Ad revenues in the newspaper industry plunged 16.7% last year to $37.8 million r, according to the Newspaper Association of America (NAA). The 2009 take is estimated to fall another 17.3% to $31.6 billion according to Alan Mutter, a Silicon Valley executive who once lead the newsrooms of the Chicago Sun-Times and San Francisco Chronicle and now writes a blog titled “Reflections of a Newsosaur.”

Mutter’s estimate would put ad revenues at their lowest levels since 1965, when the industry took in $4.42 billion, or $30.22 billion when adjusted for inflation, the Columbia Journalism Review (CJR) reported.

While the worst economic downturn since World War II has eviscerated the fortunes of print media companies like The New York Times Co. (NYSE: NYT), The Washington Post Co. (NYSE: WPO) and Gannett Co. Inc. (NYSE: GCI), publishers will see secular decline in revenue even after the financial crisis subsides.

“Think, for instance, the classified ads business of newspapers, which has been walloped by eBay and craigslist (with a final indignity provided by the cyclical collapse of the housing bubble),” the CJR said. “Most of those revenues aren’t coming back. That’s a secular decline.”

The result of this decline means a “new reality” for publishers as they transition from the printed page to digital content. All the major publishers are online and have been for some time.

The New York Times’ Web site began in 1995, when the Internet was just starting to enter consumers’ homes. Ten years later in 2005, The Timestried its hand at a subscription-based model for its Web site, known as TimesSelect, a service that charged readers without subscriptions $50 a year for online access to editorial content.

According to The Times Co., TimesSelect had about 227,000 paying subscribers by August 2007. However, accessing the content for free were an additional 471,200 home delivery readers, as well as another 89,200 college students.

But the estimated 13 million readers who accessed the site that month, according to Nielsen/NetRatings reports, dwarfed those subscriber-users. The following month, the Times Co. gave up on TimesSelect and made the Web site free for all users in September 2007.

Since then, nytimes.com has soared to become the most visited newspaper site in the United States, with roughly 20 million unique visitors per month as of March. But The Times and other publishers are still trying to figure out how to generate revenue and turn a profit, especially now that the recession is cutting into advertisers’ budgets.

“As we continue our transition from a company focused primarily on print to one that is increasingly digital in focus and multiplatform delivery, online advertising revenues are a more important part of our mix,” said The Times Co. President and Chief Executive Officer Janet Robinson. “They made up 21% of our ad revenues in the quarter, up from 18% in the same period a year ago.”

Print and online ad revenue for U.S. newspaper publishers fell 29% in the second quarter from $9.6 billion to $6.82 billion, according to the NAA. Part of this stems from a cyclical decline in spending, while the rest comes from the “new reality” that people aren’t reading as many printed newspapers as they used to.

“This data represents a rearview mirror perspective on what we all know was a terrible stretch of bad road,” said NAA Chief Executive Officer John Sturm.

And the data comes even as online news audiences are growing: The latest data from the NAA shows online newspaper readership was 73.3 million users in the first quarter, a 10.5% increase from the 66.4 million the year before.

A Financial Fork in the Road

Publishers are hoping the decline in online ad spending is cyclical, but some aren’t waiting for the recovery to take advantage of the growing information-hungry audience and what they hope is an inevitable upswing in ad revenue.

News Corp. (Nasdaq: NWS) Chairman and CEO Rupert Murdoch has vowed to charge for all of the online content of his newspapers and television news channels, including The Wall Street Journal, the New York Post and Fox News.

Much of the content on The Journal’s Web site is available only through a paid subscription of $1.99 per week, and is one of the few newspapers to successfully charge for its content, in spite of a backdoor to view articles for free via Google Inc.’s (Nasdaq: GOOG) popular search engine.

“If successful, we’ll be followed by all media,” Murdoch told the Financial Times.

Murdock predicts “significant revenues” from charging for differentiated news online.

But differentiated news isn’t enough for people to pay for it, according to Google CEO Eric Schmidt.

“In general these models have not worked for general public consumption because there are enough free sources that the marginal value of paying is not justified based on the incremental value of quantity,” he said to a group of British broadcasting executives.

Murdoch is hoping The Journal’s online success will carry over to its mobile applications for devices like Research in Motion Ltd.’s (Nasdaq: RIMM) BlackBerry and Apple Inc.’s (Nasdaq: AAPL) iPhone. His company will start charging consumers to read stories via those apps “in one to two months,” he told Reuters last week.

Several news outlets already have either ad-supported mobile news sites or device-specific applications. The Times and The Journal have the No. 2 and No. 5-most downloaded apps in Apple’s App Store for iPhone, respectively. NPR News is the most popular app.

A “Digital Vampire” Becomes a Partner to Some Publishers

Google News, which aggregates stories from the all over the Internet, currently generates ad revenue from news searches and doesn’t share any of it with the news sites – a business model that clearly doesn’t sit well with publishers.

Earlier this summer, Les Hinton, chief executive officer of Dow Jones and publisher of The Journal described Google as a “digital vampire.”

Speaking at the annual PricewaterhouseCoopers LLP Entertainment and Media Outlook event, Hinton accused Google of “sucking the blood” out of the newspaper business, and vowed new developments would level the playing field.

“There is a charitable view of the history of Google,” Hinton said. “[It] didn’t actually begin life in a cave as a digital vampire per se.”

Instead, by offering content free on the Web, the newspaper industry “gave Google’s fangs a great place to bite,” he said. “We will never know what might have happened had newspapers taken a different approach.”

Now, Google is trying a new way to share its take and possibly change the way people read news on the Web with its “Fast Flip” experiment, unveiled last week.

The idea behind Fast Flip is to present newspaper and magazine Web sites like a print publication, and users can quickly “flip” top stories in a selected category or specific topic found via Google’s search.

Google will share revenue with publishers such as The Times. Co. and The Post Co., but specific percentages were not given.

“The publishing industry faces many challenges today, and there is no magic bullet,” said Google News researcher Krishna Bharat in a blog posting. “However, we believe that encouraging readers to read more news is a necessary part of the solution. We think Fast Flip could be one way to help, and we’re looking to find other ways to help as well in the near future.”

Source: ‘New Reality’ for Newspaper Publishers Forces Search for New Revenue Streams to Tap Into

Buffett’s investment vehicle, Berkshire Hathaway (NYSE:BKR.A), made its best gains in the ’70s and ’80s, when its tight budget meant it could only investment in small-caps. It is much easier to make huge gains when starting from a low base.

Berkshire now deals with the world’s largest organizations. The next Buffett will be investing in today’s penny stocks. More from Jim…

In 1936, one smart six-year-old purchased a few six-packs of Coca Cola from his grandfather’s grocery story for a quarter per pack and resold each bottle for a nickel apiece. With that initial 20% profit he made of each six-pack, the world’s richest man got his start in business.

Today, that same man owns $12.2 billion worth of the Coca Cola Co. Obviously, I’m talking about Warren Buffet…

Everyone already knows all there is to know about him…or so they think…

Sure, we know that he went to Columbia to study under Benjamin Graham. And, that he’s one of the largest owners in many of the brand names we enjoy everyday — General Electric (NYSE:GE), Anheuser Busch (NYSE:BUD), Bank of America (NYSE:BAC), and of course, Coca Cola (NYSE:KO). He’s also the wealthiest man in the world, totaling $62 billion.

But there is something that only a handful of people know… He wants to be poor again.

That’s right! Back in 1999, he told BusinessWeek “…it’s a huge structural advantage not to have a lot of money. I think I could make you 50% a year on $1 million. No, I know I could. I guarantee that.”

The reason for his guarantee is simple… The best opportunities in the world are in small-caps. If you have a tiny company worth 50 cents per share, it’s a lot easier for it to go to $1, as opposed to a $50 one going to $100. But that’s not the only reason Buffett loves small-caps.He also discusses his affinity for finding little nuances in companies that other investors don’t see right away. In a 2005 Kansas University interview, Buffett elaborates, “You have to turn over a lot of rocks to find those little anomalies. You have to find the companies that are off the map — way off the map. You may find local companies that have nothing wrong with them at all…”

You can’t do that with big blue chips…

If a small company has a hidden asset that investors haven’t picked up on yet, it would take some work, but you could find it and make big money off of it. Finding a large company with a hidden asset is exponentially tougher.

There are a thousand reasons why smaller companies offer more potential, but at the end of the day, it comes down to one thing. How much more money can I make with small-caps.

Let’s take a look at two charts for a minute:

The top one is Berkshire Hathaway (NYSE:BKR.A), Buffett’s investment vehicle, from 1977 to 1992. The bottom one is Berkshire from 1992 to 2007.

Upon quick glance, they both look pretty good. In fact, they look nearly identical except the spike at the end of the century, which happened in nearly every single stock traded at the time.

But if you look closer there is a big difference between the two charts. Notice how in the first one, Buffett brought investors gains of 10,000%, and in the second, he only brought a 1,200% gain. Now, I know that still sounds pretty darn good (which it is), but the question remains, why did he do so much better in the first 15-year period of Berkshire than the second 15-year period? The answer is small-caps…

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You see, back in 1977, Berkshire was a much smaller company, with a lot less money to invest. So, Buffett was able to invest in smaller companies at the time, including American Express (NYSE:AXP), Disney (NYSE:DIS), and the Washington Post Company (NYSE:WPO)… Those companies were able to grow much faster than the ones Buffett is restricted to now. Now, Buffett has to look at companies worth tens of billions of dollars. In ‘77, he could look at companies worth just a few hundred million dollars.

But to do even better than Buffett, your only chance is to look for companies even smaller. I’m talking companies flying way under the radar. Companies in the tens of millions of dollar range… Simply put, buy penny stocks because Warren Buffett can’t.

Source: Beating Buffett with Today’s Penny Stocks