Peak Content: When the Attention Economy bubble bursts

This is a follow-on to an analysis that I wrote for The Media Briefing, published on 4 January. Simply put, I think a shake-out in the media business is coming due to a glut of content and advertising. I am not alone, and it would seem that 2016 begins with a lot of concerns about the sustainability of the current path in terms of media businesses. I’ve seen a raft of reports over the last week that sound like the beginning of this shake-out, both between legacy players but also amongst digital media pure plays. 

Never have we had so much choice in terms of news, information, music and entertainment. The democratisation of production brought by digital technology has made it easier than ever for people to create content, but it has also made it more difficult than ever to get paid to create it, both for individual creators and many companies. This cannot last.

The bottom line is this: Pressure on legacy media businesses and the current state of digital advertising means that you either go premium and paid – think The Economist, The New York Times, pay television, business intelligence – or you go mass and scale, trying to reach as many people as possible as cheaply as possible. There is a limit to scale, and a limit to the model of producing as much as possible as cheaply as possible, especially as the digital ad space is as super-saturated as the world of digital content.

As I said over on The Media Briefing:

For a long time, we’ve been creating too much content, so much so that I think that we’ve already reached Peak Content, the point at which this glut of things to read, watch and listen to becomes completely unsustainable. There hasn’t been enough ad revenue to sustain it for years and, with 2015 ending with a rush of acquisitions, consolidations and funding rounds with eye-watering valuations, 2016 will mark the beginning of a shake out.

Market crashes are the tsunamis that sink, if not all, then a lot of boats, and it’s time to take strategic action.

And although I’ve spent most of my career working in journalism, I’m not just talking about journalists and the commentariat, I’m talking about every kind of content. We’re producing too many podcasts, too many TV shows, video games, status updates and images than we could consume in a million lifetimes. Social updates are as much about communication as they are publishing or broadcasting, but they still eat up that scarce resource of attention. As a data journalist, I like hard numbers, and streaming music service Pandora gave us one on just how scarce attention is.

Attention is such an important topic for marketers this year because living in a connected world means our attention spans are at an all-time low (8 seconds1, to be exact), turning people into master jugglers of devices and content.

As my piece went live on the Media Briefing, it coincided with a number of articles indicating that a shake-out is already in progress. Ricardo Bilton at Digiday predicted a “winter of discontent” for digital publishers as many high-profile sites saw their traffic plateau, including Buzzfeed. Some of this is to be expected. It’s nearly impossible to maintain triple digit growth. He writes:

The challenges on the business side are fueled by the overabundance of publishers on the Web. Ad buyers are looking for deeper deals with a handful of partnerships, which is bad news for the sites that don’t make the cut.

This year will begin as 2015 ended, with a rush for digital publishers pivoting or looking for buyers. Bilton wrote that Mashable is shopping itself around, and it wasn’t too long ago that we heard that The Atlantic was exploring a sale of Quartz. For those not seeing the growth that they need to sell at a valuation that will sate their funders, we are seeing retrenching and pivots, or both in the case of Upworthy. Even seemingly safe and stable digital media players such as the Huffington Post are announcing layoffs in one area that had seen a lot of growth over the past 18 months, video.

This is all to say that those people commenting on my original piece who focused on the disruption in the legacy media business are missing the main point: This glut of content is hitting everyone who operates in the digital media space, apart from the only true unicorns of Google and Facebook.

We are fast approaching the end of this cycle though that has prioritised cheap scale above all else. As I wrote for The Media Briefing:

…flooding a glutted market only leads to a deflationary spiral until it becomes completely uneconomic to produce that commodity. It is a simple matter of economics, and it doesn’t matter whether that commodity is maize or media.

Tom Mullaly said in a comment on the post: “The market does not ‘abhor super-abundance’. Businesses trading in a super-abundant commodity abhor its abundance, and that’s an entirely different thing. Consumers of it revel in it, and that means you can monetize it, even if it’s not quite the news you knew.” Sure, for lovers of high quality content, it’s a golden age of choice in terms of incredible TV, international journalism and audio content, but it cannot last if it cannot be paid for. As Clay Shirky said years ago, “Abundance breaks more things than scarcity does.”

What happens now? 

For years now, one of my conference presentations begins by laying out this issue of overabundance and different ways to try to deal with it. As Peak Content becomes more well-known as an issue, we’re seeing a number of different prescriptions.

Tom Goodwin of Havas has written that in this flood of content, attention shouldn’t be our focus but rather clarity.

And I’m far from the first person to use the term Peak Content. It’s been circulating in marketing circles for a while now, and Erica Berger used the term in a Medium post in early December. She wrote:

To sum this up, the ecosystem we’re in right now is at highest editorial capacity for content, coupled with a shifting revenue stream away from publishers and to networks and large tech companies. There’s no hack that I or many smart people can see. That’s why we’ve reached “Peak Content.”

That said, she is optimistic about the passing of Peak Content seeing it as “an opportunity of a generation” to remake media.

But having survived both the dot.com crash, when an early generation of digital content companies were wiped out, and the Great Recession, which I survived by building my own global media consultancy, I know that when a bubble bursts it wipes as many good companies as bad. Yes, there is an opportunity here, as there always is, but it will also get messy. I absolutely agree with Tom and Erica that it’s a time for clarity and an opportunity to make something better than what came before.

But how?

I’m not going to rewrite my Media Briefing piece, but I think media companies, and this goes for you whether you’re a seed-funded start-up or a legacy media business trying to ride out what seems like the perfect storm, need to as a minimum:

  • Sharpen your strategic focus – If you’re not going to play the volume game, ask yourself what audience you serve and how will you monetise that attention. Get creative and think of things beyond the ad/subscriber dichotomy.
  • Iterative agility – Screw fail fast; instead learn quickly. Yes, failing fast is about the willingness to experiment and take risks, but the major challenge that I have seen in a lot of companies is that they fail to funnel the lessons, good and bad, back into the business.
  • Decide what you stop doing – When I worked for the Media Development Investment Fund, one of the key lessons we realised that digital start-ups had to learn was when to let go, when to stop doing something because it wasn’t supporting their success. The same goes for legacy media companies. As I wrote at Media Briefing, “one of the biggest challenges I had as an executive editor, (was) figuring out what we could stop doing that would free up enough staff time to innovate in a way that could really move the dial.”
  • Invest in revenue innovation – Never launch anything without revenue streams in mind. For every editorial innovation, I’d invest in two on the commercial side.

I want to amplify that last point because the biggest issue we have right now is that, in terms of unique users, we can reach a larger audience than ever, but no one can monetise millions of single unique users who spend 30 seconds or less with you each month.

Of all of the predictions and forecasts that I saw at the end of 2015, Amanda Hale’s, of Talking Points Memo, struck me as the clearest. She wrote for Nieman Lab:

We’ve reinvented journalism school time and time again and have nobly funded countless entrepreneurial journalism fellowships aimed at equipping journalists with basic tech and business skills (“entrepreneurial journalism,” while adjacent, is a different discipline — email me and I’ll explain), but as an industry, we have done very little to identify, pipeline, and train the publishing talent that will be responsible for securing the financial future of news.

Amen. She notes that her Twitter bio says, “Without a business plan, there is no freedom of the press.” Yup. That. As this shake-out gathers pace, scale at all costs will fade as the goal. To quote my Media Briefing piece a final time, “huge audiences don’t matter in the absence of a business model”.

If you want to hire me to work with your media, advertising or marketing company or start-up, I have just launched a consultancy, Ship’s Wheel Media, to provide digital product development, content strategy (especially social, mobile, data and visual) and content services. I am also open to discussing full-time roles. If interested, send me an email – kevin AT charman-anderson.com – or connect with me on LinkedIn

Which newspapers will survive?

For much of the nearly two years that I served as an executive editor for a shifting group of small Gannett newspapers in Wisconsin, I often asked myself: Which newspapers will survive? Trust me, it wasn’t an idle thought experiment. That’s the question I decided to try to answer in a recent piece for The Media Briefing in the UK.

The newspapers I oversaw were actually doing pretty well with growing reach and revenue. However, I know that the picture wasn’t so sunny across much of the industry.

Since my job as executive editor of a group of small newspapers in Wisconsin was eliminated in early October, it seems like a week hasn’t gone by when there hasn’t been announcements of cuts in newspapers – Tribune Publishing (almost 10 percent of its workforce is gone in 2015, the Boston Globe, swingeing cuts in Pittsburgh and Philly. It is pretty bloody out there, and we’re entering a final convulsion of consolidation in the industry as big groups like Gannett try to scale their way to compete with the big digital platform players.

Personally, I believe the next three to five years will see a major shakeout in English language media. Simply put, there is too much content chasing a finite amount of attention and advertising. Market corrections almost always overshoot, and this correction has been a while in coming so I expect that this will be bloody and brutal. And newspapers aren’t the only media that will suffer. As we’ve seen in the last month, premium cable sports giant ESPN and even early digital publishers like Gawker are having to retrench and retool. But print was in the vanguard of media to suffer, only really trailing music in terms of digital disruption. This leads me to the question: Which newspapers will survive?

Size matters

Simply put, quite a few won’t. However, I think that some newspapers will survive, and print will still be a pretty significant part of their business, although digital will drive a lot of their growth. I agree with John Stackhouse, the former editor-in-chief of the Globe and Mail in Canada, newspapers (and newspaper groups) will survive if they are either huge or small. The middle is getting clobbered, and that includes a lot of major metro and mid-size papers in the US.

The challenge for any newspaper group is that while on aggregate they fare pretty well in terms of scale, even when traffic from all of their properties are put together, they simply don’t reach the scale that the major digital platform players do. According to ComScore’s list of Top 50 Digital Media Properties for October 2015, Gannett, with the highest traffic of any US newspaper publisher, came in at number 17, just ahead of eBay. That’s not too shabby. But Gannett’s more than 101 m unique visitors were only 41 percent of Google’s uniques for the same month. That shows the challenge that most media companies are facing. ComScore Top 20 Digital Media Properties in the US October 2015

The major digital platforms are playing an entirely different game. When you look at Google and Facebook, they have all the advantages of massive scale and laser-guided ad targeting without the cost of running a large network of newspapers. Sure, they have their overheads, but they do not compare with the cost of running the 20th Century industrial legacy that is involved with a national newspaper group. And if you’re the Guardian or the New York Times, and, let’s throw a newly resurgent Washington Post, in the mix, you can have national reach without the expense of a local footprint.

For newspaper survival, I really think that small is beautiful. They are still rooted in their communities, but beyond good will, in Sheboygan and Manitowoc, two of the newspapers I oversaw as an executive editor, we didn’t have any local TV competition. They only came when we had a Rob Ford-esque mayor, had an odd crime or needed some snowstorm pictures.

So, size does matter but so does the economic health of the community. If your community is on the economic rocks, it makes it very difficult for a newspaper to survive. Sheboygan County is rocking it economically. It had the third lowest unemployment of any county in Wisconsin in September, reaching a 15-year low, and it has major national and multinational companies headquartered here.

There is a lot of opportunity in community publishing that serves communities like Sheboygan. Not only do I think that newspapers and their digital services will survive in the Sheboygans across the country, if I were an investor, that is where I’d be putting my money.

 

Local journalism: Business models that don’t rely on scale

Emily Bell hired me at The Guardian, and she has just delivered a speech in which she says what I already know.

The demands of web scale economics have torpedoed the local news model; they have also driven great invention and a new set of entrepreneurial skills into journalism.

Later she elaborates what web scale means.

A viral story is the holy grail. And viral does not mean a couple of hundred thousand any more, it means millions. Sometimes tens of millions.

I know Emily is right that one successful digital business model is scale, but I don’t believe that is the only business model. It’s just one that works right now, in some contexts. Scale isn’t new – it has always been successful, long before the internet and mobile media came along.

But I’ll sketch out the challenge for local media. I am the editor of a number of local newspapers in the US, and I’ll take one, the Sheboygan Press as an example. The total population of Sheboygan County is 114,922. That’s not even a million, much less tens of millions. And, to make things worse, the internet has undermined many of the geographical advantages that local newspapers used to enjoy.

On this basis, I might as well throw in the towel, but I’m nowhere near ready to do that. The challenge for local news is to create a new range of products for audiences born digital and mobile. For too long we’ve been trying to find a market for the same products that we used to deliver in print, and that just won’t work. We can’t simply write that local council story the same way that we used to and hope that social media will be enough to market it. I’m really not sure that those incremental, process-based stories actually engage audiences. Instead, we need thematic stories and engagement opportunities that tackle big issues in sticky ways.

There will not be a single source of revenue that will replace the fat revenues that we used to earn from print. But I have the insane, audacious belief that I can come up with another business model with multiple lines of new revenue: Digital marketing services, events and social strategies that deeply engage local audiences and make money. As Jim Brady once said to me, there is no silver bullet to save local media, just a lot of shiny shrapnel.

As I did when I was at The Guardian, I’m using third party services, the duck tape and spit of the internet, to bring the cost of experimentation down as close to zero as possible. I’m relentlessly measuring what I do, and I’m ruthless and unsentimental about failure. Learn from things that work and things that don’t work. Learn fast rather than fail fast. And, when we hit on something that works, we’re going to scale as much as we possibly can.

And we in journalism need to get over our aversion to selling. We’re being outsold at every turn, and in order to survive, we need to sell the value of the public service we provide, sell so hard that it will make P.T. Barnum blush. This is an existential battle for attention, and we need to sell a vision of local journalism rooted in service to our communities. And I’m not going to pussyfoot around this, we need to get over our aversion to making some coin.

No, I don’t think that every journalist needs to be out there selling subscriptions and ads, but every journalist needs to realise that the battle for attention that we’re fighting. Every journalist needs to understand the business we’re in and how it is changing.

I know that this is a daunting challenge, but I’ve never shirked from a challenge. Bring it on.

A fun way to earn revenue with newspaper archives

Sheboygan Press 107th Anniversary edition
The cover of the Sheboygan Press 107th Anniversary edition

The week before Christmas, the Sheboygan Press, one of the papers I edit, celebrated its 107th anniversary. Our business might be news, but our readers also love history. We run a weekly column from the head of the country historical society, and it’s really popular.

Seven years ago, for our centennial, we ran an anniversary edition and included a replica of our very first edition. For this edition, we decided to celebrate our birthday with a vintage styled newspaper with stories from throughout the decades.

As a new editor and a newcomer, it was a great way to learn about the history of the city and of the newspaper. I learned about Charles Broughton, who led the newspaper to become “one of the most influential, liberal papers in the state”. The graphic on the front page trumpeted many of his and the newspaper’s campaigns and accomplishments including the preservation of local wetlands.

Broughton was also a fierce anti-Prohibitionist, and on the front page of the commemorative edition, I included an editorial I assume he penned railing away against the Anti-Saloon League, which branded the Sheboygan Press a “bootleg newspaper”.

It was fascinating looking through our bound archives to see the features we had. Our paper used to have a society editor who chronicled just about everything when it came to the who’s who of Sheboygan. The society editor chronicled local teas, travel and social events. It’s odd that in this age of social media when we reveal just about everything to friends real and virtual that I find it a slightly creepy invasion of privacy to have this level of detail about the local goings on. Discuss.

In our first edition, the publishers ran an announcement of their intentions in launching the paper, and to be honest, there wasn’t much that I would change. They wrote:

IN PRESENTING this the first issue of the SHEBOYGAN DAILY PRESS, the publishers do so with a sense of deep responsibility mingled with feelings of pride that Sheboygan has now a daily morning paper and one that will represent the people and all classes of people.

…It is a hard matter to please everybody, and it would be foolish and futile for us to attempt to do that.

…Sensational stories and fake news will be given a wide berth. We realize that our city is a growing one and its interests will always receive our first thought. Anything that tends to advance Sheboygan and put it in the front rank will always have our cordial support. Of course there may be times when certain public affairs will demand attention and notice and when it may be difficult for us to take an impartial stand, but if such an emergency arises, as it surely will, the influence of the SHEBOYGAN DAILY PRESS will always be for what we consider the right.

When my news editor and I first came up with the idea, I felt like it was definitely one of the crazier things that we had come up with since I started. But I went to our ad director who let me know about the replica edition we had created for our centennial. The ad team embraced the idea. Actually, they didn’t just embrace it, they didn’t just run with it. They bloody well sprinted away with it. Initially, we were only going to run with four pages, but our advertisers loved the idea so much, they sold almost three pages of ads in a day. We added two more pages to the section. It’s a very nice thing to be adding pages to a mid-week edition because we have so much ad support.

We promoted the project on Facebook and even paid to ‘boost’ our posts to reach people beyond our normal audience. One post has 203 likes, which is pretty good going for a local newspaper.

I had a lot of fun putting the edition together, and I think that showed through with the edition. Our readers loved it and responded to it, and our advertisers really loved it too. What more could I ask for? We need to surprise, amuse and engage our readers more like this. It ended the year on a high note, and I am looking to carry that momentum into the new year. Happy 2015!

Facebook and co-opetition: I don’t fear reality but I want my reporters to eat

If Facebook and journalism had a relationship, it would be: It’s complicated. David Higgerson urged “journalism … to get over its fear of Facebook“. He wrote:

Facebook is huge, and needs to remain huge. To do that, it needs to remain relevant to users. It needs to ensure it doesn’t alienate people. That, in turn, is good news for journalists and news organisations. We want our content to be read. Facebook is telling us it has a huge audience and it wants to get stuff they will like to those people.

Facebook is a market reality. I don’t fear Zuck and his crew. And of course we want our content to be read, and there is absolutely no doubt that Facebook drives a lot of traffic to our content. However, as News Corps’ Senior Vice President of Strategy said on Twitter:

Yeah, we want people to read our content, to pay attention to our journalism. Facebook has a huge audience and can help us meet that goal.

But using Facebook to grow audience is only part of winning in the attention economy. The other challenge we must face is how to monetise that attention. The readers of my two papers see our Facebook Page as the freesheet of the digital age. Hell, they say as much. How do I help those readers help me pay for the journalism we’re doing? That’s a really important question.

The angst about Facebook with respect to journalism is about that value exchange, making sure that we get as much out of sharing our content on Facebook as Zuck gets out of it in terms of good old dollars and cents, pounds and pence. To quote my good friend and university classmate Theo Francis who works at the Wall Street Journal, we know we are creating value as journalists, but how do we capture it.

No serious journalistic leader that I know of is saying ignore or be afraid of Facebook, and of course, we need to make sure our content is where our readers are. We’ve moved on from that discussion, and it’s time to acknowledge that on the digital side so we can focus on the hard work of figuring out how to capture the value in the attention we earn. We cooperate with Facebook in gaining attention. We compete with Facebook in monetising that attention. That is the reality we need to face. So, yeah, as a relationship it’s complicated.

But it’s time to get real. At this moment of great flux in the attention economy, we know that any ole fool can publish, but it’s a bitch getting paid. Attention is great, but it only goes so far when it comes to paying the rent or paying staff. I can’t pay my hard working reporters in Likes. I know what Zuck gets out of my papers having Facebook pages, and I know Facebook helps me win in the battle for attention in my communities. I’m working hard to figure out how to turn those Likes into subscribers, opportunities for advertisers and cold hard cash to pay my staff.

That’s not hating on Facebook. It just is what it is, and although I could do a lot of things, I have chosen to fight the fight on the front lines of local journalism. It’s a fight I aim to win.

News organisations need to focus on customer data as mobile payments take off

With a number of new and updated products announced, Tim Cook looked to make Apple his own just shy of three years since Steve Jobs death, and while much of the focus has been on the Apple watch, to me the most interesting part of the event was mobile payments. I instantly started thinking about how mobile payments would affect the business of journalism. 

Alan Mutter updated a post he wrote on how mobile payments could revolutionise commerce, including the commercial world of journalism. For me, these four paragraphs are key:

Although the outlook (for mobile payments) is unclear, there can be no question that mobile payments will revolutionise marketing by creating an ocean of real-time, granular and precise consumer data.

This matters to publishers and broadcasters, because it means that marketers in the future probably will vector ever more of their advertising dollars into direct connections with consumers, instead of mass media. …

Because rich data – not mass audiences – will be the name of the game in the future, every local media company should be gathering as much data as possible about every household and individual in the community it serves.

The most immediate opportunities to do this are through newsletter programs, contests, site registration and smart mobile apps. Obviously, all of these tactics require close attention to government and corporate privacy policies.

We live in a world of data. Data really is the new oil, and while the challenges for news organisations are myriad, data – and not just in terms of storytelling – is increasingly important. The organisations that master data will be the master of their own destiny, and for news organisations, this might be one of the best last opportunities to retake the initiative. 

Journalism: Mining niches to support the mission

Jay Rosen ties together some of the trends happening right now in digital journalism, such as the launch of deep dive digital news sites. These sites are heading 180 degrees in the opposite direction of the generalist bundles like the newspaper and news channels.

When people entirely new to it ask me what’s the best way to get going in journalism — if you are starting as an outsider, with no credentials or experience — I always give the same advice, and I know other people give this advice too. It’s obvious enough. Start a niche news service on a subject some people care a lot about.

Niches can definitely be a winning strategy. In many ways, niche sites focused on revenue rich verticals have been working for much of the past decade – tech, sports, food, fashion. I think there are opportunities for traditional news organisations to build these types of verticals into a revenue stream rich enough to create a new form of support for public service journalism. This is part of my current strategy, looking for these verticals.

However, I want to add a caveat to Jay’s post, or amplify a caveat in his post. He writes:

These are a few of the simple virtues and basic lessons that a good niche blogger acquires by building a service from scratch. You don’t need permission to do it. Initial investment: less than $1000 for design, hosting. It’s a free country, a free press. And at first, you will probably be doing it for free.

I used to think that the radically lower cost of digital media would help traditional news organisations and indeed individual journalists outrun disruption. I was wrong. Cutting costs was part of the disruption not a strategy to survive it. The lower costs mean that there are lower barriers to entry to new competitors. To create a sustainable business in digital media, you don’t simply need to be cheap. You don’t simply need to grow your audience quickly. You also need to know from day one what your revenue strategy will be. If you don’t want to be doing your journalism for free forever, you need both an editorial plan and a business plan.

Digital disruption: Bigger audiences but lower revenues

This is the paradox of journalism in the digital age: Journalism organisations reach more people than was ever possible in the analogue age, but those larger audiences have not translated into higher revenues. Some of this has been almost constant pressure of digital ad revenues since the beginning of the financial crisis, driven by an oversupply of ad space. Digital media offer a dizzying array of choices for consumers and advertisers.

From the standpoint of journalism, like all industries facing the Innovator’s Dilemma, we scoffed at scrappy upstarts but not only editorial ones but more importantly commercial competitors for ad revenue that we didn’t even see as being in our business.

For an interesting view of this, take a look at this piece from The Conversation in Australia, a site that publishes comment on current issues by academics in Oz and the UK. Franco Papandrea writes:

The industry clearly underestimated the threat posed by the development of online competition. Although several newspapers moved early to establish an online presence, the initiatives were largely pursued to complement traditional activities rather than strategic actions to reposition their operations and bolster their competitiveness in the rapidly changing environment.

More recently, once the magnitude of the threat became evident, newspapers have scrambled to restructure in an effort to contain its impact. Their efforts so far have been concentrated in two broad areas: restructuring of publishing operations to re-align production costs with lower revenues; and seeking to convert their online readerships to earnings.

The increasing range of news and advertising services accessible on the internet is changing the relative comparative advantages of established media. The adjustment process is having a significant impact on established structures. The impact on newspapers has had both positive and negative implications.

He says we shouldn’t write off the incumbents, and he’s right. But in an age of disruption, incumbents strengths can quickly become their Achille’s heel as the market shifts.

Journalism: Paid content and determining the cost of free

Anyone who reads this blog regularly will know that I’m a huge fan of NPR’s Planet Money programme. The show guides you through the arcana of finance and economics in a witty and accessible way. Recently, they rebroadcast a programme on the cost of free. In this case they were talking about free doughnuts and rumours of a longstanding grudge that US veterans have against the Red Cross. Planet Money’s Chana Joffe-Walt investigated, and sure enough, American vets do grumble about the Red Cross charging for their doughnuts. The story is a bit more complicated, and I don’t want to spoil the reveal, but the story illustrates in Planet Money’s own wonderful fashion the cost of free, or more precisely, the cost to businesses of charging for something that used to be free. In the case of the Red Cross, they still have trouble shifting the opinion of vets who once got doughnuts for free and then found themselves paying for them.

If consumers are used to one price and it changes, the change will seem more dramatic, according to economist Uri Simonsohn, who is interviewed in the piece. When that reference price is zero, consumers will have one of two reactions. They will either adjust their reference price, the price that they are accustomed to paying, or Simonsohn says a price change can be seen as a categorical change, a change in the relationship between the consumer and the organisation. Simonsohn compared this categorical change to akin if your parents charged you for a holiday meal. The Red Cross charging servicemen for doughnuts was send as a categorical change, and Joffe-Walt said that the servicemen felt betrayed by the change in price and the change in the relationship brought about by that price change.

Simonsohn says businesses make these massively damaging categorical mistakes when they start charging for things that “people don’t think are part of business”. For example, Delta Airlines made the mistake of charging to speak to agents over the telephone in the 1990s, and Planet Money host Alex Blumberg says that customers “freaked out” and were so furious that Delta were forced to reverse the decision. As Blumberg said at the top of the programme, “Free can backfire. When you take something that was free and give it a price, that is a highly a risky move.” When people view a change in their relationship with a business as categorical, their imagination starts to run wild. If a business is going to charge me for this previously free product or service, they ask, where will it end?

Some price changes, however, are accepted. People won’t stand for being charged to speak to an agent, but now many Americans and most Europeans flying on low-cost carriers have accepted paying for bags. The idea that they have to pay to move not only themselves but their baggage from one place to another makes sense, but paying someone to have a conversation, that doesn’t make sense at all.

So how can businesses, including news organisations, avoid making the mistake of a categorical change in what they charge? As Joffe-Walt says, news organisations like the New York Times are wrestling with this. Blumberg said that people can either view the New York Times as a newspaper, which they know they pay for, or they can view it in the online ‘information wants to be free’ category. “Avoid for charging for things that people would not describe as ‘hey, I got this for free’ because that mistake could be very hard to fix,” Blumberg said.

We are seeing a lot of experiments by news organisations who are trying to generate revenue from readers to help pay for journalism, but it’s important that publishers not try to charge  for things that their readers don’t see as part of the journalism business. Making a category change error could have serious ramifications, and many news organisations do not have the resilience left to survive such mistakes. The big challenge of paid content has been, and continues to be, in understanding what things (or, more often, what bundle of things), readers will pay for. Fortunately, we’re starting to figure out what works and, just as importantly, what doesn’t.

Advertising innovation is key to digital transformation at news organisations

When I heard that Canada’s La Presse had spent three years and $40m building its iPad app, my jaw dropped. It is one of the most expensive content development projects I have heard of, and my personal view is that such exorbitant development costs don’t make sense in the digital era. Of course, then I heard that La Presse wasn’t charging for its app or for the content, and I really couldn’t believe that this was a sane strategy.

I was not alone. Steve Faguy, a freelance journalist in Montreal, had much the same thoughts. However, Faguy landed an interview with Guy Crevier, the publisher of La Presse, about the project, and Crevier says that there is a method to their madness, a method which will very soon be tested.

Crevier says that he is very sceptical about the success of paid content strategies and believes that only a few large US and European papers with a vast offering of exclusive content, especially business content, will make paid content strategies work. Faguy quotes Crevier as comparing digital paid content to cancer treatments that merely delay the inevitable. This has led many newspapers to cut staff, which leads to a downward spiral of lower quality and lower readership.

Crevier also puts the $40m development costs in context:

“How much do you think it would cost me tomorrow morning to replace La Presse’s printing presses? It would cost me between $150 million and $200 million. And when I build a plant to print La Presse, I’m limited to 250,000 to 300,000 (copies) maximum. What does this money bring in future obligations? It brings me expenses of $100 million a year in paper, ink, trucks.”

Ok, that’s all fair enough for $40m is far cheaper than $300m. But how will the app generate enough revenue to pay for a staff of 200-plus journalists if the app and content are both free? The answer is premium ads. The app was designed to include special ad slots that La Presse hope they will be able to charge $16,000 for. In Faguy’s original critique of La Presse’s strategy, he highlighted a Radio Canada report that points out that this is much higher than other digital advertising in the Canadian market, and that the app doesn’t use standard digital ad formats so advertisers will need to do custom work to advertise in the app.

Raju Narisetti, Senior Vice President and Deputy Head of Strategy for the new News Corp, sounded a sceptical note on Twitter.

It is a bet-the-farm strategy, and one that requires that the app be a runaway success. I have to applaud La Presse in putting some thought and innovative effort into their future ad strategy. But will the audience be big enough and engagement be high enough to entice advertisers to pay the premium? We will have to see, but it will be a fascinating experiment.

La Presse’s experiment is just one of many now being run by different organisations, and this innovation, whether it is Buzzfeed’s native advertising play or Quartz’s novel in-stream advertising, is not only a good thing but an essential thing for the industry. Frédéric Filloux has an in-depth look at Quartz’s business/advertising model: it’s novel approach is bolstered by being in The Atlantic stable of print and digital publications, but the site has been able to attract very high value advertising. Filloux writes:

A year ago, the site started with four brands: Chevron, Boeing, Credit Suisse and Cadillac. Today, Quartz has more twenty advertisers from the same league. Unlike other multi-page websites, its one-scroll structure not only proposes a single format, but also re-creates scarcity.

The limited number of ad slots may create a cap for growth, but as he points out, Quartz is powering towards its break-even point ahead of schedule.

I’m a journalist, and I am thrilled to see a level of commercial innovation that we haven’t seen since the late 90s. I don’t think it will address all of the issues that journalism faces in the attention economy, but at least we’re starting to fight the good fight.