Noted: UK print headwinds and growth v. revenue

As a media consultant, I am asked all of the time to point out models that actually work. I have almost always included the Financial Times in that list because they set the trend that others are trying to follow — building a reader-revenue driven digital business model. The FT was one of the early pioneers of the metered paid content model, and they have hundreds of thousands of digital subscribers. 

Now, Politico is reporting is that not even the mighty FT is immune from what most likely is the beginning of the end of print newspapers as a premium advertising platform. It might be, or it might just be a sign of Brexit uncertainty. We’ll know a lot more after 23 June. 

More worrying for the publishers in the long term is that some of the downturn is because companies are pulling out of newspapers altogether, putting their money into other formats such as the Internet and TV. The fear is: Many of those companies won’t come back.

I think in some sectors of print, they won’t come back. If they don’t come back to the FT, that would be a much darker turn for the industry and herald the beginning of final collapse of news-“papers”, at least in the Anglo-sphere.

I’m going to go out on a limb: Over the next two years, across large swathes of the English-language newspaper business, we will see widespread adoption of lower frequency printing — two or three days a week. Print will quickly become uneconomic as a platform.

Print represents the majority of the revenue for newspapers, yes, but also the majority of the cost. The economics will get ugly rapidly. The FT is lucky. It has digital revenue to fall back on, but for those newspapers that haven’t built digital businesses or other sources of revenue, the future will be bleak.

Growth v. revenue: The tension of the VC-backed model

I have to admit that I had never heard of live-streaming service Katch before Medium flagged up that a friend, Sue Llewellyn, like this post on Medium. For those of you like me, it looks like they came in second to Periscope, and I say that with no disrespect to what is obviously a small, passionate team. I do not mean to rub salt in their wounds.

In their post-mortem, something leapt out at me:

With a team as small as ours, taking the time to build out the revenue features for Katch would take away from building the growth features. When we got down to brass tacks, no matter how we ran the numbers, a premium version of Katch didn’t represent a venture-backed opportunity. 

With funding becoming more scarce, we’re entering a time where start-ups will rely much more heavily on founder, angel and seed funding. The VC’s are going to be suffering from a case of self-inflicted unicorn impalement for a while — taking the time machine back to 2002. Lots of innovation happened, but the crash was painful for a lot of people. Anyone got a fund shorting Silicon Valley real estate that they can recommend? 

Highlight good discussions to encourage positive online debate

There has been a lot of handwringing about the broken-ness of comments online. Great comments take the right strategic editorial approach and a bit of effort. Did anyone really believe the only thing a media company needed to do was slap a comment box on the bottom of articles? Too often that seems like the case.

What still baffles me after all these years is the low-hanging fruit that most news organisations are missing with community. Digitally native media doesn’t miss these easy wins. For instance, Lifehacker has a Discussion of the Day. Walter Glenn sums up the idea:

Great discussions are par for the course here on Lifehacker. Each day, we highlight a discussion that is particularly helpful or insightful, along with other great discussions and reader questions you may have missed. Check out these discussions and add your own thoughts to make them even more wonderful!

It’s a simple and positive way to drive people to the editorial features focused on discussions. They even call their commenters participants. Simple touches that all communicate a positive sense about the conversations they want to create.

Why don’t newspapers do this more often and print the best responses in the paper as well? Highlighting the comments in print would be a way to reward the  best comments, and hey, it might also drive some print sales. It ain’t rocket science, just some simple strategic thinking about user engagement.


Africa Gathering London: Putting the social in media

On Monday, I spoke at Africa Gathering London which looked at how new media was revolutionising Africa. I usually do a presentation, but I only spoke for 10 minutes and thought the presentation might get in the way of the points I was trying to make. Here’s the talk, obviously not as delivered and a bit expanded. I still haven’t mastered the art of live blogging myself.

Journalism: More networked, more distributed

Journalism is becoming more networked, not only in how it’s distributed but also in how it’s created.

Since I left The Guardian about a year ago, I’ve done quite a bit of work with Al Jazeera, training more than 250 journalists across Al Jazeera English, Arabic and Turk on how to social, digital and mobile journalism. I started with Al Jazeera English last November and early December, and I’m told that they’ve put the training to good use. (That was a bit of a joke.) Riyaad Minty, the head of social media at Al Jazeera, has a great formula that sums up how Al Jazeera approaches the new realities of networked journalism:

(information – noise) + content = accurate reporting

Throughout the Arab Spring, Al Jazeera has used social media both to distribute its journalism but also as a source for their journalism. As we’ve seen in Syria and Libya, the story of the Arab Spring would be almost impossible to tell without the help of social media. Al Jazeera has developed a sophisticated way to engage with and evaluate social media.

  1. They have built a network of contacts through social media. When they realised that Libya might be the next story in the Arab Spring, the social media team worked to build up a network of contacts there. When their reporters were kicked out of the country, they still had eyes and ears on the ground. In Syria, they have used a closed Facebook group to vet and keep in contact with sources.
  2. They also have a UGC platform of their own Sharek. It allows them to build up a history and profile of the people who send in submissions. They also take in submissions via mobile phone that allow them to get contact information so that they can easily follow up with the people submitting the images or video.
  3. They not only take in content from social media, but they also use social tools to report and distribute their journalism: AudioBoo, Twitter, Flickr and YouTube. AudioBoo is a tool that allows you to easily record audio on your iPhone or Android smartphone and upload it directly to the internet.
  4. Al Jazeera also licences some of its content via Creative Commons. Creative Commons is an alternative to traditional copyright. Traditional copyright which says that for people to use your music, images or text only by paying to licence it, Creative Commons gives content creators flexibility in how they want their content used. For instance, you can licence your content using an attribution licence that means that people are free to reuse and remix your content as long as they give you credit. Al Jazeera has its own Creative Commons repository to distribute the content that they licence. It’s been a great way for Al Jazeera content to get a wider viewing, for instance their coverage of the Israeli attacks in Gaza in 2009.

The process is about seeking, finding and amplifying the right voices. Just as with traditional sources, not all social media sources are created equal, and as Riyaad says, if we amplify every voice, it just becomes noise.

Journalism is increasingly becoming networked, distributed and participatory. We need your help to help us filter out the noise. This spring during the conflict in Côte d’Ivoire, someone came up to an Al Jazeera correspondent in the field and gave them a video that claimed to show atrocities being carried out. Unfortunately, the video was actually of ‘witch burnings’ in Kenya in 2009.


Communication by any means necessary

This morning, someone mentioned that we need to use social media to motivate people, but I think we need to consider what is motivating people to use social media.

One thing I want to stress is that social media is not about technology. It’s about something much older. It is about the fundamental human need to communicate. Often when you hear journalists parody what they see as banal chatter on social media, they mistake communication for publication. Most people aren’t posting on social media to become famous writers, but they are writing for the 15 people they are famous for. Sometimes, they are caught up in a news event, but I often refer to this as random acts of journalism. It’s the modern form of amateur video that we started seeing in the 1980s with the rise of the video camera. Now, with mobile phones, there are cameras and video cameras almost everywhere. The possibility of catching a chance event are higher than ever before.

More than this, what I’m constantly amazed by in the my coverage is the great lengths that people will go to and the creativity that they demonstrate in communicating despite enormous risk and persistent barriers from authorities.

Who has heard of the strange create the Grass Mud Horse? Grass Mud Horse refers to coded slang that internet users there write to poke fun at the official system of censorship as The Great Firewall. The Grass Mud Horse is close to the characters that when translated say something very rude about your mother. Internet users also use a strange date, May 35, which refers to 4 June, the anniversary of the 1989 crackdown on student protesters at Beijing’s Tiananmen Square.

When I was working with Al Jazeera in March and late April, they told me how some of the videos were getting out of Syria. They weren’t be posted on the internet. Syrians were burning the videos onto CDs, walking to the border and throwing the CDs into Jordan.

People want to communicate. I was part of the launch team for World Have Your Say, the sister programme of Africa Have Your Say, and we had passionate listeners around the world. One of them was Abdelilah Boukili, who worked in the Ministry of Education in Morocco. He started a blog just to capture all of the comments that he made on World Have Your Say.


Old school rules: socialising the media you have

There has been a lot of talk today about social media as if it is only Twitter and Facebook, and often the response has been that this is representative of only a small sections of voices in Africa and old, but valid, concerns about creating a digital divide. I also think that when we talk about social media, we need to think about how we can create social experience using whatever media is available to people.

One of my favourite quotes about media is from Arthur Miller that I believe he said in an interview with The Observer:
‘A GOOD newspaper, I suppose, is a nation talking to itself.”


It’s about building a social experience, not about getting jiggy with the technology. The world’s largest circulation English language newspaper isn’t in the US, UK or Australia. It’s in India, Newspapers in Asia, Africa and Latin America are seeing double digit growth. There are huge opportunities in socialising ‘old media’.

As I said, I worked on World Have Your Say. People around the world joined the discussion in the easiest and most affordable ways available to them. We felt a thrill when a ship’s captain in the Mulucca Straits called us via satellite phone to take part in the discussion. What we found over time is that people in the US, where I’m from, often emailed us. It was easy and inexpensive for them. People in the UK would ring us because the call wasn’t expensive, and they were in our time zone. If we ever did a show that touched on a subject in Africa, we would be inundated with text messages.

Often, we would use quite traditional technology to get voices in the conversation. We would send producers out with broadcasting kit into Kenya, for instance, to hear from people there.

Last year I was working in Moldova, the poorest country in Europe, doing digital media training with journalists and NGOs. When I was there, the Government was holding a celebration  to promote ties to the EU with the idea of possibly joining the union. In the square in Chinsinau, a public broadcaster had a huge public message board. It wasn’t a digital messaging board, it was a place where people could write their messages with pens and markers.

Public TV comment board in Chisinau

The message board in Chisinau Moldova.

Let’s look to Poland. Gazeta Wyborcza is a national daily newspaper in Poland. Fifty percent of Polish internet users are younger than 25, so that affects the type of information that they will look for. Older readers are not so fast in adopting he internet, an editor there told us. They worked to engage their readers whether they were online or reading in print. They asked people about healthcare in Poland. You could have your say on the website, but you could also answer questions and give your views via a form printed in the newspaper.

After joining the EU, Poland €70 billion to spend. The question was how should this money be spent. Asked the question in the newspaper across 21 regions, and used the local newspapers and journalists to write a front page commentary “Seven sins of my city”. They asked people to list the worst things about their cities. It was quite a shocking experience, because most local editors believe they have to write nicely about their city.

They organised local debates but promoted them nationally. The result was amazing – 70,000 letters, emails and calls on this topic. They asked readers for feedback, and they got it! Local TV and radio stations organised news shows about it, despite not being related to Gazeta.

People want to communicate. They want their voices heard. It’s often said that FM radio is to Africa what satellite television is to the Middle East. When we think about social media, there is a lot of ways that we can engage people socially regardless of the technology.

The Guardian needs an intervention

The Guardian and its Sunday title, The Observer have just announced a “digital-first” strategy. However, this is not a triumphant announcement. This is a burning platform admission.

Guardian News & Media, the parent company for both newspapers, lost £33m on a cash basis for the year ending 31 March, only slightly less than it’s £34.4m loss for the previous year. Guardian Media Group chief executive Andrew Miller warned that the group could run out of money in 3-5 years if things don’t change. I heard sobering burn rate figures when I was at The Guardian. I covered the boom and heard start-ups talk cash on hand, but I never expected to hear this from a major media company.

Some things leapt out at me: They reported £47m in digital revenues out of a total of £198m revenues. Digital made just shy of 24% of total revenue. That’s good going, and most newspapers would kill for that percentage of digital revenues. (Apart from the FT, which is making a killing from digital: 30% or revenue from digital now and projected to reach 50% of revenue by 2013.)

This came out from the presentation to Guardian staff:

Unaudited results for the year ending 31 March showed that revenues at Guardian News & Media, the immediate parent of the newspapers and, fell to £198m last year compared with £221m the year before, a fall in revenues that reflected a sharp fall in classified advertising. Recruitment advertising has fallen by £41m in the past four years.

The Guardian is seen as one of the most innovative newspapers in the world. It was why I enthusiastically joined them in 2006. They announced they were going web-first in June 2006, but that didn’t and doesn’t change the fact that the newspaper is burning through cash. To future of journalism folks, The Guardian is indicative of challenges facing the industry, but so far it’s not showing the way forward in solving those challenges.

Feel free to give The Guardian credit for being innovative, but everyone in the journalism community has to be more honest and realistic about its business challenges. It’s in the same sinking boat as a lot of other newspapers.

Guardian Editor Alan Rusbridger is saying that not only will they publish first to the web but that they will do less in print. The Guardian’s article says there will be no job cuts, though they have to find £25m in savings. Yet Mathew Ingram at GigaOm quotes Alan as saying there will be editorial job cuts.

Mathew also quotes Alan as saying that they have identified at least ten different revenue streams. That’s comforting. But it speaks volumes that The Guardian’s own article doesn’t mention new revenue, and Alan only mentioned existing digital revenue streams to Mathew.

The Guardian needs an intervention. Digital first will not be enough to save it. It needs to remember that although they are supported by a trust, that is not a licence to completely ignore business realities. Here is my bit of tough love:

1. Building a sustainable business is not evil

The Guardian needs to realise that making money to support journalism is no sin. There is a lot of moral space between being a sustainable journalism enterprise and being a voracious media mogul like Rupert Murdoch. I’d love to see The Guardian demonstrate how to create a financially sustainable journalism business, but it will have to challenge its own anti-commercial culture.

2. Editorial innovation alone is not enough

The Guardian is innovative, but it also shows that technical and editorial innovation are not enough on their own to guarantee a sustainable journalism business. Digital first without a business focus will still leave it in dire straits. If The Guardian is going to devote 80% of its resources to digital, as is implied by Dan Sabagh’s article, it has got to develop new revenue streams to support its digital first strategy.

3. ‘Open’ without a business model is an empty ideology

I love the open web. I think The Times hard paywall is foolish. However, the ideology of open from The Guardian lacks pragmatism. The Rupert v Rusbridger battle makes a good media ding-bong, but neither positions are proving able to solve the problems that face newspapers. (Yes, I’ve seen Guardian digital strategist Matt McAlister’s presentation on generative media networks. Hopefully, some of that strategy will be part of these 10 revenue streams. At the moment, I remain unconvinced.)

4. You’ve got a golden brand. Capitalise on it.

At the risk of sounding critical, I joke with people that The Guardian has the brand of Apple but the business focus of Twitter. Guardian readers are some of the most loyal in the world. When The Guardian recently cut short its well regarded local project, readers offered money to help it continue. Most newspapers would love to have that affection and loyalty. If The Guardian can’t capitalise on its loyal audience, incompetence will be the only explanation.

A friend of mine, who had taken a buyout from a US newspaper, said to me after visiting The Guardian a few years ago:

The Guardian seems like a great place to work when the times are good, but it doesn’t seem capable of making the tough decisions when the times are tough.

The Guardian has time to make some relatively easy decisions to ensure its future, but it needs to get serious, not just about digital but about its business. The Guardian’s often lauded as the future of journalism, but without a sound business model, it doesn’t have a future.

Rethinking the jobs newspapers do

UPDATE: Thanks for the great response on Twitter and elsewhere. Welcome visitors from Nieman Lab and Media Gazer. Please feel free to add your ideas below in the comments. I do think that print has a purpose. We just need to rethink what that is. Ideally, a refocused print product(s) and digital products with some clear revenue streams would help start rebuilding the business model for newspapers.

It’s time, actually past time, for a radical rethink of newspapers as a product. Mobile apps and mobile content are finally going mainstream with the proliferation of smartphones and tablets, and consumers are finding that these do the job better than print. The 2011 State of the News Media study in the US found:

nearly half of all Americans (47%) now get some form of local news on a mobile device. What they turn to most there is news that serves immediate needs – weather, information about restaurants and other local businesses, and traffic. And the move to mobile is only likely to grow. By January 2011, 7% of Americans reported owning some kind of electronic tablet. That was nearly double the number just four months earlier.

Which is why it’s really time to rethink and refocus the print product. In a world where immediate access to news and information is in the pocket of an increasing number of people, what role does a newspaper play? Fortunately, there is a process to think about this.


The Innovator’s Dilemma

I’m a big fan of Steve Yelvington, and I’ve had the honour to meet him and even do some training and speaking with him.  Steve often talks about Clayton Christensen of the Innovator’s Dilemma fame because of the role Christensen’s thinking had in the NewspaperNext project to rethink newspapers. The project found:

  • Great incumbent companies consistently collapse in the face of disruptive technology.
  • Cramming old products into new forms is the wrong approach so new companies with new approaches win.
  • Products succeed by helping customers get done the jobs they already have been trying to do.
  • We can learn to spot opportunities for growth, not just wring our hands over losses.

I was thinking about this when I read a couple of comments about newspapers this past week. First, SEO consultant Malcolm Coles showed the money he used to give The Guardian (my employer up until a year ago) and what he gives The Guardian now. Putting aside the financial analysis for a minute, this struck me (emphasis mine):

I’ve gone from paying £230 a year for weekday news to £4. The collapse in what I pay is because I read most of the news for the next day’s newspaper on the Guardian website on my iPad the evening before. And I read anything new on my iPhone on the way to and from work. The newspaper has nothing in that I need.

Second, David Carr was writing in the New York Times  about executive bonuses at US newspaper giant Gannett while the company asked employees to take a furlough. That aside, he said this (again, emphasis mine):

Gannett’s flagship, USA Today, is a once-robust national newspaper but has lost 20 percent of its circulation in the last three years. About a week ago, I was at the Marriott in Detroit, and as I stepped over the newspaper at my door as I usually do, I then wondered why. It occurred to me that everything in that artifact that would be useful for me — scores from the teams I follow, a brief on big news and a splash of entertainment coverage — I had already learned on my smartphone and tablet before leaving the room. Gannett is aware of the challenge and has moved aggressively into mobile, with six million downloads of its apps, but those marginal revenues will not fill the hole created by challenges to its core business.

For edge cases like me, this has been the case for years, but when media reporters for a major newspaper like the New York Times say that the jobs that newspapers used to do for them they do with something else, the industry has to take notice.


Steve Yelvington has been thinking about this question for years, but the newspaper industry really needs to ask: What jobs does a newspaper do that no other medium does for its readers? I’m not asking about how you value newspapers, but what do you actually use a newspaper for that no other bit of media can do for you? I’m not even asking about your emotional relationship to print. Actually, I think for a lot of people in the newspaper business, their emotional and professional connection to print, is actually getting in the way of answering these questions.

It’s time to radically rethink the newspaper as a product. Where would you start?

To start things off, I’d say cut the breaking (or rather broken because it’s yesterday news) news. Yes, there will be a major story of the day, but we really need to rethink how it’s presented on the front page. How does the front page feel fresh instead of repeating last night’s news? It’s almost becoming laughable how out of date most front pages feel. If you’ve got a big scoop by all means splash it, but don’t just follow yesterday’s news agenda. Next?

iPad expectations for content companies coming down to earth

I was always sceptical that the iPad would dramatically change the economics of digital content. Well, more accurately, I called content execs “delusional”. We’ve now got a few months of data under our belts, and Brian Morrissey of AdWeek comes to many of the same conclusions that I did after looking at some of the early apps and pricing strategies:

Despite the optimism that greeted the new device, there is a danger that publishers are squandering an opportunity with clunky apps, bad pricing strategies and unsustainable ad tactics.

Yes, and unlike when I wrote the post back in April, we now have months of user data, interviews and sales figures.

The first month, Wired sold more copies on the iPad than in print. After that promising first month, the designer was described as a cross between Jesus and Pele. There was lot of messianic talk around the iPad. I still love the line from Mathias Döpfner, head of Germany’s Axel Springer, who said:

Sit down once a day and pray to thank Steve Jobs that he is saving the publishing industry.

I wanted to see what the sales were after a few months, after the early adopters that read Wired had a chance to use it and decide whether static images of print pages was the digital experience that they wanted.

Wired: 100,000 iPad downloads for June; July, August, September averaged 30,300.

It looks like the early enthusiasm is cooling. iPad sales from other titles are even less impressive. When I listened to the magazine and newspaper industry talk about the iPad, they talked about how close it approximated the paper experience. As a digital consumer, I said it then and I will say it again: I don’t want a paper experience. Frankly, on a recent flight, I was frustrated trying to wrestle my print FT into submission in an economy seat. I can’t search it. I can’t flick between sections. I have no problem reading on a screen. I want to save and share what I read. As designer Khoi Vinh says in AdWeek:

The magazine app experience, according to Vinh, is akin to a “remote, suburban cul-de-sac” while the digital world is moving to a real-time chaotic city.

In a lot of ways, publishers thought that the iPad was the future that could take them back to the past of the fat profits of the print era. It doesn’t look like it’s as simple as replicating the print experience and waiting for the money.

It never was going to be that simple, and it’s a bit disappointing that the leaders in the industry believed a single device was going to overturn years of experience and expectation from the web. In the end, it just reinforces that we’re in need of a fundamental rethink. There is no magic technology that will transform print into digital success. Think digitally and commercially and then we can start building sustainable digital businesses.

Will publishers rally to Google’s Newspass?

Matthew Buckland has a great guest post on Silicon Valley Watcher looking at Google’s Newspass payment system for publishers. (It’s cross-posted from  Buckland compares the value proposition for users with Google’s system and the system that Rupert Murdoch has instituted at The Times. He likens Newspass to a cable television subscription in which a consumer makes a one off, predictable payment to receive a package of content each month. He says:

Take the analogy of satellite TV. You pay once and you get a bouquet of hundreds of channels. The transaction is simple and easy. You know you’re getting good value for money too because there is an economy-of-scale effect at work. Now imagine another scenario: What if you have to pay individually for each TV channel and go through the effort, time and extra cost to do so. It’s a no brainer really.

Of course from the consumer’s point of view, it makes a lot more sense to pay once for a bundle of content rather than paying subs to several different providers or micro-payments for individual pieces of content. However, if newspaper groups had the rationality to think about creating value propositions for their readers, they might have spared themselves the mess that they are in.

The big question, as Matthew highlights, is whether a significant number of publishers will choose to join Newspass or create their own payment system. I’m not sure that such a payment system would be possible in all jurisdictions based on competition/anti-trust law. That notwithstanding, knowing publishers, I would expect them to lobby for a relaxation of anti-competition laws in their own countries to make such a system possible rather than partner with Google, which they have as Matthew rightly points out, a love-hate relationship with. I’d say that it’s bordering on hate-hate these days, but that’s a matter of interpretation.

Matthew sees Google as a “dispassionate third party”, but with the egos in publishing and the ‘not invented here bias’, I’m not sure that publishers see Google as dispassionate or without skin in the game. Murdoch and his lieutenants, though possible an extreme example, refer to Google as a “parasite”. For them to be pushed into partnering with the likes of Google, they would have to be pressured into seeing past their almost self-destructively hyper-competitive natures and see that some loss of advantage was worth new revenue streams. In fact, I would see them being more open to partnering with another company just in an attempt to screw Google. Despite the existential threat facing some newspapers and newspaper groups, I’m not sure that they have seen the light, by which I mean the light some reportedly see with near-death experiences.

Honesty in the age of the paywall

After months of discussion and speculation, The Times and The Sunday Times have disappeared behind a paywall or have asked their readers to pay for the journalism that they value, depending on which side of an almost religious divide you fall on. Like a lot of commentary, I find the punditry and posturing around paywalls uninformed, over-simplistic and, frequently, disingenuous.

It is often said that people paid for journalism in print so they should pay for journalism online. If ‘they’ value journalism, they should pay for it.

No. As many people have pointed out, the cover price of a newspaper really just paid for the high capital costs of printing and distributing a newspaper. To put it bluntly: People paid for the platform, not for the content.

As the OECD said in its recent survey of the newspaper industry in 30 countries:

On the cost side, costs unrelated to editorial work such as production, maintenance, administration, promotion and advertising, and distribution dominate newspaper costs. These large fixed costs make newspaper organisations more vulnerable to the downturns and less agile in reacting to the online news environment.

For every newspaper journalist who moans about how much money their publication spends on running their website, I would ask them if they know how much the outlay is for printing the newspaper. Business Insider calculated that for the cost of printing and distribution the New York Times was twice the cost of sending every single subscriber Amazon’s Kindle e-reader.

Google’s chief economist Hal Varian looked at the US industry and found that in terms of core costs, only 14% of costs as a percentage of revenue went to pay for editorial. Production costs were 52% of newspaper costs by revenue. (Varian has sourced all of his statistics from the US Statistical Abstract, the Newspaper Association of America, the Pew Foundation and academic sources.)

Newspaper revenue and the great digital divide

However, here lies the conundrum for newspapers, which commenters point out on Business Insider. For most newspapers, the printed newspaper brings in roughly 80% of their revenue. With the current revenue mix, shutting off the presses is simply not an option without dramatically cutting the editorial staff. One example of this is the Seattle-Post Intelligencer, which went online only in 2009. Hearst laid off 160 employees and retained 20 “news gatherers”. It’s not necessarily a recipe for success, with traffic declining by 20% after the shift.

Digital must and can make up more of the revenue mix at newspapers. In its report, the OECD found that “online advertising only accounted for around four per cent of total newspaper revenues in 2009, and fell strongly in 2009”. However, and this is key, the report said:

In general, the online revenues of newspapers are miniscule in comparison to total revenues and online revenues of other digital content industries.

Many will say that it’s not possible to make enough money online to replace the revenue that used to flow to print. We have traded dollars in print for pennies online, they say. This is not an iron-clad law of digital content. Yes, digital margins are lower, but many content companies make money online.

In a recent Folio profile of Justin Smith’s turnaround of The Atlantic. Smith pushed for a digital first strategy, which to many in the newspaper industry probably sounds like heresy in 2010. The simple rebuttal to that would be Smith’s record of success. The Atlantic had seen declining circulation and revenue since the 1960s. In 2010, they project a turn to profit, with digital representing 39% of their revenue mix.

Innovating on the commercial side

The problem with newspapers’ digital strategies has been that they have largely been content strategies without effective commercial strategies. For too long at too many publications, digital advertising has simply been a sweetener bundled in with the print ad sales. For too long, we have not done enough to know our audiences online, understand their needs and adjust our strategies accordingly.

Those who have succeeded online often have innovated in terms of commercial models as much as they have in content creation. Google’s main revenue engine is advertising, serving up ads to people based on what they are searching for. Without that commercial innovation, Google would not be the billion-dollar company it is today if it’s business model was based solely on undifferentiated ads supporting a search service.

Indeed, I agree with this post on ExchangeWire that the publications that will benefit the most in the future “will be able to leverage that audience to generate more revenue from targeted ads or data trading” and goes on to say:

But if they are to have a commercial future, pubs will need to be become absolutely obsessed about their data and how it can be best used to unlock new revenue.

We’ll have to re-think print and digital and the revenue streams that support journalism on those platforms. We’ll need to re-think advertising and have commercial strategies that reflect differences in audiences and in editorial approaches.

Oversimplifying an issue is something that media excels at, and now, its lack of sophistication in dealing with issues is hitting closer to home. This is not simply an issue of free versus paid, not simply an issue of jettisoning freeloaders and extracting value from those who value journalism enough to pay for it. Creating such false dichotomies makes a good column in which complex issues are transformed into black and white choices for easy consumption, but simple analyses often lead to simple and simply ineffectual solutions.

Newspapers must end their dependence on the revenue from print or face continuing decline leading for many to total collapse. The industry has been having this civil war over paid versus free. Surely, the argument should be profitable versus unsustainable? We didn’t need Murdoch to build his paywall to prove a point, we already have examples of newspapers and magazines realising that they are in the news business not just the paper business.

For those labouring in the digital side of the business, once you’re making the majority of the revenue, you’ll not just have a seat at the table, in many cases, you’ll be at the head of it. It’s achievable. It’s necessary. There is no time to waste. The future of journalism (as opposed to the future of newspapers) depends on it.

Ending the self-fulfilling prophecy that digital content doesn’t make money

If you walk into a newspaper newsroom, you will hear something said over and over: “You can’t make money online”. It’s closely followed by grumbles of how much the company spends on digital. These are held up as some incontrovertible truth, like carrots help you see better.

Just as ‘carrots help you see better’ was propaganda spread by the British Air Ministry to conceal the military secret of radar, the ‘truth’ that there is no money to be made online is nonsense. It’s unquestioned propaganda in newspaper newsrooms where there is an unnecessary, senseless and ultimately self-destructive battle to keep the newspaper focused on paper, a battle driven by advocates of the primacy of print.

I’m not calling for the presses to be shut off. Rather, I’m calling for innovation in both print and digital. This battle to preserve the past is preventing companies from creating print and digital products that serve 21st Century audiences. Companies that are clear-headed and audience-driven are developing multi-platform strategies that are reversing decades long decline in profits and print circulation while increasing the share of revenue from digital. Those newspapers who remain focused on print are missing that opportunity.

It’s true that print makes the bulk of newspaper revenue, usually around 80%. But in focussing on outdated print strategies newspapers are creating a self-fulfilling prophecy: By not investing in digital, they ensure that digital revenues remain small in comparison to print.

In the US, Outsell found that in the news segment, largely made up of newspapers, only 11% of their revenues were from digital. In comparison, B2B publishers made 36% of their revenues from digital. Outsell analyst Ken Doctor said, “Simply put, the news industry has so far failed to make the digital transition.”

Although 11% of revenue doesn’t seem a good return, they have to be viewed in context. Print revenues are declining as a decades-long circulation drops no longer make print advertising as attractive. Digital revenues have been increasing, sometimes even through the recession, but it is usually from a very low base.

Commercial departments will also often tell you that it’s just not possible to make money online. In many instances, news organisations have built up huge audiences online but have failed to translate that audience into revenue. They will even refuse to investigate the opportunities afforded by digital on the basis that it would require them to do something different.

Commercial departments who say it’s not possible to make money online need to shoulder their responsibility for their failure to help newspapers make the transition to digital. If the current commercial strategy isn’t working – and old print ad sales strategies are not working very well online – why not try a new one? As the adage goes, if you do what you’ve always done, you’ll get what you’ve always got.

There is hope, though. Folio has two great profiles of two publishers re-inventing themselves: The Christian Science Monitor and The Atlantic. Both profiles dive deep into details of the two different publications.

After rising losses, The Christian Science Monitor shifted from a daily newspaper to a web-first strategy with a weekly news magazine. One thing that stands out in the profile of the Monitor is how much audience research they have conducted and continue to conduct with more than 3,500 readers. They found out why people had stopped taking the newspaper: Cost, lack of time and a shift to getting headlines online. I really liked the way that publisher Jonathan Wells summed up how they re-thought their value proposition:

We had to think long and hard about it. Our approach is a composite of the learning economy—we’re serving people without a lot of time, who are trying to understand complex issues quickly, and contribute to a solution. As one guy here says, our mission is ‘Help me get smarter, faster.’

One thing that jumped out at me was how willing they were to be nimble and to rethink not only how they worked digitally but also their print strategy. As they said, they were able to convert 93% of their print readers from the daily to weekly, and they’ve increased subscriptions by 63% since the shift. Increasing circulation going from 2009 to 2010 is something that most publishers would have killed for. They are not pursuing newsstand sales. They are focused on attracting the “right customers through controlled, targeted growth,” according to senior marketing director Susan Hackney.

They have also increased their page views by 49%, and they are looking to develop a line of digital products. This is all really smart, strategic and refreshing in an industry that seems to be mostly focused on squeezing the last bits of profit out of declining business models. That’s just a taster of an excellent article.

Folio also did an excellent profile of The Atlantic, which is managing to reverse a revenue decline that began in the 1960s. I often say that news organisations need to disrupt their business before someone else does. Atlantic Media president Justin Smith did just that, pushing for a digital-first strategy. From the Folio article:

(Smith) stressed that print is not dead, but taking this approach allowed the company to unlock its grip on traditional revenue sources. Importantly, the Web site’s overhaul was set up as an insurgency on the print brand. “If our mission was to kill the magazine, what would we do?” said Smith, who added that a digital competitor was going to do that anyway, so they did it themselves.

They are projecting that digital will account for 39% of their revenue in 2010. They not only shifted to digital first, but they also took a novel marketing approach, setting up their own marketing services division in an effort to differentiate themselves from ad networks. I’ll leave you to read the rest of the article, and I’ll give you one last reason to read the rest. After decades of decline, they looking at a profitable fourth quarter of 2010 and a multi-million profit in 2011.

To reposition themselves, these publications are looking for innovation from both print and digital but with a digital first strategy. The Monitor is using audience research to deliver products more relevant to their audiences, and they are thinking clearly about where they need to go and how nimble they need to be to achieve success.

We can rebuild businesses to support quality journalism, and here are two examples that show a few options for the way forward.

Digital brain drain at British newspapers

Emily Bell left for the Guardian to become the director of a new centre for digital journalism at Columbia University, and let me congratulate her on the opportunity. Simon Waldman, described as the Guardian Media Group digital strategy chief by the Media Guardian, is leaving to join the DVD by mail service LoveFilm.

Now at the Telegraph, the Media Guardian is reporting that Will Lewis has been forced out over a disagreement with the publisher on the newspaper’s direction. What is shocking is that Lewis had just launched a new internal digital incubator just last November, the so-called Euston Project. He was named Journalist of the Year in March for the Telegraph’s scoop on the MPs’ expenses scandal last year.

My former colleague Roy Greenslade has details. It appears that Lewis wanted the Euston Project to be a standalone business and the publisher disagreed.