For all those hopeful newspaper managers, searching for a new revenue model that will save good, old-fashioned newsroom journalism, I have a message for you:
You’re wasting your time. Please, stop. There is no new revenue model for journalism.
This isn’t to say that publishers cannot change the way that they’ve operated in past media to secure their future online. But they need to look beyond looking for radical new ways to charge customers for their work.
There are three ways – and only three ways – that publishers can make money from their content:
1. Direct purchases, such as subscriptions, copy sales and tickets
2. Advertising
3. Donations, including direct contributions and grant funding
Let’s break ’em down:
Direct purchases
Many publishers are looking longingly toward paid content to move their bottom lines back toward pre-Internet profit margins. But a publication’s ability to charge for its content, and the amount it charges, increases in direct relation to the amount and detail of unique information it provides in that content.
Walk into a bookstore and compare the prices of newspapers, magazine and books. Newspapers go for a few quarters a copy, magazines for a few bucks and books, typically, for at least $10-20. Newspaper and magazine circulations also are dropping, suggesting that they remain overpriced in the current information market.
Without a home-delivered hard copy, the commodity information available in most newspaper has no financial worth to most readers. The more detailed information and original narratives in some magazines have small ($1-10) value for some readers. Books remain at the top of the price scale, offering longer and more detailed narratives written in unique and (one hopes) compelling voice.
Because of this, no one is going to be able to craft a paid content model that elicits significant payment from more than a handful of readers for commodity news. And, despite what “proud parents” in the newsroom might think about their work, almost everything produced by all U.S. newspapers and broadcast newsrooms falls into that category.
Magazine publishers might have a better go with paid content online, but again, the revenue model is not changing online – though the price point within that model may change in response to increased competition. But most magazines are finding that their content barely rises above the commodity level now established in the online market.
I can think of only one for-profit publishing entrepreneur who’s managed to make a paid content model work in print and online – and he’s launched a successful television broadcast for his publication, too. (And, no, it’s not Steven Brill or Rupert Murdoch.) I’m surprised that I’ve never seen Cook’s Illustrated founder Christopher Kimball at any online publishing conferences; he’s the only one in the business who seems to know how to make paid content work. (For what it’s worth, OJR profiled Kimball’s Cook’s Illustrated back in 2005.)
Advertising
Despite fears about the death of advertising, I say that there will always be people willing to pay to gain access to others’ audiences. That, distilled, is the definition of advertising.
Social media may provide a new ways for retailers and other business to speak directly to customers and would-be customers, but as anyone who’s started a Twitter feed with no followers can attest – building an audience is hard. Buying access to an established audience that you’re not now reaching is, for businesses with money, a far easier way. Advertising endures.
Online, advertising takes new forms – from banner ads to interstitials to affiliate links – but none of these forms are fundamentally different from any form of advertising that has come before. They remain a way for a publisher to sell access to its audience to another. So long as a publisher builds an audience, it will have the ability to rent access to it to advertisers. At which price point the publisher will be able to do that will depend upon the audience, and the amount of competition also reaching that audience.
Donations
PBS and NPR pledge drives represent obvious forms of donation revenue for publishers. So do grants awarded to non-profit publishers. Online innovators, such as spot.us, have adapted this form with “crowd-funded” reporting for individual stories. And does anyone remember the Amazon Honor System?
But allow me to suggest that much of what has passed for advertising has been, in fact, donation funding. For an example, I’d classify the majority of the ads my wife and I book on our violin community website this way – the advertisers don’t particularly care about click-throughs or their ROI [return on investment]. They advertise with us because they want to support the community and they understand that we need income to keep it going.
We can access donation funding in our advertising because we know the people running the music schools and violin shops who advertise with us. Many of them participate on the site and maintain relationships with others in the violin world through it. If we hadn’t developed these personal relationships, the advertising relationship we would have with those organizations would be reduced to a simpler ROI equation – they’d figure out how many sales they made from the clicks off their ad and decide if those sales justified the ad’s cost.
Just like those business owners and managers whom we don’t know personally do.
I suspect that as newspaper and TV and radio station ownership consolidated among a handful of corporate chains – and Main Street businesses sold out to, or shut down because of, national retail chains, the personal relationships that news publishers used to have with advertisers have been severed. As a result, a good chunk of news advertising has moved from what was essentially donation funding to strict, ROI-based advertising.
Given that most businesses take a short-term view toward ROI, and discount the long-term branding value of advertising, this switch is making it tougher for news publishers to close, and maintain, sales.
Smart publishers need to revive and repair personal relationships with potential advertisers and funders, in an effort to increase donation funding to their publishing efforts.
What’s changed, and what hasn’t
By reducing the barrier to entry for new publishers to almost zero, it has vastly increased the number of competitors reaching any given publisher’s audience. The Internet also has enabled new ways for publishers to solicit and receive money through each of these three methods (e.g. spot.us’s crowdfunding).
But the Internet hasn’t changed that these are the three ways to make money from content.
Publishers must take a sober look at these three options and decide how best to maximize their income opportunities within them. For most, that means abandoning thoughts about paid content, and instead working on the other two means, such as finding the most effective forms of advertising within their publication (and turning off readers with overly aggressive ads is not effective over the long term). More importantly, I would suggest that publishers work to cultivate their relationships with their community, to maximize the amount of donation income that they can receive, either in direct donation or via advertising campaigns.
At that point, it’s time to take a hard look at the other side of the ledger, and work to find a publishing and production model that allows a news publication to live within its current income means. That’s where the real change will happen in news publishing – the expensive, labor-intensive, manual newsroom model will give way to new, distributed, communal reporting and editing models, ones that are now being forged by journalist entrepreneurs.
I wish that news businesses, foundations and journalism schools spending resources on searching for new funding models would abandon those futile efforts, and instead redirect that funding toward cultivating and studying innovation in news gathering and production. And in doing that, I wish that industry would quit looking to print editors and broadcast station managers for leadership and instead look toward online publishers and editors who are making nascent efforts work.
Unfortunately, too many print and broadcast veterans don’t want to change their production model. So they instead devote their time and energy toward getting someone to fund another doomed quest to look for their revenue model Holy Grail.
There is no new revenue model for journalism. That’s why we have to find new production models that work.
About Robert Niles
love this idea of fixing the production model instead of the revenue model. But also the idea of donation funding is interesting and its the first i heard of it. I’ve basically articulated this kind of thinking but didnt know what to call it or how to really codify it, so thanks for doing so.
First, I agree completely that production costs need to come down. The web-native organizations that are succeeding understand this, such as the HuffPo and Gawker (whatever you think of their “journalism”, their model works.)
But I believe that there are sources of revenue that you missed, aside from charging for content, advertising, and donations.
For example, you can sell data. This is tied into advertising but not quite the same thing. Got a sophisticated user content aggregation system? Plenty of marketers would like to know what it is that people actually want (naturally there are privacy concerns, but these should be addressable with aggregate-only data.)
See the interview with the CEO of Broadersheet for an example of a journalism business funded partially this way: http://econsultancy.com/blog/4186-q-a-broadersheet-com-ceo-peter-clark
You can also sell services. This is what Factiva and Lexis-Nexus do. I can imagine lots of other creative business models. How about a research services firm?
Frankly, I think journalism organizations need to think more like Google. They’re in the information game, and today that means technology.
Great article – thank you.
Do you think a news model could also be supported by State or Government that we could trust?
I think you may be overlooking a possible model: selling something else and giving the content away for free. I’ve heard a few interesting ways news organizations are doing this.
The one I found most interesting was a model in which the news organization provided the news for free, but sold access to its information databases. These databases are filled with all sorts of things that governments and corporations might legally have to make available, but provide it in a better way than those institutions, and all in one place.
Do you think it could be practical for news organizations to give away the news as marketing for the real product — access to a data warehouse?
On advertising, one of the things I decided in launching The Batavian was I concluded there was no reason to give up on advertising as a revenue model. I realized that the problem with online advertising wasn’t that it was doomed to fail, but that how it was being pursued by newspapers was doomed to fail.
Just like newsroom personnel tend toward thinking — just throw the same print journalism up on line and it will be fine — the sales side has tended to think their traditional role of creating “set it and forget” advertising would work online as well.
We’ve tended to sell banner spots, plop and ad in and figure our work is done.
But that’s when the work is just beginning.
Further, the banner model used by newspapers is broken. Too few placements and the CPM/rotation model destroys reach and frequency and ignores how users actually use the web.
— Howard Owens
I agree that there are revenue streams besides advertising that weren’t covered in the article: data, lists and their derivative market insights (permission-based, of course); marketing services; events whether recreational or educational; online promotions; and perhaps the highest-potential of all, revenue associated with mobile and location-based initiatives. None of these is a blockbuster individually, but together they roll up, long-tail style, to growing new profit pools.
Selling data (or other information products) is just another form of direct sales.
Government subsidy is another form of donation.
Ancillary services, such as hosting conferences, are other ways for a company to make money, but they are not making money from news content. They are other businesses under a common corporate roof (e.g. Test prep services from the Washington Post Co.)
Let’s also remember that classifieds are just another form of advertising, but one that, Craigslist has shown, is not dependent upon juxtaposition with news content. Also, as Craigslist also has shown, classified are commodity data that no longer have any financial sales value in the Internet marketplace.
Robert, you make some excellent points, but I thoroughly disagree with the main point. News organizations can and should find new revenue streams by developing a digital marketplace for businesses in their communities and by pursuing mobile opportunities that go well beyond what you have described here. I elaborate on my blog: http://bit.ly/8VzqPp
I couldn’t agree more with Steve Buttry and the comments he made in the blog post he linked to. I’m kicking around a potential startup that is squarely focused on what he talks about – direct purchases. I can’t go into right now but it starts with doing something most haven’t done. That is, take a step back and really understand a media property’s community and their value as well as the core competencies of an organization. At most, media properties have done a 100,000′ view of that (e.g., basic demographic info). If one takes that step back and gets down to the 1,000′ level, there are hidden gems in there. People just aren’t looking hard enough.
It kind of reminds me of when I was at Microsoft when Search had no revenue model and was dismissed. That must be up there in the Top 10 list of all time missed opportunities back when Microsoft could have owned the top spot in the Search game. It was a failure of imagination. I think that is what we see here.
Disclosure: I’m an admitted congenital optimist.
” More importantly, I would suggest that publishers work to cultivate their relationships with their community, to maximize the amount of donation income that they can receive, either in direct donation or via advertising campaigns.”
With respect, that’s not a business model, that’s just the begging bowl.
Fascinating topic. I think the fundamental flaw is that news agencies expect consumers to separate with their money on a large scale. Well, they won’t.
I firmly believe the future of news monetization is in advertising. News agencies have to shed the overheads of printing, and invest in technology and people that can optimize advertising revenues.
Two proven methods to do this are personalisation [Google. Facebook] and optimization of ad inventory [every major online publisher].
A company that is worth checking out is UltraKnowledge – http://ultraknowledge.com/ – those guys are going to totally kill it this year.
I personally want to see the important news finding me, I want NYT to know who I am and be able to prioritise the stories *I* care about – thats what Broadersheet aims to solve. We think the data is going to be really valuable too! Happy to talk more about that but I think its a tangent 🙂
I’m reminded of a quote I saw a few years ago from Andrew Chen: “Your ad-supported B2C site is actually a B2B enterprise in disguise” You just extract the money from a different end point.
Just IMHO 🙂
not sure if my comment is in limbo or if google chrome eated it.
people won’t pay for content. there is such a long tail of (popular) content you’re toast with a paywall (unless you’re niche)
i think that what news agencies are missing is that they are a b2b: they make their money by selling adverts. they *have* the content and traffic, christ, monetising a huge audience is the easy bit of a web operation.
except news publishers have all this legacy “stuff” that is going to rapidly decline in revenues, and like a plaster, rather than rip it off quickly, they’re gently peeling it away and suffering for years.
maybe the solution isn’t in personalization of advertising. optimising seo and ad inventories via solutions like ultraknowledge are proven to increase advert revenues. no brainer.
the issue is that these technical solutions take many years to mature and be optimal. eg: publishers should have done this when that little thing google news came out. it isn’t too late now, but in five years time it will.
think less like an old school publisher and more like facebook.
(thanks for the hat tip, Jonathan)
peter
As to Steven’s response on his blog, direct sales to consumers was the first of the three methods of making money that I listed. Direct sales includes not just subscriptions and single copy sales, but any form of selling information directly to a customer, including datasets and directed research. (I should have included that line in the piece. Apologies.)
Again, though, I submit that most news organizations vastly overvalue the commodity information that they produce.
General assignment reporters, without formal training or professional experience in the beats that they cover cannot hope to create content of great value than then professionals now blogging on those beats.
I do believe that there is a market for information, as Steve writes about, but that it cannot be served by current newsroom production models. To create content of enough value to be sold in that market, news publishers need to employ (or be run by) experts with greater experience in these fields. But that change needs to happen on the production side. Asking marketing or sales to make it happen won’t work.
I think you’re missing an obvious point, which is that major media properties are stocked with under-leveraged, talented journalists. These journalists can be trained to help produce revenue-generating products and services such as events, custom research reports, and streaming video reports. Some investment is required, but ultimately it will help both the media properties and the journalists themselves. In my view, people who claim journalists are one-trick ponies are themselves one-trick ponies.
Having Mr. Niles comment on digital journalism vs print journalism is like having Karl Rove comment on the GOP vs Dems. You can be sure what you’ll get before the conversation even starts. I’d be more interested to see how Mr. Niles thinks real journalism will survive — and he is kidding himself and you if he thinks there will be any valuable model that depends on volunteers and donations.
I’m curious why Robert is focused on making money from news content, since newspapers have *never* made money from news content. We know consumers never paid full freight for it, but advertisers weren’t paying for it either. What they were paying for was access to potential customers — hitching a ride, if you will, along with the news content. I think all of the additional potential revenue streams discussed here and elsewhere capitalize on much the same thing: a newspaper organization’s deep knowledge and insight into its local consumers, and the ability to use that to grow local businesses, using whatever platforms and tools are most appropriate to do that.
Great post Robert. It serves as a reminder to anyone trying to make money on the web. Simple but true.
Robert, thanks for your response, but you misunderstand me: When I talk about direct sales, I am not talking about selling what our company produces. I am talking about brokering sales for our business customers: Instead of selling them eyeballs, we help them sell their products, which is what they really want. In addition to publishing engagement announcements, we host a bridal registry, so we are actually selling wedding gifts and collecting the money for local merchants. In addition to publishing coverage of the local sports team, we sell tickets and sweatshirts and those ridiculous flags people fly on their car windows on game day. In addition to developing apps to help mobile customers access our content, we develop apps to help local businesses sell pizzas. And so on … I have detailed these approaches in other posts: http://bit.ly/RtJO7 and http://bit.ly/70dwFz
This is genuinely a different revenue model than selling your data or the information you gather. To lump it in with direct sales of content is to undervalue its potential.
Niles is very sure of himself, but he’s also wrong about the limited number of revenue models.
My online news company, WND.com, developed another revenue model 13 years ago that still accounts for nearly 50 percent of our revenue.
Maybe that’s why we survived the dotbomb when so many other online content companies did not.
Maybe Niles should actually talk to successful entrepreneurs in the field before rushing to conclusions that are not correct.
I have to agree with Steve. In the UK, the Telegraph is successfully developing this revenue stream, and the Guardian has started to do so. But there are many more ways to get into direct sales than by just opening up a catalog section of products and services. There will always be advertising, but increasingly, brands are looking for ways to connect directly with consumers and to have conversations and transactions with them. Making money on the web is no longer just about selling ads; it’s all about helping to make those connections and to facilitate the transactions.
OK, Joseph, what is your model, and how does it differ from one of these three methods?
Elaine, newspapers very much made their money from advertising in the past, both classified and display (though, mostly, through classified at the papers where I’ve worked.)
My question for others in the comments is… if circulation is crashing with newspapers priced from 25 cents to a buck per copy, what makes you think that a newsroom is going to be able to earn more money from higher-priced information produced by the same newsroom, without fundamentally altering the production and publishing models?
Are there really underworked reporters sitting around with time and expertise to do in-depth research that can be sold at a premium to wealthy customers? Not in any newsroom I’ve ever seen.
I think Dan Conover has a clear vision of some of the possibilities for data that might justify the higher costs Robert asks about. It’s a good question, but I think Dan has a good answer. And my answer to tough questions is, “Let’s try.”
http://xark.typepad.com/my_weblog/2009/05/the-lack-of-vision-thing-well-heres-a-vision-for-you.html
I was going to write about all of the reasons Steve’s “direct sale” idea wouldn’t work but Howard Owen beat me to the punch in the comments section of Steve’s blog. Suffice to say that becoming a local e-commerce hub is not a revenue model for journalism it’s glib to talk about it without considering logistics, inventory, drop-shipping et al.
The post of Dan Conover that Steve refers to is equally pie in the sky. Sure, if you could structure all data in news content you could do some neat things. And if I had a million dollars I’d be a millionaire. It’s that first part that’s tough.
Structuring data is not easy. What Dan’s post proposes is a super-salesforce.com, except it’s not just to database relatively structured data–it’s to database *everything*. And salespeople *hate* structuring their data and will generally only do it because the financial outcomes of the effort are so easy to track and audit.
And anyway, the big guys have already gotten here: Reuters’ Open Calais allows them to structure and repurpose data better than any local organization could do on their own, even if they structured the data better on the input side.
So basically, yes, Robert is right. There are no new business models to monetize “journalism”.
I agree that what Steve is getting at is more accurately considered an ancillary business that can provide a (method 3) donation to the newsroom, in the form of subsidizing the parent company.
But I should openly concede a fourth model, which I did not include because I consider it unethical, and in some cases, illegal.
4. Leveraging reported information before publication
Remember the hubbub over Mark Cuban’s business model for ShareSleuth?
This (method 4) is the revenue model in play there – trading in the stock of a public company based on information you’ve reported which might move its stock price, but making that trade before you publish the report.
This fourth model also would apply if you decided to cut out the Wall Street middlemen and just go ahead and blackmail someone based on your reporting, although that might also be considered a form of model number one, i.e. direct payment.
Not someplace I’d want to go. But leveraging unpublished information is a fourth revenue model… if you’re willing to count a sleazy one.
Joseph
But Robert, calling direct commerce “ancillary” and a subset of the philanthropic model means that advertising is the same. After all, advertising products and services has no real relationship to reporting news; its just the activity that makes the journalism possible. If selling ice cream cones on the corner could make enough money to support a newsroom, we’d be doing that; it just happens that selling advertising has worked well enough for the last 100 years. But going forward, it won’t, and we need a different revenue generator. Direct sales doesn’t require inventory or shipping logistics, any more than data storage requires actual servers. If you can make a fraction of a percent of every sale for which you put together buyer and seller (like Ebay does) you have a nice business. News sites are in good position to connect buyers and sellers; they need to find ways to get a sliver of a slice of every transaction they facilitate.
The major media outlets in my region have pushed towards monetizing their websites with a variety of advertisements. One site in particular, has uses links under specific keywords on each story. In addition to this, they also display one popup whether you are logged in our not. Of course they have advertising banners, but many are just blind to the locations that they appear at.
What sets this site out from the rest is that they permit commenting on each story. This builds a sense of community and helps the visitors to overlook some of their more intrusive ads.
While value, or perceived value, will impact price and sales anywhere between the floor and the ceiling is driven by competition. For example, people will buy gas as long as it’s under $5 or $6 a gallon. But if a station starts giving away gas for free, they will have cars lined up down the block. But if all the stations are charging about the same (within a dime of each other), they will all have business. People won’t forego their vehicles and walk until the price hits the ceiling. The point is, as long as there’s a newspaper out there giving away the same or similar content for free, nobody is going to pay for content. That puts a big emphasis on unique, local news, which should be fee-based.