How paper ads still drive the newspaper business

When I read David Carr's piece in the NY Times yesterday, I thought he made some smart points about Howard Kurtz, media brands and his core question: "if news is wherever the public finds it, what really is the value of creating a complicated, labor-intensive print product? " Carr's answer was that it made the writer of a fine piece (like his story revealing the crassness of Tribune management) feel good. I know how he feels. Having a story run on the front page of the WSJ was even better than being "most e-mailed".
But I was surprised to note that his entire story did not include the "A" word -- advertising. Carr is terrific reporter and fine writer. But it's pretty clear he never spent a moment working as a business reporter. If he had, he would have followed the money.
The answer to his question is this: the value of creating a print product is that advertisers will pay for it. Newspapers could probably get all their valuable readers -- the ones with money, smarts and willingness to switch brands -- to read on line. But they can't make a credible argument that those readers will buy as a result of seeing banner ads or pop-ups on line. So advertisers won't spend anywhere near as much for a banner on NYTimes.com as they will for a full page ad in the paper NY Times front section.
Nobody in charge of the Times -- or my old employer, the Wall Street Journal-- really wants to produce news on newsprint. It's environmentally offensive (which bothers the Times). It gives unions representing people like truck drivers and typographers control (which bothers the Journal). But the only way they can persuade advertisers to spend $200,000 on a full page color ad is by letting them do it in print. The paper Times or Journal is perceived by advertisers to have value while the digital version isn't.

Historically, advertising has paid up to 80% of the bills at most newspapers. That's fallen because classified advertising is dying, but ads still account for well over half of newspaper revenue. Until that changes, there's value in creating a complicated, labor-intensive product. Moreover, those complications are a huge barrier to entry. The Times, like most newspapers, has a monopoly on daily access to readers through its print edition. That means it can charge monopoly prices for ad pages. Online, readers surf numerous places for news, making banner ads on any of them a commodity that is priced competitively.

If you don't look into the continuing reliance on revenue from print advertising, you can't understand the new newspaper business.