Wednesday, August 21, 2013
Here are some more thoughts on why newspapers may still be a wise investment and how they may find ways to develop a stable of print and digital products that complement each other.
Virtually all newspapers have websites that look good and have great functionality. So why aren't they all producing acceptable amounts of profit? The question probably should be asked differently, "What do consumers and advertisers expect from newspapers?" Then ask, "What do they expect from the Internet?" The answers are different but there is overlap. The area of overlap is the area of opportunity for creating a business that is needed by consumers and advertisers and capable of creating value that translates into profits.
To determine the real value of the website it is useful to measure the total advertiser dollars spent on a website only ad buy versus those being bundled with a newspaper or distribution ad buy. These stand-alone purchases might give some insight into the job that advertisers are looking for newspaper websites to perform. The amount of money being spent by advertisers on pure website advertising versus the amount of resources being devoted by newspapers to the website might also be useful information.
Newspaper website ventures ought to be competing for Internet dollars, not newspaper dollars. With the amount of resources and talent being put into media web operations, it seems the media should have invented Craig's List, Facebook, LinkedIn or some of the other sites that generate huge amounts of traffic. So, another question, "Are newspapers trying to convert their current business platform to an Internet model?" If so then, "What parts of the model are being considered worthy of conversion?" What parts of the media value created by a local or regional newspaper can be converted to the Internet model and retain real value? If viewers have access to all Internet sites why will they come to a newspaper website?
The Newspaper Business Model Versus The Internet
The key to a newspaper's financial success has been its ability to deliver an audience of dedicated readers (subscribers) to advertisers. This is best when readers are paid subscribers because it is easier to sell an advertiser on the "wantedness" of the product since people are willing to pay for the publication.
It should be noted though that there are niche publications that can command strong advertising commitments without paid subscribers. These publications still have a quantifiable audience that can be delivered to advertisers.
Printed publications have another feature that is attractive, a fixed position in the product. The advertiser's ad is on the same page in all copies of the publication that is delivered to readers.
An additional feature is the serendipity of reading the printed publication. This increases the probability that unintended articles and ads will be read. Unintended readership is valuable to advertisers because it builds awareness that can be capitalized upon when a consumer becomes an active buyer.
Finally, the printed product is delivered periodically to the same household. Thus, advertising in the publication multiple times in different editions increases the probability the ad will be seen through multiple exposures. This ad frequency helps move consumers through the five steps of decision-making (unawareness, awareness, comprehension, conviction and action). 1
So, in summary, print publications are delivered to a definable audience, the ad is certain to reach all readers, the ad is in the same spot in all copies of the product and the publication is delivered to the same group of readers multiple times.
This differs from the current Internet delivery of the news. First, the audience is comprised of individuals that find a site compelling enough to visit. The publisher can't say that a certain number of individuals will receive the news delivered by the Internet. The publisher can only talk about the unique visits to the site and the number of clicks on a story after the fact. That is, it is not delivered by the publisher but is sought by the reader.
Second, a lack of a definable audience requires the publisher's Internet site to compete with all other Internet sites. To drive readers to a particular site is difficult when there are as many as 150,000,000 sites available to anyone with access to the Internet. Identifying an audience for an advertiser becomes problematic. The number of Internet sites will continue to grow and these sites will find innovative ways to attract audiences. This will continue to fragment the market and make creating specific audiences more difficult.
Third, Internet advertising usually does not have a fixed position for advertisers. Usually the ads rotate. This further amplifies the difficulty to deliver a definable audience to an advertiser. In other words, it is difficult to say that a viewer will see the advertiser's ad because the viewer may not be on line when the ad is rotated into position.
Fourth, the search mentality of the Internet reduces the serendipity of the reading experience and reduces the probability that unintended articles and ads will be read.
Finally, the lack of an identifiable audience that receives delivery from the publisher makes it more difficult to build advertising frequency, which is valuable to advertisers.
It seems then, the print publication has significant advantages over the Internet for the advertiser even with smaller audiences. The question becomes: How do you compare the cost of advertising between the two mediums? Is the "cost per thousand" is still a good selling metric?
The cost of reaching a print customer should be equal to or less than delivering an Internet reader. The cost of reaching an Internet reader will be much higher when the fragmentation of the audience is coupled with the rotation of the ads. The real metric should be the probability of consistently reaching a reader, which is likely to be more expensive for an Internet reader than a print reader.
Most publications these days have digital editions. The digital newspaper edition is simply the print edition delivered by the Internet. The pages are in the same order and appear exactly like the print product. The product is delivered to subscribers by email. It differs in appearance and functionality from the newspaper web site, which offers rotating ads and delivers news in a different format.
What is surprising is that the digital editions are not robustly marketed. Newspaper marketing seems focused on the print product (decreasingly) and the newspaper’s web site (increasingly).
It seems there are a whole lot of opportunities being missed. Digital editions offer the ability to have in digital form a product that has a definable audience, has ads in a fixed position, allows the serendipity of exposure to unintended ads and articles and can effectively build ad frequency.
The digital edition also offers advantages over the print edition in that subscribers can be offered various sections of the newspaper for different rates. Delivery can be made wherever an email can be received at any time of the day.
Additionally, the digital edition allows counting of emails that are opened which could be a powerful ad sales tool.
Finally, the digital edition allows the ability to launch new sections to digital readers to test the market before investing in or in lieu of the cost of print.
It is up to newspapers to recognize the value of the digital edition and develop a strategy to promote the print + digital product as something different from a newspaper’s website. It is then possible to create new revenue streams and improve the overall profitability of the newspaper organization.
So how do you convert the print model to the Internet? Consider Richard J.V. Johnson's decision to make the Houston Chronicle a morning publication. He started by converting from an afternoon to an all-day newspaper and gradually eliminating the afternoon edition through attrition (this process took twenty years). I think the same approach might be considered for converting a print newspaper to a digital product. The process should be methodical and would take years to accomplish. The bigger question is how to preserve the definable audience that can be delivered to advertisers in the same way the print product does.
Symbiosis of Print/Digital and the Website
With the explosion of information options and formats presented by digital products there is the improved capability to address more of the information needs of readers. These information needs are the jobs that the media is being hired or asked to do.
There are several approaches to meeting the increasing need for information. One approach says that each type of information need represents a different business opportunity and an individual revenue stream. This argument would suggest that a newspaper have a different business model for the print, digital and website products. This approach is likely to minimize the ability to broadly address the information needs of the audience and the advertising needs of the sponsors.
Consider the model that has a symbiotic relationship between the website and the print/digital editions. The website would be relegated to doing what it does best – provide immediate access to events unfolding in the present and access of immense amounts of data to answer specific questions. The print/digital editions would do what they do best – in-depth news coverage, editing and packaging of news and features and a static product for a specific period of time (an edition stays in the same form for about twenty four hours).
The symbiotic relationship allows the creation of a seamless business model that can employ the revenue building strengths of each product. As news happens it could appear on the website and then be moved to the print/digital edition when it is published. When news is published in the print/digital edition it could be removed from the website. Both the website and the digital edition could have links to archives.
The symbiotic relationship allows the creation and magnification of revenue streams. For web users wanting information that has shifted to the print/digital edition there are subscriber opportunities (web users might be provided free access for a period of time then be asked to subscribe). The website would be a source of building the subscriber base for the print/digital edition. For print/digital users the website provides current news and answers to specific questions on a broad array of topics.
The website provides the option to sell rotating banners or even static banners for specific time slots. The print/digital edition offers the ability to provide an ad to an audience of subscribers in a static product. The digital edition allows better delivery options than does the print and the print product still has the portability and dedicated audience advantages.
Creating a symbiotic relationship will require all products to fall under one marketing strategy. Getting the currently competing entities to fall under one strategy may be the most difficult hurdle for the newspaper. It may be difficult for each to recognize they play a smaller role in a larger overall strategy.
In summary, the printed newspaper has advantages for readers and advertisers that are different from an Internet website and the digital newspaper edition has delivery options that are different and superior to the print product.
By developing a symbiotic relationship between the print and digital editions and the website, newspapers have the ability to create audiences that can be delivered to advertisers. These audiences can become loyal consumers of newspaper products.
Answering the questions and taking the steps above start down the road of converting to a digital business. It will be some time before electronic displaces print. But if that is to take place shouldn't it be newspapers that drive the transformation?
1 Roger Wimmer, The Five Stages of Communication/Persuasion.
Wednesday, August 7, 2013
Interesting news that the Boston Globe sold for $70 million and the Washington Post sold for $250 million. These newspapers would have commanded at least 5 times that selling price a decade ago.
This is further evidence that print media is in trouble. The question is if the trouble is truly from the presence of digital products or from management’s inability to change the business model of newspapers.
By selling to owners in other fields of business, perhaps newspapers will find a way to succeed. Selling the Washington Post to the founder of Amazon.com, Jeff Bezos may provide some new innovative solutions. Selling the Chicago Tribune to a private investment firm did not provide a favorable outcome.
I would say that the Amazon.com approach to building customer relationships has a better chance of success than most. I would also say that the owner of the Boston Red Sox, John Henry, has a better idea of how to engage an audience than most.
I have spent a lot of time studying the affect of the digital age on the newspaper business. The digital age offers a lot of advantages with respect to the immediacy of news and the facilitation of the marketplace. There isn’t a news happening on the planet that isn’t available to the general public on an almost immediate basis. Amazon.com is probably the best example of the impact of the digital age on retailing.
Still, the printed newspaper has a following. The Wall Street Journal recently listed the top 10 newspapers by circulation:
1. The Wall Street Journal — 2,378,827 (includes 898,102 digital editions)
2. The New York Times — 1,865,318 (includes 1,133,923 digital editions)
3. USA Today — 1,674,306 (includes 249,900 digital editions)
4. Los Angeles Times — 653,868 (includes 177,720 digital editions and 43,275 branded editions)
5. Daily News of New York — 516,165 (includes 155,706 digital editions)
6. New York Post — 500,521 (includes 200,571 digital editions)
7. The Washington Post — 474,767 (includes 42,313 digital editions and 1,305 branded editions)
8. Chicago Sun-Times — 470,548 (includes 77,660 digital editions and 208,087 branded editions)
9. The Denver Post — 416,676 (includes 192,805 digital editions and 10,041 branded editions)
10. Chicago Tribune — 414,930 (includes 46,785 digital editions
These statistics show that there is still demand for a printed newspaper product and a growing demand for digital newspapers. Part of this demand is based on the “comfortableness” factor of an audience that likes the regularity, familiarity and credibility of newspaper reporting.
An area to really study is the growth of digital newspaper products. These products are usually a digital copy of the printed product. They carry all of the printed product’s attributes to a purely digital format. This is different from the newspaper’s website which will not have the “feel” or look of the newspaper.
I have written in the past about the advantages of advertising frequency and constant reach of an identifiable audience that are lost when the focus is on a web site as opposed to the printed or digital newspaper. While these are real losses they will probably not be the critical factors in saving newspapers.
The critical factors will be in understanding the audience and building a bonding relationship with that audience. Here, Jeff Bezos and John Henry excel.
If you have ever done business on Amazon.com, you immediately realize what a friendly experience is provided. My wife recently tried to buy a water filter for our refrigerator from the manufacturer. She spent about 30 minutes on line and was completely frustrated. She then thought she would give Amazon.com a try and about three minutes later she had ordered and paid for the filter. There are a lot of commerce websites but Amazon.com stands at the head of the class for creating an experience that invites customers to return.
While in a different business, John Henry has consistently had one of the highest attendance records in major league baseball. I was visiting with a friend who managed the business side of the San Francisco Giants who said that it was important to understand baseball is competing with all forms of entertainment. The critical factor was making certain that the crowd enjoyed the total experience. This is a lesson that is not lost on John Henry.
News will continue to be important and building a consistent audience will be critical to creating an advertising base to make a newspaper a profitable enterprise. Taking elements of the old model and melding them with elements of the new, while creating a bonding relationship with the audience will be critical. I think these two entrepreneurs have the ability to apply insights from their past successes to their purchases of newspaper organizations.
I also wouldn’t discount Warren Buffet’s ability to apply his notions of how to create successful, lasting business enterprises to the newspaper organizations he is purchasing.