Thursday, June 3, 2010
We will keep cranking the presses
When people learn I am in the newspaper business, I invariably get asked about the Internet and its effect on printed publications.
Ink on paper has been around for 500 years and I believe it will be around forever. That being said, the Internet is an exciting, vibrant new medium that has created more competition for advertisers and readers.
It’s not unlike what happened in the restaurant business. Twenty years ago, there were only a handful of fine dining restaurants in Jackson. Now there are dozens.
It doesn’t mean the restaurant business is not healthy. It just means more competition. You have to operate efficiently or you’re history. This is the inevitable result of free markets.
Over the years, the newspaper industry has proven to be a survivor. In the early part of the last century, unionization and intense competition made publishing a tough, low margin business.
Then came a successive series of electronic competitors: radio, television, cable, satellite and the Internet. Not to mention direct mail, shoppers, hand flyers and just about anything else you can think of.
The ad business had a good long run of higher than normal profits. Profits attract capital. Capital creates competition. Competition lowers margins. Lower margins discourage capital. Lack of capital reduces competition. Lack of competition increases margins. It’s a natural cycle.
Think about how many specialty publications now exist in Jackson compared to a decade ago. There are literally dozens of new printed publications. Technological advances have vastly lowered the cost of production, allowing more choices for readers and advertisers.
Most people don’t realize it only costs about 25 cents to print and deliver a paper.
You see this trend in every industry, not just in publishing. The Internet has altered the business model of virtually every industry from manufacturing, to retailing, to shipping to accounting.
There is clearly a viable demand for print. I see that every day. My challenge as a manager is to operate efficiently. This central aspect of what I do is the only thing that hasn’t changed about my business.
In fact, the Internet has been a bit of a bust as an advertising medium. Print ads command almost 10 times the price of Internet display ads on a per eyeball basis.
To be sure, ‘search’ has been a huge bonanza for Google, but the pop-up display ads have experienced far less success.
I like to use the analogy of a driver versus a passenger in a car. The passenger has the luxury of looking out the window at the billboards, but the driver has to watch the road.
Online, you are in the driver’s seat, busy choosing the content. In contrast, print readers are passengers. The content has already been chosen. This makes print readers more open to advertising messages.
Politico, a famous political web site, only makes money from its print magazine offshoot.
If web display ads can track surfing habits and serve up custom ads to individual readers, web advertising will be very profitable.
Two problems with behavioral targeting: One, Congress is on the verge of banning it based on privacy concerns. Second, the content providers (such as newspaper web sites) are getting peanuts while the intermediaries (ad agencies) are making all the profits.
Right now, newspapers, magazines and other content providers are trending toward hybrid pay web sites. The headlines are free, but you will have to pay to get the full story. This is not unlike what has happened in the music industry.
Consumers may have to make a choice: Either let web sites track your surfing and serve you up customized ads or get ready to start paying for a lot of previously free content on the web.
Quality content costs money to create. If there is not a viable way to monetize local content, content will suffer. This is happening now. There are 25 percent fewer journalists in America today than five years ago. The current web business model is not working for content providers. Get ready to see some changes.
My company operates a dozen web sites across the state. Most are the dominant web sites in their markets. Two will be going to a ‘hybrid’ pay model this month. The headlines are free, but to read the whole story you must be a subscriber.
Pay versus free? Printed products have wrestled with the dilemma forever. Some publications are free. Some are pay. Web sites will be the same. One thing is for sure: To get people to pay, you must have quality content that is unique.
Looking at the stats on print and screen readership and advertising trends from 25 local Mississippi markets, print is hands down the more popular medium for local news. Readers prefer it 10 to one. Advertisers 20 to one. Until those numbers change, we’ll keep cranking up (and improving) the presses.
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