have meant investing in Google when it listed at $85 in 2004 (below the price expected – Sasha), now trading at $561.




That was the past though. We are still strong believers in Google and would still be buying at these levels. Where to for online advertising from here? I've mentioned before that I believe Facebook and Twiiter have a lot of potential in this sector. What I really wanted to point out however is how our world changes and evolves so quickly. My Grandparents still buy the newspaper everyday but I can guarantee you that when Tablets become household goods, that newspaper on your coffee table will become a device that you can read your daily news, video conference call your mate in Australia and compose a song in five minutes with.