Ad growth a sign of the Times

News organisations favour subscription revenue over the fragmented and volatile digital advertising market. But what happens now that online marketing offers a veritable gold mine?

On Wednesday, the New York Times reported digital ads sales had soared in the second quarter of 2021 versus 2020 and 2019. The advertising boon has benefited the likes of Facebook and Google most. But smaller publishers like the New York Times also gain from marketers eager to appeal to cash-heavy consumers.

The transitory nature of the online ad boom has discomforted New York Times shareholders. Even after a sharp rally on Wednesday, its shares are down nearly a tenth this year. The company’s stock price soared in previous years thanks to its emphasis on subscription growth. But a lofty forward price-to-earnings multiple above 38 has encouraged it to think creatively about its next move in a hypercompetitive media market.

The New York Times claims that the market for those willing to pay for English-language news is 100 million people deep. At the end of the second quarter, the company reported 8 million subscribers across print and digital formats. Of the 142,000 net subscriptions added in the second quarter, nearly half came from its cooking, games and audio products rather than core news.

The Trump years and coronavirus pandemic created natural drivers for news consumption. However, in a more conventional environment, the New York Times faces the same risk as any business with a mature product.

The company was smart to invest in adjacent areas, including food, gadget reviews, television production and podcasts. Ultimately, a media company has to become an ecosystem and a lifestyle brand. The New York Times has a billion dollars of net cash. With a temporary digital ads gusher, that balance will grow faster than expected. Investors expect it to use those funds to find the best way to keep the business growing beyond news.