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.
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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?
