A user-centric model, pushing forward with not only targeted ads but other offerings those in the community will like, is the way to go. Multiple, offsetting revenue streams (perhaps, even, subscription revenues):

http://teemingmedia.com/index.php/2009/05/01/the-value-of-a-user/

Create a product that people are searching for i.e. information/news/entertainment/shopping etc

Do it a cost that can be paid for by revenues with a bit left over to invest (to keep ahead)

And that’s it……….

With regards to revenues the reason newspapers are stuffed (that means in trouble BTW) is that they have no idea how to increase revenue.

Because they have been selling advertising space and not response.

As soon as you sell response, (like Google) or sales, like affiliates, then you have loyal clients. (I am introducing response selling with Guardian Media Group local newspapers based on pay-per-call – it works!)

On cover price, if you give the milk away, (online free) why pay for the cow, ( I heard this expression somewhere…….don’t know who).

If you have 100,000 users, 25,000 readers, events, merchandise sales, affiliate deals, advertising pay per call, advertorials, direct marketing, leaflets, video CV’s etc etc there are hundreds of different revenue lines that can come it. It’s just that newspaper people are in their own box and they can’t seem to see outside it.

Boyd Butler

I believe all this talk is way overdue and helpful, but I also don’t see how advertising on a website will keep journalists and web people employed. Not to mention some kind of profit. It’s going to have to be another way. Also, 99.9999999% of the blog world is not as ethical/educated/motivated as Jeff. I agree with the poster above that that will be NO way to get your news! Yikes, talk about inaccuracies!

I believe in the news and hope some idea comes along to help the newgathering brands.

I reiterate an earlier comment: In the future, the only content that will have monetizable value is content that no one is ever allowed to read!

Exploitable value lies in the meta-data that remains locked away from the ravages of perfect copying and uncontrolled distribution.

With your example, one of the important things you needed from newspapers you were attempting to partner with, was the ability to select sub-sets of their customer base to target. In your case, ROI was obviously driven by paying to send things to all the right people and none of the wrong people.

Meta-data sitting beneath decision-making platforms (be they carbon or silicon) is the key to extracting the maximum amount of potential value…whether from advertisers or subscribers.

If done correctly, it becomes a win-win-win for the publisher, subscriber and advertiser. The publisher need the maximum revenue that’s capable of being supported by the content that’s been created…the subscriber wants always to see relevant content (be it editorial or advertising) and the advertiser wants highly efficient and effective communications platforms to reach potential customers (a long way of saying: maximize ROI).

These are all decision making processes that are driven not by the publicly available (and copyable) content…but by meta-data, whether implicitly or explicitly generated.

I really think this is where thought and innovation should be focused…it’s a significant untouched opportunity…

Dale Harrison
dale.harrison@inforda.com

For example, four years ago, when we tried to launch a daily newspaper for kids in the US with some local newspapers they were not even able to tell us which of their subscribers had kids.

It is a lot about gathering customer data. So, as a news organization what do you do in the digital world to gather data? Data to help serve better content and data to put the right ads in front of the right customer. How do you do that while respecting the privacy of your customers? How do you do that while respecting the separation between advertising and journalism? Can you do that offering only news (I don’t think so)? So what do you offer, besides news, which content, which services to gather data about the communities you serve?

We are convinced, like you apparently, that it is all going to be about ROI. If news organizations want to keep a big piece of the ad pie, they need to become data gathering organizations… also.

I blogged about it here: http://mediacafe.blogspot.com/2009/03/why-is-it-going-to-be-increasingly-more.html

Advertising has to be backbone of what will support journalism. Here I mean advertising in a broad sense of the term…not just graphic banner ads and AdWords, but the ability of an business or organization to target a message to an individual on a mass basis.

Coming to this debate from the standpoint of an advertiser, I have to say that most online news sites (and I absolutely include both pure Internet as well as old media websites) fail to provide much of what I’d like to see as an advertiser. The absolute worse being the print-based publisher’s online properties…and newspaper sites at the very bottom of that heap.

As an advertiser, I want to see a highly engaged audience, which well only be there if the site offers high quality and relevant material. Without great writing and editing there’s no chance of creating an engaged audience.

I also want to be able to target an advertising message to a member of that audience in such a way that the reader does not feel it’s intrusive; in a way that has the potential to even be seen as added value by reader. I want to be able to do true 1-on-1 targeting of message to reader.

No one is leveraging the existing technology in a way that facilitates these goals to the extent that’s possible…and it’s this lack that is driving down the online ad rates and sucking the oxygen from the room.

Based on my own spending, I’ve seen there to be fully a 100x spread in online ad rates when normalized on a CPA basis. Advertisers that invest in the analytics work to really trace Ad ROI by placement see this and move their dollars to the highest ROI…which these days is often Google AdWords (even after normalizing for the “last-click” effect).

The difference in pricing can be accounted for almost exclusively by the level of targeting of the ad placements…a kind of “targeting premium”. When I can prove poor Ad ROI, I’m going to shift resources into either higher-ROI ads or into non-advertising options such as more sales people, more trade shows, etc.

If publishers can solve this problem, there are plenty of dollars what will flow their way…dollars they need to support good writing and good content creation in general.

——–
Here’s why I think there’s such a wide ROI-spread (and a resulting price spread and income short-fall for the publishers)…

Advertising with the poorest ROI tends to be based on classic demographic targeting. The problem is that every member of the demographic is treated indistinguishably…and of course the actual audience distribution tends to include lots of eyeballs that lie outside the basic demographic.

The effect is high Type l and Type ll error rates…meaning high false negatives (the ad is missing people it should be hitting) coupled with high false positive (the ad is displayed to people who don’t care).

With search ads, there’s much higher targeting, but still issues. A typical Google search ad will have a low Type l error (meaning the ad has the potential to be exposed to everyone I’m looking for), but often still has a high Type ll error rate (any given search term has a range of unrelated semantics…drawing people outside my targeting group).

Some of the highest online ad-rates are associated with controlled circulation trade publications (CPM’s as high as $80-$100). Because of the narrow subject matter and targeted audience there’s reasonably low Type l error rates and very low Type ll error rates.

There are ways to achieve these low Type l/ll error rates that online publishers could potentially take advantage of. Granted, the solutions are challenging to implement well and very technical in nature (but so is the operation of massive web-fed presses). The mathematics and technology is certainly there and waiting to be picked up and used.

However, if the ad-rate problem isn’t solved, I just don’t see how publishing groups (even pure online outlets) will be able to generate the level of ad revenue needed to support quality journalism.

Dale Harrison
dale.harrison@inforda.com

But you get at a question that I think is more important going forward: “What are the advertisers needs and how can we find new ways to meet them?”

The Lawrence World-Journal does this nicely by selling Web services, consulting and packages for its online Marketplace. It’s not unlike Yelp, which is creating a poor track record of trust with local merchants.

But it seems there must be opportunities to create communities and platforms that allow for transactions for local services (i.e. a bidding platform for people looking for someone to install solar panels) where news org take a transaction fee (like eBay).

In general, online ads are spread too thin, their effectiveness is too weak to bank on building any kind of business on them, including news.

Actually, editorial committees do nothing more than verify quote accuracy. (They can’t do more because they don’t have domain knowledge – they don’t know more than their sources.)

But, let’s ignore that. The real problem with the “difference” is that if we accept that as the definition of “reporters” and journalism, few newspapers do much (outside of sports and society).

Take your newspaper and divide into three piles, advertising, content from elsewhere, and reporting. Note that the piles are of decreasing size.

I separated “content from elsewhere” from reporting because content from elsewhere can be gotten from elsewhere. Because of that, the possible revenue from that newspaper is the perceived value of the advertisments and reporting, and the latter is dominated by sports and society.

Newspapers used to make a lot of money from commodity news. They can’t any longer.

Seriously JJ, you over estimate the influence of bloggers.
They will not become reporters. Here’s the difference: reporters pitch and then go out and do the story. THEN an editorial committee reviews it and fact checks…
Bloggers merely spin news.

No one will pay for news as long as it is free and shared through the internet. Yes Google is largely to blame for this. They have deep pockets and can do things for “free” since they make revenue from the ad links…
Google scares me.

A lesson worth remembering is that at the turn of the 20th century people had a transportation problem…and the solution turned out not to be a “faster horse”…but a Ford.

And one should note that the Ford didn’t arise out of the “horse industry’s” R&D efforts, nor the “Horse Industry Revitalization Act” nor the horse industry’s attempts to experiment with new Business Models.

I think the future of the media business will look as different as Ford and Toyota’s operations look from horse traders and blacksmiths.

——
What’s historically given value to editorial content is the relative scarcity of distribution versus readers (not the Kindle kind). Newspapers have historically enjoyed natural localized economic monopolies that allowed each of them to exercise monopoly control over the amount of content (and advertising) they allowed into their local marketplace.

Monopoly constraint of distribution and supply will always lead to prices (and profits) significantly above open market rates. Newspapers then built costly organizational structures commensurate with that stream of monopoly profits (think AT&T in the 1970’s).

Unfortunately the Internet came along and changed all the rules!

——
The dynamics of content replication and distribution on the Internet destroys this artificial constraint of distribution and re-aligns advertising (and subscription) prices back down to competitive open market rates. The often heard complaint of Internet ad rates being “too low” is inverted…the real issue is that traditional ad rates have been artificially boosted for enough decades for participants to assume this represents the long-term norm.

An individual reader now has access to essentially an infinite amount of content on any given topic or story. All those silos of isolated editorial content have been dumped into the giant Internet bucket. Once there, any given piece of content can be infinitely replicated and re-distributed to thousands of sites at zero marginal costs. This breaks the back of old media’s monopoly control of distribution and supply.

To paraphrase Nietzsche, “God is dead. God remains dead. And we have killed him with the Internet…”

——
The core problem for the newspapers is that in a world of infinite supply, the ability to monetize the value in any piece of editorial content will be driven to zero…infinite supply pushes price levels to zero!

What this implies is that no one can marshal enough market power to monetize the value of content in the face of such an infinite supply and such massively fragmented distribution. Pay-walls, lawsuits and ill conceived legislation won’t allow the monopoly conditions to be re-constructed because only ONE VERSION each story has to leak out to start the cycle all over again.

——
Another way to think about this is that once data becomes publicly visible on the Internet, its monetizable value rapidly dissipates to zero.

This is at the core of why Google can extract $25B a year from the economy without creating ANY content…what they create is meta-data about content (which CAN be monetized)…and all that meta-data remains non-visible. Only the results of decisions based on that meta-data by their search and advertising platforms is made publicly visible.

The lesson is that Google DOES NOT monetize other people’s content…it monetizes its OWN meta-data. This is certainly one path to making the news profitable…not search per se…but various other approaches to the monetization of meta-data that’s within the reach of publishers.

So the exquisite irony is this:
In the future, the only content that will have monetizable value is content that no one is ever allowed to read! (i.e. the meta-data)

——
There are certainly ways to make online news profitable…and many of us are working to develop such approaches…but I can assure you they don’t involve inventing a “faster horse”…

Dale Harrison
dale.harrison@inforda.com