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How to Drive Online News Revenue

Posted on Mar 28, 2012 in Newspaper Revenue | 1 comment

It breaks my heart when I read articles like a recent one by Michael Wolff of The Guardian describing the news industry’s “imploding business model” and “portending, once again, the end of the world as we know it.” (http://bit.ly/HiLIk3) His article describes why the growing trend toward mobile news is going to kill the news industry, because it will further erode revenue from CPM (impression-based) banner advertising. As if banner ads were a viable model for news regardless. I suppose I shouldn’t be too surprised by the report; last month John Paton (CEO of Digital First Media, the second-largest media company in the US) said “And for God’s sake stop listening to newspaper people. We have had since the mid-90s to get this right and clearly we are no good at it. Put the digital people in charge – of everything. They can take what we have built and make it better. It is so very important we get this right – not just for the industry and investors – but for our communities.” (http://jxpaton.wordpress.com/) As one of those “digital people” I’ve been working to transform the news industry by introducing digital media innovation, both on the newsroom and the sales revenue side. I generally work with clients to help them tailor a sales strategy that will work with their market and their editorial focus, but I thought I had better discuss in this blog some of the tangible options that a newsroom can bring to bear. And none of them are banners or paywalls! If there is one thing I have learned from 20 years working in Silicon Valley, it’s that you have to follow the money: in this case, you have to analyze where businesses are spending their ad budgets. And so that’s where I started, by looking at business advertising spend. For the past 3 years I have focused on local and specialty news outlets: those news and magazine publishers whose target demographic is either geographically local or psychographically tuned to both their audience and their advertisers. (In other words, where the advertisers are targeting, in the publication’s readership, a highly qualified demographic of consumers.) So if my suggestions below seem too focused...

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Capitalizing on News Assets

Posted on Feb 2, 2012 in Future of News | 0 comments

Noted journalist Bob Garfield is the author of The Chaos Scenario, a 2009 book about the collapse of traditional media. Garfield was recently interviewed by Peter Conti, EVP of Borrell Associates, an advertising and media industry research and consulting firm. (Garfield will be presenting the keynote address at Borrell’s annual Local Online Advertising Conference in New York City.) The interview, available on YouTube, is titled ‘The future isn’t in hyper-local news’ (an admittedly disheartening title for those of us in the local news industry). Mr. Garfield says: “The combination of incredible fragmentation, which limits your audience size, and the inexorable downward trajectory of advertising prices, means that nobody, nobody is going to have the critical mass to professionally and profitably deliver news. In my opinion, the future isn’t in hyperlocal per se, as a standalone operation. In my opinion, weirdly, the answer is going to be in consolidation. I believe that in every market, the winner will be the entity, whether it’s a local TV station, a public radio station, a local newspaper, a series of hyperlocal sites banded together, or some parties as yet unthought of, to form strategic relationships for content and for revenue, with other players in that market. And the combination of organizations that get there first, and create revenue streams while simultaneously becoming the central hub for news and information culture, in their communities, they win, they scoop the pot, and everybody else just disappears. Weirdly, paradoxically, this vast, vast fragmentation is going to lead to consolidation, and I believe, in market after market after market, winner takes all.” First, the assumption that advertising prices are in a downward trajectory isn’t entirely true. Banner advertising is certainly in a downward trajectory, as “banner blindness” and poor click-through rates show it to be ineffective advertising. But advertising models that pay off remain quite valuable to businesses. The winner in a news catchment area needs to be offering effective advertising, the kind that reliably and measurably delivers customers.   Second, while Garfield speaks about markets being too fragmented to support hyperlocal news, he also notes that advertising will coalesce around one entity (local TV, public radio, or the local newspaper) that wins all the marbles. In this...

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Where Did Newspapers Go Wrong?

Posted on Feb 1, 2012 in Future of News | 0 comments

About a decade ago, newspaper agencies began to lose sight of what advertisers were asking for, and at the same time they failed to monetize valuable online content, focusing almost wholly on one of the worst forms of online advertising: banner ads. They also ceded revenue from areas like classifieds and job postings to Internet competitors, and missed new online opportunities in areas like coupons, business directories, video infomercials, and email direct marketing. It’s little wonder then that newspaper revenues are shrinking. The question persists, how is it that Silicon Valley 20-somethings found it so easy to eat the newspaper industry’s lunch? Why was the industry so slow to adapt? This blog is about forward-thinking solutions, so I am not eager to dwell on what has already happened. The lunch has been eaten; it’s time to get a new one. Hindsight, as Malcolm Gladwell suggests in his essay “Connecting the Dots,” is subject to “’creeping determinism’–the sense that grows on us, in retrospect, that what has happened was actually inevitable.” (Although, dear reader, I do look forward to your comments in this regard.) Let’s just say for now that newspapers were neither staffed nor prepared to embrace digital innovation. But that time has passed, and digital opportunity is readily available, and comparatively inexpensive, to whose who reach for it. It’s instructive to look at the habits of advertisers, since advertising represents 50% to 75% of a newspaper’s overall revenue. While newspaper sales departments are still trying to sell print ads, local business advertisers have moved on to new and better ways to connect with their customers: Facebook business pages, YouTube branded channels, mobile business apps, email campaigns, online coupons, and much more, almost all of it online. Advertisers are spending money; record amounts of it. In fact, online ad spending has finally surpassed print ad spending. Just not at the newspaper. This has to change. It’s not an inevitable trend, it’s a blind spot that must be addressed. The 2012 projections are now in, following a substantial rise in 2011: “US online ad spending will post growth well above 20% again this year to reach nearly $40 billion, eMarketer estimates, as the...

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The Fall of the Newspaper

Posted on Jan 31, 2012 in Future of News | 0 comments

For generations, local businesses relied on newspapers as the mainstay of their advertising budgets. In fact, until 1992, when TV and cable overtook them, newspapers were by far the largest source for overall US advertising spending, representing 37% in 1949 and dropping steadily to under 15% in 2008. And with that, the pundits began sounding the death knell for newspapers. Advertising Media Share chart by Martin C. Langeveld But for small and mid-size businesses, who cater to a more geographically local market, local newspapers continued to linger on as a critical source for advertising. After all, local news readers are well-qualified, targeted local business customers. The person reading the news is more likely to clip a coupon, read about your business, and walk into your store. Today, the local paper is itself no longer the primary focus of local business advertising spend. Newspaper agencies have seen their profits eroded as advertisers move away from traditional print advertising in favor of online, mobile, and social media. (In upcoming posts I’ll discuss where that ad spending has headed, and what newspapers can do to survive and even flourish in the digital age.) According to a 2010 report from Pew Research and the American Society of News Editors: “…the leaders of America’s newsrooms are nonetheless worried about the future. Fewer than half of all those surveyed are confident their operations will survive another 10 years—not without significant new sources of revenue. Nearly a third believe their operations are at risk in just five years or less. And many blame the problems not on the inevitable effect of technology but on their industry’s missed opportunities.” Newspaper Association of America print and online ad revenue chart 2010 With print revenue dropping, and online revenues almost flat, newspapers indeed seem to be headed for extinction. Hundreds of fine papers, large and small, have vanished in the past few years. The search for profitable models continues. Millions of dollars worth of “news experiments” have been funded by the likes of the Knight Foundation, the MacArthur Foundation, and others. A 2010 Pew Research report states: “Jan Schaffer of J-Lab  estimated that since 2006, more than $141 million in...

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