Search engines pushing local newspapers out
Consumers are turning away from newspapers for local shopping information and heading to the Web instead, a reflection of the impact Internet search engines are having on the use of traditional media, a study released yesterday shows.
Fully 70 percent of U.S. households now use the Internet to find local merchants and services, which is equal to the percentage that go to newspapers, according to a survey conducted in February by market research firms Constat Inc. and The Kelsey Group.
A similar poll conducted in October 2003 found that 60 percent of U.S. households used the Internet for local shopping information, while 73 percent used newspapers. Assuming the current trend continues as expected, the Internet will surpass newspapers in America over the next 12 months.
"This is a reflection of how pervasive the Internet is becoming in our daily lives," Kelsey analyst Neal Polachek said. "It's not just about buying airline tickets or some of the other things people did five years ago."
The findings are significant for newspapers, as well as Yellow Pages and other traditional media for finding shopping information. With people using the Internet more, advertising dollars are sure to increasingly shift from print to cyberspace.
Driving the shift is the increasing use of broadband among consumers. Fully 55 percent of people with Internet access, which could be at home or in the office, use a high-speed connection, according to Nielsen/NetRatings. In addition, 69 percent of retail purchases made online are conducted via DSL, cable or other speedy connection, and broadband users spend 34 percent more on the Web than dial-up users.
With broadband steering people to the Internet to shop, an increasing number of consumers are turning to search engines as the starting point, with the biggest players in the market Google, Yahoo and Microsoft reaping the rewards.
The ConStat/Kelsey study did not look at the number of times shoppers use the Internet versus newspapers, Polachek said. Instead, the survey showed the increasing reach of search engines in local markets.
"Reach is a leading indicator of frequency of use," Polachek said. "What we're seeing is the early signs that (Internet) search is going to increase in use, because it's increasing in reach."
This trend is bound to hit the UK more extensively as soon as the major engines have expanded their local search facilities here.
To compete, newspapers and other traditional local advertising media will need to develop new business models for attracting shoppers, Polachek said. For example, a national newspaper, such as The New York Times, could build its own news portal with a search engine capable of directing people to local merchants and services through partnerships with regional newspapers.
"There's only a few national newspapers, but those brands have to figure out a way to bolster the newspaper industry, so it remains relevant in the future," Polachek said.
There are signs that the largest newspapers are extending their reach in the Internet. The New York Times Co., publisher of The New York Times, The Boston Globe and other newspapers, announced in February that it planned to buy About.com from Primedia Inc. for $410 million in cash.
About.com, which offers expert advice on topics ranging from personal finance and home repair to consumer electronics and geography, reaches an audience of 22 million unique visitors each month. The Times Co.'s Websites, on the other hand, are visited by 13 million users a month.
The ConStat/Kelsey study also showed that people were going to fewer sources for information. For example, 62 percent of people used one information source in looking for local trade services, such as plumbing, compared to 32 percent in 2003. The number of people using two sources, on the other hand, declined to 22 percent from 46 percent.
This trend, again, appeared to benefit the large Internet search engines, since they offer very broad search capabilities.
"If you believe consumers are going to search engines more often, then search engines are probably one of the sources they're going to," Polachek said. "But we can't make that direct link from this data."
The study was based on telephone interviews with 500 people at least 18 years or older in February 2005 and in October 2003. The survey has a margin of error of about 3 percent.
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