Sustaining journalism

Finally catching up with David Folkenflik’s NPR piece yesterday about Columbia J-school’s efforts to help news companies update:

And then there’s the BBC Media Show about pay walls and collaborative hyperlocal and more; listen here.

Warning: You’ll hear me on both.

Online advertising and alternative revenue models

Though it seems natural that online advertising would slow during a down economy, we’re seeing signs that it will never reach the lucrative stature that the print industry has known for years. Blogads CEO Henry Copeland told me a few months ago that when it comes to highly-trafficked blogs, there’s too much supply and not enough demand. The ease of entry not only for publishing, but for entering the ad market as well — Adsense, affiliate links, etc. — has created an overabundance for cheap advertising, dividing it up into millions of $5 morsels that do very little for individual bloggers and take away advertising dollars from the bigger players.

This is not to say that content is worthless, but that people are having to find alternate ways of monetizing their sites. Bloggasm, for me, is a loss leader to sell my digital PR services, and we’re finding that more and more bloggers are using their blogs to make connections within their fields, leading to more lucrative jobs and contracts.

This creates a dilemma for many mainstream journalists, however, because of the ethics concerns that would arise if they used their content to promote paying gigs. We saw this with the Washington Post salons a few weeks ago. But still, journalists like Chris Anderson and Malcolm Gladwell have turned their celebrity journalism status into well-paying speaking gigs, and likely many lower level journalists have enjoyed at least some prosperity from the connections they’ve made through their journalism. But though this may solve a problem for the journalist, what does it do for the news organization?

For them, it’s simply a matter of clawing for smaller and smaller sums in advertising dollars.

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Can online pay walls boost print sales?

Usually the argument for a newspaper placing up a paywall centers on the idea that users will value the content enough to pay for its online distribution. But when an Arkansas newspaper placed a pay wall up on its own site, it didn’t necessarily care that the wall didn’t produce much revenue:

The economic argument in favor of online paid content is not necessarily in the revenue it can generate on its own, Walter Hussman said Thursday afternoon, but it is in the way paid content can help keep a newspaper’s print circulation up.

…Hussman said the paid content online generates just one-tenth of 1 percent (0.1 percent) of the newspaper’s total revenue. But the newspaper has been very successful in keeping print circulation up in part because the newspaper is not giving all its content away for free. The Democrat-Gazette’s daily circulation is up 3,000 to more than 176,000 over the past 10 years, while other newspapers in the Southeast are down (some significantly). Sunday circulation for the Democrat-Gazette is down just 1 percent in 10 years.

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Journalists Are News Companies’ Most Valuable Asset

Journalists are news companies’ most valuable assets.

That’s what Mike Arrington asserts, and I think he’s right (disregard the “failing old media” rhetoric):

And earlier today I got a glimpse at what AOL is up to – they are hiring all the journalists being fired and laid off by the newspapers and magazines. And they now have a news room 1,500 journalists and editors strong. Amazingly, failing old media is throwing away their most valuable assets. And AOL is eagerly picking those assets up for a song. Before anyone knows it, AOL may be the most powerful news outlet in the world.

Given that NYT has gone to great lengths to avoid newsroom layoffs, I suspect they know full well how valuable their journalists are.

Mike Arrington is TechCrunch’s most valuable asset, for his personal brand and for the quality of the post he writes.

As Arrington points out, AOL CEO Tim Armstrong has also realized how valuable journalists are, and is aligning AOL’s new strategy with cornering the market for journalist talent.

But is Arrington right that media companies are blithely throwing away their most valuable asset? Why did newspapers make so many newsroom cuts on their path back to profitability? Is it because they don’t recognize the value of their journalists?

I think it’s because they are still wrestling with the declining value of their other major asset: industrial printing and distribution capacity, i.e. printing presses and delivery trucks and all their industrial staff. While some newspapers have made significant cuts to their industrial operation by not delivering or publishing everyday (and a few have taken the extreme step of ending their industrial operation entirely), most have protected this asset because it is not really variable — it’s mostly all or nothing.

But to say that the value of industrial printing and distribution capacity is declining is not to say it has no value — it of course still generates most of newspaper company revenues. But the decline, while exacerbated to a large degree by the recession, is still secular long-term. (And newspaper companies are surely using the breathing room they achieved through cost reduction-driven profitability to figure out their long-term strategies — and they are focused on digital.)

AOL, in contrast, has no industrial assets, so has the latitude to invest in journalists. They also have another huge asset that newspapers enjoyed in their geographic distribution areas that they entirely lack on the web: SCALE

A notable illustration of the shifting value of news company assets that sits between AOL and most newspaper companies is Politico.

Politico rose to prominence by showcasing its high profile journalists on its website.

Politico Blogs

Politico Ben Smith

Unlike most news sites, Politico has real profile pages for its journalists and showcases their bylines on every story (even the lead homepage story):

Politico headline byline

This doesn’t mean, however, that Politico derives no value from industrial printing and distribution. In fact, half of their $15 million in annual revenue comes from a print edition published three days a week when congress is in session, and once week otherwise (via Vanity Fair).

But Politico doesn’t own any printing presses or delivery trucks, i.e. no industrial assets. And the print publication is largely the product of content produced first for the web — and it is very much a “nichepaper,” i.e. it targets the highly valuable audience of Capitol Hill staffers and members of Congress.

The results is that Politico is able to invest in a talented newsroom staff of 100, paying nearly as much as The Washington Post. And Politico is profitable.

But does focusing on journalists as news companies’ most valuable asset mean that news companies should be exclusively in the content production business? That’s a significant shift from the industrial printing and distribution business.

In the digital media world, companies like Google and Apple have taken over, as Columbia J School Dean and former WSJ.com managing editor Bill Grueskin put it, the “profitable front end of the distribution chain,” leaving news companies with the much less profitable back end of the value chain (i.e. content creation).

But what if journalists could also be the key to news companies getting back into the distribution business, in digital media?

The greatest asset of Google, the most successful content distribution business on the web, is its ability to harness the judgment of every person who creates a hyperlink on the web, and to know which links from which sites represent more trusted judgment.

News companies still employ in their newsrooms arguably the greatest collective source of news judgment.

So how can news companies leverage the asset of their journalists’ news judgment?

Hint #1: Collaboration

Hint #2: Scale

News companies are notably trying to figure out how to get into the business of charging for content on the web. As Apple’s iTunes demonstrated, the key to charging for content is in effective and highly convenient packaging.

Could journalists be the key to not only creating the content but also packaging it?

Think about that for a while. More in another post.

A next generation in Ann Arbor

(First, full disclosure: I consulted for Advance Publications on its project in Ann Arbor and worked for the company for a dozen years as president and creative director of its online arm, Advance.net.)

AnnArbor.com launched on Friday. I think it’s a bigger deal than it seems at first glance. Advance folded the Ann Arbor News the day before and closed that company. On the next day, it launched AnnArbor.com as a new service, based online and in the community, structured very differently from a newspaper: smaller and more collaborative. As folks have noticed on Twitter, the home page looks nothing like a newspaper site of yore. It’s a blog and it’s intensely local.

Note also that the advertising is different. Rather than banners and buttons, AnnArbor.com offers local deals that are interspersed in the content and also listed in a directory. It happens that these deals are published as blog posts and they read that way. We need to try new and more appropriate means of serving local marketers.

The new company will still print two days a week, and that’s probably why people don’t notice just how much of a change this represents. As I said below, there’s still money in distributing coupons and circulars and in some print advertising, so the company will continue to grab that, at least in the transition. But this company is focused online and in the community.

Ann Arbor is a unique place: highly interested in news, highly connected, with a great university, not to mention a Google office, in town. That’s why it was picked. From the moment this shift became public, the project’s editor, Tony Dearing, and business chief, Matt Kraner, were out in the community to build with the community. I said sometime ago that if this works, the community didn’t help them build AnnArbor.com; they helped the community build it (and their own sites in a new news ecosystem in town).

It’s just a beginning. I hope we’ll see the service become more collaborative, more of a network and less of a site. I know they will experiment with new advertising and sales models and methods. And I hope they will find the way to create a sustainable journalistic enterprise serving the town for many years to come. It’s a brave start and I think it’s worth watching, so that’s why I’m drawing it to your attention.