Silicon Valley Watcher - Former FT journalist Tom Foremski reporting from the intersection of technology and media

Newspapers and magazines aren't making money online

Posted by Tom Foremski - March 22, 2007

Here is an interesting post from BizReport. It shows that publishers aren't making money from their online operations.

Publishers aren't profiting from online operations - Internet - BizReport

Out of 350 international newspaper and magazine executives gathered in Hannover, Germany, for a media conference, only one was able to claim making a profit from their online operations.

by Helen Leggatt

Furthermore, despite investments totalling millions in marketing dollars, only a handful of the industry players present could claim more than 3 percent of their sales came from online.

The economics of publishing online can't support the people and processes that are needed to produce it.

This is a serious issue because as the "paper" based economic models get trashed, it is clear that online publishing isn't going to save old media publishers anytime soon. Even if their online revenues were to double tomorrow, it still wouldn't be enougth.

It is another example of "you can't get there from here" when it comes to old media transitioning to the new media world.

It's because publishers have to compete against online publishers such as Google whose costs of publishing a page of content and ads is miniscule. The reason GOOG or YHOO or Craig's List can sell advertising cheaper is because they don't have to pay for their content.

Mostly, their content is machine-generated, or harvested by their spiderbots roaming the Internet, or it is user-contributed as in Craig's List.

Online advertising rates reflect this economic reality and thus are held down at low levels. These are levels that won't be able to support old media publishers.

It costs tens of thousands of dollars for newspapers and magazines to produce, market and distribute a "page" of content. 

There is no way that they can compete against competitors whose comparable costs are pennies per page.

Therefore we have to figure out a new economic model for media--it has to be something more than online advertising.

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