What happens if the old media dies too soon? The urgent need for solid online news media business models
By Tom Foremski - November 14, 2005
Over the past few months I've been asking what happens if the old media dies before the new media learns to walk.
By which I mean, what happens if we lose much of the old media before the new media business models are formed?
It is Silicon Valley's top companies, such as Google, Yahoo and Ebay, that are devastating the old media business models. But the new media business models have not yet "grown up" to support the quality journalism that we need as a society.
The New York Times, for example, pays about $1.25m a year to have a Baghdad bureau, not to mention the rest of its huge editorial infrastructure. In contrast, online publishing relies heavily on revenues from Google text ads--but Google ads won't pay enough to fund a global network of journalists.
Google's blowout quarter
Google's blowout quarter last month means one thing: the old media is losing advertising dollars faster than we thought.
Those sales are not coming from market share gains against rivals such as Yahoo, since Yahoo also reported a very good quarter due to increased advertising.
And this is just the start of a trend that's likely to accelerate as print advertising sales contracts expire and budgets become free to shift to online advertising.
Swinging to extremes
We know what will happen in a situation like this: We will see a flood of online advertising as the pendulum swings to an extreme, before moving back towards the middle.
Which means that the old media will have its knees chopped from under it. Or perhaps the entire revenue-generating torso will be hacked off.
Media is crucial to big problems
What happens if the old media dies before the new media learns to walk is a crucial question because the media, in all its forms, is the forum in which societies think things through. Media is how the world thinks about important problems and finds solutions.
And this includes Fox news, the blogosphere, and the rest of the entire mediasphere. It might seem a messy way to solve big problems, but that's what the media helps us do. And that requires a professional media corps, not a part-time blogger army. The blogosphere provides checks and balances on the "big" media.
And BTW, it is not blogging that is killing the old media, it is the economics of online advertising versus print. You can pin a rock solid ROI on an online advertising campaign that you could not do with print advertising.
You can track users: who clicked where, and when they did it. You can track the conversion rate in real-time. You cannot do that in print advertising, TV or radio.
Google is a competitor
It is companies such as Google, Yahoo, Craigslist, Ebay, and many other online advertising companies that are killing the old media, not deliberately, but in pursuit of their own business models.
Google is a technology-enabled media company, yet many media web sites carry Google ads on their front page. And Google has a business model that newspapers, and most other content producers, cannot compete against.
Google's costs of operations are so far below that of a newspaper that there is no hope of competing with Google for those ads. So why give up prime online real estate to a competitor? It doesn't make sense and all it says is "I don't know what to do with this space."
It's true that Google does provide welcome revenues to online news sites and other third party content sites. But even those modest amounts might not last. Consider this:
-Revenues from Google.com sites grew 20 per cent in the most recent quarter while revenues from Google's advertising partners grew just 7 per cent.
-Google has introduced "smart pricing" a technology that serves up adverts to partner sites based on how well the third-party content can generate conversions. Poorly converting sites, including the New York Times, might find that they can attract large readership but their Google ads conversion rate is poor compared with Google's search site, and therefore Google will "smart price" the advertisement and charge less for the ad on poorly performing third party web sites, which leads to less revenues to the publisher.
And please remember: ads perform much much better on Google's search and service pages than they do on third-party web sites.
[With smart pricing, conceivably Google could tweak the ad servers to channel more ads through its search sites to make their quarterly numbers...? GOOG does not release quarterly sales forecasts, but, the analyst community does, and GOOG has to pay attention to meet those numbers to avoid volatility.]
-Google has an incentive to channel more high paying ads through its own sites rather than those of its partners and that trend will continue.
It's because it can make more money that way. It is sharing 80 per cent and even 100 per cent of the ad revenues with some selected partners. [It is a large share but why not? It gives Google distribution and reach and it can always grab back the advertising monies when it is ready.]
Big solutions needed
So, if we lose much of the old before much of the new media can take on the roles we need, what then? How will we, as a society, think things through?
We have some pretty big problems ahead to solve. We have the avian flu pandemic looming; we have a growing energy crisis; we have ever larger and more complex problems to solve.
Can the Blogosphere take the place of the old media? Only to a small extent, and that is because quality journalism is difficult to do, it has to be done daily, hourly, minute by minute as big news stories break. And 99.999 per cent of the blogosphere has a day job that is not in media.
Partners needed for historic mission
I am one of the very few journalist bloggers that does not have a day job. In May 2004 I became the first journalist to leave a major newspaper, the Financial Times, to specifically become a full-time journalist blogger, and with a mission to find out and develop the business models for online news and related content.
Over the next few weeks Silicon Valley Watcher will announce partnerships with tech companies, with PR companies, and maybe even with an advertising agency, to help figure out the online business models that can support a robust and healthy online media run by media professionals who make their living completely from online journalism.
Throw away the banner ads
What does it mean to help develop an online business model? It will mean developing a new form of online journalism, in a format that works.
We know what doesn't work: banner ads, skyscraper ads, flashing marketing messages. Those are cultural artifacts, attempts to imprint the old world onto the new. In this online medium, online journalism does not have to look the same but it does need to have the same principles of truth, fairness, and independence.
I have a challenge for our partners: Imagine the space taken up by that banner advert, or a skyscraper ad in a sidebar, and figure out what else could go into that space?
What kind of value, rather than marketing messages, can you create in that space for the community of readers of SVW? What kinds of editorial products might be needed? What is the format of that mix, what does it look like?
Maybe a large tech company could buy that space for a list of headlines related to a story topic, a type of contextual additional content that would help expand a news story to include many more additional points of view.
That creates value to a reader, from a clearly identifiable sponsor/source.
Or, a PR company could provide a list of headlines linking to stories about its clients, related to the content on the page. Client companies of the PR firm could demonstrate their thought leadership on key topics in the news, while the news is happening, rather than the next day or week...
The PR companies could spread the cost of maintaining that banner-sized "window" across their portfolio of clients. It might also help them maybe grab a chunk of the advertising budgets...
Conversely, advertising agencies could do the same, grab for the PR budgets...
A rare chance to shape the look/format of the new media
These are just some of the things that could be done, and the kind of things that focus on value to the community rather than spin.
It's a chance to help define the way online media looks for the next decade or more. What the format will be, what kinds of editorial/business model combinations work best.
And if we figure things out together, then everyone in the online media world wins, because everyone will be able to follow the same format.
It's a chance to grab a place in the history books, to help define the shape, the look-and-feel of a new media. So let me know if you can join us in this noble venture :-)
tom at SiliconValleyWatcher.com.
- - -
Please see:
The most troubling question in media today...
Reverse the Google pay per click model
By Tom Foremski - November 14, 2005 | Permalink | Category: Media Watch
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Comments (15)
In terms of blogging vs MSM it is a situation you see in every business, you need to either increase revenues or cut costs (or ideally both!) MSM are losing revenues and still have huge costs. What is interesting about Yahoo IMHO is not so much that they are stealing revenues, but they are finding out new ways to report. While I question the usefulness of the war porn site "Kevin Sites in the Hot Zone" on Yahoo, I cannot help but admire the creativity and innovation of the site and in finding a niche audience to reach out to. Low cost and targeted media powered by the web.
Posted: November 15, 2005 3:01 PM
I am ready for experimetations ! Working for a large French regional newspaper we prepare the second the new version of our web site. But do we need one site ? No, we need sites as to me. Sites that can talks together, taking the audience, age by age, hobby by hobby, and so on...
Besides the importance duplication of the newspaper infos, local,regional,targeted portals seem to be one the strategic goals. But to provide what kind of contents that could generate trafic, services and then money ? Cimeteries are full of so-called succes stories in terms of portals of contents... So we must experiment to find real topics that can help the(s) audience(s) to live, enjoy job, etc.
The Cultural Revolution is on the way but it is much easier to write about it rather than making it. Next step ?
Posted: November 16, 2005 6:41 AM
I too am concerned about the old media, mainly because they have not realized thier value is less today than it was 10 years ago (much like the music busines ;), I expect ad rates for some of companies I use to be lowered, unless they can offer me a tied in to the online presence of said media free, which may or may not hit the target audience for me, but could at least ad a few links which makes google and yahoo like my online sites better.
The old media is surely feeling a loss of money, and that is making them greedy, rather than focusing on making the consumers expereince better, they are just blanket selling and filling in more ads.
Google and yahoo have a limit on the amount of ads they place per amount of content, and their model is growing as they stay focused on the tough competition. Old media has enjoyed for much to long just a slew of money coming in as long as they can show numbers for an audience. Never caring for the end user has made it possible for other mediums to step in and do better.
I too look forward for the pendulim to come back to the middle, so long as that middle reflects a more adjustable cost for advertisers as consumers shift thier flighty viewing habits.
Posted: November 17, 2005 12:16 AM
Tom, your comments are understandably focused only on the print media, but the same dynamics are at play in the broadcast media. In one example I still don't understand, terrestrial radio broadcasters run ads for satellite radio; their direct competition. This is either the result of broadcasters' short-sighted greed or an arrogance that does not fit them well.
Posted: November 17, 2005 8:23 AM
Tom:
Fascinating. I wish you luck in getting this off the ground and will watch closely.
Those of us inside "old media" hope there's another option: That old media can learn to walk the new walk before it collapses. It's a reason we've launched blogs like mine, bringing professional journalism to this new medium.
As you say, we'll probably meet somewhere in the middle.
Kevin Maney
USA TODAY
Posted: November 17, 2005 4:48 PM
The other thing that one should consider is that here in New York, english readers on the train read almost exclusivly the free papers, METRO and the other one, which i can't rememeber the name of. So "old media" have stiff competition even in the analog world, that didn't exist just a few years ago. You will definetly see the Post's #s down because of this, let alone the NY Times.
Personally I read all my news via rss feeds on my sidekick, but most of the kids today of the ME generation are getting their news on iPod podcasts, that they sync their iPods to in the morning at home. They don't even need to use their eyes anymore!
Brilliant!
Posted: November 19, 2005 12:20 AM
The other thing that one should consider is that here in New York, english readers on the train read almost exclusivly the free papers, METRO and the other one, which i can't rememeber the name of. So "old media" have stiff competition even in the analog world, that didn't exist just a few years ago. You will definetly see the Post's #s down because of this, let alone the NY Times.
Personally I read all my news via rss feeds on my sidekick, but most of the kids today of the ME generation are getting their news on iPod podcasts, that they sync their iPods to in the morning at home. They don't even need to use their eyes anymore!
Brilliant!
Posted: November 19, 2005 12:20 AM
The other thing that one should consider is that here in New York, english readers on the train read almost exclusivly the free papers, METRO and the other one, which i can't rememeber the name of. So "old media" have stiff competition even in the analog world, that didn't exist just a few years ago. You will definetly see the Post's #s down because of this, let alone the NY Times.
Personally I read all my news via rss feeds on my sidekick, but most of the kids today of the ME generation are getting their news on iPod podcasts, that they sync their iPods to in the morning at home. They don't even need to use their eyes anymore!
Brilliant!
Posted: November 19, 2005 1:06 AM
If you can't support yourself with hundreds of small media sells (eg papers of today) or user fees (eg 'labor' papers of 150 years ago), you saddle yourself with a few large ones who direct your content (eg early TV & radio).
I notice you have two 'founding sponsors', Tibico and Infineon. Infineon even has their own 'channel' on your site. How can you make a plea for integrity & independence?
Posted: November 23, 2005 7:52 AM
I'm not sure what you mean by integrity and independence. I write about whatever I find interesting and I don't check it out first with my sponsors. They pay part of my costs but I am carrying the rest. I haven't seen a paycheck in 18 months, I am the ONLY mainstream journalist to have a left a major global newspaper to become a fulltime journalist blogger and to figure out a way to make a living. If I succeed, then other media professionals will follow. And we will continue to have high quality media. If I don't then we won't and that is bad. Because a high quality media is essential to how society "thinks" through big problems, and we have massive ones on our plate...
Posted: November 23, 2005 11:41 AM
I appreciate what you are doing -- it's brave, it's experimental. But at present you have a direct press release feed from Infineon in your sidebar, labeled "Latest news from the microchip industry".
You may have a free hand in the middle but you've given Infineon an unfiltered column on your front page. That's a huge concession!
No editors, no ombudsman, just aggregation agreements. How you can have quality without editorial control?
Posted: November 23, 2005 12:20 PM
I control the quality of my content, Infineon controls the quality of its content. You know which is which. If Infineon should choose to publish questionable content then that is their choice and they would own the consequences.
I do not see the problem. I am not going to police or edit anyone, everyone owns their own stuff and is tagged by it. You can see that it is Infineon content and thus they produce and are responsible for it. You can see what I produce--the sources are clear and you make the judgements, if any.
Posted: November 23, 2005 1:21 PM
How practical and profitable might it be for SVW’s content to be syndicated to old media publishers? Could syndication generate significant revenue? What syndication services are available now for bloggers?
Since newspapers are shedding their own writers, having access to content from sources such as SVW could serve the interests of professional bloggers and newspaper owners. It could also provide old media readers with a broader range of ideas and sources.
Posted: January 4, 2006 4:44 PM
I think you are right--it would be very practical. And I'm already doing it to some extent. I'm writing a "blog" for ZDNet, and Always On have asked me to be a columnist. ZDNet pays, but Always On doesn't. Sooner than later, the ones that pay for content will do better than those that always want content for free.
After all, the value of free stuff is that it has no value--by definition :-)
Posted: January 4, 2006 8:17 PM
Tom, AlwaysOn may not be paying their content providers, but they are receiving money from members. Not sure what all I get for it (wasn't a print version coming, too?). Your pieces can only help. Here's hoping you can monetize something from 'em...
Posted: January 7, 2006 6:42 AM