Apr
27
Digital Newspapers and Advertising Don’t Work
Filed Under B2B, Blog, Industry Analysis, internet, mobile content, news media, online advertising, Publishing, Search, social media, Uncategorized | 1 Comment
Well, Ken Doctor says it, and Neil Blackley draws it to my attention, so it must be right. Ken, now the doyen of newspaper analysts, notes on his Newsonomics site (http://newsonomics.com – a site whose title banner is replete with a photo of the Flame-Haired Temptress herself) that not only are digital revenues failing to grow significantly for newspapers in the age of paywalls, but that the contribution of digital advertising, the supposed rising graph line which will cross over the falling print advertising line in years to come, is now itself down to a growth rate of 1.5% in the US. In a country where online advertising now surpasses both broadcast and cable television advertising in revenue terms with a revenue base of $42 billion, newspapers command an $18 billion advertising market (IAB 2013 full year report). Ken shows that newspapers report this differently – the NAA report for 2013, also published last week, shows ad revenue of $ 23.7 billion, but even on this basis, says the sage of Santa Cruz, “as digital advertising overall grew by $6.2 billion a year, newspapers digital ad take increased by only $50 million – less than 1% of that $6 billion dollar growth”. And it also means that the growth trend measured year on year is in steep decline. The digital advertising market for US newspapers grew in 2010 at 10.9 %: in 2013 it increased at only 1.5%.
Like a good industry commentator Ken lets his readers draw their own conclusions from all of this, while pointing out, inter alia, that 10 companies dominate 71% of the digital advertising market – and none of them are newspapers. He indicates also that digital classifieds growth has diminished to 2%, and high growth sectors like mobile, digital video, search and performance -based advertising are not places where newspapers have developed any strength. And, crushingly, he indicates that his own estimates of circulation revenue growth were around 5% for last year, based on the outcomes of paywall subscription models becoming so widespread in the US market. In fact revenue growth was only around 3.7%. Factor in inflation and growth becomes very hard to find, in my view. And it also seems to me probable that there is a parallel experience in Europe. Paywalls have not increased revenues significantly, and digital advertising growth is in decline . Ken is an ex-newspaper man and a very polite one as well – my question after reading his summary of these two reports is more direct: If we can now see that the business model is bust in all respects, are newspapers as we once knew them destined for the Dustbin of History?
The answer to this depends on whether you think that the only business model for newspaper publishing was the advertising/circulation model developed in the last days of print. What we have seen so far in the digital age has been a huge effort to keep that model going by other means. So we transfer the print to online, without fundamental format change, and we expect the advertising model to follow it. And then, when people use the digital network as it was meant to be used, and copy stuff to their friends, and comment upon it, we place it behind a paywall in order to control and charge them for doing that, and we intersperse the text with display advertising which is easy to avoid, gets low footfall and is unattractive to advertisers. Or, as with Schibsteds or Axel Springer in Europe, we buy up all the classifieds and put them into mega-sites to which users go as needed and which are – rightly – fully separated from the whole business of newspapers. Car.com, the last site in the US which stated a link to the interest of the newspaper world in needs-based advertising is now for sale.
But even if many newspaper managers find it hard to get their heads around the fact, there are other newspaper business models that will be worth a try once the present models have been proved, at the cost of the redundancy of many good journalists, not to work. If, as I anticipated in a recent blog, the Guardian is brave enough to go to a membership model, with privileged members getting to write and comment alongside their peers, then it may be possible, from their 80 million plus registered online users, to find 5 million prepared to pay £50 a year for citizen journalist privileges, for the peer review of fellow opinionated opinion-formers and to have access to the iconic brand as “members”. While Vice and Buzzfeed at all will thrive as ways of giving content to social media users for re-use, some brands will be able to go forward as communities, like the New York Times, within which sub-communities thrive under a trusted brand umbrella. As advertising becomes a social media fulfilment, with stated needs satisfied by machine-to-machine matching services (aka data analytics) and ad spend generally declining as a way of bringing products and services to people’s attention, people will seriously wonder how the late days of print were so dominated by advertising. One thing is certain. Newspapers will get smaller as revenue vehicles, their role will be commentary and explanation and background rather than breaking news, and none of this will happen at all unless they get a grip on what happened to format in mobile and social media contexts. And then, again, I find myself ending up with a line I have worn thin with overuse these many years: none of this gets to happen unless they can reconnect with the users they have ignored, understand again the behaviour and requirements of users online through observation and intuition and be prepared to change every facet of their performance and activity in order to work in a digitally networked world.
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Erratum Ken Doctors seat of sagacity is Santa Cruz , not San Diego. My apologies DRW