A recent piece, by Ken Doctor on WashPo, laid out an analysis of the ideas and sentiments swirling around the NAA gathering in San Diego a couple weeks ago. Namely, how to push Google and other big players into paying royalties to newspapers for indexing and displaying snippets of their content.
I address his idea of "fair share" in another post here.
Ken put forward two main objectives and suggested a reboot in approaching them. This is a good start.
Admittedly, this is a vast and complex scope. To narrow it we have to make some basic assumptions. We're talking about news and information traditionally called journalism covering local, State, National and International affairs. The topics would at least include government, politics, economics, health, environment, science, technology, business and the softer topics such as sports, entertainment and lifestyle.
Here are few questions that have to be answered from a consumer perspective:
What value do consumers place on current news and information?
How much time spent viewing satisfies their 'need to know'?
How many sources are required to satisfy that need?
How much does the answers to all of the above depend on the varying degrees of importance or interest in singular news events ( and by type: investigative vs. hard vs. soft news)?
Under the current model of news consumption and delivery, consumers mostly pay for consumption by contributing their attention, which is sold by publishers to advertisers. The perception from consumers POV is that news information is mostly 'free'. They aren't forced to calculate the currency value of their attention.
The Ties That Bind
News and information content has been inextricably tied to advertising with a few exceptions in the non-profit sector. There are some unintended consequences of this arrangement that have to be addressed, and in my opinion are at the root of the problem facing the formation of new models. It's the problem expressed in the anecdote of a person looking for his keys under a street lamp because the lighting is better than in the dark area some distance away where he presumably lost the keys.
One can't study the problem of creating a news and information publishing that is tied to advertising without studying the enormous changes occurring in advertising itself and how the web has upset the old system. Advertising is the economic foundation of traditional media. As it goes, so goes the rest.
Craigslist, ebay, Monster and others through the distribution efficiencies of the web offered a classified (buy/sell/trade/employment) environment for consumers and businesses that has displaced classified sales from the pre-web economics at a ratio of probably 50:1. It may be higher. So, not only did they take the market share for the category, but they shrunk the overall market size in total sales.
Search engine contextual ad programs have done a similar thing. The difference is that this strikes closer to the bread and butter forms of advertising affecting all traditional media. Realizing that consumers are shifting more and more of their attention to using the web for all kinds of content, and using the product and services research capability, companies large and small have to dedicate more and more of their marketing and IT budgets to building a web presence and then marketing that presence online. Google has been one of the chief beneficiaries of this shift. Because of the incredible distribution efficiencies of the web, Google and others have been able to grab market share for advertising at lower prices than traditional media vendors and do so very profitably. Thousands of other providers (device producers, software companies and IT services) have been able to sell their wares to help companies build and deliver their web presence, none of which went to traditional media or ad agencies.
The next wave that is already showing signs of maturity is directories, local as well as non-geographic specific. Traditional media players have been so slow to enter this arena that it's debatable whether or not they can catch up fast enough to claim sustainable market share. There is tremendous first mover advantage. Google has a huge head start, as does Yelp, City Search, Superpages, Yellowpages and others. Local publishers have some advantage if they move on it, because they can bundle many other local services that larger aggregators can't do as easily. All said, Google is the one to watch given their ability to control search results. They are able to reach and serve small businesses that don't have the investment for a website and promise them top search rankings. Directory advertising will take the market share directly from traditional local display advertising.
You'll notice banner ads missing from this mention of new ad formats and delivery. They're a carry over from the traditional mindset of how advertising worked. They may be okay for a transitional period, and may linger for awhile. They just aren't as useful from a consumer perspective in light of all the new forms that are in development or will be in the next ten years.
Research and Buying Decisions
Consumers Can Ignore Most Advertising
Consumers are able to do real research, really fast now as the first leg of a buying decision. They use web search for this task. Traditional advertising has relied on consumer ignorance for effectiveness. It focuses on persuasion techniques that usually misinform, or are at best incomplete. Research was time consuming and only a handful of people would do it thoroughly. Now it's fast, albeit not always reliable, but that will progressively change.
Consider this consumer challenge. If you had to buy a vehicle, would you be better served by spending an hour on Consumer Reports site gathering data for unbiased third parties and peers, or watching TV ads and browsing a daily newspaper?
Advertising in traditional forms provides very little actual utility for consumers. That means it has gradually become less effective for advertisers. The greater the facility for consumers to inform themselves through quick and meaningful research, the less impact traditional advertising has. The less impact it has, the more incentive for companies to find other ways of reaching consumers, which means trying a new model to present products and services. The first step is to cut out the less value-contributing middleman.
Trying to sustain an old advertising model is futile. Trying to support journalism with that model is futile too. Journalism has to be redefined and segmented from a demand side equation in order to determine value. What is the most valuable news content for consumers and how does that break out by consumer segments and which publishers can deliver it in high quality form? There will be competition among publishers, but much less redundancy. There will continue to be an element of advertising, but the traditional form will be a small percent of that pool.
If popularity of news content was driven by marketing to acquire consumer attention in the old model, quality through specialization will drive popularity in the next wave. Distribution has always been king, but the oligarchy of control has been obliterated. Smart distribution is key now. I suppose consumers will pay for high quality content if it clearly serves their needs and can be accessible easily when they need it.
Because journalism has been tied to a supply-side model (trad media/advertising) with its cost and delivery buried in an economic world unrelated to its purpose, in order to succeed, it has to reinvent itself to serve a demand-side model that produces direct income first, and indirect second.
New Journalism Models
I've been building examples of these over the past couple of years looking for the right combination of income that is directly related to the value of content, as well as income components once removed. My conclusion is that journalism will be delivered by smaller organizations that are vertical in nature and then band together through network confederations to achieve economies of scale.
If you examine the operating finance of a typical newspaper and strip out the non-journalism costs, further strip out the non-essential management costs, and hire a team of journalist to cover a vertical category of news, you create a hyper-efficient, high quality content stream. The job losses we see now comprised of journalists are because newspapers are holding onto their legacy structures that carry non-essential journalism expense. I repeat—the bulk of costs in a newspaper operation supports sales, marketing, production, distribution and the administrative resources to manage all those things that have nothing to do with journalism.
In that sense, start up enterprises, that aren't tied to legacy bias, have a better chance to emerge and prosper. Traditional companies can make the same investment by creating these start ups themselves. Just like they could have created Craigslist or Google, but didn't. Why they are not doing this with a vengeance of urgency and largess is anybody's guess. My guess is that they don't like the idea of giving up the power they have accumulated over one-hundred fifty years. They don't like the idea that fulfilling the noble role of the fourth estate isn't going to make them rich. That they will have to learn to collaborate instead of using command and control methods. Power, wealth and control is not theirs, and that has to sting a bit too much to be pursued.
Journalism and journalists will thrive in the new era of media not tethered strictly to advertising. The new forms will be smaller, but have greater independence. The concentration of wealth behind the few large media enterprises is passing.















