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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.

December 14 2010

18:00

Jeff Israely: Speeding up a startup, but slowing down at the same time

Editor’s Note: Jeff Israely, a Time magazine foreign correspondent in Europe, is in the early stages of a news startup called Worldcrunch. He details his experience as a new news entrepreneur at his site, but he’ll occasionally be describing the startup process here at the Lab. Read his past installments here.

Okay, here’s my shot at a new law of physics to apply to our news startup: Q. When does speeding up help you to slow down? A. At the exact moment that slowing down will help you speed up. Experienced entrepreneurs (and basketball players) will recognize this quantum bit of gobbledygook as the art of the pivot. Here’s how this particular apple fell on my head.

A month ago, when we unveiled Worldcrunch in this space, with a signup page and basic description of what we’ll be doing, it was part of a fairly straightforward plan and timetable for getting our site launched. Step 1: Announce the thing and open Facebook and Twitter accounts. Step 2: Complete the back office and site development. Step 3: Revamp the design and refine the functionality. Step 4: Solidify the core crew of multilingual journalists to begin building the editorial structure. (Note: Fundraising, partnerships, and legal issues are always at the top of the list…but their timetables have a logic all their own.)

Once steps 2, 3, and 4 began to fall into place, we’d start. Gradually. Privately. Our homepage/signup page would be a placeholder, while the various pieces came together behind the scenes. Through December, we’d use a special password for access to begin to show what we were doing (design, functionality…and the articles themselves) to our friends and colleagues, potential partners and investors, and those interested enough to sign up. Then, by the first week of January, shazzam: Launch!

But in the span of 72 hours in mid-November, two things happened that convinced us it was time to, er, slow-down-and-speed-up. First, we were presented with the chance to create an innovative front end for the website, which also held the possibility to integrate iPhone and iPad apps more rapidly down the road. This new front end would slow us down. Around the same time, one of our news partners, top French business daily Les Echos, told us they were extra eager to have us begin producing their stories to post on their website. Well, we thought, after we saw the first few Worldcrunch-produced stories on lesechos.fr, we realized we should (as is foreseen in the partnership agreement) also start posting them on ours. This would speed us up.

Putting these two equal but opposite forces on some kind of pulley system attached to a pair of fisherman’s sinkers (10th-grade physics don’t fail me now!) created the perfect conditions for our startup to make that famous pivot.

So as of two weeks ago, we are live, sort of — for anyone to see. It is not our beta, or even alpha, version. Yet it’s not quite a blog either, since we are not just publishing stuff about what we’ll be doing, but actually starting to do it. We have chosen to call our temporary public home The Garage.

This was a major decision, strategically and psychologically. As such, it was bound to test the fiber of the team, and again proved that despite our occasional bickering like brother and sister, my co-founder Irene and I are truly in synch. There was a lot riding on the decision to both push back the beta launch, and in the meantime go live with our stories. It would change both how we’d present ourselves to the public, and the mechanics of how the actual site (and company) might evolve. Yet after two brief conversations between us, and consultations with our investors, we agreed on the change of plans as if we were thinking with one brain. This bodes well for other big decisions — and pivots — that are sure to come.

A pivotal meal?

Last week was The Lunch. If some day Worldcrunch ends up realizing its full potential, the cafeteria-chic meal at Gustave in the Eighth Arrondissement will stand as one of the key moments that set us on our way. The occasion was the arrival in Paris (for the LeWeb confererence) of Lili Rodic, our indefatigable Zagreb-based web development team leader. Along with Irene, there was also Frederic Bonelli and Diane Grappin, two of our first investors. Fred has been advising us on key technical and digital publishing strategy. Diane is driving all that is product- and design-related at Worldcrunch.

We were at lunch to talk about refining the Garage, and the next steps for moving closer to the beta launch. But inevitably what we need to do today, particularly in the development of the technology, leads to discussions about the future: about how to build into the technical framework the right tools to allow our editorial and business ambitions to be realized. We brought up ideas that had already been floating around. We factored in budget and timing issues. We ate our nouvelle cuisine off of plastic trays.

But at a certain point, Fred began to lay out his vision for what the architecture of Worldcrunch should be, literally mapping it out for Lili (and the rest of us) on a piece of scrap paper. Something in that moment started to crystallize. We could suddenly see how our editorial and technical potential was naturally intertwined. It was the blueprint for a news enterprise built with new eyes — as I put it a year ago in a blissfully ignorant “about” page for my blog — and legs.

Still, big plans aside, my days now are mostly (and finally!) filled with the nuts and bolts of producing stories. We have the beginnings of a dynamite team on the editorial side. Together, we are using this time in the Garage to begin to create what in some ways is a wholly new editorial process: the selection and production of stories in English from the best of the foreign-language press, in real time. There is much to dissect, much to learn, and it will of course be a topic for future posts. In the meantime, both the day-in, day-out journalism we are doing and the other dot-connecting to come is proof of another theorem: The quality and efficiency of the editorial side improves in direct relation to the quality and efficiency of the business and technical sides. And vice-(vice)-versa. But this is not another new law of physics: just the old, yet ever valid formula for what we still call the news business.

December 13 2010

20:00

Steven Brill: 2011 will bring ebook battles, paywall successes, and a new model for long-form articles

Editor’s Note: We’re wrapping up 2010 by asking some of the smartest people in journalism what the new year will bring.

Here, Journalism Online cofounder and long-time journalism entrepreneur Steven Brill lays out three predictions for 2011.

1. E-books will continue to soar — and authors will get into major fights with publishers over who gets what percentage of the take, with more top authors withholding their e-book rights and selling them independently or through specialty distributors.

2. Someone — via Press+, I hope — will go into the business of commissioning long-form magazine articles from top writers and providing the first two or three paragraphs online for free and then selling the rest for, say, 75 cents or a dollar. That trailblazing publisher might call these “mini-e-books” and use a business model of simply splitting the revenues with the author, 50-50. My favorite candidates would be website publishers who already have great brand names, such as the Huffington Post or Daily Beast, but that want to revive long-form journalism and make money doing it (and limit risk by making some top writers their 50-50 business partners, rather than pay high flat fees for their work.)

3. As it becomes clear (as it already is to our Press+ affiliates, and as will also be made clear when The New York Times, too, launches its metered model approach) that the sky doesn’t fall in on newspaper and magazine websites who try the freemium model, more newspapers and magazines (and online only sites, too) will begin charging their most frequently-visiting customers for their content online.

Unlike old-fashioned pay walls, the metered model means publishers keep all their online ad revenue and almost all of their monthly unique visitors. (Our affiliates have not lost a nickel of ad revenue.) By next year I bet a big chunk of publishers are doing it and most of the rest are planning it.

Progress will be slow but steady; they’ll gradually climb some of the way back to their old margins. More important, they’ll be preserving their franchises as the trusted-brand provider of news and information in their community — whether that community is the world of sophisticated news consumers who read the Times or those in a small town in Pennsylvania or the UK who read the local paper for news about the school board. Only now they’ll gradually be moving out of the business of paying printers and truck drivers to facilitate that. Their customers will be customers for their content, no matter how it is delivered. That in turn will enable daily papers, for example, gradually to stop printing daily, cutting back on the week’s slowest ad days or even ultimately cutting back just to Sunday or to no print version at all.

All of the above will be facilitated by the onslaught of tablets, such as the iPad, which make reading the same kind of intoxicating sit-back experience that have made books, newspapers and magazines so irresistible. But we’ll also see that the real value of devices like the iPad for reading newspapers and magazines is not as much about the apps that get built for them as it is about how web browser versions are so well presented on them — which means that publishers will want to charge for their web versions if they are going to charge for an app version.

December 02 2010

15:00

The Newsonomics of Google Grouponomics

[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 wasn’t supposed to be this way. Newspapers were the kings of coupons, the best source for getting the daily deal, on any kind of local product or service you could imagine. Over the years, direct (mailed) competition came along, taking business from newspapers. Now, it, has been further eclipsed by the sheer cost savings of digital coupons, which rose 60 percent within the last year.

In that context, Groupon was an idea just waiting to come along; and the remorse being expressed in newspaper buildings across America this week is the same: Why didn’t we come up with that idea? The remorse should go deeper; check out the Groupon Merchant Services page, and try to find a similar one, with similar marketing support, offered by a newspaper company online. In fact, Groupon’s whole pitch to merchants, cheerfully animated in its Grouponomics section, is a textbook lesson in selling local.

Now, if gobbled by Google today, or as the company moves into play, Groupon is set to become a big local ad play. In the Google portfolio, it could be the on-ramp to an eight-lane gateway, as Google widens its reach into local business marketing and local merchants get introduced to Google, through Groupon’s simple couponing pitch. As I noted last week (“The newsonomics of eight-percent reach“), Google’s reach into the small- and medium-sized business community in the US is about 8 percent, leaving more than 23 million businesses as potential clients. Get a bigger piece of that growing digital marketing play — estimated to be $16.1 billion by Borrell Associates — and you’ve got a big growth engine to add.

In fact, think of Groupon as Google’s new gateway drug. The Groupon inventors did the R & D, and now Big Search (aka Big Ads) is coming along to greatly expand its market reach and penetration. Groupon makes entry to local merchant markets simpler, and that’s the key to the $5 billion or so purchase price (“The newsonomics of simplicity“).

Certainly, we can tick off the reasons why the Google/Groupon deal makes sense for Google:

  • It’s a growth strategy. As paid search inevitably matures, Google needs to stoke several new engines of growth to keep the topline growing. Groupon has scaled to $400 million in sales in two years, and clearly has lots of potential.
  • It’s a search strategy. What could be better to add to keyword results than a single, relevant deal of the day? You want relevant ads? Nothing’s better than a relevant, geo-targeted coupon on something you just searched for.
  • It’s a social strategy. The deal is an in-your-face move directed at Facebook, as it connects up the web of relationships to buying.
  • It’s a mobile strategy. As the world moves mobile, tablets proliferate, and Google’s newly federally approved AdMob ad network looks to 2011, a simple daily deal can make the most of location-aware shopping.

All those are true. Yet Google has made more than 40 acquisitions this year, and none has approached this purchase price. So the gateway factor here, I believe, is the big difference-maker. In 2010, the power of a simple, great daily deal, well-delivered, breaks through the digital clutter — and provides the way into the wallets (and hearts) of local merchants.

Talk to those selling digital products to local merchants, and they’ll tell you it’s a slog. Yes, it’s working. All those 25 million merchants are experiencing the angst of marketing transition. They know they need to be in digital, but how do you work this search engine marketing, appear in the right places on the smart phone, play Facebook? It’s a slow go. Some merchants are digitally savvy, but most need the fundamentals explained, packaged, and demonstrated. That takes time. It’s not only newspaper sales managers that tell you this; it’s also what Google sales managers have said as they’ve tried to figure out the quickest way into local.

There may be nothing quicker than saying: How ’bout we do a coupon? Those six words could open the door wider and more quickly. Once through the door, Google, of course, can offer its growing array of paid search (Ad Words), display (Double Click) and mobile (Ad Mob) products, and ease businesses into the wonders of Google Analytics.

Figure that $5 billion price is worth it, if it ignites the local market sales more quickly, and acts as a gateway drug. Therein we can see the newsonomics of Google Grouponomics. How quickly can Google double its, maybe, 1.5 million merchants? Let’s say those additional 1.5 million merchants spend only 25 percent annually of what the first 1.5 million spend, which is about $27 billion a year, at the 2010 run rate. (A quarter as much might make sense, because many of the first set of advertisers are big, national ones.) If it could double its merchant base two years earlier (than it could if it didn’t buy Groupon), that might mean an additional $13.5 billion in revenue ($6.75 billion a year from the second 1.5 million advertisers). Suddenly, the $5 billion price is understandable.

The big question: What’s it likely to mean in local newspaper markets? How will it change an emerging balance of sales power?

Already, newspaper companies have taken a more catholic approach to local ad sales. Much of the Yahoo-related money they’ve taken in comes from selling Yahoo.com ads in their area, in addition to their own site inventory. A number of companies are reselling Google ads in their own markets, trying to leverage the power of their feet-on-the-street sales force and their well-known community brands.

Consequently, in addition to the why-didn’t-we-do-that remorse they’re feeling, they’re wondering how the Groupon deal will change the local sales landscape over the next couple of years.

A few scenarios:

  • Doomsday: Google’s use of Groupon as its new stalking horse lets it dominate local online spending as it has with national paid search. Newspaper online ad growth — newspapers’ only growth engine — slows against the competition. Newspapers’ Sunday circulars — based on price/item sales — become more obsolescent, as they are replaced by niched and customized deals of the day, not just a single day of the deal available to everyone.
  • Google replaces Yahoo as the partner of choice: The Yahoo consortium looks fairly mature these days, bringing in some good revenue for several top sellers. Yet it’s plagued by Yahoo’s ongoing identity crisis and Carol Bartz’ less-than-full backing. So Google could become the new best friend of newspapers (and broadcasters and Yellow Pages companies), enabling them to sell Groupon-led digital deals, and supplant Yahoo (which itself tried to buy Groupon earlier this year for a reported $2-3 billion) out of the local game. There’s precedent, with some of those newspapers already reselling Google paid search, and the higher sellers getting monetary incentives to do it. So Google could take a largely go-it-alone strategy, selling coupons-plus itself; or fully partner with local salesforces — or, third and probable choice, pursue a hybrid strategy for now, as it increases local penetration.

Among the big questions here: How would Google value the power of local feet-on-the-street, compared to cheaper telesales and self-service? Local sales forces have been vital to the newspaper/Yahoo initiative, and to Groupon’s own growth. Check out Groupon’s employment page (especially “Sales and Business Development — Outside,” to use industry vernacular), and you can see the value it places on feet-on-the-street. And yet Google has built its empire largely on self-service, and would like to do that into the future, increasing margin. Who else wants to turn coupons into self-service? Well, Groupon. Within a week, it will unveil its own Groupon self-service offering.

So, much of this deal, its value to Google, and its threat or promise to newspaper companies may come down to simple question: What do you need to sell a digital coupon to a local merchant?

November 18 2010

17:30

Crunching Denton’s Ratio: What’s the return on paying sources?

There was a lot of buzz on Twitter yesterday about Paul Farhi’s piece in The Washington Post on checkbook journalism — in particular the way a mishmash of websites, tabloids, and TV news operations put money in the hands of the people they want to interview. (With TV, the money-moving is a little less direct, usually filtered through payments for photos or videos.)

But, just for a moment, let’s set aside the traditional moral issues journalists have with paying sources. (Just for a moment!) Does paying sources make business sense? Financially speaking, the justification given for paying sources is to generate stories that generate an audience — with the hope that the audience can then be monetized. Does it work?

There’s not nearly enough data to draw any real conclusions, but let’s try a little thought experiment with the (rough) data points we do have, because I think it might provide some insight into other means of paying for content. Nick Denton, the head man at Gawker Media and the chief new-media proponent of paying sources, provides some helpful financial context:

With the ability to determine instantly how much traffic an online story is generating, Gawker’s Denton has the pay scale almost down to a science: “Our rule of thumb,” he writes, “is $10 per thousand new visitors,” or $10,000 per million.

What strikes me about those numbers is how low they are. $10K for a million new visitors? There aren’t very many websites out there that wouldn’t consider that an extremely good deal.

Let’s compare Denton’s Ratio to the numbers generated by another money-for-audience scheme in use on the Internet: online advertising. After all, lots of ads are sold using roughly the same language Denton uses: the M in CPM stands for thousand. Except it’s cost per thousand impressions (a.k.a. pageviews), not cost per thousand new visitors, which would be much more valuable. What Denton’s talking about is more like CPC — cost per click, which sells at a much higher rate. (Those new visitors aren’t just looking at an ad for a story; they’re actually reading it, or at least on the web page.) Except it’s even more valuable than that, since there’s no guarantee that the person clicking a CPC ad is actually a “new” visitor. Let’s call what Denton’s talking about CPMNV: cost per thousand new visitors.

CPC rates vary wildly. When I did a little experiment last year running Google AdWords ads for the Lab, I ended up paying 63 cents per click. I ran a similar experiment a few months later with Facebook ads for the Lab, and the rate ended up being 26 cents per click.

What Denton is getting for his $10 CPMNV is one cent per click, one cent per new visitor. It’s just that the click isn’t coming from the most traditional attention-generating tool, an ad — it’s coming from a friend’s tweet, or a blogger’s link, or a mention on ESPN.com that sends someone to Google to search “Brett Favre Jenn Sterger.”

Doing the pageview math

And that $10 CPMNV that Denton’s willing to pay is actually less than the return he gets for at least some of his source-paid stories. Take the four Gawker Media pieces that the Post story talks about: the original photo of singer Faith Hill from a Redbook cover, to show how doctored the image was for publication; photos and a narrative from a man who hooked up with Senate candidate Christine O’Donnell; the “lost” early version of the iPhone 4 found in a California bar; and voice mails and pictures that allegedly show quarterback Brett Favre flirting with a woman named Jenn Sterger, who is not his wife. Gawker publishes its pageview data alongside each post, so we can start to judge whether Denton’s deals made financial sense. (Again, we’re talking financial sense here, not ethical sense, which is a different question.)

Faith Hill Redbook cover: 1.46 million pageviews on the main story, and about 730,000 pageviews on a number of quick folos in the days after posting. Total: around 2.2 million pageviews, not to mention an ongoing Jezebel franchise. Payment: $10,000.

Christine O’Donnell hookup: 1.26 million pageviews on the main story, 617,000 on the accompanying photo page, 203,000 on O’Donnell’s response to the piece, 274,000 on Gawker’s defense of the piece. Total: around 2.35 million pageviews. Payment: $4,000.

“Lost” iPhone: 13.05 million pageviews on the original story; 6.1 million pageviews on a series of folos. Total: around 19.15 million pageviews. Payment: $5,000.

Brett Favre/Jenn Sterger: 1.73 million pageviews on the first story, 4.82 million on the big reveal, 3.99 million pageviews on a long line of folos. Total: around 10.54 million pageviews. Payment: $12,000.

Let’s say, as a working assumption, that half of all these pageviews came from people new to Gawker Media, people brought in by the stories in question. (That’s just a guess, and I suspect it’s a low one — I’d bet it’s something more like 70-80 percent. But let’s be conservative.)

Expected under the Denton formula:
Faith Hill: 1 million new visitors
O’Donnell: 400,000 new visitors
iPhone: 500,000 new visitors
Favre: 1.2 million new visitors

Guesstimated real numbers:
Faith Hill: 1.1 million new visitors
O’Donnell: 1.17 million new visitors
iPhone: 9.56 million new visitors
Favre: 5.27 million new visitors

Again, these are all ham-fisted estimates, but they seem to indicate at least three of the four stories significantly overperformed Denton’s Ratio.

Reaching new audiences

The primary revenue input for Gawker is advertising. They don’t publish a rate card any more, but the last version I could find had most of their ad slots listed at a $10 CPM. Who knows what they’re actually selling at — ad slots get discounted or go unsold all the time, many pages have multiple ads, and lots of online ads get sold on the basis of metrics other than CPM. But with one $10 CPM ad per pageview, the 2.2 million pageviews on the Faith Hill story would drum up $22,000 in ad revenue. (Again, total guesstimate — Denton’s mileage will vary.)

Aside: Denton has said that these paid-for stories are “always money-losers,” and it’s true that pictures of Brett Favre’s manhood can be difficult to sell ads next to. Most (but not all) of those 10.54 million Brett Favre pageviews were served without ads on them. But that has more to do with, er, private parts than the model of paying sources.

But even setting aside the immediate advertising revenue — the most difficult task facing any website is getting noticed. Assuming there are lots of people who would enjoy reading Website X, the question becomes how those people will ever hear of Website X. Having ESPN talk about a Deadspin story during Sportscenter is one way. Having that Redbook cover emailed around to endless lists of friends is another. Gawker wants to create loyal readers, but you can only do that from the raw material of casual readers. Some fraction of each new flood of visitors will, ideally, see they like the place and want to stick around.

Denton publishes up-to-date traffic stats for his sites, and here’s what the four in question look like:

It’s impossible to draw any iron-clad conclusions from these squiggles, but in the case of Jezebel and Deadspin, the initial spike in traffic appears to have been followed by a new, higher plateau of traffic. (The same seems true, but to a lesser extent, for Gizmodo — perhaps in part because it was already much more prominent within the gadget-loving community when the story broke than, for example, 2007-era Jezebel or 2010-era Deadspin were within their target audiences. With Gawker, the O’Donnell story is too recent to see any real trends, and in any event, the impact will probably be lost within the remarkable overall traffic gains the site has seen.)

Fungible content strategies

I’ve purposefully set aside the (very real!) ethics issue here because, when looked at strictly from a business perspective, paying sources can be a marker for paying for content more generally. From Denton’s perspective, there isn’t much difference between paying a source $10,000 for a story and paying a reporter $10,000 for a story. They’re both cost outputs to be balanced against revenue inputs. No matter what one thinks of, say, Demand Media, the way they judge content’s value — how much money can I make off this piece? — isn’t going away.

Let’s put it another way. Let’s say a freelance reporter has written a blockbuster piece, one she’s confident will generate huge traffic numbers. She shops it around to Gawker and says it’ll cost them $10,000 to publish it. That’s a lot of money for an online story, and Denton would probably do some mental calculations: How much attention will this story get? How many new visitors will it bring to the site? What’s it worth? I’m sure there are some stories where the financial return isn’t the top factor — stories an editor just really loves and wants to publish. But just as the Internet has turned advertising into an engine for instantaneous price matching and shopping into an engine for instantaneous price comparison, it breaks down at least some of the financial barrier between journalist-as-cost and source-as-cost.

And that’s why, even beyond the very real ethical issues, it’s worth crunching the numbers on paying sources. Because in the event that Denton’s Ratio spreads and $10 CPMNV becomes a going rate for journalists as well as sources, that means for a writer to “deserve” a $50,000 salary, he’d have to generate 5 million new visitors a year. Five million is a lot of new visitors.

There’s one other line Denton had in the WaPo piece that stood out to me:

“I’m content for the old journalists not to pay for information. It keeps the price down,” Denton writes in an exchange of electronic messages. “So I’m a big supporter of that journalistic commandment – as it applies to other organizations.”

When we think of the effects of new price competition online, we often think of it driving prices down. When there are only a few people competing for an advertising dollar, they can charge higher rates; when there are lots of new competitors in the market, prices go down. But Denton’s basically arguing the equally logical flipside: I can afford to pay so little because there aren’t enough other news orgs competing for what sources have to offer. Let’s hope we don’t get to that same point with journalists.

15:00

The Newsonomics of news anywhere

[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.]

Facebook isn’t trying to replace Gmail or Yahoo Mail — it’s just trying to bring a little order to our world, right? This week’s Facebook Messages announcement is stunningly simple, and in line with the next phase of the web, both overall and for news.

Take MSNBC’s description of Facebook Messages:

Instead of dealing with the dilemma of reaching people via e-mail or direct message or SMS, all of these will be combined, so that you’ll be able to reach someone the way they prefer to be reached, without you having to think about it. ‘All you need is a person and a message,’ said Andrew Bosworth, director of engineering for Facebook.

That’s the next web (r)evolution in a nutshell. It’s a unified theory of messaging. And it can be easily extended into the unified theories of TV, movies, shopping — and news.

Make a few substitutions, and you’ve got “All you need is a person and a movie,” or “All you need is a person and a shopping list” or “All you need is a person and the news.” For news creators, and aggregators, it’s a big thought that will be play out more dramatically in the tablet-inflected world of 2011. Only those who grok its meaning and execute properly may make digital reader revenue a reality.

In short, it’s about simplification, about interconnection, about consolidation, and it’s a principle that is beginning to — and should — form the foundation of the much of the next-generation thinking about the news business.

Though we’ll continue to see a panorama of new digital services and products, much of the early digital vision has been built out. We may live in a find-anything-anytime-anywhere world, but it’s also a digital fumbleathon, as we bounce from mobile apps of three distinct platforms, mail and preference settings, interminable demands for passwords, multiple hard-to-combine “friend” and contact lists, Twitter decks, Facebook walls, RSS feeds, preference popups, security hiccups — not to mention TV remotes and cable guides that seem like visitors from a distant analog planet.

Facebook Messages says: We get it. We’ll make it easier for you to keep in touch with those you want to stay in touch with. We’ll see how well Facebook delivers on that promise, but it’s the right one for our age. We can see its echoes multiplying.

On Wednesday, HBO announced that its HBO Go initiative will make HBO available through digital devices for its cable channels subscribers by year’s end. That initiative is part of parent Time Warner’s TV Everywhere push, which likewise says: You paid us once. Now get what you paid for wherever you want it. It’s the unification of the premium TV business, as cable companies are starting to see unprecedented churn, given piecemeal availability of programming through the Internet, legally or illegally.

Comcast is making a similar promise, as it newly announced app promises to connect up its customers’ experience. The app’s functionality is rolling out over time, but will ultimately allow viewing of all Comcast’s Xfinity content via devices, plus provide programming services, such as remote DVR taping, and let an iPhone replace that dreaded remote — borrowing a little bit from Tivo, a little bit from Sonos.

Netflix, of course, grasped the concept earlier, as CEO Reed Hastings has noted (“Six Lessons for the News Industry from Reed Hastings“): “We knew that the DVD business was temporary when we founded the company. That’s why we named it Netflix and not DVD by mail. We wanted to become Netflix.” Netflix’s current promise: “Unlimited TV.” You guessed it: one relationship with the brand, and you get what you paid for however you want it.

Where are the news promises? Well, the first generation has been Yahoo News. Remember your first time seeing all those wondrous headline links from the BBC, the Post, the Hindu, and CNET all in one place? First-generation aggregation was cool, but we haven’t really progressed much beyond it, though we’ve seen nuances, with personality added to aggregation (HuffPo) and some regional aggregation (Seattle Times, TBD.com). We’ve seen some good smartphone apps and a few new iPad apps. Come 2011, we’ll begin to see more News Everywhere experiences.

The first big one in the U.S. should be The New York Times. The Times will launch its metered pay system early in the year. If tech issues can be solved, expect paying customers to get access — aiming toward seamless, but likely with a few wrinkles — across devices, an intending-to-be-unified reader experience. The Times’ Martin Nisenholtz explained recently: “It’s not just about the website anymore. It’s about all of the brands where you can read the Times…it’s about the website, smartphones, the slates, iPad…it’s a hugely different world than it was five years ago.” So, the Times will say give us a single price, and we’ll let you read about you want of the Times where you want, recognizing you across digital experiences and — nirvana — allowing you to keep track of what you’ve shared and read, and with whom, without you having to recall whether you sent that story to your best buddy on your iPhone.

I’ve called that approach All-Access, and I think it’s the news industry version of TV Everywhere. So far, the best example of all-access pricing is the Financial Times, upon whose experience the Times’ model is built. Its “newspaper + online” top-of-the-line subscription allows full digital access plus the paper for one price.

The Everywhere notions seem friendly — and they have to be consumer friendly to be successful — but they’re actually quite darwinian. How many entertainment and news brands will we pay for? Only a handful, probably, especially at premium rates. So in the news business, that battle means only a few brands win the reader revenue sweepstakes, unless a Hulu-for-news proposition (AP’s digital rights clearinghouse expanded; a second life for Rupert Murdoch’s Alesia?) succeeds big-time.

To win, news companies will have work on the principle of the Field Theory. No, not the unified field theory, though unification of message and of service is fundamental. It’s the Sally Field Theory, which you remember the 1984 Oscars speech: “I’ve wanted more than anything to have your respect…I can’t deny the fact that you like me, right now, you like me!” Well who wants renewed respect than newsies? Who keeps talking about the trusted brand relationship that newspapers have long had with readers?

If news companies want to “own” the news customer (and be able to mine his data deeply), then they, large or small, newly minted or history-encrusted, have to bring their games to a new level. For the Times (or the Journal), the current breadth of content may be sufficient, if the execution manages to bring a little delight of ubiquity to paying subscribers.

For local news companies, the bar is probably a different one. Yes, they’ll have to put their tech development in high gear (many are woefully behind on tablet apps, just as the devices explode under this year’s Christmas trees), but they’ll also have to up their local value proposition. That means not just repurposing their own staff’s local news output, but really reaching out to community blog aggregation, broadcast partnership, working Yelp-like guide magic (probably through partnership) and/or creating a new level of digitally enhanced local shopping experiences. It’s unclear how much limited local news across devices is worth to news consumers.

News Anywhere, or unified news, or All-Access, whatever we want to call it, demands the singular focus, product development and messaging that Netflix, HBO, Comcast, and Facebook are bringing to it. Those are all skills that have been problematic in the news industry. Yet, here we are, in a new age, in a mobile news age about to unfold, giving the journalism, and journalists, another chance to get it right.

November 15 2010

17:00

Comments and free samples: How the Honolulu Civil Beat is trying to build an audience (and its name)

“You’re starting from absolute scratch. That’s a big hill to climb.”

That’s not an excuse, but it is the reality of the news startup that John Temple is describing. Temple is the editor of the Honolulu Civil Beat, the online-only news source that made a big splash earlier this year because of its pay-first mentality. As envisioned by Temple, and by Civil Beat founders Pierre Omidyar and Randy Ching, most of the content on the Civil Beat site sits behind a paywall.

As far as startups go, the Civil Beat had news futurists curious about whether a media organization could get readers to pay for news upfront — particularly since Civil Beat has the advantage/disadvantage of starting from a paid subscription model out of the box, as opposed to introducing one after the fact. The big question — it almost seems like a sphinxian riddle — is how do you get people to pay for your work if they can’t readily access it?

In the first six months, the answer seems to be a lot of hustle on the part of Temple and his staff. They’ve aggressively pursued coverage on land use and money issues, placed an emphasis on data, and are engaging readers on and offline. And one other thing: They’re giving away free samples on CivilBeat.com.

“When you’re working at an established organization, you’re building on so much tradition. And here you’re not. You’re developing everything,” said Temple, who is more than familiar with established organizations having been editor and publisher of the departed Rocky Mountain News.

Doling out free content

Where Civil Beat has to be creative, Temple told me, is in making a connection to readers and turning them into site members. “The challenge of course is to have enough people feel that you’re essential that they want to support you and pay for your services,” he said. (Temple said they aren’t releasing numbers on Civil Beat memberships or site traffic just yet. Though he did say this: “People who are willing to sign up at the early phase of a new news product like this with high aspirations — there’s low churn rate with those people.”)

The paywall also sprouts leaks on certain days, when some Civil Beat stories are viewable to the public — generally reporting on the government or elections, Temple said. The Civil Beat homepage, as well as its Twitter feed, also provide a basic understanding of the day’s news in a less-than-closed off way. Temple said it’s been important, as a matter of marketing as well as gaining the public’s trust, to demonstrate to readers that their news is not completely hidden away.

Which is why they went one step further, offering the equivalent of “free ice cream sundaes!” with complete free access to the site on certain days. The free content days are timed around stories the staff believe are in the public interest or enterprise stories they’d like to see reach a wider audience. Temple said they recognize that in order for readers to decide whether they want to spend money on the Civil Beat, they should be able to sample it first.

What the Civil Beat shares in common with many news organizations is the belief in the strength of their journalism as the primary draw for the public, be it land development and environmental stories or campaign funding news. It’s a mix of news basics in new forms, with the Civil Beat reporter/hosts fact-checking (similar to PolitiFact) statements from politicians and parsing data for document-driven reports on subjects like public employee salaries.

“We share with the readership the experience in gathering those records and encountering government agencies,” Temple said. “In some ways that has been very provocative, because we’ve written about how difficult it is to get information and how government agencies treat us.”

Building community

As a small news organization willing to experiment with coverage areas, reader engagement, and ways readers can pay for content, Temple said it was necessary to have an open dialogue with members about changes to the Civil Beat. The company blog has become a place to discuss their journalism and ask for suggested interview questions. Temple said it’s also been useful as they’ve also tinkered with the subscription levels and pricing, offering a 15-day trial for $0.99 and adding a $0.99 cent per month discussion membership to take part in comments. (Comments are free to view, just not to leave.)

And speaking of comments, Temple says they have nothing but good things to report. Discussions have largely remained civil, even while spirited. Members use their real names or can use a screen name (though Civil Beat staff know members’ real identities, thanks to the subscription process). And what may be most surprising to editors dealing with comments elsewhere: “We don’t even have a profanity filter on our comments — anybody can post anything in our comments. It’s all self regulated,” Temple said.

The Civil Beat seems to be making its biggest bet on reader engagement, not just as a method of outreach, but also as content for the site. The debates between readers, ranging from education reform to a proposed Honolulu rail project are filled with long, thoughtful posts, often citing links for background. In turn, Civil Beat staff will invite members to write blog posts spun off from discussions or on other topical issues. “Obviously, the core content is the journalism that we produce, but the comments and the discussion create a whole other level of content,” Temple said.

They’re also reverse engineering the idea of comments as the new “public square,” by holding events (called “Beatups”) on issues like the judicial nomination process and the merger of the Honolulu Advertiser and Honolulu Star-Bulletin. The events are open to members, with non-members able to join for as little as the $0.99 commenting subscription.

Temple wants to not just inspire the daily conversation, but be a part of it — and yes, to get people to help pay for their work along the way. By making select stories open and comments visible, the strategy appears to be letting outsiders have just enough of a taste (or get them riled up for a debate) to pique their curiosity. The idea for the Civil Beat is to prove its worth as a news organization through their work while being open with readers about how they operate. And with substantial financial backing, it can afford to give its strategy some time to develop.

“If you look at most news organizations, and of course they’ve all evolved over the years, there’s still a pretty defensive posture,” Temple said. “We don’t think that’s a healthy way to approach it and I think our members have responded really positively to that. They want to feel that they can talk to you.”

15:00

Josh Marshall on Talking Points Memo’s growth over the last decade: Moving from solo blog to news org

It’s funny to think back to the Talking Points Memo of ten years ago, just a strip of text down a single blue page. (It also had a red-background phase before settling in on the beige color scheme it still has today.)

On November 13, 2000, Joshua Micah Marshall launched the site as a place to blog the presidential election recount in Florida. The tone was different then, much chattier; witness how often Marshall referred to himself as “Talking Points” in the third person, as in “Talking Points heard….” But over the next decade, of course, Marshall not only kept his blog going but grew it into one of the most cited models for online journalism, winning prizes, innovating with the crowd, attracting capital, and growing to a staff of almost 20. (Disclosure: TPM’s growth employed me at one point.)

In honor of TPM’s tenth anniversary, we emailed Marshall some questions about the growth of TPM and the direction it’s headed. He’s been dropping hints about future plans on Twitter, and he’s thinking a lot about what mobile devices will mean for news. And he says TPM is getting ready to experiment with a paid membership model early next year — but not a paywall.

There are some valuable lessons for anyone in the midst of, or considering launching a startup. Here’s the full transcript.

LKM: TPM is turning ten. Are you where you even close to where you thought you would be when you started? Are you where you thought you would be even five years ago?

JMM: Ten years ago, in November 2000, I don’t think I don’t think I gave any thought to where it was going. So I didn’t have any sense of where it would be. But five years ago was when I made the decision to build TPM into a multi-person news organization. Basically in the early spring of 2005. And on balance I’d say, yeah, this is about where I thought we’d be. Certain things are different. At the outset I thought more in terms of launching a series of basically distinct sites. But over time, I saw the logic of taking a more consolidated approach, making TPMMuckraker, for instance, more of a section within a TPM news site than a site in itself. But in terms of scale, topics I wanted us to cover, the move toward paid advertising as the core funding model, it’s about where I was shooting to be at this point.

LKM: You’ve tweeted about your disappointment in outlets repurposing content for the iPad rather than imagining something new. How did you think about TPM and the iPad or tablets? Do you think tablets will create a totally new form in the next few years, the way blogging emerged as its own form?

JMM: We’re focusing a huge amount of resources and thinking on mobile devices. Just to give an example, the percentage of visits to TPM that come from mobile devices is currently rising at almost 1 percentage point a month. So our first priority in 2011 is to make sure TPM is clean, fast and easy to use on all the key devices — iPhones, iPad, Android, etc. But my general sense is that while every digital publication thinks it has a “mobile strategy,” most actually don’t. They think they do, but they don’t. That’s because mobile devices will significantly change the mode of reporting and presentation, just like the web did a decade ago. If you go back to the mid-late 1990s, all the news organizations had websites. But it was basically print slapped onto the web. It was only in the beginning of this decade that you started to see presentational forms that were really native to the web and worked in the context of its strengths and weaknesses. I think mobile is about where web journalism was in maybe 1996-97. So we’re trying to keep in mind that the medium is still quite primitive and that we want to come up with some genuinely new, innovative uses of it.

I think it’s going to grow quickly, with two segments: one that’s basically tablets, things that look something like the iPad now does and then much smaller devices that people will carry with them/on them at all times. In the former category, I think you’ll have versions that look something like full-function websites, albeit designed very differently and around touch. It’s with the smaller devices that we’ll really be challenged to figure out ways to operate within much smaller screen sizes and interact with readers in fundamentally different ways. But as I said before, I don’t think anyone’s really come up with the break-out ideas for mobile yet.

LKM: A while back, you teased the idea of a membership model, where paid TPM members might get extra content or access. Do you imagine that model coming to fruition in the next year or two?

JMM: We’re hoping to do that in the first half of 2011. But to be clear, we’re never moving to a paywall model.

LKM: TPM’s expansion has been steady in the last few years. How do you balance maintaining quality with growth?

JMM: It’s a constant struggle. I knew something about journalism when I started doing this. And I actually knew a decent amount about the technology that powers a website. But I didn’t know anything about growing a company or an organization. So I’ve learned on the job. There are a lot of particular details about management and stuff like that. But I think the key is keeping in place a critical mass of people whose integrity and judgment I can trust. Building TPM taught me to be a businessman, and I enjoy that part of it. But really that’s what it comes to: a core of people who you trust.

LKM: What do you wish you knew ten years ago when you first started blogging?

JMMIt’s funny. I’m glad I didn’t know any of it. The pleasure for me has been exploring, learning, coming up with ideas or more often finding half-formed ideas and wrestling with them until I find some way to use them to improve what we do. I wouldn’t want to rob myself of that.

LKM: What does TPM look like ten years from now?

JMM: Stay tuned.

November 09 2010

15:00

Loose ties vs. strong: Pinyadda’s platform finds that shared interests trump friendships in “social news”

There isn’t a silver bullet for monetizing digital news, but if there were, it would likely involve centralization: the creation of a single space where the frenzied aspects of our online lives — information sharing, social networking, exploration, recommendation — live together in one conveniently streamlined platform. A Boston-based startup called Pinyadda wants to be that space: to make news a pivotal element of social interaction, and vice versa. Think Facebook. Meets Twitter. Meets Foursquare. Meets Tumblr. Meets Digg.

Owned by Streetwise Media — the owner as well of BostInnovation, the Boston-based startup hub — Pinyadda launched last year with plans to be a central, social spot for gathering, customizing, and sharing news and information. The idea, at first, was to be an “ideal system of news” that would serve users in three ways:

1. it should gather information from the sites and blogs they read regularly;

2. it should mimic the experience of receiving links and comments from the people in their personal networks; and

3. it should be continually searching for information about subjects they were interested in. This pool of content could then be ranked and presented to users in a consistent, easily browsed stream.

Again, centralization. And a particular kind of centralization: a socialized version. Information doesn’t simply want to be free, the thinking went; it also wants to be social. The initial idea for Pinyadda was that leveraging the social side of the news — making it easy to share with friends; facilitating conversations with them — would also be a way to leverage the value of news. Which ties into the conventional wisdom about the distributive power of social news. In her recent NYRB review of The Social Network, Zadie Smith articulates that wisdom when it comes to Facebook’s Open Graph — a feature, she wrote, that “allows you to see everything your friends are reading, watching, eating, so that you might read and watch and eat as they do.”

What Pinyadda’s designers have discovered, though, is that “social” news doesn’t necessarily mean “shared with friends.” Instead, Pinyadda has found that extra-familiar relationships fuel news consumption and sharing in its network: Social news isn’t about the people you know so much as the people with whom you share interests.

Pinyadda’s business model was based on the idea that the social approach to news — and the personalization it relied on — would allow the platform to create a new value-capture mechanism for news. The platform itself, its product design and development lead, Austin Gardner-Smith, told me — with its built-in social networks and its capacity for recommendation and conversation — bolsters news content’s value with the experiential good that is community — since a “central point of consumption” tends to give the content being consumed worth by proximity.

The idea, in other words, was to take a holistic approach to monetization. Pinyadda aimed to take advantage of the platform’s built-in capacity for personalization — via behavioral tracking, or, less nefariously, paying attention to their individual users — to sell targeted ads against its content. “Post-intent” advertising is interest-based advertising — and thus, the thinking goes, more effective/less annoying advertising. That thinking still holds; in fact, the insight that common interests, rather than familiarity, fuels news consumption could ratifies it. As Dan Kennedy put it, writing about the startup after they presented at a Hacks/Hackers meetup this summer: “Pinyadda may be groping its way toward a just-right space between Digg (too dumb) and NewsTrust (too hard).” The question will be whether news consumers, so many of them already juggling relationships with Facebook and Twitter and Tumblr and Posterous and other such sites, can make room for another one. And the extent to which the relationships fostered in those networks — connections that are fundamentally personal — are the types that drive the social side of news.

November 08 2010

15:00

Center for Public Integrity changes up its audience strategy to build a new revenue stream from readers

Nonprofit news outlets reach an audience in different ways. To borrow an analogy, imagine that there are two camps: wholesalers and retailers. Under the wholesale umbrella, we find organizations like ProPublica that primarily reach their audience through partnerships with established news organizations. Retailers, meanwhile, reach an audience directly, like Voice of San Diego or MinnPost.

Both strategies can make sense. But as journalism fundraising becomes increasingly competitive, that audience distinction is blurring. ProPublica, for one, is investing more resources into its website. And the Center for Public Integrity, a longtime wholesaler known for projects that appear in newspapers like the Washington Post or The New York Times, is now rethinking its digital strategy and wading into retailing, too. “It’s not an either or proposition,” the Center’s new executive editor John Solomon told me recently. With a $1.5 million investment from the Knight Foundation, they’re working on revamping their digital strategy to reach readers directly, via the web and mobile products. The strategy isn’t just about distribution for distribution’s sake — it’s about the bottom line.

“The Center had a different challenge than the rest of the journalism industry,” Solomon told me, referring to the for-profit world. “When the Center started, it was the center of the nonprofit world. Today there are 70, 80, 90, 100 groups all competing for the same limited pool of nonprofit dollars — the Knights, the Fords, the Carnegies, all these gracious funders of nonprofit journalism. So the Center has decided to take the leap aggressively and listen to funders and try to create earned revenue that augments our donations, that creates a sustainable model.”

Solomon’s goal is to produce $2 worth of journalism for every $1 a foundation donates. To do that, he’s looking beyond foundations to readers. That’s akin to a model very familiar to the Center’s executive director, Bill Buzenberg, who spent almost 30 years in public radio (supported by listeners, like you!) at NPR and Minnesota Public Radio. The Center isn’t alone in trying to rethink its nonprofit model. Knight recently announced a $15 million grant project to help figure out longterm funding solutions for journalism.

The first step toward that new revenue stream is pulling in a new audience. Since Solomon started on new digital projects a few months ago, including making its website more SEO friendly, time on the Center’s site is up dramatically, to a remarkable 12 minutes per user. (He showed me the Google Analytics chart for proof.) Pageviews have skyrocketed too. The site is in the midst of a complete redesign, which will make it feel more like a news site and less like a think tank’s. We recently wrote about a new HTML5 product that makes reading long-form journalism pleasant on any device and without an app.

I asked Solomon how he plans to round up these new, engaged readers. He pointed to some of the successes he pulled off in widening the audience both online and in print at the Washington Times, where he had been executive editor for a little less than two years. “One of the little dirty secrets in my last eight months at the Washington Times before the Moon family erupted and the paper fell apart, web traffic was up 500 percent,” he told me. “Digital revenues were up 360 percent and our national print publication grew circulation by 25 percent. There is no other print publication, that I can think of, in the middle of a recession that had that kind of double-digit gains.” (Although, to be fair, many conservative outlets saw increases in audience pegged to the election and administration of Barack Obama.)

Washington journalism is in a time of significant revenue rethinking — from the paywall-only National Journal opening up a free version of its site, to free Politico launching paid products, the movement toward multiple revenue streams is afoot. General manager of the Allbritton-backed startup TBD, Jim Brady, recently said at a Online News Association panel that his business model is “shrapnel” — “there isn’t one stream that’s going to make us successful.”

If the Center can figure out a way to monetize a new audience, there will likely be an eager audience watching that success. “I really believe the nonprofit journalism world can be the innovation lab where the business models change,” Solomon said.

October 28 2010

16:00

Engagement: Where does revenue fit in the equation?

Our post earlier this week about philly.com’s seven-part equation to measure user engagement has sparked a lively debate in the comments. The central question: Should a news site’s engagement equation factor in revenue? If so, how?

To recap, Philly.com’s equation puts a numerical value on user engagement by calculating what percentage of the site’s users fulfill certain criteria, including viewing multiple pages, spending more than six minutes on the site, leaving comments, sharing content through social media, or returning regularly. The equation allows philly.com to track how the site is doing in terms of these individual categories of engagement, as well as averaging them out to obtain an overall engagement percentage.

But several people, starting with Sonia Meisenheimer of the St. Petersburg Times in the post itself, questioned the usefulness of an equation that doesn’t take into account how user behavior affects the news organization’s bottom line. Ravi Pathak propsed adding revenue as a coefficient, and Ophir Prusak suggested that factoring in banner-ad clickthrough rates might be a good way to do this. Jim Novo put a different spin on the question, asking:

Another way to say this: does it matter more to you what kind of content engaged visitors in the past, or what kind of content attracts visitors who are likely to remain engaged in the future?

He suggested focusing exclusively on “recency,” or the likelihood that a user will visit the site again, as an engagement metric that speaks more directly to revenue.

But Eric T. Peterson, the author of the white paper upon which philly.com’s engagement equation was based, jumped in to defend the idea of keeping revenue calculations separate from engagement:

Even in the media and publishing model, engagement and revenue are different aspects of consumer behavior. A consumer can be very engaged with your site but not be tremendously profitable…but you still want a way to measure their engagement independent of profit. Same for satisfaction and engagement — they are different aspects of the consumer experience…Work to understand what my (or any) engagement metric can tell you about your audience first, then go looking for the relationship between engagement and money.

More than a dozen people have chimed in on the issue, and the debate is still going on. You can read the full thread here.

October 21 2010

14:00

The Newsonomics of the ad recovery

[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.]

Reading the news about the news business, you may have missed this: advertising is booming, again. Well, booming may be too strong a word, but overall, it’s growing. Unfortunately, the news about the news ad business is still negative. Not as negative as the negativity of last year — down 27 percent for 2009 — but still down in single digits over 2009. Being less negative than last year is good, it’s better, but my math doesn’t add that up to a positive.

So what we have here is a trend that’s held true from boom to bust through tepid recovery: newspaper companies’ continue to be the laggards, losing market share in ad revenue, by the week, month, and year.

This week’s reports from The New York Times Co., Media General, and McClatchy, and last week’s from Gannett, all point to the same numbers with a minus sign in front of them. Let’s look at the numbers, and the newsonomics of the ad recovery.

Overall ad spending is up 2.5 to 4 percent through the first nine months of the year, and forecasts call for it to come in at that rate for the full year.

Let’s pick that apart.

Local TV advertising is up 13 percent in 2010, according to BIA/Kelsey. National broadcasting is putting up double-digit numbers. Cable advertising is growing in single digits. Radio’s up about 6 percent.

Even magazine advertising, subject to similar doldrums as newspapers, was up 5.3 percentin the third quarter, its second consecutive quarter of positive growth.

Digital advertising picked up its pace rapidly at the beginning of 2010: up 11.3 percent over the first half of the year to $12.1 billion, according to the Interactive Advertising Bureau. This digital growth is a long-term trend — online advertising is now a close No. 3 among advertising media in the U.S. (behind TV and newspapers). It’s surpassed TV, to become No. 2 in the UK, and surpassed newspapers to become No. 2 in Japan. (See The Newsonomics of online ad trending.)

As an aside, consider how much faster Google is growing than the online ad market, from which it derives almost all its revenue. In the third quarter, Google reported revenues of $7.29 billion — a 23-percent year-over-year increase.)

Now back to newspaper advertising. Gannett’s publishing revenues dropped 4.8 percent in the third quarter, while the The New York Times Co. was down 2.7 percent. McClatchy saw a 5.7-percent decline. Media General had even more problems: down 7.6 percent in pub revenues. Gannett’s and Media General’s revenues, overall, were helped by owning broadcast properties, as Media General’s 18.4-percent increase in broadcast helped it report an overall increase in year-over-year revenues. Broadcast revenues at Gannett were up 22.3 percent.

Why the great disparity between newspaper — meaning print newspaper — and the rest of the recovering ad world? We won’t take the space to parse it here and now. Suffice it to say that the long-term declines in classified categories — auto, real estate, and recruitment — have hurt the industry greatly. Now, though, even retail advertising is “coming back” quite unevenly, the bumpy road to recovery New York Times CEO Janet Robinson highlighted in her third-quarter report remarks.

The possible silver lining of the newspaper reports: Some digital revenue reports were on a par or better than the growth of online advertising overall. That hasn’t been the case consistently over the past couple of years, so the the latest numbers offer a ray of hope for the future.

If online advertising grew 11.3 percent overall, then compare that to the 3Q growth rates (not quite apples to apples, but not far off) at the New York Times Company (15 percent), Gannett (10 percent), MediaGeneral (15-22 percent, depending on how you count it) and McClatchy (1 percent). Those numbers indicate that some of those newspaper companies are doing a better job of selling digital advertising.

My talks with publishers and online directors point to several reasons for that good performance, ones long in discussion, but now becoming more routinely operational. The No. 1 reason: Publishers have simply focused more resources on selling digital products. They are also increasingly un-bundling products, not forcing as many print/digital buys. And, of course, they’re putting themselves in position to get spending in the fastest growing ad category — online — and devoting fewer resources to mining print revenues, which are declining in general.

So here’s the rub, and the conundrum. Newspaper companies are now pedaling as fast as they can, trying to get as digital as they as fast as they can, because that’s what the growth in ad dollars is happening. The New York Times Company says that 27 percent of its ad revenue is now driven by digital, and that’s up three points year over year. So it has a quarter of its ad business in the new world, and three-quarters in the old world. Add it up, and you get those negative numbers overall. The trick of the next several years: pedal (and peddle) even faster on the digital bike, while stoking the steady, if slowing train of print — and pray that the train doesn’t run out of coal too quickly.

October 18 2010

16:00

Move over, LiLo! Public-interest news can be more valuable to publishers than traffic bait

Conventional wisdom: What people really want from their journalism is some combination of celebrity gossip, naked celebrities, and gossip about naked celebrities. That may be a slight exaggeration, but it’s more than an assumption: Through the magic of web analytics, news publishers have access as never before to the collective Id of the people they serve…and again and again, such lowbrow fare as LiLo’s legal troubles and Favre’s photographic adventures rack up the pageviews, while their less sensational counterparts are rewarded for their dignity by being left alone. The more high-minded journalism — the public-interest investigations, the news about the economy and public policy — is still valuable, of course. But it’s also, we’ve assumed, a loss leader.

A study released today provides a hopeful counterpoint to all that (hopeful, that is, if you’re not Lindsay Lohan): For publishers, hard-news-focused, public-interest-oriented reporting might actually be more valuable than celebrity gossip and similarly LiLotastic fare. And not just in a good-for-democracy sense, but in a bottom-line sense. Perfect Market, a firm aimed at helping publishers maximize online revenue from their content, tracked more than 15 million news articles from 21 of its client news sites — including those of the Los Angeles Times, San Francisco Chronicle, and Chicago Tribune — from June 22 to September 21 of this year. And it found that, while the Lohan sentencing and other celebrity coverage drove significant online traffic, articles about public-interest topics — unemployment benefits, the Gulf oil spill, mortgage rates, etc. — were the top-earning news topics of the summer. The latter stories offered their publishers, overall, more advertising revenue per page view (which is to say: more bang for their advertising buck) than their fluffy counterparts.

The caveat: Perfect Market has a vested interest in the financial viability of quality content. (“At Perfect Market we believe that content matters,” the firm says in its press release. “By delivering the right content in the right format to the right user with the right relevancy, Perfect Market has increased the revenue for partners in our program by at least 20-fold.”) That said, though, the study’s holistic scope — moving beyond pageviews to focus on revenue — is an instructive approach. Traffic is notoriously fuzzy as a metric; it’s also notoriously stingy when it comes to return-on-investment. (Take The Huffington Post, which, for all its skill — PHOTOS! VIDEO! SLIDESHOW! — at leveraging our love of scandal, and for all the traffic it brings to its site, has struggled with profitability.)

For publishers struggling to sustain their operations, let alone grow them, it’s revenue that matters. And in Perfect Market’s study, via context-optimized advertising, it was consumer interest — not the casual variety that leads to quick headline-views, but the more engaged variety that leads to high time-on-site numbers and increased chances of ad clicks — that translated to revenue. Articles about social security were the most valuable to news publishers, the analysis found, generating an average of $129 in revenue for every thousand pageviews. Articles about mortgage rates were next, at $93 for every thousand views, followed by Gulf recovery jobs ($34 for every thousand).

LiLo, on the other hand? She generated only $2.50 for every 1,000 pageviews.

(It’s worth noting that the high-paying topics are united less by their hard-news nature than by their proximity to companies interested in hawking their wares. Immigration lawyers want their ads next to immigration stories; mortgage brokers and “Refinance now!” types want to be next to mortgage-rate stories; job sites want their ads on those Gulf-recovery-jobs stories. That makes sense, but it doesn’t do much for the sea of worthy news stories that won’t have an easy e-commerce hook. There aren’t many good contextual ads for Lohan court stories, but there also aren’t many for corruption investigations.)

We talk about the convergence of mediums: TV and print products and the web, video and text and multimedia, collapsing into one mega-medium. What the Perfect Market study suggests, though, is that there’s another type of convergence we would do well to cultivate: the conflation of editorial content and commercial. Earlier this year, Ken Doctor compared the revenues per unique user at the HuffPo and The New York Times; he estimated that, while the Times brought in $1 per unique user per month, the HuffPo brought in only 12 cents per user. And he attributed the discrepancy in large part to the Times’ advertising savvy: Its longtime presence in the ad-sales business means that it “owns key agency relationships.” It’s able to invest in making its ads contextually relevant to its content and, thus, to its users: AdSense, writ large. None of that is to say that the old church/state wall that has separated ads from journalism should be allowed to crumble; it is to say, though, that engagement may be just as important to news sites’ commercial content as to their editorial.

Image by Globovision used under a Creative Commons License.

15:30

Launch! Five lessons from the first months of running a news startup

Six exhilarating, nerve-scraping months ago, I left my daily newspaper job to put my livelihood where my mouth is: to build a topical local news service serving riders of public transit in Portland, Oregon.

In print, Portland Afoot is an image-rich four-page monthly newsmagazine about “low-car life,” distributed by mail to homes and, starting in the next month or two, to workplaces. Online, it’s a heavily reported wiki, with evergreen pages on every bus route, bike law, and commute subsidy in town, among many other things.

Crazy? Obviously. But four months after launch, I’ll tell you this: I’ve never been learning more or learning faster. Now that I’ve become one of the entrepreneurs I’ve covered here at the Lab, Josh has generously invited me to spin out a few of the practical lessons I’ve been spooling up. Let’s start at the beginning.

Start scheduling meetings immediately, at least one each week, and do not stop.

Michael AndersenYou know how one hour of sleep before midnight is worth two hours after midnight? One coffee date before your launch is worth two coffee dates after your launch.

Maybe it’s because people like to be in the know. Maybe it’s because they’re proud to see their advice shaping your product. Maybe it’s because they have a reflex to root for risk-takers. I don’t know.

Whatever the reason, the earlier people hear about your plan, the more they’ll want to help you. And “people who want to help you” happen to be the things you’re about to need more than anything else in the world.

Loop in local institutions that share your interests.

I thought I was picking a topical niche for the sake of our audience (harried readers without time for irrelevant news) and our sponsors (retailers wanting to target green consumers at the neighborhood level). What I didn’t realize was that I was also opening my arms to a whole universe of private local organizations predisposed to help me succeed.

Portland Afoot needed early subscribers and legitimacy; celebrated local-news blog BikePortland.org ran a positive preview. We’re planning a neighborhood-specific product; the Willamette Pedestrian Coalition, a regional advocacy group, helped me brainstorm the contents. We needed a pilot location for my workplace-distribution scheme; the Swan Island Transportation Management Association, a federally funded traffic-reduction nonprofit, agreed to host it in the industrial area they oversee.

Spare me the warnings about lost independence. Yep, that’s a major risk, and I’m doing my best to deal with it through full disclosure. But it’s a jungle out there and you’re not going to survive without friends. In our case, the whole revenue model depends on print distribution partnerships; entanglements are a fact of life. If your news startup is ever going to get important enough to make enemies, it’ll need to make a few friends first.

If you’re going to sell ads, sell two cheap ones before you launch.

Justin Timberlake and Jesse Eisenberg in The Social NetworkMy gut says Justin Timberlake is right: a website with ads is like a great party that has to be over at 11. I’m sure Portland Afoot would have a few more print subscribers, a bit more web traffic, and most importantly a few more superfans if it had launched with zero ads.

But this nonprofit business, unlike Facebook, is not headed for an IPO. It’s got about a year to succeed or fail to pay my rent. And though I haven’t yet started selling ads in earnest, I’ve done enough to guarantee that you second ad is easier than your first, and your third ad is easier than your second. Prove to advertisers that your audience has worth by getting some ads on the page.

You are not too cool for e-mail.

I hate spam. I hate it so much that when we launched, I promised to ping our mailing list no more than once every three months. It’s a promise I’ve kept — and it was a big mistake.

For people who care about you, regular emails aren’t spam. They are reminders that you exist and are doing wonderful things of which they approve. How do I know? Because nothing — not direct mail, not inbound links, not tables at neighborhood events — drives traffic or action like a mass email to people who’ve opted to receive it. One of my lucky breaks before we launched was that I popped a single box on the site to start building a list of the emails of early visitors. Here’s the PHP script. Steal it.

The weirder your product is — and ours, a heavily reported wiki and four-page monthly magazine, is almost as weird as they come — the more important email, with its universal familiarity, becomes. Email is the U2 of Internet communication — all these years later, it’s the one thing we all still share. Embrace it.

Launch as close as possible to the summer solstice.

Trust me — you’re going to need the energy.

October 08 2010

14:00

This Week in Review: A surprisingly sensible move online, two ugly falls, and questioning hyperlocal news

[Every Friday, Mark Coddington sums up the week's top stories about the future of news and the debates that grew up around them. —Josh]

Another old-media stalwart goes online: This week’s biggest story is a lot more interesting for media geeks than for those more on the tech side, but I think it does have some value as a sort of symbolic moment. Howard Kurtz, who’s been The Washington Post’s media writer for pretty much all of its recent history, jumped this week to The Daily Beast, the aggregation and news site run by former magazine star Tina Brown and media mogul Barry Diller. Kurtz will head the site’s D.C. bureau and write about media and politics. He’s about as traditional/insider Washington media as they come (he also hosts CNN’s Reliable Sources), so seeing him move to an online-only operation that has little Beltway presence was surprising to a lot of media watchers.

So why’d he do it? In the announcement story at The Daily Beast, Kurtz said it was “the challenge of fast-paced online journalism” that drew him in. In interviews with TBD, Yahoo News and The New York Times, Kurtz referred to himself as an “online entrepreneur” who hopes to find it easier to innovate at a two-year-old web publication than within a hulking institution like the Post. “If you want to get out there and invent something new, maybe it is better to try to do that at a young place that’s still growing,” he told TBD.

Kurtz has his critics, and while there are some (like the American Journalism Review’s Rem Rieder) who saw this as a benchmark event for web journalism, several others didn’t see The Daily Beast as the plucky, outsider startup Kurtz made it out to be. PaidContent’s David Kaplan said that with folks like Brown and Diller involved, The Daily Beast has a lot of old media in its blood. (It may merge with Newsweek soon.) Salon’s Alex Pareene made the point more sharply, saying he was going to work for his “rich friend’s cheap-content farm” for a “fat check and a fancy title.” As Rachel Sklar told Politico (in a much kinder take), for Kurtz, this is “risk, but padded risk.”

Maybe the fact that this move isn’t nearly as shockingly risky as it used to be is the main cultural shift we’re seeing, argued Poynter’s Steve Myers in the most thoughtful piece on this issue. Kurtz is following a trail already blazed by innovators who have helped web journalism become financially mature enough to make this decision easy, Myers said. “Kurtz’s move isn’t risky or edgy; it’s well-reasoned and practical — which says more about the state of online media than it does about his own career path,” Myers wrote. For his part, Kurtz said that his departure from the Post doesn’t symbolize the death of print, but it does say something about the energy and excitement on the web.

Of course, people immediately started drawing up lists of who should replace Kurtz at the Post, but the most worthwhile item on that front is the advice for Howard Kurtz’s replacement by Clint Hendler of the Columbia Journalism Review. Hendler argued we’d be better off with a media critic than with another studiously balanced media writer. According to Hendler, that requires “someone who is willing to, as the case warrants, state opinions, poke fun, call sides, and make enemies.”

A reporter and a newspaper chain’s sad scandals: Two media scandals dominated the news about the news this week. First, Rick Sanchez up and got himself fired by CNN last Friday for a radio rant in which he called Jon Stewart a bigot and suggested that Jews run the news media. Sanchez apologized a few days later, and The Huffington Post’s Chez Pazienza mined the incident for clues of what CNN/Rick Sanchez relations were like behind the scenes.

There are a couple of minor angles to this that might interest future-of-news folks: Joe Gandelman at The Moderate Voice used the situation to point out that those in the news media are being targeted more severely by partisans on both sides. (We got better examples of this with the Dave Weigel, Octavia Nasr and Helen Thomas snafus this summer.) Also, Sanchez was one of the news industry’s most popular figures on Twitter, and his account, @RickSanchezCNN, may die. Lost Remote said it’s a reminder for journalists to create Twitter accounts in their own names, not just in their employers’.

Second, The New York Times’ David Carr detailed a litany of examples of a frat-boy, shock-jock culture that’s taken over the Tribune Co. since Sam Zell bought it in 2007. (Gawker and New York gave us punchy summaries of the revelations.) The Tribune is possibly the biggest and clearest example of the newspaper industry’s disastrous decline over the past few years, and this article simply adds more fuel to the fire. The Columbia Journalism Review’s Ryan Chittum noted that the article also contains the first report of Zell directly intervening in news coverage to advance his own business interests. Meanwhile, the Tribune is slogging through bankruptcy, as mediation has broken down.

New media analyst Dan Conover saw the Tribune fiasco as evidence that the news business doesn’t just need to be reformed, it needs to be blown up. “We are past the point of happy endings, beyond the hope of half measures, and we know too much now to keep accepting the smugly reasonable advice of the Old Order’s deeply conflicted spokespeople,” he wrote. It’s quite the righteous-anger-fueled rant.

The hyperlocal business model questioned: We talked a bit about hyperlocal news last week, and that conversation bled over into this week, as Alan Mutter talked to J-Lab’s Jan Schaffer about her fantastic analysis of local news startups. Mutter quoted Schaffer as saying that community news sites are not a business, then went on to make the point that like many startups, many new news organizations go under within a few years. The money just isn’t there, Mutter said. (The Wall also has 10 takeaways from Schaffer’s study.)

For those in the local news business themselves, the Reynolds Journalism Institute’s Joy Mayer provided some helpful tips and anecdotes from West Seattle Blog’s Tracy Record, and the Online Journalism Review’s Robert Niles put together an online news startup checklist. Meanwhile, the hyperlocal giant du jour, AOL’s Patch, continued its expansion with a launch in Seattle, and dropped hints of a plan to get into newspapers. TBD’s Steve Buttry assured local news orgs that they can compete and collaborate with Patch and other competitors at the same time.

The iPad’s explosive growth: It’s been a little while since we heard too much about the iPad, but we got some interesting pieces about it this week. CNBC informed us that the iPad has blown past the DVD player as the fastest-adopted non-phone product in U.S. history with 3 million units sold in its first 80 days and 4.5 million per quarter, well more than even the iPhone’s 1 million in its first quarter. It’s on pace to pass the entire industries of gaming hardware and non-smart cellphones in terms of sales by next year. The NPD Group also released a survey of iPad owners that found that early adopters are using their iPads for an average of 18 hours a week, and for a third of them, that number is increasing.

When the iPad first came out, many people saw its users spending that time primarily consuming media, rather than creating it. But in an attempt to refute that idea, Business Insider put together an interesting list of 10 ways people are using the iPad to create content. And marketer Hutch Carpenter looked at the quality of various uses for the iPad and predicted that as Apple and app developers improve the user’s experience, it will become a truly disruptive technology.

More defenses of social media’s social activism: Malcolm Gladwell’s New Yorker piece questioning Twitter’s capability of producing social change drew no shortage of criticism last week, and it continued to come in this week. Harvard scholar David Weinberger made several of the common critiques of the article, focusing on the idea that Gladwell is tearing down a straw man who believes that the web can topple tyrannies by itself. Other takes: Change Observer’s Maria Popova argued Gladwell is defining activism too narrowly, and that online communities broaden our scope of empathy, which bridges the gap between awareness and action; The Guardian’s Leo Mirani said that social media can quickly spread information from alternative viewpoints we might never see otherwise; and Clay Shirky, the target of much of Gladwell’s broadside, seemed kind of amused by Gladwell’s whole point.

The sharpest rebuttal this week (along with Weinberger’s) came from Shea Bennett of Twittercism, who argued that change starts small and takes time, even with social media involved, but that doesn’t mean it isn’t happening. “As we all continue to refine and improve our online social communities, this shift in power away from a privileged few to an increasingly organised collective that can be called at a moment’s notice [presents] a real threat to the status quo,” he wrote.

Reading roundup: A few more nifty things to check out this weekend:

— A few cool resources on data journalism were published this week: British j-prof Paul Bradshaw wrote an invaluable guide to data journalism at The Guardian, taking you through everything from data collection to sorting to contextualizing to visualization. ReadWriteCloud’s Alex Williams followed that post up with two posts making the case for data journalism and giving an overview of five data visualization tools. And if you needed some inspiration, PBS’ MediaShift highlighted six incredible data visualization projects.

— The offline reading app Instapaper has become pretty popular with web/media geeks, and its founder, Marco Arment, just rolled out a paid subscription service. The Lab’s Joshua Benton examined what this plan might mean for future web paywalls.

— Several mobile journalism tidbits: TBD’s Steve Buttry made a case for the urgency of developing a mobile journalism plan in newsrooms, The Guardian reported on a survey looking at mobile device use and newspaper/magazine readership, and the Ryerson Review of Journalism gave an overview of Canadian news orgs’ forays into mobile news.

— Northwestern j-prof Pablo Boczkowski gave a fascinating interview to the Lab’s C.W. Anderson on conformity in online news. Must-reading for news nerds.

— The real hot topic of the past week in the news/tech world was not any particular social network, but The Social Network, the movie about Facebook’s founding released last weekend. I couldn’t bring myself to dedicate a section of this week’s review to a movie, but the Lab’s Megan Garber did find a way to relate it to the future of news. Enjoy.

October 04 2010

16:30

Why diversity turns into conformity in online news: An interview with comm scholar Pablo Boczkowski

If you talk to any of the number of young academics who occasionally contribute to the Lab, it’s likely the name Pablo Boczkowski will come up sooner rather than later. Pablo was one of the first scholars to rejuvenate the hallowed concept of the “newsroom ethnography” for a new generation of scholars examining a new generation of news problems. He has inspired many younger journalism researchers, including me.

Boczkowski was kind enough to take some time to sit down and talk with me about his new book, News at Work: Imitation in an Age of Information Abundance. Since Megan covered the general arguments of News at Work in a previous Lab post, I figure I’ll skip the chit-chat and just let you dive into the (lightly edited) interview. In it, I ask Pablo about, among other things:

  • how newsrooms have changed over the past 15 years
  • the two things he, as a qualitative scholar of news, would want working journalists to know
  • why it’s useful to study news in South America
  • how he thinks his work speaks to debates about the future of journalism

Some of Boczkowski’s most important arguments include:

On what consumers want: “When you sit down and talk to somebody, who is just a regular consumer…it’s very humbling, because you have a sense of, ‘Wow, that’s what people want.’ These statistics about how much time people on news websites, for instance, and what kind of content they use — for the most part, it’s about getting headlines.”

On the importance of the public: “It is impossible to avoid the public anymore. I mean, it’s impossible to avoid listening to the public anymore…The question is what to do when you have to listen to the public. In my own experience, what you hear is not a whole lot that you would like to hear, especially if you have certain ideas about the role of journalism in society, and the importance of that for democracy, and the way the public feels. It’s a little bit depressing. But that is not going to go away because you’ve stopped listening to people.”

On why blogs don’t affect the homogenization of news: “One blog is very different from the next. That is true, but if you look at how the demand for news is organized, the web is a winner-takes-all market. You have the highest concentration of attention of all media markets. The top ten players command not only a high share of attention, but an even higher share of attention than radio or print. What that means is that all these idiosyncratic websites that might give you one perspective that is unique, or might have one part that is not anywhere else, but the likelihood that a large fraction of the audience would actually pay attention to that is minimal. More consumers gravitate towards the top 10 to 20 sites.”

CWA: You began your research in the 1990s with what eventually became Digitizing the News. And the book you’ve written now, News at Work, covers the mid-2000s. I was wondering if you can draw a narrative thread between your first book and your latest one. Can you tell me a story, or is there an arc that ties Digitizing the News into your new book?

PB: The obvious one on the academic side is that Digitizing the News focused on the making of news with a very, very strong sense of technology. Those were the major concerns. This book has a bigger agenda. So while I still pay a lot of attention to the making of news, I also started to branch out into trying to understand what happens with the news when it’s already made — how it is consumed and circulated in society. It’s an extension of the other book towards the realm of news consumption.

The second extension is that while technology still figures in an important place in News at Work, the book also deals with issues of content and meaning.

The third extension of Digitizing the News is the extension of ethnographic space. Digitizing the News, actually, the research for that book started outside of the U.S., but I never included that part. I was also going to do a comparative study at that point. I didn’t get to this because I thought that people were more interested in change and innovation. Over time, my research became more focused on the more interesting comparative dimensions. So still looking at the U.S., but putting the U.S. into perspective and trying to understand what is going on in other parts of the world, because it is interesting in its own right and also because it helps us make sense of what’s going on in the U.S.. That’s why News at Work, in part, takes place in terms of the data and the story outside of the U.S.

Another fourth thread has to do with the fact that Digitizing the News was a book about change and about innovation. It’s also about the impulse to innovate, but the difficulty to do so within established news organizations that are highly traditional. They have been doing certain things for a long time, and it was very hard for them to change from within. News at Work takes place several years — it’s not a decade later, but the following decade.

When a lot of water has gone under the bridge, we start to have a sense of how things have unfolded over 15 years, and how things might unfold over the next so many years. And it tells a story that it’s less about innovation with all its difficulties and possibilities. It’s more about the lack of originality, the lack of change. And not because people want that, but because of the social dynamics and the practical dynamics that have made innovation difficult. It doesn’t matter what you want to call it, but something has made innovation very difficult to emerge.

CWA: You might say the even when innovation has occurred, it has often produced as much imitation as it has diversity. Is that a fair way to summarize it?

PB: Yes. I mean, the unintended consequences of trying to innovate sometimes are that you get a situation which is more conservative than what was going on before. Again, News at Work is really a story about unintended consequences. Digitizing the News is a story about what people tried to do and what happened. News at Work is a story about things that people have not tried to do, have not tried to accomplish, and it happened anyway. Because it happened anyway, and because it happened on the way to doing something else, it was very hard to eradicate because it has not happened by our own will. I think this taps into very deep social tendencies, in general, and particularly in the news industry.

CWA: A lot of the Lab’s readers are working journalists, and they might not pay much attention to the academic study of news. So if you wanted practitioners to take away one or two key points away from News at Work, what would you want them to know? If this is the only time they will hear Pablo Boczkowski talk about this book, what would be the two main takeaways that you would want working journalists to know?

PB: The first thing I’d want them to consider is that, ironically, in the age of the Internet, more news has become less news. So you need to figure how less can become more, instead. To me, it’s evident that the growth and the speed at which information circulates has created some negative consequences for news agencies, negative consequences for consumers, and negative consequences for journalists, because they don’t like how their work is going these days. Nobody has gone into the news profession to replicate other people’s stories and to basically rehash material that already exists.

The question is how to go into that situation so that it is a situation in which less is more. What the research on consumers clearly shows is that, yes, there is some appetite for news headlines and maybe leads, but for the most part, all people really want to read is headlines. And because all people want to read is headlines, you shouldn’t keep rewriting them, rewriting them. You don’t need to rehash them. I am convinced.

You know, I was absolutely humbled and stunned when I started to talk to consumers, the public. To me it was shocking, revealing. When you sit down and talk to somebody, who is just a regular consumer, and you get a sense of what news they like, what they don’t like, what news they want, what they don’t want, etc., it’s very humbling, because you have a sense of, ‘Wow, that’s what people want.’ These statistics about how much time people on news websites, for instance, and what kind of content they use — for the most part, it’s about getting headlines.

You know, it’s not going to make much of a difference if the headline is coming straight from AP or Reuters or if it’s a tweet. I don’t think it’s going to make much difference. One question that I repeatedly ask — it’s not in the books, but it really informed my thinking a lot — a question I routinely ask is imagine instead of having me in front of you, you have the main person of your preferred news site, the manager, the editor. If you would ask for one change on the design of the website, do you know what people said? They wanted an interface like the Google page results.

CWA: So just give them the headlines and a sentence at most.

PB: Exactly.

CWA: They didn’t want video? They didn’t want chats?

PB: No.

CWA: They didn’t want interactivity? They wanted the headlines?

PB: Yes, for the most part.

CWA: That is humbling.

PB: The consumers described their routines. They were strongly organized around the headlines and the navigation of the headline. That coincides with the amount of time people spend on these sites.

CWA: Which is almost no time at all.

PB: Not very high. It’s a fraction of the time they spend on print. And that doesn’t even take into consideration the fact that, that at that time, they are doing other things. They could be in a conference call.

CWA: They are working. They are at work.

PB: Yes. Even in the evening, they’re doing something else. I watch soccer games now with the computer on my lap. I’m sometimes taking soccer stuff from the game on my computer, but that already means that I’m splitting my attention. So if you speak to someone who has to make key editorial decisions, if you spend your time just rehashing what others are doing, you’re spending very valuable resources in creating a product that doesn’t have the value added. It’s not appreciated to the same extent that the resources have invested in them. That doesn’t make much sense. I think it is painful for news organizations to realize that. News has become a commodity.

Spending a lot of resources and trying to make your commodity slightly different from somebody else’s commodity, I don’t think that’s going to work.

CWA: Now, in some newsrooms, to the degree this is known, the reaction has been, “Well, we need new things that will keep them on the site for longer,” right? “We need to have a chat with the editor. We need a slideshow. We need to have the reporters not only typing the story, but getting up in front of the camera. We need to make these print reporters into TV guys who stand up in front of cameras.”

Based on your studies of consumers, do you think that is a losing battle? Do you think that is more what journalists should be doing rather than rewriting headlines? Where would you take that conclusion?

PB: I don’t think making people available for chats or having a great video, given how much time it takes — I don’t think that’s a winning proposition either. I honestly don’t think so. What happens in seven years from now, when journalists start to perfectly understand where the consumer is going — I mean you’ve written about this. Journalists have a set of very mixed emotions. For the most part, they use the data not to inform, like people do in most other industries, but to tweak what they already think and to adapt their thinking. Based on what I see, I don’t think it makes any sense to keep rewriting your competitors’ headlines. It makes sense to place them in a particular way that maybe some of them can be given an editorial perspective and frame. But if it makes more sense than to redeploy all of your resources so that you have more original content, comments, opinions. One often needs to increase the coverage of content that draws a lot of attention, but it also means that changing news values, generally, so journalists don’t want to do that.

It’s also probably time to realize that the level of newsroom employment is way too high for the nature of the market. The other thing for a journalist is — it’s the same way it was humbling for me as a scholar that had me thinking for more than 10 years about journalists and the news and thinking about everything I could think about inside the box of the newsroom, therefore having an impact on society. Then when you start to talk to people, to consumers, to the audience, you realize, ‘Whoops, there is a lot going on.’

Another conclusion is that it is impossible to avoid the public anymore. I mean, it’s impossible to avoid listening to the public anymore. It is absolutely impossible. It’s impossible for scholars. I think it’s impossible for practitioners. The question is what to do when you have to listen to the public. In my own experience, what you hear is not a whole lot that you would like to hear, especially if you have certain ideas about the role of journalism in society, and the importance of that for democracy, and the way the public feels. It’s a little bit depressing. But that is not going to go away because you’ve stopped listening to them.

So what you do with that is a separate story. But it’s absolutely critical to start listening. I think listening to the audience goes far beyond tracking website traffic. The traffic metrics will only tell you a little bit. I did that in the book, looking at what stories sell the most in terms of clicks. But what you get by sitting down and really listening to news consumers, even if it’s a handful of them, is far more important.

Journalism has always been a very insular profession. That cannot be sustained any longer. There is a lot of value that is lost by not listening to the audience. You might not like what you hear. It might be depressing or terrible to hear, but you can’t stop that. It’s not going to go away.

CWA: I’m sure there will be commentators and commentators who hear you saying that there is more media and less news, who are going to say, “Oh, but how can you say that? There are blogs. There is citizen journalism. There’s niche websites popping up all over. How can he say there is less? There is a town that had one news outlet. Now it has 15.” I guess my question would be how would you respond to that sort of criticism?

PB: What I say in the book is that it’s more volume of information and frequency of examination, coupled with decreasing diversity of the content. On the supply side, there may be many, many, many more outlets than before. There is much more media than years ago. They have more options. They have new content all the time. But if you actually analyzed the kind of content that gets supplied, it is incredibly similar from one outlet to the next.

There was that study in Baltimore where they took all the local media in Baltimore across the range of television, radio, blah, blah, blah, for one week. What they found was that 84 percent of the stories that they analyzed had no new content. Some other venue had already covered it the first time when it appeared on the second. That’s 84 percent.

CWA: So even if there were some methodological difficulties in that study, which a few people I know have pointed to, 84 percent is still remarkably high.

PB: It’s huge!

CWA: Even if you allow for some critique like, ‘Well, maybe they didn’t look at enough people,’ 84 percent is still tremendous.

PB: It’s huge. I found the same in my study. On the supply side, you have many more places to get the news, but what you get is the same.

Now, when you say that consumers have blogs and this and that, they are very idiosyncratic. One blog is very different from the next. That is true. But if you look at how the demand for news is organized, the web is a winner takes all market. You have the highest concentration of attention of all media markets. The top ten players command not only a high share of attention, but an even higher share of attention than radio or print.

What that means is that all these idiosyncratic websites that might give you one perspective that is unique, or might have one part that is not anywhere else, but the likelihood that a large fraction of the audience would actually pay attention to that is minimal. More consumers gravitate towards the top 10 to 20 sites.

So, from a practical standpoint, there are outlets out there that have unique information, but do lots of people pay attention to them? No. So in terms of what happens to the supply of news, and what happens with the demand of news, on both sides of the equation, you have is an incredible loss of diversity because the large outlets tend to cover more or less the same stories.

CWA: Through monitoring and imitation.

PB: Exactly. That’s the main theme of the book. When people talk about the web, people talk about what is possible. They assume that what is possible will happen. Because it’s possible, therefore, it’s likely. What the book shows is that there’s a difference between something being possible and something being likely. We have to keep that in mind. There are a lot of things that are possible in life, but there are very few of them that are actually likely to happen. Given the current dynamics, both in terms of how journalists work and what the public does, it is quite unlikely that we will have a very diverse set of facts, even perspectives circulating in society for the average consumer.

I mean, yes, it’s a lot of noise, but there is very little difference in terms of meaning. There is a lot of volume, but it doesn’t make it necessarily very different.

CWA: The bulk of your research for this book takes place in South America. That’s still very unusual in media scholarship. What do you think we can learn by studying journalism outside the United States and the U.K.?

PB: There are several things. I will focus on one. There’s a very, very common explanation for the increase in journalistic similarity, and that explanation has to do with market concentration. We tend to call that the political economy explanation. It doesn’t have that name when journalistic practitioners talk about it, but it’s basically the same story.

The story is basically that this is all a result of the increased pressures of market variables and market logic in the profession. It has a lot to do with media companies operating on the market, and therefore having to compete with entities that are publicly traded across industries that have different logic. So newsroom managers will often say: “It’s not our fault. It’s the market.” It’s not really, “What can we do?” It’s the quarterly earnings or the pressure of the market; therefore, we have to downsize. It serves as a cure-all for the responsibility of the institution that people get news from. You can’t blame them. It’s happening to them.

The interesting case about Argentina is that, while there is a market component, journalists there enjoy a particular labor protection situation, whereby it is very difficult for news organizations for fire journalists. It’s very costly for news organizations to downsize very dramatically.

CWA: Unlike the United States.

PB: Yes. In Argentina, if you were to hire a journalist on a full-time basis, after a month, if you want to get rid of that person, you have to pay a lot of severance. So that’s number one. Number two is that most of the companies in Latin America are not publicly traded companies. They are family-owned enterprises for the most part. The media industry in the U.S. became publicly traded decades ago.

Now, of course, market pressure still exists. If you don’t sell or circulate, financially, there are consequences. It is less direct, especially for short-term dynamics. The cost for the news organization to expand or contract very rapidly is increased. Because those external pressures are mitigated to some extent, it is easier to bring to life what happens inside the newsroom as opposed to outside of it. It’s easier to see how they create a situation increasing monitoring, this increasing imitation, and how that transpired into the news. It happens even when these companies are not publicly traded. That doesn’t mean that in the case of the U.S., the fact that these companies are publicly traded and they shrink the news, it’s not important. Yes, it is, but it means that we have a situation in the U.S which is over-determined. The problems with journalism are not all about the market. It’s not all about debt. It’s not all about downsizing.

CWA: Some of the responsibility for this situation lies with the internal organization and management of newsrooms ultimately.

PB: Exactly. It’s exasperated by external market dynamics, but it’s not really what’s going on outside the organization. That’s a lack of taking responsibility by people inside the organization. That was the big advantage to having studied this outside of the U.S. Inside the U.S., it’s much more difficult.

CWA: In my own research in Philadelphia, the market is such a dominating factor in what I studied, and for other people who are probably doing primarily U.S.-based studies right now. I think it’s become even more difficult in the United States to disentangle the market from it.

PB: I think the consequences are far worse for journalists than for scholars because practitioners over-attribute. They say: “It’s all about the market. There’s nothing we can do. We’re just adapting to the new conditions.” That’s not true. There are lots of things that they are doing deliberately, with unintended consequence, that generate a lot of the outcomes that we see. So that to me was a plus that I had studied this outside of the U.S.

CWA: Obviously, the future-of-journalism stuff has become a major political and issue of public discussion in the United States. There are conferences. There are F.C.C. hearings. This is a public issue now in this country in a way that it has not been for a very long time.

So I guess what I would like to ask is: What would you say to the people who are engaged in this conversation? What can they take from your research? The big question is how to get journalism that is good for democracy. There are lots of ideas about how that type of democracy-building function of journalism can be maintained and strengthened. So, to the degree that you feel comfortable laying in on that debate, based on your own research, what would you say?

PB: That’s an interesting question. In terms of the research for this book in particular, I’ve been to one of these “future of journalism” conferences and I followed the others a little bit. My sense is that the discussion is poorly framed. It is framed in a very traditional way. In a traditional way, I mean framed like how journalism is framed. “We tell the public what the public needs to know. It doesn’t matter what the public wants. It doesn’t matter how the public reacts to it and make meaning out of what we tell them.”

Now, a lot of good has come out of that. But in terms of framed discussion, I think the relationship between journalism and the public has to be reframed. That’s a major element of this book. I made a conscious decision not to stop when I had figured out what was going on in the newsroom, but to then try to understand what happens then. The consequences of imitation shaping the news that we get. What happens? How do people deal with that?

The reason why this is so important is from a business standpoint. There is no business that can survive in a competitive situation, a competitive market, by ignoring the preferences and behavior of the consumer. So journalists could ignore that for decades because it operated, for the most part, in a non-competitive market. But that doesn’t exist anymore. What I hear when I go to “future of journalism” meetings, the discussion is framed entirely normatively: “This is what should happen.”

But, if you want realistic reform and real chances of something happening, you need to have normative conversations with grounded understanding of how people live their everyday lives. My sense that the power of journalism is extremely important for society, but it’s far more important to journalists than what it actually is the public.

A keen journalist really understands what the public does with the stories that they tell. It’s going to be extremely difficult to come up with a realistic reform strategy because these strategies, in my mind, have much less to do with the funding structures for journalism than with understanding how people live their lives and role that information has in the way that people live their lives. So it has to be about journalism and its public. It cannot just be about journalism.

Until we start having a real conversation about the inner workings of journalism, and the way journalistic organizations contribute and continue to contribute to its problems, it will be very difficult to come up with a real, workable solution.

September 28 2010

14:00

September 23 2010

15:00

The Newsonomics of Apple’s “digital circulation” share

[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.]

So the newspaper business is now figuring out how to deal with a new middleman, Apple. The last decade has been about moaning and groaning about The Google, how it has become the mass medium, leaving newspapers in the niche, and how it has gotten the big share of digital ad revenue as an aggregator while news creators have gotten the short end of the hockey stick. The new decade looks like it’s bringing up a suite of similar questions, with Apple first in focus (and maybe Facebook coming next).

Just when newspaper companies thought they’d seen a big, new opportunity to establish strong new reader revenue lines on the tablet, their dreams have hit the pause button. Apple says it wants 30 percent of that emerging reader revenue — including ongoing digital subscription streams — telling publishers that they, like everyone else, have to go through the App Store to do the transaction, giving Apple its due cut. Publishers are now figuring outhow to respond, and as they do, let’s look, briefly, at four sets of numbers that tell us why this Apple/newspaper company tiff matters so much. Within those four sets, we can see the emerging newsonomics of tablet reader revenue.

  • Let’s start with a global number: $34 billion. That’s the amount of circulation revenue — almost all of it print-based — that newspaper companies around the world took in last year, according to research I do annually for Outsell. That number is about 34 percent of total newspaper company revenue, which came in at $99.8 billion. So if it is newspapers’ strategy to transition paying readers to digital devices, charging them along the way, some part of that $34 billion will move to tablets, ereaders, iPads, Streaks, and whatever the next generation of devices are called. If Apple snapped its fingers and transformed the print industry tomorrow, its 30-percent take would be $10.2 billion. That’s a fantastical number, of course: No fingers can be snapped, not all print readers will transition, pricing will change, and so on. But we can see globally how much money may be in play over time.
  • Let’s move to a real-life example, The Wall Street Journal’s $17.29 monthly iPad subscription rate. It’s reportedly sold well, though we don’t have good numbers on it. It’s the major standalone, separately priced news app, and that got it a lot of attention when it was announced. While we can debate the merits of standalone iPad pricing vs. bundling the price with print/web/smartphone access, the pricing itself is of interest. The Journal understands that some readers will abandon print for the iPad. When they do, the Journal doesn’t want to exchange print circulation dollars for iPad pennies. An annual iPad subscription costs $207.48. That compares to $249 for the print edition, although the Journal’s been doing a lot of heavy discounting of its flagship paper. The Journal’s iPad pricing, which itself can be discounted over time as print is, is intended to ease that circulation revenue transition. At $208 a year, Apple would presumably take $62. Overall, the Journal counts more than 2 million in circulation, with more than 400,000 of those online-only and Kindle subs. Pricing will change over time, but just take those 400,000. If they all wanted tablet access, that could amount to $24.8 million a year for Apple.
  • Let’s move on to the New York Times, the company that is going “paid” early next year, and has the best chance of any U.S. general (non-financial) newspaper to pull it off. For the first six months of the year, the Times itself (not the other newspapers the company owns) took in $346 million in circulation revenue. Currently, its web content is free. Let’s say that it prices in a similar fashion to the Journal, keeping about the same amount of revenue as it goes digital and that 10 percent of its sales are on an Apple tablet a couple of years from now. That would mean about $35 million in iPad circulation revenue for a half a year, or $70 million for a full year. Apple’s take of that: $21 million.
  • Finally, let’s look at Apple and the music industry. Today, Apple’s iTunes pulls in about 28 percent of all music sales in the U.S., or seven-tenths of the total 40 percent of U.S. music sales that are now digital. It took Apple seven years to get there, from a dead start. Of course, the music and news businesses are completely different, right? We can name the differences, but let’s concentrate on the main thing they have in common: Many consumers love digital delivery. So that migration — from analog medium (CD, newspaper) to a suitable, finally-it’s-arrived digital device (iPod, iPhone, tablet) — may be another guide that’s useful.

Those 40 percent (of total U.S. music sales) and 28 percent (Apple’s share of overall music sales) numbers are ones to note. If they held true for news reading, then by 2017, we can be assured of one thing: Apple’s share of news “circulation” revenue would be mind-bending.

September 20 2010

16:00

A warning to nonprofit news organizations: Government funding may not boost the bottom line much

At a time when some Americans are talking about increasing government support for journalism, here’s an interesting new study that adds a useful data point to the discussion: When governments provide financial support to nonprofit organizations, 73 percent of the extra money is counterbalanced by a decline in support from private donors. In other words, the value of government money received is decreased by a reduction in funds from elsewhere.

The paper is by Jim Andreoni of UC San Diego and A. Abigail Payne of Canada’s McMaster University, and it examines over 8,000 nonprofit organizations. The idea that government funding reduces private giving is not new, but this paper attempts to figure out why — and how — the trade-off occurs. Is it because private donors think that government grants eliminate their own need to give — the idea that they “already gave at the office” through their tax dollars? Or is it because getting government money causes nonprofits to relax, to reduce how aggressively they pursue outside money through fundraising?

Andreoni and Payne come down squarely on the side of the latter — it’s primarily nonprofits’ own reduction of their own fundraising efforts that lead to less outside support, not any change of heart by donors. When the government gives, nonprofits take that as an opportunity to cut back on fundraising, even though fundraising is highly cost-effective; the paper finds an average $5 return in gifts for every $1 spent on raising money. Reducing fundraising may save some cash in the short term, but it doesn’t appear to be a smart strategy.

If charity managers find fund-raising a “necessary evil,” or fear it may hurt their evaluation from charity watchdog groups, then a government grant will allow them to redirect efforts from fund-raising to providing charitable services. This means that after getting a grant, charities may simply cut back fund-raising.

The paper finds that for every $1,000 given through a government grant, nonprofits reduce their spending on fundraising by an average of $137. But that decrease leads to a drop of $772 in donor gifts. (The paper found that, contrary to the fears of some, government grants encourage outside donors to give instead of discouraging them — but the impact is small, only about $45 per $1,000 in government grants.)

In other words, adding it all together, $1,000 in government money only nets out to $410 in the end, on average.

The study didn’t look specifically at nonprofits engaged in journalism, and it’s difficult to apply its findings directly to the ongoing debate over government support for news. Check out the full paper for much more detail. But if I were in charge of a nonprofit news organization, here’s what I’d take away from Andreoni and Payne:

Government help is not a cure-all. Even setting aside the very legitimate arguments over the wisdom or ethics of government support for news, it doesn’t appear to be quite the financial boon some are foreseeing, at least for nonprofit organizations more broadly.

Fundraising is worth investing in. Andreoni and Payne say it’s surprising to economists that $1 spent on fundraising could lead to $5 in revenue, but it’s a robust finding that lines up with what the industry reports internally. They also point out that not every nonprofit approaches fundraising with the same sort of enthusiasm (the “necessarily evil”); those who find the task distasteful will pay for it in the pocketbook.

Success in one source of revenue can’t lead to the abandonment of others. The smartest nonprofit news organizations are busy trying to build a multi-pronged model for financial sustainability — often blending advertising, sponsorship, small individual donors, money from big foundations, content-sharing alliances, and more. Over-reliance on any one source is dangerous; just ask the publisher of a major metro newspaper about classified advertising circa 1995.

Photo by Thomas Hawk used under a Creative Commons license.

September 16 2010

17:30

The still-evolving Newsonomics of digital transition

[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 seems like a simple enough question. If newspaper companies could make the switch to digital publishing, how much would they save in costs?

Newspapers have been Big Iron companies, operating on a industrial manufacturing cost basis, as the information revolution has developed all around then. They’ve participated, triumphed here and there, yet seen their business model effectively cut in half, as first the classified business cratered and then other ad lines shrank.

Surely, as newspaper companies go digital-first, multi-platform and tablet-ready, there’s a financial path from here to there. Surely we can see how the old costs of physical production, printing and truck-based distribution can be winnowed, replaced by hyper-efficient digital creation and distribution.

I’ve been plumbing around in those numbers for a couple of weeks, and I can report back that the print-to-digital transition is at best a work in progress. Sometimes it seems more like an exercise in the pseudoscience of numerology. There are all kinds of intriguing numbers — but they just don’t add up yet.

The numbers we know, though, tell stories, and offer pointers.

Take this one: 4.1 percent. That’s what Warren Webster, president of AOL’s newly expanding Patch, recently told me it costs his company to match the content production of a “like-sized newspaper.” Meaning that Patch can produce the same volume of content (quality, pro and con, in the eye of the beholder) for 1/25 the cost of the old Big Iron newspaper company, given its centralized technology and finance and zero investment in presses and local office space. (Staffers work out of their homes.)

That’s an astounding number, which even if tripled, gives a legacy publisher or editor pause.

Yet the second sentiment coming out of that publisher’s or editor’s mouth is this: Tell me exactly how is Patch going to make enough just to be profitable, even if it only pays one very full-time reporter, plus freelance, per community.

For Dave Hunke, publisher of USA Today, which has just announced a major restructuring to get itself “ready for the next quarter-century,” such cost questions are very much on his mind. Yet asked how much cost could be cut out of the legacy enterprise if it went wholly digital, he pauses, laughs and says, “That’s honestly one of the few questions we haven’t looked at. You could have a reasonable number if you had a business model around the digital business.”

Hunke’s point is a big one. You can have a business model that supports a wholly digital news enterprise — it just won’t be a very big one. Take SeattlePI.com, supporting about 20 editorial staff and flirting with profitability. For Hunke, the question is how you keep a big news staff and a big news footprint as you transition. That’s the still-looming question for metro newspapers, who see the many startups forming around, under, and near them. And, at this point in the digital evolution, there’s simply nowhere near the money necessary to pay for big newsrooms.

Still, the question of digital transition economics is one that’s on many minds.

If you could flip that print to digital switch, what might it mean in numbers?

Start with 60 percent. That’s the rough percentage of costs that might come out of an enterprise, as print production, printing, circulation and distribution expenses, along with those jobs, were eliminated. The 40 percent or so remaining? Figure about 20 percent of costs are newsroom, and 10-15 percent are ad sales. Add in a reduced (from print heyday) number of finance, HR, marketing and management jobs. As one publisher told me: “There are still way too many managers around, managing lots fewer people and lots less money.”

That 40 percent or so number gives a notion, though, of where this is all headed, though it’s only a marker. Hunke announced a 9-percent staff reduction with the restructuring, and, of course, everyone wanted to know where those cuts were coming from — production, circulation, advertising or elsewhere. He says he couldn’t say because he doesn’t yet know.

“Nothing’s a clean cut,” he says. He makes the point — one familiar to many publishers — that he’s leading a digital transition, but one that includes maintaining (and maybe growing) a print product along the way. His multi-platform, segmented audience approach means that job descriptions themselves are in flux. That, of course, makes budgeting even more difficult in the transition.

The notion of continued care and feeding of the print product — Hunke, correctly I believe, sees it as a niche product for a certain group of readers — is key. Remember that daily newspapers still depend on print for 85-percent-plus of their revenue. My sense is that the tablet will accelerate a print-to-digital transition — especially for baby-boomer readers — and that hastening will favor newspaper companies that manage products, costs, and revenues smartly.

There’s no template, though, and no formulae that anyone can share. The transition road is too dark and bumpy at this point, without map or GPS.

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