Newspapers made the mistake of devaluing their ad inventory by increasing their supply. There's a really good – business – argument to be made for cutting the number of ad slots on the page.
You shouldn't underestimate how much newspapers know about the economics of their inventory. In many ways, ad slots are price discrimination. Companies that want 100% share of voice (ie: no one else gets ads on the page) will pay a premium to get it. A small company may just buy a cheaper ad slot at the bottom of the page. They have thousands of permutations on how they can sell ads, and they will shut off as many slots as necessary to get a premium campaign going.
Indeed. It can be a reinforcing cycle either way. On the one hand, you devalue your ads by taking any offer that comes along, ignoring the effectiveness of ads, and cramming your content with as much ad space as possible. In this mode readers have no value for ads and ad space becomes less and less valuable. On the other hand, if you put a lot of effort into procuring good and relevant ads, if you maintain a high standard for the ads you accept, and if you keep ad space under control then ads can potentially become more and more valuable.
If you come into the problem with the idea that the only way to control ad revenue is by the number of ads on the screen you've already lost, you're playing in the amateur leagues.
