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

Media Disruption: Is the Race To The Bottom Bottoming Out?

Posted by Tom Foremski - November 28, 2017

The media industry continues to be disrupted and former high flying new media companies are being hit as revenues from advertising continue to fall despite increased readership.

Monika Bauerlein, CEO of Mother Jones magazine lists some the recent troubles:

Buzzfeed, the big media success story of the past decade, projects missing its earnings targets by some 20 percent.  CNN faces shortfalls, despite its incredible scoops and a political climate that’s had all of us glued to the headlines.  Mashable, another investor darling, announced its sale for about a fifth of its valuation just two years ago.  The Daily Beast, owned by the same parent company as Tinder, is looking at a sale, and    Univision is on the hunt for someone to take a piece of the former Gawker sites.  Alternative weeklies are on life support and Conde Nast is making cuts. 

Journalism Is Imploding Just When We Need It Most – Mother Jones

Bauerlein writes:

Some blame the Google and Facebook algorithms (could real news getting caught up in the fight against the fake stuff?). Others speculate that readers and viewers are simply tiring of the 24/7 onslaught of crazy.

Her strategy for magazine survival is to build trust with readers through important investigative journalism projects in the hope they will donate money.

I hope you’ll consider joining (or re-joining) the community of some 50,000 MoJo donors with a tax-deductible gift here

Foremski’s Take: 

Asking for money seems to work for a specialist magazine such as Mother Jones which has never had to completely rely on advertising. But asking for handouts is not a sustainable business model -- it can only work for a very small number of publications.

We need something viable, scalable and available to all.

The darlings of the new media sector such as Buzzfeed, Gawker, and Mashable attained massive amounts of traffic yet even they were unable to run fast enough to stem the race to the bottom on declining advertising revenues.

Google is also racing to the bottom. Every quarter it reports less money per click than the same period in the prior year. In it's most recent quarter it reported 18% less -- a larger than expected decline. But it beat Wall Street estimates because it found more places to show more ads.

Traditional and new media companies cannot match the scale and the low costs of the platform-based media companies. They have additional advantages such as avoiding the label of a media company and thus able to shun the costs of maintaining community standards in regards to hate speech and fake news.

Google and Facebook can survive the race to the bottom for much longer than the media companies that rely on people rather than software to create content. But they are media companies run by engineers and they don't understand the economics of the business and their effect on the industry.

Unequal relationship...

Google and Facebook need news content but they take too much of its value and return too little. Media companies complain that the traffic is of poor quality and hard to monetize.

For example, Mother Jones spent $350,000 on an investigative series that was tremendously popular online but was only able to recoup $5,000 in online advertising revenues.

Media beggars...

Billionaires such as Jeff Bezos and Warren Hellman have stepped in to try and help out the media industry, and Patreon collects donations for worthy media ventures.

But begging is not a business. Handouts cannot scale and they mask a very serious problem that is not addressed -- the continuing instability in the media business model.

We need innovation in the media business model so that it rewards quality journalism with reasonable profit margins that enable reinvestment, growth and vigorous competition. We do not have this or anything like this. And there's nothing on the horizon.

Garbage collection...

This is an incredibly serious problem because without a trusted and healthy media sector we cannot make the right decisions to govern ourselves and lead our future.

Garbage in -- garbage out.

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Please see: Fake news problem: Facebook is a media company run by engineers

$GOOG Analysis: Google's rapidly narrowing future

Journalism+Silicon Valley: What Balance Of Power?

No good news for media industry in Internet Trends report

Analysis: Facebook's 3,000 editors...Is it still a tech platform?

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