Why the iPad Might Be a Winner

Newspaper advertisers don't trust the Internet yet, and for good reason.

Google's (Nasdaq: GOOG  ) chief economist, Hal Varian, writes in a recent blog post that readers of online newspapers spent just 70 seconds doing so, while physical newspaper subscribers spend 25 minutes per day with their favored fishwrap. Accordingly, Varian writes, less than 5% of newspapers' ad revenue derives from their online editions.

The message? Form factor matters when it comes to attracting and keeping newspaper subscribers, and advertisers will only pay for captive readers.

But they aren't paying as much as they used to. According to the latest data from the Newspaper Association of America, digital ad revenue fell for the first time in 2008, down 1.8% to $3.1 billion. Overall ad revenue fell 16.6% that year. E-readers such as Amazon.com's (Nasdaq: AMZN  ) Kindle could change that by encouraging readers to spend more leisure time swiping through digital newspapers.

The research is encouraging. A demographic study of 442 Kindle users by blogger Zack Sherwood found that 35% spent six or more hours per day using the Internet, and 47% accessed a newspaper site at least once per day. Now do the math: There are 21,600 seconds in six hours, and only 70 of those -- or 0.3% -- are used for daily newspaper browsing.

Steve Jobs must love data like this. It means Apple's (Nasdaq: AAPL  ) forthcoming iPad and peers from Hewlett-Packard (NYSE: HPQ  ) , Barnes & Noble (NYSE: BKS  ) , and Sony (NYSE: SNE  ) have a low bar to hurdle when it comes to lifting digital newspaper engagement.

Publishers should also be happy. Even a modest uptick in engagement would allow New York Times (NYSE: NYT  ) and others to raise digital ad rates, filling some of the crater caused by the decline of print.

Mexican billionaire Carlos Slim Helu recently denied rumors he'd add to his already healthy stake in New York Times. Perhaps he should reconsider?

Are you reading the paper through an e-reader? Would you? Share your thoughts in the comments box below.

Amazon.com and Apple are Motley Fool Stock Advisor selections. Google is a Motley Fool Rule Breakers recommendation. Try any of our Foolish newsletter services free for 30 days.

Fool contributor Tim Beyers is a member of the Rule Breakers stock-picking team. He had stock and options positions in Apple and a stock position in Google at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. The Motley Fool is also on Twitter as @TheMotleyFool. The Fool's disclosure policy is also a palm reader. Who knew?


Read/Post Comments (3) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On March 11, 2010, at 8:33 PM, demodave wrote:

    Tim,

    Read your Weekly Walk of Shame article from yesterday:

    http://www.fool.com/investing/general/2010/03/10/weekly-walk...

    Then re-read this article that you wrote today.

    Are you seeing any connections? Apple wants to make sure it gets credit for the efficacy of its advertising....

    Kinda makes sense, when you think about it.

  • Report this Comment On March 11, 2010, at 8:33 PM, demodave wrote:

    Tim,

    Read your Weekly Walk of Shame article from yesterday:

    http://www.fool.com/investing/general/2010/03/10/weekly-walk...

    Then re-read this article that you wrote today.

    Are you seeing any connections? Apple wants to make sure it gets credit for the efficacy of its advertising....

    Kinda makes sense, when you think about it.

  • Report this Comment On March 11, 2010, at 10:43 PM, TMFMileHigh wrote:

    Hello demodave,

    >>Are you seeing any connections? Apple wants to make sure it gets credit for the efficacy of its advertising....

    Sure, it does make sense for Apple to have the ability to easily imbue its devices with advertising. At the very least, it could be a differentiator versus iPad and iPhone competitors.

    But the logic of having an advertising offering doesn't change my view of the insanity of force-feeding ads to uninterested users. Apple's challenge is to create an ad platform that is never bothersome and sometimes useful.

    FWIW and Foolish best,

    Tim (TMFMileHigh and @milehighfool on Twitter)

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