Bad Timing? Just as News Sites Grow, Online Advertising Dips

(MoneyWatch)  Maybe the stars are simply aligned against the newspaper industry. The latest figures from Nielsen Online are encouraging about traffic growth -- all of the Top Ten sites grew in August, six of them by 50 percent or more. Newcomer Politico, which was started by former reporters and editors from some of the nation's best papers, has surged onto the list with triple-figure traffic growth.

And the Washington Post, which has improved its site design and content this year, has pulled ahead of USA Today to take over the #2 spot on the list behind the NY Times.

Top Ten Newspaper sites -- August 2008

• NYTimes.com -- 19,862,000 -- 52%
• washingtonpost.com -- 11,249,000 -- 25%
• USATODAY.com -- 10,403,000 -- 9%
• Los Angeles Times -- 8,941,000 -- 66%
• Wall Street Journal Online -- 7,637,000 -- 51%
• Chicago Tribune -- 4,739,000 -- 56%
• Daily News Online Edition -- 4,507,000 -- 103%
• Boston.com -- 4,479,000 -- 4%
• SFGate.com/San Francisco Chronicle -- 4,477,000 -- 25%
• Politico -- 3,630,000 -- 156%

So far, so good. The problem is that Nielsen also reported an overall 6 percent drop in image-based online ad spending for the first half of 2008. Not surprisingly, the financial services sector, which traditionally has been the leading industry buying online ads, cut its spending by 27 percent, amidst the turmoil on Wall Street.

Furthermore, much of that ad spend may not be coming back, since several major companies have already collapsed and more are rumored to be teetering on the edge. Q-3 and Q-4 are likely to be relatively weak for online advertising, as both companies and consumers hunker down against the financial storm clouds.

But with the continuing public fascination with this election cycle, online news sites should attract large traffic surges between now and November. Then, depending on which party wins, the excitement may carry on into January. A traffic slowdown, if it comes at all, shouldn't occur until the middle of Q-1 next year.

From a news perspective, these are the best of times, but don't tell that to the ad buyers down on Wall Street.