Catching up on my newspaper reading over the weekend, I noticed two advertisers using social media soundbites to boast of their products. The first was Motorola, which incorporated into its ad quotes pulled from Facebook, Twitter, and a site called Phandroid.com (“The first independent website dedicated to delivering Android news”), among others. The second was for Trident’s new Layers chewing gum, sticking strictly with Twitter (headline: “The people have Tweeted”).

I don’t know whether or not these advertisers sought permission from the quoted to feature their testimonials, but imagine how excited @mattchew03 and @amybites must be to see Trident put their “names” in print. And suspicious Twitter handles (-chew? -bites?) aside, I have to believe that they are legitimate endorsements (as opposed to planted reviews, which no advertiser would be dumb enough to employ in the age of social media).

That, of course, is not news. Newspapers are shrinking and their circulation shriveling, like a mirror reflecting the Internet’s growth and expansion. Politicians and pundits (including many newspaper editors and publishers) who aren’t schooled in business don’t recognize the absolute and inescapable law of creative destruction. They wring their hands as if what’s happening is a tragic thing. I see it simply as the way of the world.

To a news consumer, the Internet offers many advantages over ink and paper, from timeliness to portability, affordability to dialogue. And for a generation of readers spawned in the wake of the Web, getting their news online is not only better than in print, it’s more natural. Even old guys like me who love the sound of the thump on the driveway in the morning increasingly turn to our Macs and Blackberrys to keep up with breaking events.

But while the Internet is rapidly replacing ink, paper and newsstands, the Web is to news as an aluminum can is to Coke—a terrific way to deliver the product but not the source of its value. Newspapers are struggling because newspapers are confused—they forgot they were in the business of building an audience and focused instead on selling the audience (to the advertisers who increasingly bore their cost of operating). That was fine as long as they had a monopoly on distribution, but it led them to spend their limited resources on adding more ink colors rather than more color to their ink. Now that advertisers have (ultimately) infinitely more choices, newspapers are stuck.

But the answer isn’t so difficult. The key to the future of the newspaper industry lies in its past. There will always be a market for news, and newspapers still have core competencies in gathering, reporting and interpreting what’s important to their readers. If they do their job well, they’ll continue to be able to provide the exclusive content for which readers will pay, regardless of whether or not it results in ink-stained fingers.

The more the newspaper industry focuses on “news” rather than “paper,” the better off it (and we) will be. That will enable it to embrace evolving distribution opportunities and find new sources of revenue and competitive advantage. Just like every other industry must do.

Newspapers do have a number of unique advantages–local newsrooms, longstanding reputations, deep-rooted community contacts–but as long as they insist on an outmoded distribution model they’re going to continue to shrink.

That said, their task is not as easy as simply porting their cargo over to a different vehicle (namely, the web). It will take repackaging, refreshing and rethinking exactly what “product” they provide, and to whom. That’s why I found comments made by the Wall Street Journal’s L. Gordon Crovitz so refreshing. He says, “For years, publishers and editors have asked the wrong question: Will people pay to access my newspaper content on the Web? The right question is: What kind of journalism can my staff produce that is different and valuable enough that people will pay for it online?”

For too long the Fourth Estate has thought itself immune to the laws of commerce. Alas, as the newspapers above (and the New York Times, the Boston Globe, and dozens of others) are discovering, people seeking news, analysis and enlightenment have more options than ever.

While it may pain them to think of themselves as a (gasp) business, traditional newspapers have tremendous brand equity. As the dynamics of their industry continue to evolve, they can keep watching that equity whither away or take bold steps to remain relevant. “All the news that’s fit to print” is rapidly becoming an anachronism.