Part 2: Digging an Even Deeper Hole

(Second of three parts)

In my previous post, I discussed the chasm that exists between the newspaper industry's current state and its future, when the business becomes primarily about online revenue rather than print. The optimistic view is that that transition will take five to eight years, at least.

But just as the industry is heading off the edge of the cliff into this chasm, there are indications that the online side of the business, so important to the future, is having problems of its own. There is increasing evidence that newspaper online traffic has plateaued at many papers—or worse, is declining—and that online ad revenue, after years of robust curly-number double-digit percentage growth, is slowing.

There is anecdotal evidence of this if you talk to people inside the industry; a somewhat more empirical take can be found in a little-covered study released in August by the Joan Shorenstein Center on the Press, Politics and Public Policy at Harvard. The study found that while major national newspaper Web sites are enjoying traffic growth, "those of many local papers are not." At the same time, the growth in online newspaper advertising, as measured by the Newspaper Association of America's quarterly online advertising tallies, has slowed to 20 percent this year after several years at 30 percent. It's hard to sustain 30 percent growth, of course, but again, anecdotes confirm the numbers—things seem to be slowing down.

The news just keeps getting sunnier and sunnier, doesn't it? That chasm is looking wider and deeper.

Why are newspaper Web sites hitting the wall in traffic and revenue growth? Alas, for some of the same reasons that their print counterparts have been declining for years: lack of innovation and relevance.

Let's be blunt: Most newspaper Web sites really aren't very good. Yeah, they post the daily news online, many of them now are updated throughout the day, and hey! We've now got blogs and podcasts and video! Oh my!

That's great—if it's 2003. Unfortunately, that's the year most newspaper sites still are stuck in—at best. Meantime, the rest of the online world has continued to evolve and aggressively adopt new technologies and forms of presentation, and newspaper sites are being left in the digital dust. Newspaper Web site readers visit these other sites, too, and newspaper sites pale in comparison.

We're living in the era of Facebook and YouTube, and newspaper sites, for the most part, still are one-dimensional--newspapers pasted on a screen. While the bar for Web quality is being raised every day, newspaper sites look stodgy and outdated by comparison (much like their print counterparts, alas). Don't even get me started on the state of the art in newspaper Web site design—overstuffed, overcluttered pages make that Nascar's sponsor-festooned cars look clean and orderly, to borrow a line from the great print and Web designer Roger Black.

Some quick examples of smart and popular online technology and features on which newspaper sites are still playing catch-up, big-time: Popular and competitive news and sports sites like ESPN.com, CNN.com and MLB.com have video on practically every major page. Craigslist, Google and Wikipedia make searching for relevant and useful information a snap. Facebook, MySpace and Twitter are bringing people together in innovative ways using social networking, augmented by gee-whiz presentation technologies like Ajax. Yelp, Flickr and neighborhood listservs and Yahoo Groups are becoming essential sources of local information, powered by shared community knowledge. Google and others are flat-out reinventing advertising. Bloggers by the tens of millions are redefining every type of news commentary and coverage. Widgets are the fastest-growing Web phenomenon we've seen in ages. Online games and kids-oriented sites are marvels of color, motion and interactivity. Myriad specialty sites are providing new sorts of focused information in new ways that make newspapers look even more like general-interest dinosaurs.

And those are just the tip of the iceberg. Web 2.0 sites of all varieties are using technology in ways that newspaper sites can't come within miles of matching. Creative mapping, simplified mobile device delivery, content aggregation, interactive database tools, innovative ways of gathering and republishing information (take a look at the very cool Tripit for one fascinating example)—this is the state of the Web, circa 2007. Even the best newspaper sites don't come up to these standards, and most aren't even close.

Suffering by comparison to the rest of the Web, newspaper sites are less and less attractive to online readers. Want proof? Look at comparisons of the amount of time people spend on newspaper sites versus how much time they spend on other major online sites. Alan Mutter has conveniently broken this down: Visitors to sites owned by Google, Microsoft and Yahoo spend six times as much times—six times—as they do on major newspaper sites: 2 1/2 minutes a day versus 24 seconds a day.

And those are the best newspaper sites; the time comparisons for lesser sites are doubtlessly far worse. According to the Pew Research Center, readers spend about 15 minutes a day with the printed newspaper (a number that's in steady decline). Twenty-four seconds a day with a newspaper Web site? Ooh, that's a scintillating product.

We've seen this before; indeed, it's the history of newspapers on the Web. At best the online product has been just good enough; at worst, more often than not, failures to aggressively innovate have left newspapers way behind the curve as the likes of craigslist, Drudge, Google News and countless others have carved out large chunks of businesses that newspapers once monopolized. The Web is a fast-moving stream of innovation; you're can't just declare victory when you've gotten your newspaper online and added a few rudimentary features. But that seems to be what many newspapers have done.

Enough bad news. Let's look at the bright side: As newspapers move across the chasm and make truly significant changes in their business model (not merely rampant cross-cutting), the numbers may begin to break in their favor. One major change that's going to have to be made: Getting past lip service and truly understanding that the online product is the primary business, and that print is secondary. Once that obstacle to innovation has been crossed (and truly, nobody's there yet), newspapers will be better equipped to deal with the future. Publishing a print newspaper is a very expensive proposition (you know, presses, ink, paper, etc.); publishing an online edition is much cheaper.

What does that mean? That newspapers need to think hard about getting out of the "paper" business. That could mean drastically reducing the size and press run of the print edition; it could mean eliminating it entirely; it could mean outsourcing large chunks of production and distribution to reduce costs.

Radical stuff, but it has to happen; the audience for the print product is simply dwindling. And drastically reducing the costs of production can provide significant cost savings that will make it easier to swallow the decline in print revenue and get newspapers across the overall revenue chasm. For while online revenue, at least for the near future, won't cover the cost of creating and publishing a print newspaper, it will grow within a few years to fully cover the costs of producing an online edition (yes, including a full newsroom). That's a very different calculation, and it makes the ongoing shift in revenue slightly less painful. Enlightened newspaper companies should be running the numbers on this and thinking hard about taking the big step away from print.

Another reason for hope: Smarter advertisers. The advertising industry has been as slow to creatively embrace the Web as publishers have, but that's finally changing. More and more advertising budgets are being shifted online, and more and more creative advertising is taking advantage of the medium in ways that simple banner ads—the online equivalent of the newspaper display ad—could not. At the same time, small local advertisers are coming to the Web in force, and newspaper sites should be well-positioned, as local products with local ad sales forces, to capture that advertising. They just need to create products and advertising sales programs to seriously tap into the local online ad market.

So yes, there will be something worth getting to on the other side of the revenue chasm. But it will require radical changes in how newspapers do business. In my next post, I'll offer several prescriptions for how newspapers can successfully cross the chasm and emerge as successful news organizations—if not actual newspapers—on the other side.

Part 1: The Chasm
Part 3: Building a Bridge to the Future

Comments

[Dave Mastio]

Newspaper web sites seem to just sit there never changing very much. The one thing you didn't mention is that when they do something interesting, they never seem to manage to trumpet it very much or what gets trumpeted is so unbelievably not innovative it makes you smack your head (the NYTs adding comments to stories for instance)

[Ydobon]

Dave Mastio wrote, "so unbelievably not innovative it makes you smack your head (the NYTs adding comments to stories for instance)."

They wouldn't even be doing that much if they weren't terrified by the impending death of print.

[Joshua Hatch]

Mark,

Do you think the MinnPost.com model of distributable PDFs that users can print out can work? Will it? I'm curious about your thoughts on it as a business model and its chances for success.

[Mark Potts]

Joshua: Thanks for the comment. I haven't dug deeply into MinnPost, though I had concerns about the sustainability of their business model when they first announced their plans (http://recoveringjournalist.typepad.com/recovering_journalist/2007/08/it-takes-more-t.html), and I haven't really seen anything to change that. The product looks fine, but very, very conventional, not really using the medium well--a newspaper mentality translated to the Web. (The missed opportunity there for citizen participation and contributions is glaring.)

As for PDF editions--that's hardly an original idea, and I'm not aware of it ever really working for anybody. Several papers have trumpeted PDF editions over the years and then quietly dropped them for lack of interest. MinnPost would be better off putting its resources into mobile distribution or a Facebook widget.

It's not fair, for many reasons, to judge a new product as ambitious as MinnPost just a few days after launch--as it evolves, it may get much better, or at least different, or it may run out of steam. So far, I think it's a noble effort, but it's not ambitious or innovative enough. And it probably needs a more sustainable business model.

[James]

I barely notice adverts on teh internet. I don't think i notice them at all. Is everyone else the same? If so, we should be worried...