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 But in focussing on outdated print strategies newspapers are creating a self-fulfilling prophecy: By not investing in digital, they ensure that digital revenues remain small in comparison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.

QsOTD: Journalists shouldn’t confuse important with simply urgent

I’m keeping an eye on the UK Association of Online Publishers conference from afar today by following the #aop3c tag on Twitter. David Gilbertson, CEO of B2B publisher EMAP*, looks to be giving an incredibly insightful presentation, and journalists using Twitter show once again why the service is so useful. Joanna Geary of TimesOnline posted this very cogent comment from Gilbertson:

While news is urgent it may not be important and people pay for important.

Hard copy news businesses (print) will have to adapt to this, Gilbertson added, and he goes on to further refine the distinction he’s highlighting and its implications to the business of journalism. Matt Ball, MSN UK editor-in-chief, quotes Gilbertson as saying:

Intelligence prompts a decision, information doesn’t. You can charge for the former.

Geary fleshes the quote out a bit more: “David Gilbertson: B2B must deliver inteligence to help people do job, not info that people don’t know what to do with”.

UPDATE: David Worsfold clarified that he wasn ‘t quoting Gilbertson in the comments. It’s not clear whether Gilbertson said this or rather if it’s a bit of analysis from David Worsfold with Incisive Media, but I think it’s a makes a point worth highlighting. Worsfold either says or quotes Gilbertson on Twitter that these distinction between importance and urgency, between intelligence and information have “implications for news obssessed editorial teams”.

“Pure news” is not enough but remains critical, Gilbertson says. Pure news must be supplemented with data and analysis. He does draw a distinction between B2B and B2C publishing saying that intelligence is a critical driver in the B2B sector while consumption in the B2C sector is driven by many things that might include intelligence and perspective. However, when Gilbertson says that we can’t provide information that people don’t know what to do with, that is equally relevant to B2C as it is in pure business publishing.

Speaking as a news consumer rather than a journalist, I value information-rich news and context-rich analysis over incremental updates and uninformed commentary. I honestly believe, and my work bears this out, that consumers appreciate when you connect the dots and put information in a larger, more meaningful context. I’m not, and I doubt many average news consumers, are suffering from a lack of information, but I do know that many suffer from a lack of context.

The question for news organisations is how they develop products that deliver value and intelligence that consumers can act upon. These products can be essential new revenue streams for news organisations. As I wrote yesterday, news organisations need to put effort into developing these value-added products in tandem with conversations about charging for them. And yes, this will have implications for editorial teams. We must switch from merely chasing incremental developments to mining stories for meaning. In these tight times, we need to ask questions of how we can turn information that we’re already gathering into intelligence for our readers, and we need to develop unique, compelling products based on that intelligence that our audiences find valuable enough to pay for.

*Disclosure: The Guardian Media Group, parent company of the Guardian and my employer, owns a stake in EMAP.