Surprise: To boost its circulation, Rupert Murdoch's Wall Street Journal Europe engaged in massive channel stuffing. No kidding. It sounds like everyone discovers, all of a sudden, how medias (old and new) actually work. Granted, when it comes to cheating, News Corp is in a class all by itself. The phone hacking scandal pushed the practice of checkbook journalism to the pinnacle of massive corruption. As for the circulation scheme unveiled last week by the Guardian, WSJ Europe has pushed the envelope of bogus circulation numbers much farther than any other newspaper in the world.
From May 2009 to April 2011, the WSJE had a deal with a Dutch company called Executive Learning Partnership by which ELP purchased thousands of copies of the Journal for a price as low as 0.01€. If such deal is not uncommon, the scale was: 41% of the WSJE's total audited circulation was inflated via this little scheme. The deal also involved a positive coverage of ELP. On Tuesday October 11th, Andrew Langhoff, the publisher of the Wall Street Journal Europe handed his resignation out.
The next episode is likely to unfold inside the soundproof walls of News Corp’s boardroom. While the phone hacking scandal might still hold more juicy bits in reserve (Guardian's full coverage here), the circulation scandal involving the Murdoch empire’s most prestigious asset could be the one transgression too far. The board could be tempted to demote the aging boss. The rationale behind their putative decision would point to the rigid, top-down News Corp chain of command. In such an environment, practices such as this amazing circulation scheme must have been directed or, at the very least, tolerated by top management.
More broadly, this scandal raises another question: What is the real value of an audience, print or digital, when it is artificially bought -- instead of naturally sold?
In the newspaper business, inflating circulation is hardly new. In fact, it is standard practice. The way copies are counted is a soft encouragement to blur the line between loyal and occasional readers. Officially, audit organizations across the world make subtle distinctions between distribution channels. They break down paid/unpaid circulation, mass subscriptions, types of deliveries, etc. On most Western markets, roughly 20% to 35% of the circulation for supposed paid-for newspaper is actually free.
Beyond that, we have what I'd call "near-free" circulation, i.e, copies that are paid a fraction of the cover price, usually just above the minimum rate imposed by audit organizations to be counted as paid distribution. This includes copies made available in airline lounges and hotels. In the end, this circulation is free. First of all, end users won't disburse a dime for their newspaper (it is part of the service). Second, the price paid by the corporate distributor will likely be offset by side arrangements such as logistics fees charged by airlines or hotel chains (let alone advertising deals that could also be part of the package). Taking in account such arrangements, the share of free distribution can rise well above 50%.
USA Today had always championed such practices. Poynter.org Rick Edmonds wrote a compelling story on the subject.
[USA Today's] report for the six-month period ending March 2011 shows 973,000 of an average daily circulation of 1,829,000 comes from the hotel programs — about 53 percent.
USA Today has relied on hotel copies since its launch in 1982, but the deals have morphed over time. Slightly fewer than half are still placed outside guests’ room with a charge added to the bill (unless the guest declines).
The rest are simply left out in the lobby, breakfast rooms and hallways for the taking. Under the newest ABC rules, USA Today can charge as little as a penny per paper — so it could offer a hotel stack of 100 copies for a dollar a day.
Also, returns (copies not picked up) are not counted as they are by newsstands, so those remaining untouched at the end of the day in a hotel still count toward the total.
The Wall Street Journal incident and other related practices are likely to induce changes in the way audit organizations certify the distribution of print press, they will have to better reflect the weight of near-free distribution.
This raises two questions: to what extent are digital media and their native analytics really willing and able to solve the issue once and for all? And what is the real value of artificial audiences?
The answer to the first question is no. Unfortunately, despite its native ability to count users on the web, assessing real audiences proves more difficult than expected as people use more than one device and/or dedicated applications to access the same content. In addition, the advertising community invests very little effort in isolating the most valuable audience segments. In most cases, ad purchases are performed with limited analytics and handled to young and poorly trained people who apply the only rule they understand: discounting.
This approach leads to the emergence of a strong ecosystem of cheating. Scores of companies are now in the business of inflating traffic stats. The de rigueur metric is unique visitors? Just buy those. The seller will load your sites with incentives aimed at luring users. Attracted by games or other tricks, people flock to the site, they visit only one page and go away. Do that once a month and you'll see the actual number of UVs jump at a cost of about 5 cents per user. In other words, if you spend €100,000 a month on such tricks, you'll get an extra 2 million users on your site. These are super fly-bys not reading a single story on your site? No one really cares. Since ads are purchased on the basis of quantity, over time you are likely to recoup your investment.
There is a side effect: such tricks push prices further down because media buyers increasingly distrust the system. Today, they apply the rule "you cheat, we cut prices". And the downward spiral continues.
Many in the business hope for a serious cleanup of audience measurement systems for both print and digital. The goal is to assign a higher value to quality audiences, that is paying more for readers of Slate, Politico or the Guardian, as opposed to those of Arianna's legion of unpaid bloggers, or of content farms’ illiterate digital slaves.
Loyal audiences do carry a much better value than fly-bys. The 20/80 rule also applies to the digital business: the most loyal users make 20% of the audience and account for 80% of the revenue. Matt Shanahan of Scout Analytics has documented this in detail: in a recent piece titled Building a Loyal Audience? That's a Business Model!, he shows how a fly-by generating three page views in one month is worth $0.09 in revenue; by contrast, a loyal user will generate 100 page views and $3.00 in monthly revenue.
There is no shortage of tools to isolate the most loyal audience. The increasing weight of mobiles devices such as tablets and smartphones might actually help. Those reading devices are indeed very personal. Most can be tracked down to a single individual. Already, large databases aggregate user names and unique device ID numbers. Soon, applications will also carry unique ID numbers, adding further granularity to measurement capabilities.
As for now, the digital advertising business hits a low point “thanks” to the following triplet: bottomless inventories, indiscriminate bulk purchases, and thick slices of bogus audiences. But as users shift to mobile, we can hope for a flight to quality that will breathe a new life into the entire food chain.