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Many Web sites have now reached a point where they can claim profitability.

That good financial news, though, must be put into perspective. First, the money being made on the Internet is still a relatively small part of company income. Second, how much of a profit center it is depends to a certain extent on how costs are accounted for, and many news Web sites do not pay for the cost of supplying much of their content.

It will still be years until the Internet becomes a major economic engine that is paying for the journalism it produces rather than piggybacking off its older media parents.

Still, the Internet is journalism’s growth area, at a time when other areas are shrinking in audience, which is putting inevitable pressure on economics and quality. The growth rates for revenue and profit are high, and at the close of 2003, the projections for 2004 and beyond were aggressive. Some of this optimism stems from a belief that companies will become savvier at using the data that they collect from users, both through requiring registration and by tracking people’s actual use of the site. As Web publishers learn more about their users, they will be able to increase their revenue from advertisers willing to pay more to reach specific demographics.1


It is important to recognize that the Web represents only a small part of the overall revenue of these companies. The numbers, realistically, would be barely worth mentioning for these corporations except for the perceived potential growth of the sector. In a report, “What Newspaper Web Sites Earn,” Borrell Associates examined the 2002 online revenues from the 11 largest publicly-traded newspaper companies.2 These online revenues on average accounted for only 2 percent of total revenues of the companies. Dow Jones, which charges for online access, had the highest percentage with 3.2 percent.3 Even if the online revenues continue at robust rates of growth, it should be kept in mind that it will be some years before they make up a significant portion of company revenue.4

Even a comparison of newspaper groups’ online revenues to their newspaper revenues demonstrates online divisions’ relatively small contribution. At the New York Times, online revenues were only 4 percent of newspaper revenues in the third quarter of 2003.

Online Revenues for Newspaper Companies, 2002
Source: Borrell Associates, ‘‘What Newspaper Web Sites Earn,’’ April 2003, p. 8
*Includes revenue from non-Newspaper related sites, such as television Web site revenues and other Web ventures. New York Times Co. includes the Web sites for the New York Times and the Boston Globe. Gannett figure does not include the USA Today Web site.

Keeping this in mind, however, the rate of growth is impressive-and important. Except for Dow Jones, each of the 11 newspaper companies reported a double-digit increase in revenue for their online operations in 2002, according to Borrell Associates. Belo led with a gain of 49 percent. Gannett, Tribune, Knight Ridder, Lee, and Media General all had increases of at least 25 percent, and The Washington Post reported 18 percent growth.5

The projections for 2004 are that such growth rates will continue and perhaps increase. The Online Publishers Association said that in a survey of 26 leading media companies, which included many newspapers, 2003 third-quarter advertising revenue was 46 percent higher than in the third quarter of 2002.6 Even if 25 percent growth persists, newspaper companies will double their online revenues by 2005 over 2002 levels and triple them by 2007.

There are suggestions that this impressive rate of growth is true at other Web outlets. Richard Deverell, head of BBC Interactive, remarked in 2003 that was getting 3 million readers every day and was growing by 50 percent a year, while BBC television was getting 10 million viewers a day and was declining by 5 percent a year.7

While the revenue model of the news on the Web is still emerging, the picture is clearly improving.

One factor is classified advertising. McClatchy reported an 80 percent increase in 2003 online classified revenue over 2002.8, on the other hand, has reported over 60 percent growth n revenues excluding classified advertising, and 30 percent overall.9 Classified revenue, in other words, is not growing at the same rate as other advertising sectors.

Online Revenue as Percent of Total Company Revenue, 2002
For 11 public newspaper companies
Source: Borrell Associates, SEC Filings
Includes Media General Inc., Lee Enterprises Inc., Belo Corp., McClatchy Co., Washington Post Co., Dow Jones Inc., Knight Ridder Inc., New York Times Co., Tribune Co., and Gannett Inc


Getting a grip on the next part of the economic picture, profitability, is a little harder. Borrell does not collect profit figures, only revenue. Even where there are numbers, moreover, profitability is hard to gauge since Web sites require substantial investments as seed money to design and operate them. So, while a site or online division may be making money on current operations, the startup costs have to be considered when calculating the Web’s full impact on the company.

Revenues and Profits for Select Newspaper Online Divisions
2000 to 2002
Design Your Own Chart
Source: SEC Filings
New York Times Digital does not include the New York Times Regional Group

The evidence suggests, however, that profits are improving. Some bigger companies, indeed, are now able to argue they have crossed the breakeven point. ABC News announced that its online division turned a profit in its 2003 fiscal year.10 For newspapers, four large corporations report operating profits for their online divisions to the SEC. The online operations of two of these companies – the Tribune Co. and The New York Times – became profitable for the first time in 2002, after incurring large losses in 2000 and 2001. Two others, Knight Ridder and the smaller Belo, continued to approach profitability in 2002 but still had losses. It may be that The Times and the Tribune Co. have been able to leverage the size of their individual newspaper audiences with advertisers looking to get a good price for as many eyeballs as possible. Chains with smaller newspapers may have to work harder in order to collect ad dollars.

Some have raised the concern that even these profit numbers and, to some extent revenues, may be inflated through complicated accounting procedures. Newspapers often sell print and online classified advertising as a package deal. It is then up to each company to decide how much of each classified dollar belongs to print and how much to online. By shifting around the distribution, online divisions can appear more or less profitable. “There’s no hint here of Enron WorldCom-style accounting,” Dominic Gates wrote in the Online Journalism Review. “It’s not crooked – it’s just complicated with lots of room for fiddling with the numbers.”11

One thing is clear, however. As the newspaper industry watches shrinking readership, declining circulation and stagnant advertising revenues, the investment in the Web represents, to date, the industry’s primary investment in the future.

Different Economic Models on the Web

At this point, there is no established financial model for online news divisions. Will the revenue come more from advertising, as it does in newspapers in TV, or more from subscriptions, as it does in newsletters, or from a combination? Many companies are trying different approaches with their sites in hopes of finding a sure formula. To understand the diversity of models springing up, consider the sites of three of the largest print dailies, The New York Times, The Wall Street Journal and The Washington Post.

The New York Times

The New York Times Web site is operated by a subsidiary of the New York Time Company, New York Times Digital (NYTD), which also operates The Boston Globe’s The Times site remains mostly free for users, as long as they register and provide some personal information. By requiring registration, NYTD is able to track users’ movements through the site. These movements are then used as leverage with advertisers, allowing them to target their most desirable consumers.

Unlike most newspapers, NYTD does not acquire its content free. The online division purchases content from the print division for the amount of 10 percent of the NYTD’s revenue. In turn, NYTD draws revenue from two main streams: selling advertisements on the site and licensing Times content to electronic databases. The Times has promoted its online advertising opportunities as a way to reach a desirablely affluent audience of about 10 million unique visitors each month. To help grab users’ attention, the site sells “surround sessions” where advertisers can purchase all the advertising spaces on a screen, ensuring that users will only see their advertisements.12

Not all of The Times’s Web site is free, however. Users must pay for such special content as crossword puzzles ($34.95 for an annual subscription). In a larger move in May 2003, The New York Times site started charging for its popular e-mail alerts service, News Tracker. For $29.95 a year, subscribers receive e-mails of Times content on up to 10 topics. Before the fee was imposed, the service had 500,000 readers. By August 2003, the service had 20,000 subscribers.13

The mix of streams has resulted in profits for NYTD. For the third quarter of 2003, the division announced profits of $5.7 million on revenues of $21.8 million (the New York Times Company as a whole had revenues of $759 million). About 71 percent of NYTD’s revenue comes from advertising and the rest from electronic licensing of Times content and other services.14

The Wall Street Journal

The Wall Street Journal follows a different route to reap its revenues. Like The Times, it sells advertisements on its pages. But anyone who wishes to read The Journal online must pay an annual subscription. Even those who already subscribe to the Journal in print form must pay for it, though at a lower rate.

The Journal, owned by Dow Jones, remains one of only a few – and the only major newspaper – to charge for access. While not uncommon with magazines and the trade press, as of January 2003, Editor and Publisher reported, only 21 daily newspapers were employing the subscription model.15

The Journal charges $79 a year to subscribe online ($39 for print subscribers), or $6.95 a month. As of September 2003, the site had 686,000 subscribers, which represent the bulk of the site’s revenue (approximately $16 million in the third quarter of 2003). Unlike the Times, the Wall Street Journal’s site does not benefit from database licensing (charging online archive companies for access to older articles); this activity belongs to another division of Dow Jones, which also makes money online through the Dow Jones Newswire.16

Many newspapers have feared that charging users would chase them away. Yet Editor and Publisher’s Steve Outing predicts that “[w]hat is likely is that an increasing number of news sites – including the most prominent ones – will create more and more ‘premium’ content, for which they will charge fees to view.”17 Outing warns that such a system has negative effects since this premium content falls below the radar of search engines, a key magnet for drawing traffic. One added benefit enjoyed by The Journal has been being able to add each of its online subscribers paying the full $79 a year subscription fee to its overall ABC circulation total, which led to a 290,000 jump in circulation between 2002 and 2003.18

The Washington Post

The Washington Post represents a third online approach. Unlike the New York Times’s push for targeted advertising and The Wall Street Journal’s insistence on a subscription, the Washington Post’s online site relies on general advertising, including classifieds, in order to produce its revenue.

The Post Web site is run by a subsidiary of the Washington Post Company called Washingtonpost.Newsweek Interactive (WPNI), whose offices are across the Potomac River from Washington in Arlington, Virginia. The site does not charge a subscription or ask users to register, though it does ask for some basic demographic information. It also does not have to pay for content.

As a result, nearly all of the revenue comes from advertising. Revenue for WPNI, which mainly comes from The Post site, was $12 million for the third quarter of 2003, an increase of 32 percent over the third quarter of 2002. A large chunk of this revenue, 40 percent, came from classified advertising, which The Post has aggressively sought to increase with its section.19

In its efforts to generate revenue from the Web, the Post defies long-established standards that govern the print product. For example, the newspaper would not dare run advertising on its front page or next to the editorials, yet ads greet users on the Web in both places. This has become the norm on many advertising-supported Web sites, as newspaper sites develop unique norms on what is an acceptable space for advertising.
Making Ends Meet

The model that online news sites follow may depend in part on the size of the publication. For now at least, the larger the paper, the more remunerative its online division is. Borrell found that the largest newspapers (those with circulations of more than 200,000) took in nearly four times as much revenue as the smallest dailies after accounting for differences in size.

Indeed, the smallest papers (those with circulations of less than 50,000) average less than $6 in online revenue for each of their print subscribers. Newspapers with circulations of more than 200,000 were able to collect more then $20 in online revenue per print subscriber. Revenues for newspapers between 50,000 and 200,000 fell in the middle. Overall, the sites in the study averaged $14.49 in online revenue per unit of print circulation.

Newspaper Online Revenue Per Subscriber, 2002
Design Your Own Chart
Source: Borrell Associates, ‘‘What Newspaper Web Sites Earn,’’ April 2003, p. 12
Based on 246 newspapers.
Where Local Online Advertising Goes, 2002
Design Your Own Chart
Source: Borrell Associates, ‘‘What Newspaper Web Sites Earn,’’ April 2003, p.5

In the latest year for which data were available, 2002, newspaper Web sites procured a 40 percent share of online local advertising. The next largest slice belonged to online yellow pages, with 24 percent. Yahoo, AOL and MSN got 12 percent. Local television and radio sites got 3 percent.20

Newspaper publishers’ greatest concern comes from the 21 percent of local advertising dollars going to the so-called vertical companies online such as eBay,, and Borrell Associates labels these new companies as “classified killers” because they eat away at the robust income that newspapers have enjoyed for so long. As they are in print, classifieds are an important revenue stream online. The McClatchy newspaper company, for instance, draws 60 percent of its online revenue from classifieds.21 In an already shallow pool of online advertising dollars, newspaper Web sites are having to learn how to compete to a much greater degree than they have had to in print.

There is another problem. If the newspaper Web sites lose substantial portions of online classifieds, they seem likely to lose them out of their newspapers as well. Why would someone who chose over the local newspaper for an online classified ad then turn around and make a separate purchase of a newspaper classified?

The problem has a societal as well as business implication. If substantial portions of classified advertising shifts away from paying for journalism, the political and social impact could be enormous. The resources of the most important newsgathering organization in every town in America could shrink. Instead of endeavoring to cover the totality of their communities, newspaper companies, in whatever delivery form, would be forced to be much smaller, targeted newsgatherers, with smaller staffs and more limited news agendas. Newspapers, in that sense, would move more in the direction of local television.

Local TV

Television stations do not face the same threat as newspapers of losing large advertising sectors. But the transition from broadcast to online content is more difficult than it is for newspapers, for which text on paper simply can become text on screen. And the Web is an even more paltry part of television company revenue at this point. The national television networks and cable channels have been able to build popular sites, but while most local television stations now have Web sites and are accustomed to adding new content quickly, they have difficulty competing with the depth of the local newspaper.

Who’s Making a Profit on Local News Web Sites, 2002
Survey of station managers
Design Your Own Chart
Source: RTNDA/Ball State Survey by Bob Papper, RTNDA Communicator, April 2003

As part of his annual survey for the Radio Television News Directors Association, Prof. Bob Papper of Ball State University asked local television news directors if their Web sites were making money. Only 13 percent indicated a profit while 25 percent reported a loss. About 44 percent of respondents said they did not know if their sites were making money. This could indicate widespread detachment of news directors from the online activities of their stations, a theory supported by the fact that news directors in the largest markets were the most likely to be in the dark (74 percent). In the smallest markets the figure was only a third, 34 percent. As the market grows, so does the newsroom, and news directors could be somewhat more specialized in their responsibilities. Or, perhaps, many of those surveyed chose for one reason or another not to reveal the financial status.

Stations’ online profitability does not seem to be in proportion with its market size. The highest percentage of news directors indicating an online profit came from the middle-sized markets. Yet news directors from both the next larger and next smaller markets were less likely to report online profits.

Many television stations turn over their sites to companies that specialize in creating television Web sites. Two of these companies – Internet Broadcasting Systems (IBS) with 65 stations and WorldNow with 143 stations – are in the Nielsen//NetRatings top 20 News Web sites list. “All IBS sites over a year old are profitable, and we are growing those margins,” the IBS chief executive, Tolman Geffs, said in an article in the Online Journalism Review.22

Certainly, the television station sites’ audience growth suggests the potential for profit. From September 2002 to September 2003, IBS’s aggregate monthly online audience grew by 50 percent to 8 million unique visitors. In the same period, WorldNow’s total traffic increased by 32 percent to 3.3 million unique visitors

In the end, the economics of news on the Web are promising but still evolving. While revenues are growing, and audiences are robust, generating big-time revenue remains a struggle and the model is unclear. While Web journalism is trying to sort out reliable ways to make money, it is also having to fend off new forms of online competition for ad dollars, such as, that are not engaged in journalism. For now, the biggest Web sites and newspaper companies are faring best. Smaller ones may thrive in chain combinations. But in many ways, the economics of the Web might be analogous to radio in the 1920s. It is not clear yet what the industry will look like even 10 years away.


1. Dave Morgan, “News Web Sites: A Future Waiting to Happen,” Editor and Publisher, December 18, 2003. Available online at:

2.These companies are: Gannett, Tribune, New York Times, Knight Ridder, Dow Jones, Washington Post, McClatchy, Belo, Lee Enterprises, Media General and Journal Register.

3. Borrell Associates Inc, “What Newspaper Web Sites Earn,” April 2003; Advertising Age, ”100 Leading Media Companies list,”

4. New York Times SEC Quarterly Report, November 5, 2003. The comparison is made between the revenues of New York Times Digital ($22 million), which operates the Web sites for The New York Times and The Boston Globe, and the revenues of The New York Times and the New England Newspaper Group ($582 million), which includes The Worcester (Mass.) Telegram and Gazette as well as The Globe.

5. The lone exception, Dow Jones, which owns the subscription-based Wall Street Journal Web site, had only a 3 percent increase. The Wall Street Journal’s lack of online growth may stem in part from the downturn in business advertising in 2003. Another factor may be its choice to follow a subscription-based Web site rather than a completely advertising-based site, which is discussed below. A third part of the explanation may be that Dow Jones is simply farther along in its development, so its growth is slower.

6.Online Publishers Association, “Quality Online Content Providers Show Substantial Third Quarter and Year-to-Date Ad Revenue Growth,” press release, November 20, 2003. Online at

7. Richard Deverell, comments made at the 2003 Online News Association Annual Conference, November 15, 2003, Evanston, Ill.

8. Leon Lazaroff, “Profitable classifieds poised to climb in ’04,” Chicago Tribune, December 13, 2003

9. “The Washington Post Company Reports Third Quarter Earnings,”, October 31, 2003. Available online at

10. “ABC News Online Services Turns to Profit,” Reuters, December 18, 2003.

11. Dominic Gates, “Dubious Accounting?” Online Journalism Review, July 10, 2002. Available online at

12.New York Times Web site:

13. “’s Paid News Tracker Service Surpasses 20,000 Subscribers,” Business Wire, August 7, 2003.

14. New York Times Quarterly Report (10-Q), November 5, 2003

15. Carl Sullivan, “More Publishers Try All-Paid Web Model,” Editor and Publisher, January 23, 2003

16.; Dow Jones, Inc. Quarterly Report (10-Q), November 14, 2003

17. Steve Outing, “Stop the Presses!” Editor and Publisher, January 27, 2003,

18. Mark Glaser, “Journal Takes Broader View of Circulation with Online Inclusion,” Online Journalism Review, November 11, 2003. Available at

19. Melinda Gipson, “Playing the Game to Win,” Newspaper Association of America, August 2002, p. 20.

20. “What Newspaper Web Sites Earn,” Borrell Associates Inc., April 2003, p. 5, fig. 1

21. “Playing the Game toe Win,” Newspaper Association of America, August 2002, p.7

22.Cory Bergman, “TV Stations May Finally Get the Point,” Online Journalism Review, April 24, 2003. Available online at