On Atomizing Your Business Model: The Newspaper Industry

Continuing our series on the atomization of content and business models, today I look at the newspaper industry.

First, from the user point of view: online (vs. the print version), it’s much more difficult to find the glue that will make your news container (your URL) stick together. if you have a strong brand (the New York Times, for example), people will navigate directly to your site but readers can now access your content via RSS readers, blog posts and news aggregators like Google News. These have been flourishing, reorganizing newspapers’ articles (the new content atoms), into flexible reading formats. For newspapers, it’s a catch-22. You want to be indexed by news aggregators to drive traffic back to your site but you wonder if you’re losing brand equity at the same time. Efforts at trying to get readers to register to newspapers’ sites (to generate potentially valuable socio-demographics information) have been a major failure. Clearly, the only strategy now is building a strong brand online while allowing readers to access your atomized content via a variety of vehicles but that creates problems from a monetization point of view.

Traditionally, the newspaper business model has been found in these three revenue categories: reader subscriptions, traditional display advertising and classifieds. Except for a few exceptions (the Wall Street Journal comes to mind), experiments in paid online user subscriptions have been failures as digital content is much more difficult to sell as an aggregate than print content. Classified revenues are being nuked by free sites like Craigslist or Kijiji, or aggregators like Oodle. Newspapers have been also forced to offer free classifieds, managing to generate some priority placement /enhanced content revenues but not to the previous print level. Online display advertising is working but it does not monetize as well as print advertising.

To better monetize their destination site, newspapers have been looking at various new solutions. One is in-line text ads (double-underlined sponsored keyword ads appearing directly in the article text) delivered by companies like Vibrant Media but, as I mentioned yesterday, the blurring of the line between editorial and advertising content has created ethical issues within news organizations. Already in 2006, in an article called “Is It News…or Is It an Ad?”, the Wall Street Journal exposed the various issues around the product:

“This type of online advertising within the text of an article, known as in-text advertising, has been around for a while. But it used to be relegated to niche sites like the videogamers’ haven IGN.com and ScienceDaily.com. Now it is appearing on some mainstream journalistic Web sites, like those of News Corp.’s Fox News, Cox Enterprises Inc.’s Atlanta Journal-Constitution and Hearst Corp.’s Popular Mechanics magazine. That marks a departure from a long-observed tradition in the print medium of keeping editorial content separate from advertising. “Journalism ethics counselors decry the trend. “It’s ethically problematic at the least and potentially quite corrosive of journalistic quality and credibility,” says Bob Steele, the senior ethics faculty member at the Poynter Institute, a journalism school in St. Petersburg, Fla.”

More recently, Tim McGuire from the Walter Cronkite School of Journalism in Arizona wrote about its use in the Arizona Central web site:

Michael Coleman, Vice-President of Digital Media for AzCentral, told me late Friday that the site has been using Vibrant Media for “two or three weeks.” Coleman described the relationship as a test and said this is not a “Gannett roll-out” of the concept even though some Gannet papers are using the system. “We’ve got a pretty non-committal contract with them, Coleman said. “The publisher made the call, and we decided to try it and see what happened.” Coleman said the experimental aspect of the deal explains why nobody has announced this deal.

Business Week wrote about the phenomenon in December:

Many journalists believe that selling the words in a story blurs the line between editorial and ad content. Some worry it creates an incentive to insert ad-linked words or order up certain types of stories. Forbes’ online arm caused a ruckus in 2004 when it rolled out in-text ads. After an outcry among the editorial staff and negative media coverage, Forbes ended the practice. (…)

Publishers are paid by Vibrant and other marketing companies based on how many times readers scroll over a word. Advertisers only pay Vibrant for how many times a reader actually clicks on an ad. In-text ads draw a higher response than traditional Web ads: About 0.2% of Web users click on posterlike ads known as banners; Vibrant CEO Douglas Stevenson says 3% to 10% scroll over and click on in-text ads, depending on the category.

I think the use of in-line text ads might be problematic thus far because newspapers have been using the technology to better monetize their destination site. I would suggest that the better use of this new ad vehicle would be to monetize a smaller atom of content, i.e. the news article, decentralized from the destination site. Embedding in-line text ads within RSS feeds or other distribution mechanisms might be a small price to pay to allow readers to access news article outside of the newspaper’s site. Another option would be to have RSS ads, like the Feedburner Ad Network.

I think the general takeaway here is that newspapers shouldn’t look at the same business models to monetize centralized and atomized content.

Update: The Kelsey Group discussesNewspaper Next 2.0, a “progress report” by the American Press Institute on the evolution of newspaper companies beyond the print edition.” I took a quick glance at it (it’s a 110-page document) but it does not seem to address many of the business model issues that newspapers are facing. As my friend Peter K. says in the post, “The report has a better fix on consumer-oriented solutions than business solutions. But that’s not surprising for a newspaper industry (i.e. editorial-driven) product. If the Yellow Pages Association commissioned similar research, it would probably be the other way around.”


Forbes Online Success does not Cannibalize Print; Future Focus on Local Business News

I had missed that news last week:

The head of Forbes.com told an industry conference that online success has not come at the expense of the print product. Speaking at the OPA forum for the future, in London today, James Spanfeller, president and CEO of Forbes.com, told delegates that his site drew 16 million unique visitors per month.

“The success of Forbes.com has not come at the expense of our print product, in fact the two media platforms have been a great complement to each other… we’ve had all the magazine content on the site for ten years, from launch, during that time readership for the magazine has increased. “The strategy has paid off handsomely for us not only in terms of increasing readership for the print product but we have also seen tremendous uptake of folks reading our sites.”

Mr Spanfeller said that growth was based on the recognition of the Forbes brand rather than a specific single delivery platform. “The manner by which people find our content is less important than having a brand that stands out and that people recognise.” He added that Forbes was prepared for a platform agnostic publishing world where the focus was on providing business news on a local basis. He said Forbes had just launched a Polish version and further local language services with geographically specific content were planned. He added that Forbes was investing heavily in creating original video.(…)

(via Journalism.co.uk )

What it means: it’s common knowledge in the industry that Forbes has done a very good job with their online properties, building specific content for the Web and launching vertical sites like Forbes Autos . What’s interesting is that they say it hasn’t dented their offline revenues and that’s good news for an industry that has seen its share of problems recently. Premiere Magazine is shutting down its print edition in the US but will keep operating its web site. In the videogames industry, Computer Games Magazine, the second oldest pc-focused game magazine, has apparently been shut down by publisher TheGlobe.com. (Personal note: I’ve known Steve Bauman, the editor-in-chief, since my days at UbiSoft in the ’90s).

Coming back to Forbes, according to this New York Times article, “the Forbes site attracted almost $55 million in revenue in 2005, the most among business publications” The Times article also debates whether they have as much traffic as they claim, bringing back to the surface the whole third-party measurement issue. “Some competitors argue that Forbes.com’s popularity derives in part from racy, provocative or wealth-obsessed lifestyle features that have little to do with traditional business news — examples from this year include “The Hottest Billionaire Heiresses,” “Top Topless Beaches” and “America’s Drunkest Cities.” Those kinds of articles, unlikely to appear in Forbes magazine, may be a small fraction of those that Forbes.com posts each day, but they are often featured on mass-market Web portals.” I call that smart marketing. As long as you don’t over-extend and dilute too much your brand, there are a lot of things that can be done differently online. You want to capture those eyeballs.

Update1: InfoWorld kills print edition, will focus on online. Owen Thomas from the Business 2.0 blog says: “I’ve heard from IDG insiders that IDG is keeping other print titles on life support, on the theory that the print edition adds brand awareness and gravitas to the websites.”

Update2: Time Warner announces that Life Magazine will be shut down