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May 15 2013

12:20

The newsonomics of where NewsRight went wrong

newsright-wide

Quietly, very quietly, NewsRight — once touted as the American newspaper industry’s bid to protect its content and make more money from it — has closed its doors.

Yesterday, it conducted a concluding board meeting, aimed at tying up loose ends. That meeting follows the issuing of a put-your-best-face-on-it press release two weeks ago. Though the news has been out there, hardly a whimper was heard.

Why?

Chalk it up, first, to how few people are really still covering the $38.6 billion U.S. newspaper industry. Then add in the fact that the world is changing rapidly. Piracy protection has declined as a top publisher concern. Google’s snippetization of the news universe is bothersome, but less of a central issue. The declining relative value of the desktop web — where NewsRight was primarily aimed — in the mobile age played a part. Non-industry-owned players like NewsCred (“The newsonomics of recycling journalism”) have been born, offering publishers revenue streams similar to those that NewsRight itself was intended to create.

Further, new ways to value news content — through all-access subscriptions and app-based delivery, content marketing, marketing services, innovative niching and more — have all emerged in the last couple of years.

Put a positive spin on it, and the U.S. newspaper industry is looking forward, rather than backward, as it seeks to find new ways to grow reader and ad revenues.

That’s all true. But it’s also instructive to consider the failure of NewsRight.

It’s easy to deride it as NewsWrong. It’s one of those enterprises that may just have been born under a bad sign. Instead of the stars converging, they collided.

NewsRight emerged as an Associated Press incubator project. If you recall the old AP News Registry and its “beacon,” NewsRight became its next iteration. It was intended to track news content as it traversed the web, detecting piracy along the way (“Remember the beacon”). It was an ambitious databasing project, at its peak taking in feeds from more than 900 news sites. The idea: create the largest database of current news content in the country, both categorized by topic and increasingly trackable as it was used (or misused) on the web.

AP initially incentivized member newspapers to contribute to the News Registry by discounting some of their annual fees. Then a bigger initiative emerged, first called the News Licensing Group (NLG). The strategy: harness the power of the growing registry to better monetize newspaper content through smart licensing.

NLG grew into a separate company, with AP contributing the registry’s intellectual property and becoming one of 29 partners. The other 28: U.S. daily newspaper companies and the leading European newspaper and magazine publisher Axel Springer. Those partners collectively committed more than $20 million — though they ended up spending only something more than half of that before locking up the premises.

Renamed NewsRight, it was an industry consortium, and here a truism applies: It’s tougher for a consortium — as much aimed at defense than offense — to innovate and adjust quickly. Or, to put it in vaudevillian terms: Dying is easy — making decisions among 29 newspaper companies can be torture.

It formally launched just more than a year ago, in January 2012 (“NewsRight’s potential: New content packages, niche audiences, and revenue”), and the issues surfaced immediately. Let’s count the top three:

  • Its strategy was muddled. Was it primarily a content-protection play, bent on challenging piracy and misuse? Or was it a way to license one of the largest collections of categorized news content? Which way did it want to go? Instead of deciding between the two, it straddled both.
  • In May 2011, seven months before the launch, the board had picked TV veteran David Westin as its first CEO. Formerly head of ABC News, he seemed an odd fit from the beginning. A TV guy in a text world. An analog guy in a digital world. Then friction between Westin and those who had hired him — including then-AP CEO Tom Curley — only complicated the strategic indecision. Westin was let go in July, which I noted then, was the beginning of the end.
  • Publishers’ own interests were too tough to balance with the common good. Though both The New York Times Company and AP were owners, it was problematic to include feeds of the Times and AP in the main NewsRight “catalog.” The partners tried to find prices suitable for the high-value national content (including the Times and AP) and the somewhat lesser-valued regional content, but that exercise proved difficult, the difficulty of execution exacerbated by anti-trust laws. Potential customers, of course, wanted the Times and AP as part of any deal, so dealmaking was hampered.

Further, all publishers take in steady revenue streams — collectively in the tens of millions — from enterprise licensors, like LexisNexis, Factiva, and Thomson Reuters, as well as education and copyright markets. NewsRight’s owners (the newspaper companies) didn’t want NewsRight to get in the way of those revenue streams — and those were the only licensing streams that had proven lucrative over time.

Long story short, NewsRight was hobbled from the beginning, and in its brief life, was able to announce only two significant customer, Moreover and Cision, and several smaller ones.

How could it have been so difficult?

It’s understandable on one level. Publishers have seethed with rage as they’ve seen their substantial investment in newsrooms harvested — for nothing — by many aggregators from Google to the tens of thousands of websites that actually steal full-text content. Those sites all monetize the content with advertising, and, save a few licensing agreements (notably with AP itself), they share little in the way of ad revenue.

But rage — whether seething or public — isn’t a business model.

Anti-piracy, itself, has also proven not to be much of a business model. Witness the tribulations of Attributor, an AP-invested-in content-tracking service that used some pretty good technology to track pirated content. It couldn’t get the big ad providers to act on piracy, though. Last year, after pointing its business in the direction of book industry digital rights management, it was sold for a meager $5.6 million to Digimarc.

So if anti-piracy couldn’t wasn’t much of a business model, then the question turned to who would pay to license NewsRight’s feed of all that content, or subsets of it?

Given that owner-publishers wanted to protect their existing licensing streams, NewsRight turned its sights to an area that had not well-monetized: media monitoring.

Media monitoring is a storied field. When I did content syndication for Knight Ridder at the turn of the century, I was lucky enough to visit Burrelles (now BurrellesLuce) in Livingston, New Jersey. In addition to a great auto tour of Tony Soprano country, I got to visit the company in the midst of transition.

In one office, older men with actual green eyeshades meticulously clipped periodicals (with scissors), monitoring company mentions in the press. The company then took the clips and mailed them. That’s a business that sustained many a press agent for many a decade: “Look, see the press we got ya!”

In Burrelles’ back rooms, the new digital monitoring of press mention was beginning to take form. Today, media monitoring is a good, if mature, industry segment, dominated by companies like Cision, BurrellesLuce, and Vocus, as social media monitoring and sentiment analysis both widen and complicate the field. Figure there are more than a hundred media monitoring companies of note.

Yet even within the relatively slim segment of the media monitoring space, NewsRight couldn’t get enough traction fast enough. Its ability to grow revenues there — and then to pivot into newer areas like mobile aggregation and content marketing — ran into the frustrations of the owner-newspapers. So they pulled the plug, spending less than they had actually committed. They decided to cut their losses, and move on.

Moving on meant making NewsRight’s last deal. The company — which has let go its fewer than 10 employees — announced that it had “joined forces” with BurrellesLuce and Moreover. It’s a face-saver — and maybe more.

Those two companies will try to extend media monitoring contracts for newspaper companies. BurrellesLuce (handling licensing and aggregation) and Moreover (handling billing and tracking) will make content available under the NewsRight name. The partnership’s new CAP (Compliant Article Program) seeks to further contracting for digital media monitoring rights, a murky legal area. If CAP works, publishers, Moreover, and BurrellesLuce will share in the new revenue.

What about NewsRight’s anti-piracy mandate? That advocacy position transitions over to the Newspaper Association of America.

NAA is itself in the process of being restyled into a new industry hub (with its merger and more) under new CEO Caroline Little. “As both guardian and evangelist for the newspaper industry, the NAA feels a tremendous responsibility to protect original content generated by its members,” noted Little in the NewsRight release.

What about the 1,000-title content database, the former AP registry that had formed the nucleus of NewsRight? It’s in limbo, and isn’t part of the BurrellesLuce/Moreover turnover. Its categorization technology has had stumbles and overall the system needs an upgrade.

There’s a big irony here.

In 2013, we’re seeing more innovative use of news content than we have in a long time. From NewsCred’s innovative aggregation model to Flipboard’s DIY news magazines, from new content marketing initiatives at The New York Times, Washington Post, Buzzfeed, and Forbes to regional agency businesses like The Dallas Morning News’ Speakeasy, there are many new ways news content is being monetized.

We’re really in the midst of a new content re-evaluation. No one makes the mistake this time around of calling news content king, but its value is being reproven amid these fledgling strategies.

Maybe the advent of a NewsCred — which plainly better understood and better built technology to value a new kind of content aggregation — makes NewsRight redundant. That’s in a sense what the partners decided: let the staffs of BurrellesLuce and Moreover and smarts of the NewsCreds make sense of whatever newer licensing markets are out there. Let them give the would-be buyers what they want: a licensing process to be as simple as it can be. One-stop, one-click, or as close as you can manage to that. While the disbanding of NewsRight seems to take the news industry in the opposite, more atomized, direction, in one way, it may be the third-party players who succeed here.

So is it that NewsRight is ending with a whimper, or maybe a sigh of relief? Both, plainly. It’s telling that no one at NewsRight was either willing or able to talk about the shutdown.

Thumbs down to content consortia. Thumbs up to letting the freer market of entrepreneurs make sense of the content landscape, with publishers getting paid something for what the companies still know how to do: produce highly valued content.

January 27 2011

16:00

The Newsonomics of do-over

Editor’s Note: Each week, Ken Doctor — author of Newsonomics and longtime watcher of the business side of digital news — writes about the economics of news for the Lab.

You remember do-overs from your childhood, right? On the playground, something went awry in a game, and you just called do-over: Reset the game, reset the clock. It’s one convenience of childhood that seldom makes it way into adult life. Yet that’s just what newspaper company owners are hoping to do in 2011. I thought of calling this post “The Newsonomics of inflection point,” but that seems too high-minded. Do-over is more apt to the emotions undergirding decision-making in early 2011.

Tuesday, in speaking to a group at USC’s Annenberg School of Communication, one graduate student heard my description of the paid-content landscape and asked a great, simple question: “I don’t understand why now, after news being free all these years, publishers now want to be paid for it. Why now?”

Indeed. Why now?

There are two reasons, I think. One’s economic, and it first got big, public voice at the Newspaper Association of America session in San Diego, two years ago this month. There Rupert Murdoch and Dean Singleton laid down the gauntlet: Google was stealing content, and readers needed to start paying. It was a public expression — pushed to the forefront by the deep recession — of what had become a private realization; the exchange rate of print ad dollars for digital ad dimes didn’t seem likely to change. Simply, there wasn’t — as far as the eye could see — enough money in digital advertising to sustain large news enterprises, long-term. The other reason is emotional: What we do is valuable, so people should pay for it — though as the grad student pointed out, most of the reader payment has gone to paper and distribution costs, not to feeding journalists.

If 2009 was a period of emotional as well as economic depression for those in the industry, 2010 was one of simmering hope, which the glimmer of tablet emergence stoked. Now, in 2011, we’ve got a convergence of factors beginning to create a new sense of where traditional news publishing may go. They may, collectively, provide an inflection point, a point at which the news industry sees itself differently and consumers are suddenly confronted by numerous paying choices. Together, these factors offer a newsonomics of do-over, the ability to unwind what many call the original sin of giving away news content for free, and creating a new business model for how news is distributed and paid for.

There are four factors that have pushed us to this point, in early 2011:

  • Tablets certify the mobile, news-anywhere era: Until recently, if you asked publishers what business they were in, they’d tell you the newspaper business — and online. It’s been a two-part business, anchored in print (still 85 percent of all revenues) and moving at glacial speed “online,” meaning desktop/laptop. The smartphone began to change that mindset, but hasn’t produced significant new revenue for news publishers, even though they’ve made efforts to create some smartphone products. It’s been the emergence of the tablet, with its promise of real new revenue, that certifies what I’ve called the News Anywhere model. Arthur Sulzberger’s outlining of that manifesto Sunday at the Digital Life Design conference in Munich is as good a statement of it as any: “Wherever people want us, we must be there. That’s our commitment to be there on the devices, including paper — paper’s fine — devices and paper for as long as people want.” Now all news publishers, some pushing forward at warp speed, others being pulled along, are moving into a true multi-platform world.
  • A metering system that says you can have your cake and eat it, too: It’s not a paywall, it’s a hurdle, says Journalism Online. Set the hurdle at 10 or 20 pageviews a month, and 80 percent or so of your visitors will never even see it. Capture half the rest of those frequent visitors, and you’re started a new digital reader stream. And, by the way, if you do it right, your digital ad revenue can keep on growing — that’s your own major hope for any ad growth at all — because your traffic won’t decrease by any more than 10 percent. In a nutshell, that’s The New York Times’ strategy, as well.
  • Apple’s push and shove: Unannounced, publishers are moving forward with what Apple has told them. Apple is pushing them to align their web access strategy with their tablet strategy, saying if you want to retain direct customer relationship and revenue, you can’t offer all this stuff for free on the desktop and just charge for the tablet. That’s the push, and the strategy is shoving publishers, both salivating for tablet revenue and afraid that the tablet will hasten print readership decline one way or the other, to align their access strategies, from print to desktop to smartphone to tablet. That’s all-access, and it’s coming to be the prevailing industry model.
  • The rise of public equity: PE owners, as evidenced by their rising influence at MediaNews, are now pushing their publishing enterprises to innovate faster, embrace mobile, and get busy with new revenue streams. The all-access, news-anywhere model is a natural for them as well, offering the potential of enough new money to build new companies of sustainable profitability — and that’s their only ticket to cash out by 2015.

Put it altogether, and the do-over looks eminently reasonable.

Yet it’s no slam dunk, and we’ve got to wonder how the theory will play out in practice. The tests are now coming fast and furious. The Wall Street Journal has switched to multi-platform, all-access pricing recently. The New York Times will do the same soon, adding its meter. News Corp.’s The Daily tests out consumer willingness to pay for a new, native news product, while Ongo seems to have stumbled out of the gate with an underwhelming presentation and too small — and haphazard — a list of initial news suppliers as it asks news consumers for $84 a year. The Dallas Morning News will lead U.S. metros into this new world. Journalism Online will power a good five to six dozen newspaper sites — most are metered, most getting ready for the tablet — by mid-year, as well.

Though it all makes good economic sense to the industry, some — how many? — consumers find work-arounds more appealing than publishers expect. As daily publishers have cut back and back, we’ve seen an explosion of new news content, from top-drawer regional startups to hundreds of native hyperlocals and Patches to great niche sports sites and more entertainment and lifestyle feature content (hello, Demand Media IPO!) than anyone can stomach. There’s lots of free news content still out there, and planning to be out there, from the Reuters and Washington Posts to the GlobalPosts and BBCs and U.S. public radio stations/websites. It will be fascinating to see how the non-paywall news suppliers organize themselves — consortiums are in discussion — to offer alternatives to this very do-over strategy.

December 16 2010

15:00

The Newsonomics of all-access — and Apple

[Each week, our friend Ken Doctor — author of Newsonomics and longtime watcher of the business side of digital news — writes about the economics of the news business for the Lab.]

Don’t wait for the white smoke to waft over America’s tech consumer Vatican, the Cupertino headquarters of Apple. The electronic elves are too busy shipping Christmas iPads, and figuring stock-option payouts based on 2011-12 sales projections. Those projections, newly minted by eMarketer, call for another 50 million iPads to be sold in the U.S. alone over the next two years, atop the eight million they think will sell by year’s end. (Other manufacturers would only sell another 20 million tablets in the U.S. over the same period.)

The white smoke? That would be the signal to news and magazine publishers of how Apple is going to allow access to the tablet kingdom. We’ve seen lots of debate, quasi-information, and mixed signals out of Apple about how digital subscriptions will work, including who will keep which revenue and who will partake of user data, the new digital gold. Apple execs talk regularly to publishers, under threat of severe NDA. Those discussions and the back and forth of dealing with Apple on how apps must be configured to get approved are described as an exercise in Kremlinology — trying to divine how things are really working and will work, without actually being told.

After talking with numerous people in and around the tablet/apps industry, I think we can divine the 2011 policy and clear away the smoke and mirrors. Simply put, this is what the de facto Apple policy on digital news subscriptions appears to be:

  • Publishers can charge their digital readers for tablet — and smartphone — subscriptions, and keep the generated revenue stream.
  • Publishers can offer “free” apps in the Apple store — iTunes for now, iNewsstand maybe not too far away.
  • Publishers must — and here’s the rub — restrict browser access is some form. In other words, you can’t simply charge for digital content on the tablet and the smartphone and let it run freely wild through a browser. The pay models may not have to be the same, tablet to smartphone to browser (that’s unclear), but publishers can’t two use two opposite approaches and use the iTunes stores an initial access point to gain customers and keep all the resulting revenue.
  • Publishers must do their own authentication of users and their own e-commerce outside the Apple interface, to make the program work.

Importantly, numerous news players are acting on the belief that the above will be the policy, given their conversations with Apple. If that seemingly de facto policy becomes formal — with the announcement of the iPad 2? — it will have far-reaching implications. In fact, it gives a rocket boost to the “paid content” (meaning new streams of digital reader revenue) revolution now in front of us. Why? It marks the convergence — maybe the ratification — of three big things happening as we enter 2011. Put them together, and you have the Newsonomics of all-access.

Number one: The tablet. It’s a reader’s product, and therefore a news publishers’ dream. Longer session times. Longer reading forms embraced. A greater willingness among consumers to pay. Print-like advertising experiences — and rates. All of those results, reported privately by the big news companies that are first to market with tablet products and also in a user survey just released by the University of Missouri’s Reynolds Journalism Institute here, are preliminary. (More on the recent Roger Fidler-led Digital Publishing Alliance conference, at which I spoke, here.)

As the iPad moves from Apple lovers to mass market, those numbers should moderate. Yet the very nature of the tablet is telling us that digital news reading isn’t what we thought it was — only a Kibbles ‘n Bits, check-in-on-the-briefs-and-scoot reading experience. It looks like a lot of what we thought were huge changes in news reading behavior may have had as much to do with what the nature of a computer (desktop, laptop) reading experience, and not with a change in the nature of humans themselves. We’ll see, but meanwhile, it looks like a good fifth of the country will have a tablet by 2014.

Number two: That paid content push. 2010 has been prologue, as The New York Times took the year to lay extensive plans, connecting pivotal technology, and Journalism Online traversed the country (and lately other continents) preaching from the pulpit of the Holy Church of Freemium and the practice of metering. Don’t erect a paywall, like News Corp. did in London with the Times; start the meter, track it, and charge accordingly. That’s the Financial Times model, and the one The New York Times and Journalism Online cite as a bible, along with learnings from The Wall Street Journal’s freemium experience, a pivotal education for JO principal Gordon Crovitz, who served as WSJ publisher. The digital reader revenue payment was born out of abject frustration, as publishers concluded that digital advertising itself would never support the large news enterprises they wanted to maintain. They were tired of unicycling into the future; digital reader revenue restores the “circulation” leg of the business, providing (in the abstract) two strong legs to stand out going forward.

Number three: The arrival — finally, o Lord — of the news-anywhere, multi-platform, multi-device world that we’ve been envisioning for more than a decade. For more than a decade, it was a print/online world, in the minds of publishers. Now it’s a print/online (desktop, laptop), smartphone, tablet — and soon Apple TV for news — world. That changes everything in how product is thought out, created, presented and sold.

Put these three phenomena together — a multi-platform world in which the tablet becomes a prime part of daily news reading, reading that will be partly charged for — and you have the shiny new business model of 2011: all-access. I’ve written about all-access and exhorted those publishers with high-quality, differentiated news products to embrace it (see The Newsonomics of the fading 80/20 rule, on Time Warner moves). Now, the forces of the times seem to have conspired to bring it forward and make it dominant.

No, there has been no announcement of a warm all-access embrace, but consider:

  • It’s the model used by the paid-content champ FT (“The Newsonomics of FT as an Internet Retailer“) and The Economist.
  • It’s the model just embraced, without fanfare, by The Wall Street Journal, which had throughout the year priced each new digital platform separately. In its recent announcement of an Android tablet product, it said: “A full digital subscription is available for $3.99 per week, which provides access to WSJ Tablet Edition for Android and iPad, WSJ.com, and WSJ Mobile Reader for BlackBerry and iPhone. Current Journal subscribers receive full access to the WSJ Tablet Edition for free for a limited time.”
  • The New York Times model will follow the same across-platform approach when it launches metered pricing early next year.
  • And, it’s not just the big guys. Take Morris’ Augusta Chronicle, a new Journalism Online customer, which just went metered– and all-access, including its upcoming tablet product in the subscription bundle. Expect to see other Journalism Online customers — a few dozen to start — follow this model next year, along with a number of other dailies that tell me they are planning a similar approach.

The big idea? Cement the relationship with those readers who really want your news, delivered by your brand, global, national or local. Say simply: We’ll make it easy for you to read the news however, wherever, on whatever you want and offer it at a single bundled price. Expect three basic offers: Everything (Print + all digital forms), Print Only and the Digital Bundle (probably including the odd cousin of the digital group, the e-edition), plus some by-the-device (iPhone, iPad, Blackberry, etc.) pricing. It’s certainly not a news-only idea, as Netflix, HBO, and Comcast build out the same model.

It’s a tablet-fed, Apple-polished tablet do-over, and for many news publishers, really a do-or-die effort to reassert brand and product value, reassembling a new business model and building what will sooner-than-later be a digital-mainly business. Will they succeed? Some — those with substantial product offerings that are not commoditized — who move the meter dials smartly, picking off the top five percent or so of their mostly digital visitors for payment will. In a twist on the now-legendary Jarvisism: Charge the best. Market ads to the rest. (And don’t scare them off with a paywall.) Other legacy publishers have cut too much to make the new math work, and still other newer publishers will find all-access works for them as well.

There are many more twists, turns, issues — many of them requiring technology lacking among many publishers — and obstacles yet to work through, but we’ll get to those into the new year. Apple’s own role certainly won’t be to remove itself from the new equation, but to find numerous ways — iAds anyone? — to harvest value.

For now, consider all-access the model to be tested in 2011.

October 19 2010

14:00

NAA finds a more favorable website stats vendor — but misses the readership shift to mobile news

When last we checked on the Newspaper Association of America’s web stats (and other data) back in April, the monthly website usage information that the nation’s daily newspaper organization was publishing came from Nielsen Online, and it wasn’t all that pretty.

The NAA tried to put the best spin on the data, but as we pointed out at the time, time spent at newspaper sites was in the doldrums and getting gradually worse, with three of the seven shortest attention spans measured by Nielsen occuring in the first quarter of 2010: 34:10 minutes in January, 31:39 minutes in February, and 32:21 minutes in March. For context, consider that at the time, also according to Nielsen, the average Facebook user was spending nearly seven hours on the social networking site.

It looks like NAA was not happy with those first quarter web stats. It published April data from Nielsen but offered no further updates for four months. At that point, I inquired whether NAA had decided to stop publishing the data, and was informed by Jeff Sigmund, director of communications, that “a new methodology” was in the works.

The new methodology turns out be be Comscore. Last Thursday, NAA posted Comscore data for September, and simultaneously wiped all the old Nielsen data off its site. The reason for the switch is clear: Comscore’s results are more favorable to newspapers than Nielsen’s in several categories, as trumpeted in an NAA press release.

As part of the switch, Comscore provides NAA with data specific demographic slices, something it didn’t get from Nielsen. For example, it reports: “More than 55 percent of adults in the 25-to-34-year-old demographic visited a newspaper website in September. During that same time period, 52 percent of this age group visited Yahoo! News Network, 22 percent visited CNN and 24 percent visited MSNBC.” We’d love to drill a little deeper there, but that particular comparison seems to suggest that, with no real statistical difference between Yahoo News and the entire newspaper business in reach among 25-to-34-year-olds, Yahoo offers a vastly more efficient one-stop ad buy than newspapers do.

Similarly, NAA says Comscore found that “one-in-four (25 percent) of adult newspaper website visitors come from households earning at least $100,000 a year, compared to 21 percent of all adult Internet users.” News consumption and newspaper readership have always skewed a bit toward higher income strata, so that’s not surprising — in fact, that four percent advantage is not particularly impressive, and here again, advertisers can easily find sites that are far more efficient in reaching high-income consumers.

When compared with the old Nielsen data, the benefits of the vendor switch are obvious. In March, Nielsen found 72.1 million unique visitors, which was about equal to the average for the previous 9 months. But in September, Comcast identified 102.8 million UVs, “almost two-thirds (61 percent) of all adult Internet users” according to the NAA release. (The release explains that Comcast is now NAA’s preferred methodology because “it more accurately reflects the true size of the newspaper Web home and at-work online audience,” but it offers no explanation of the major discrepancies between the old and new systems. “More accurately” seems to mean “they found more of them.”)

Time spent, or engagement, is the metric that matters most to advertisers these days. Unique visitors, no matter how impressive a slice of the total web audience they represent, don’t deliver customers to advertisers. They key is whether site visitors are engaging — interacting — with the content and the advertising on the site, and that kind of engagement still eludes most online newspapers.

The NAA release says “the findings point to engagement,” without putting that engagement in context or mentioning the specific per user/per visit “time spent” portion of Comscore’s findings, which are posted in the “Trends and Numbers” section of NAA’s site. There, Comscore reports 3.8 minutes per September visit, and 8.5 visits per visitor, for the month. That’s 32.3 minutes per visitor, total, for the month of September — a result slightly below the first-quarter average of 32 minutes, 43 seconds found by Nielsen. So in the engagement metric, “more accurate” means “almost exactly the same.”

So, while it’s no doubt statistically invalid to directly compare the Nielsen and Comcast findings, what NAA seems to have bought by switching is a larger audience spending about the same amount of time per visitor. And that “time spent” by either method boils down to an average of about a minute per user per day — still only about one half of one percent of all time spent online.

Comscore measured a total of 3.3 billion minutes spent at (U.S.) newspaper websites (compared to an average of 2.3 billion in the first quarter — the increase being due to the improved UV count) which sounds like a lot until you consider that (in August, and globally) we collectively spent 41.1 billion minutes at Facebook. Those figures should not be directly compared, but it’s clear that newspapers, collectively, enjoy just a fraction of the attention the top social network commands.

Perhaps more important than all of this statistical nitpicking, though, is the fact that while the NAA fiddles with methodology and stat sourcing, the audience is in the middle of another major shift in its digital news consumption from web browsers to mobile platforms — smartphones, e-readers and tablets. By sometime in 2012, cumulative sales of iPads, alone, will likely exceed the number of home-delivered newspaper subscriptions. The majority of mobile content consumption is likely to fall on the leisure side of the consumer’s online time — enabling deeper, longer engagement than the fleeting workday news consumption being measured by Nielsen and Comscore. Many newspapers are in fact working to follow their audience in this shift (though few are leading them there), but NAA is still stuck in an earlier mode of touting questionable browser traffic stats.

NAA’s vendor switch may mean a somewhat more impressive monthly press release, but it misses the mark of what it should really be doing to help its members find a digital audience. It’s time for NAA to dig much more deeply and broadly into this shifting landscape — to begin measuring and comparing news consumption in print, in broadcast, on computers and on mobile devices. So far, few news media have found ways to make their digital versions profitable, let alone self-sustaining in the absence of their legacy print versions. Will they ever get there, when their national trade organization is still refining “methodology” for counting its web browser audience, while that very audience is rapidly shifting its consumption to a whole new generation of digital devices in which usage of apps, rather than websites, is what counts?

Image by Eric Skiff used under a Creative Commons license.

May 27 2010

14:00

The Newsonomics of wilting flowers

[Each week, our friend Ken Doctor — author of Newsonomics and longtime watcher of the business side of digital news — writes about the economics of the news business for the Lab.]

Ah, the Dream of the Wilting Flowers. Like many web dreams, premature, premature, premature…and then, maybe soon, pop. A sensation, with lots of dollars involved. Our best current example: Steve Jobs’ “invention” of the iPad, which of course was dreamed up in quite similar forms, decades before, in the fancies of Alan Kay and Roger Fidler, among others.

It’s all timing, right?

So it’s a good time to get a sense of what’s happening in local mobile commerce among news companies.

A friend visiting the exhibition hall at the NAA Orlando convention in April told me he’d been besieged by mobile commerce vendors. Then there’s the group (mobile commerce) grope, symbolized by the Groupon craze. Get a whopping good deal — but only if you can get enough of the crowd to go along with it as well. Of course, iAds are on the horizon, with Apple offering a sweet-smelling twist on walled-garden marketing pitches. Google’s AdMob — the leading mobile ad network — just got the thumbs-up from the FTC and has launched AdWhirl, its open-source (take that, Apple) “mediation layer” to facilitate mobile commerce. You can’t stay on top of all the mobile-marketing plays these days, no matter how much you try.

Let’s look at newspaper companies and what they’re doing with mobile commerce. Talk about timing: When Dan Finnigan ran Knight Ridder Digital a decade ago, one of his favorite mantras was the Dream of the Wilting Flowers. As in: It’s 4:30. You’re driving down the street. Your phone knows where you are, of course, and coming up, on the right is a florist…with a perishable commodity, flowers that will be worthless within 24 hours. Your “smart” phone, knowing where you are, who you are, your flower-buying habits, and maybe your spending proclivities, sends you the florist’s coupon for half-off, if you stop by within the half-hour. Satisfied merchant, satisfied customer, a perfecting of supply and demand.

It’s still a great vision, with a new generation chasing it, and getting closer. Talk to newspaper companies, though, and you’ll hear the answer is “we’re not yet there.” Closer, but not quite there.

Bill Ganon sees that wilting-flower dream, but he’s drilling down into something more basic: mobile sales training and the establishment of mobile pricing standards and analytics. Then, maybe by the end of the year, he says, the location-aware capabilities of smartphones may start to smell the daisies.

Ganon is the general manager for local market development for Verve Wireless, and Verve is the newspaper industry’s biggest mobile play. Spurred first by AP investment and partnership in summer 2008, many newspaper companies have turned to Verve for mobile content and, now, ad solutions. Verve now powers more than 400 mobile news sites for newspaper and broadcast companies including MediaNews, Hearst, Belo, McClatchy, Freedom, and Lee.

Verve is making a new ad push, after seeing its first forays fall flat locally. That push is predicated on scale. Its network — the Blackberry has just been added to the iPhone, with Android and iPad applications on the way, says Ganon — has grown dramatically. Year over year, for April, it has grown to 8.9 million uniques (from 2.9) and 130 million page views (from 51 million).

When Ganon — a veteran of old media sales at Newsweek and Sunset, as well as eight years with Qualcomm — took over local sales eight months ago, he found a ragtag group of local mobile efforts. Now, as Ganon describes his work, we can see the emerging newsonomics of local mobile pricing. As the mobile commerce world explodes, Ganon is focusing on the basics. He says Verve can now count 75 local sites beginning to make consistent sales, up from around 20 when he came on board. The basics of the push:

  • Training: Verve’s local market sales team of four is spending lots of time training newspaper and broadcast sales staffs on how to sell mobile. That’s reminiscent of the ongoing training done by Lem Lloyd’s merry band through the Yahoo-powered Newspaper Consortium. (In fact, with all the Yahoo, Verve, and marketing-services training ongoing, I’d wager that newspaper sales people have gotten more training in the last two years than in the previous two decades.) Verve’s training focuses on taking the mystique out of mobile: “Advertisers don’t like stealth solutions. They like to know what’s behind the curtain,” says Ganon.
  • Pricing: Ganon urges a $15 CPM (cost per thousand) floor for selling mobile. With that guideline, he says Verve-powered sites are averaging $19 CPMs, which would be about twice the average of what news sites on getting on the desktop web. Says Ganon: “This is your time to define metrics.” In other words, try to establish a price, not allowing prices to fall to low single digits as inventory is sold by middlemen, as has happened in the main digital business. Right now, most newspaper companies can count no more than five percent of their digital revenue, coming from mobile. Most of that total — maybe $100 million — is going to bigger, national brands like The Wall Street Journal and The New York Times. That’s out of maybe $500 million involved in mobile advertising overall in the U.S.
  • The Pizza Sale: Salespeople are being trained to sell the crust (a banner ad), the sauce (a landing page, tailored to action off the ad), and the toppings (call-to-actions, whether “click to call” or map directions). Pricing is still impression-based, though, Verve sees cost-per-click and cost-per-acquisition offers down the road.

What’s apparent is how early we are in local mobile selling — and how far away it is today from adding appreciably to news site revenues. The deals are small, and even the best-performing sites can count no more than 20 advertisers, with most having far fewer on their sites at any one time.

And the Dream of the Wilting Flowers? Ganon says Verve should be able to add in location-aware selling, maybe by the end of the year, but he believes that it “will be a major breakthrough.” So, 2011, maybe. When that breakthrough comes, the big question is who will benefit most: the local newspaper and broadcast companies, or Apple, or Google, or Yahoo, or maybe Verizon or AT&T?

Ask Walter Sanchez, publisher of BQE Media in Brooklyn and Queens and a Verve client, and he’ll tell you it’s an uphill climb. I met Walter at a recent New York Press Association conference, and his marketing efforts were way ahead of the curve, among publishers. He’s busy selling social sites, SEO, SEM, and mobile sites, he’s proud of getting such small businesses as Beach Bum Tanning sold on mobile ($500 a year for a landing page and 3,000 short-text messages). But he’ll tell you that most local merchants are indeed still mystified by the web, and they’re slow adopters: “When those 21-, 22- and 23-year-olds start buying their own businesses, in a few years, then, we’ll see real adoption.”

May 04 2010

14:00

Moderating declines: Parsing the NAA’s spin on newspaper circ data

Newspapers could borrow a line from a recent Dilbert comic strip: “We’ve been doing great since we redefined success as a slowing of failure.” Or perhaps it was the other way around, and Dilbert creator Scott Adams was inspired to write that line in a recent strip by the inventive terminology of newspaper executives describing “sequential improvement” and “moderating declines” in their revenue trends despite continuing losses in the double digit range.

Currently, the industry is reporting first-quarter earnings, and last week the Audit Bureau of Circulations released unaudited “publisher’s statements” reporting paid circulation for the six months ending March 31. The numbers are down, but the spin is up.

On the circulation front, the Audit Bureau of Circulations reported that circulation fell 8.7 percent on weekdays and 6.5 percent on Sundays, among newspapers filing publisher’s statements. This compares with drops of 10.6 percent weekdays and 7.6 percent Sundays for the prior six-month period, enough of an improvement for Newspaper Association of America CEO John Sturm to declare that “the data indicates the declines are moderating.”

Actually, it’s hard to discern real moderation in the rate of decline. The losses in the most recent period are indeed a bit less severe than those in the prior (Sept. 30) period, but they are worse than the drop in the period before that, or in any previous period. If we ignore the Sept. 30 data as an outlier, we actually have a trend that’s been worsening steadily for the last six years:

Nothing about that final uptick indicates that it’s a reversal of the trend — it would take two or three periods of “improvement” in the form of “moderating declines” to make that a valid conclusion. In fact, both of the upticks in the trendline disappear if we take the statistically reasonable step of averaging spring and fall six-month circulation changes into annual figures and graphing those:

Moreover, viewed in long-term context, this latest minor slowdown in the rate of decline disappears entirely when newspaper circulation is viewed in the context of population: Since 1945, the number of papers sold per 100 households has dropped steadily, declining in 61 of the last 64 years.

(The circulation numbers on which this chart is based come from Editor & Publisher via NAA; E&P hasn’t released its Yearbook with a 2009 figure, so 2009 is my estimate based on the last two ABC cycles and estimated census households.)

It’s also quite possible that the uptick is entirely the result of some of the new options newspapers have in counting their circulation. Some of the declines of the past few years have come from ditching distribution in unprofitable outlying areas, and cutting back on “third-party” programs in which advertisers were persuaded to pay for bulk distribution, free to recipients, at community events or door-to-door in targeted areas. The value of this circulation was always questionable, but now ABC rules are permitting substitution of new forms of questionable circulation.

Take, for instance, the Bend (Ore.) Bulletin, where weekday circulation grew 34.3 percent. How? Since Jan. 1, with ABC approval, the paper has been counting e-subscriptions sold to current print subscribers for an extra 50 cents per month. As long as the subscriber can choose to opt in or out of the added digital subscription, the e-subscription counts as one paid subscription in addition to the printed one, even if the customer never accesses it. Applying this stratagem for only three months of six-month reporting period, the Bulletin tacked 12,462 weekday e-subs to its “core” print circulation of 29,072 (which is actually down by more than 1,000 from 30,155 a year ago). And next time around, counting the e-subs for six full months, it expects to report circulation of about 54,000.

How much of that is going on, and to what extent is it responsible for that uptick? I haven’t delved into the data, but Paid Content did, and reported that e-edition circulation was up significantly: the digital editions of the top 25 newspaper e-editions rose 40 percent, from to 1,363,212, versus 973,721 a year earlier.

There’s are other questionable figures being circulated, as well. In his statement on the ABC data, Sturm also cited readers-per-copy data that appears, at first glance, to mitigate the downward trend in copies sold: “Newspaper print products are also finding their way into more people’s hands, with readers-per-copy increasing by 7.5 percent in just the last three years to 3.3 adults on average, according to a recent analysis from Scarborough Research and Newspaper National Network LLP.” Here’s the graph:

Missing from this statement is the important qualifying statement that the Scarborough study applies to 25 selected “top markets,” not to all newspapers.

For its report (PDF download), Scarborough chose the 25 largest newspapers omitting “national” newspapers (New York Times, Wall Street Journal, and USA Today), as well as omitting papers in the midst of major circulation pattern transitions (Denver Post, Detroit Free Press, Philadelphia Inquirer, San Jose Mercury-News, Seattle Times and Seattle Post-Intelligencer).

In response to email inquiries, NAA’s research director Jim Conaghan and communications chief Jeff Sigmund defended Sturm’s statement. “He correctly cites the Scarborough research,” Conaghan wrote. “John Sturm’s statement references research conducted by Scarborough which was based on an analysis of the top 25 markets,” Sigmund wrote. But Sturm’s statement leaves out the important qualifier of the 25 markets. Conaghan also wrote to me: “You need to carefully read what is contained in the Scarborough report. Large markets/papers, survey data. The old NAA estimates were derived by a different method, and would represent total U.S.” By “old NAA estimates” he meant a 2007 report available at the NAA site that found 2.128 readers per copy weekdays and 2.477 on Sunday. (That study, in a footnote, discounts the validity of the Sunday number, stating: “Projection relatively unstable for Sunday RPC. Use with caution.”

Now, as that quote suggests, readers-per-copy (a.k.a. the “pass-along rate”) is a notoriously difficult thing to measure. But it has been tracked by Scarborough and others for a very long time and has been pretty consistently cited (and drilled into the heads of newspaper advertising representatives) as being around 2.3, plus or minus a point or two. This allowed salespeople for a 30,000-circulation newspaper to tell retailers that readership was actually about 75,000. The readers-per-copy factoid was included for years in NAA’s own “Facts About Newspapers,” a vest-pocket sized booklet of data distributed annually to advertisers and publishers. In 2000, Facts About Newspapers claimed 2.1 readers per copy, and 2.2 on Sundays. In 2004, it was 2.3 on weekdays, 2.4 on Sundays. In 2007, as cited above, it was 2.1 weekdays and (with a grain of salt in the NAA footnote) 2.5 on Sundays. When I started in the business, in the late 1970s, I recall that it was 2.6. In 1983, Scarborough and Simmons both came up with about 2.7, but that was noted as seeming to be on the high side. The average U.S. household is about 2.57 people, another reason why any reader-per-copy finding above that level is questionable. I think Conaghan is right on the money to say that Sturm’s claim of 3.3 can not be applied to any markets outside the those selected 25 and that reality is still in range of 2.2 to 2.5 as it has been for 50 years.

Sturm also pointed to the online newspaper audience, stating: “The latest Nielsen Online data found that newspaper websites attracted a record 74.4 million unique visitors per month on average in the first quarter of 2010 — more than one-third (37 percent) of all Internet users.” Left unsaid: the monthly UV average for this quarter was probably boosted in February by traffic related to the Olympics. The February UV count was 76.1 million, an all-time high. In March, with 10 percent more days than February, UV’s were 5 percent lower at 72.1 million.

But everyone knows by now that UVs are not a very good indicator, and “time spent on site” is what counts, at least if you’re trying to sell advertising. By that score, Q1 did not shape up very well for newspapers: in January, the average visitor spent 33:09 minutes at newspaper sites, in February, 29:06 minutes, and in March 32.21 minutes. These are three of the four shortest attention spans recorded by Nielsen Online for NAA since January 2004 (with the caveat that data before June 2009, which showed significantly higher times spent, was based on a different survey sample and can’t be compared with later stats).

Here’s the trend line for attention, or time spent, at newspaper websites since the June 2009 methodology change.

When that trend starts to demonstrate clear and strong “sequential improvement,” newspapers will have something to shout from the rooftops.

March 25 2010

16:00

The Newsonomics of online ad spending, and its costs

[Each week, our friend Ken Doctor — author of Newsonomics and longtime watcher of the business side of digital news — writes about the economics of the news business for the Lab.]

It’s a complaint we’ve long heard in the newspaper industry: It’s the 25-year-old media buyers who are driving the business into wrack and ruin. If they only understood the world wasn’t just made up of people just like them — the wired, the mobile, the people whose parents read newspapers — advertising spending would be more rational.

Much of that talk, of course, is sour grapes, the inevitably griping we hear when change is in the air, when disruption messes with our views of the way the world should be, with our careers, with our paychecks.

We’ve also heard, mainly in the past year or so, that news companies just don’t think there’s much ad money on the web. Rupert Murdoch and Arthur Sulzberger have been vocal about the need to get greater revenues from readers, given what they’ve said is an historic change in ad revenues. That philosophy has fueled much of the push to find paid content models that work and work big.

Let’s look at some of the data about ad spend, and at least one innovation that may impact revenue allocations in the next several years.

First, and maybe most importantly, usage of digital media — in time — far outweighs, in proportion, the ad dollars spent on it. From a recent JP Morgan report, we see the estimate that adults are spending 29 percent of their time on the web, but advertisers are only putting 8 percent of their ad spend on the web. Meanwhile, newspapers only get 8 percent of our attention, but 20 percent of the ad dollars. That’s a big, continuing disparity. We wouldn’t expcct a one-to-one relationship between time and dollars spent — too many mitigating factors — but given the trajectory of online usage, we’d expect less disparity over time.

In 2009, most reports put the total of online advertising spending in the U.S. at about $23 billion. The Newspaper Association of America (NAA) puts daily newspaper online revenue at about $3.5 billion. That’s 15 percent of the total, a number that I think is a bit high, given the bundling and difficulty of separating out print from digital buys. Even at 15 percent, though, it’s less than the historic 20 percent of the national ad spend that newspapers — in print — long took out of the market. $3.5 billion (or even $4.6 billion, had the industry maintained its print percentage) isn’t a big number — and it’s peanuts compared to print revenues lost over the last couple of years.

Yet, the $23 billion number is a big one, and the fastest growing in advertising overall. Significantly, the top 10 websites take in 72 percent of that revenue, a share three percentage points greater than a year earlier, according to Interactive Advertising Bureau. The concentration in spending on bigger properties has accelerated.

So the spoils of the new medium have gone to a relative few, most of them content aggregators, as Yahoo, Google, AOL, and MSN top these revenue charts. The New York Times is represented, but most local newspaper companies and sites fare relatively poorly. It’s not just dimes of Internet revenue to dollars of print revenue; it’s trickle-down ad spend.

Why? One key reason is scale. It’s simply easier to buy the big sites than smaller ones. That’s especially true when we consider how new and how immature the digital ad spending landscape is.

That 25-year-old buyer may now be reaching the terrifying age of 30, but she or he isn’t the problem. The problem is at least, in part, structural. The American Association of Advertising Agencies (AAAA) has estimated that it costs twice as much to manage the placement of digital ads as compared to print and broadcast.

“If traditional services are assumed to require staffing and fees that imply an effective commission rate in the range of 12%–15% (with media planning and buying services assumed to be 1/3 of the total), Digital can typically require resources equating to an effective commission rate ranging from 25%–30% (with media planning and buying services assumed to be 1/2 of the total),” says the 2009 report.

So, the 30-year-old media buyer finds herself in a system that’s overburdened. TMI, too much information flowing in, too little time to absorb and make sense of it and not enough staff to work it. One result: More money spent on bigger ad buys, which, of course, take less time to place.

Against this backdrop, we see the value of Yahoo’s Newspaper Consortium, streamlining the buying process for all those newspaper properties. That’s boosted online revenue by the tens of millions.

Now Centro, one of the news industry’s top suppliers of digital advertising (about $100 million in ad business moved through Centro to media overall in 2009) is demoing a streamlining product. It is called Transis, and it was unveiled at AAAA’s early March conference. The product’s ambitious goal: “Transis automates the entire digital media buying process from planning through billing and centralizes all related communication. It aims to bring the diverse tasks of ad placement — from building media plans, handling RFPs and insertion orders, billing and reconciliation — into a single console for ad agencies. The intent: more ad volume for Centro and the 2,000 or so websites on which it places ads.

Ten digital agencies are now testing Transis, a trial that could last six months. So, if Transis has an impact on the revenues of non-Top 10 websites — the broad swath of local websites that Centro President Shawn Riegsecker calls “B” placement sites — it will be in 2011. Of course, Transis, or something like it, would have to become a standard to drive a major change in ad revenue buys and splits. Its principle, though, is one to watch, and one that could be more ad dollars going to smaller sites.

Further, it’s another indication that the digital industry’s out-of-the-chutes growth is based on many first-generation practices and habits. As it emerges out of gawky adolescence and matures, new technologies may have the capacity of changing how we think of business models and business potentials, and how new journalism will be funded.

13:39

NAA chief on Q4: “Velocity of ad decline is moderating”

The Newspaper Association of America has quietly updated the “trends and numbers” section of its site with fourth-quarter 2009 revenue, showing a 14th consecutive quarter of overall revenue loss and only a few indications of slowdown or reversal in the downtrend.

Counting online revenue, the industry’s total revenue came in 23.73 percent below Q4 of 2008. In the first three quarters of 2009, the losses were 28.28 percent, 29.00 percent and 27.94 percent. While the lower loss rate in the Q4 results could be considered an improvement, the only category with a significant improvement was online advertising, which lost just 1.00 percent in Q4, compared to drops of 13.40 percent, 15.90 percent and 16.92 percent in the first three quarters. (For the full year, total revenue came in at $27.564 billion, which is a mere $64 million over my prediction made back on September 22.)

Putting the best possible spin on the situation, NAA President and CEO John F. Sturm said in a statement: “The velocity of the advertising decline for print classifieds continued to moderate, and adverse trends for national advertising and newspaper Web sites lessened considerably as last year came to a close.” He added that he had been hearing “buzz” that this “ad trend improvement” was continuing in the first quarter of 2010.

Indications from a few of the firms for the first quarter of 2010 do point to a smaller loss, perhaps in the low teens. Since the downtrend began in 2006, the industry has lost more than 44 percent percent of its revenue, including nearly 48 percent of print revenue.

In most categories, Q4 provided no particular relief from the downtrend. Some details:

Online revenue, as noted, was down just 1.00 percent, perhaps an indication of better days ahead. Part of the problem for online has been that for many, if not most publishers, a good fraction of online revenue is directly tied to printed advertising, with the online component sold as an “upsell” or added value proposition. This means online volume drops right along with print, even if there’s growth in ads sold on an online-only basis. As I mentioned a few weeks ago, at E.W. Scripps, this linkage of online and print covers about half of all online advertising, and I’m finding similar levels at other firms.

Retail revenue (the largest category) was down 24.33 percent, continuing precisely the track it was on for the first three quarters (which were off 23.68 percent, 24.92 percent and 23.98 percent, consecutively). And keep in mind that while retail sales have not rebounded much, we’ve had GDP growth since mid-2009. Every retail category measured by NAA showed a decline, which has been the case all year. Not surprisingly, the worst drop was in the building materials category, which fell 36.58 percent, a tad better than losses in the 50 percent ballpark for the first three quarters.

Classified revenue was down 31.72 percent, falling less than the first three quarters (42.34 percent, 40.42 percent and 37.90 percent), but that may be because there’s just not much left to lose. In Q4, total classified revenue was $1.757 billion, compared with $5.243 billion in Q4 of 2005, the best quarter ever in classified volume. In other words, in four years, more than 66 percent of classified revenue has evaporated.

As in retail, every classified category (automotive, real estate, recruitment and other) was down in every quarter of 2009. The slight reduction in the rate of decline can be attributed to slowdowns in the loss rates in automotive (down just 37.0 percent in Q4 versus losses in the low 40s during the first three quarters), and “other,” which was off just 8.0 percent (versus 16.1 percent, 11.7 percent and 8.8 percent earlier in the year), but that “improvement” is probably due to the growth in foreclosure notices, which are generally counted in this category.

National revenue fell 19.80 percent, compared with losses of 25.87 percent, 29.61 percent and 29.84 percent in the first three quarters. National saw small upticks in automotive (based on spending by manufacturers to support the cash for clunkers incentives), food, household furniture and furnishings (which almost doubled), and medical and toiletries. While most categories were down, at least there is evidence of a few actual trend reversals in spending by national brands.

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