Posted by: structureofnews | June 2, 2012

Reinventing Ourselves

Clay Shirky has an excellent piece at CJR looking at the Washington Post’s business prospects and how it needs to reconceive itself to survive.  It’s smart and interesting – and even more so when read in the context of a separate strain of discussion making the rounds, this one about the dwindling returns from online advertising.

Together, they make the best argument for why we have to rethink core parts of what we do and what we produce, and soon.

First, the advertising discussion.   There’s a frightening chart (above) – frightening, at least, for newspaper publishers – showing how print captures a disproportionate percentage of advertising dollars compared to its share of audience attention.  That can’t be good news for print publishers; advertisers, at least in theory, should be gravitating towards other areas – such as mobile – where people are spending more time.

But wait, it gets worse.  Media critic Michael Wolff dissects the online advertising market and concludes that ad rates have only one direction to go, and that’s down.

The daily and stubborn reality for everybody building businesses on the strength of Web advertising is that the value of digital ads decreases every quarter, a consequence of their simultaneous ineffectiveness and efficiency.

As Facebook gluts an already glutted market, the fallacy of the Web as a profitable ad medium can no longer be overlooked. The crash will come. And Facebook—that putative transformer of worlds, which is, in reality, only an ad-driven site—will fall with everybody else.

OK, so it’s a bit apocalyptic; but the broad outlines of that dynamic have been clear for a while.  And if online ad rates – low as they already are – keep falling, what happens to online news organizations that are building an ad-based future (and there are a fair number of them)?

Dan Kennedy, at Northeastern University, suggests a couple of fixes, including keeping the presses rolling, moving to a flat-fee ad model (ie, sponsorship), expanding non-profit journalism, and experimenting with flexible paywalls.

And indeed, more and more publishers seem to be doing that last one.   Ken Doctor points out that circulation dollars are growing as a share of many media organization’s revenue – presumably both because circulation numbers are rising as well as because ad numbers are shrinking.   And he asks good questions about a world where journalists are more directly paid by their readers, as opposed to by advertisers.

Will journalists feel more closely connected to their readers — and to their public service missions — if readers pay more of the cost of journalism?

(It’s a question Gordon Crovitz, one of the founders of Press Plus, the paywall provider, asked not that long ago as well.)

The trouble, though – and this is where Shirky comes in – is that with some notable exceptions (high-end newsletters, financial news organizations like Reuters and Bloomberg, for example), circulation revenue is unlikely to be able to pay for large newsrooms.  Or at least newsrooms on a scale and size we’re used to, or hoping for.  People simply aren’t used to – and quite possibly never will get used to – coughing up the amount of money that news organizations used to take in from advertisers.

So if you can’t bring in the dollars you want, what can you do?  You can cut costs, but that only gets you so far before the product starts to suffer.

Or at least, your traditional product starts to suffer.  That is, the product – say a newspaper – that’s built around certain ways of doing things, certain structures, and certain areas of coverage.

Why not rethink all those assumptions?  Shirky points to Homicide Watch, an innovative site that tracks every murder in DC, run by a husband-and-wife team on a shoestring.  Never mind, for the moment, how it’s funded (his salary) or that it doesn’t have a real business model;  what it does do is bring a completely different approach to coverage of crime, one much more akin to the ideas embedded in structured journalism.

As Shirky notes:

Because the content is so intertwined (the pages of multiple victims in the same assault are linked, as are the pages of the victim and the accused), Homicide Watch is more like a database than a news wire; each additional detail posted raises the value of the whole collection, a pattern that copies more from Wikipedia than from the traditional newspaper coverage.

The site may or may not make money; and if the  Post took over it, it would probably cost them more to run and maintain it.  On the other hand, you could make the case that it’s much more comprehensive way to cover crime, has user-friendly content, keeps its value longer, and that all it comes are a relatively lower cost that traditional coverage.   Not unlike the way Politifact reinvented at least some part of political coverage.

Is there a business model here?  Well, it’s at least a cheaper way of getting broader – and possibly better – coverage; and it certainly doesn’t preclude writing great stories as well.

If we accept that advertising (and circulation) revenues will never rise to the levels of the past decades – and pending the discovery/invention of new revenue streams (my money is on data) – then we need to rethink what we do and how we do it, rather than pine for the good old days, or hope for magical buckets of money to fall from the heavens.

But we shouldn’t cede that process to other people, as we’re in danger of doing.  As Krishna Bharat of Google notes:

It used to be that you could focus on journalism because the technology around you was stable. You could hone your craft on top of TV or print or whatever it was, but now the technology platform on which you’re building is also changing. In order to be truly successful you can’t just wait for the technical innovations, you need to be fueling the technical innovations, which means, in turn, that you need to be hiring all these disciplines.

More than just hiring people with those skills – we have to embrace those disciplines.


Responses

  1. […] background-position: 50% 0px ; background-color:#101010; background-repeat : no-repeat; } structureofnews.wordpress.com – Today, 3:51 […]

  2. Reg,

    No offense, but I’m going to have to disagree with some of this, or at least point out some additional nuance.

    Shirky’s post on CJR was in response to a prior CJR/Audit post by Ryan Chittum in which Chittum made the plausible argument that the The Washington Post might be better off going forward if there wasn’t such a large amount of cash flow being diverted to shareholder dividends. The gist of the Shirky counter-argument was evidently that even if such money was made available, The Post wouldn’t know what to do with it.

    Personally, I’m not so sure. There’s evidence that despite the errors of such things as Loudoun Extra, the hiring of Rob Malda (CmdrTaco of Slashdot fame) for WaPo Labs seems to indicate that the paper does have at least some clue about the online realm.

    It’s also probably important to keep in mind some backstory context in that Ryan Chittum works for Dean Starkman, who has been involved in something of a running feud with a Future Of News (FON) faction of media criticism whose most visible proponents include Shirky, Jay Rosen, and Jeff Jarvis.

    My personal opinion is that if you want to know what’s wrong with the news business, the FON faction is a good place to start; if you’re looking for ideas on how to fix what’s broken, you probably want to look someplace else.

    It’s also suggested that almost anything Michael Wolff has to say about advertising be taken with a large grain of salt; Wolff’s tenure as editor of Ad Week is not an example of someone with particular insight into the advertising business.

    Dan Kennedy’s post at Neiman, as you’ve pointed out, does offer some specific fixes. It also raises an additional issue:

    First of all, the concept of flat-fee pricing as an ad model is not the same, at least it seems to me, as a sponsorship. The distinction being that a sponsorship normally applies to a sponsor being willing to underwrite a specific kind of content within a larger framework.

    In the example of The Batavian that Kennedy uses, Howard Owens charges all advertisers a set monthly fee for an ad in one standard size. Something that seems to be working although not at great scale.

    What’s interesting is that Aol’s hyper-local Patch effort uses a similar flat-fee model, with the addition of various sizes and page placement, but doesn’t seem to work well at all. Anecdotally, a key reason seems to be that Aol has misread the market by setting the price point too high.

    The main point here is that bad ideas are always going to fail, but good ideas succeed or fail based on implementation. This is the sort of trap Shirky fell into when predicting that the NYT’s paywall wouldn’t work.

    It’s also debatable whether or not a paywall is potentially too trivial an amount to be worth the effort. Whether that’s true or not is probably going to depend on such things as market, price point, and meter variables. It’s probably also true that although nobody really likes paywalls, the consensus seems to be they’re necessary to the extent that readers need to provide a higher proportion of revenue.

    Somebody that seems to have a rational grip on how this stuff needs to shake out is John Paton at JRC/Digital First who has said in the past that in order to move from print or a print/online hybrid into an online pureplay, the magic number for being able to provide an equivalent level of journalism is somewhere around 18 percent. That number is likely not going to be the same for every paper, but Paton’s view seems to provide an interesting way of setting a target.

    Regards,
    Perry

    • Perry,

      No disagreement on most of your points – and thanks for the additional nuance. I’m with you on the Ryan/Dean vs. FON feud, although I guess what I was trying to say is that it isn’t enough to just want more money for news organizations; we also have to seriously rethink the kind of product we produce.

      I’m generally skeptical about online ad revenue and what it takes to get it in significant amounts (relative to the cost of generating traffic), and while I’m a fan of circulation/subscription revenue (ie, some kind of paywall), I’m skeptical about how much they can bring in, except in some very specific areas – finance and sports, to name two.

      I’ve also been grappling with the question of how to monetize subscription revenue beyond those who value immediacy – a paywall makes those who want information immediately pay up, but leakage seems inevitable, and if you don’t mind reading it later, it’s harder to get you to cough up.

      Which is one reason I’m fixated on the notion that data and structuring information is the way to provide a user experience that subscribers will pay for, even if the gist of the news is already public. So Homicide Watch looks like a very interesting concept to me.

      In other words, I do think there’s money in subscribers, and even in online ads; but I suspect we’ll need some other revenue streams (data, for one) as well as ways to extract more value out of daily news coverage – and that, to me, means rethinking the news product significantly.

      Thanks for a. keeping me honest and b. for making me think more about this.

      Best,

      Reg

  3. Reg,
    Thanks for the write-up and the kind words about Homicide Watch. About our business model: We make a small amount of money off Google Ads, but our real business is licensing the software platform that powers the site (essentially offering news orgs outside DC a white-label version), as well as consulting. That business is just getting going, but we think a lot of newsrooms could really run with the concept.

    About ads in general: I’ve worked for a lot of news outlets, and one of the core problems I see is that attention is fleeting. People read a story and bounce, and that isn’t attractive to an advertiser.

    On Homicide Watch DC, our audience sticks. Our average time on site is around six minutes, and users hit six pages per visit (more on our traffic here: http://lauraamico.tumblr.com/post/24192020848/may-traffic-report). We think that’s valuable to advertisers, and we think you could apply the approach to other beats.

    • Chris,

      Thanks for reaching out, and I’d love to hear more about how the site works and how it’s doing. I caught the tail end of a presentation you did at NICAR, I think, but I’m sure there’s much I missed. I’m guessing that getting real leverage out of a working newsroom – the police reporters at a metro paper, say – could take any implementation to an even higher level. And, as you say, it could be on any number of beats.

      Best,

      Reg

      • Reg, I’m happy to answer any questions you have. Email anytime (chris at homicidewatch.org). Best, Chris.

  4. Brilliant article Reg. I totally agree that there is a fundamental rethink needed and this will involve changing the media landscape. I don’t think pay-walls work (having witnessed first hand the drop in interest/numbers). I think the hardest thing for news organisations to digest is *not* the drop in circulation figures etc but the disaggregation of huge chunks of their business. Homicidewatch being an excellent illustration of the same.

    And while you might be right in being sceptical of online ad dollars, I think the trends have shown that all business (Google, FB) have seen an increase in revenue / user. More here in Mary Meeker’s presentation http://news.cnet.com/8301-1023_3-57443686-93/mary-meeker-unveils-kpcbs-internet-trends-for-2012/

    • Disaggregation is a huge issue, I agree – to a large extent it was the cross-subsidies that funded a lot of what we find/found good and great about news organizations. How we continue that mission in an unbundled world is the key question, rather than paywalls or not. (And there’s a fascinating debate going on right now at CJR.)

      I’ll look up the online ad numbers you mentioned – thanks!

  5. I think slide 25 clearly shows the point I am trying to make. Overall since the spurt in Mobile users, there has been a slight drop in ARPU – average revenue per user(primarily since people are working out how best to monetise mobile!). You might also want to see slide 17 which shows how a disproportionate amount of ad dollars are spent on print (compared to the the time spent on medium) http://www.scribd.com/fullscreen/95259089?access_key=key-mv1qbwlvykk5cacr6a7.

    • Thanks! I like slide 22 as well – Facebook’s ARPU (which, while sliding, isn’t as bad as it might be). That said, I’m wondering how much of this revenue will go to content plays vs. platform plays. More broadly, it seems to me everyone needs a pretty diversified revenue stream in this environment – and just as importantly, needs to figure out what kind of content works online. And we’re still really at an early stage with that.

      • I suspected the platform plays get a bigger overall share than the content plays! You are also right about the diversified revenue stream. But there are already indicators of what works and what does not.

        I use the three step high level approach while talking to people from more traditional media.

        1) The first step would be for people within traditional media to realise that the world has changed (and accept that suing new tech companies will only get them that far).

        2) The second would be to have an innovative outlook and try different things. Focus on content plays (whilst keeping platforms old & new in consideration) in the digital space and start getting revenue streams in place. It is easier to scale an existing revenue stream rather than try and make one materialise out of thin air.

        3) Understanding the target market and demographics would be key to the platform question from point 2 (younger users consider ease of availability to be part of the quality of news! http://www.inma.org/modules/store/index.cfm?action=store_detail&pubid=93).

        But overall, very interesting times ahead!

  6. […] debating that – as Ryan Chittum and Clay Shirky and sort of did at CJR (and I riffed on here) – it’s hard to figure out how much journalism costs. Not to mention figure out what its real […]


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