Italy's top newspaper groups pool online advertising

MILAN, Jan 14 (Reuters) - Italy's two biggest newspaper companies have formed an online advertising consortium aimed at increasing revenues from the Internet at a time when the print sector faces increasing cyclical and structural problems.

RCS MediaGroup (RCSM.MI) and Gruppo Editoriale l'Espresso (ESPI.MI) said the move was the first of its kind in Europe and that the consortium, called Premium Publisher Network, would be open to other editorial groups to join.

Analysts said the move made sense even though it did not change their valuations for the companies as growing online advertising was still only a fraction of the total market.

"When the cake is too small and there is a competitor like Google (GOOG.O), anything that makes critical mass is useful to face this oligopoly," said an analyst at an Italian bank.

Together RCS and l'Espresso give advertisers access to 40 percent of the online advertising audience in Italy, according to Audiweb Netview, they said in a joint statement on Tuesday.

Premium Publisher Network will start operations by the end of the first half of 2009, offering performance advertising -- which links charges to readership levels. RCS and l'Espresso will continue to offer online display advertising separately.

The newspaper industry has been severely hit by the economic downturn as spending is curbed by cost-cutting advertisers or eroded by Internet giant Google and other online outlets.

In the United States, newspaper publishers have already formed consortiums to take advantage of rising online advertising.

About 800 U.S. newspaper websites of the Newspaper Consortium have arranged a partnership with one-time rival Yahoo (YHOO.O) and several top U.S. newspaper publishers have formed an advertising sales network called quadrantONE.

RCS and L'Espresso publish Italy's most read newspapers Corriere della Sera and La Repubblica respectively.

Advertising revenues at RCS fell 2.7 percent on a like-for-like basis in the first nine months of the year while those at L'Espresso slipped 4.6 percent on a reported basis.

"It's an innovative way to join forces in a market that has still to be developed," said the analyst at the Italian bank, who asked not to be named.

Alberto Francese of Banca IMI said online advertising has strong growth potential in 2009 but it represents around 4 percent of the entire Italian advertising market.

Performance advertising accounts for 20 percent of online advertising, he said.

RCS shares fell 1.5 percent to 0.977 euros on Wednesday at 1401 GMT and L'Espresso rose 1.43 percent to 1.13 euros. (Reporting by Danilo Masoni; Editing by Mike Nesbit)