The search for a working business model takes another serious blow
OK, correct me if I’m wrong.
But most of our papers are planning to go after more online advertising. The increase in online revenue, we’re told, will offset the declining revenue we’re getting from our print operations.
But I have a few questions about that plan that no one seems able to answer.
To give me some credit, I had the same questions back in 1994 when the internet was first introduced to us. I was at The (Raleigh, N.C.) News & Observer at the time. We were one of the first papers to put a footprint on the Web — Nando.com was a huge online news presence in the mid 1990s. And we were one of the first papers to give online access to every newsroom staffer.
But my question then was: Where will the money come from? Will selling those tiny little ads make as much money as the big ads we’re selling in the paper?
Oh, you’re such a troglodyte, I was told. The money will be there.
Well, now it’s 13 years later and I keep hearing about how the best and brightest in our industry are searching for a working business model. And it occurs to me: That’s just what I was asking, all those years ago: Where will the money come from?
Two things happened over the past month to make me worry about all this. The first, I’ll get to in a moment. The second occured when I read the Monday New York Times.
According to the NYT, the new adblocker plug-in for the Firefox browser can completely eliminate any advertising on any site you visit — and it can do it as effectively as our pop-up blockers are working now.
Noem Cohen reported in Monday’s Times:
The larger importance of Adblock is its potential for extreme menace to the online-advertising business model. After an installation that takes but a minute or two, Adblock usually makes all commercial communication disappear. No flashing whack-a-mole banners. No Google ads based on the search terms you have entered.
From that perspective, the program is an unwelcome arrival after years of worry that there might never be an online advertising business model to support the expense of creating entertainment programming or journalism, or sophisticated search engines, for that matter.
Apparently, the most vocal opponents to Adblock are using the same arguments that TV networks used unsuccessfully against TiVo: By skipping ads you’re stealing from us.
What a rotten argument. That implies that viewers — or readers — have an obligation to their respective stations or publications to read or watch the ads. Good luck finding an audience who will agree with you.
Cohen, again:
For now, the opposition to Adblock Plus has been led by small Web sites who want all Firefox users blocked from Internet sites in retaliation. One such advocacy site, whyfirefoxisblocked.com, taunts a Firefox user with the headline, “You’ve reached this page because the site you were trying to visit now blocks the Firefox browser.”
The page includes the following argument: “While blanket ad blocking in general is still theft, the real problem is Adblock Plus’s unwillingness to allow individual site owners the freedom to block people using their plug-in. Blocking Firefox is the only alternative.”
So we’re putting our industry’s economic future into the hands of a medium in which the user has so much control over the product that she can slam the door on unwanted advertising.
But why would any advertiser put his money into a medium in which his message is so easily avoided?
To me, it suggests a future for journalism in which only a non-profit business model can exist.
Which doesn’t seem like a bright future at all. And that frightens me.
Which brings me to the first thing that happened recently – the thing that put me in a mind to ponder such things.
My friend Alan Jacobson pointed me to this very disturbing blog. It’s been making the rounds. Perhaps you’ve seen it. Basically, we’re told that there is no way any economic model can — or ever will — generate the revenue it takes to sustain a newsroom.
Henry Blodget of the Silicon Valley Insider posted on Aug. 10:
It’s easy to say that the New York Times and other newspaper companies are screwed, but sometimes it helps to actually run the numbers. Do you know why they’re screwed? It’s actually not the cost of paper, ink, trucks, printing plants, and other physical distribution expenses. Rather, it’s the cost of content creation.
Senior New York Times reporters believe they are underpaid, and, relative to other highly educated folks at the peak of their professions, they sure are. But relative to the online revenue they generate, those talented reporters, columnists, editors, and researchers actually cost a fortune.
I won’t repost his entire, fairly brief, essay here. You really ought to go see it for yourself. He makes a convincing case that the revenues might not follow us online.
To give Alan some credit, he predicted this exact thing nine years ago in SND’s Design magazine.
Blodget’s case, however, is supported by the fact that he uses actual numbers in his argument. It’s the first time I’ve seen cold, hard numbers used to make a point of this nature.
Blodget produces his numbers and then concludes:
Revenue drops by more than half, 40%-50% of employees get fired, and the company still loses money. Using the NYT’s Q2 numbers and these assumptions, for example, revenue would have dropped from $789 million to $285 million. More importantly, EBITDA (earnings before interest, taxes, depreciation, and amortization) would have dropped from $118 million to -$64 million. Which means that management would just be getting ready to fire a few hundred more people.
This, in short, is why newspapers are screwed.
Gulp!
OK, that’s my negative side talking. What positive things can I say?
Um…
For starters, I have to admit that I never understood the business model for radio or TV, either.
I don’t know about you guys, but whenever a string of ads comes on my car radio, I switch to another station. Ever since I bought a car adapter for my iPod, I rarely listen to radio anymore anyway, except for my favorite NPR programs.
And TV? I’m one of those guys who considers a commercial break an opportunity to run to the kitchen for a beer. Or to hit the rest room. (Funny how those two activities kind of feed off each other, especially during football season.)
Yet, while neither radio nor TV are thriving these days, both media seem to make at least a moderate profit.
So perhaps it’s not as bad as it seems. Perhaps I’m overreacting to a story in the Times (admittedly, it wouldn’t be the first time).
Or perhaps I’m just a troglodyte.
September 5th, 2007 at 9:56 am
Give me an ad like Peugeot has on French blogs, and I’ll gladly watch:
Here, if my link coding works.
And read some more of Blodget, then consider the source. He’s been trying to put a stake in newspapers harder than I’ve been trying to put a stake in zombies.
September 5th, 2007 at 12:25 pm
Before we go predicting the death of organized news (again), let’s see what happens with Net neutrality and with online ad prices, as more and more eyes turn to the Web for … everything.
I’m not worried about ad blockers. I doubt all that many people will install ad blockers over the next five years. People don’t hate ads, they hate interruptions and annoyances. And if ad blockers did become popular, Web gurus would just find new ways to embed ad content.
Yeah, I can see a lag between online ad revenue and print revenue killing a number of newspapers. But I don’t think news will die. It doesn’t look like the survival strategy is gonna bubble up from the big newspaper chains, though, does it?
September 5th, 2007 at 2:27 pm
I think you make some good points, Charles. I think newspapers are putting all their eggs in one basket, and a rather creaky one at that, in hoping that their online revenue will come and will be enough to sustain them. It’s one thing to produce online content that people want to see, it’s another to be able to make money from it, and it’s yet another to make enough money from it to support a whole media company the size a typical newspaper is now. It’s a whole lot easier to get enough money to support one blogger than it is to support hundreds of people.
I’m with you on that I don’t watch/listen to any advertising. And frankly, I don’t understand why anybody advertises online at all, considering their ads are seen as intrusions. When there is an entire industry dedicated to developing technology to quash Internet advertising, what does that say about how your ad message is received by the public? Perhaps I’m in the minority in that I don’t buy stuff based on what an ad says.
As for the future of newspapers/journalism, I think in many ways it’d actually benefit from becoming a non-profit venture. Good journalism costs money, and it doesn’t always generate revenue, so to launch a journalism enterprise with the goal of making money puts you on a path where you’ll eventually have to pick between the bottom line and “doing what’s right”. That problem had been sidestepped for much of the newspaper industry’s lifespan because newspapers have been and still are profitable, but now we’re getting closer and closer to the point where that decision has to be made in a for-profit model. And I think a nonprofit model is sustainable. Just look at NPR and public radio. I think they do good, interesting journalism, and they develop a loyal following. Besides, it’ll make journalism a public service rather than just another company trying to make a buck. That perception alone can enhance the media’s relationship with its audience.
BTW, I couldn’t help but grin a bit when you mentioned Nando. I still remember writing stories and movie reviews for NandoNext while in high school and college. Ahh. Free pizzas, free movie tickets, and skybox at Bulls games. That’s what journalism should be about.