The question really is, will the newer investments and initiatives take hold in time to stem the bleeding? Traditional classifieds advertising, the lifeblood of old line newspaper operations, is quickly disappearing as cheaper online alternatives destroy that business. The Times just released its earnings report and it isn’t pretty. The latest quarter resulted in a $335,000 loss compared to a $23.9 million profit in the quarter a year earlier.

My sense is that Harbinger and Firebrand are getting the Times for a bargain if indeed they can insert their own directors onto the board and fix some strategic errors. The company has agreed to expand the board to 15 seats from 13 but this proposal will need to be approved by shareholders. I expect that disgruntled shareholders will consent.

Here are some notable points or ideas sparked from the earnings release:

• Overall revenue dropped but circulation revenue actually increased 25%. This was made possible by raising prices on newspapers like The Times and The Globe. This to me seems ridiculous. Physical, cellulose-based newspapers are no longer premium products. The short term boost in circulation revenue will quickly fade as customers flee to online news sources. Younger readers are already there and older readers will soon be there. The strategy should be to gently help older readers make the transition from paper to Web. In order to do this, the company should actually be lowering prices on newspapers to increase readership. Content should then be written and presented in such a way as to encourage usage of online properties the company controls.
• The About Group, the company’s Web division, showed healthy gains in revenue and income. Online efforts are working so continued investment in this space is imperative. I’d look seriously at buying news aggregation and crowdsourcing website Digg.com – a company that has been trying to sell itself. It’s one of the Web’s most popular websites and it has been for sale for quite some time. Perhaps the asking price has been lowered.
• Local search and local advertising is the next big thing on the Internet. Venture capitalists are looking for the next generation of startups that will displace first generation local services like CitySearch (IACI) with intelligent application of search engine technology, search engine marketing (SEM), search engine optimization (SEO), and geostamping technology. The best implementations are probably still being stewed over by entrepreneurs, but some existing acquisition candidates include Zillow.com, Local.com, LocalBizNOW, ZipLocal, and Smalltown.

As I have said before, “if creative destruction is going to happen, you might as well do it to yourself.”

Advertising Age is reporting that U.S. media employment fell to a 15-year low in December 2007. The major driver behind this slump is the struggling newspaper industry. This is not surprising because nearly everyone is spending more time getting their news on the Internet and less with broadsheets. Exacerbating the losses is the disappearing classifieds business as online alternatives like craigslist, partially owned by eBay (EBAY) offer cheaper and more immediate classifieds solutions. The New York Times (NYT), also known as the Gray Lady to the cognoscenti, recently announced another 100 job cuts as a result of diminishing revenues and profits.

Suffering to a lesser degree are the broadcast and cable television companies. Still, recent studies show that consumers are spending far less time surfing the boob tube and much more time online for entertainment on websites like YouTube which is owned by Google (GOOG). Employment numbers are falling here too but to a lesser degree than in newspapers.

Rounding out the traditional big three in media is the similarly suffering radio industry. Blame Steve Jobs and his Apple (AAPL) iTunes-powered iPods for the vanishing radio listener. The Billboard Music Charts just don’t have the same clout and influence they used to as music fans take control of their own playlists by getting farther out on the long tail. Who needs a disc jockey to tell you what’s hot when you can discover that perfectly obscure independent band on the Internet?

All is not doom and gloom. While traditional U.S. media is quickly shrinking, the U.S. advertising/marketing services industry is growing at a healthy clip. Advertising agencies, marketing-consulting services, graphic design, public relations agencies, and media-buying agencies are all segments witnessing expanding payrolls. This flies a little in the face of the argument that content is king. At least with job counts, it seems that those who subsidize the creation of content is king. Or perhaps content is still king but influence is moving away from professionally produced content controlled by a handful of conglomerates and towards massive amounts of user-generated content by amateurs and independent bloggers. Top bloggers are making a great living and their “jobs” aren’t being counted.

The growth in advertising/marketing services jobs bodes well for the startup that I am just beginning to build. SocialOptimize, my social media development and consulting agency that I co-founded, was started to answer a huge need in the marketplace. My partner and I found that huge corporations, members of the Fortune 2000, were in dire need of help addressing the burgeoning social networking and social media space. Huge user-generated content sites like Myspace, owned by News Corporation (NWS-A), and Facebook, partially owned by Microsoft (MSFT) are capturing the majority of consumers’ time spent online. Advertising dollars will flow to these platforms as agencies like SocialOptimize steer corporate marketing dollars to where the eyeballs and wallets are congregating.

Going forward, it will be interesting to see how Advertising Age will count the jobs and advertising dollars associated with social networking web applications and widgets. Software developers are finding ways to serve advertising through their apps and widgets. At SocialOptimize, we have had big marketers propose advertising on our own proprietary widgets because our apps offer marketers much more value than traditional advertising channels like newspapers and radio. This value comes from the ability to target deeper audience segments while offering demographic data and evidence of return-on-investment (ROI) at a more granular level. Well-designed apps are also much more engaging than traditional media, causing consumers to spend enormous amounts of time interacting with the apps and the social networks attached to those web applications and widgets.

The big negative about this report is that I’ll have to compete even harder to attract top talent to SocialOptimize. Good talent is so difficult to find!