I get the same question again and again as I explain our innovation efforts at Gazette Communications: How are you going to make money doing that?
When I explained our plans to separate content from product, people could see that we were moving to an organization built for the future rather than the past. But they still asked: How do you monetize that? (Yes, even journalists have started using the M-word.)
I answer in my Blueprint for the Complete Community Connection, published this week on my blog: We need to move beyond advertising.
Harvard Business Professor Clayton Christensen, the foremost authority on disruptive innovation, says established businesses take two approaches when faced with disruptive technology: They ignore it or they try to cram their existing model into the new opportunity. The newspaper industry did both. When we realized we couldn’t ignore the Internet any longer, we tried to cram our newspapers into our websites.
On the content side, we are finally getting beyond that, producing videos and interactive databases and Flash graphics exclusively for digital audiences. We are liveblogging events, Twittering and posting breaking news as soon as we verify facts, rather than holding back in fear of “scooping ourselves.”
On the revenue side, though, most news sites remain stuck in the print ages. We still live on display ads, priced by how many eyes will see them. Beyond the disparity between print and online ad rates, this places us in a vulnerable position with the business customers who provide the money that supports our watchdog journalism.
In our advertising model, we are a big expense line in the budgets of our business customers. We bring shoppers through the door, but the business actually makes the sale. In tough times (and these are tough, you might have noticed), our business customers do the same thing we do: They look for places to cut expenses. That advertising budget line looms huge – the merchant cuts the ad budget and the newsroom cuts its staff. But advertising works, so fewer people will come into the store. Instead of blaming the steepening decline on the cut in advertising, the business blames the economy and cuts advertising some more. And the newsroom cuts again, or maybe furloughs this time.
We need to change the fundamental relationship with our business customers. What if we sell tickets on our sports and entertainment sites, offer gift registries with engagement announcements and sell gift certificates and make reservations in our dining guides? The customer takes out the debit card and makes the transaction right from our news site and we collect the money. That changes us from an expense line in the customers’ budgets to a revenue line (actually, we want to be both). Our fee is like withholding tax – our customer never had the money so it doesn’t sting as much and it’s not something the business can cut from its budget. In fact, the merchants want to grow that revenue line, so in tough times, they’ll want to do more business with us.
This is what the Blueprint for the Complete Community Connection seeks to do: Change the relationship that media companies have with our communities. We become more than just a source of news, crossword puzzles and sales ads to our consumers. We become their connection to community life: news, information, shopping, social life. And for businesses, we become an essential connection to customers.
An example of how we change both the content and revenue approach is the blueprint’s proposal for a new driving vertical. For years, newspapers’ automotive content has been focused on a single purpose: buying and selling cars. Ads focused on new and used cars for sale. Editorial content was sparse but often included reviews of new cars. An advice column used as filler might provide a little help in the actual operation of a car. Because we ignored the possibilities of the Internet too long, others beat newspapers in developing digital platforms for buying and selling cars, and our automotive vertical is faring about as well as Detroit right now, taking a 29 percent hit last year.
Buying a car, though, is actually a rare task for most people. I did it last summer for the first time in more than five years and hope it’s that long before I buy again. But I drive daily. What if we developed a vertical for the everyday tasks of driving? This would provide a traffic map, gas-price map, pothole map, databases of bridge inspections, parking meter citations and gas-pump inspections. We would provide discussion groups for classic-car fans, parents of teen drivers and other automotive interests. We’d offer a place for sharing photos of souped-up cars and stories about first cars. We’d provide text alerts about traffic problems and road closures. (Many newspaper sites already provide some of these services, but not grouped together. The auto-focused databases are grouped with other databases, as though we want to appeal to some imaginary broad segment of the population interested in data.)
The revenue opportunities of a driving vertical are vast: Places that service cars and sell tires, parts and insurance, most of them not big newspaper advertisers, would love to reach this audience. We could offer an emergency-service option, where drivers in need of immediate repairs text or email their need and we alert business customers and make the appointment with someone who can squeeze the driver in today. If we develop a place where drivers come frequently for help, where do you think they will turn when they’re ready to buy? That’s where the car dealers will want to advertise.
Initial reaction to the C3 blueprint has been encouraging. Mark Potts quoted it extensively in a blog post, saying, “the Gazette’s plan feels like a much-needed revolution.” Mark Briggs and Michele McLellan praised it as ambitious. Robert Ivan called it a “must read for all news media professionals.” Jay Rosen praised it as “today’s future-of-news key read.”
Praise feels good but doesn’t get the job done. You could find far more voices claiming that our solutions lie in charging for content, which I view as a waste of time and energy. I don’t claim that the C3 blueprint has all the answers to that persistent money-making question. But we have a plan and we are pursuing it. Now my Gazette Communications colleagues and I need to deliver.
Journalists need to engage in that discussion. I hope you have (and share) some better ideas.
About Steve Buttry
It is SO not my place to tell a visionary like my former colleague Steve Buttry he hasn’t gone far enough in his revenue discussion, but, well, here are a couple of additional ways a driving vertical might make money (all are transferable to any other part of a news org’s online presence):
Steve’s list is a great start. I’m sure there are more ideas and I look forward to seeing them listed here and implemented at newspaper organizations around the country!
UPDATE: Last week at an API seminar we developed a list of 14 non-ad revenue sources, some of which are mentioned above. Courtesy of attendee Jordan Moss from the Norwood News, here’s the rest of the list. Not all may be applicable to Steve’s specific example, but all are worth newspapers’ exploring:
All of these ideas are great, but I’m unclear on why this will actually help newspapers and not just online businesses in general.
Any website (yes, a well-done hyperlocal site) can connect people in a region to businesses. Any website can (and many do) access database information to make cool things.
So, if one site has to pay lots of journalists while the other doesn’t … and both have the same business model … you seem to have Craigslist again? The site without the journalists can charge lower premiums and get more customers, right?
Yes
Thanks,I think your article and views will help me to improve my relationship with my community
I am actually quite surprised how poor the current level of integration of different types of services on news and media sites are. This is the place where people come to get new information, but they lack the ability to act based on it. Most of the affiliate programs provide very poor level of integration. I see the future of affiliate marketing as widgets that can be integrated into websites that don’t force visitors to go to another website but see the affiliate program as part of the media site services.
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http://www.getbest.info
Right on. Not trivial though.
Another hot spot that we (BlackWhiteRead.com) have been thinking about is our relationship with community organizations: Women’s League, Kiwanis, neighborhood associations. We already partner with them, but not much money changes hands. Why don’t we help them drive membership (and take a little fee)? Sell tickets to their events (and take a little fee)? Sell photo reprints to their members? Obviously, there are unlimited opportunities.
Good on you for this discussion.
I really believe that newspapers problems are far deeper and more out of their control than most analysis would suggest…and that the future of media will not be anything that looks 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.
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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!
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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…”
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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.
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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)
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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
[email protected]