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.

Apr

10

Its an Ideology, Stupid

Filed Under B2B, Big Data, Blog, data analytics, Education, eLearning, Industry Analysis, internet, mobile content, Publishing, Search, semantic web, social media, Uncategorized, Workflow | 2 Comments

Like the KISS principle, the obvious sometimes evades me entirely until some kindly soul points it out. So it was out on the road this morning, listening to a BBC Radio documentary about start-ups while waiting in line for my share of the privilege of using Britain’s highways, that the scales fell from my eyes. Of course, the world of the Network is indeed an Ideology. While it is not nearly as advanced as the Church of England or the Communist Party once were, it is still more all-embracing than the insipid political parties of the day in Europe and the US. Think for a moment. What do you really believe in? The inalienable right of Old Etonians to rule England? Or your ability, through a protocol you and I barely understand, to use a tiny device to reach and speak to anyone in the world. The ability of a Bush or a Clinton to hold a post-imperial power together? Or the ability to find and check any information anywhere? Will the EU save us, or Open Access? What is more important to the future of Mankind – the UN or the W3C?

We can take this to extremes, of course, but just at the moment I would judge that if you threatened Europeans and Americans with loss of network access, even to a service like Twitter, as happened two weeks ago in Turkey, then the great and the good would simply refuse the command, find alternate access points, use satellite internet, and find every possible way of remaining in contact – as so many middle class Turks did, until it was obvious even to their government that this would not work. And this goes even more to the point for business access: arguably there is no going back from immediate communication for anyone making, buying or selling anything above the purely local level. And the great thing about the Connectivity faith is that, like previous religions, it subsumes everything that was there already. Some of the most passionate capitalism on view is displayed by network start-ups. Some of the most idealistic exponents of Open Access, Data and all other Opens, belong to sects that would make the Diggers and the Levellers look right wing. All human kind is here, subscribing to the basic rules of connection, mark-up, content organization and retrieval. This is probably the greatest number of people all subscribing to the same rulebook that planet Earth has ever seen.

Within the world of connectivity, dynamic networked new businesses will be built, and you do not need to be in Shoreditch or Silicon Valley or any other “cathedral zone” of the new order, to succeed. But we all need to recognize that the nature of business in the new order may well be different, so perhaps we now need to gather up some of the lessons, after 25 years of observation of how a networked society increasingly behaves, and see how we may apply them to what comes next. Here are some contributory thoughts in that direction:

* Many of tomorrow’s businesses will be smaller than their real world expiring counterparts, both in terms of revenues and staffing. This is partly because they are virtual, partly because we are paying small amounts for fractions of transactions in the network.
* Very many of today’s real world businesses will not survive the real world convergence with the network. Permanent job loss will scar many lives.
* Network trading will be very profitable, with smaller enterprizes realizing better margins than their real world counterparts. Increasingly network margins will stay in the network, and by the time we reach Bitcoin III the network will have moved from a microcosm of the real world into being the …real world.
* When the history is written, we shall note that by 2014 net citizens were already reading, per person, a great deal more than any previous human generation. This trend continues as more and more people realise that they need a far better basic education to survive in a networked world, and that those educational outcomes could be achieved very effectively by self-learning in the network.
* New levels of public and private trust will need to be created as more and more people “meet” for the first time online – and never meet in person. Close work colleagues may never physically meet. The signals given by voice and video will be closely examined as each of us strives to recognize “trustworthy” behaviour and indicate it to others. This will be part data analytics, part screen and keyboard performance analytics, and part, as now, pure hunch.
* Collaboration is the order of the day on the network. As individuals, as companies, we seek to get closer and help. This is because no one is vertically self-sufficient any more, and in a networked world that demands solutions we have to band together to create them. Knowing who your potential collaborators are becomes more important, for the first time since the Neolithic, than knowing who your competitors are.  As competition becomes more of a contest for public (aka user) trust and attention, and less a struggle for product and pricing differentiation.
* There is no part of human life on the planet that, in an Internet of Things as well as concepts and ideas, is beyond the range of the networked world. The priesthood which emerges could pose a threat or expose an opportunity, but at present we seem to have opted to live in an “ungoverned” network world. Certainly we will want to avoid any nation “controlling” the network , but there will be increasing clashes with nation states, both the most sophisticated and the most primitive, as their proponents seek to restore nineteenth century notions of rule and control. Only the mass can resist this, and only by acting as a mass.

The triumph of the network is not inevitable – and yet there seems at present no counter force. And already we have icons – all hail, Steve Jobs – and soon, no doubt, we shall have that priesthood mentioned above. I think I shall apply for a minor archimandrite-ship, or even a role as a Hermit!

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