2014 won’t be an easy year for the digital news business. The good news is the list of mandatory actions is coming into sharper focus. Today, we look at key items.
The hard part is finding positive signs. My own guess: for the news industry, the excruciating migration from print to digital will get worse before it gets better. If I had to draw a J curve, as economists put it, it would look like this:
Note that the green list is longer than the red one. But we are still not through with the negative key factors.
For the news media industry, advertising will remain problematic this year. The graph below sums up the sector’s dire situation (a US view that mostly applies to other mature markets):
For 2014, planet remains badly aligned:
– There is nothing is sight to correct the huge imbalance between the supply of digital advertising space and advertisers’ demand. Digital media continue to produce millions of new URLs per day that banners simply can’t match. As long as no one is willing to reduce the supply-side, the imbalance is likely to last. This is even more regrettable when considering how the media industry will need to increase its own promotion activities in order to support the diversification that is key to its survival. Practically, if an online publication decided to close 30% of its inventory and assign it to promote its mobile apps, verticals, ancillary products, etc., it would win on both ends. First, it would recreate some scarcity, meaning higher revenue metrics and, second, it would beef up the promotion of its own products. Unfortunately, such an idea won’t last a minute in a short-term budgetary review.
– Thanks to Real-Time Bidding (RTB), publishers actually fuel the price deflation by auctioning their leftover inventory on various marketplaces. In doing so, they generate some revenue – at the expense of the format’s per unit value (in such auctions, expect no more than 5-10% of nominal prices). In addition this process mechanically applies negative pressure to premium placements because the advertisers will opportunistically purchase a guaranteed and targeted audience wherever available. Even the New York Times will jump on the RTB bandwagon — “in [its] special way”, it claims. We’ll see.
– Making serious money with mobile ads will remain elusive. For most digital news outlets, mobile users are likely to pass the 50% of the total audience later this year. Unfortunately, the magic advertising formula has yet to be cracked as a mobile user only brings a fraction of the equivalent web revenue. I don’t believe in a miracle ad format that will make the commercial experience “engaging” or “enjoyable”… You don’t “engage” people on the move. You grab, seduce, retain them with repetitive and attractive contents that properly fit their time-wise needs and cognitive availability. Then, if the content is good enough, unique, and able to create a reflexive daily habit — then you might be able to convince a fraction of the audience to pay for it. Note the italics, they point to significant obstacles on the road to the mobile pot of gold.
On mobile, I feel interface quality and selectiveness of functionalities are even less forgiving than on the web: you can’t allow useless stuff on a smartphone screen, there is simply no tolerance for it. All contents being equal, the success of a mobile news product will largely depend on the quality of its interface.
Now let’s turn to the green part, the hopeful one.
Agility. One of the benefits of the continuing newsrooms shrinkage (no, we’re not through, yet) will be news staffs making further gains in agility and polyvalence. As Scott Klein, senior editor for news applications at ProPublica, puts it in the NiemanLab Predictions for 2014 (worth a read):
You can be a good journalist without being able to do lots of things. But every skill you don’t have leaves a whole class of stories out of your reach. And data stories are usually the ones that are hiding in plain sight.
Scraping websites, cleaning data, and querying Excel-breaking data sets are enormously useful ways to get great stories. If you don’t know how to write software to help you acquire and analyze data, there will always be a limit to the size of stories you can get by yourself. And that’s a limit that somebody who competes with you won’t have.
To put it more bluntly, in 2014, thriving newsrooms will share the following characteristics: (a) they will be fastest to inject a critical proportion of new blood in their ranks and (b) they will invest in training to add the skills, mostly tech ones, required by modern journalism.
New Forms of Ads. Digital Advertising is half-way through a decisive transformation. As I wrote here many times, the market will stretch at its extremities; one will end up with more automation (the aforementioned RTB trap) while the other end might be more virtuous. It will be based on tailored promotional operations and Branded Content product lines (see coverage in the Monday Note), both form carrying higher CPMs and better reader acceptance. I’m a true believer in the continuity — not the blend nor the confusion — between journalistic contents and commercial editorial. Brand, companies, have a lot to tell beyond traditional advertising. Most publishers will be slow movers in that field. Even if such new forms of ads turn to be a fad (which I don’t believe), it won’t be a costly mistake to hire a commercial editor flanked by a couple of smart people, a combination of writers and strategic planners (not easy to find, I’ll admit, you might instead consider training existing staff), able to understand and convert client needs into good storytelling aimed at attracting (but not deceiving) readers.
2014 will be the year of media companies realizing they must morph into technology companies — or embrace, one way another, the technologies that guarantee their survival. Consider the following factors: advertising requiring better audience profiling; smart recommendation engines becoming mandatory to retain readers; semantic “footprint” becoming the de rigueur instrument to serve a solvent and loyal readership; journalism thriving through data… These all make the need for tech people able to understand editorial issues more pressing.
As long as those prerequisites are well understood, I’m bullish on the future of digital news.