Nimble Code: Tag newspapers

Advertising The Future Newspaper

2006-12-13T05:56:00-08:00

And now for the second post in this minor series All The News Fit To Serve wherein the blogger attempts to parlay a passing knowledge of the newspaper business into an exploration of how newspapers might change in the Web age. As it should go without saying, these are my opinions, and do not reflect any thinking at my employer or any actual strategy being taken there. Just needed to clear that up. That said, on with the show! This post’s theme: advertising, or how “old media” is not so much different than new media when it comes to bringing home the bacon.

Analyzing the newspaper business today is a study in contrasts. On the one hand, print circulation continues to decline and the recent drop suggested a more extreme decline may be in the future. Net wisdom decries newspapers as ailing dinosaurs doomed to extinction by 2014. On the other hand, papers still enjoy healthy profit margins and often monopoly status in local markets that gives them an advantage in covering a local area unmatched by anyone. Still, newspapers have seen some unsettling drops in readership and the decline in classifieds might be a troubling portent. On the other hand, newspapers are far from finsished and the warning signs have actually helped some papers to retrench and repair wasteful processes. In terms of readership, ewspapers still enjoy esteemed and privileged positions in their local markets that are still worth a lot, but Wall Street is alarmed whenever at the anemic growth or even retreat many papers are suffering. Putting it more simply:

The glass is half full
But the water level is dropping at an accelerating rate

And now every paper is trying to figure out how to refill the glass. But why is declining readership such a concern for newspapers? It helps to understand how the business operates.

You might assume that papers are supported largely by subscription fees and the decline in print readership is troubling because of decline in that revenue. But for many papers, subscriptions only offset delivery and printing costs; indeed, it is possible for some small urban papers to even make a business giving away their product for free! Rather, subscriptions have the unusual property in that they are meaningless as money, but essential as a quantity. Because the real value of circulation is to set the advertising rates.

Like many Web sites, the dominant driver of revenue for newspapers is advertising. Of course, there are sometimes a few other minor revenue streams (licensing, royalties, books), but advertising is such a dominant revenue source that you can directly gauge the health of a paper by the advertising rates it can charge. And since the value of an advertising in a paper is largely determined by the size of the audience it reaches, advertising rates (and advertising profits) are directly influenced by the circulation of the paper. Advertising has been exceedingly good for newspapers – the total ad market for papers is estimated at $45 billion – but the writing is on the wall. Classifieds (another form of advertising) have already precipitously declined, and it’s only a matter of time before commercial advertisers follow suit. The party is over; this is why the papers are getting scared.

There is some good news on the horizon though. Internet readership of papers has been climbing steadily and ad rates are expected to continue increasing at a phenomenal rate – next year, internet advertising is expected to increase by 29% while traditional media advertising will increase only an anemic 1-2% – and some papers like the New York Times have built online web sites that reach a global audience and dwarf the readership of their printed versions. A lot of geeks read these trends and argue that papers should save themselves today by discarding the printed product and surviving off websites only, but such a move would only be suicide for any paper foolish enough to try it today.

The catch is for all its promise, Internet advertising is nowhere near the profitability of print advertising – optimistic estimates suggest it might be there in 10 years. This gap is simply stunning to casual pundits like me who think the Web is a ready equivalent to anything in traditional media. Why is this disparity so great? I think it has to do with a few different factors. One possibility is that Internet advertising is not attractive enough to traditional print advertisers yet, perhaps because of its perceived limitations (you just can’t buy a flashy three-page spread in the first few pages of the Magazine online). In addition, unlike print advertising, no single entity has a monopoly in a local ad market on the Internet. Which belies another difference between the two ad markets: the print version is local, the web version is global. I think it will take a while for some advertisers to want to reach the latter.

All is not bad for for Web advertising however. As stated before, web ads are able to reach sheer numbers of people inconceivable for any print publication today and at all times of the day and night, so some profits might be made in volume. Newspapers could also conceivably farm out web advertising to outside sources too who might have a better chance selling to Internet-savvy advertisers (Google is certainly hoping for this). The main advantage of online advertising in the long run will prove to be demographics however, and how intelligently newspapers are able to target them. The audience for a print ad can only be considered as an aggregate average, since the same ad goes to every subscriber, be they rich or poor, urban or suburban, dog owners and/or video game players and/or coffee drinkers. But the beauty of Internet advertising is that you can target the ads to the consumers more likely to respond to them – I am still talking about marketing to aggregate groups and not individuals (that gets a little too much into privacy), but the groups are much smaller here. This might make Internet advertising rates eventually exceed those of print ads. Newspapers would be foolish to ignore this opportunity. Which is why every newspaper at this point seems to require users to register. As an anonymous reader, you’re worth so very little to advertisers; as a 27-year old female from the Midwest, you (as part of an advertising group) might be worth much more. More readers and better marketing might help to make up for the decline in print readership.

But the real kicker is that for many newspapers, the website will never be able to close the gap.

Online readership growth for any paper must eventually reach a stable plateau where it starts to level off. How do you increase readership to greater levels beyond that? One possibility is to increase the paper’s website to be more than the news. The New York Times has followed this idea and unveiled sites for interactive applications like movies, travel, and home finance. Another possibility it acquiring outside media sites like About.com (NY Times) and Slate (Washington Post). This helps to some degree, but it can also seem like developing portals in an age where portals are no longer relevant. Personally, I think the opposite approach might be the wave of the future. Stop expecting your readers to live their online lives at your websites and distribute your content to them all over the web. But that’s a topic for the next post.

All The News That's Fit To Serve

2006-11-29T13:01:00-08:00

Here in New York, it’s routine for people you’ve just met to ask you what you do for a living (we inquire about rent when we get to know each other better, about 10 minutes later). As interesting as it was at Alacra, most people’s eyes would start to glaze over when I summarized the various minutiae of reselling financial information online (I eventually learned to describe it through the metaphor of a grocery store). But everybody knows about the New York Times, and I can almost visualize the cascade of associative thoughts—complete with press passes tucked in fedoras, people shouting at each other in a news room, and the obligatory spinning newspaper transition. This then leads right into the next question: that’s the newspaper, but what do you do at Times Digital that’s so different and special? Not much for the moment, and that’s a problem.

The lion’s share of traffic to the New York Times Digital goes to www.nytimes.com, which is largely just a reformatting of the printed paper for a web audience. Sure there are some additional applications specific only to the website (eg, you can search through movie reviews and we now have videos), but you could easily miss them, since the focus on presenting a cohesive look that mirrors the printed product all but guarantees that anything truly exclusive to the website will never be allowed to stand out. Indeed, one might get the sense that the management of the Times thinks of the Web as merely another printing format, rather than a completely different medium in its own right. Despite the fact that online readership obliterates the print subscribers these days, I would honestly be surprised if any newspaper’s editorial board contained a member who only read the paper online and “understands” the web. Furthermore, even “understanding” the Web does not entail grokking how savvy readers browse the paper online—how many newspaper editors know what a tabbed browser is for instance? or why single column is preferable to users with scroll wheels on their mice? My guess is not many. These sort of blind spots are not much of a big deal to those who want to just maintain the status quo in a new marketplace (and how mostly see the online paper as merely a convenience for people on the go), but I think there are so many unique web-only opportunities being missed out that newspapers need to grasp. And I’m going to write the next few blog posts on some ways in which newspapers might uniquely evolve online. I think the problem is not so much the people, but the cultural mindset needs to evolve a new notion of what newspapers are and how the public interacts with them. In the next few posts I will explore some ways in which the notion of newspapers might change online and how that might affect the news of tomorrrow.

But first, a few disclaimers. I’m not singling out my employer only for ridicule. Many of the problems the Times faces in the Internet age (declining readership and a demographic that’s skewing older) are striking the industry as a whole. Also, unlike some smaller regional papers, the Times has been working hard to position itself as a global news brand both in print and online, which could make all the difference between success and failure in any new web ventures. And the paper side of the operations here does at least recognize that something must be done to reverse the slide in readership and profitability and integrate the web and newspaper operations more tightly (although they don’t quite know what that might be). But the New York Times does share much of the mindset current to the newspaper industry, and I do work here, so it’s too easy for me to single them out for examples indicative of newspapers as a whole.

Also, I am not a media analyst or expert in how the newspaper business works. I do not have a journalism background and I do not even have a lot of experience working in a newspaper environment. I have never visited a newsroom and even navigating the old building’s corridors to visit the credit union or get a photo ID left me as bewildered and confused as a tired old man. It’s possible I’ll gloss over something momentous or overstate something glib. But I do think I understand the Web and how people use it and I will treat the idea with more seriousness and depth than the usual buzzwords when geeks try to reinvent the newspaper business. Hopefully it’ll be good, but as always let me know how you feel in the comments.

And finally, I do believe there is a place for newspapers in the Web world and I am working here at the Times mainly because I am interested in being a part of developing new refinements of a business model that’s been unchanged for hundreds of years

That said, on with the show! Newspapers online are rather limited, what are the ways they can change and embrace the web? I will be following up with four further posts organized into distinct but overlapping themes:

Advertising
Distribution
Disintermediation
Diversity

Notice how I started the latter three with ‘D’ to be extra clever. Those will link to the further posts when they are published, but stay tuned and watch this space.