The increased income of Google (which is nearly all ads) matches the decreased income of the newspapers, so it doesn't seem like the ad spending actually decreased, it just moved away from the papers.
"Google, Craigslist and others are (mostly) in the new high-intent advertising market. It's an entirely different type of market based on an entirely different type of moment. The reason newspapers are losing here is because you aren't even in this market to begin with."
Not even in the market? Surely anyone who reads about the newspaper business has heard about the role of classifieds, and how they propped up newspapers until Craigslist came along?