The irrational imitation of the online news industry
All across Europe, journalistic online startups are launching, aiming to produce and disseminate news in new ways. In our brave new world, the nimble startups of tomorrow were supposed to be overtaking the lumbering dinosaurs of yesterday online. But nearly all of these startups, even the most impressive and innovative sites, are struggling to survive because they face structural and strategic challenges that are not always recognized upfront. To succeed, European journalistic startups need to recognize these challenges, move beyond simply imitating others and find their own paths ahead.
The structural challenges for European journalistic startups have to do with the competition they face in content and advertising.
Startups are trying to establish themselves in a market for online news that is dominated by legacy media like newspapers and broadcasters. New journalistic ventures, such as Netzeitung, Rue89 and Il Post, are competing not only with other startups but also with the popular online offerings of news organizations like Spiegel, Le Monde and La Reppublica. These incumbents, and others like them, have built their digital strategy around their well-known brands and content from their existing newsrooms. They fund them with profits from their (generally declining) offline operations. Together with a handful of aggregators and portals, such legacy players dominate online news provision in most European countries.
As European news startups compete with established news media on the content side, they are also trying to carve out a position in a market for online advertising. That market is already dominated by U.S.-based giants like Google (and increasingly Facebook). A few large players attract most of the advertising, while innumerable smaller websites with display advertising keep down rates (so-called CPMs, cost per thousand impressions), eroding the value of the audience that each journalistic venture manages to attract.
Those are the structural challenges. The strategic challenges, meanwhile, concern the tendency toward irrational imitation. Startups across Europe need to break with two kinds of imitation in particular to develop sustainable funding models for the future.
On the one hand, many startups imitate what has been the dominant model for online news for the last 20 years. They produce content, make it available to users for free and try to cover costs by placing advertisements on their site. This doesn’t work. News that is free at the point of consumption has worked for broadcast television, radio and for-free newspapers for decades. But because of the structural challenges of online advertising outlined above, the model is not working on the Internet. Most sites operating on this basis are operating at a loss, and have done so for years. It is not clear that the dynamics of online news and online advertising are likely to change anytime soon, so to launch a site based on this model expecting to break even is a clear case of irrational imitation – doing the same thing, hoping for a different outcome.
Friday media highlights
Here are some of the day’s top stories in the media industry:
TV Networks Fight Drug-Ad Measure (WSJ) “Advertising costs are deductible to any company as a business expense. The plan being considered by Rep. Rangel’s Ways and Means committee would eliminate the deduction with respect to prescription drug advertising,” writes Martin Vaughan.
Big media seek 21st century business models (Reuters) “Media moguls at this week’s Sun Valley conference have spent as much time discussing how to reconfigure business models disrupted by the Web as they have worrying about the weak economy,” reports Yinka Adegoke.
Zucker Says Marketplace Has Reached Bottom (B&C) Ben Grossman writes: “NBC Universal chief Jeff Zucker said Thursday that while the overall marketplace is still challenged, he thinks it may have bottomed out. ‘It’s still quite uncertain and we don’t really see the full recovery we are all hoping for,’ he said. ’It’s still tough out there, but I think we have seen a bottom.’”
The Financial Times and New York Times make further syndication deals (Editors Weblog) “Both the Financial Times and the New York Times have announced their international syndications will include additional countries. The FT has confirmed content sharing arrangements with publications based in Turkey, France, and South Korea,” writes Christie Silk.
NBC Reveals Displeasure as U.S.O.C. Unveils Plan (NYT) Richard Sandomir writes: “The head of NBC Sports said Thursday that he broke off talks in April about combining the Olympic channel that it partly owns with the one being planned by the United States Olympic Committee.”
AP Works Toward Universal Online News Format (Mediapost) Gavin O’Malley writes: “The Associated Press, along with fellow non-profit The Media Standards Trust, on Friday unveiled a digital news “microformat” to effectively encapsulate the content and key meta-data of every news story online.”
Google’s Mayer on how to write online news
Just about everyone has thrown a thought or two by now into the great bubbling pot of stew that is the future of journalism. Latest in line is Marissa Mayer, Google’s vice president of search products and user experience.Mayer, one of Google’s earliest employees who gets reams of newsprint in Silicon Valley for her cupcake spreadsheets and love of Oscar de la Renta, spoke before a Senate subcommittee on a future of journalism hearing on Wednesday.Apart from defending Google, which has come under attack from the news industry — most notably the Associated Press — for profiting from content, Mayer gave some tips on how journalists should write their stories.Mayer talked about something she called the “atomic unit of consumption” — a news article rather than an entire newspaper, much like one song downloaded digitally instead of buying an entire album. Here’s an excerpt from her prepared testimony:
The atomic unit of consumption for existing media is almost always disrupted by emerging media. For example, digital music caused consumers to think about their purchases as individual songs rather than as full albums. Digital and on-demand video has caused people to view variable-length clips when it is convenient for them, rather than fixed-length programs on a fixed broadcast schedule.Similarly, the structure of the Web has caused the atomic unit of consumption for news to migrate from the full newspaper to the individual article. As with music and video, many people still consume physical newspapers in their original full-length format. But with online news, a reader is much more likely to arrive at a single article. While these individual articles could be accessed from a newspaper’s homepage, readers often click directly to a particular article via a search engine or another Website.
Mayer then went on to suggest that reporters and editors need to think differently about how they write for online:
Treating the article as the atomic unit of consumption online has several powerful consequences. When producing an article for online news, the publisher must assume that a reader may be viewing this article on its own, independent of the rest of the publication.To make an article effective in a standalone setting requires providing sufficient context for first-time readers, while clearly calling out the latest information for those following a story over time. It also requires a different approach to monetization: each individual article should be self-sustaining. These types of changes will require innovation and experimentation in how news is delivered online, and how advertising can support it.
So wait, now the big bad wolf is counseling Little Red Riding Hood before gobbling her up for dinner? Maybe Google and news publishers can be friends… or at least frenemies. Read Mayer’s full testimony here.Keep an eye on:
- Online video site Hulu signs its first international TV content deals. (Financial Times)
- Former CNBC host lands at MSNBC. (Associated Press)
- Hear it once and for all: Twitter is not for sale. (Reuters)
(Photo: Actress Brooke Shields portrays Little Red Riding Hood at a charity fundraiser/Reuters)
The future of media will not be anything that looks like the current structures…A lesson worth remembering is that at the turn of the 20th century, people had a transportation problem…and the solution turned out not to be a “faster horse”…but a Ford.And one should note that the Ford didn’t arise out of the “horse industry’s” R&D efforts, nor the “Horse Industry Revitalization Act” nor the horse industry’s attempts to experiment with new Business Models.I think the future of the media business will look as different as Ford and Toyota’s operations look from horse traders and blacksmiths.——What’s historically given value to editorial content is the relative scarcity of distribution versus readers (not the Kindle kind). Newspapers have historically enjoyed natural localized economic monopolies that allowed each of them to exercise monopoly control over the amount of content (and advertising) they allowed into their local marketplace.Monopoly constraint of distribution and supply will always lead to prices (and profits) significantly above open market rates. Newspapers then built costly organizational structures commensurate with that stream of monopoly profits (think AT&T in the 1970′s).Unfortunately the Internet came along and changed all the rules!——The dynamics of content replication and distribution on the Internet destroys this artificial constraint of distribution and re-aligns advertising (and subscription) prices back down to competitive open market rates. The often heard complaint of Internet ad rates being “too low” is inverted…the real issue is that traditional ad rates have been artificially boosted for enough decades for participants to assume this represents the long-term norm.An individual reader now has access to essentially an infinite amount of content on any given topic or story. All those silos of isolated editorial content have been dumped into the giant Internet bucket. Once there, any given piece of content can be infinitely replicated and re-distributed to thousands of sites at zero marginal costs. This breaks the back of old media’s monopoly control of distribution and supply.To paraphrase Nietzsche, “God is dead. God remains dead. And we have killed him with the Internet…”——The core problem for the newspapers is that in a world of infinite supply, the ability to monetize the value in any piece of editorial content will be driven to zero…infinite supply pushes price levels to zero!What this implies is that no one can marshal enough market power to monetize the value of content in the face of such an infinite supply and such massively fragmented distribution. Pay-walls, lawsuits and ill conceived legislation won’t allow the monopoly conditions to be re-constructed because only ONE VERSION each story has to leak out to start the cycle all over again.——Another way to think about this is that once data becomes publicly visible on the Internet, its monetizable value rapidly dissipates to zero.This is at the core of why Google can extract $25B a year from the economy without creating ANY content…what they create is meta-data about content (which CAN be monetized)…and all that meta-data remains non-visible. Only the results of decisions based on that meta-data by their search and advertising platforms is made publicly visible.The lesson is that Google DOES NOT monetize other people’s content…it monetizes its OWN meta-data. This is certainly one path to making the news profitable…not search per se…but various other approaches to the monetization of meta-data that’s within the reach of publishers.So the exquisite irony is this:In the future, the only content that will have monetizable value is content that no one is ever allowed to read! (i.e. the meta-data)——There are certainly ways to make online news profitable…and many of us are working to develop such approaches…but I can assure you they don’t involve inventing a “faster horse”…Dale Harrisondale.harrison@inforda.com
Pay old-media execs to help you charge for new media
Three of the traditional media world’s brightest stars have a bright idea: Start a consultancy to help old-media companies charge for their content online. (And announce the venture in an old-media publication.)
From The Wall Street Journal’s website on Tuesday afternoon:
A trio of media executives is starting a firm to guide efforts by newspapers and other publishers to charge for content posted on their Web sites as advertising revenue tumbles.
The venture, Journalism Online LLC, is being led by Steven Brill, the founder of the American Lawyer magazine and Court TV; Gordon Crovitz, a former publisher of The Wall Street Journal; and cable-television veteran Leo Hindery.
Crovitz, who was unseated when Rupert Murdoch bought his paper and given a column instead, told the Journal that charging for online content won’t solve all the problems facing newspapers and other information purveyors on the Internet, but it would do some good. He also said that Journalism Online LLC would make money by sharing revenue from consumer payments and licensing fees. No word from Hindery (now in private equity after selling TCI to AT&T and running Global Crossing before that company hit the skids) or Brill (one existing magazine, one defunct one).
UPDATE: Crovitz told us that publishers — not all of them newspaper publishers — are in talks about whether to use the system. He wouldn’t name any, however. (And another UPDATE! Philadelphia Inquirer and Daily News Chief Brian Tierney says his papers aren’t ready to sign up yet, but they are interested in talking more about it.)
How does it work? Crovitz said some publishers could charge annual or monthly subscriptions, and possibly per-article payments. The system also could allow a comprehensive monthly fee for access to all publishers who use the system. The New York Times quoted Brill as saying $15 a month is a possible price, but Crovitz said that it’s too early to say yet.
At last with that model the consumer has a choice of whether to buy the intelligence or not. Bloggers, on the other hand, are paid for out of companies’ marketing budgets when adverts are displayed on their pages, which pushes up the shop prices of all the goods advertised on that page, for all consumers, whether we like it or not.
NewsCred: You rank the credibility of news
Digg gained plenty of press because it let its users determine the popularity of various news articles. A new website, NewsCred, is taking a different approach: it lets readers rank the credibility of the news itself.
The site has been up since May in a private “alpha” mode and on Tuesday launches into an official “beta” version — Web terminology for something that’s live for the public, but not necessarily in its final form.
To find out more about NewsCred, I spoke to Shafqat Islam, 27, who was born in Bangladesh but lives in Geneva, and is one of the two chiefs who runs the site. Islam is a former project manager for financial systems at Merrill Lynch (he built systems there for traders and private bankers) who runs the site with Iraj Islam (no relation), 24, and a resident of Stockholm.
I asked Shafqat Islam what the purpose of the site is. After all, there are plenty of websites out there that present news from various sources all in one place. Besides ranking sites by credibility, he said he wanted to develop a modern news service that was not too difficult for people who are not techies at heart.
“For regular customers like my friends or my family, none of them had even heard about NetVibes or knew what an RSS feed was,” he said. “We wanted to create a news aggregating site where it’s just as simple as clicking the logos of your favorite websites. It’s for mainstream news readers.”
NewsCred capitalizes on the concept of the “community” in news presentation, something that traditional news outlets and other sites have determined is crucial to keep users interested in coming back. Making the ranking of credibility a mainstay of the site is something that he thinks will add a level of involvement among users that they don’t get right now on Yahoo’s or Google’s news sites.
“We want to give news readers a platform to voice their opinion. We really believe that being a news reader is qualification enough to give your opinion on a journalist or a news article,” he said. “We also want to encourage people to discover more news sites.”
In Loom of the Fannie/Freddy Bailout, why doesnt anyone in big media bring up the the fact that most loan officers were instructed to use websites like FAKEPAYCHECKSTUBS . com (creating documentation that never existed) to help the loan qualify through every step of the pipeline, to collect the 6 percent commission they make on EVERY deal – is it any wonder why the economy and the worlds banking system is where it is at today
