Taylor enters industry evolving in digital news age

With his purchase of Star Tribune Media Co., Glen Taylor is entering a newspaper industry that is reinventing itself in the digital era.

After nearly 15 years of decline in print and classified advertising revenue, the newspaper industry has started to stabilize by snaring more revenue from readers and taking advantage of opportunities that digital technology provides to customize news and ads.

The Star Tribune is healthier than many U.S. newspapers, analysts say, though also considerably smaller than it was at the industry's peak in 2001.

After two recessions, three owners and a bankruptcy restructuring since that time, the Star Tribune's revenue and employee base have dropped by more than half. But the company has been profitable for several years and managed a small revenue gain in 2013 for the first time in nearly a decade, publisher Mike Klingensmith said this year.

The Star Tribune has benefited from the combination of a strong market — Minnesota and the Twin Cities area have for decades had above-average rates of newspaper readership — and well-executed strategy, said Ken Doctor, a news industry analyst and former managing editor of the St. Paul Pioneer Press.

"The product has been better resourced and better maintained than most in the industry," he said.

Although it prints only about 70 percent of the papers it did at its peak, the Star Tribune reaches more readers than ever with the addition of its website and mobile apps, the company said. It also has by far the largest news gathering staff in the state, with more than 100 reporters.

On Sunday, the biggest day of the week, the Star Tribune's audited print readership is 1.1 million. More than 450,000 visit its website every day.

Over the past three years, the company started charging subscription fees to online readers and began delivering customized ads to them. About 20 percent of its advertising revenue came from digital last year, and it is developing a new mobile website and a makeover to its main website.

As newspapers work to expand their coverage and reach in digital space, other digital news organizations are emerging that focus only on delivering news online.

"This is where small companies can be so powerful, a single product and single focus," said Jessica Lessin, a former Wall Street Journal reporter who last year started a technology news site in San Francisco called the Information.

On the business side, the Star Tribune has made up for the erosion of print advertising revenue by starting services for small businesses, optimizing its printing plant to print other newspapers and raising subscription fees. Today, the Star Tribune gets 45 percent of its revenue from subscriptions, up from 25 percent a decade ago.

The firm also moved into the vanguard of digital advertising by selling some of its online ads in real time. In the microseconds from when a reader clicks on its website to seeing a page, the Star Tribune auctions ad spaces to advertisers who are most interested in reaching that particular reader. Members of the Star Tribune's sales team raise and lower prices for those ads throughout the day, aiming to maximize revenue.

Such real-time ad selling is taking off this year after several firms developed sophisticated algorithms to match advertisers with readers of media sites. In the ad industry, the technique is called "programmatic buying," and it is expected to account for about $7.4 billion in U.S. ad spending this year, about 20 percent of all digital advertising.

Minneapolis ad agency Colle+McVoy is further ahead than most agencies in buying digital ads in such a manner for its clients, expecting that about 40 percent of its spending this year will be on programmatic ads. "We're paying what that ad is worth at that moment," said Nicole Pomerleau, the agency's director of media.

Doctor estimates that U.S. newspapers have generated $100 million in additional revenue over the past year from programmatic ads, a notable increase, but one that's still at the margin for an industry with about $38 billion in annual revenue.

Evan Ramstad • 612-673-4241