NewBizNews: Metro

This is the third of three strategies for a sustainable future of news that we’ll be working on at the CUNY New Business Models for News Project It’s the most complex and the most important: What can fill the void when (I used to say if) a metro paper dies?

In our conference on new business models last October, we picked on Philadelphia but since then not only has its newspaper company gone bankrupt but there are so many new candidates: Minneapolis, San Francisco, Boston, and on and on.

What makes this complicated to envision, let alone model, is that a single product from a single old-fashioned company will be replaced not by a new-fangled product and company but instead by an ecosystem made of many players operating under many models and motives.

I’ve described my vision for this before but there are many variants. We can’t put it all into a single, neat spreadsheet. Instead, we’ll need to look at this future from a few angles – from the bottom-up (the hyperlocal models I wrote about earlier); from the notion of a new kind of news organization that both reports and organizes news and helps support the ecosystem; from a network that exists simply to support the ecosystem; and others. I know people working on some of these and we hope to work with them, learning as they learn and providing help.

From another perspective, we also just want to look at total resources and needs from a macro (that is, metro) level: how much is being spent now and what does it support? What could it support? What could the mix of players and their work look like? What’s most likely to be covered on its own? What will need specific support and perhaps subsidy?

In my mind’s eye, I see:
* One or more likely more news organizations that help organize and support news across the ecosystem – with content, promotion, revenue, perhaps technology, probably training.
* Ad/revenue networks also supporting the ecosystem (they could be the same but don’t have to be).
* Some level of public-supported journalism (i.e., can foundation and citizen support – local ProPublicas and Spot.USes – be sufficient to subsidize investigative reporting in a market? Can we get more investigative journalism than we have now?).
* Lots of bloggers – many of them laid-off professional journalists – trying to make a go of it covering areas and interests. The more support they have, the more of them there will be.
* Individuals volunteering their effort, contributing to bloggers, to the news organizations, to crowdsourced efforts.
* I believe we must demand transparency from government at all levels – a default of openness; every action and all information to be searchable and linkable – so there can be many more watchdogs on government helping focus where precious reporting resource should go. Part of what must come out of this project and similar efforts is not just strategies but a movement. Newspapers including the Guardian and the NY Times are beginning to collect such data and make it available in APIs. Government must have an API.
* What else?

As I’ve said in my previous posts, the first step in our work in the project is to gather data, to understand the current marketplace and the potential. This one is so broad that some of the data will be broad.

What I’d really like – but don’t have the funding or time to do – is a quantitative and qualitative audit of the total journalistic resource and output in a market: How much is spent today on everything that’s called journalism (that is to say, including happy-talk TV news and rip-and-read radio) because that is an indication of the total commercial support available? What is the proportion of that resource that goes to original journalism (i.e., beat and investigative reporting) and how much goes to repetition and production?

My point is that I know there are efficiencies to be had. The money is there and can be spent far better. Indeed, when I talked about this with someone at GoogleNews when I visited, he questioned why we should make journalism as it is the starting point of the discussion. Shouldn’t we aim higher with greater goals? Yes, but this is where the discussion is today: How do we cover a metro area when a paper dies? How do we fill that void? So what is the void? And what are the opportunities? I won’t get that audit but I’ll come back to this basis of comparison anyway.

As I said in the hyperlocal post, let’s also keep in mind that much of the forward-looking discussion must be speculative. We need to imagine new kinds of coverage and new kinds of advertising service. The guy from Google was right: If all we try to do is replace what we have, that’s not good enough. We need higher ambition.

So, what data do we need to start with? Here’s my beginning list. Please add to it:

Total ad revenue: How much is spent in each medium by what kind of advertisers (regional, local, national, individual) in what categories? What are the trends (besides classifieds dying and retail consolidating)?

New advertising opportunities: From the hyperlocal analysis: What is the potential population of new advertisers never served by media and how can they be served in new and highly targeted and efficient ways?

Total editorial staff: Even without a full audit, we need to estimate the staff devoted to news today and break it down by function, trying to get some idea of the actual reporting resource in a market.

Audience: We need a picture of the people formerly known as the audience: reach by what kind of outlet (online and off), frequency, time spent….

Content: Again, even without an audit, we need at least some picture of what’s put out today: beat coverage, investigations, event coverage, breaking news coverage, features, and so on. What does the community really need? We at least need to put a strawman to this. Some of this may be ceded – do what you do best, link to the rest – to national players that do a better job of covering interests (e.g., health, national sports, entertainment). We should not fall into the trap of replacing what we have now but instead define needs and opportunities.

Other revenue: I learned recently when I met with Axel Springer’s editors that they are making money off merchandise sales. So is the Telegraph in London. That could be a ripe new opportunity and we need to get specific. Events, training, and other services could bring in revenue. The separate effort on paid content will dovetail with this effort.

New ad models: Just as hyperlocal advertisers would be ill-served by selling banners and false scarcity (pay a premium for the home page that only 20 percent of the audience sees!) under old models, so is this true of the existing population of larger metro advertisers. We need to brainstorm new ways to serve them and then try to extrapolate revenue from that. Or better yet, start from the other direction: What are the advertisers needs and how can we find new ways to meet them?

Network potential: This fits with the hyperlocal discussion: A single site selling itself (as newspaper sites do today) is necessarily limited. We need to explore the opportunities in networks. From the top down, it means that a company can monetize content it doesn’t have to create at less cost and risk and larger scale. From the bottom up, it means that a small site can get revenue it could not sell itself but it can also sell into a network of higher value.

Contributions: Start here: About 10 percent of the listeners of NPR contribute to it. Most of the rest of NPR budgets is made up of foundation support. (Let’s please leave government to the side.) So that’s an analogue – though imperfect – for public support of journalism in a market. We will need to project how much charitable support can be raised for journalism in a market. Perhaps we even need to speculate about a foundation that does investigative and perhaps beat reporting if it’s difficult to see a clear path to commercial support. For discussion.

The value of volunteering: This feeds in from the hyperlocal model, extrapolated to the metro level.

What this looks like in the end is a map of players, what they do, and how they’re supported. And we probably need to put forward a scenario of what a day or week looks like in local news when the ecosystem replaces the legacy: What beats need to be covered, who’s doing it, and why? What are new ways to work collaboratively? Who’s covering the fires? Do we really need to cover them? How can we collect data? What new services can we create? We’re imagining a new vision of sustainable news and how it will be sustained.

Now on with the work.

[I wrote this on a plane ride and have no brain left so I apologize for typos and missing links; I'll followup with those.]

  • Dale Harrison

    It’s just this sort of very out of the box thinking that will create the future for news reporting! I really believe that the future of media will not look anything like the current structures…

    A lesson worth remembering is that at the turn of the 20th century people had a transportation problem…and the solution turned out not to be a “faster horse”…but a Ford.

    And one should note that the Ford didn’t arise out of the “horse industry’s” R&D efforts, nor the “Horse Industry Revitalization Act” nor the horse industry’s attempts to experiment with new Business Models.

    I think the future of the media business will look as different as Ford and Toyota’s operations look from horse traders and blacksmiths.

    ——
    What’s historically given value to editorial content is the relative scarcity of distribution versus readers (not the Kindle kind). Newspapers have historically enjoyed natural localized economic monopolies that allowed each of them to exercise monopoly control over the amount of content (and advertising) they allowed into their local marketplace.

    Monopoly constraint of distribution and supply will always lead to prices (and profits) significantly above open market rates. Newspapers then built costly organizational structures commensurate with that stream of monopoly profits (think AT&T in the 1970′s).

    Unfortunately the Internet came along and changed all the rules!

    ——
    The dynamics of content replication and distribution on the Internet destroys this artificial constraint of distribution and re-aligns advertising (and subscription) prices back down to competitive open market rates. The often heard complaint of Internet ad rates being “too low” is inverted…the real issue is that traditional ad rates have been artificially boosted for enough decades for participants to assume this represents the long-term norm.

    An individual reader now has access to essentially an infinite amount of content on any given topic or story. All those silos of isolated editorial content have been dumped into the giant Internet bucket. Once there, any given piece of content can be infinitely replicated and re-distributed to thousands of sites at zero marginal costs. This breaks the back of old media’s monopoly control of distribution and supply.

    To paraphrase Nietzsche, “God is dead. God remains dead. And we have killed him with the Internet…”

    ——
    The core problem for the newspapers is that in a world of infinite supply, the ability to monetize the value in any piece of editorial content will be driven to zero…infinite supply pushes price levels to zero!

    What this implies is that no one can marshal enough market power to monetize the value of content in the face of such an infinite supply and such massively fragmented distribution. Pay-walls, lawsuits and ill conceived legislation won’t allow the monopoly conditions to be re-constructed because only ONE VERSION each story has to leak out to start the cycle all over again.

    ——
    Another way to think about this is that once data becomes publicly visible on the Internet, its monetizable value rapidly dissipates to zero.

    This is at the core of why Google can extract $25B a year from the economy without creating ANY content…what they create is meta-data about content (which CAN be monetized)…and all that meta-data remains non-visible. Only the results of decisions based on that meta-data by their search and advertising platforms is made publicly visible.

    The lesson is that Google DOES NOT monetize other people’s content…it monetizes its OWN meta-data. This is certainly one path to making the news profitable…not search per se…but various other approaches to the monetization of meta-data that’s within the reach of publishers.

    So the exquisite irony is this:
    In the future, the only content that will have monetizable value is content that no one is ever allowed to read! (i.e. the meta-data)

    ——
    There are certainly ways to make online news profitable…and many of us are working to develop such approaches…but I can assure you they don’t involve inventing a “faster horse”…

    Dale Harrison
    dale.harrison@inforda.com

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  • Jason Wallis

    What a terrifying vision!
    Just like China or North Korea we can have a single big-brother overall news organization trickling down the news to the bloggers. The bloggers will do it for free.

    Seriously JJ, you over estimate the influence of bloggers.
    They will not become reporters. Here’s the difference: reporters pitch and then go out and do the story. THEN an editorial committee reviews it and fact checks…
    Bloggers merely spin news.

    No one will pay for news as long as it is free and shared through the internet. Yes Google is largely to blame for this. They have deep pockets and can do things for “free” since they make revenue from the ad links…
    Google scares me.

  • Andy Freeman

    > Here’s the difference: reporters pitch and then go out and do the story. THEN an editorial committee reviews it and fact checks…

    Actually, editorial committees do nothing more than verify quote accuracy. (They can’t do more because they don’t have domain knowledge – they don’t know more than their sources.)

    But, let’s ignore that. The real problem with the “difference” is that if we accept that as the definition of “reporters” and journalism, few newspapers do much (outside of sports and society).

    Take your newspaper and divide into three piles, advertising, content from elsewhere, and reporting. Note that the piles are of decreasing size.

    I separated “content from elsewhere” from reporting because content from elsewhere can be gotten from elsewhere. Because of that, the possible revenue from that newspaper is the perceived value of the advertisments and reporting, and the latter is dominated by sports and society.

    Newspapers used to make a lot of money from commodity news. They can’t any longer.

  • Jordon

    Great read, out of box thinking is what has made us the super power. In a traditional sense CNN was out of box thinking at one point; who would have thought 24 hours news would become a worldwide sensation. But when it comes to the internet the shift in thought process is exactly what is needed to accomplish lot more with lot less and still provide value. For example the http://www.MillionDollarHomepage.com was out of box thought and did well for alex. Lately two sensations are growing and doing well in Canada http://www.DragToTop.com who thought simply drag your site to the top could work and http://www.Twitter.com 140 words to announce you are getting married. The traditional newspapers have a stiff competition from citizen sites such as http://www.NowPublic.com and http://www.iReport.com and for good reasons; market as a whole knows the news much faster than the reporters and now days with simply dragging or tweeting your news in less than 30 seconds can put it in front of the masses; who needs to dirty their hands with black ink from the print. Rupert is one smart business man but his sense is running south lately; he wants to start charging people who come to his newspaper sites (good luck). When I think of social, search or news the word Free flash’s in my head and I’m sure I’m not alone with that thought. I agree with your New ad models view; if newspapers don’t find it soon, they are history in long-term growth sense.

  • Mike Manitoba

    Y’know, whenever I read this stuff it sounds less and less like “This is what’s best” and more like “This is what we want, so shut up.”

  • http://www.nextnewsroom.com Chris O’Brien

    My main critique here is the continued focus on advertising as the primary source of revenue going forward. In general, I think advertising is failing on the Web to deliver in the way advertisers once hoped and that’s hurting a variety of online businesses, news organizations included. Even Google is starting to see its ad model erode with advertisers reducing the amount they’re willing to pay per click.

    But you get at a question that I think is more important going forward: “What are the advertisers needs and how can we find new ways to meet them?”

    The Lawrence World-Journal does this nicely by selling Web services, consulting and packages for its online Marketplace. It’s not unlike Yelp, which is creating a poor track record of trust with local merchants.

    But it seems there must be opportunities to create communities and platforms that allow for transactions for local services (i.e. a bidding platform for people looking for someone to install solar panels) where news org take a transaction fee (like eBay).

    In general, online ads are spread too thin, their effectiveness is too weak to bank on building any kind of business on them, including news.

  • Dale Harrison

    @Chris O’Brien:

    Advertising has to be backbone of what will support journalism. Here I mean advertising in a broad sense of the term…not just graphic banner ads and AdWords, but the ability of an business or organization to target a message to an individual on a mass basis.

    Coming to this debate from the standpoint of an advertiser, I have to say that most online news sites (and I absolutely include both pure Internet as well as old media websites) fail to provide much of what I’d like to see as an advertiser. The absolute worse being the print-based publisher’s online properties…and newspaper sites at the very bottom of that heap.

    As an advertiser, I want to see a highly engaged audience, which well only be there if the site offers high quality and relevant material. Without great writing and editing there’s no chance of creating an engaged audience.

    I also want to be able to target an advertising message to a member of that audience in such a way that the reader does not feel it’s intrusive; in a way that has the potential to even be seen as added value by reader. I want to be able to do true 1-on-1 targeting of message to reader.

    No one is leveraging the existing technology in a way that facilitates these goals to the extent that’s possible…and it’s this lack that is driving down the online ad rates and sucking the oxygen from the room.

    Based on my own spending, I’ve seen there to be fully a 100x spread in online ad rates when normalized on a CPA basis. Advertisers that invest in the analytics work to really trace Ad ROI by placement see this and move their dollars to the highest ROI…which these days is often Google AdWords (even after normalizing for the “last-click” effect).

    The difference in pricing can be accounted for almost exclusively by the level of targeting of the ad placements…a kind of “targeting premium”. When I can prove poor Ad ROI, I’m going to shift resources into either higher-ROI ads or into non-advertising options such as more sales people, more trade shows, etc.

    If publishers can solve this problem, there are plenty of dollars what will flow their way…dollars they need to support good writing and good content creation in general.

    ——–
    Here’s why I think there’s such a wide ROI-spread (and a resulting price spread and income short-fall for the publishers)…

    Advertising with the poorest ROI tends to be based on classic demographic targeting. The problem is that every member of the demographic is treated indistinguishably…and of course the actual audience distribution tends to include lots of eyeballs that lie outside the basic demographic.

    The effect is high Type l and Type ll error rates…meaning high false negatives (the ad is missing people it should be hitting) coupled with high false positive (the ad is displayed to people who don’t care).

    With search ads, there’s much higher targeting, but still issues. A typical Google search ad will have a low Type l error (meaning the ad has the potential to be exposed to everyone I’m looking for), but often still has a high Type ll error rate (any given search term has a range of unrelated semantics…drawing people outside my targeting group).

    Some of the highest online ad-rates are associated with controlled circulation trade publications (CPM’s as high as $80-$100). Because of the narrow subject matter and targeted audience there’s reasonably low Type l error rates and very low Type ll error rates.

    There are ways to achieve these low Type l/ll error rates that online publishers could potentially take advantage of. Granted, the solutions are challenging to implement well and very technical in nature (but so is the operation of massive web-fed presses). The mathematics and technology is certainly there and waiting to be picked up and used.

    However, if the ad-rate problem isn’t solved, I just don’t see how publishing groups (even pure online outlets) will be able to generate the level of ad revenue needed to support quality journalism.

    Dale Harrison
    dale.harrison@inforda.com

  • http://mediacafe.blogspot.com/ Jeff Mignon

    @ Dale you hit the nail on the head. It is going to be more and more difficult to subsidize news with advertising. Digital is the kingdom for direct marketing: one to one, or many to one. We are entering a “data war”, as on you insist on it, to prove (or not) ROI. Unfortunately newspapers are really bad at gathering data and not very good at direct marketing.

    For example, four years ago, when we tried to launch a daily newspaper for kids in the US with some local newspapers they were not even able to tell us which of their subscribers had kids.

    It is a lot about gathering customer data. So, as a news organization what do you do in the digital world to gather data? Data to help serve better content and data to put the right ads in front of the right customer. How do you do that while respecting the privacy of your customers? How do you do that while respecting the separation between advertising and journalism? Can you do that offering only news (I don’t think so)? So what do you offer, besides news, which content, which services to gather data about the communities you serve?

    We are convinced, like you apparently, that it is all going to be about ROI. If news organizations want to keep a big piece of the ad pie, they need to become data gathering organizations… also.

    I blogged about it here: http://mediacafe.blogspot.com/2009/03/why-is-it-going-to-be-increasingly-more.html

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  • Dale Harrison

    @Jeff:

    I reiterate an earlier comment: In the future, the only content that will have monetizable value is content that no one is ever allowed to read!

    Exploitable value lies in the meta-data that remains locked away from the ravages of perfect copying and uncontrolled distribution.

    With your example, one of the important things you needed from newspapers you were attempting to partner with, was the ability to select sub-sets of their customer base to target. In your case, ROI was obviously driven by paying to send things to all the right people and none of the wrong people.

    Meta-data sitting beneath decision-making platforms (be they carbon or silicon) is the key to extracting the maximum amount of potential value…whether from advertisers or subscribers.

    If done correctly, it becomes a win-win-win for the publisher, subscriber and advertiser. The publisher need the maximum revenue that’s capable of being supported by the content that’s been created…the subscriber wants always to see relevant content (be it editorial or advertising) and the advertiser wants highly efficient and effective communications platforms to reach potential customers (a long way of saying: maximize ROI).

    These are all decision making processes that are driven not by the publicly available (and copyable) content…but by meta-data, whether implicitly or explicitly generated.

    I really think this is where thought and innovation should be focused…it’s a significant untouched opportunity…

    Dale Harrison
    dale.harrison@inforda.com

  • A.C.

    An unfortunate thing with newspapers closing is what Jeff doesn’t talk much about- Editorial is a small part of the whole operation. There’s going to be a lot of jobs lost! And many who are more talented than the journalists!!!

    I believe all this talk is way overdue and helpful, but I also don’t see how advertising on a website will keep journalists and web people employed. Not to mention some kind of profit. It’s going to have to be another way. Also, 99.9999999% of the blog world is not as ethical/educated/motivated as Jeff. I agree with the poster above that that will be NO way to get your news! Yikes, talk about inaccuracies!

    I believe in the news and hope some idea comes along to help the newgathering brands.

  • Boyd Butler

    Publishing concept is very easy.

    Create a product that people are searching for i.e. information/news/entertainment/shopping etc

    Do it a cost that can be paid for by revenues with a bit left over to invest (to keep ahead)

    And that’s it……….

    With regards to revenues the reason newspapers are stuffed (that means in trouble BTW) is that they have no idea how to increase revenue.

    Because they have been selling advertising space and not response.

    As soon as you sell response, (like Google) or sales, like affiliates, then you have loyal clients. (I am introducing response selling with Guardian Media Group local newspapers based on pay-per-call – it works!)

    On cover price, if you give the milk away, (online free) why pay for the cow, ( I heard this expression somewhere…….don’t know who).

    If you have 100,000 users, 25,000 readers, events, merchandise sales, affiliate deals, advertising pay per call, advertorials, direct marketing, leaflets, video CV’s etc etc there are hundreds of different revenue lines that can come it. It’s just that newspaper people are in their own box and they can’t seem to see outside it.

    Boyd Butler

  • http://www.mediaflect.com Dorian Benkoil

    Agree with Jeff MIgnon, and glad to see there’s consideration of a lot more than ad revenue.

    A user-centric model, pushing forward with not only targeted ads but other offerings those in the community will like, is the way to go. Multiple, offsetting revenue streams (perhaps, even, subscription revenues):

    http://teemingmedia.com/index.php/2009/05/01/the-value-of-a-user/

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