December 17th, 2008
With all the debate over the future of newspapers, here’s a question I haven’t heard anybody ask (much less answer): If a metropolitan newspaper suddenly ceased to publish, leaving the city with no newspaper, what would happen to all of that newspaper’s ad dollars?
Most newspaper companies’ strategy right now is based on the assumption that you can’t shut down the print newspaper because it brings in 90% of the revenue, and you couldn’t possibly support the same news gathering operation with the 10% revenue slice that goes to the website. (The 10% problem)
There’s just one problem with this assumption. All of the ad dollars that the print newspaper gets are, by definition, ad dollars that the newspaper’s website does NOT get.
Think about that for a second. Newspapers know that they are competing with their websites for ad dollars. But newspapers are also essentially competing with their websites for survival.
So what WOULD happen to those millions of dollars in advertising if there were no longer a print newspaper to collect them?
Some of it would simply vaporize due to one of the following factors:
- Craigslist, Kijiji, or other free classified websites
- Businesses stop advertising altogether (never saw ROI)
- Businesses shut down entirely (e.g. retailers)
- Prolonged cyclical downturn (e.g. real estate)
But what would happen to the rest of it, to the ad dollars that businesses still want to spend?
Who would compete for those ad dollars? How much pricing power would they have with the old monopoly gone? How would the value propositions and ROI (perceived or real) differ from that of newspaper advertising (e.g. search advertising vs. display advertising vs. new ad models). How would advertisers perceive these alternatives to print advertising?
Most importantly for newspapers, what share of these suddenly liberated ad dollars could their news brand (which used to be the name on the advertisers’ checks) capture with an online-only reincarnation, now that the brand was no longer competing with itself? (I’m following ASNE’s lead in calling it a news brand instead of a newspaper brand.) What kind of newsroom and journalism could those “reclaimed” ad dollars support?
If I were a newspaper executive, I would cancel all meetings, clear off my desk, get out a really sharp pencil, and start trying to answer these questions. You can be sure that many other companies are already working on figuring out the answers.
To be clear, I’m not saying that newspapers should shut down the print product. I’m saying that newspapers should make sure they think through what would actually happen to all that advertising revenue if they were forced to stop publishing in print (which increasingly looks like a real possibility for some newspapers). Figuring this out could, in some cases, make the difference between surviving in some form (or even thriving) and ceasing to exist.
P.S. Regarding circulation revenue, those dollars will likely vaporize if the newspaper stops publishing in print. Why pay for distribution when its free? (Yeah, newspaper subscriptions were mostly for the distribution, not for the content. Everyone understands printing the newspaper and delivering it to your door is costly. And everyone knows it’s not the case with bits. Which is not to say readers don’t value the content, but there’s a big difference between paying for news and paying for the delivered bundle of news and information that is a newspaper.)