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June 27 2013

15:17

The newsonomics of Advance’s advancing strategy and its Achilles’ heel

Another city. Another melange of limited information, confused storytelling, and an unsuccessful attempt to put on a happy face to mask a huge change in newspapering and civic life.

Last week, Oregon’s dominant paper, The Oregonian, followed in the footsteps of other Advance papers and announced it would be delivering to homes only four days a week come fall. It will be greatly slimming down staff, including dozens in the newsrooms, formally going digital-first, reorganizing into two companies, and producing newsstand editions on the days it won’t home deliver. It’s Advance’s Slim-Fast, Phase 2, tweaked after its torturous New Orleans rollout last year (“The newsonomics of Advance’s New Orleans strategy”).

That’s the new Advance playbook, as the company — a top 10 newspaper company by revenue in the U.S. — proceeds with a revolutionary restructuring of the local news business. It’s a play that serves at this point as a contrarian example. Most publishers believe the Newhouse family, owners of the very private Advance, is downsizing its own business, and about to give away the local market dominance in readership and commerce monopoly regional dailies have long had in the United States.

Within Advance, you hear that its strategy isn’t just on plan — it’s ahead of it. How do we put together what’s really happening and figure out what to make of it?

It’s not easy. Working with sources up and down in Advance cities is one way, gathering lots of partial views. While top editors are willing to talk, Advance’s business leaders are mum. That’s just silly: Newspapers have a special responsibility to the public, one that although further tested by Advance’s new strategy, is universal. Newspapers are citizens of their community — leading ones, we’d hope — and clamming up about changes of this significance is contrary to the values of the trade.

Just as curiously, Advance isn’t sharing much with its peers in the industry. If Advance has really developed the new secret sauce, why not share it with other newspaper publishers nationally and globally? After all, they’re not the competition. Yet Advance’s omerta-light DNA is a sideshow here. What we care about is the Advance strategy and what it means to the readers, to the journalists, and to the business of news going forward.

So let’s look at the updated newsonomics of the Advance strategy, Phase 2, as it rolls out in Portland in October, two months after Cleveland’s Plain Dealer takes the same plunge. Let’s look the strategy — which has a fair amount of smarts built into it — and its challenges, pitfalls and, likely, its Achilles’ heel.

Planning for print decline

As a strategy, think shock therapy and you’d be close. For decades, the Advance papers had been the epitome of corporate paternalism. The no-layoff pledge, generous health benefits, and good salaries all said job-for-life. Advance’s separation of its local digital sites (OregonLive.com in Portland, for instance) from the newsroom — literally 10 blocks away and reporting to corporate, not the publisher or editor — greatly hampered a singular reader focus.

As other companies struggled mightily with the digital transition, the huge staffs of the Advance dailies found themselves too often sitting on the sidelines. Individual editors, with great variability, tried to innovate. Overall, though, Advance dailies were falling behind the peers in trying to meet the digital revolution.

After years of waiting, waiting, and waiting, the company is now in a mad rush to change. When it came time to acknowledge basic truths about newspapering, Advance management reached for the hand grenade rather than the scalpel.

Reading the same tea leaves of print decline as their brethren, they decided that blowing up the enterprise (reassembling it in two pieces) and downsizing their operations, their home delivery, and their community service was the answer.

Their analysis, curiously, parallels that of iconoclast John Paton, the mastermind behind Digital First Media, as Journal Register and now MediaNews properties experience their own more evolutionary revolution. The in-common belief: As print ad revenues show accelerated decline, companies must greatly reduce their legacy costs and concentrate on the digital future. In fact, Paton has somewhat endorsed Advance’s efforts.

While the experiments began in Michigan in 2009, it was the the New Orleans Times-Picayune downsizing that riveted public and industry attention. In fact, 60 Minutes, which had sought the one moment for years to finally talk about the decline of the U.S. press, used the Times-Picayune’s réduction des effectifs as Exhibit A.

Everyone acknowledges that Advance publicly handled the New Orleans changeover as poorly as it could. Marketing. Messaging. Engagement. All subpar.

The T-P seemed to be at odds with the community that went into the streets to demand its very pulp-based existence. The community’s clamor for a seven-day paper went unheeded — until Monday, when the street edition of The Times-Picayune hit pavement, in 60 glorious tab pages. The New Orleans paper had borrowed a page from its northern cousin, the Post-Standard, which cut back home delivery Feb. 1, publishing a print edition even on days that it no longer offered home delivery. The changeover, Phase 2.

Now The Plain Dealer, which just announced a set of layoffs last week, and The Oregonian are following the same five-point model:

  • Massively cut expenses: At The Oregonian, about a sixth of the 650 staffers will lose their jobs. At Syracuse, the number was closer to 30 percent of about 400. Overall, I’ve extrapolated that Advance is aiming for an about 25 percent expense reduction (mainly in staff, printing, and distribution); I’ve been told that is close to the mark.
  • Pixelate the remaining ink-stained wretches: As Oregonian editor Peter Bhatia made (solely, he says) the layoff decisions that eliminated the jobs of about four dozen journalist staffers — about a quarter of the newsroom — he’s been quite clear that digital skills played a part in his decision-making. “How well [people] will work in the new world order” is key, he told me this week. (For the depth of the tumult within The Oregonian, check out Willamette Week’s takeout here.)
  • Separate out the old business from the new: In all its restructured cities, two separate companies have emerged to replace the old print. In Portland, it’s the Oregonian Media Group (yes, the already much-satirized OMG) that will now employ the content and sales people. As I’ve argued over the years, it is content and sales, quite simply, that are the foundation of the new business. The Advance strategy recognizes that and takes it to an operational level. The other new company Advance Central Services Oregon houses “support” of OMG. So it’s mainly made up of the print-oriented parts of the business — production, printing and distribution — along with HR, finance, and technology.
  • Provide seven-day print, but not home delivery: In New Orleans, and at Advance’s two Alabama dailies, the end of seven-day print was cold-turkey. One day: seven days a week of print; after the changeover, only three days. Then, Advance learned something from the Syracuse model. Pushed to continue (at least for a while) the semblance of seven-day print, the Post-Standard found that a by-product of daily print — the durable, seemingly vestigial e-edition — achieved a market purpose. Today in Syracuse, with a daily circulation of about 75,000, about one in ten readers downloads that daily e-edition. E-editions have been around for 15 years; essentially, they’re replicas of the final edition of the printed paper, ones that can be updated during the next day, but often aren’t.

    Why would anyone want to read a static copy of yesterday’s news? Think older readers. They own computers, but are more comfortable with the format of the newspaper they’ve read for decades. This is an interim market, to be sure, but serving it is a subscriber retention must. To publish an e-edition, you need a print edition. If, like the Oregonian, you’re making substantial revenue printing other publishers’ papers, adding a short run of single-copy papers can be done very cheaply. Hence, single copy editions.

    In Portland, there will be four days of home delivery. The Wednesday, Friday, and Sunday editions are clearly full papers. The content emphasis of a Saturday paper — first called a “bonus” in its announcement — is still taking shape, says Bhatia. Consistent with Advance’s marketing and messaging faux pas, it has also named its daily e-edition, “My Digital O,” to the guffaws of many. Talk about service journalism.

    This single-copy story may get more interesting. Whereas Syracuse has stuck to a 16-page edition, with a single ad — to facilitate that e-edition — New Orleans’ TP Street debuted with 60 pages and a good run of ads, adding three to its print team to produce it. Both cities’ papers are delivered to hundreds of newsstands. An ironic question: What would Advance have to charge to restart seven-day home delivery, coming full-circle in its digital-first, cost-cutting exercise?

  • Keep digital access free — at least for now: Most puzzling in Advance’s strategy is its reliance on advertising, which continues to go south for the whole industry — including Advance. As more than 500 dailies in the U.S. move to charging for digital access, including all of Advance’s peer chains, Advance eschews paywalls. Why? Well, given the tight lips, we’re not sure.

    The lack of an All-Access model, I believe, looks like the Achilles heel of the Advance strategy, even if that strategy works in other ways. Why? Advance depends and will depend much more on ad revenue than its peers. Many of those peers believe that reader revenue may reach 50 percent of total revenue within two to five years. They believe that print advertising’s fade looks near-irreversible. Further, they’ve learned that the sharp growth curve upward in digital ad revenue has hit a wall. Some struggle for growth at all; most are in single-digits, well below the 15 percent growth of digital ad revenue overall. Sure, The Oregonian, The Post-Standard, or The Harrisburg Patriot-News could institute a paywall. It would likely, though, yield much less than it could have.

    Getting the order of things right on a paywall is important: Much better to improve the seven-day print product, add usable mobile apps, and then price up, even if you have a mind to cut home delivery. That way, you’ve established a new, higher price — and the monetary value of digital. Instead, Advance maintains what now seems like a nonsensical approach to paid print and free digital, and that bodes ill for holding on to current print subscribers, much less convincing many people to pay much for all-access down the road.

    If other publishers believes half of their 2016 revenue will come from digitally oriented readers, how will Advance newspapers deal with the lack of that revenue? It will have two major choices: find currently unknown large sources of revenue — or keep cutting expenses, including newsroom staff.

Stand back from this audacious strategy — with all its staff-cutting pain, its inducing of reader pain, and the promise of its digital-first, future-is-now thinking — and it’s hard to get past the point of its missing digital reader revenue strategy.

That said, Advance’s more immediate bet is that it can radically reduce its costs and maintain its dominating presence in local news and commerce.

It’s too early to assess the local advertising challenge. It’s a hyper-competitive marketplace, and Advance seems to succeeded in corralling seven-day advertisers into three days. (I’d projected it would hold on to 85 percent of its print advertising revenue in New Orleans; the number appears to be closer to 90 percent.) It still faces, though, a fast-declining (high single digits loss in metro markets) print market. Further, its ability innovate fast enough in the digital ad marketplace is unproven.

As one observer put it to me today, does the new Oregonian plan to make its future on display banner ads? I’m sure execs would answer that no. But its work in newer forms of digital advertising, from content marketing to marketing services to a major video presence, all seem relatively nascent. Is it ready for prime time as a digital-heavy company? Not yet, certainly, and the clock shows two more big Advance dailies going digital-first within 90 days or so. As it fights for digital ad revenue, it faces many competitors from Google and Facebook nationally to lots of local players.

New competition

In news impact, so far, there is mixed evidence.

Observers in both New Orleans and Syracuse tell me it is a crazy-quilt. Yes, with time-stamping on the website, more stories and posts are being pumped out of the newsroom.

The new operations break their share of news, and some second-day stories do a great job of summing up major news events. Sometimes, though — more than they used to — both papers drop the ball on breaking news. Other news players, from NewsChannel 9 WSYR in Syracuse to The Lens and the just-launched Baton Rouge Advocate’s greatly energized New Orleans play (“The New Orleans Advocate”), are competing more consistently. The Advance papers are still the biggest dog in town, but the dog park is now more diverse. Come fall, The Plain Dealer and The Oregonian will wake up to find their traditional alpha status more challenged day by day.

Times-Picayune editor Jim Amoss believes he is already seeing the dividends from the wrenching change the newsroom has seen. His staff is thinking news, not the next day’s paper.

“We’ve had eight months of having the news gatherers and editors separate, physically separate, from the print team and not having to think about the print product. The new rhythms have been inculcated in everybody,” says Amoss. “The total number of people in news went from 181 pre-change to 160 now. We’re still in the process of filling some of those positions. That total includes 91 reporters (including metro area news, sports, entertainment, Baton Rouge, and Washington correspondent). The number of reporters pre-change was roughly the same.”

Digital audience has grown, as we would expect given the print stoppage. Overall pageviews are up 15 percent, and “eyes on content” — meaning views of articles, videos, and photos across the site — are up 35 percent. A significant part of that is huge photo growth, up 150 percent year over year; photos represent 16 percent of the site’s traffic.

With the changeover, editors and ad directors have more direction of their own digital presentations and business. Advance Digital, to whom the separate sites used to report, still provides digital product development, sales strategy, news and information content product development, and centralized technology for the digital products.

Oregonian editor Peter Bhatia echoed Amoss’ newsgathering point to me this week: The Oregonian newsroom today has about 90 reporters and will have about the same in the fall. The newsroom cutting has fallen disproportionately in middle editor and copy editing ranks in all the Advance cities, a strategy well-employed by others over, including the Star Tribune, over the past several years in making cuts.

The big questions, of course, are who those reporters are, how much experience they have and what beats they cover. In any newsroom restructuring, newsroom managers can use the opportunity to make changes they long wanted to make, but found inconvenient. In this great shuffle, some areas, like environmental beat experience, have been wiped out at the Oregonian.

Further digital skills may have trumped journalistic skills in such Sophie’s Choice decision-making. Finally, The Oregonian — as keenly aware of its newsroom dollar budget as of its actual headcount — cut many high-salaried people, as well as some younger staffers, weighing, I’m sure, one more factor: exposure to age discrimination suits, as any employer in such a situation would do.

All of that change means The Oregonian, come fall, will find new areas in which to excel — and will leave its flanks more open to competition. In Portland, there’s a lot of it. Pulitzer Prize-winning Willamette Week provides city-smart, well-established news coverage. Oregon Public Broadcasting has been adding coverage area after coverage area. Add in a strong TV news presence and several niche print players, and The Oregonian may find what its sister papers in New Orleans and Syracuse have found: breaking news and analysis becomes more of a multi-horse race.

It’s not just news-gathering and writing that matters on the web, of course. A digital-first news operation should be the go-to news aggregator for the region; The Oregonian isn’t. It should have the best tablet and smartphone apps — news and entertainment — and its offerings so far are nothing special, open to competition. It could leverage community, user-generated content far better, borrowing a page from its Northwest neighbor, The Seattle Times, but hasn’t moved in that direction.

Broadly, let’s say the strategy — at least parts of it — may be right. Then the question becomes: Is the Oregonian ready to execute on it?

There’s little doubt that most of Advance’s employees — whose work will make or break the strategy — have little confidence in the “the plan.” It’s paternalism gone awry, and the sense of abandonment is clear. The lurch in strategy is offering little comfort, as Advance and its publisher largely keep the staff in the dark about how the new business is going to create successful products and long-term employment.

What Advance has done is buy some time. In radically cutting its cost base, it may have given itself a couple of extra years to get its new strategy right. It will need that time, at least, to work the prodigious to-do list it has handed itself.

Photo by Josh Bancroft used under a Creative Commons license.

May 30 2013

11:36

The newsonomics of climbing the ad food chain

The numbers are sobering.

While digital advertising has been growing at a 15 percent pace annually in the United States, the digital ad sales of news companies have largely plateaued, struggling to find any growth year over year. The New York Times Company reported digital ad sales down 4 percent for the 1st quarter, while McClatchy managed a 1.5 percent increase in the first quarter. Most news-based companies are significantly underperforming that 15 percent average — in the low single digits, either positive or negative. Meanwhile, the top five digital ad companies, led by Google, increase their share of ad revenue year after year and soon will hold two-thirds of it.

Why are publishers lagging?

Publishers describe their digital ad woe with these terms: “price compression,” “bargain-basement ad networks,” and “death of the banner ad.” Each describes a world of hyper-competition in digital advertising — a world of almost infinite ad possibility and unyielding downward pricing pressure.

Not long ago, news companies believed that their premium-pricing models would withstand the competitive onslaught. Now they’re retooling, trying to speed their adaptation to the new nature of the digital ad beast.

It’s a matter of survival. For some, all-access circulation revenues are a good positive (pushing overall circ revenue up 5 percent in the U.S. last year). All, though, find themselves running as fast as they can to make up both for the freefall of print ad loss and that overall digital ad pricing downturn. “The ground is falling away under you” is how FT.com managing director Rob Grimshaw describes it.

Let’s look at what some of the leading digital ad innovators among publishers are doing to regroup. Let’s look at the newsonomics of climbing the ad food chain, checking in with two global publishers, The New York Times and the Financial Times, and two regional ones, the Minneapolis Star Tribune and Digital First Media. They provide a snapshot of a world in ever-spinning change.

Their strategies are all fairly similar: employ a range of new techniques that will justify premium prices. Let Facebook, which controls as much as a quarter of all web ad inventory, sell at 80-cent CPM and make money on scale. Publishers know they will never win that game. They want rates *20 to 50* times that, offering increasingly better targeting of their affluent readers.

Climbing the ad food chain is mainly about three things: technology, creativity, and sales relationships. It is also, overall, about differentiation, the roar of a lion in a crowded landscape.

Grimshaw, a former ad guy, says simply: “You’ve got to be doing something unique.”

Let’s look at each of the areas:

Technology

Digital advertising is all about technology in 2013, and you’ll see lots of talk of the ad-tech stack, and who owns it. Google, of course, owns much of it, through its successive AdWords/Doubleclick/AdMob and more creations, acquisitions and integrations. Its stack is so efficient that many publishers feel compelled to use it, though they are wary of getting their businesses tied ever more directly to Google — or the Google “Death Star,” as some critics call it.

For most publishers, Google is the classic frenemy. They work with it when they think the advantages outweigh the hazards, even as top publishers build their own programs. In fact, expect to soon see U.S. news publishers transition their Newspaper Consortium partnership with Yahoo into something intended to be broader, something that allows publishers to opt into and out of the ad programs of multiple portals — not just Yahoo — harnessing the ad tech of the day.

Six-month-old Smart Match is one of the FT’s latest innovations to stay “premium.” In brief, the content of an advertisement is matched, dynamically, to that of an article. The technology: semantic targeting of both article content and the FT’s current “ad library” for the best matches on the fly, as compared to standard keyword targeting.

Advertisers commit specific budgets for specific time periods, and the FT does the matching. The FT says it gets a major lift in ad engagement with the technology, an average of 9x over its average clickthrough. Ten clients are now live in Smart Match’s soft launch period.

Ad effectiveness isn’t a one-time process; breakthroughs like Smart Match require ongoing engagement with marketers, as publishers work with them to figure out what works and what doesn’t — and to tweak constantly. “Ads can’t be a fire-and-forget enterprise” any longer, says Grimshaw.

The FT is setting floors on pricing and better controlling inventory, testing small “private exchanges” with select ad buyers and agencies, working with Google in the U.S. and Rubicon in Europe. Exchanges have caused publishers lots of headaches, as too much of their inventory — mixed and matched with lots of “lower quality” inventory — helped drive down pricing and deflated the meaning of “premium.” So many have pulled back from exchanges in general; a few are starting to harness the exchange concept, but in a members-only approach.

“We are constantly evolving our approach to the programmatic marketplace, and private exchange activity is one part,” says Todd Haskell, the New York Times Co. group vice president for advertising. “We’ve been using private exchanges for a series of single-client buys executed using private exchange technology, and are now exploring several single buyer/multiple brand programs.”

One big notion here: minimize channel conflict, so that a publisher isn’t competing with itself, making its inventory available at variable prices here and there. Private exchanges are proceeding cautiously. Buyers get more flexibility, but within the control of publishers.

Such private exchange testing follows the adoption of RTB (real-time-bidding), which publishers are honing to get better rates for the ad inventory they can’t sell locally. “We moved away from a remnant inventory model a few years ago with the adoption of RTB and actively manage all of the programmatic demand that we see through the ad exchanges,” says Jeff Griffing, the Star Tribune’s chief revenue officer. “As a single-entity, local site publisher, our strategy is to make sure as many bidders/buyers as possible can transact on their audience impressions that we fulfill on our site.”

Similarly, Digital First Media is moving to add new data — including third-party data from traditonal sources like Experian — into its own systems. “As we move more into the programatic world, with our own Trading Desk and all our own inventory in our private exchange, we keep adding data to all that traffic and match it in a way that enhances the ROI for the small and medium advertisers,” says Digital First Ventures managing director Arturo Duran.

Ad tech is also allowing publishers to do things they couldn’t previously do. The Times is using new brand new ad formats to help marketers gain interactivity. One new program will allow for coupon delivery within an app.

The idea of delivering more experiences within experiences — rather than alongside — can be seen in another recent announcement. Twitter Amplify allows advertisers to deliver videos in-stream — part of a slew of ad-friendly moves, well described by Ingrid Lunden at TechCrunch. Among the early partners to sign on: BBC America, Fox, Fuse, and The Weather Channel. The goals here: make ads both more experiential and more lead-generating.

Yield optimization is a term now part of everyone’s vocabulary. Optimization — the better use of data through adjustment of the digital pulleys and levers that adjust what’s offered, at which price points when — has always been a part of the advertising game. Cycle time, and sophistication, though, have markedly moved up. Where the Times used to adjust in 24-month cycles, says Haskell, it now makes significant moves in three-month periods.

There are lots of moving pieces to optimization. The Star Tribune’s chief revenue officer Jeff Griffing describes how his company does it: “The push to premium help us drive our effective yield on pageviews; we’ve established baselines that our different pageviews should meet or exceed and factor in our directly sold campaigns with those indirectly or programmatically filled. We have an optimal formula for how will fill inventory and have set up systems that make sure we’re delivering maximum revenue across all ad units.”

Of course, publishers have long adjusted based on supply and demand. Today, though, the complex external development — various sales partners, through networks, private exchanges and more — requires fine tuning to get the highest possible price for fleeting inventory.

If this all seems like four-dimensional chess, mobile adds a fifth dimension. Haskell recalls the boom in second-screen tablet usage found on election night last November. That development provides a new place for the text-, numbers-, and analysis-driven Times to play in what is usually an immediate TV story. Consequently, it opens up new ways for the Times to exploit the tablet as a second-screen, timely ad vehicle.

The tablet (and mobile, generally) is quickly moving from niche to main play for the Times and others. Of its 43.6 million U.S. unique users in March, 18.3 million arrived via mobile devices, the Times says.

There’s targeting — and then there’s super-targeting. So the Times is selling what Todd Haskell calls “super premium.” It is able to target, through its growing audience database, readers with certain job titles, reading certain sections of content. That kind of targeting drives higher rates, and it’s part of the Times’ plan to move up on the food chain, just as the middle and bottom of that chain widens infinitely.

Creativity

Over the past year, publishers have reawakened to the notion of commercial storytelling. They now see it — a cousin to editorial storytelling — as a core competence, and one that many marketers envy.

“Agencies and many advertisers don’t know how to do it,” says Grimshaw. “There’s a constant need for fresh [marketing] content.”

Enter content marketing, which I recent covered in depth in “The newsonomics of recylcling journalism.” The Star Tribune’s Griffing points to his company’s first big foray into the field, a Kids Health site. Sold to a single sponsor for one year, Children’s Hospital, the new content was produced by Star Tribune staff and is a prototype for products to come. Griffing says the company’s innovations, overall, have pushed year-over-year digital ad growth into the teens.

2013 is the year of content marketing, from New York to D.C. to Minneapolis to Dallas to San Francisco. The creative spark comes from a combination of old-fashioned journalism skills, both editorial and marketing. Sums up Rob Grimshaw: “Publishers have tremendous assets that have never been exploited.”

Now, often, the creation and placement of “native advertising” are inextricably tied. As with the Times’ IdeaLab, the Washington Post’s Brand Connect, and Atlantic Media Strategies, global publishers have asserted their high-end editorial skills, applied to other people’s storytelling, and are packaging that skill with an ad buy. Haskell points out that the creative costs can be built into the ad buy itself, if the buy is big enough. “We’re not looking to make money on the creative,” he says.

That combination of the creative and the buy shows the newness of it all, and the early flux in the content marketing craft. Over time, we’ll likely see a greater cross-title placement of above-average creative, saving on creation costs. How then will the various content marketing works of a Times, an FT, a BuzzFeed, or an Atlantic Media compare? Which will become go-to creative companies, and which will return to the old comfort area of selling placement?

Video creation has also unearthed new creativity among the formerly ink-based wretches. In fact, most companies tell me that video ad demand, at anywhere from $25 to $75 cost per thousand rates (many multiples beyond display ads), is still outstripping supply.

The Star Tribune’s Griffing puts it this way: “This one is simple. We are selling as much video inventory as we have; 1.2 million plays per month, which is significantly more than the next closest competitor, a local TV station. That said, until we’re doing 10M plays a month, revenue for video will be relatively small.”

In a nutshell, that describes the dilemma. The New York Times recently hired Rebecca Howard, late of AOL/HuffPo, to expand its sold-out video inventory.

For Digital First Media, a pioneer in local news video through the Journal Register Company, new video formats offer premium possibilities. It’s going short, and long. “For short format we just closed a deal with Tout.com, and we are deploying their player in all our sites.” DFM journalists will take videos, through Tout (“The newsonomics of leapfrog news video”) and place them quickly on the sites, says Digital First’s Arturo Duran. “Some of those ‘Touts’ are embedded inside the articles. This is following what the consumers are doing, and the tests by WSJ and BBC. They have created snippets of 15 seconds of information that feed their sites with real time information on events. For end users, it’s a faster, easier way to watch it. There is a big play in the mobile arena, specially smartphones, as end users are watching more video in this [short] format than any other.”

Longer-format video is still in the planning stages for DFM, says Duran, pointing to the potential of live events, interviews with personalities, direct chats with readers, and more. It’s noteworthy that despite the success of video advertising, text-based sites still haven’t mastered greater quality production of greater scale and aren’t well-using third-party, “higher quality” video to satisfy ad needs.

Sales relationships

In an age of self-service, spawned by Google’s paid search products, the sales channel is still multi-tiered. Self-service works profoundly for some products, but telesales and in-person, feet-on-the-ground sales forces are finding new life.

Blame complexity. The choices advertisers now have are endless. Top-tier advertisers are served by such specialized teams as the FT’s “strategic sales” unit. The group works matches the complexity of FT’s analytics-fueled approaches to marketing with advertiser needs.

At the other end of the spectrum, the burgeoning marketing services business (“The newsonomics of selling Main Street”) is bringing these new approaches to smaller, local businesses. The Star Tribune’s Jeff Grilling, a major proponent of the marketing services business, has already learned some lessons from his company’s Radius marketing services foray.

“I’m finding more similarities than less, to our traditional sales approach. I’m finding that we are only as good as our sales people and the relationship they create, and that many small business customers have been approached by some sort of digital solutions vendor in the last few years. Make no mistake, there is no easy money in the SMB digital solutions business — it is very competitive and customers have are typically skeptical because of weak solutions they’ve experienced by other vendors in previous years. So if it’s a quick and easy revenue stream that a media company is looking for, I would look at options other than SMB digital solutions. I do still believe, however, that if your intention is to genuinely help local businesses grow, and you have the stomach for investment, strategy, execution, and patience, SMB digital solutions can be a viable product line.”

That tells you how long a haul this digital transition remains, and how many twists and turns even the innovators must endure.

Photo by NJR ZA used under a Creative Commons license.

May 23 2013

16:33

The newsonomics of value exchange and Google Surveys

whittier-daily-news-google-survey-paywall

What happens when a reader hits the paywall?

Only a small percentage slap their foreheads, say “Why didn’t I subscribe earlier?” and pay up. Most go away; some will come back next month when the meter resets. A few will then subscribe; others just go elsewhere.

So what if there were a way to capture some value from those non-subscribing paywall hitters — people who plainly have some affinity for a certain news site but aren’t willing to pay?

Welcome to the emerging world of value exchange. It’s not a new idea; value exchange has been used in the gaming world for a long time. As the Zyngas have figured out, only a small percentage of people will pay to play games. So they’ve long used interactive ads, quizzes, surveys, and more as ways to wring some revenue out of those non-payers.

It’s a variation on the an old saw that says much of life boils down to two things: money and time. It also brings to mind the classic Jack Benny radio routine, “Your Money or Your Life.” If people won’t pay for media with currency, many are willing to trade their time.

Now the idea is arriving at publishers’ doorsteps. It is being tested mainly, but not exclusively, as a paywall alternative. Yet, as we’ll see it, there may be many other innovative uses of time-based payment.

In part, this is part of the digital generational shift we might call “beyond the banner.” Static, smaller-display advertising is increasingly out of favor, with both prices and clickthrough rates moving deeper into the bargain basement. But marketers want to market, readers want to read, and viewers want to watch, so new methods that combine the marketing of brands and offers and the go-button on media consumption are au courant.

That’s where value exchange fits. Publishers are seeing double-digit, $10-$19 CPM rates from value exchange, and that’s more than many average for their online advertising. Annual revenues in the significant six figures are now flowing in to the companies that have gotten in early on the business.

The big player in publisher-oriented value exchange is Google Consumer Surveys (GCS), a year-old brainchild born out of the Google’s 20-percent-free-time-for-employees program (and first written about here at Nieman Lab). GCS now claims more than 200 publisher partners, including the L.A. Times, Bloomberg, and McClatchy properties. It says it has so far exposed some 500 million survey “prompts” to readers.

GCS will soon have more company in the value exchange game. Companies like Berlin-based SponsorPay, which offers interactive ad experiences in exchange for access mainly to games, is beginning to pursue publisher possibilities, both in Europe and the U.S, where half of its current clients are based. SponsorPay emphasizes mobile and social in its business.

L.A.-based SocialVibe, newly headed by hard-charging CEO Joe Marchese, is an ad tech company. It’s mainly oriented to non-newspaper media, especially TV companies.

How does this value exchange exactly work? Typical is the implementation at one smaller paper, the Whittier Daily News in the L.A. area., one of some 35 Digital First Media papers (both MediaNews and Journal Register brands) that have deployed GCS almost since its inception. Upon reading their 10th, and last, free metered article of the month, readers get a choice: buy a sub for 99 cents for the first month — or take a survey. “Do you own a cat?” for instance.

Publishers get a nickel for each completed response. Response rates tend to fall between 10 and 20 percent. “Completion rates” improve by targeting specific questions to specific audiences. The nickels add up.

For publishers, then, we have a new acronym: PAM, Paywall Alternative Monetization.

Consider the innovation a by-product of the paywall revolution. If you haven’t created a barrier to free access, you have less leverage to force wannabe readers to choose the lesser of two choices to proceed with their reading. Now, publishers can say, pay me for access with money — or with time. The time is short — measured in seconds or maybe minutes, depending on a video’s length or a survey’s questions.

What does the consumer get for answering a question? It varies. Respondents can get as little as a single “free” article, or an hour, or a day of access.

These programs can offer side-by-side offers. For instance, someone like a Press+ (which now powers some 380 newspaper sites) may power a subscription offer in one box, and Google Surveys or a SocialVibe can offer up an alternative in a neighboring one.

Digital First Media, long a public skeptic of paywalls, is using value exchange as an adjunct to its paywalls, many of which were deployed before DFM took over management of the MediaNews papers. While it is using it successfully as a paywall alternative, says Digital First Ventures managing director Arturo Duran, it’s also finding a couple of other ways to wring money out of surveys.

At many of its digital properties, including The Denver Post, its photo- and video-heavy Media Center hub offers Google surveys as speed bumps for continued access. Readers perceive value; enough of them are willing to pay with a few seconds of time to keep getting access to visuals. Similarly, Boston.com’s The Big Picture “news stories in photographs” uses GCS.

This approach, putting up a speed bump — in the form of a survey — instead of paywall explores the nuances of differing consumer valuation of differing parts of news sites. The Texas Tribune has offered a similar approach, having used Google surveys on its extensive data section. How often a survey is deployed can be adjusted by the publisher, working with Google, to maximize both revenue and reduce traffic lost. The search here is for the magic sweet spots.

The Christian Science Monitor is also an earlier surveys adopter. “We don’t have a paywall,” says online director David Clark Scott. “So we tried an experimental speed bump.” Those bumps were installed first on a single section, and now have grown, popping up on much of the site. One CSM twist: If you come to the site directly, you won’t see the surveys. If you come via some search, social, or other referrals, you will.

Digital First is also testing survey deployment for a group notoriously hard for the news industry to monetize: international readers. “We can’t sell [ads] in Kenya, Japan, and India,” says Duran. Instead of fetching bottom-of-the-ad-network prices, as low as 25 cents, surveys can return money in the whole dollars. One lesson so far: “It’s a much better experience than an ad,” for many readers, says Duran.

Publishers are also finding other ways to get readers to “pay.” At the Newton (Iowa) Daily News, the paywall also provides these two alternatives: answer a survey question or a share an article (via Twitter, Facebook, or Google+) in exchange for continued passage.

“It wasn’t about market research at all — it was about trading time for content,” says Paul McDonald, head of Google Consumer Surveys. McDonald, who developed the product along with engineer Brett Slatkin, says they tested out what people would most likely be willing to do, in exchange for some good. They tested a million impressions at The Huffington Post and found that question-answering was the most likable activity. Hence, Google Consumer Surveys.

“Most research is stuck in old ways — paper, email, and phone. It’s a stagnant industry, ” McDonald says. The industry, of course, has responded, offering its own critique of GCS’ rapid-fire — surveys can be commissioned and deployed within a day, with complete results, broken down by customized demographics (at an extra cost to survey buyers) within 48 hours — disruption of the market survey space. Still, industry reaction is more than mixed, with the positives of Google’s new technique winning adherents among bigger brands and smaller businesses. It’s a self-service buying technique, borrowing from Google’s flagship AdWords model.

Interestingly, Google itself is using Surveys to obtain consumer insight. Yes, the company that derives more data from our clicks than anyone still finds asking a human being a question can yield unexpected learning — which, of course, can be combined with clickstream analytics. YouTube is among the many GCS deployers.

It’s a new frontier, and one that I think offers a number of curious potentials.

  • At scale, if there is scale to the business, it’s about significant new sources of revenue.
  • As a paywall alternative, it may be a detour that leads back to the road to subscription. If a reader is engaged enough with a news brand over time — kept engaged in part through value exchange — maybe he or she will eventually subscribe. Does a value exchange-using customer have a higher likelihood of subscribing in the future? It’s too early to know, but we may have soon have sufficient data to see.
  • Value exchange could expand the ability to gain customer data. Each time someone trades some time for reading, she or he could be asked for an additional piece of profiling information. Essentially “registered,” that new customer becomes more targetable for subscription offers or advertising.
  • We can start to widen the idea of trading time for access. Remember the idea of the “reverse paywall,” espoused by then-Washington Post managing editor Raju Narisetti and Jeff Jarvis? Spend enough time with a news product, and get rewarded, they proposed. Value exchange begins to structure that kind of relationship, providing value both to readers and publishers. Rough equalization of value would be a painful process, but it may be doable through much experimentation.
  • Let’s combine two things: the rise of mobile traffic and value exchange. Mobile may not be ad-friendly, but customers might be far more willing to watch a video or touch through a quick questionnaire on a cell phone — and that can ring a different key on the digital cash register. “Mobile is already more diversified,” says SponsorPay CEO Andreas Bodczek, explaining that it is moving beyond gaming companies for value exchange and will soon include publishers.
  • GCS is an easily deployable tool for small- and medium-sized businesses. As such, it could be an interesting add-on for publishers’ emerging marketing services businesses (“The newsonomics of selling Main Street”). That’s a line Google could allow newspaper companies to resell, just as many resell Google paid search.

April 09 2013

12:25

September 05 2012

18:04

Journal Register Co. declares bankruptcy…again: Is this the industry’s first real reboot?

It was just three years ago that the Journal Register Co. filed for bankruptcy, its collection of small local newspapers hit hard by the economic crisis and the secular decline of the newspaper industry.

But it came out of bankruptcy in only six months, and the changes started coming quickly: bringing in John Paton as CEO, committing to growing digital revenue, hiring away top talent, experimenting with open-source software and open-to-the-community newsrooms…it’s been hard to keep up with its one-new-initiative-a-week pace. They’ve been on the move, in a way that frankly hasn’t been the norm in the American newspaper business.

Through it all, Paton emerged as the industry’s most vocal cheerleader for a digital-first culture — and that was even before “digital first” went from a mantra to the name of a new parent company that would also run the much larger MediaNews chain of newspapers. JRC reported digital revenue growth as strong or stronger than their peers and seemed to be making good progress towards a company-wide culture change.

So today, JRC announced…it was declaring bankruptcy again. Here’s Paton:

The Company exited the 2009 restructuring with approximately $225 million in debt and with a legacy cost structure, which includes leases, defined benefit pensions and other liabilities that are now unsustainable and threaten the Company’s efforts for a successful digital transformation.

From 2009 through 2011, digital revenue grew 235% and digital audience more than doubled at Journal Register Company. So far this year, digital revenue is up 32.5%. Expenses by year’s end will be down more than 9.7% compared to 2009.

At the same time, as total expenses were down overall, the Company has invested heavily in digital with digital expenses up 151% since 2009. Journal Register Company has and will continue to invest in the future.

Journal Register expects to emerge from bankruptcy in around 90 days; operations will continue uninterrupted during the process.

Since JRC is as watched as any newspaper company outside The New York Times Co., here are three quick thoughts on today’s move, based on Paton’s post, the company’s press release, and our previous reporting.

I. Room for further consolidation?

JRC is owned by Alden Global Capital, a hedge fund that has investments across much of the publicly traded U.S. newspaper industry. Those investments, combined with its merger-without-merging with MediaNews last year, has led some, like our own Martin Langeveld, to posit that Alden is pushing for a major consolidation of the newspaper industry.

It’s easy to imagine how some of JRC’s recent moves — like its outsourcing of national business news and its chain-wide aggregation project Project Thunderdome — could scale well across a broader swath of the industry.

JRC will apparently enter bankruptcy with a buyer at the ready — something called 21st CMH Acquisition Co., “an affiliate of funds managed by Alden Global Capital LLC,” which has submitted a signed stalking horse bid. So it appears that, in the end, Alden will still be in control, with Paton continuing as CEO.

(I’m not sure how much to read into the creation of something called an acquisition company — is it just to acquire JRC, or is it a staging area for further acquisitions and consolidation, a sort of decades-later echo to what Gannett did buying up family-owned papers? Does 21st CMH stand for “21st Century Media Holdings”? Just a guess.)

Newspaper valuations have for the most part stopped plummeting — if only because there’s only so far for a still-profit-making company to fall. (Year-to-date, some are actually up in stock price: The New York Times Co. is up 21.5 percent, Gannett’s 13.5 percent.) But it’s reasonable to think there are still any number of companies that would be happy to find an exit to scale. By re-buying, in effect, a slimmed-down JRC, Alden seems to be showing it’s still interested in that model.

(Although it’s more than a little crappy that JRC’s employee FAQ says decisions about everyone’s job status will be “made by the ultimate purchaser” — when that ultimate purchaser is apparently just another arm of the current owner. It’s theoretically possible that, at a bankruptcy auction, someone could outbid Alden for JRC, but it seems highly unlikely; Alden’s one of the few folks wanting to put money into newspapers rather than pull it out.)

II. A second shot at shaving debt

It’s worth noting that Paton didn’t become CEO until after the last bankruptcy was concluded. (Paton joined JRC’s board in August 2009 when the company came out of bankruptcy; he became CEO in early 2010.) Paton is arguing now that the terms of the previous bankruptcy were built on higher hopes for print than has since proven justified — that the company didn’t shave enough off its debt and contractual obligations to hack it in today’s business.

We’re on the right track with digital revenue, he’s saying, but we’re still handcuffed by fiscal decisions made from a print-is-healthy mindset:

All of the digital initiatives and expense efforts are consistent with the Company’s Digital First strategy and while the Journal Register Company cannot afford to halt its investments in its digital future it can now no longer afford the legacy obligations incurred in the past.

Many of those obligations, such as leases, were entered into in the past when revenues, at their peak, were nearly twice as big as they are today and are no longer sustainable. Revenues in 2005 were about two times bigger than projected 2012 revenues. Defined Benefit Pension underfunding liabilities have grown 52% since 2009.

Timing is, truly, everything. The newspaper companies that made terrible-in-hindsight decisions to bet on print at peak valuations — McClatchy buying Knight Ridder, for instance — were stuck with crippling debt obligations. But if you just stuck around long enough, that major metro that cost $562 million in 2006 could be had for $55 million in 2012. Alden, as a fund, focuses on distressed assets, those available at market values below their true value. (You can see why they’d be interested in newspapers.)

JRC seems to suffer from an analogous problem: It went through its bankruptcy at a time when some executives still thought the downturn was cyclical and not permanent. That left it with obligations that likely can’t be sustainable in the primarily-digital-revenue model Paton is building toward. One imagines that Paton won’t make that same mistake this go-round. (Sister company MediaNews already had its strategic, debt-trimming bankruptcy.)

That’s little comfort if you’re owed a share of those pension benefits now deemed “no longer sustainable,” of course. But the reality is that most newspaper companies are still not close to a footing that’s sustainable for the long term. Anyone who thought the cuts were over is going to be disappointed for, at a minimum, several more years.

III. It’s put-up-or-shut-up time

Paton’s been the industry’s most effective evangelist for a digital future. (It helps that he took over a newspaper chain not known for quality or tradition beforehand; he has a free hand that Arthur Sulzberger or Don Graham don’t to do deep institutional surgery.) JRC and Digital First have been great at putting forward an innovative face, from its heavy-hitter advisory board to small demonstration projects (Ben Franklin Project) and more substantial rethinkings of workflows (Project Thunderdome).

And they’ve done so in a way that is both open (they’re happy to tell you about the amazing things they’re doing) and closed (not reporting financial results, as publicly traded companies must).

But it’s been harder to be certain how Paton’s optimism has translated into results. Digital revenues are growing, but from an unspectacular base. Many of the company’s initiatives seem, while interesting, unlikely to move the revenue needle much. Print revenues are a problem, just as they are at its peers. Today’s release illustrates that JRC hasn’t yet found the magic formula.

But could Paton’s plan be a model for the local and regional newspaper industry as a whole, as some have dearly hoped?

Paton now will have his chance to prove it. In around 90 days, he’ll have had his chance to shed the costs he wants to shed. No longer will “we were built for print” be a good excuse; if two bankruptcies can’t clear out all those cobwebs, I’m not sure what could. “Digital first” will move from a slogan to a corporate name to a foundation of the company’s business structure.

The newspaper industry’s problem today is not that its leaders don’t know how to make money in media. Lots and lots of money still flows through newspaper offices every day. It’s that they can no longer make that money at the scale they could 10 years ago — but their cost structures are still tied to that old scale. That’s why the past half-decade has been a seemingly endless string of layoffs and cutbacks, shaving dollars and people to keep up with revenue declines, while still being stuck in a fundamentally print-driven structure.

Meanwhile, as newspapers were busy writing press releases about layoffs, their nimble online-native competitors have been able to start from a blank sheet of paper and build for a digital scale of revenue.

This bankruptcy will allow JRC to have get the closest thing the newspaper business has seen to a true reboot.

Now all Paton has to do is deliver.

August 10 2012

15:53

August 02 2012

15:53

December 21 2011

18:00

Steve Buttry: From a dropped paywall to a social media Pulitzer, expect a year of transformation

Editor’s Note: We’re wrapping up 2011 by asking some of the smartest people in journalism what the new year will bring.

Next up is longtime digital journalist Steve Buttry, the director of community engagement and social media at the Journal Register Co. & Digital First Media.

We will see more newspaper-company transactions in 2012. After a few years where no one wanted to sell at the price the market had dropped to, we’ve had Journal Register Co., the Oklahoman, the San Diego Union-Tribune, and the Omaha World-Herald (am I forgetting one?) sell in the second half of 2011. I believe those sales have helped set the market value, and some people who were refusing to sell will swallow their losses and get out of the newspaper business.

In the transactions mentioned above, people with sufficient wealth appear to have bought the companies outright, taking on little or no debt. (Take the World-Herald, which was bought by the ultimate rich person, Warren Buffett, at the helm of the ultimate public company, Berkshire Hathaway.) I believe we’ll see more transactions involving publicly held companies in 2012. We may also see more creative transactions that fall short of a sale, such as the Journal Register Co./Digital First Media deal to manage MediaNews Group.

I think Google+ will add a new feature (probably more than one, but one will get all the attention) that will make more of a splash than the initial launch of G+ did.

At least one Pulitzer Prize winner (most likely Breaking News Reporting) will have used Twitter and/or Facebook significantly in its coverage and its entry, and the social media use will be cited by the judges (or their refusal to cite it will be glaring).

The winner of the 2012 presidential election will work harder on reaching voters through social media than through the professional media.

Gene Weingarten will write a disapproving column about the changing news business that is funny but dead wrong. (After last year, I had to throw in one sure thing.)

Those are third-person predictions about what other people/companies will do. This last new prediction should carry the disclaimer of obvious self-interest, since I am leading community engagement and social media efforts for the company — but I am confident that Digital First Media will continue to lead the way in transforming the digital news business.

Beyond that, I will re-offer last year’s predictions, since they largely didn’t happen in 2011 (I suppose I can claim #newnewtwitter as being partial fulfillment, though it doesn’t include the features I mentioned):

  • Twitter will make some notable upgrades, including targeting and editing of tweets, historical searching, and some innovative commercial uses.
  • A leader will emerge in location-based news, social media, and commerce.
  • We will see some major realignment of journalism and news-industry organizations. Most likely: the merger of ASNE and APME, mergers of some state press associations, mergers of at least two national press organizations, and mergers of some reporter-beat associations. One or more journalism organizations will close.
  • At least one high-profile news organization will drop its paywall.
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