Case Study 2: The Newspaper Industry's Collapse

What Happens When Attention Migrates

Introduction: The Most Important Industry Collapse You Didn't Notice

In 2005, the United States newspaper industry generated approximately $49 billion in advertising revenue. It employed roughly 55,000 newsroom journalists. It published daily and weekly papers in nearly every county in the country, covering city councils, school boards, police departments, courts, and local businesses with a granularity that no other medium could match.

By 2020, newspaper advertising revenue had collapsed to approximately $9 billion — a decline of more than 80% in fifteen years. Newsroom employment had fallen by more than half, with over 27,000 journalism jobs eliminated between 2008 and 2020 alone. More than 2,000 newspapers had closed entirely. Hundreds of counties that once had a local daily paper now had none.

This is one of the most significant structural collapses in American media history. It happened gradually enough that no single day felt like a crisis, and it happened during a period when so many other things were also changing that it was easy to miss. But its consequences — for local democracy, for civic accountability, for the quality of American public life — are only now becoming fully visible.

This case study examines why it happened. The answer is almost entirely about where advertising money went, and why. Understanding the newspaper collapse is understanding the attention economy in its most concrete and consequential form.

The Newspaper Business Model: What It Actually Was

To understand why newspapers collapsed, we first need to understand what their business model actually was.

The popular image of newspaper economics focuses on subscriptions — readers paying for their daily paper. But subscriptions were never the primary revenue source for most American newspapers. As recently as 2005, advertising accounted for approximately 80% of newspaper revenue, with subscriptions contributing the remaining 20%. The newspaper was, economically speaking, an advertising vehicle that happened to contain journalism.

Within advertising, two categories dominated:

Classified advertising — want ads for jobs, apartments, cars, and merchandise. At their peak in the 1990s, classified ads generated approximately $19-20 billion annually for U.S. newspapers and accounted for more than one-third of total advertising revenue. This was not glamorous journalism-adjacent revenue; it was the economic foundation of the entire enterprise.

Display advertising — retail chains, department stores, grocery stores, automotive dealers, and local businesses buying large ads to reach mass local audiences. Macy's, JCPenney, Sears, and their regional equivalents spent hundreds of millions per year buying newspaper display ads. This was the second pillar.

Both pillars would be systematically demolished between 1995 and 2015.

The Classified Catastrophe: Craigslist and the Free Substitute

The first blow came not from a social media company but from a nonprofit. Craig Newmark launched Craigslist in 1995 as a free classified advertising service in San Francisco. It spread gradually through major cities in the late 1990s and accelerated its national expansion between 2000 and 2006.

Craigslist offered everything newspaper classifieds offered — job listings, apartment rentals, used car sales, personal ads, and household merchandise — for free. Not cheaper. Free. For most categories, listing and responding to ads cost nothing for either party.

Newspapers charged $15-50 for a three-day classified listing. Craigslist charged nothing. The economics were immediate and brutal.

Between 2000 and 2012, classified advertising in U.S. newspapers fell from approximately $19.6 billion to approximately $4.5 billion — a loss of $15 billion per year in revenue. A significant portion of that revenue evaporated to Craigslist, which in 2012 generated approximately $122 million in revenue (from a small subset of paid categories) while destroying $15 billion in newspaper revenue.

This is one of the starkest illustrations in the history of the attention economy: a single product, offered for free because the cost of digital distribution is near zero, destroyed a revenue stream that had sustained American journalism for a century. The product wasn't better in any complicated way. It was just free, in a digital form that was easier to search and easier to respond to.

The Display Advertising Migration: Precision vs. Approximation

While classified revenue was collapsing to Craigslist, display advertising was migrating to digital platforms — for different but equally structural reasons.

Newspaper display advertising worked on approximation. A retailer buying a full-page ad in the Chicago Tribune knew it would be seen by some number of Tribune subscribers — roughly the paper's circulation, which was independently audited by the Alliance for Audited Media. The advertiser couldn't know whether their specific target customers were among those subscribers. They couldn't know whether the ad was actually seen, recalled, or acted upon. They paid for the possibility of reaching a large audience.

Digital advertising offered something categorically different: measurement. When a retailer placed an ad on Google or Facebook, they could know:

How many users saw the ad (impressions)
What percentage clicked it (CTR)
Where those clickers came from (geographic data)
What demographics the viewers represented (age, gender, income proxy)
Whether the users who saw the ad subsequently visited the retailer's website (conversion tracking)
Whether they made a purchase (for advertisers with conversion pixels installed)

The difference between "your ad might have been seen by Tribune subscribers" and "your ad was seen by 47,234 users aged 25-54 in the Chicago metro area with household incomes above $75,000, 3.2% of whom clicked through, and 0.8% of whom subsequently made a purchase with an average order value of $127" is not a difference of degree. It is a difference of kind.

Advertisers — rational economic actors optimizing their spending — followed the measurement. Why pay more for less information?

The timing of this migration accelerated with each development in programmatic advertising:

2004-2006: Google launches AdWords (2000) and AdSense (2003); self-serve advertising becomes accessible to small businesses.

2007-2009: Facebook launches self-serve advertising; social targeting by demographics and interests becomes available for the first time.

2010-2012: Real-time bidding matures; advertisers can buy audiences across millions of websites simultaneously, instantly, with demographic targeting.

2013-2015: Mobile advertising scales as smartphone adoption reaches 60%+ of U.S. adults; location-based targeting adds a new precision dimension.

Each development made digital advertising more measurable, more targetable, and more accountable — and made newspaper display advertising look more approximate, more expensive, and less justifiable by comparison.

The Toll: Specific Papers That Closed

The revenue collapse was not abstract. It manifested in the closure of newspapers that had served their communities for decades or centuries:

Rocky Mountain News (Denver, founded 1859): Closed February 27, 2009. The 150-year-old paper, which had won four Pulitzer Prizes, closed after its parent company E.W. Scripps was unable to sell it. It had lost $16 million in the first half of 2008. Its final edition headline: "Goodbye, Colorado."

Philadelphia Daily News (Philadelphia, founded 1925): Combined with the Philadelphia Inquirer in 2015 and ceased publication as an independent paper in 2020. The Daily News had been a working-class tabloid with a robust sports section and serious investigative capacity. Its closure ended 95 years of a distinct editorial voice in Philadelphia.

Seattle Post-Intelligencer (Seattle, founded 1863): Ended print publication on March 17, 2009, transitioning to an online-only format with a drastically reduced staff. From a newsroom of 165, it cut to 20. The resulting website, while still operational, cannot perform the investigative and accountability journalism the full-staff paper did.

Ann Arbor News (Ann Arbor, Michigan, founded 1835): Closed July 23, 2009, ending 174 years of continuous publication. The paper was replaced by AnnArbor.com, an Advance Publications digital property that provided neither the coverage breadth nor the institutional continuity of the print paper.

Tucson Citizen (Tucson, founded 1870): Closed May 16, 2009. At 139 years old, it was among the oldest newspapers in the American Southwest. Its closure left Tucson with a single daily paper, the Arizona Daily Star.

These high-profile closures were accompanied by thousands of smaller ones. Between 2004 and 2020, more than 1,800 U.S. newspapers closed — the majority of them small weeklies and community papers that had been the sole source of local coverage for their communities. Counties that lost their only newspaper became what researchers began calling "news deserts."

By 2020, more than 200 U.S. counties had no local newspaper at all. More than 1,500 counties — roughly half of all U.S. counties — had only one, often a weekly with limited staff.

What Was Lost: The Public Value of Journalism

The losses in the newspaper industry were not simply commercial. They represented the destruction of a specific kind of public infrastructure — one that is difficult to replace and whose absence has measurable democratic consequences.

Local government accountability. Research published in the Journal of Finance (Gao, Lee, and Murphy, 2018) found that municipalities in counties that lost their local newspaper subsequently experienced increases in municipal borrowing costs. The mechanism: without local journalism scrutinizing municipal finance, bond markets assessed higher risk. Local governments that operate without local press coverage also tend to show higher rates of corruption and lower rates of civic participation.

State and federal oversight. Newspapers that closed their state capital bureaus — a common cost-cutting measure — left state legislatures less scrutinized. A 2019 study published in Political Communication found that declines in local newspaper coverage correlated with lower voter knowledge of state-level candidates and reduced split-ticket voting (a sign of less informed, more partisan voting behavior).

Court and police coverage. Before the collapse, most metropolitan daily papers had a police reporter and a courthouse reporter. These beats — unglamorous, time-consuming, requiring relationship-building over years — are poorly suited to digital models. As newspapers cut staff, court and police coverage contracted dramatically. Wrongful convictions that might once have been investigated by a local newspaper reporter now go unexamined. Civil asset forfeiture abuses, jail conditions, prosecutorial misconduct — these receive less scrutiny than they did when newsroom staffing was double or triple current levels.

The institutional knowledge problem. A newspaper with a reporter who has covered city hall for twenty years possesses institutional knowledge that cannot be quickly replaced. When that reporter is laid off and the paper closes, that knowledge disappears. The new reporter at the surviving outlet — if there is one — must rebuild relationships, learn history, and earn access from scratch. This imposes persistent quality costs on coverage that are invisible in any single story but cumulative over years.

What Replaced It: The Platform Economics of Local News

The vacuum left by newspaper closures was not simply unfilled. It was partially filled by a set of digital alternatives whose economics differ fundamentally from newspaper economics in ways that matter.

Digital news startups: Organizations like The Texas Tribune (Austin, founded 2009), The Intercept (national, founded 2014), and hundreds of smaller local sites have emerged to fill local coverage gaps. Many operate as nonprofits funded by philanthropic grants and reader donations. Their quality can be excellent. Their scale remains a fraction of what newspapers provided at peak: The Texas Tribune, one of the most successful local digital news nonprofits in the country, has a staff of approximately 100 — compared to the Austin American-Statesman's newsroom of 300+ at its peak.

Platform-native local pages: Facebook, Nextdoor, and similar platforms enable local communities to share information — but they are algorithmically optimized for engagement, not accuracy. Misinformation spreads on local Facebook groups. Nextdoor is notorious for racially tinged crime reports that often turn out to be unfounded. The economics of attention monetization do not reward careful, verified, accountable journalism; they reward content that generates reactions, which is a different and often conflicting objective.

National outlets: National digital news organizations (BuzzFeed News before its closure, Vox, Politico, The Atlantic in digital form) captured some advertising revenue that left newspapers. But national outlets do not cover city council meetings in Scranton or school board decisions in Boise. The journalism that was lost was specifically local, and no national outlet has filled that gap.

The Structural Explanation: This Was Not About Quality

It is tempting to explain the newspaper industry's collapse as a quality story — that newspapers failed because they were slow to adapt, clung to old models, or provided inferior content. This explanation is wrong.

The papers that closed were not uniformly bad. The Rocky Mountain News was a Pulitzer Prize winner. The Philadelphia Daily News had produced nationally recognized investigative journalism. These papers collapsed not because readers stopped valuing journalism, but because advertisers found a better deal elsewhere.

The structural explanation is simpler and more important: digital platforms could deliver audiences with more precision and at lower cost than newspapers. When the measurement advantage of digital advertising became impossible to ignore — roughly 2007-2012 — advertising money migrated regardless of journalism quality.

This is the attention economy in action. Attention did not stop being valuable when it shifted from newspapers to social media. The advertising market simply found a more efficient way to capture and price it. The byproduct of that efficiency was the destruction of the economic model that had sustained local journalism.

The newspaper industry's collapse is the clearest demonstration that the attention economy is not neutral — that the migration of advertising money from one medium to another has consequences that extend far beyond the commercial interests of the parties directly involved. The consequences include the erosion of democratic infrastructure, the reduction of civic accountability, and the permanent loss of institutional knowledge and journalistic capacity that took decades to build.

Benjamin Day launched The New York Sun in 1833 and proved that advertising could sustain journalism. Google, Facebook, and Craigslist together proved that when advertising follows more efficient distribution, the journalism it sustained does not automatically survive.

That is the lesson of the newspaper collapse. Not that journalism is dying. But that journalism that depends on advertising is dependent on the continued willingness of advertisers to pay for the particular form of attention it delivers — and that willingness is neither guaranteed nor stable.

Discussion Questions

The chapter argues that the newspaper industry's collapse was structural rather than a quality failure. Evaluate this claim. Is there any sense in which newspapers did make strategic errors that accelerated their decline? What, if anything, could the industry have done differently after 2000 to better protect its economic position?
The case study identifies several specific democratic consequences of the newspaper collapse: increased municipal borrowing costs, reduced civic knowledge, less accountability journalism. Which of these do you find most significant, and why? Are there consequences the case study doesn't mention that you would add?
Craigslist destroyed approximately $15 billion per year in newspaper classified revenue while generating only $122 million in revenue for itself. What does this tell us about the relationship between the economic value of a service and the economic model needed to sustain it? Are there other sectors of the economy where a similar dynamic might play out?
The case study notes that platform-native local pages (Facebook groups, Nextdoor) are algorithmically optimized for engagement rather than accuracy. How does this connect to the chapter's argument about engagement metrics? What specific mechanisms make engagement optimization a poor substitute for journalistic accountability?
The nonprofit local news model (Texas Tribune, etc.) has emerged as one alternative to advertising-supported journalism. What are the limits of this model? Could it, at scale, replace what was lost? What would be required — in funding, in audience engagement, in institutional capacity — for nonprofit local journalism to fully substitute for what the advertising-supported newspaper provided?
If you were designing a policy intervention to address the consequences of the newspaper collapse, what would it be? Consider: direct public funding for local journalism, mandatory revenue sharing from platforms that profit from news content, tax incentives for local news subscriptions, or other mechanisms. What objections would your chosen intervention face, and how would you respond to them?