Newspapers could boost their revenues by millions of pounds just by using a different charging system for advertisements on their web sites, according to new research from accountants Ernst & Young.
The firm also urged newspapers to be more innovative in attracting young readers to help counter decades of circulation decline.
Struggling with a two-year slump in the UK advertising market, newspapers and other traditional media companies have invested heavily in their web sites and online businesses in an effort to find new revenue streams.
Most UK newspapers charge advertisers for every thousand times their ad appears on a web site, the E&Y research says.
In contrast, companies such as search giant Google charge advertisers each time a reader clicks on a web ad - the so-called "cost-per-click" system. E&Y has calculated that national newspaper web sites - The Guardian, Timesonline, the Daily Mail & General Trust and Telegraph titles - could have generated online ad revenues of £120-250 million each in 2007, just from their UK traffic, by charging advertisers on a cost-per-click system.
That is compared to the £15-20 million E&Y estimates each paper made in online ad revenues.
It also estimates that Google makes £2.40 per month from each visitor to its site, compared to around 10 pence made by leading national newspapers' web sites.
"This gap is an opportunity for newspapers as it shows that monetising online services in the UK is possible," said Luca Mastrodonato, media and entertainment analyst at E&Y.
"But to do so newspapers need to move away from the volume based cost per thousand impressions (CPM) model towards more interactive ad models such as cost per click (CPC)."
E&Y's calculations are based on the number of people who visit newspapers' web sites; the number of page impressions for the web sites; and an analysis of Google's UK web traffic and advertising revenue.
It also recommends that newspapers should try reaching younger readers by offering more free titles and by advertising through social networking sites, such as Facebook or MySpace, rather than relying on expensive cover-mounted giveaways, such as CDs and DVDs, for short-term circulation boosts.
National newspapers' circulation has fallen by an average of 330,000 daily copies every year since 2003, according to industry figures cited by E&Y.
The decline is partly due to younger readers preferring to get their news online rather than from a paper.
Neil Benson, editorial director of Trinity Mirror's regional titles, which includes The Birmingham Post, said: "Traditionally, newspapers have found it difficult to engage 18 to 34-year-olds as regular readers. Our research shows that our web sites have a markedly younger demographic than most of our newspapers. In addition, we are finding that younger people who would not read a newspaper are beginning to interact on our web sites - not necessarily with us, but with their friends, using our sites as a social networking platform.
"A good example was last summer, when we asked teenagers to post their school proms photos on one of our sites. Not only did they do that, they also began to use our forums to post comments and to chat to each other.
"This is very encour-aging because it shows that if we can identify topics younger people are interested in and offer them a platform, they will come."
David Black, Trinity Mirror group director of digital publishing, said: "We are making good progress growing our digital business.
"Our revenues are coming from a range of sources, including display advertising, cost-per-click contextual advertising and classifieds. Our goal is to offer users and advertisers the products they want, in the format they want."
