STATE OF THE NEWS MEDIA – PART THREE
KEY QUESTIONS FACING DIGITAL NEWS: That is the headline from the Online News section of the report. Yes, no cute headline this time. Let's face it. The ones from the two previous parts were a bit of a stretch. Anyway, the key questions are a dose of reality for news operations trying to create, if not predict, their future. In brief, the report notes "money will, to a large degree, determine where things are going" AND "advertising alone will never generate the revenue traditional media generated." One word keeps popping up throughout – sustainability. Yes, as reported earlier, total online ad revenues (which includes Web and Digital advertising) jumped ahead of newspaper print advertising (by $2 Billion), but that growth is not necessarily associated with news. On top of which, news is competing for advertising dollars in a world in which there are a lot of competitors… or frenemies (a word the report doesn't use)… or even possible partners. Search still accounts for the lion's share (48%) while banner and display ads normally connected with news are still small. Video ads are the fastest growing area, and have potential, but they still make up an even smaller part of online advertising -- $1.4 Billion; Or put another way, one-tenth of search and only five percent of the online total. The report makes the case for "targeted display" as an option for online news advertising. Targeted display is what I think of as contextual or behavioral advertising – using search habits, demographics, location and past behavior to target ads to a target audience. "In theory" the authors say, online news could make use of such advertising approaches because they already know a lot about their customers and they are trusted.
The battlefield will be in local online ad spending which now accounts for 40% of all online ad spending – up from 34% a year ago. Theoretically, traditional news operations would have an advantage since much of the news traffic online goes to them. But it doesn't quite work that way. Again, there are other competitors for online attention such as portals, search engines and other information providers. And, again, much of the digital agenda is being set by third parties – device makers and software developers. Two prime examples are Apple and Google which control much of the content and advertising, allowing others only limited use, the report says. An interesting side note to this is that the report says Google is much friendlier than Apple. Only further complicating the issue is the fact, noted earlier, that the three major online measurement firms (Nielsen, comScore, HitWise) all use "different methods of counting." On a positive note, a reminder that a third (34%) say they got news 'yesterday' online – up five percentage points from a year ago.
As to mobile and applications… well, another reality check. Apple has more than 350,000 applications. Android has more than 90,000. Of all the mobile and tablet owners, just 13% have used an app for local news and information. That equates to one percent of the American population. And of that, only 10% have actually paid for that app. Reality checks hurt, don't they? That's not to dismiss the possibility. After all 18-29 year olds are making greater use of apps, and, again, nearly half of mobile users (47%) say they got "some kind of news and information' from their mobile device – almost double the year before (26%).
THE WAL-MART OF NEWS: They didn't use that analogy but that seemed to be the implication of the analysis of AOL's move into online news. Right now, the AOL properties 'only' get an average of 3 Million unique visitors a month. By way of comparison, the Web's most trafficked news website, Yahoo News, gets 94 Million unique visitors a month. Website Topix, which relies totally on aggregation, had 7 Million unique visitors. So, it may seem a little premature to use that analogy. The difference though is that AOL is staking a lot on original content creation. Yahoo has started back into original content creation, hiring a dozen journalists, but it has had a mixed history of starting and stopping such efforts. Still, its latest efforts have paid off with a 300% increase in original content. Of course, that means it went from one percent original content the year before to four percent in the last year. The vast majority (96%) is still aggregated content. AOL, on the other hand, increased its original content six times over from seven percent in 2009 to 42% last year.
On top of which, AOL bought, or merged with, depending on your perspective, The Huffington Post. It is a move which (my interpretation) the report seems to question. For example, it notes that The Post had revenues of $31 Million versus AOL's $2.4 Billion. AOL already had many more national journalists than Huffington which had all of four reporters in 2009 and a projected 18 last year out of a total of 70 to 80 mostly "curators and editors." AOL was #3 or #4 in traffic versus The Post's #8. The report says that what Huffington does have is an 'upward growth trajectory' and (somewhat worrisome, to me at least) "an ideological orientation that AOL did not." In any case, the report notes in the Digital section that AOL's Patch has websites in 800 towns and communities, soon to be 1,000. The author of the Community News section says the AOL News Network "casts a long shadow on the local news landscape." By way of perspective, the report does note that a similar venture, BackFence, failed after struggling for three years, in part because of what the report called an "unavoidable reality" – local news is expensive to produce and the audience for any one piece is limited.
As a side note, here's a question for you Message readers – is it just me, or is the report's discussion of Tina Brown's appointment as editor of the combined Newsweek/Daily Beast operation dripping with sarcasm? It notes that Brown, "the creator of the money-losing Daily Beast" brought with her… "a digital brand… a famous magazine resume, major marketing presence… (she is, they note, and in their words) "a media celebrity"… as well as financial backing from Billionaire Barry Diller.
CONVERTING COMMUNITY CONVERSATIONS INTO CASH. If you read only one section of the report, besides the overview, read the Community News section by Michelle McLellan. Maybe it's because I was reading it at 4 a.m. after four cups of coffee, but I just found this part fascinating. It's a combination of reality check and real hope. The reality check – we have been "spoiled into believing" that journalism is such an important public good that people "were bound to open their wallets for it despite evidence to the contrary." The fact is there are too many people focusing on content and dreaming that their next grant is just around the corner. The real hope – discovering and providing what customers value. Here the fact is there are not enough people focusing on digital innovation and trying different business models. The point, she says, is that finding success means experimentation… as in, (though she doesn't use this often-used phrase) – fail fast and move on. News operations need to have multiple revenue streams. I would add (commentary) – one, that just doesn't apply to community news operations, and, two, that all news operations need to be community news operations. She quotes the folks at community website, St. Louis Beacon, who make the point that… they're not an online newspaper but an "engine of engagement"… (which just doesn't) toss information at people but figures out how to serve them… in community conversations.. meeting new people in respectful, intelligent conversations." And before you think I've gone over the deep edge, they say these relationships apply to advertisers and sponsors as well as readers and users.
One other point -- for my journalism education brethren, McLellan says: "if the real job is to help journalism survive, then entrepreneurship, business literacy and community engagement needs to be as much a part of the curriculum as multimedia and digital literacy."
THINGS I MISSED WORTH MENTIONING: First, two firsts I missed. For the first time, more online listeners (55%) report listening to online only audio (like Pandora and Slacker Radio) than to the streams of radio stations. Also, for the first time, the Internet became the #1 platform of choice for news among 18 – 29 year olds in 2010. It was the #2 choice among 30-49 year olds. Okay, now in no particular order, the other things I missed mentioning in the two previous reports:
According to an RTNDA survey, there are 224 stations running news produced by another station, although I have to say I sort of mentioned this in a previous report but without the specifics. Newspaper websites reach a larger audience in 50 of the top markets, with local TV tops in 14 of those markets. In talking about newspapers' declining revenues, the report notes that half of that decline comes from shrinking ad volume and half from declining ad rates. Despite fears, private equity owners of media have not made substantial changes any different from traditional publisher/ owners. And credit to the report authors for honesty, their prediction or 'possibility raising' that local owners would step in to save or salvage city news operations has not happened. In the section about the networks' morning news shows, an important distinction is made between ratings and share. In actual fact, the morning news has grown among people who are actually watching, but there are fewer people watching anything at those times. There were 196 magazines started in 2010, while 176 folded. The year before, a whopping 596 magazines folded. Even after all its cuts, the publishers of Newsweek estimated that it cost them $17 on average to acquire a new subscriber.
And in the area of things I didn't know (and, yes, I could fill a whole Message with that): Retransmission fees make up an average of seven percent of the revenue for local stations. (I should note that the networks want to get a piece of that pie back.) This one was something of a surprise -- According to the report, CBS News only broke even last year. And more of a shock than a surprise, 'little' CNBC generates nearly as much revenue ($722.9 Million) as the entire broadcast division ($850 Million.) BTW, for some reason, I didn't see any exact figures for profitability for ABC News, although there was a lot in the report about its expense cutting efforts.
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