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For a while now, the consensus has been that the way to monetize content on the web was through garnering attention. Scott Karp declared the web to be a “link-driven attention economy,” and Kent has addressed the subject several times, notably here and here. Newspapers like the New York Times bought in, and abandoned their subscription-based access plans, assuming that the greater level of openness would bring greater levels of attention and generate greater levels of income.
Unfortunately, things haven’t worked out that way so far. For a variety of reasons, the NY Times, like many other newspapers, is in dire financial straits. Rupert Murdoch has recently led the charge for a return to subscription-based access, declaring,
“Quality journalism is not cheap and an industry that gives away its content is simply cannibalizing its ability to produce good reporting. . . . We can be platform-neutral but never free.”
This announcement (along with the AP’s increasingly bizarre strategies), has generated the response you’d expect from the blogosphere — Murdoch is a dinosaur guilty of trying to maintain an outdated business model, and he’s dooming his publications to irrelevance:
If you put a price – any price – on an article in the Wall Street Journal, people will not be able to share it. Sites like Mashable won’t be able to link to it. Digg, Twitter, StumbleUpon . . . any content behind a paywall will receive zero traffic from all these social sites.
And that fact alone is enough for the entire system to fail, because the benefit of receiving money from a small portion of the readers will be outweighed by the fact that fewer people will see the content . . .
But what good is all that traffic when it doesn’t bring in any revenue? Despite the sound and fury coming from the usual echo-chamber spokesmen, no one seems to have any real suggestion for how all that attention is supposed to result in profits. The promised ad money from those linked attention-payers hasn’t materialized. Chris Anderson openly admits as much:
SPIEGEL: But where’s the Web-based business model for it?
Anderson: We’re still figuring that out.
The idea of running a publishing house on hopes and dreams until a new business model emerges is proving problematic for many, and some are looking beyond the current era of free content with no monetization.
Tim Luckhurst, professor of journalism at Kent University . . . argued that what Murdoch is “very clever,” and . . . “he has realised that 1,000 users paying to read your title online are worth more than 5m doing it for nothing.”
Luckhurst said: “The simple reality is that it’s a myth that content is given value by links… The link economy is an old-fashioned model…a smaller group of online readers dedicated to their newspaper sites of choice was more beneficial than promiscuous surfers.”
But that still leaves the tricky transition of getting people to pay for something that they’re used to getting for free, which is going to be an enormous hurdle Murdoch must clear if he’s going to succeed.
Mark Cuban recently wrote an open letter to Rupert Murdoch, with some intriguing suggestions of how to pull it off. First, Cuban takes a detailed look at the actual economics of linking, using traffic from a big aggregator like Newser.com to see what it adds to the bottom line. His conclusion is that the common wisdom has it backwards, and that the aggregators need the news sites much more than the news sites need aggregators providing links:
According to Quantcast he gets about 24k unique users every day. If 1 pct of those users went to a Fox site, say the NY Post, and each looked at 5 pages, that would be a total gain of 1.2k Page Views. If you were able to sell 100 pct of those at $15 CPM, which you can’t. You would make $18 per day. About $ 6.5k per year. Best case.
More likely, in this economy, you are not selling 90 pct of the inventory he sends you. Heck, you aren’t selling a big chunk of the inventory that you get on your sites anyway, so the marginal value of the traffic sent by Newser.com might be about zero. Why would you help a site, that is a direct competitor for minimal incremental revenue?
This is where all the netizens jump in and tell me I’m crazy. . . . That’s not the internet way. Which of course is exactly how they respond to every business question involving the net. The major news sites are keeping the aggregators that don’t originate news content alive. From Drudge Report on down. You are crazy to do so. Let the search engines send you traffic. Block the rest. Your revenue impact will be minimal. The competitive impact significant.
He goes on to argue that while the idea of charging per-article is a non-starter, there’s a great variety of packages Murdoch could put together, using material from across his media empire, that would attract subscribers. He elaborates further in his follow-up posting:
My model is that companies should inventory all the assets they have and try to find optimal ways to deliver those assets in a way that is profitable to the company and of value to the consumer. In an era where the marginal cost of delivery of digital assets, and many cases physical assets are falling, why not package those assets in a manner that consumers want to buy ?
The suggestions presented should be food for thought for academic publishers like university presses and societies. Most of us produce products beyond our subscription journals, things like books and videos. Combine these with the other exclusive material within our domains (access to meetings, course lecture material), and some obvious packaging opportunities arise.
Newspapers face challenges beyond their business model, the biggest being the homogenization of content, where any one source can substitute for another. Murdoch’s toughest obstacle may be producing quality material that is unique enough that it can’t be easily replaced by a free alternative that is “good enough.” But if he can pull that off, there’s an argument to be made that a smaller market penetration consisting of paying customers is preferable to a wider penetration of freeloaders.
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Aug 18, 2009 at 5:14 pm
Tim O’Reilly’s comments on free content, advertising vs. subscription based models, etc. at his 2008 TOC conference — the message mainly being “free in the service of paid” — are still spot-on. He, too, did the math and found that for publishers of specialized content (like O’Reilly and like scholarly publishers) an ad-based model is crazy. That doesn’t mean you don’t provide stuff for free. It’s all about looking at ALL your content, understanding what its value is, and to whom, and then putting the RIGHT STUFF out there for free to attract people to your paid content. He has been very successful in doing that. Although he’s not technically a scholarly publisher, I think what he is doing is WAY more relevant to scholarly publishers than whatever Murdoch does or doesn’t do. It’s not just a matter of _going back_ to some old model. It’s a matter of rethinking all the models entirely — and trying out many of them to see what works best. O’Reilly, and Safari, have come up with a lot of interesting models that scholarly publishers could benefit from.
Aug 19, 2009 at 4:42 am
Great point Bill, I was also at TOC2008 (Fellow STMers you should go to this conference) and I second your thoughts on Tim’s talk (Here is the link to the video: http://blip.tv/file/970310).
To see where Murdoch has changed his views, see this blog by Tim: http://radar.oreilly.com/archives/2007/11/free-is-more-co.html
The newspapers are being hit by the brutal exposure of just how valuable (or not) their ‘content’ is. The market just got efficient on them in a most devastating way. It maybe dangerous to extrapolate from a sample of 2, but the FT and the Economist are both doing very well I believe and this is because they are delivering information that people really need and will pay to get in order to get a competitive advantage. They also have neat ways to deal with irregular visitors.
Nobody pays for 24hr news channels (not directly at least) so the market rate for ‘News’ is zero. The market rate for Analysis isn’t zero, but I don’t see much analysis worthy of the name unfortunately. Over here in the UK, the Telegraph just did a massive piece of journalism on how our politicians were gaming the parliamentary expenses system. It would be interesting to know what effect that had on their revenues. I think Scott Karp’s thesis about links was that Newspapers that link OUT, add value to their offerings because they then act as curators of useful material which can then be monetised as people will pay to save time in finding out more about something of interest.
The ad problem is an odd one. Ad People think that a full page ad in the times or the NYT is more valuable than something equivalent online. I wonder how that is measured, or whether the inertia of the Ad folks is the problem. Federated Media are doing interesting things here, and I believe they are able to get much higher rates for their sites. Of course the other problem is that newspapers are not supposed to couple the ads to the content directly… exactly the opposite of what Google has done. I think the STM world mostly shudders at the idea of directly linking ads to the journal content – conflict of interests and all that, but the truth here is that intimate coupling of an ad to the context AND to the visitor is a very high value thing indeed. Of course the identity and privacy issues here are currently what stops this working – which is why facebook cannot currently monetise their offering effectively. Go watch Minority Report to see the future of ads. It’s disturbing to us I think, but then we grew up with old world values of identity and privacy.
Trying new business models is vital for us, Jeff Jarvis made an important point when he said “Beware the cash cow in the Coal Mine”. He was talking about TV Guide which didn’t innovate because nobody wanted to risk the revenues. I bet that logic resonates with all of us in the STM world.
Aug 19, 2009 at 8:47 am
I’ve often encountered the same problem regarding online ads. Companies seem willing to pay large sums for print ads in journals, which are probably not very effective, yet they’re unwilling to pay a small fraction of that for online ads that they can track and analyze. I have a suspicion that many ad departments aren’t all that interested in doing detailed analysis of metrics, they’d rather just have the pat answer that a print ad went out in X thousand copies and rest their laurels on that.
Aug 19, 2009 at 8:59 am
Measurability of advertising is a big issue, but in an unexpected way. Online ads are measurable, so they are much more closely monitored and priced on performance. That makes them much lower-priced, relatively. But this is fundamentally wrong. If print ads were based on transaction metrics, they’d be very cheap. Ultimately, pricing advertising on transactional performance is a direct marketing mentality, not an advertising mentality. Advertising can’t be measured as transactions — it’s more about creating awareness, changing perceptions of value, and carving out mindshare. Print advertising was more pure advertising, but online ads have been conflated into a transactional model that doesn’t match advertising goals. The pricing of print advertising was probably more correct as advertising.
Aug 19, 2009 at 8:42 am
O’Reilly is often a dose of sanity in the maelstrom. He is actually trying to run a business using new tools and models, as opposed to most voices who are trying to make a living by talking about running businesses without actually doing so themselves. He has a real-world laboratory, and is certainly someone any scholarly publisher should be following.
Great point about limited use of free content to sell the rest of your content. It’s worked well for the Wall Street Journal, where they generally open the big national stories to everyone, but keep the niche material behind the paywall, as the niche people (investors) are the subscribers. It didn’t work at all though for the New York Times with their Times Select program, where the news was free but the editorials and features were behind the paywall. In the journal that I run, we have “featured articles” each month, which are freely accessible to all, the idea being that for a new journal, it helps with exposure, lets people know we exist, increases readership numbers (helpful for advertisers), and generates links which helps our Google ranking. It’s particularly useful for us as we’re a methods journal, and most protocols refer to other relevant protocols that are behind the paywall, hopefully spurring enough interest to generate a few subscriptions.
Aug 19, 2009 at 7:10 am
There’s definitely a balance here for content providers — some free to serve the attention economy (which is real), most not to serve the money economy (which is more real). What intrigues me about the attention economy is that it’s very engineered and accessible now, and companies have found ways to make it pay without owning content. Can content providers discover these tricks themselves? Or will we continue to feed the attention economy? News organizations are faltering because they’ve conceded, and while Murdoch may be able to win a battle with paid content, he seems destined to lose the war.
Aug 19, 2009 at 8:51 am
You might be interested in Newser’s response to Mark Cuban:
Which raises the question of why news sites don’t just set up their own aggregators while blocking third parties from their own content, essentially taking over that business for themselves.
Aug 19, 2009 at 9:02 am
The AP announced earlier this year it was going to try something like this, but it might already be too late. Also, a content provider is going to be competing on technological sophistication and audience-targeting savvy, in a space where they’ll be playing catch-up. They’ve been dealt a grim hand by the Fates.
Aug 19, 2009 at 9:41 am
All true Kent, but if the news sites start blocking traffic from aggregators, the competition goes away. Of course they’ll block one another as well, perhaps ending up with even more power in the hands of search engines.
Aug 19, 2009 at 10:44 am
Something to throw into this mix is what the Guardian have just done over here in dear ole’ blighty. they’ve built an api for their content so that their journalism can be mined, remixed and reused.
For Free…
Here’s the (possibly) genius bit. To do this, you have to sign an agreement that allows the Guardian to run adverts next to it’s content on your site. It’s Adsense for their content, but done backwards as it were so that the Guardian controls the ads AND the Content. This is another case of Scot Karp’s link economy by the way.
Kent – your point about the print ad prices also needs to take on board the scarcity aspect of the print real estate – in print you can’t just go and find another paper with the reach/prestige/target demographic/whatever of the NYT. Not a problem on the web. Also as David mentioned – how many creative types are mathematicians?
One thing that was implicit in Tim’s talk was the fact that he has a team of folks doing detailed analysis of the various business models he runs and the experiments. Those guys really do fail fast cheaply and often, and they do it pretty successfully (at least to the outside world). There are some skill sets we really need to get hold of and analysis of that thing we call online is definitely one of them – it’s more than visitor numbers and clicks, it’s deep mining for user behaviour patterns and all sorts.
Aug 19, 2009 at 10:51 am
David,
Good points. I had some references to the scarcity of print in a first draft of my reply, but took them out because I actually think for advertising a print journal was a proxy for an audience. And I think reaching the right audience with advertising is still valuable since audience (and attention) scarcity hasn’t changed much. That’s why I think for advertising the main issue I see is a mindset that’s inappropriately about transactions (advertising as direct marketing). If online advertisers had completely embraced advertising online, they’d be happy to put 50K impressions in front of the right specialists or domain experts, and they’d measure differently — more on brand recall, creative effectiveness, market share, mind share. Now, they measure click-throughs. In fact, a person could argue that online advertising is much more valuable than print because it does everything print advertising does AND it provides direct mail-like transactional opportunities.
Aug 19, 2009 at 11:12 am
Kent, how do you reconcile that with studies that show that people don’t even look at banner ads? Is there a point in paying for something that’s going to be ignored completely? If this is the case, then why pay anything for impressions?
I think one of the major issues I’ve found (at least in science publishing) is that the people buying ads are not scientists, their background is in advertising. They don’t have much of a grasp about the ways of scientists, how literature is read, or even what scientists do with their days. When we tell a potential reagent manufacturer that we publish protocols that use their reagents, very often the first question asked is, “what’s a protocol?” Our papers are directly relevant to selling their products, but it’s often an uphill climb to get them to understand why.
There’s also a huge difference between putting an ad for Coke on the 7th page of People Magazine and an ad for a centrifuge on the 7th page of Cell. Readers are going to flip through People and look at each page. Most Cell readers are going to the website and downloading the pdf of individual papers they want to read. Most will never even look at the html version of a published paper, let alone the print version. Those who do still get the print aren’t idly skimming through the pages for branding opportunities.
Aug 19, 2009 at 11:22 am
Ah, perception is such a tricky thing. Even Jakob Nielsen’s heat maps might not measure the quick recognition glance that someone gives an advertisement. We’ve been surprised to hear from readers in the past that advertisements hold some intrinsic value because they communicate a lot about the commercial space of an industry, and that’s inherently interesting. And if people don’t even look at them, how does that explain click-throughs? That means that some small percentage are not only seeing them, but clicking through to see what else the advertiser has to say. Some people think messaging has a “five times” rule to it — someone needs to see a message five times before it really gets received. Advertising is part of this additive process, so a good promotional mix will include advertising, direct mail, and other techniques to tell the story.
Domain expertise is important for advertising people to have to some degree. The best advertisers understand this.
Aug 19, 2009 at 11:37 am
This is a reply to David’s comment below (I can’t reply to that for some reason).
Effectively the market rate for impression is near enough zero to be considered so is it not.
A conclusion here is that ad models are failing in all sorts of ways, and some of those ways are to do with the fact that mainstream advertisers are not savvy when it comes to matters technological. You need a maths geek, an ethnography geek, a tech geek, and and geek to advertiser geek to talk to the advertisers in a way they can understand and those roles are by no means mainstream – outside of O’Reilly I suspect.
That ads that work are the adwords ads that appear on Google. Google gets all the above and more importantly employs a whole bunch of people to do things like look at search trends for predictive reasons – they ain’t doing that for kicks – it’s so they can build it into their pricing models for adsense bids. I believe that same approach will work for Newspapers et al, but you gotta believe that will work and you have to make the jump that says we will follow the data religiously (so to speak). Advertising has become an engineering exercise, not about the play of font upon image or the quality of light falling upon the car as it swoops down the mountain road. that method does not work at all now that we have crossed the rubicon in the way we consume our information. So you got to get smarter about it – Honda’s live advert with the sky dive (done here in the UK last year), Another Uk supermarket trying a live 3 min how cookery lesson. Adverts people will not FF through. Ads as useful content.
I bet no newspaper would ever go to an advertiser and say – we aren’t running your ad – it just didn’t perform well enough for that space on our paper, you need to go away and do it better.
Google does that all the time with adsense. Theirs is a different way methinks.
Aug 19, 2009 at 11:47 am
Nielsen suggests that the reason Google Ads work is that they’re being used in a situation where a reader is actively seeking information on a topic, in a search engine. Ads in other situations don’t do as well because a reader is actively filtering them out, rather than seeking their information. So context seems to play a big role.
Your post also made me think of the genius Sony ads for their HD televisions. I’ve watched those repeatedly and shown them to many friends.
Aug 19, 2009 at 11:00 am
To push things further, if the Guardian refused outside links from anyone who didn’t agree to their license, they’d put the commercial aggregators out of business. Let the bloggers and non-profits do what they’d like with your content (and make a very small amount of money from the associated ads) but cut off anyone whose business model is based on using your content to sell their ads.