How to Make Money in Newspaper Advertising

The U.S. newspaper business is a declining industry. Since 1990 newspaper circulation has been in a steady
fall, with the drop accelerating in recent years. According to the Newspaper Association of America, in 1990
62.3 million newspapers were sold every day. By 2011 this figure had dropped to 44.4 million. The fall in
advertising revenue has been even steeper, with revenues peaking in 2000 at $48.7 billion, and falling to just
$20.7 billion in 2011. The reasons for the declines in circulation and advertising revenue are not hard to find;
digitalization has disrupted the industry, news consumption has moved to the Web, and advertising has
followed suit.

Declining demand for printed newspapers has left established players in the industry reeling. Gannett Co.,
which publishes USA Today and a host of local newspapers, has seen its revenues slip to $5.3 billion in 2012,
down from $6.77 billion in 2008. The venerable New York Times has watched revenues fall from $2.9 billion to
$1.99 billion over the same period. The industry has responded by downsizing newsrooms, shutting down
unprofitable newspaper properties, including numerous local newspapers, and expanding Web-based news
properties as rapidly as possible. It has proved to be anything but easy. Whereas consumers were once happy
to subscribe to their daily print newspaper, they seem to loathe paying for anything on the Web, particularly
given the large amount of “free” content that they can access.

Against this background, one local newspaper company is swimming against the tide, and making money at it.
The company, Community Impact Newspaper, produces 13 hyper- local editions that are delivered free each
month to 855,000 homes in the Austin, Houston, and Dallas areas. The paper was the brainchild of John
Garrett, who used to work as an advertising director for the Austin Business Journal. Back in 2005, Garrett
noticed that the large-circulation local newspapers in Texas did not cover news that was relevant to smaller
neighborhoods— such as the construction of a local toll road, or the impact of a new corporate campus for
Exxon Mobil. Nor could news about these projects be gleaned from the Web. Yet Garrett believed that local
people were still hungry for news about local projects and events that might impact them. So he started the
paper, launching the inaugural issue in September 2005, and financing it with $40,000 borrowed from low-
interest credit cards.

Today the paper has a staff of 30 journalists, about 35% of the total workforce. The reporting is pretty straight
stuff—there is no investigative reporting—although Impact will do in-depth stories on controversial local issues,
but it is careful not to take sides. “That would just lose us business,” says Garrett. About half of each edition is
devoted to local advertisements, and this is where Impact makes its money.

For their part, the advertisers seem happy with the paper. “We’ve tried everything, from Google Ads to
Groupon, but this is the most effective,” says Richard Hunter, who spends a few hundred dollars each month to
advertise his Houston restaurant, Catfish Station. Another advertiser, Rob Sides, who owns a toy store, Toy
Time, places 80% of his advertising dollars with Impact’s local edition in order to reach 90,000 homes in the
area. An analysis by Forbes estimated that each 40-page issue of Impact brings in about $2.50 in ad revenue
per printed copy. About 50 cents of that goes to mailing and distribution costs, 80 cents to payroll, and another
80 cents to printing and overhead, leaving roughly 40 cents per copy for Garrett and his wife, who own the
entire company. If this analysis is right, Impact is making very good money for its owners in an industry where
most players are struggling just to survive.