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April 21 2011

14:00

The newsonomics of a single investigative story

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.

It’s a week to celebrate great investigative work. ProPublica made some history with its Pulitzer for online-only work about the financial meltdown, and the Los Angeles Times crowned its success with the larger-than-life Bell corruption tale, winning its own top prize. Both well deserved.

Meanwhile, as journalists sat around their terminals awaiting the Pulitzer bulletin, an investigative series broke across California, perhaps reaching more audience more quickly than any previous investigative piece. There were no bodies to count, nor billions or millions of ill-gotten gains to uncover.

Rather, California Watch’s “On Shaky Ground” series is aimed at preventing disaster, getting ahead of the Grim Reaper. The series took a big look at the likely safety issues in the state’s schools when (not if, right?) The Big One hits. It found, not surprisingly, that although state law mandated seismic preparations, all kinds of bureaucratic nonsense has contravened that intent. It found that about 1,100 schools had been red-flagged as in need of repair, with no work done, while tens of thousands of others were in questionable and possibly illegal shape. The so-what: Some of the very institutions providing for the kids of California have a certain likelihood of actually falling on top of them and killing them.

It’s old-fashioned, shoe-leather, box-opening, follow-the-string journalism, and it is well done.

While it’s fun to celebrate great journalism, anytime, it’s vital to look at the newsonomics of this kind of investigative journalism. What did it take to get it done? How much did it cost and who paid for it? And, to look at the plainly fundamental question: How do we get lots more of it done in the future?

The series took more than 20 months to complete. The interactive timeline, “On Shaky Ground: The story behind the story,” tells that tale with tongue in cheek; it’s a great primer for any beginning journalism class. Corey G. Johnson, freshly hired from North Carolina and part of a young reporting contingent that has been mixed and mentored well by veterans like editorial director Mark Katches, stumbles on a list of 7,500 “unsafe schools” as he’s doing a routine story on the 20th anniversary of the Loma Prieta earthquake.

Along the way, the story grows in import and paperwork. California Watch, the less-than-two-year-old offshoot of the Berkeley-based Center for Investigative Journalism (CIR), adds other staff to the effort, including reporter Erica Perez, public engagement manager Ashley Alvarado, distribution manager Meghann Farnsworth, and director of technology Chase Davis, among other reporters.

In the end, the series rolled out in three parts — with maps, databases, historical photos, its own Twitter hashtag, a “My Quake” iPhone app — and a coloring book (“California Watch finds a new consumer group, kids“), intended to reach kids, the most important subject and object of the reporting. Already, the state legislature has scheduled hearings for April 27.

The reach of the roll-out is one of the new lessons here. Six major dailies ran at least some part of the series. ABC-affiliate broadcasters took the story statewide. Public radio news leaders KQED, in the Bay Area, and KPCC, in L.A. ran with it. KQED-TV. The ethnic press signed on: La Opinion ran two seismic stories Sunday and Monday, while at least two Korean papers, one Chinese paper, and one Chinese TV station included coverage as well. More than 125 Patch sites in the state (California is major Patch turf) participated.

A number of the distributors did more than distribute. They localized, using data from California Watch, and reporting on their local schools’ shape. KQED-TV produced a 30-minute special that is scheduled to air on at least 12 PBS affiliates in the state.

San Francisco Chronicle managing editor Steve Proctor is frank about how priorities and resource use have changed in the age of downsizing. When Proctor came to the paper in 2003, he says, the paper had five to seven people assigned to a full-time investigative team. Now there’s no team per se, with the Chronicle investing investigative resources in an “investigate and publish” strategy, getting stories out to the public more quickly and then following up on public-generated leads they create. It’s an adjustment in strategy and in resource allocation — and the California Watch relationship makes it even more workable. “We’ve been pretty sympatico with them from the beginning,” he said. “We’ve used the majority of what they’ve produced.”

So let’s get deeper into some numbers, informed by this series, and see where this kind of work can go:

  • “On Shaky Ground” cost about $550,000 to produce, most of that in staff time, as the project mushroomed. That’s now a huge sum of money to a newsroom, even a metro-sized one. Ask a publisher whether he or she is willing to spend a half a million on a story, and you know the answer you’ll usually get. It’s a sum few newsrooms can or will invest. Consequently, the economics of getting a well edited, well packaged series for a hundreth of that price is an offer few newsrooms can (or probably should) refuse.
  • California Watch, not yet two years old, runs on a budget of about $2.7 million a year. That budget supports 14 journalists, whose funding takes up about 70 percent of that $2.7 million number. That’s an intriguing percentage in and of itself; most daily newspaper newsrooms make up of 20 percent or less of their company’s overall expenses. So, disproportionately, the money spent on California Watch is spent on journalists — and journalism.

The project is about midway through its funding cycles. The ubiquitous Knight Foundation (which has contributed about $15 million to a number of investigative projects nationwide through its Investigative Reporting Initiative), the Irvine Foundation, and the Hewlett Foundation, all of which have provided million-dollar-plus grants, are reviewing new proposals.

The key word, going forward here, is “sustaining.” Will foundations provide ongoing support of the “public good” of such journalism? There’s lots of talk among foundations, but no clear consensus among journalism-facing ones. “There really isn’t a foundation community that thinks with a common brain — same situation as in the news community,” Knight’s Eric Newton told me this week. “Each foundation makes its own decisions using different criteria. Some foundations see their role as launching new things and letting nature take its course.” CIR executive director Robert Rosenthal is among those trying to find a new course. Although he’s a highly experienced editor, he finds that most of his time is found fund- and friend-raising.

  • California Watch is building a syndication business, feeling its way along. Already, six larger dailies — the San Francisco Chronicle, the Sacramento Bee, the Orange County Register, the San Diego Union-Tribune, the Fresno Bee, and the Bakersfield California — are becoming clients, paying a single price for the all-you-can-eat flow of daily and enterprise stories California Watch produces. They, a number of ABC affiliates (L.A.’s KABC, the Bay Area’s KGO, 10 News San Diego, 10 News Sacramento, KSFN in Fresno), and KQED public radio and TV in the Bay Area are also annual clients pay between $3,000 and $15,000 a year each. A la carte pricing for individual projects can run from $3,000 to $10,000. The California Watch media network, just launched in January, is an important building block of the evolving business model. It is clear that while syndication can be a good support, at those rates, it’s a secondary support.
  • So, if California Watch were to be totally supported by foundation money, it would take an endowment of $54 million to throw off $2.7 million a year, at a five percent spend rate. Now $54 million raised one time isn’t an impossible sum. Consider just one gift: Joan Kroc left NPR more than $200 million eight years ago. Consider that the billionaires’ club started by Bill Gates and Warren Buffett (encouraging their peers to give away half of their wealths) is talking about newly raising a half a trillion dollars for the public good. Last summer, I suggested the group tithe a single percentage point of the club’s treasury for news-as-a-public-good. It seems to me that stories like “On Shaky Ground” make that pivotal education/health/journalism connection; send “Shaky Ground” to your favorite billionaire and urge him to sign on.
  • Let’s do some cost-benefit analysis. How much is a single child’s life worth? How about a school of 250? We could consult a liability lawyer, who undoubtedly would put assign a six- and seven-figure number per life, and then tie up the courts, post-disaster, making the math work. So if California, bereft as it is of capital, were to invest in the infrastructure, per its own laws, wouldn’t it be ultimately cost-effective? Of course it would be, and in this case we see in microcosm, the question of American infrastructure writ large. Are we a country that will let more bridges fall into mighty rivers, more schools fall onto our children and more poor roads cause preventable injury and death? You don’t need my political rant here. Rather, let us just make the point that journalism — old-fashioned journalism, newly digitally enhanced — is a key part of forcing America to face its own issues, whatever the solutions.

In this project and in California Watch generally, we see the reconfiguring of local media. An owner — whether AOL, Hearst, or private equity — can hardly reject the offer of paying one-hundreth of the cost for space-filling, audience-interesting content. Welcome to a new kind of content farm, to use that perjorative for a moment. Yes, California Watch operates on the same Demand Media-like principle of create-once-distribute-many, realizing the digital cost of the second copy is nil. Let’s consider it the organic, cage-free content farm. It makes sense for a state the size of a country (California = Canada); smaller versions of it make equal sense for Ohio, North Carolina, or Illinois.

Older media outsources journalism and in-sources (affordable) passion. There are lots of lessons here (“3 Reasons to Watch California Watch“), but that fundamental rejiggering of who does the work and how it is distributed and customized is a key one. As Mark Katches points out, “They [distributing partners] put their voices on our story.” That’s a new system in the making.

Old(er) editors can learn new tricks. For a good show-and-tell of that principle, check out Rosenthal’s talk to TEDxPresidio two weeks ago. I first saw him give the talk at NewsFoo in Phoenix in December. Amid more tech-oriented talks, his stood out and was much applauded. It’s a clarifying call for real journalism, perfected for the digital age. Share it.

February 24 2011

15:30

The Newsonomics of the digital mercado

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.

It’s as old as organized humanity itself: the mercado, the bazaar, the marketplace. We love to visit Old World marketplaces as we travel abroad. At home, our own shopping is now a mish-mash of malls, big box stores, neighborhood shops, and online commerce. Amazon, itself, is now a $34 billion business, and its Prime delivery program can deliver just about anything (my favorite buy: an electric mower) right to your door, seeming so local.

We can research almost any purchase. We can compare prices. We can get advice and reviews from hordes we’ll never meet.

Yet it’s far from nirvana. Navigating the byways of web commerce, other than great walled gardens like Amazon, can be frustrating. Numerous culs-de-sac interrupt us. Price-comparison sites like Price Grabber, Google Product Search, Shopzilla, and UK’s Kelkoo only seem to give us a partial view of what’s available. It’s tough to know when reviews may be gamed. Sites like preprint-digitizer Shop Local (“Your Local Weekly Ads, All in One Place”), owned by Gannett, seems curiously backwards, like replica E-Edition newspaper products for reading. Trying to compare model numbers, on sites like CNET or Best Buy, can give us digital nervous breakdowns.

Within the infinity of shopping choice, a lot of us would like some order.

That’s what the new Find n Save product aims to provide, and for the benefit of newspaper companies. Find n Save is the latest effort from newspaper companies to reclaim what they consider to be their birthright, maybe a third generation of such marketplaces following the ShopLocals and the earlier Storerunners.

Find ‘n Save focuses us on a decade-old-plus newspaper company problem.

While the daily newspaper — with its display and classified ads, its Sunday circulars, and its Wednesday food coupon – used to be the leading local marketplace, it now is just part of the pack. One number — print ad revenue halved in 10 years to $24.8 billion in 2009 (no final tally is yet in for 2010, which was still lower in single-digit decline) in the U.S. — gives real meaning to this splintering of commerce.

Digital media, with its search-led research/price comparison abilities and, now, with the new couponing craze, has wrought havoc with the newspaper business model.  All of that digital commerce has been disruptive and disintermediating. Yet there’s been more disintermediation (of traditional publisher/merchant relationships) than remediation.

We turn to lots of digital media to research and shop, but we have few go-to places of habit, again with Amazon making the greatest inroads into our shopping lives so far.

From a customer-centric perspective, it’s never been more confusing to find good deals. Yes, they seem to come from every quarter — print circulars, the web overall, direct mail, eBay alerts, Amazon “notifications” — but they’re disordered.

A recent study by the BIA/Kelsey group puts a number on the proliferation of marketplace choice. The annual study points to consumers using an average of 7.9 different media to make buying decisions in 2010, compared to only 5.6 in 2007. Buying’s gotten more complex.

The flipside, of course, is that merchants’ own choices about how to market have gotten more complex (“The Newsonomics of  Eight Per Cent Reach“), with small- and medium-sized businesses using 4.6 media to reach customers in 2010, as compared to 3 in 2007.

So taking a look at Find n Save, let’s look at the Newsonomics of the would-be new mercado, and what it will take to make these new marketplaces bigger business for local media.

McClatchy’s newspapers are the first big clients for Find n Save, a product of Travidia, a long-time player in the print-to-digital ad conversion business. Find n Save replaces Marketplace 360, the company’s former regional marketplace product.

Two big McClatchy papers — its hometown Sacramento Bee and the Kansas City Star — launched Find n Save in November. The company’s other big sites, from the Miami Herald to its North Carolina properties (Charlotte and Raleigh) and the Fort Worth Star Telegram, should feature it by July 1, with the rest of the company’s 30 markets putting Find n Save in place by year’s end. MediaNews’ flagship Denver Post will also launch it soon.

It’s not the only new effort at a regional marketplace.

Find n Save will soon by joined by another regional commerce portal. FYI Philly will launch this spring, in the greater Philadelphia region, two of its principals tell me. It’s conceived as a commerce portal, details to come. Significantly, it’s the result of unprecedented cooperation among four newspaper competitors in that region: Philadelphia Media Network (the new parent of the Inquirer and Daily News), the Journal Register company, Gannett, and Calkins Newspapers.

For Chris Hendricks, McClatchy’s VP/interactive, the Find n Save push is about a grand goal: reclaiming retail advertising. While the destruction of print classifieds has been well chronicled, the steady decline of local retail has been less so. You can figure that retail advertising has declined about $7 billion annually since its 2001 height. Yes, online display advertising has yielded some retail revenue, but doesn’t come close to recreating the lost revenue — or the lost sense of marketplace. 

So Hendricks talks about “blowing up retail” — and reordering it with Find n Save. “People are searching more and more for local services and products,” he says. “And they’re getting more and more confused.”

Find n Save aims to bring some simplicity to that confusion. Take a look at it, and you can see it’s a work in progress. What we notice about it — very prominently — is the deal of the day. Yes, Find n Save aims to take advantage of the Groupon revolution. Some Find n Save sites are partnered with Groupon, while others offer their own deals of the day. The idea is that the deal of the day isn’t just a new ad play, a new revenue source, for news sites; it’s also a new gateway to local commerce. The rest of Find n Save shows its ambitions:

  • It gives prominence to other local couponing, deals without the social must-buy incentives of the daily deal. Subway sandwiches, vacuum cleaners, lots of restaurants, and car care — but all in one place.
  • It incorporates product search, as have previous versions of the product. Consumers can search by product, brand, and store, among other attributes, narrowing or expanding search as they wish, and see where that product is available locally. The big allure, here, is the ability to check whether a product is in stock, at multiple, close-by locations. Search for lamps or shoes or spas, and you’ll find a motley assortment of offers.

So far, the November-launched sites have seen their marketplace traffic “quintuple,” says James Green, chief marketing officer of Travidia and an alum of Raleigh’s pioneering Nando Media. He says that’s due mainly due to “product-centric search engine optimization,” providing a new level of prominence in Google search results. If that base can keep growing, Chris Hendricks sees the sites becoming commercial magnets. Possible new, related streams can include display ads, offering prominence and placement, charging local retailers for ingestion of their inventories and conversion of their print material generally and topical directories, he says.

“Deals are the content,” says Hendricks. He notes, for instance, that news sites’ attempts to connect up editorial content with restaurant directories — using newspapers’ unique and core strengths — hasn’t produced the dividends many of us thought they would. Forget the packaging of feature content with ads; just focus on the ads.

So what can we make of this step forward?

Well, it’s a step, but probably many more are needed. Fronting a site with coupons makes some sense, and will pull in additional audience. Yet the overall research and shopping experience will have to be fuller if these are to become go-to sites with masses of local buyers.

It’s hard to know how many years we are away from the perfection of commerce — you know, getting each of us the kinds of timely and meaningful shopping offers that bring order out of the digital shopping chaos. Certainly, though, here is some of what will be needed:

  • Broader, deeper databases of products: That’s simple to say, and hard to achieve. I asked James Green whether Find n Save is a breakthrough product. Not yet, he said, saying that there’s not yet “enough conversion.” That translates as product search being too spotty; provision of retailers’ real-time inventories is still a work-in-progress. If we as consumers run into more dead-ends than usable deals, we’ll stop coming back.
  • Reviews and recommendations: Find n Save contains none. In a world of imperfect knowledge, we love seeing what dozens of others think of products and services, just like in the early mercados. What’s new, good, and fresh? Throw out the reviews that are outliers, and we’ve got a better-than-even shot of making a better buying decision. Sites without them lack the critical component found in sites from Amazon to Best Buy to Yelp.
  • Preferences and customer knowledge: While some of us are highly concerned about privacy, many others say, ‘Just use your tracking to give me what I want — including deals — and stop spamming me with useless ads.’ So the ability to state preferences and to have my digital behavior intelligently watched — for my benefit — will be a big differentiator.
  • A great tablet product. James Green says Find n Save’s mobile app will be ready soon. Apps are, of course, becoming a price of admission for mobile customers. More importantly, the winning local marketplace will figure out how to combine deep, broad shopping info, social reviews, deals — and to fully embrace the interactive and visual capabilities of the tablet. Just as the iPad — and its newer cousins — are the big do-over opportunity for news companies’ reader business models, they’re also literally a blank slate for the new mercado.

Who will build it? It could be a Travidia, or an Amazon or a Google or a Facebook or a Flipboard-for-commerce so far unborn. There are billions of dollars baiting the hook.

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