Entries Tagged 'Business of news' ↓

Twice in recent weeks I’ve had conversations with fellow journalists that settled on the old advertising-versus-subscription myth: “There are just two types of revenue for news organizations – advertising and audience.”

Each time, I told them that split is too simplistic – and doesn’t match how The Bosses have historically managed the business.

I’m usually willing to cut slack on this issue – I was basically stupid about news-industry finances until I left the newsroom. But given its increasing importance, I want to elaborate on those conversations and weave in some stuff from my business-of-journalism class.

Don’t think about “advertising” or “audience” revenue. Think about why people are willing to pay you; what they are actually paying for; and how you organize to serve those customers.

(Credit-where-due note: This piece borrows heavily from the late Tom O’Malia at USC and the inestimable Clay Christensen at Harvard Business School.)

For our examples, let’s take the largest revenue category at most shops – advertising. The very notion of it as a monolith  masks the “why” and “what” questions above: The problems of, say, car dealers differ radically from those of cell-phone companies. So let’s throw out the framework of “advertisers” and instead think of separate groups of customers, and their different needs.

The “how” question? Let’s build our internal organization structure around “lines of business” – or the specialized teams (sales people, designers, product managers) who serve particular groups of customers.

Tom used to illustrate the concept like this:

The customer may seem self-explanatory: “The advertiser.” Nope. Get more granular: Used-car dealers versus human-resources recruiters. Ad buyers at Target and Best Buy seeking distribution for their Sunday sales circulars versus your neighbors publicizing their garage sale.

The benefit they receive should be similarly nuanced. This is the job the customer is hiring you to do on their behalf.

That job is not “exposure to my audience.” Remember: No one wakes up in a cold sweat at 5 a.m. thinking, “My God! I have to buy an ad in the morning!” But lots of business owners wake up in a cold sweat thinking “Where am I going to get some new customers?” – or “How am I going to find that left-handed Django engineer?” or myriad other problems.

You need to understand your customers’ problems – and how your products can help fix those problems. Those solutions can (and should) stretch far beyond mere publicity. The live-events line of business is often about making direct introductions between sponsors and certain attendees; the digital classifieds business (car sales, help-wanted postings) has evolved well beyond mere listings to using algorithms to matching specific shoppers with specific listings. A used-car dealer trying to move a lime-green Honda Civic doesn’t really care about people looking for brand-new minivans.

The sales channel is how you connect the dots – how you convince the customer that you have a product that can solve their problem – that you can deliver value to them.

In other words, don’t think of a single bucket of revenue called “advertising” – think of it as six, seven or eight different buckets, each with its own unique value to the paying customer, each requiring its own measurement and management.

Print and digital ads sold to local retailers to promote their wares? Let’s call that local display, and let’s have a dedicated team of sales reps who spent most of their days out of the office working with those clients.

The same kinds of ads sold to national cell-phone companies and really big local advertisers like the big hospitals? Let’s call that major accounts – retail, and have them work closely with our sales team in New York.

Garage sales and other general listings tucked back in the want ads? Let’s call that classifieds – other – and since most of those customers only buy a couple ads a year, let’s keep the costs way down by handling all those business over the telephone and via email.

And so on, through categories like “help wanted” and “automotive.” You could tell how seriously each line of business was being taken by The Bosses: You just looked at the quality of the managers assigned to the category. General classifieds (the garage sale and lost-pet ads) almost always had the youngest managers, and the sales teams never left the building. They sat at a phone bank with headsets on, waiting for the phone to the ring.

In theory, the best leaders and sales people got promoted over time to the biggest and toughest accounts – major local retail and the car dealers. (Theory isn’t always practice, of course: I remember flummoxing one allegedly senior rep when I kept asking why her account, the largest health-care and hospital group in town, was down 30 percent year over year in their spending with us. Have they changed their strategy? Do they have a new leader who hates our company? Are they shifting everything to radio and TV? Time after time, her only answer was “I don’t know!” until finally she yelled at me: “Look, all I know is that no insertion orders have come out of the fax machine!” No wonder that sales team had the reputation for being mere order takers, better suited to work at McDonald’s. My buddy Bill eventually fixed that.)

Thinking in terms of “lines of business” also allows you to spot new opportunities. For years, the newspaper industry treated subscriptions the way grocery stores treat milk: A loss leader. Those 99-cents-for-13-weeks circulation come-ons did not make a dime of profit. (In fact, on balance, it cost about 25 to 50 cents per copy to simply print and deliver each day’s edition; the subscription fee typically didn’t even cover those costs.) The real profits were in the advertising.

When ad revenues started plummeting in 2006-07, it took counter-intuitive thinking, and heavy-lifting analysis at The New York Times to figure out the digital-subscription puzzle: Very few people are willing to pay anything for news. But a smaller, passionate group of super-users values us so much that they will pay a lot. Hence the nearly-universal metered-wall – which a lot of people (me included) though was the height of stupidity when The Times launched it in 2009. (Tim, I apologize for all those nasty things I said.)

The point of all of this: Don’t fall into the trap of limiting your thinking to the traditional notions of “advertising” or “audience revenue.”

Instead, think of “specific jobs my organization can do to solve a problem for someone who is willing to pay us for it.” Examples? That’s another long post for another day – but here’s a hint.

If you’re able to shift your organization thinking, you – and your journalism – will be better off for it.

Got a question? Want to argue a point? Ask in the comments below.

YouTube is becoming one of those “gradually, then all at once” phenomena – like the rise of always-on high-speed internet a decade ago, or the gradual-then-sudden collapse of newspaper ad revenues from ’05-’08.

When a colleague and I first negotiated a YouTube syndication/revenue share agreement back in 2007, most of the media world treated YouTube as a novelty, a place for keyboard cats and 14-year-olds’ rants. Certainly it would never be a venue for serious content, or for real ad dollars.

Today? Media companies are falling over themselves to expand their YT presence. Talent is flocking to its burgeoning content channels. A knowing acquaintance talks of regularly cashing $10,000-a-month revenue-share checks from YouTube for his guerrilla content operation – and of people he knows who often add a zero to that figure. (Why no link? I’m respecting a confidence, folks.)

Oh, and before my friends on the broadcast side of the media business feel too smug about their record-breaking political season?

Local TV makes strong revenues (and high rates) because of its oligopoly power over geographically targeted video ads – and because there are inherent limits on its ad inventory (only 24 hours a day, only certain hours during the day with high viewership around local content, only x minutes of ads per hour). To media companies, those both feel like protection against the sort of collapse that roiled the newspaper business.

Except:

We all know the Obama campaign in particular spent boatloads on YouTube this cycle.

And I just saw my first-ever LOCAL business running a pre-roll on YouTube. Something is afoot when local businesses in the sleepy backwater of Nielsen DMA 43 start changing their ad-buying patterns.

I’m not predicting an imminent collapse in broadcast revenues. (Ad dollars do follow the audience – but usually much more slowly than new ventures would like.) But YouTube has nearly unlimited ad inventory, and breathtaking targeting abilities. Change is coming.

From the inestimable Owen Youngman, the sort who always says his mood has never been better in spite of whatever crisis is breaking.

Here he outlines the birth of Red Eye, the youth-focused commuter paper of The Chicago Tribune, and a classic example of disruptive and lean product innovation at work.

Two must-read blog posts from erstwhile colleagues prodded me into finishing this entry, which I started far too long ago.

It’s for all those friends of mine – unemployed, underemployed, or just feeling dead-ended in their traditional newsroom gig.

There’s a  type of job out there you might be good at. It has a title you’d probably never think to look for. Your skills might match it anyway.

“Product manager.” (Here’s an example.)

Terrible title. (Could it be more bureaucratic?)

Great job, though — especially in terms of influence and power.

Product managers get to decide what functionality to add to a website (think commenting and audience-photo submissions for a newspaper site).

They’re at Ground Zero of the launch of new freestanding brands (think of a locally focused entertainment product), or managing the digital equivalent of an old warhouse.

At its core, the role is about representing the customers (note the plural, please) in all decisions – designing a site, deciding what functions a mobile app should have, figuring out what forms of content and advertising a new digital venture should have.

Years ago, when I first started developing new products, I was struck by the similarity of product management to  the role great section editors play – especially over how to allocate your staff and what the highest priority was at the moment.

In other words, if you’re inquisitive, smart and decisive, you can be a great product manager.

Many of the great ones I’ve known and worked with started their careers in newsrooms. They’re always asking questions. They’re voracious readers of anything related to the topic at hand. They know what the competition is up to. And they’re always, always pitching new ideas.

I’m not the only one who has latched onto that analogy. Matt Sokoloff – a long-time product manager for the Orlando Sentinel and Tribune Interactive, now a Reynolds Journalism Institute fellow at Missouri, uses it with students all the time.

“A good journalist can write a good article. But a great journalist can write a great story,” he says. In the same way, “a great product manager can build a great product.”

A couple caveats – both around the idea that you can’t simply waltz into the job and play everything by ear.

Section editors and street reporters tend to rely on experience and intuition (at least they did back in that other century, when I had those jobs).

Product managers risk disaster if that’s their main research tool. They need to use real data – and if none exists, run tests to generate some. (See Eric Ries’ excellent The Lean Startup for more.)

Second, about that plural noted above: Almost every product has multiple customers – and the ones who actually pay are highly important. For most news media, that means the advertisers, not just the audience. And even those segments have sub-segments that you must understand.

Understanding all those nuances takes enormous work. But then being good at a beat, or running the best features section in the state takes work, too.

Leftover stuff:

It’s worth noting that both of the blog posts that prompted me to finish this screed tie back to perhaps the most-brilliant piece of the year about entrepreneurial journalism: David Skok and James Allerton’s remarkably thorough three-part discussion with Harvard Prof. Clayton Christensen.

The piece takes Christensen’s groundbreaking research on disruptive technology and applies it to the business side of news. It’s a true must-read for anyone interested in the future of our business – and it’ll be required reading for the next group of students I’ll be teaching at AU.

Finally, if you want a condensed, rigorous look at those ideas, get your boss to send you to API’s upcoming session on disruptive innovation for news, part of its Transformation Tour.

My friend and former colleague Bill Day and I just finished a great six-week course in entrepreneurial journalism for 18 graduate students in American University’s Interactive Journalism master’s program.

We set out to be intentionally provocative, because Bill and I have seen too many great ideas for projects and products turn into smoldering wreckage because of miscommunication between journalists and business folks. (OK, and partly because Bill and I just like being provocative.)

So we taught it as if it were a master’s level business-school class. We used case studies about interesting media start-ups. We taught the ABCs of financial statements (yes: We made journalists look at numbers) and the grandular details of different revenue models. And we required every student to pitch a sustainable news-and-information venture.

We heard some terrific ideas. But as Tom O’Malia*, a serial entrepreneur and director emeritus of the Lloyd Grief Center for Entrepreneurial Studies at USC,  reminds anyone who will listen: Ideas are cheap.

Entrepreneurial ideas are only useful if they can be refined into a workable business concept – one that has real, paying customers, and delivers clear value to those customers.

Tricky distinction, especially for reporters.

No, your audience is usually not a paying customer. (We won’t get into the tiresome paid-content discussion here – but even at newspapers and magazines, subscription fees from the audience are a small portion of revenues, and an even tinier portion of the profits. The real paying customers are the advertisers.)

We were gratified at how quickly the group caught on.

Many of the ideas were terrific, and got only better by the final pitch session. We’re going to be intentionally vague about the specifics – several folks are still working on their ideas with an eye towards actually executing them in the real world. Suffice to say our interest was piqued by proposals to:

• Mine rich internal archives of entertainment reviews at a major media company
• Connect reporters and people who have compelling information to, um, share. (“Leak” is such a loaded word, wouldn’t you agree?)
• Attack a classified-advertising niche that has largely – and strangely – been left untouched. So far, anyway.

Great. But you know what was even better?

The weak ideas – the ones that started life as “Hey, kids! Let’s put on a website!” (All credit to Mark Potts for that line.)

Over just two months, those weak ideas got better. From vague beginnings emerged sharp proposals to create:

• A unique alliance around a hyperlocal site to provide modest, yet stable, funding that doesn’t rely on local ad dollars.
• Community and hobby-driven sites that focus on narrow, but attractive, niches. (All I’ll say about one of those niches: The hobbyists scraped together $15 million to construct a building for their pastime?!? That’s a niche I’d like to capture.)
• A clever blending of non-profit status, cheap technology and Internet cafes to support women in West Africa.

The point here is not that all of these ideas will work. Perhaps none will.

The point is that 18 young people – hard-core traditionalists, inexperienced cubs, even some NGO and government types – innovated. They combined creativity, perseverance and some basic business principles to develop concepts that are worth testing in the marketplace.

And therein lies the future of journalism: Smaller, nimbler, more creative.

*(As an aside: Bill and I owe a huge debt to Tom for graciously sharing his curriculum and research.)

My friends at the Online News Association put together a terrific program at the University of Alabama-Birmingham for entrepreneurial journalists and others interested in starting news and information sites. (Thanks to the Gannett Foundation for the necessary financial support.) 

I spoke a bit about emerging business models to support these kinds of sites (and – plug warning – the work of my partners at GrowthSpur).

You should search on Twitter for the #ONAUAB hash for some of the fascinating discussions that grew out of the sessions. Less fascinating, perhaps, was my presentation – but for those who asked for it, it’s here.

(Why, yes – I used Prezi. My friend Tim Windsor snarks that Prezi screams 2009 the same way a Yamaha DX7 synthesizer screams 1983. But, hey, I liked a-ha.)

Also: Here’s Robert Hernandez‘s excellent presentation on how journalists can use social media tools (both to build audience, and to be better reporters).

And @DannySanchez’s informative riff on free tools doesn’t have a perfect online analog – but he writes about nearly all of those tools (and even more) on his blog, Journalistopia.com.

When you check out Tigers.com this morning, you see video of a brilliant catch … but not of a badly botched call that cost a team a perfect game.

Similarly, if you check out TwinsBaseball.com, you see video of home runs … but not an equally botched call that cost the Twins (disclosure: my favorite team) the game.

All credit to MLB Advanced Media: The glaring videos are available on the sites. You just have to hunt for them. (The Tiggers’ video is on the story-level page; the Twins/Mariners’ um, “infield single” is utterly buried on the site’s video ghetto.) Frankly, YouTube was easier. (Wondering if MLBAM has take-down notices flying this morning.)

A small thing, perhaps, in a world where cellphone and surveillance video is used as a publicity weapon in an international incident, and a major oil company is behaving like Keystone Kops in the Gulf – but one more tiny example of odd results when the economics of publishing change.

The Knight Digital Media Center’s entrepeneurial bootcamp at USC has been terrific. (Search #uscnewsbiz on Twitter to get a feel for how terrific.)

Here’s a bucket o’ links and resources I referred to in the discussion at the Knight Digital Media Center’s Entrepreneurial Boot Camp. (They may be useful, of course, to other journopreneurs.)

• First and foremost: As you think about revenue, don’t fixate on one source – no successful media outlet ever has. Look for several – specific ideas in this link .
• I freely admit that I’m a history geek (How many Virginians does it take to change a light bulb? Four – one to unscrew, three to give you the history of the old one all the way back to the landing of the first English colonists at Jamestown.) If you want to understand the context of today’s media revolution, here are some terrific (I’d say essential) readings.
• The number of independent news and information sites is exploding. To keep up – and to spot trends in sustainability – three sites are particularly helpful:

J-Lab at American University

The New Business Models for News project run by Jeff Jarvis at CUNY

The Collaboratory run by the Reynolds Journalism Institute at University of Missouri

• Several specific essays and blog posts have become intellectual watersheds of the independent-site phenomenon. I’d encourage you to read Jay Rosen’s “the people formerly known as the audience” piece – it reads like a manifesto. Similarly, Jeff Jarvis’  notion of “do what you do best, link to the rest” is critical. If you ever need to remind anyone of what’s at stake, Clay Shirky’s talk at Harvard in late 2009 is calmly frightening. Scared? Good. Now, for a glimmer of hope, read James Fallows’ piece on how Google just might not be the enemy Rupert et al think it to be.
• Enough of the intellectual stuff. Let’s get to work. And because we’re broke entrepreneurs, we’ve got to do it cheaply. Here’s some free and low-cost stuff.
• Finally, something to keep an eye on. It’s no exaggeration to say that Journal Register Company historically ran some of the worst newspapers in America – small-town dailies and weeklies with antiquated equipment, dispirited staffs, crushing debt and Dickensian management policies. New CEO John Paton is dragging it out of bankruptcy with a refreshing “question everything” style. JRC’s Ben Franklin Project set a goal of publishing an existing daily and weekly using nothing but free and open-source tools – and succeeded. It’s brilliant experimentation, worth stealing.

Also: Here’s the link Susan Mernit mentioned to Brad Feld’s VC site.

I’ve been preparing a presentation to the terrific News Entrepreneur Boot Camp at the Knight Digital Media Center next week. I’m part of a panel of folks who have transitioned from the newsroom to business-side roles.

As part of the prep work, I’ve re-read a hefty stack of posts about emerging revenue models for news – advertising-supported for-profits, L3Cs, non-profit structures, even the wishful-thinking paid-content model.

Running through many of the pieces was an irksome thread: A focus on single solutions. Most framed the discussion in terms of “what’s the source of revenue,” as if there were a magic bullet that can solve every operation’s money woes.

There isn’t, of course. What’s more important, though, is there never has been. In times like these, naiveté isn’t charming – and for entrepreneurial journalists, it can be downright dangerous.

No successful news media organization has ever relied solely on a single source of revenue. In fact, the most successful industry segments – newspapers, magazines and broadcast stations – have long had many revenue sources, almost too many to list.

There’s more elaboration – and a rough list of the different sources — in this deck.

Key takeaways:

-  Don’t think too broadly. Even something as seemingly straightforward as “advertising” isn’t a single source of revenue. There are myriad advertising products – each with distinct strengths and weaknesses, sets of customers and sales models.

- As you plan the revenue models for your own proto-business (that’s what start-up journalism sites are, folks), copy the best of traditional organizations. Find multiple streams of revenue.

(Lest this come off as too scolding: I think it’s fantastic to see journalists actually interested in this sort of question. For decades, most of us acted as if the money that powered our organizations was created by magic. Worse, some assumed that it was the result of their brilliant journalism. For a welcome example of incisive, if tardy, analysis, see James Fallows’ terrific Atlantic piece on Google and the news industry.)

Most of what I hate about the newspaper industry was encapsulated in a single session at the American Society of News (not Newspapers! Really!) Editors meeting in D.C. a few days ago. An otherwise smart agenda took the inevitable detour down the rabbit hole with yet another discussion of pay walls.

Walter Hussman, publisher of the Arkansas Democrat-Gazette in Little Rock, flogged his usual paywall-as-a-defense argument: In a world where online users are worth less than print readers, he seems to say don’t bother with the former. “Why would I want to be platform agnostic when I can get (ad rates of) $40 (per thousand print readers) instead of $4?”

 I was reminded of two recent, similar quotes:

•  An analysis ascribed to Washington Post president Steven Hills in a devastating New Republic piece on the paper’s woes: Post print readers are worth $500 a year in revenue; online readers are worth only $6.
• Rupert Murdoch’s assertion that users will cough up for online content: “When they’ve got nowhere else to go they’ll start paying.”  

Hussman and Hills are both falling for the same “defense first!” mentality that has crippled innovation at newspapers. They’re implicitly assume print readership will stay the same forever (it isn’t ), and that print ad revenues will maintain, too (they aren’t).

Rupert is making an even bigger mistake. He assumes “nowhere else to go,” conveniently forgetting that his media empire was built on expensive printing plants and government broadcast licenses, each of which makes competition economically unfeasible.

Clearly, Rupe hasn’t noticed that those monopolies are gone (or maybe he’s blustering). Local television stations are emerging as real competitors  to newspaper sites in many markets. Some, like Allbritton Communications in Washington, are building separate sites to target niches and general news. And there are plenty of independent  local  sites, with new ones springing up all the time. On their own, they may not seem formidable. But enough of them in a community could ruin a local newspaper publisher’s day. No wonder potential entrepreneurs are licking their chops.

 (The ease of publishing via free services like WordPress  and Blogger are a key reason that “information wants to be free.” More on that, including some semi-geeky economic theory, another day.)

 If competition makes paywalls nothing more than defense (and the numbers sure seem to make that case), then what’s a better answer? What gets at Hussman and Hills’ arguments that print readers are worth more?

Let’s take this out of the emotional world of change for a second, and into the dispassionate world of math. Everyone remember the commutative and associative properties from third grade?

If your print readers are worth 10 times your online users, then work to get 10 times the number of online users. You’ll make the same amount of money. (Actually, you’ll end up with more – production costs are lower on digital platforms. No paper, no trucks.)

Daunting? Sure. Simply regurgitating your print product in digital formats won’t grow your audience ten times. No single product will, either.

But a network of niche products is part of the answer.

So is good app for the iPad (and don’t forget the waves of similar devices that are sure to follow).

It also means forcing the business side of the house to think clearly and execute.  And it means engaging in biz-side thinking ourselves.

If our goal is to grow our audiences again – not merely milk the ones we have – we have to engage consumers. We have to give them what they want, when, where and how they want it.

Yes, it’s not easy. Innovation never is.

But doing nothing – or hiding behind a paywall – merely guarantees a slow, lingering death for newspapers. That’s unfair to shareholders, to employees – and ultimately to the communities we serve.