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.”

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Oops! We Forgot to Atomize Our Business Model!

A couple of news articles caught my eye last week. Mediapost reported on a TV exec seminar hosted by Havas’ Media Contacts unit. Talking about the online video revolution, Mediapost says major TV providers are moving aggressively online–and not only to their own online destinations, but in an array of “distributed” online content options to deliver their programming directly to consumers regardless of where they are on the Web.”

In addition, TorrentFreak discussed data from Mininova (one of the largest torrent listing sites) showing that “ 50% of all people using BitTorrent at any given point in time do so to download TV-series, quite an impressive number. In total, over a billion TV-shows are downloaded every year, and this number continues to rise.”

Our friend the Atom

Flickr photo by Marshall Astor

What it means: recently, all savvy media industry strategists have been talking about content atomization and clearly, in the TV industry, TV channels are being atomized by new Web technology. Whereby, in a traditional cableco world, channels used to be the basic content building blocks (think about how your cable TV subscription is structured), TV shows have become the new atomic element.

But there’s a problem.

The content is being atomized but the main TV business model (30-second ads) was built to be part of a larger element, the TV channel. Ads used to fill, i) the “empty spaces” between shows and ii) planned 3-minute interruptions during the show. In the first scenario, those empty spaces don’t really exist anymore as shows become the basic element and BitTorrent is disrupting the second scenario by offering easily accessible ad-less versions of your favorite programs.

Guess what. Someone forgot to atomize the TV business model while they were busy atomizing the content.

So, how do you atomize TV’s business model? Is it all about product placement, sponsorships, pre-roll ads? Do you move to a user-paid subscription model for individual shows? And BTW, is the future cableco the equivalent of a RSS reader for online videos?

And what does it mean for other media, newspapers for example?

In the case of newspapers, from a content point of view, news articles are the new atoms. This is the way news information travels online. But, in that situation, newspapers’ business model has been blown to bits (no pun intended). Let me explain. Like TV channels, newspapers are inserting ads in the empty spaces around news articles. These spaces don’t really exists anymore, so how do you monetize? News article sponsorships? A-la-carte article user-paid
subscriptions? This one is not easy as journalism ethics (rightfully so!) have kept news article and ads completely separated. How do you bring ads closer to the article without breaking readers’ trust?

What about radio?

For the traditional FM radio industry, individual songs are clearly the basic atom of content. But those are so easy to find online through legal (music streaming services, iTunes) or illegal means (BitTorrent again). As for their business model, radio stations insert ads around songs. Again, these slots don’t exist in an atomized world. Maybe radio stations should invest in original content or better DJs (Wired calls them robo-DJs in “Why things suck”)? Can radio stations move online as trusted brands and become real music aggregators/recommendation engines? It might be too late. So, is FM radio as we know it screwed? Maybe more than people think. That one again is not easy to solve.

And finally, directory publishers?

As for directory publishers, their business model is currently in the ranking of directory listings. But those individual listings might be the new content atoms. And if they are, it means that the ranking structure does not exist anymore. Is it now the merchants’ phone number and a pay-per-call model? Is it pay-per-click to individual merchants? Given that directory content is all about advertising, atomizing content does not impair a directory publisher from atomizing their business model but it just needs to be properly executed. I believe pay-per-call and pay-per-click to individual merchants might definitely be the way to go.

Conclusion

If you’re atomizing your content, don’t forget to atomize your business model! This blog post raises important questions about future traditional media business models. I don’t have all the answers at this point but I meant this post as a wake-up call to stimulate deeper strategic thinking in all traditional media firms.

How Facebook Complements Your Blogging Strategy

I’ve been using Facebook intensively for about 4-5 weeks now and it has become an important staple in my blogging/media strategy. Here’s how it complements what I’m currently doing in the Praized blog:

1) Facebook Status Updates: I use the “status update” function as a micro-blogging tool (a bit like Twitter). It helps me put in words what’s on my mind in that specific moment and it captures my personal zeitgeist. It only takes a few seconds to write but people react to it. I usually receive one message a day from friends/readers reacting to my status update line. Don’t forget it’s a status update that triggered the Save Business 2.0 efforts.

status update Facebook

2) The “Post a Link” function in the Posted Items page: I use that function when I want to share with my friends/readers an interesting article I just discovered that might not be completely within my pre-defined blogging topics in the Praized blog (i.e. social and local). Examples in the last week include the Skype outage and the Google browser rumors. I always comment on the article to add value and I often end up my comment with a question to trigger additional reader comments.

Facebook Post a Link Function

3) I import my blog posts within Facebook Notes using the Import a blog function. You just need to plug-in your RSS feed URL. I’ve tried using the MyBlog app but it does not work well (I have to manually update the RSS feed to get my blog posts within Facebook). My readers get warned I’ve imported a note (in their newsfeed) and they see an excerpt from the post. They can also comment within Facebook or go to the original post.

Facebook Imported Note Notification

One caveat: don’t abuse your friends’ trust by posting too many links or importing too many notes every day. Unless you’re always interesting, they’ll shut you down and change the channel. That’s what happened to Robert Scoble last week with some of his Facebook friends. Tomorrow, I’ll offer five suggestions to improve Facebook. BTW, don’t hesitate to add me as a friend on Facebook if you’re interested in reading/discussing social media.

Traditional Media Need Google and other Aggregators

Catching up on some interesting blog posts this week, I found this superb analysis by Publishing 2.0 about why newspapers should embrace online aggregators.

Highlights:

  • Many newspaper executives have made an enemy out of Google and other online aggregators who disintermediate newspapers and all other traditional media.
  • These aggregators drive a significant amount of traffic to newspapers.
  • The real fear is that aggregators are destroying the direct brand relationships that newspapers and other branded media have traditionally had with their audience.
  • The problem that newspapers and other traditional media brands have is that they still see branding as a function of controlling the distribution channel, rather than branding each unit of content that must now live and survive on its own in a disaggregated online media ecosystem.
  • The real missed opportunity for newspapers is in optimizing their content to convert user who find their way to newspaper content via search and other aggregators into subscribers and direct users of the brand. (there is an interesting example from The New York Times and some interesting data from Publishing 2.0 RSS subscriptions in the post)
  • Newspapers will also limit their growth by focusing only on their own content — the New York Times and many other mainstream media sites have embraced aggregation themselves, as blogs have done for years, by linking usefully to other sites, which only increases their value as a destination.
  • None of this will save newspapers from declining print circulation, i.e. it won’t turn young people who don’t read print newspapers into print readers. But it can help people discover the newspaper’s original content online — and if they discover it enough times, some of them will start going to these newspapers directly as a source. This is essentially a reinvention of the circulation department.

What it means: a couple of things. First, if you are traditional media, you need to re-think how you see your brand. There is a retail version of your brand (your destination sites) and there is a wholesale version of your brand (rss feed, SEO strategy, content licensing, etc.). Both are as important strategically. Second, the idea of branding content pieces in addition to your destination site is brilliant. Make sure you take that into account when working on your wholesale strategy. Finally, embrace search engines and aggregators to increase your reach.

How People Find Blogs (and Some Learnings from Praized)

eMarketer analyzes a Vizu Answers and Ad Age report that discusses the way readers find new blogs.

Survey highlights:

  • “Two-thirds of blog readers discover blogs by links on other blogs.”
  • “Recommendations account for another 23% of blog finds. “
  • 20% finds them through search engines
  • 6% through blog search engines like Technorati or Google Blog Search

eMarketer adds:

The fact that blog awareness is effectively spread by word-of-mouth is key for anyone using one in a campaign. Not only can you not build it and expect them to come, you cannot even build it and optimize it for search and expect them to come. Blog launches must be accompanied by links on established blogs, and some good recommendations from established, influential bloggers.

In addition, the survey asked respondants their main reasons for reading blogs:

Two-thirds of blog readers said that they read to be entertained, and 43% said that they read to keep up with personal interests or hobbies (multiple answers were allowed). A third said they read for education and 12% for business, making these clearly minority opinions.

What it means: high-level, here’s what I’ve learned about blogging (and blog linking) since I started writing 5 months ago.

  1. Before you start blogging, you need to identify the ecosystem(s) in which you’re going to “evolve”. The Praized blog is part of multiple ecosystems: Above all, it is part of both the Local Search ecosystem and the Social Media ecosystem. But geographically, it’s also part of the Canadian bloggers ecosystem.
  2. Once you’ve identified your universe, you need to start reading blogs from these worlds. I follow updates through a RSS reader (I use Google home page, nothing fancy). I read about 40 to 50 active blogs (by active,I mean daily updates) that operates in those three worlds. You’ll find a good subset of these blogs in my blogroll (I have not updated it in a while).
  3. Pretty soon, you’ll want to start commenting in these blogs. This will allow you to find your voice.
  4. You’re ready to start blogging. Continue commenting in your ecosystem’s blogs and make sure you refer to other blogs when you find interesting news on them.

I’ve also found some interesting qualitative data about blog post “tagging” (the “Categories” in the right column), which might help you with search engine indexation, but that story is for another day…

How People Find Blogs (and Some Learnings from Praized)

eMarketer analyzes a Vizu Answers and Ad Age report that discusses the way readers find new blogs.

Survey highlights:

  • “Two-thirds of blog readers discover blogs by links on other blogs.”
  • “Recommendations account for another 23% of blog finds. “
  • 20% finds them through search engines
  • 6% through blog search engines like Technorati or Google Blog Search

eMarketer adds:

The fact that blog awareness is effectively spread by word-of-mouth is key for anyone using one in a campaign. Not only can you not build it and expect them to come, you cannot even build it and optimize it for search and expect them to come. Blog launches must be accompanied by links on established blogs, and some good recommendations from established, influential bloggers.

In addition, the survey asked respondants their main reasons for reading blogs:

Two-thirds of blog readers said that they read to be entertained, and 43% said that they read to keep up with personal interests or hobbies (multiple answers were allowed). A third said they read for education and 12% for business, making these clearly minority opinions.

What it means: high-level, here’s what I’ve learned about blogging (and blog linking) since I started writing 5 months ago.

  1. Before you start blogging, you need to identify the ecosystem(s) in which you’re going to “evolve”. The Praized blog is part of multiple ecosystems: Above all, it is part of both the Local Search ecosystem and the Social Media ecosystem. But geographically, it’s also part of the Canadian bloggers ecosystem.
  2. Once you’ve identified your universe, you need to start reading blogs from these worlds. I follow updates through a RSS reader (I use Google home page, nothing fancy). I read about 40 to 50 active blogs (by active,I mean daily updates) that operates in those three worlds. You’ll find a good subset of these blogs in my blogroll (I have not updated it in a while).
  3. Pretty soon, you’ll want to start commenting in these blogs. This will allow you to find your voice.
  4. You’re ready to start blogging. Continue commenting in your ecosystem’s blogs and make sure you refer to other blogs when you find interesting news on them.

I’ve also found some interesting qualitative data about blog post “tagging” (the “Categories” in the right column), which might help you with search engine indexation, but that story is for another day…

Local & Social Media Predictions for 2007

I’ve recently discussed in this blog a list of online media predictions for 2007. I’ve decided to take the plunge and offer my own predictions in the Local and Social Media space for the year to come.

1) Atomization: 2007 will see the acceleration of content/functions/applications atomization (decentralization) via the adoption of multiple syndication methods like RSS, XML and APIs by a majority of web sites.

2) Verticalization: The success of generalist social networks and online video sites in 2006 means that we will see the arrival of a multitude of new specialized players in these two fields.

3) RSS: a clear business model for RSS will emerge. It will start replacing e-mail marketing as a way to communicate directly (and better) to your customers

4) Local will become more social / Social will become more local: A good example of the later is the addition of maps (often Google Maps, the poster child for Atomization!) in FiveLimes or Flickr.

5) Traditional Media will continue to realize that they desperately need to capture eyeballs online, leading to more online acquisitions and/or investments.

6) Long distance & local calls will continue their move towards free. Model might actually reverse itself and we might finally see the strong emergence of pay-per-call as a legitimate lead model for advertisers.

7) Traditional media will create SEO job positions. Search Engine Optimization is a key success factor for traditional media to be well positioned in search engines. Innovative companies will create Social Media Optimization (SMO) positions.

8) Video Monetization: a clear business model will emerge. Either Google’s acquisition of YouTube or the launch of the Venice Project (don’t bet against Janus Friis and Niklas Zennstrom…)

9) The proliferation of destination sites without clear business models will lead a lot of them to adopt the B2B business model, i.e. software licensing or ASP to traditional media companies.

There you go! Anything you would have added? Do you agree, disagree?