Bloomberg News reports that the newspaper industry took its biggest hit so far in the first quarter of this year - with advertising sales dropping 14 percent. The all-important categories of real estate and recruitment saw their ads drop 35 percent. Almost immediately, the hatchet fell: McClatchy announced it's cutting 1,400 jobs - 10 percent of its workforce.

Newspapers are losing their ad money. So you would think someone else is reaping the rewards. After all, if advertisers aren't spending on newspapers, they have to be spending somewhere else. So where is the ad money going?

Turns out, it's just going away.

Kip Cassino at Borrell Associates has the key quote in this article:

"This stuff isn't going to online intermediaries, because if it were there would be three or four enormous sites for each of these categories,' Cassino said. "It's going to companies that say, `I can do my own advertising."'

The disruption is even worse news than media companies had feared. This isn't simply a case of trying to grab shifting ad dollars. Advertisers, as Terry and I have written, are eliminating the middle man. Newspapers' biggest competitors now, as Cassino puts it, is their former advertisers.

How big is this decline? It's bigger than than the recession following 9/11. The biggest on record, in fact, going back to 1971 when the Newspaper Association of America began to keep such records. And while newspaper website revenue grew about seven percent, even that's not good news - it's the smallest gain since the group started recording Web revenue in 2004. And it's certainly not even close to making up for the print side's losses.

This is a coming attraction for TV.

What do we do in the face of this disaster? Unfortunately, there's no silver bullet answer. But once again, we have a giant red flag waving at us. And it signals the urgent need for change.

Local television still has the chance to act on several fronts:

* The creation of original content online, working with advertisers
* Building free classifieds sections
* Creating "Continuous News" sites which allow higher sales rates by daypart
* Embracing mobile with much stronger, more compelling offerings
* Investing in ourselves and developing creative interactive experiences
* Developing many more niche sites and products that allow targeted advertising

Advertisers will go where the audience is, if the audience is relevant to them. The "Large Number" audience that mass media delivers is not as useful as it once was. If we can deliver strong numbers of a well-researched, targeted audience, and if we can provide local advertisers with a compelling case, we can bring in the revenue.

According to Broadcasting and Cable, Nexstar reports that community sites, such as RochesterHomepage.net (run by WROC, but not awash in the station's call letters) are the key to the company growing its Web revenue from $100,000 in 2006 to $5 million last year and $10 million this year.

Hyperlocal sites aren't enough. We still need to reinvent ourselves and our newsrooms. But we're already seeing this strategy bring in significant revenue. And that may be the difference between staying vibrant and closing the doors. (Link)

Steve Safran, Sr. Vice President, Media 2.0, AR&D