Tag Archives: online

Boom. Bust. Boom.

I displayed the little totem pictured to the left in my office for the past 7-8 years as a constant reminder to myself and anyone who came to visit of how things aren’t always what they seem. Flush times could simply be masking bad ideas and stupid money. Tough times can present opportunities to think different(ly).

The only constant is that, in the words of Don Ameche’s character in the David Mamet movie, “things change.”

Right now, we’re all living through a big change. In a downturn, money dries up. People spend less. Businesses advertise less. News organizations struggle to cover their markets on less revenue.

But even in the current tough scenario, online looks to grow in the coming years. We’ll see if the predictions hold, but recent prognostications by some key analysts, while ratcheting their projections downward, still hold out hope for mild improvement in digital ad revenues.

The problem is, of course, that these are just projections. You have to look only as far as last December to see how far ad projections can be off when conditions on the ground change.

But if we don’t invest our efforts and our dollars where the growth is, we might as well pack up and go home.

Aggregation works

Newspapers need to be dragged kicking and screaming, but Drudge knows it and Google knows it. Aggregation works. An outstanding way to build audience is by sending people away.

One of my favorite recent arrivals on the web has been Guy Kawasaki’s Alltop.com. The model is simple: aggregate the best of the web in vertical categories and organize it in a clean and logical presentation.

In six months, he’s grown his site from nothing to more than five million page views by pointing at other people’s content:

You can think of an Alltop site as a “digital magazine rack” of the Internet. To be clear, Alltop sites are starting points—they are not destinations per se. The bottom line is that we are trying to enhance your online reading by both displaying stories from the sites that you’re already visiting and helping you discover sites that you didn’t know existed. In other words, our goal is the “cessation of Internet stagnation” by providing “aggregation without aggravation.”

Some legitimately question whether Alltop is merely riding on the back of content created by other sites, but I think that the careful aggregation itself – the curation – does add value and makes it easier for me to find the content I’m looking for.

A new verb: To Batavian

GateHouse Media is up to something potentially amazing.

The newspaper company has launched a news operation in a town where the local (non-GateHouse) paper had largely ignored the web: Batavia, New York.

TheBatavian.com is an online news site that’s all local and 100% paper-free. By eliminating one of the greatest sources of expense – the printed paper – the startup in Batavia increases the chances of breaking even and – imagine that – making a profit in a business far too many people are writing off as too expensive.

More importantly, TheBatavian.com could very well be schooling the competition on what happens when you allow the hottest medium of all to lie fallow. And in the process, they may be coining a new verb – to Batavian: to snatch a market away from the snoozing competition with an online-only play.

As GateHouse’s Howard Owen says on his own blog:

We picked Batavia because it’s a neat, vibrant town; it’s close to our home office; and the daily newspaper there was doing nothing on the web.

Amazingly, the local paper still just has a brochure site and hasn’t engaged the battle. This certainly bears watching.

Most news, print included, is free

That old tired meme – If everyone wants to read their news online, why don’t we charge for it? – is the Old Faithful of seemingly good ideas that aren’t. You can practically set your watch by the frequency that someone (often a print-centric newspaper employee) will throw down the idea as a fresh perspective on The Revenue Problem.

Which is a long way of saying that this post is at least partly a response to this post by Gus Sentementes of The Baltimore Sun:

Right now, we hear lots of anecdotes of people giving up the print edition and just consuming the news online, where it is free.

But we all know nothing is ever free. Harvesting the news costs a lot of money, though the promise of an Internet-only news site means a publisher doesn’t have to worry about operating a costly printing press and buying pricey paper and ink by the ton.

So would you pay for an online subscription to get a little better coverage and more distinctive, original reporting? Or would you be happy with the free information that leaves you still hungry for more at the end of the day?

Before asking whether people will pay for online news, consider this question:

What do people pay currently for printed news from their local paper? 75 cents an issue? A couple bucks a week?

The real answer: nothing.

The newsstand or subscription price doesn’t pay for the reporters or the editors. It pays for the printing and distribution of the paper (or at least, partially pays for it).

But the articles? They’re free. Whether you’re reading an article in the paper or online, it’s being “paid for” by advertising, not by the reader.

That’s why the decline in advertising in the US newspaper industry is a much more urgent problem than the modest declines in circulation. As ad dollars shrink, the ability of newspaper companies to create their product on a daily basis becomes much more difficult.

If a newspaper company were to truly charge what the paper is worth – that is, cost of reporting, editing and production plus a fair markup – most newspapers would have to charge many dollars per issue. That would cut into readership and, ultimately, drive down advertising revenues as fewer readers led to lower ad rates. The advertiser-subsidy allows for the paper to cover its costs and make a profit.

The same realities carry to online, but are magnified by the astounding volume of competing content available from uncountable sources. Any local or regional paper that charges for all content will make a fraction of what it can make as an ad-supported model. Why? Because once you put up a pay wall, fewer readers will visit and fewer readers mean diminished ad sales. You’d have to charge $1,000 or more a year per reader to even begin to make up for the lost advertising income.

So how does the Wall Street Journal succeed with their paid model? Here’s what I believe: They’re a highly-specialized, national product and many of the subscriptions are reimbursed or direct-billed business expenses. If a local or regional paper could replicate the WSJ experience, surely some would be doing so by now. The few experiments in this area have been less than successful, usually by small-market papers that are trying to protect print circulation.

Is the online model perfect? Hardly. Right now, online revenue needs to grow faster if it’s going to support the kinds of newsrooms that can properly cover a metro area. One of the questions news professionals should be asking isn’t “Can we charge for what we’re already doing?” but rather, “What can we create that people will gladly pay for?” What kind of valuable information can 200- or 300-person newsrooms dig up and synthesize that’s both compelling and exclusive? A hybrid model, where most basic news is free but certain types of information – or tools for managing that information – have cost associated with them, seems an inevitability.

Until then, I believe putting up a pay-wall between the public and local news would effectively kill the online revenue stream that newspapers across the country need to be able to count on.

Inflation-adjusted newspaper revenues approaching 1982 levels

According to The Newsosaur, Alan Mutter, the first-half 2008 newspaper revenue details, released by the Newspaper Association of America, represent the worst numbers in a dozen years.

But that’s comparing 1996 dollars to 2008 dollars. If you look at print revenue performance in constant 2008 dollars, the industry hasn’t seen numbers this grim since 1982 (click to see the chart in full size):

Newspaper revenue (print only) 1982-2008

What’s really bracing about that chart is how the rate of decline clearly accelerates in the past few years.

This chart does not include online revenue, which NAA has tracked since 2003.

(Obligatory warning: I was an English major in college, not a stats geek. This constant-dollar hack was made with simple web tools and the original data from the NAA. If this is way off, please let me know.)