Posted by: structureofnews | September 17, 2010

Into Every Cloud A Lining Must Fall

Poynter interviews Rafat Ali about prospects for online media, and it’s not pretty.

Among other things, he talks about the challenges of building a business that can scale; the difficulty of keeping up against the latest technology; and the problems with going hyperlocal.   It’s hard to find silver linings or even patches of clear sky amidst the gloom – but there are some.

First, the bad news:

Content is hard. All of these players, they’re trying to do local, but on a national scale. Companies like Patch will have hyperlocal stuff, but at the end of the day they will have a larger presence and economies of scale, and the back end will be similar for all of those. Sales teams will be optimized across all of those networks.

But it hasn’t worked, really. None of those have at this point shown any long-term sustainability, not even Yahoo Local, honestly. Particularly being part of Yahoo News, it should be a huge operation. Yahoo News should be the biggest site on the Web. Yahoo itself is making enough money — but compare that to the audience that they have.

It’s depressing stuff, or it can be.   But a large part of what he’s talking about is the ad-driven news business.   And that’s not the only model.

For any vertical, B2B or consumer, we have learned [that] for most of the sites, whether it is in tech or any other sector, that beyond a certain point they don’t scale. But the Web is still all about scale. Ad models are based on scale. Audience models are based on scale, despite what everybody else says.

Yet, the growth in terms of revenues for any of these are incremental. If anybody is saying otherwise, they just are kidding themselves.

And that’s right: Online ad CPMs suck, and generally require large audiences to bring in real revenue.   (There are exceptions, of course.)   Hence the focus on traffic, scalability, and all that.   And keeping costs – and particularly people (journalist) costs – down.

That’s why chasing an ad-driven news business looks tough.  It works best with very cheap-to-generate content.  At the other end of the scale, really expensive content can be sold without any ads, but only on topics that people really care about, such as financial and business news.  There’s probably more businesses that could be grown out of that – tracking legislation, for example, or following healthcare regulation – the stuff of trade and specialist publications.

But that’s also why looking at hybrid models – some premium subscriptions, some advertising, and some data-driven services – makes sense.  And particularly – and I know I’m sounding like a broken record – if we bring down the average cost of content creation by making stuff that lasts longer, and sits in databases accumulating value, not losing it.

Rafat is also talking about businesses that scale, and noting that not many do.  That’s probably true, but it doesn’t mean there aren’t stable, relatively small “lifestyle businesses” – ie, news sites that pay their employees decently and generate a most return without much hope of expansion and taking over the world.  It won’t make you a millionaire, but you’ll stay employed, albeit without much of a safety net.  A bit like running a small restaurant.

So maybe those aren’t particularly bright spots – that smaller ambitions and not chasing online ads may still offer paths forward.  But you take what you can get.

What is absolutely scary is his point about how unstable everything is, and how fast the landscape shifts.

The only constant in the news industry is change. And how do you build a lasting brand, a business in that kind of sector? There’s too much undercutting. The fact of life in the news industry is everybody undercuts everybody. Everything undercuts everything. Every new technology undercuts every technology, which will then get undercut by a new technology that will come along.

As a rational human being that wants some stability in life, how do you create lasting in businesses in that sector? It’s pretty hard. …

And that may be the hardest thing to live with.


Responses

  1. But the changes and uncertainties are what make the industry exciting, isn’t it? People who pursue a stable life won’t even bother get into the business.

    You writes more and more like a journalism entrepreneur. I won’t be surprised if one day you set up your own media business!

    • It used to be the daily work was exciting and unpredictable, not the business model and the paycheck. Now it all is.


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