The deep recession continues to take a toll on newspaper ad revenues. The Newspaper Association of America (NAA) reported today that ad revenue for U. S. newspaper publishers declined 29% during the second quarter. Ad revenue declined from $9.6 billion a year-ago to $6.8 billion. This comes on the heels of a 28% year-over-year decline in ad revenues in the first quarter. Industry wide ad revenue in the larger print segment declined 30% to $6.2 billion in the second quarter. Even the smaller online-only segment has not been immune to the recession. According to the NAA, online-only ad revenue fell 16% to about $650 million.

Against the backdrop of shrinking demand for products and services, employers grew reluctant to increasing head count. Job recruitment ad revenue declined 66%, the highest among classified categories. Ads in troubled sectors like real estate and autos fell 46% and 43%, respectively.

Newspaper publishers like Gannett (GCI) and New York Times (NYT) derive more than 50% of the sales from ad revenue. Washington Post (WPO) too is exposed to ad sales. WPO is however better diversified as 50% of the company's revenue comes from educational services provided by its Kaplan unit.

Against this miserable advertising scenario, it is hardly a surprise that newspaper stocks have suffered massive declines. GCI and NYT shares have seen nearly 52% and 38% of their value wiped out over the past year while WPO shares are down 25%. These stocks have underperformed shares in the consumer discretionary sector where the Consumer Discretionary Select Sector SPDR (XLY) is down 12%.

With the economy showing signs of leveling off and providing hopes of recovery, newspaper publishers can hardly wait longer for better times. The second quarter data from the NAA has a silver lining. With the exception of real estate, classified ad sales declined less in each category during the second quarter compared to the first.