US newspapers lost advertising revenue found

And why the answer to the problem is not about scale. 

Thomas Baekdal compares the decline of advertising revenue for US newspapers with the rising ad revenue of Google and Facebook.
Thomas Baekdal compares the decline of advertising revenue for US newspapers with the rising ad revenue of Google and Facebook. Full post at http://bit.ly/2cLUkYb

Everyone in media in the US saw the graph a couple of years ago showing the cliff that the newspaper industry has fallen off with respect to advertising revenue since the beginning of the first decade of the 21st Century thanks to a simple bit of graphing by Mark J. Perry.

Now, media watchers have added the numbers and shown where that money went. Ben Thompson of the Stratechery blog added in Facebook’s revenue rise to show one reason why newspapers in the US are facing even greater headwinds, even as the US economy starts to show a little more life. Thomas Baekdal took it one step further, adding in Google’s revenue. It almost mirrors the decline of newspaper advertising, although Google’s rise seems a bit steeper.

I want to make an important point, though: Google didn’t actually kill the newspaper advertising market. Google replaced it with an entirely different market. It’s the same money, but Google isn’t in the same market as the newspapers. It instead created its own market and brands decided that was a better place to be.

I would also say that Google, via its Android mobile OS, also shifted its advertising model deftly to mobile. When you combine this graph with Mary Meeker’s graph about the attention minutes that people spend, you see why Google’s growth continues.

Mary Meeker's 2016 comparison between the percentage of time that people in the US spend with their mobile devices and the difference in mobile ad spending. Full presentation available here http://bit.ly/2dE9vUO
Mary Meeker’s 2016 comparison between the percentage of time that people in the US spend with their mobile devices and the difference in mobile ad spending. Full presentation available here http://bit.ly/2dE9vUO

In the US alone, Meeker estimates that there is a $22 b opportunity in the difference between the amount of attention that people are spending with their mobile devices and mobile advertising spend.

But it is not all doom-and-gloom. Baekdal also points out:

This is an incredibly important distinction to understand. Google isn’t winning because it’s big or that it has so much more scale. It’s winning because it created a way for people to have high-intent moments, which brands can reach with their ads.

We have shifted from having a single advertising market (all based on low-intent exposure), to having two different advertising markets… and the media only fits into one of them.

I would counter that the old print mass media fit into the scale model. However, there are many other media businesses that were never about scale, and if you look at some of the models that are showing success, they are about finding a committed niche, whether geographical or topical and serving it well. That might be B2B media, such as Rafat Ali’s travel business focused Skift, which just announced a new vertical to tackle, Chefs & Tech. In Tulsa Oklahoma, The Frontier has 500 subscribers, as of April, willing to pay $30 a month for local investigative journalism. De Correspondent in the Netherlands broke 40,000 subscribers last December.

Of course, this is all about reader revenue, not necessarily how to replace the fat revenue that advertising used to deliver to local newspapers. I don’t think that ad revenue will ever come back so we need to find a new model for local news and information, and I don’t think the answer is scale. Media cannot scale cost effectively to compete with Google and Facebook.

As for new models, maybe we already have one in the US, TV, but that isn’t going to go as deeply local as newspapers once did. But I think we’ll see more experimentation in local news media over the coming years supported by truly local entrepreneurs. But sometimes it’s good to know what isn’t working so you can move on to try other things.

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.

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.