Just ask the New York Times (NYT), which says Twitter is about to become one of the top 10 referral sources to the paper’s site.

Impressive. But what exactly does this mean?

There was a flurry of excitement this afternoon on Twitter–of course–when Simulmedia CEO Dave Morgan threw out a much more exciting data point: Reporting/Tweeting from an industry conference, Morgan said Times digital boss Martin Nisenholtz had announced that “Twitter now drives 10% of NYT digital distribution, up from 0 a year ago.”

Other attendees report hearing the same thing. But whether they were participating in a mass hallucination or Nisenholtz misspoke, here’s the Times’s official line, via spokeswoman Diane McNulty: “At its current growth rate, Twitter is, or will soon move into, the top 10 in terms of referrals to NYTimes.com.”

If that’s the case, then Twitter likely accounts for much less than 10 percent of the Times’s traffic. If you assume that Google (GOOG) is the paper’s largest external referral source and that it likely accounts for a third of the site’s traffic (these are semi-educated guesses, but I’m happy to adjust), then Twitter and other sources at the bottom of the top 10 are going to be in the low single digits.

Still! It is a lot of traffic, and a year ago it either didn’t exist or someone else was directing it to the Times. Now the trick for Twitter (and its investors) is to figure out a way to capitalize on this phenomenon.

Yesterday, the publisher said that overall ad revenue had dropped 30 percent in the last quarter, which wasn’t surprising. But Internet ad revenue dropped 15.5 percent, which was a surprise, since it’s an acceleration from the previous quarter’s loss. What gives?

Times officials have multiple explanations:

1. A lot of the loss comes from our classified ads, which have been vaporized.
2. This year’s numbers don’t look good because last year’s numbers were so great.
3. At least we’re not Yahoo (YHOO)!

Check out this exchange from yesterday’s earnings call between analyst John Janedis, New York Times (NYT) digital boss Martin Nisenholtz and ad boss Denise Warren. Seeking Alpha:

John Janedis–Wells Fargo Securities: Martin, can you just talk a bit more about where you’re seeing on the display side with the news media, did any major customers pull out? And do you think you’re losing share relative to the total industry?

Martin A. Nisenholtz: No, I mean I’ll ask Denise to comment on this specific to The New York Times, but I don’t think we can point to any major losses. I think that her comments about overall volume on the side, on the businesses, is true of the digital side as well. I would point out that, to point to Janet’s [Robinson, NYT CEO] comment about most of the hit, a disproportion of the hit coming in the classifieds area.

Denise Warren: Can I just jump in and remind you again that we had a really, really, really robust quarter overall for nytimes.com last year, but really in the display area? So we are up against really significant comps. That’s just some context that I think is important that you have.

And just based upon what we’ve been seeing in the marketplace comparing to other sites there, we do believe we are taking share in the display marketplace, and we do believe we are performing better than most of our competitors in the display marketplace.

Martin A. Nisenholtz: I mean Yahoo just announced a 14% decline in display. I think, while we’re not breaking out the numbers, I think our display performance overall at nytimes.com and across the News Media Groups was better than that.

All of this sounds right to me (for the record, last year the Times’s Web ads grew 18.3 percent in Q2). But if the Times wants to keep investors optimistic about the company’s prospects, it’s going to need a better pitch than “we’re doing better than Yahoo.”

UPDATE: For a pretty good roadmap of where the Times is headed–more dollars from customers, fewer from advertisers–check out this smart piece from the Columbia Journalism Review. It notes, for instance, that the Times is now making nearly as much from subscribers as from advertisers.

Remember last week, when Google was forced to explain why it wasn’t single-handedly destroying American newspapers?

Turns out the company is in talks with some of the country’s biggest newspapers to…well, save them.

But, that isn’t exactly the right phrase. In fact, it’s not clear how to describe the talks. But we do know that Google (GOOG) is chatting with both the Washington Post (WPO) and the New York Times (NYT), because that’s what employees of the Washington Post and the New York Times are reporting today.

Here’s the Post’s Howard Kurtz, in a column this morning castigating newspapers for being too slow to react to the Web:

“Post Co. chief executive Donald Graham and Google chief executive Eric Schmidt and their lieutenants have been holding talks about a possible collaboration. This could range from creating new Web pages to technological tools for journalists or readers. Hanging over the talks is the reality that the search giant, while funneling vital traffic to news sites, vacuums up their content without paying a dime.

Post executive Philip Bennett confirmed the discussions, saying: ‘We’re talking to each other about improved ways of creating and presenting news online.’ He calls it ‘an informal collaboration’ that ‘has produced some interesting ideas already. I’d say that on the journalism side of the conversation we’ve learned a lot.’”

Here’s a Google spokesperson’s description of the meeting, for what it’s worth: “This was an informal meeting, and we’re always talking with publishers to find new and creative ways to help them make money from compelling online content.”

I assume that the unnamed spokesperson will also describe meetings with the New York Times, which the Times’s Brian Stelter reported on today–via Twitter–from an internal presentation that the paper’s Web site put on for its newsroom.

Here’s the Tweet: “At a digital strategy meeting at the Times. News nugget: Wash Post isn’t the only paper in talks w/ Google. NYT is, too.”

I’m following up with Times folks about said talks, but it’s no surprise to hear about them. That’s because contrary to what you may have heard during Senate hearings about the state of the newspaper business last week, every sentient Web publisher realizes that Google can be a huge boon, directing a firehose of traffic to their content.

Indeed, a lot of the gripes you’re hearing about from publishers are really just pleas for Google to please direct more traffic to their sites. That’s the gist, for instance, of NYT digital boss Martin Nisenholtz’s anecdote about typing “Gaza” into the search engine and getting Wikipedia and Twitter messages, before he sees a Times story.

Google’s argument is that it is a neutral arbiter when it comes to this stuff and simply provides links based on the results of its black-box algorithm. So, it will be difficult for it start giving newspapers–no matter how august and important–a leg up when it comes to search results, because everyone else will want in too.

Then again, Google is facing the increasingly likely prospect of antitrust charges over the next few years. Some of the pressure is coming from Microsoft (MSFT), which is working as hard as it can to beat that drum. But the search giant is certain to face suits from the struggling newspaper business as well.

Thus, cutting some deals in advance may not be the worst idea.

Side note: Kudos the Times’s Web-savvy Jennifer 8. Lee for providing a comprehensive Twitter stream from her company’s meeting. Well worth checking out.

UPDATE: Here’s a guess–perhaps Google has been talking the papers about a new, automated filter that will fetch news for users without asking them what they want.

Google does have plans for a solution. In about six months, the company will roll out a system that will bring high-quality news content to users without them actively looking for it. That’s what TheWrap.com’s Sharon Waxman says Schmidt told her he was working on last month:

“Under this latest iteration of advanced search, users will be automatically served the kind of news that interests them just by calling up Google’s page. The latest algorithms apply ever more sophisticated filtering–based on search words, user choices, purchases, a whole host of cues–to determine what the reader is looking for without knowing they’re looking for it.

And on this basis, Google believes it will be able to sell premium ads against premium content.

The first two news organizations to get this treatment, Schmidt said, will be the New York Times and the Washington Post.

Does the New York Times make more money from this arrangement, I asked? No, Schmidt confirmed, it won’t. But by targeting the stories that readers will want to read, it will get more hits out of the stories it has, which will drive its traffic and ultimately support higher advertising rates beside the stories.”

It’s worth noting that a “source close to Google”–who might possibly be someone on Google’s public relations staff–dismissed Waxman’s report, without saying which part was inaccurate, according to VentureBeat: “A source close to Google has raised serious questions about the veracity of Waxman’s claims about Schmidt’s comments. The company has not confirmed any of her post’s content.”

Here’s a novel approach from a coterie of big media brands, including the New York Times (NYT) and Disney’s (DIS) ESPN: Complain loudly that the search engine isn’t treating you fairly.

Ad Age’s Nat Ives reports that digital publishing executives, including John Kosner, who runs digital media for ESPN, and Martin Nisenholtz, who oversees digital at the Times, have been grousing that their stuff doesn’t show up high enough in Google’s (GOOG) search results.

That’s the same complaint that just about every Web site in the world has, because everyone knows the value of Google juice.

But Ives quotes publishers–all of whom are anonymous except for the two I’ve mentioned–who feel that their stuff deserves special treatment because their content is inherently more valuable, and because so much of the Web riffs off/rips off their work. In fact they’d probably point to this very post as an example of a derivative work that should show up lower on Google’s results than the original story.

But it’s unclear what the big guys think Google can actually do about this.

“Publishers said they’re not asking for a leg up over amateurs and link-happy bloggers. ‘This would in no way mean that only professional content publishers would get an advantage,’ one said. ‘It really just says that the original source, and the source with real access, should somehow be recognized as the most important in the delivery of results.’

Google says it’s trying but can’t just flip a switch to deliver pro publishers’ dreams. ‘There’s absolutely value to original content,’ a spokesman said. ‘There’s value to derivative content, too. We look at this in many ways from the point of view of the user. But the truth is there are so many shades of gray even within, quote, original content.’”

I’d also warn publishers to be careful of getting what they wish for. If Google was somehow able to train its bots and spiders to suss out material that was truly original, it’s entirely possible that many of the big guys wouldn’t be happy with those results, either.

[Image credit: bbaunach]

Yesterday, for instance, the New York Times (NYT) provided a wealth of information about the state of the ad business. Here’s a summary, with an assist from Seeking Alpha, of stuff I found interesting:

What kinds of companies are still buying ads? Corporate advertisers like energy companies and financial companies–those that haven’t gone bust–trying to reassure customers; advocacy groups trying to influence the new administration.

Who’s cutting back? Hollywood: Fewer movies released, and less marketing money put behind each release (though that will change during awards season this spring); telcos, because there’s less growth out there; books, for obvious reasons.

Classified ads are killing us. Above and beyond anything else, the newspaper business is dying because its super-lucrative classified ads business is (still) dying. Technology, in the form of competition like Craigslist, critically wounded classifieds, and now the economy is finishing it off. The dropoff in the help-wanted category accounted for half of the the Times’s digital decline in Q4, said digital exec Martin Nisenholtz.

NewYorkTimes.com is a meaningful brand for display advertisers. Other properties–like About.com–aren’t. Nisenholtz says ad rates at NYT.com actually increased for most of the year. But About.com, which had been the company’s star digital performer, fell apart at the end of the year because of its display ad business–there’s nothing about the site’s brand or audience that commands a premium from display advertisers. The paper is now redesigning About.com to emphasize cost-per-click ads–that would be ads from Google (GOOG), primarily–because there’s still growth there.

Perhaps as much as 50 percent of the company’s digital inventory is sold by ad networks In response to a question, Nisenholtz wouldn’t put out an exact number. But he came close: “I would say that from an industry-wide perspective, you are probably looking today at around 50 percent. Some of our properties are above that, some of them are below that, but that’s about where the industry is at this point.”

The grim details are here, but I’ll save you some time:

• Revenue was down 13.9 percent, an acceleration from October’s 9.4 percent drop.
• Ad revenue was down 20.9 percent, an acceleration from October’s 16.2 percent drop.
• The really awful news: Internet ad revenue and overall Internet revenue actually declined in November, down 3.8 percent and 2.6 percent, respectively.

In the good old days of 2007, the Times could at least say that while print revenue growth was slowing to a halt, Internet ad sales were growing quickly. By last month, the best thing you could say about Internet revenue at the Times was that it was still growing a little bit. Now that’s gone, too.

For the record, the Times says that it was still able to register “moderate” display ad growth at its newspapers, but that its online classifieds and real estate ads had gotten crushed, for obvious reasons. And over at About.com, which until now has been the bright spot on the Times’s financials, display ads shrank, wiping out out “moderate” growth in cost-per click ads.

And expect more of the same in December and in 2009. Martin Nisenholtz, the Times’s digital boss, has already warned investors that the “softness in November” would “accelerate into December” and that “next year is going to be a different year, by a fairly profound margin.”

Per usual, the one bit of good news in the Times’s numbers is that its readers continue to value its publications enough to pay for them: Circulation revenues increased 4.2 percent. But if the Times can’t convince advertisers to pay, too, that’s not going to matter. Happy holidays!

There was just a glimmer of news at the event, though it wasn’t surprising or pleasant: The Times’s Web business is falling away, day by day.

Digital head Martin Nisenholtz said revenue at his unit had been OK until the last two months of the year, but that there had been “softness in November, accelerating into December…next year is going to be a different year, by a fairly profound margin.”

Bear in mind that the Times’s digital performance pre-November was grim to begin with–digital revenue grew just 4.3 percent in October–and it becomes possible to imagine that digital revenue will decrease for at least part of 2009.

Nisenholtz didn’t do anything rash like attach any numbers to his comments, but he did add a little bit of color: His About.com unit, which is boosted by cost-per-click/search ads, is still doing OK-ish. But the business of selling display ads to Times Web sites is getting pummeled, and could be “under great stress” next year, he says.

So if About.com is doing (comparatively) well, why not sell that asset to help the paper escape its cash crunch? I asked CEO Janet Robinson that question after the event. She did everything but insist that the paper would never part with About.com, and praised it up and down–“an extremely important part of our digital future,” etc.

But given a couple chances to do so, she never explicitly ruled out a sale. Given the paper’s position, I don’t think she can.

[Image Credit: 1962 NYC Newspaper Strike photo from Life/Google archive)