Most newspapers have intensified their focus on their own digital editions during the past few years, but still haven’t been able to overcome this fundamental problem: digital ads typically sell for 10 percent to 50 percent less than print ads.
That gap is the chief reason that the annual print ad revenue at U.S. newspapers has plummeted 60 percent in just seven years, dropping from $47.4 billion in 2005 to $18.9 billion last year, according to the Newspaper Association of America. Over the same stretch, the industry’s digital ad revenue has climbed from $2 billion in 2005 to $3.4 billion last year.
Bezos has been making rapid inroads in digital advertising at Amazon. The company’s annual ad revenue is expected to total about $835 million this year, up 37 percent from $610 million last year, according to estimates from the research firm eMarketer.
But newspapers are mired in such a deep financial hole that it will be difficult for even a savvy Internet executive like Bezos to find a workable solution at The Post, said Christopher Harper, a journalism professor at Temple University.
‘‘It’s not really a business deal, it’s almost an investment in a nonprofit,’’ Harper said.
It’s one Bezos can easily afford to make. The purchase price works out to just 1 percent of Bezos’ estimated $25 billion fortune. In the U.S., the median charitable contribution works out to nearly 5 percent of annual discretionary income, according to the Chronicle of Philanthropy.
Bezos is also in a better position to absorb ongoing losses at The Washington Post than the newspaper would have been had it remained part of a publicly held company under pressure to deliver better returns for a larger pool of shareholders.
‘‘One of the smartest things is moving toward private ownership,’’ said Ellen Shearer, a journalism professor at Northwestern University. ‘‘I think that’s what a lot of papers need right now, particularly The Post.’’
It’s likely that some of his ideas will fail, but that probably won’t bother Bezos. In his inaugural letter to Amazon shareholders in 1997, Bezos emphasized, ‘‘It’s all about the long term.’’ He has attached that proclamation to each annual letter he’s written since.
Indeed, it took Amazon nearly a decade before it turned its first annual profit. Even now, the company doesn’t make as much money as most analysts think it should, partly because Bezos is continually investing in new ideas and equipment that he believes will make the business even more lucrative. After subtracting the $3 billion of losses sustained during its early years, Amazon has earned a combined $2 billion since its inception. In comparison, Google Inc. — a company born four years later than Amazon — is now earning more than $3 billion every three months.
Bezos’ strategy at Amazon.com has worked well so far, gracing so far with a market value of $137 billion.
‘‘One thing that Bezos seems to be is patient,’’ said Jeff South, a former newspaper editor and reporter who is now a journalism professor at Virginia Commonwealth University. ‘‘He was with Amazon, losing money quarter after quarter. He seemed to say ‘we know what we’re doing, it’s going to take time.’ Hopefully, that can transfer to newspapers.’’
After getting to know Bezos while interviewing him for his book, Gregerson is convinced the Post purchase is a case of business mixing with personal passion.
‘‘Jeff loves books, he loves journalism, he loves writing, he loves ideas and he love to make things happen,’’ Gregerson said. ‘‘That’s a quality 90 percent of executives don’t have. They don’t love the essence of what they are doing as much Jeff does. I don’t know what answers he will have in terms of a 10-year plan for the Post, but I think there is a good probability that he will figure something out.’’
Bree Fowler reported from New York.