The ongoing death throes of TBD, a Washington-based local news site that launched in April, attract my attention because a talented friend of mine joined the venture last spring. I remember wishing him well in a coffee shop 11 months ago while thinking “I've got a bad feeling about this.”
Here's why, and it's not a complex answer. TBD, like practically every other for-profit media business in America, relies on advertising to pay its bills. The pitch for Web-only news ventures like TBD is that they'll turn a profit on low revenues because they come without the legacy costs of their newspaper-backed Web competitors.
What gets overlooked in these proposals is just how low those revenues typically turn out to be. Despite a rebound from their crash in 2009, Web ad rates remain so dismal that it's difficult to make money producing journalistic content online even when your company's main expense is newsroom payroll.
Despite that math, ad-funded Web start-ups still look like worthwhile risks to some investors. The news-media industry is in flux and local news (in the abstract aggregate) represents an enormous market awaiting an efficient solution. The first outfit to find the magic combination of technology, social engagement, journalism savvy and smart business practices stands to create a profitable template for follow-on franchises.
There's nothing wrong with that logic. The problem is what's happening to advertising.
Advertisers don't sponsor your news product – they rent the attention of whatever audience you've assembled, and this exchange isn't nearly as valuable for either party as it used to be. Much has changed since the era portrayed in Mad Men, but for the purposes of this topic, the most important change is this one: in the mid-20th century, consumers had limited media choices, and so their attention was concentrated and could be sold at premium prices. In the early 21st century, consumers enjoy exponentially more media choices, which is why the advertising value of each choice is now miniscule compared to the 20th century revenues on which the industry was founded.
To clarify, I'm not suggesting that advertising is going away. Consumers still need to buy things, producers still need to sell things, and connecting the two generated $300 billion last year in the United States alone. Advertising is changing, but there's no reason to believe that much of the news our great-grandchildren consume won't come with some form of attached advertising.
What I'm challenging is the prevailing wisdom that because advertising shaped and subsidized journalism in the 20th century, the reinvention of journalism in the 21st century is simply a matter of re-balancing online ad rates with newsroom overhead. Those rates are lower because audiences have fractured and we're never going to reverse that trend, so it follows that if your only revenue plan for producing original journalistic content is selling Web ads beside it, you'd better learn to make that content cheaper and more sensational than your already cheap, sensational competitors.
This math is what made the paid-content movement so powerful in 2009. If you can't raise your ad rates and you can't throttle back the supply of things that people pay attention to, your only choices are to produce more content at lower rates or to find an alternate revenue stream. Since print media companies already understood subscriptions and rack sales, re-creating those models online was an obvious pitch two years ago – even though it was already clear at the time that few newspaper companies produced the kinds of content that could reliably profit from paywalls.
The paywall revolution didn't materialize in 2010, and while some of those delayed roll-outs are expected to launch this year, the people predicting success for these ventures tend to be the people selling the software. Even those salesmen are no longer predicting immediate paywall (the new term is "metered model") profitability, redefining success as brand protection and a slow process of indoctrinating online customers to a pay-as-you-consume culture. The idea that paid content will change the game for media companies just doesn't carry its own weight today.
So if that's where we are, and I suspect there's a quietly growing consensus that acknowledges these limitations, then why isn't there more of an effort to develop alternatives?
The most obvious reason is that the intellectual infrastructure of the news industry is an advertising infrastructure. Most news executives rose to their positions either through expertise in the ad business or their experience in the newsroom, where editors teach young journalists that subscribers pay for printing and trucks, but advertisers pay everyone's salaries. Proposing to this group that 21st century journalism could produce significant value independent of advertising is a bit like pitching heliocentrism to the Roman Inquisition in 1610. You're not just proposing a new revenue stream, you're moving the center of the known universe. Kind of a tough sell.
We live in a mass-media society during an information age, and everyone “knows” that the economic value of quality data is lasting but the economic value of quality news is fleeting. We hold this truth to be self-evident: No matter how well-reported, news is only valuable during the flitting moments when people are paying attention to it. For all our First Amendment rhetoric, journalism isn't a product we sell to consumers, it's a loss-leader we use to package consumers into audiences for advertisers.
I think it's time we challenged this assumption. What if the information that news companies collect and publish actually accrued in value? Even a marginal value for the data produced in the reporting of news stories could be a transformative development for 21st century media, provided that the value grows as the data set expands.
For the short term future, it's likely that most of the “smart money” in the news/advertising business will continue to back ventures that offer 21st century tweaks on 20th century business models. But as the paywall movement fades into a footnote, ad-dependent start-ups like TBD fold into obscurity and cheap cons such as Demand Media collapse like pyramid schemes, an opportunity emerges. Who will imagine the ways to convert reported information into valuable data products? Who will fund the development of the tools that make such products possible and profitable?
The future is not knowable, but let's be clear about the lessons of history. The assumption that the future will look like the past is based on an illusion that time routinely treats with disdain. That's not much of a consolation to the good people laid off at TBD this week, but it might be a new starting point for their profession.
There are always anwsers to every puzzle.
Here is the answer.
Create good quality content, print in high volumme, distribute hyber locally and free.
Post it online free, printable and allow websites to link at no charge, allow visitors to email your printable content.
Include coupons with codes and barcodes on all content, One page content per one page of coupons.
Work on the honor system.
Receive commission on each redeemed coupon.
One coupon redeemed equals $1.00.
$1,000,000 coupons redeemed equals One Million dollars.
Allow coupons to be redeemed digitaly, Ipad, Iphone, etc.
Do not charge setup, distribution fees.
Contracts are OK if they only include how much your commission is and when they will send a check.
Clients will keep track of the redeemed coupons, (all discounts and coupons are tracked).
Clients will pay because this is risk free advertising. They also do not have to deal with salepeople and new contracts every year. Everybody wins.
I have been doing this for over 5 years with my company San Diego Metro Publishing and my web site PrintFreeMaps.com. It works, but no one else has had the courage to take this great leap of faith.
If you question my method, please show me any weakness.
Can this work for journalism?
Yes, but the system needs to be torn down in order to rise again.
Posted by: Danny Buelna | Friday, February 25, 2011 at 20:59
We get by.
http://westseattleblog.com
Some one pointed out that all we do is provide needed content and advertising to a market that previously had no access to reasonably priced outlets. But that makes us those proto-mammals who hid under the rocks while the dinosaurs had trouble coping. What that means is that we're not the complete future, but we are one aspect of it.
Posted by: Wsblive | Saturday, February 26, 2011 at 01:07
Your site is one of the success stories in terms of hyperlocal newsblogging and I don't dispute that it can be done, or that the Placeblogging template isn't a valuable part of the new media ecosystem. I admire the hell out of everyone who does local journalism the way y'all do.
What I disagree with is the now-generalized notion in the industry that the future of journalism is going to be limited to endless variations on the theme of low-overhead "getting by." Proto-mammals were adapted to survive in the margins, and thank god for them, but I want to see more attention directed toward adaptations that could lead to more abundant futures.
Dependency on advertising as the sole subsidy for journalism is a short-term reality, but it's a bad policy in the long run. It must change.
Posted by: Dan | Saturday, February 26, 2011 at 07:35
It's completely inaccurate that all for profit media outlets rely on advertising alone. Only online companies do. Most print media hasn't in many decades.
It'd be good to know that when you're analyzing the business.
Posted by: patricia | Saturday, February 26, 2011 at 09:46
I'm intrigued by the idea of data products created from news information. What would they look like? I could imagine one product, for example, being an interpretive bundle of stories about the same topic, perhaps tracing its coverage over time. I can imagine content analysis products, perhaps providing the ability for users to research how often a certain idea, person, or even a phrase has appeared in the press during a particular period of time. I can imagine tools for academics to supplement their research through such content analysis tools. It is going to hinge on better data storage and retrieval solutions for all that transitory news information, so we can mine it for deeper messages. Who would pay for this, however? And would it be enough?
Posted by: Jillelswick | Saturday, February 26, 2011 at 12:55
The iPad subscription thing will wobble mightily when MSFT releases their touchpad version of Windows 7. The selling point of "Why pay Jobs when we can get you all the same stuff for free?" will be powerful. So far the only organization ready to figure out what's next is NPR. About a year and a half ago I heard one of their high sheriffs speak at a luncheon where she outlined their idea of finding different ways of offering content and then charging the end user very small sums. There's no telling if it will work, but it beats the hell out of being a GroupOn wannabe, a tschotske peddler, or an events planner or any of the other brain storms that have been going around.
Posted by: Wsblive | Saturday, February 26, 2011 at 13:07
I've been doing a lot of that kind of imagining, Jill. You can find a directory (with summaries) of my essays on these topics here..
http://www.danconover.com/ideas/new-media
...the ones that are relevant to your questions are listed under "Semantic Journalism."
West Seattle, even though I'm pretty much out there as a paid-content skeptic, I'm not ruling out successful exceptions to the general rule. Tablets are a different user experience, and I don't think Murdoch is insane to experiment with his paid-content tablet newspaper.
NPR has been very forward-leaning in its approach to delivery -- they're the champs at podcasting, and were one of the first to put the format to work. But then they have a special relationship with their listeners (and it isn't a business relationship).
Patricia, I think you may have missed a point somewhere.
Posted by: Dan | Saturday, February 26, 2011 at 18:39
Great analysis. Look forwaed to ideas to make information accrue in value.
Posted by: PatrickLacroix | Sunday, February 27, 2011 at 04:25
You're right on the money. Publishers should take advantage of the brand recognition and trust they enjoy in their regions to become diversified suppliers of business services. Here's a detailed proposal I posted last year: http://newspaperdeathwatch.com/how-to-save-local-newspapers/.
Sacramento Press (http://www.sacramentopress.com/)is a new-media publisher that is putting these ideas to work. The company derives only half its revenue from advertising. The rest comes from services, seminars and adjunct marketing programs that help local businesses take advantage of the wide range of media they now have available to them to generate business.
Posted by: Pgillin | Sunday, March 06, 2011 at 11:18