Tough times for newspapers

In the wake of the financial crisis, the debate around online newspapers and the traditional newspaper model for making money has increased. Today media companies have major financial problems. The newspapers are losing revenue in several areas; subscriptions are declining, classified advertising revenues are sharply reduced, and advertising revenues fall dramatically. The result is powerful cost savings in various editorial with huge layoffs. At the same time a lot of newspapers editions are shut down.

Do you dare to cannibalize big revenues?
One of three big revenues for the newspapers and the media companies was from classifieds. During the last 10 years classifieds has moved from print to online, but the newspapers underestimated the impact of the web and did not see the transformation. Robert Weisman has a great article titled ‘What went wrong?’ where he describes how (and why) The Boston Globe was a victim of its enormous success. They had the opportunity to put their lucrative classified advertising business on the Web, but cannibalization of their huge classified advertising revenues was out of the question. What they “kicked” out of office got picked up by TMP Worldwide and later expanded into Monster.com.

One of the most difficult processes inside an organization is developing something that cannibalize itself. Schibsted, the larges media company in Norway made a strategic move setting up a new organization outside of the newspapers (FINN.no) late in the 90th’s with the goal of building up the largest online classified site in the country. The development from the print business into a multi-media environment for classified business have been a huge success moving revenue from print to online. Today FINN.no (still owned by Schibsted) is the (one) by far dominant classified player in Norway and has almost no competition at all.

Online presence for many years
Most media have been positioned on the web for many years but the challenge is that the revenue is not big enough and the companies do not manage to replace the lost revenue on paper with revenue online. From an end-user perspective it is fascinating to see the lack of innovation at online newspapers. For almost 15 years the news online has just been a copy of the print edition. When looking at the newspapers online today my impression is that newspapers are at the same stage as classified was back in 1996 (classifieds online was just merely a copy of 3 liners from print). Of course there has been some product development and product innovations. The newspapers today are trying out Twitter integration, opening up for comments and debate and to some extent starting to actually link out from articles. But as I see this no huge step has been taken. As an end-user I would like to follow topics that I find interesting inside the articles, I would like to follow persons and places. I would like the information about it to be aggregated and presented in an easy and intuitive context. I would like to look at all the photo’s taken not only the one that the author finds to fit best. I would like to buy or license the photos.

In a great post (in Norwegian) Ragnhild Kr. Olsen describes how much better suited the web is to deliver news with depth, perspective and context than print. Rich user experience built up by linking opportunities and the combination of text, images, audio, video and graphics, dialogue and interaction with the audience gives newspapers a powerful way to convey information. But as she points out the opportunities to do this is exploited in a very modest degree – or not at all.

The web is social, distributed and linked
The media landscape is changing and it’s changing a lot. Breaking news hits social platforms like Twitter with stories and pictures, big exclusives stories goes online first and getting distributed all over the web (look at Guardian), you and I have the ability to produce and distribute higher quality videos than traditional broadcasters and so on. Some weeks ago, Google Chief Executive Eric Schmidt delivered a closing keynote at the Newspaper Assn. of America annual conference in San Diego. Some of his advise to newspapers is that they have to get used to the idea that they are not just generators of trusted, professional content, but also aggregators of the new kinds of information the Web has enabled (the collectively edited knowledge structures like Wikipedia, and user-generated information like blogs, images and online video). Jeff Jarvis the author of What would Google do?, describes the shift from content economy towards a link economy in which content only acquires value if others link to it. One interesting thing about this shift is that today the linking is all about linking documents or web pages.

The creator of the World Wide Web, Tim Berners-Lee’s vision of the Web as a universal medium for data, information, and knowledge exchange (the semantic web) will reinforce this trend and the possibilities and changes deriving out of this is hard to imagine. Here is a great Video of TBL where he talks about the semantic web or open and linked data.

Anders Brenna from Teknisk Ukeblad has written an excellent article (in Norwegian) titled: How is the future of journalism. In his article he discussed the role of journalism in a media landscape in dramatic change, argues that news must be free and discusses how it still is possible to make money.

Know your user and advertising will follow
Online advertising is huge and the spend will increase during the next years (as I have blogged about here). But one of the problems is that the online newspapers are not set up to take advantage of this trend. I believe that in the coming years there will be a lot of innovation in this field. Focus will be on behavioral targeting and social media to get more precise targeting and effect. To take advantage of this you need to fulfill at least a couple of things; First of all you must know your user. How the user is actually using your site is important and also in what mode the user are in at the time of the visit. It is surprisingly few online newspapers that actually know much about their user. How often are you able to actually register or log in to your favorite newspaper online? And then if we look at the mode what is the primary goal of the users visiting the newspapers? Is this mode a good match with more demanding advertisers looking for more effect? Probably not.

The development and innovation in display ads has been next to zero. It’s amazing that I still go into websites being presented with boring banners. It’s about time someone starts to innovate the formats. A couple of months ago I wrote a post about how Google is changing the Yellow Pages Industry They know advertising business better than all of us. Looking at how they manage to erase the differences between the ads and other content is something to transform to other areas. That means you must erase the differences between editorial content and ads.

The lack of innovation should be met by pushing the limit
When I look at online newspapers I often think about the mobile industry. For 15 years the mobile industry as in producers of mobile phone had the ability to innovate. Year after year they produced new phones that was just a copy of older phones. But along came Apple. The interesting thing about Apple’s appearance in the mobile industry is not solely the iPhone as a product. The phone clearly innovated the phone as a product in ways that Nokia, Siemens, SonyEricsson among others was not able to do. But Apple actually turned the mobile industry upside-down by innovating the phone, innovating the business model, innovate packaging, distribution and partnerships. They actually focused on several main areas, looked at how this fit together and combined this with great user experience.

The New York Times article In Europe, Possible Survival Lessons for U.S. Papers highlights the Norgwegian web site VG Nett. VG Nett has a profit margin of more than 30 percent and rivals Google as the most popular Web site in Norway. They have really been innovative, pushing the limits for what a newspaper online could do. They develop new products and services not solely focusing on purely news, and experiments with and engage end-users in clever ways. VG has developed Nettby the second largest Internet-based community in Norway (after Facebook) with more than 980,000 users and profiles (as of January 3, 2009). That a newspaper is behind the largest community online in Norway (besides Facebook) is impressive. VG was the first newspaper to publish photo from the tsunami in 2004. The photo was taken from a phone and sent as a MMS. This seems to have started a strategic move towards embracing user-participation in the Newspaper.

Innovation is not a free lunch
A lot of writers and blogs are saying that newspapers need to innovate. But I hardly read any that tells how they can do it, or writes anything about how to find a healthy business model. Innovation is not an easy task that you just do. It’s difficult. For the last couple of years I’ve been working a lot with innovation. My opinion is that for an organization to be innovative you must have processes and culture that enables ideas and creativity. You must have systems that captures ideas, figuring out what ideas to work on and an organization that has the ability to conceptualize and implement them. Innovation must be a central part of how you work and internal innovation processes and idea management tools must be natural and integrated part of the business.

Tough times must be met by tough decisions
Putting a closed door in front of your business is a dead end. The shift from the content economy towards the link economy will affect distribution strategies. Content need to be distributed and you need to be the best provider of it (look to what Guardian is doing). Pushing the limits for what a newspaper online could do as VG does is probably necessary to lay the foundation for making money in the new media landscape. Everyone doing business on the web, should ensure that they know their users. What is their interests and modes? The lack of information about the users is probably on a collision course with future advertising requirements. To be innovative, innovation must be a strategic and systematic part of your business. Working with culture, idea management, capacity and impact is important.

The key resources in not any longer solely based on the high quality articles and story’s written by journalists but also how it’s packaged, distributed, related to other information and the value added information that the users will contribute with. That is the paradigm shift that newspapers must see!

Thanks to Erlend Schei for great feedback to this blog post and pushing me forward to actually go through and write it.

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