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Monday, 20 October 2014
Newspapers look to outsource more than just content services
Wednesday, 20 June 2012

A less than stellar performance in ad sales for the first quarter of 2012, confirms that outsourcing has never been a more viable option for newspaper publications looking to shore up their bottom lines.

Trends in ad revenues of newspapers

newspapers_20thjune_exhibit1.pngThe ‘Quarterly Newspaper Ad Expenditures’ figures released by the Newspaper Association of America, in May 2012, paints a bleak picture for the future of advertising revenues for the U.S. newspaper industry.

The accompanying graph illuminates the trends in total ad sales, both print and online, by juxtaposing the numbers for the first quarters of the years 2011 and 2012.

 

 

 

 

  •  Total ad sales, print and online, fell 6.86%
  •  Total print ad sales fell 8.20%
  •  Total online ad sales rose 1.00%
  •  Total online ad sales constituted 16% of total ad revenue in the first quarter of 2012, compared to 15% in the same quarter in 2011

While the holiday season in the last quarter of the year usually boosts ad revenues, this was not seen in the reported data.

There is a silver lining for US newspapers. In a recent survey, “Global Trust in Advertising”, 47% of respondents trusted print ads in newspapers, compared to 28% of trust for online banner ads, illustrated in the exhibit below.

      newspapers_20thjune_exhibit2.png

Furthermore, in a recent survey by the Pew Internet & American Life Project, it was found that 72% of Americans follow local news closely, and they rely on local newspapers for their source of information. This could lead to a potential increase in sales for local newspapers, if their sales and marketing personnel are able to leverage this trust.

The offshoring need

None of this negates the fact that severe pressure on revenues and margins is forcing the U.S. newspaper industry to cut costs for its very survival. In our report, titled ‘Offshoring by U.S. Newspaper Publishers ’, we found that all three tiers of newspaper publishers in the US will be offshoring by 2015, where the three tiers are characterized by their revenue, manpower strength, and coverage and presence. The services most commonly offshored by newspaper publishers are shown in the exhibit below.

newspapers_20thjune_exhibit3.png
Traditionally, newspapers outsource production and pre-press services, such as layout and typesetting. However, outsourcing is fraught with issues concerning turnaround time and quality. A couple of issues faced by newspaper publishers are explained below:

  • Ad page layout can change until the last ad is placed, making on-time delivery a critical success factor.
  •   Copy editing, requires understanding of the newspaper’s culture, such as the difference between Broadway, the theater hub in Manhattan, and Broadway Ave, which spans the five boroughs of New York City.

Ad production has the most offshoring potential; it is easier to offshore, the service maturity in the provider market is high, and cost savings are estimated at 40-60%. An emerging opportunity in design services for service providers that cater to newspaper publications is photography research. Service providers have access to a database of stock images, and select the right image based on the content. Researching permissions of images already included in the content by crawling through databases is another avenue for service providers to explore. Our recent blog post on the services and sub-services offered by most publishing outsourcing service providers throws light on the portfolio of design and ad production services.

Service providers in the Publishing Outsourcing industry will need to adapt rapidly to the new needs of newspaper publishers. To share your views and thoughts on emerging trends and challenges in this KPO segment, participate in the ValueNotes Annual KPO survey .

- Deepti Krishnan, Research Analyst, ValueNotes


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