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US newspaper ad revenues are expected to drop 42.5% in the next seven years, signaling a death spiral for the medium as readership moves online and to more real-time, interactive venues, according to a report from eMarketer.

In its report, “Newspapers in Crisis: Migrating Online,” the research firm estimates that newspaper advertising revenues dropped 16.4% to $37.9 billion in 2008 and expects that by 2012, those revenues will tumble to $28.4 billion – slightly more than one-half the industry’s revenue peak of $49.4 billion in 2005.

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Since 2006, ad revenues have declined quickly, eMarketer said, adding that it expects a 15.9% drop in 2009 that will pull ad revenues down to $31.9 billion. From 2010 through 2012, the firm forecasts that the rate of decline will slow but remain in negative territory. Overall, it will amount to seven straight years of declining ad revenues, a 42.5% drop.

Problems Deeper than Just Print

Though the future of news media is undoubtedly going to be online in some format, simply migrating existing print editions to the web is not a sure recipe for success, according to eMarketer. Newspaperers face stiff competition from online-only media, blogs, and user-generated content sites that are not stretching to make the transition.

Moreover, online ad revenues are dropping. eMarketer estimates that online newspaper ad revenues declined by 0.4% in 2008 to $3.15 billion and will continue to drop in 2009 by 4.7% to $3.01 billion. The recession, the dismal state of the newspaper industry and the quarterly online ad spending trends for 2008 all factor into these projections.

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“The challenge is continuing to make money with the transition to online,” said Carol Krol, eMarketer senior analyst and author of the report. “Newspapers have the same transition problems that plague other traditional media such as TV, and so far they have not been able to crack the code,” Ms. Krol said.

The report recommends that newspaper websites increase the creation of interactive products that appeal to their readership, particular younger consumers, and adds that blogs, social communities, and video content within and related to sites will be rewarded with increased visitor engagement and a deeper relationship with readers.

About the research: eMarketer benchmarks its projections against Newspaper Association of America (NAA) data and factors in the recent economic downturn.

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