The business model for news broke into pieces during the first Internet boom, but America's top newspaper groups were able to stay in denial until around 2003. After all, companies such as Gannett were still able to deliver profit margins of 25-30% quarter after quarter, thanks to a combination of acquisitions and cost-cutting. Wall Street was satisfied.
But then some of the analysts who covered media groups were told by their bosses to cover two of the big Internet survivors: Yahoo! and Google. After all, they are in the same business: selling advertising. When those two worlds collided, things got ugly for the newspaper groups, because the analysts saw the online players assembling eyeballs so much more cheaply. The chart below compares stock prices for Google and Gannett.
The other shifts, which started during the first Internet boom, were not only about cost. One was a profound shift in user behavior. Whereas for years people had essentially made daily appointments with the news, by the early 21st Century we had almost all become "drive-by" news consumers, grazing on information on multiple devices at all times of day. The change is captured in these images provided by USA TODAY's Kinsey Wilson.
The other profound shift involved targeting. For years, advertisers had muttered that "I know that 50% of my advertising is missing the mark, but I don't know which 50%." The Sunday paper landed on the doorstep with all sections bundled: News, Sports, Business, Style, Classifieds. Sure, some subscribers might not be interested in all of them, but nearly all wanted news.
News was the organizing principle needed to assemble a mass audience for advertisers.
Then suddenly, it wasn't. Websites dismantled the Sunday paper and built businesses around the most lucrative bits. Travel became a multi-billion dollar online industry. Why? In part because websites cut through the opaque process of travel booking, but in part because advertisers knew they were reaching people who were actively planning to travel. No more wasted 50%. If advertisers wanted to sell cars, they could go to cars.com. Advertise jobs? Monster.com.
Even low-end classifieds took a massive hit in cities served by Craigslist, which offers free classifieds and makes money by charging below-market rates for just a few categories. How can they do it? No printing or distribution costs. This isn't a case of grabbing 50% of a $50 million dollar market from the papers; it's a case of turning a $50 million dollar market into a $5 million dollar market, and grabbing 50% of that.
Where is this all headed? A bleak but conceptually interesting forecast is provided by the Flash movie Epic, which was originally made in 2003. The no-surprise ending: Google wins. (The updated version, the one linked here, adds a small social media triumph at the end to give hope.)
Whether that scenario plays out, the Internet has created some facts that pose a direct threat to journalism -- at least as it's traditionally defined:
- Everyone's a publisher thanks to blogs
- Content is atomized, and so is the conversation, thanks to RSS and search.
- People increasingly expect to be part of the conversation, because the Web has become a two-way medium.
These slides Download distributed_journalism.ppt
from Kinsey Wilson tell the story.
What does this add up to? The business model for news has fundamentally changed, and so has the fundamental relationship between media organizations and the people formerly known as the audience.
One bright spot: Small, community newspapers in the U.S. continue to do well. The notion of community something to keep in mind when thinking about what that new relationship with the audience should be.
Recent Comments