The Krugman Paradox

The Krugman Paradox is a phenomenon referring to newspapers' websites and the sites' inability to produce economically sustainable advertising revenue, despite the audience size of the website. The term got its name from a situation where a PetMeds.com advertisement ran for three days beside New York Times editorial columnist Paul Krugman's articles. This after the fact that Krugman had just been named winner of a Nobel Memorial Prize in Economic Sciences.

This is a term coined by newspaper industry expert Robert Ivan in his paper, The Krugman Paradox. The paradox indicates that newspapers must increase the effectiveness of their online advertising if this is to be their main revenue stream. This is a departure from the current practice of growing revenues through mergers & acquisitions, increased linking, and new content creation to generate a bigger audience reach. As well as attempting to reach break-even through cost [...].

A December 17, 2008 Report from ContentNext Media entitled, Size Doesn’t Matter: An Analysis Of Online News and Political Sites, by Lauren Rich Fine supports the idea that pursuing growth strategies in and of themselves are not proven ways to generate economically sustainable revenue streams for general information news sites.