British newspapers need to revamp their online advertising models in line with Google and steer away from giving away free CDs to shore up their future, according to a new report by consultants Ernst & Young.
The report advises newspapers to imitate Google's successful advertising model, which charges advertisers on a cost per click basis, instead of the cost-per-thousand model used by newspapers online.
It estimates that had the main newspaper websites generated the same revenue per UK unique user in 2007 as Google, they would have earned online ad revenues of between £120m and £250m.
At present, many national newspaper websites do not reach a fifth of that figure, with the report estimating that the most popular websites generated £15m to £20m each in ad revenue in 2007, while Google's UK operation generated £1.3bn. Among the most popular websites are Guardian Unlimited and Times Online.
Luca Mastrodonato, a media analyst at Ernst & Young, said: "This gap is an opportunity for newspapers as it shows that monetising online services in the UK is possible.
"But to do so, newspapers need to move away from the volume-based cost-per-million model towards more interactive ad models such as cost-per-click or cost-per-lead."
The report also attacks free giveaways, in the form of cover-mounted DVDs and albums, as a short-term measure that fails to address how newspapers can encourage young consumers to acquire the newspaper habit. It says half of the UK's 15- to 44-year-olds use the internet for news and information, most of which is free.
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