In today’s context of massive revenue depletion, everyone (almost) agrees on one thing: digital media revenue sources will have to be diversified. There is no magic bullet, no dominant model that will guarantee, by itself, a sustainable revenue stream. Time to think the hybrid way. Free will coexist with paid-for, different users (occasional vs. intensive) will be discreetly assigned different revenue models, platforms will diversify as technical standards for publishing or transactions emerge, opening new fields for monetization. Old churches and ideologies will crumble.
The biggest stimulus for such creativity is the collapse of the internet advertising model. On average, CPM (cost per thousand viewers) have dropped by 30% – 40% during the last twelve months and very few expect a recovery. As far as booking rates are concerned, they are dropping as well. It is frequent to see only a mere 30% of pages inventories actually sold to advertisers. Unlike prices, this latter percentage is likely to bounce back at the first sign of economic relief.
But the classical advertising model’s weakness is more structural. The “old” banners / display stuff doesn’t fly as expected. People simply don’t click enough on those items and even sophisticated targeting yields minor relief. The only “healthy” segment is search ads, but it is dominated by the Google Way — a massively deflationary one. Successful medias will be the ones who manage to shake off the old cobwebs and proceed to rethink their relationship with the advertising sphere. It will be fairly easy for social or non-hard news sites, but true information content vehicles are likely to struggle with ethical issues…
As far as platforms are concerned, last week, we looked at smartphones: they’re on their way to become the main vector for news, whether it is for text or video. Numbers looks good: last year, according to IDC, on the 1.19 billion mobile phones sold worldwide 155 million (13%) where smartphones. In 2013, says IDC, 1.4 billion handsets will be sold, among them 280 million (20%) smartphones. And if anyone harbored any doubt regarding the ecosystem’s health, just consider the 65,000 applications available for the iPhone and the state of the competition. As explained in this Fortune magazine story, the sector is red-hot: since the iPhone introduction in june 2007, Blackberry quarterly sales have more than tripled. Even Google joined the fray with Android phones — and following a trajectory than will put the search engine to a collision course with Apple (see Jean-Louis’s column War in the Valley; Apple vs. Google).
Coming back to the title of today’s column, let’s talk about paper, the pulp, dead tree version. I can see many reasons why some sort of paper version can help.
1 / The “tangible” effect. To spread ideas, a blog works phenomenally well; it’s fast, dynamic, flexible, work bidirectionally; in other words: it’s necessary. Now, let’s be honest: every blogger wishes, deep inside his/her brain amygdala to be published on print — not giving up the the blog, of course, for all the reasons mentioned above, but they would be thrilled to have some kind of column on pulp. I have seen it many, many times. The same applies to books, by the way. Like it or not, paper still carries a feeling of authority, permanency (even if this is the web that keeps memories of everything). Plus, the paper has interfaces features that have yet to be matched by portable digital devices (think of breakfast reading for instance).
2 / The “object” dimension. Thanks to the Quark Xpress generation, design of print products has dramatically improved. And since design still sells (and for long, see Apple), there is no reason to spare efforts to achieve the best possible product.
3 / Reinforcing identity. Whether you call it areas of excellence or competitive advantage, the print product, because of its selective nature, must reflect the editorial team’s core competencies. It can be politics, business, arts. But the print has to carry this identity, even if it leads to a niche product.
4 / Reaching a different audience. In the media business, popular success often flows from a clever balance between necessity and attraction. Such balance is the combination of news I want to have when I need it, and the news I’ll be happy to find (serendipity), or that will capture my attention by being staged in an attractive fashion (seduction). If the internet is unbeatable for the first part, especially in its mobile dimension, print can be better at seducing. The audience segment extracted as a result will be specific, and in many ways, different from the bulk of the online readership.
5 / Monetizing the segmentation. To maximize its value, this specific audience deserves the white gloves treatment. We mentioned the importance of combining design to usefulness, let’s now focus on distribution. Again, think the hybrid way. Something like a paid-for-free. Let me explain. Since we are into image enhancement, having a price tag makes senses. It projects the idea of value. Falsely by the way, since the mainstream press — dailies or magazines — has been almost free (just consider the subscription price of a newsmagazine for instance) for quite a long time. Still. It is more a question of perception than of reality here. So let’s settle for a price tag. But the bulk of the print run will me made available for free.
This is one of the key breakthroughs of modern quality free press: non-paid distribution can be targeted with a unprecedented level of precision. In a city like Paris, if you want to target 40-something single mothers or upscale business people, you can. By crossing various publicly available databases, you know where they live or work, how and when they are on the move, how they entertain themselves, shop, etc. In a near future, thanks to the data collection made possible by mobile phones, such mappings will be dynamically updated (you’ll know exactly where “your” crowd is and what it does at a given moment).
Should you make this precious audience pay for your product? Probably not. You make it available for free. Others, those who want your paper (whether it is a weekly or a multi-weekly) will have to pay for it at newsstand or “selected” selling stations. The axiom is: for the audience that I see as valuable, the product is free; the audience I care little about but wants to read my product has to pay. (Spare me this stern glance, we all know many products working that way). From a business perspective, presenting to the advertising community a well-designed niche product, targeted to a solvent (and captured) audience should translate into high CPM — that’s the goal.
Today, the poster child of the hybrid concept is the American website Politico. Its flagship news product is a great website manned by a staff of a hundred highly skilled professionals. It drills the political niche down to the bone. The effort yields a 30,000 copies multi-weekly, twenty pages newspaper (mostly a reprint of internet stories). The paper is, in theory, paid-for ($3.50), but practically distributed for free in strategic places such as Congress, selected offices buildings (lobbyists of K street in Washington DC), and executives branches. Although Politico doesn’t disclose any financial figures, a recent article in Vanity Fair states that Politico’s paper edition accounts for half of of the $15m revenue projected for 2009.
Politico exhibits all the genre’s ingredients: a must-read for a precisely defined audience; exclusive stuff (read New Republic’s excellent story The Scoop Factory ); and the thrill of an obsessively updated website. Such journalistic quality allows Politico to become a trusted source for other media through an ambitious affiliation program which combines content and ad programs. The print edition relies on a selective (read: elitist, valuable) distribution.
Sure, Politico’s niche is a large one, encompassing the huge Washington food-chain. But now, let’s look beyond mere clones of Politico’s formula. Consider the flexibility of modern publishing — lightweight setups, the ability to pinpoint target groups — and think of the diminishing reach of mainstream media. For well-adjusted hybrid products, these factors open many new opportunities all over the marketplace. —FF
- The economics of moving from print to online:
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