Back when newspapers where the only game in town for ad space, they could charge whatever they wanted. Now the web has near infinite ad space, and newspapers find themselves playing the wrong game. They’ve got ad sales staff that specialize in commodity order fulfillment and not premium advertising solutions.

So what distinguishes a premium ad solution from commodity ad space? It’s a premium solution if not every site can deliver the value. Any site can slap a display ad on a page — that’s what makes it a commodity. High-end brand publishers like newspapers  really have only one way to distinguish themselves from every other web publisher on the planet — their ability to create high quality content that attracts a targeted, high quality audience.

But… there are many sites that specialize in creating “good enough” content that can attract segments of that high quality audience, and then selling that audience at a much lower cost.

But wait, you say, high-end brand publishers should be able to sell the ad next to their higher quality content at a higher price. Isn’t that the whole principle behind premium publishing?

Not when it comes to display advertising. Display advertising isn’t more valuable when placed next to premium content because display advertising has so LITTLE value to begin with. In fact, display advertising creates so little consumer value that it actually SUBTRACTS value from high quality editorial content when placed next it. Ever see those belly fat ads on top tier news sites? Dancing Martians lowering your mortgage payments? Whiten your teeth? It’s a total train wreck.

In fact, many ad exchanges are focused on bundling and selling audiences in a way that exploits this commodization of display ads and effectively cuts out the value of the publisher.

So what’s a high-end brand publisher to do?

The answer is to offer advertising solutions that give advertisers the opportunity to create REAL consumer value; the kind of value that complements and even enhances the value of high quality editorial content; the kind of value that high-end brand publishers specialize in creating.

Many advertisers have sought this kind of premium value from high-end brand publishers, and most publishers have responded with customized solutions like the classic “microsite” or one-off customized ads. But that too can be a losing proposition. Case in point from Mercedes:

It was a good day for newspaper Web sites when Mercedes-Benz USA introduced its updated E-Class cars this summer. Mercedes bought out the ad space on the home pages of The Washington Post, The Wall Street Journal and The New York Times, and had those sites create special 3-D ads for them, at an estimated cost of $100,000 a site.

When Mercedes advertises its more basic models next year, it will largely avoid newspaper Web sites and rely on networks. That lets Mercedes “be very targeted and efficient with our dollars,” said Beth Lange, digital media specialist for Mercedes-Benz USA.

The problem with these solutions is they don’t scale — they are expensive for publishers to deliver, and they are expensive for advertisers to buy. The result is most advertisers are lured back by the siren song of commodity ad network cost efficiency. So while high-end brand publishers do well for big splashy launches, they can’t compete when advertisers go into the post-launch mode of consistent, continuous, high ROI value creation.

What high-end publishers need is a way for advertisers to create premium value for consumers that scales and can deliver a consistent, continuous ROI that justifies a premium over commodity ad networks.

What would advertisers be willing to pay a consistent premium for? The holy grail of every advertiser — to become media, i.e. to create high quality content that attracts and retains an audience of current and prospective customers. Advertisers would also pay a premium to align the value that they create for the consumer with the value that high-end brand publishers create for consumers — just like on a search results page, where the ads are as valuable as the “editorial” content.

But if every high-end brand publisher tries to deliver such a solution by themselves, it won’t scale for advertisers. The key is to scale across many high-end brand sites while still delivering the kind of premium value that commands premium pricing.

That’s the next generation of premium online advertising. More in my next post.

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That’s what Mike Arrington asserts, and I think he’s right (disregard the “failing old media” rhetoric):

And earlier today I got a glimpse at what AOL is up to – they are hiring all the journalists being fired and laid off by the newspapers and magazines. And they now have a news room 1,500 journalists and editors strong. Amazingly, failing old media is throwing away their most valuable assets. And AOL is eagerly picking those assets up for a song. Before anyone knows it, AOL may be the most powerful news outlet in the world.

Given that NYT has gone to great lengths to avoid newsroom layoffs, I suspect they know full well how valuable their journalists are.

Mike Arrington is TechCrunch’s most valuable asset, for his personal brand and for the quality of the post he writes.

As Arrington points out, AOL CEO Tim Armstrong has also realized how valuable journalists are, and is aligning AOL’s new strategy with cornering the market for journalist talent.

But is Arrington right that media companies are blithely throwing away their most valuable asset? Why did newspapers make so many newsroom cuts on their path back to profitability? Is it because they don’t recognize the value of their journalists?

I think it’s because they are still wrestling with the declining value of their other major asset: industrial printing and distribution capacity, i.e. printing presses and delivery trucks and all their industrial staff. While some newspapers have made significant cuts to their industrial operation by not delivering or publishing everyday (and a few have taken the extreme step of ending their industrial operation entirely), most have protected this asset because it is not really variable — it’s mostly all or nothing.

But to say that the value of industrial printing and distribution capacity is declining is not to say it has no value — it of course still generates most of newspaper company revenues. But the decline, while exacerbated to a large degree by the recession, is still secular long-term. (And newspaper companies are surely using the breathing room they achieved through cost reduction-driven profitability to figure out their long-term strategies — and they are focused on digital.)

AOL, in contrast, has no industrial assets, so has the latitude to invest in journalists. They also have another huge asset that newspapers enjoyed in their geographic distribution areas that they entirely lack on the web: SCALE

A notable illustration of the shifting value of news company assets that sits between AOL and most newspaper companies is Politico.

Politico rose to prominence by showcasing its high profile journalists on its website.

Unlike most news sites, Politico has real profile pages for its journalists and showcases their bylines on every story (even the lead homepage story):

This doesn’t mean, however, that Politico derives no value from industrial printing and distribution. In fact, half of their $15 million in annual revenue comes from a print edition published three days a week when congress is in session, and once week otherwise (via Vanity Fair).

But Politico doesn’t own any printing presses or delivery trucks, i.e. no industrial assets. And the print publication is largely the product of content produced first for the web — and it is very much a “nichepaper,” i.e. it targets the highly valuable audience of Capitol Hill staffers and members of Congress.

The results is that Politico is able to invest in a talented newsroom staff of 100, paying nearly as much as The Washington Post. And Politico is profitable.

But does focusing on journalists as news companies’ most valuable asset mean that news companies should be exclusively in the content production business? That’s a significant shift from the industrial printing and distribution business.

In the digital media world, companies like Google and Apple have taken over, as Columbia J School Dean and former WSJ.com managing editor Bill Grueskin put it, the “profitable front end of the distribution chain,” leaving news companies with the much less profitable back end of the value chain (i.e. content creation).

But what if journalists could also be the key to news companies getting back into the distribution business, in digital media?

The greatest asset of Google, the most successful content distribution business on the web, is its ability to harness the judgment of every person who creates a hyperlink on the web, and to know which links from which sites represent more trusted judgment.

News companies still employ in their newsrooms arguably the greatest collective source of news judgment.

So how can news companies leverage the asset of their journalists’ news judgment?

Hint #1: Collaboration

Hint #2: Scale

News companies are notably trying to figure out how to get into the business of charging for content on the web. As Apple’s iTunes demonstrated, the key to charging for content is in effective and highly convenient packaging.

Could journalists be the key to not only creating the content but also packaging it?

Think about that for a while. More in another post.

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Steve observes:

On the Internet, we have no need of wire editors; if we wish to have wire content on our websites, we can plug in AP Hosted News, or run a full feed of AP Online or some similar product from another service. But with everything on the Internet just a click away, the value of such branded and hosted wire content is low (and measurable), and even that may go away before long, based on simple cost-benefit analysis. We may be better off sending users to CNN, MSNBC and NYtimes.

Feature editing faces the same problem:

But the job simply doesn’t transport to digital media. Again, everything on the planet is just a click away, much of it more interesting, entertaining and informative than can be found in the typical daily newspaper’s features.

Yet there is a HUGE opportunity in this shifting landscape. Just because there’s a wealth of content a click away doesn’t mean that news consumers know where to click in order to find it.

Instead, we have what Clay Shirky describes as “filter failure”:

Here’s what the Internet did: it introduced, for the first time, post-Gutenberg economics. The cost of producing anything by anyone has fallen through the floor. And so there’s no economic logic that says that you have to filter for quality before you publish…The filter for quality is now way downstream of the site of production.

What we’re dealing with now is not the problem of information overload, because we’re always dealing (and always have been dealing) with information overload…Thinking about information overload isn’t accurately describing the problem; thinking about filter failure is.

Local news sites may serve their readers much better by sending them to CNN, MSNBC, and NYT for non-local news, as Steve suggests. But they may also send them to local news sites in other regions for stories dealing with common issues. They may send them to local blogs and other non-MSM media sites.

There is a wealth of sources on the web. Helping readers find the best of the web could help local news sites remain daily destinations rather than just a host for content to be aggregated by someone else — which could help those news operations get back into the content distribution business, which is how they made money in print, and how they could make a lot more money on the web.

Wire and feature editors are already skilled content curators — they just need to adapt those skills to filtering the web. One challenge they can apply their news judgment to is discovering new sources of trusted information, something Google CEO Eric Schmidt admits alogirthms struggle with.

For general search, we’ve been careful not to bias it using our own judgment of trust because we’re never sure if we get it right. So we use complicated ranking signals, as they’re called, to determine rank and relevance. And we change them periodically, which drives everybody crazy, as or algorithms get better. There’s no question in my experience that the top brands represented in this room would, in fact, float to the top in our search ranking. The usual problem is you’ve got somebody who really is very trustworthy but they’re not as well-known and they compete against people who are better known, and they don’t, in their view, get high enough ranking. We have not come up with a way to algorithmically handle that in a coherent way.

Another skill that would help wire and feature editors take on the challenge of filtering the web, and make them hugely relevant in the web media era, is collaboration. They could learn a lot from the editors in Washington State who have been practicing collaborative curation, whether for a statewide flood or a flu outbreak.

Publish2’s Senior Editor Josh Korr wrote about this vision for re-inventing the wire function on the web in a recent Nieman Reports piece, “A 21st Century Newswire—Curating the Web With Links”

If I were a wire or feature editor in a newsroom, instead of waiting to become obsolete, I would start immediately learning how to be a top notch web curator. I’d ask myself — how can I become the Jim Romenesko or Matt Drudge for my community. I would start learning how to use the tools of web curation and learning how to collaborate with other web curators. I’d study how newsrooms like Chicago Tribune have created an editorial workflow for collaborating to curate the web (see Colonel Tribune Recommends on the Chicago Breaking News blog.)

And if I ran a newsroom, I’d look at how I could retrain and reassign talented to editors to be vital contributors to the web operation, even as their function becomes redundant for the print operation. (Or, I’d imagine a future where content from a diverse range of web sources could be licensed and curated for print — see this Josh Korr post.)

There’s still time for any journalist in the newsroom to become essential to the future of news, rather than being emblematic of the past.

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But in addition to the key editorial question, Seattle has also now become a test case for one of the most important questions about the near-term future of the newspaper industry that is almost never asked:

What will happen to the print advertising when the newspaper stops publishing in print?

I asked this question a few months ago in theory, but now we get to see what happens in actuality.  Logically, one or a combination of the following will happen to the newspaper’s advertising dollars:

1. Vaporizes, i.e. the advertiser stops spending the money — given the economic crisis, this seems likely for some advertisers
2. Shifts to Seattlepi.com — which is hiring its own sales force following the dissolution of the joint operating agreement with the Seattle Times
3. Shifts to another newspaper, i.e. Seattle Times — through the JOA, the same sales force sold ads for Seattle PI and Seattle Times, so it only makes sense that some advertisers will shift some or all of their spending to the Times
4. Shifts to competing local online media, e.g. The Stranger, West Seattle Blog
5. Shifts to non-local media that can target local audiences, e.g. Google, Craigslist

Anyone who runs a newspaper should be watching this experiment under a microscope. Someone should even go so far as to obtain copies of the last month of Seattle PI in print and call up every display advertiser and ask them what they plan to do.

This experiment has already been playing out in Denver since the Rocky Mountain News ceased publication, but since the Rocky ceased entirely, we didn’t get to see what happened with option #2 above — and that’s the BIG question for many newspaper companies looking at online-only publishing. (The experiment in Denver could be radically altered if a new publication is launched by former Rocky staff — it’s contingent on whether they can sell enough subscriptions, which I hope they do because that is another vital experiment.)

So much of the discussion of the future of the newspaper business seemes to assume only option #1 above will occur. But that’s unlikely.

Of course the big question is whether local media can find new ways to create value — and I say “create value” because that is the key to any new business (vs. “new business model,” because those discussions typically start with what the business needs, not what the market needs). I think there are tremendous opportunities for new value creation in emerging collaborative media ecosystems, but that’s for another post.

In the meantime, all eyes are on Seattle.

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The biggest danger with news aggregation is that instead of acting as a filter, it can sometimes add to readers’ information overload. I read Andrew Sullivan’s blog as much for his links as for his original posts, but some days his link-blogging is just too prolific for me. (As Howard Owens put it: “To all the bloggers in my RSS reader: You post too frequently. Stop it. Let me catch up, for a change.”)

Commenter Matthias Spielkamp worried that the Washington link project might have had this effect: “I don’t have the time to read through 25 different stories to get a picture of the situation.”

But we shouldn’t mistake a long list of links for confusing overload just because it looks like overload from afar. The closer readers are to a story or event, the more they want to know about it and the less overloaded they’ll feel.

Take a look at the headlines on the current Kitsap Sun flood widget: “W. Wash. flood clean-up information”; “Maple Valley firefighters rescue residents from flooded homes”; “Flooding, for the most part, misses Federal Way”; “At least 500 Snohomish County homes flooded, officials say”; “Flooding halts Whidbey sports action.”

Each of those is a unique story that’s going to be very useful to someone living in that area. None of them repeats the others. Chances are, someone who lives in Maple Valley has friends or relatives in Federal Way or Whidbey. What looks like two dozen versions of the same story to Matthias or me is vital information for people who live in the flooding area.

Jack Lail found the same level of interest for Knoxnews.com’s link roundups on the Tennessee Vols. To me, the roundups look like overload. But they get tons of page views, Jack noted, “because fans are passionate and can’t get enough information on their teams and games.”

It’s kind of counterintuitive, given the emerging consensus that Matthias noted in another comment about the importance of clean news sites that don’t overload the audience. What good human-powered local aggregation does is feed readers’ deep interest in such topics without overloading them with 50 versions of the same AP story.

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Sometimes all you need is a few Tweets, a bunch of links, and some like-minded pioneers.

That’s how a quiet revolution began in Washington state Wednesday. Four journalists spontaneously launched one of the first experiments in collaborative (or networked) link journalism to cover a major local story.

But it gets better. Those four journalists weren’t in the same newsroom. In fact, they all work for different media companies. And here’s the best part: Some of them have never even met in person.

“The whole thing came together on Twitter yesterday morning,” Elaine Helm, new media editor at the Herald in Everett, said in an email Thursday.

The story was crazy rain in western Washington: evacuations, flooded and closed highways, avalanches, a breached levee, the whole deal. Elaine (@ehelm on Twitter), put a call out for local Twitterers to adopt a common hashtag for flooding coverage. Paul Balcerak (@paulbalcerak), assistant editor of dynamic media for Sound Publishing, suggested #waflood, which they agreed on and posted for their Twitter followers to see.

As Paul described it in an email, Brianne Pruitt (@briannepruitt, Wenatchee World web editor) and Angela Dice (@adice, Kitsap Sun web editor) picked up on the hashtag, “and it snowballed.”

That would have been innovation enough, but Paul went a step further: He saved links to flood coverage through Publish2, tagging each with “waflood,” and posted on Twitter that he was doing so. Soon Elaine, Angela, and Brianne were also adding links to Publish2 with a “waflood” tag.

They then put Publish2 widgets on their news organizations’ sites that displayed the links they were collaboratively gathering, greatly expanding their sites’ coverage of the flooding.

Here’s the Herald’s link roundup (which is also linked on the Herald’s homepage);

Kitsap Sun’s (inset in a story at left, linked on the homepage at right, and on this full page of links);

Wenatchee World’s (see inset box at left);

and the one at Sound Publishing’s pnwlocalnews.com (see “Washington state flooding” at the bottom).

Voila — instant collaborative link newswire!

The collaborative spirit of journalism’s future

This collaboration is remarkable in all kinds of ways.

First, you can tell by the Twitter timestamps how quickly everything came together. Second, with a link newswire fed by multiple news organizations, there’s a danger that everyone might add only their own stories to the mix. But this group added outside sources as well (including the News Tribune, Seattle Post-Intelligencer, the Seattle Times, Yakima Herald-Republic, the Daily Record, and more). Third, all four independently and instantly “got” what the others were doing, which shows how much the ideas of collaboration and link journalism (and even the term itself) have spread.

Lastly, did I mention the four journalists work for different media companies? The Herald is owned by the Washington Post Co., Kitsap Sun by Scripps, Sound Publishing by Black Press (of Victoria, B.C.), and Wenatchee World is independent/family-owned. Paul hasn’t met Angela or Brianne in person, and has met Elaine briefly once. Yet none of that was an obstacle.

I asked Angela in an email whether she knew the others in non-Twitter life. Here’s her wonderful answer:

I used to work with Elaine at the Sun and talk to her regularly, and she’s one of the reasons I joined Twitter. While I’d never done any project with Brianne before, she had made it a point to visit other papers around the region and introduce herself when she became the Wenatchee World web editor, which is how I started following her on Twitter. I met Seth Long [Sound Publishing's new media director] on Twitter, which is how I met Paul, neither of whom I’ve met in person. They both, however, work with a former co-worker and friend of mine. It’s a small, small online journalism world in Western Washington.

How refreshing is that? Forget walled gardens — this is the spirit of journalism’s future.

In some ways the networked linking process is an extension of how newsrooms collaborate with traditional wire services, but I think the Washington project is more than that. Papers using a traditional wire service aren’t really collaborating. They’re primarily trying to a) extend the reach of their stories, and b) get access to material they can’t afford to produce on their own.

The dynamic on display Wednesday, and the relationships Angela described in the quote above that allowed for this collaboration, seem more organic — a mental leap forward. They even emphasized the collaboration in the widget descriptions: Kitsap Sun’s says “Stories are chosen by news reporters and editors from Washington news organizations,” while the Herald’s says “Below are news stories that journalists around the state have selected to post using a service called Publish2.”

I asked Seth Long (@greenergrad) about a similar project he and Angela had worked on in December to round up links to snowstorm coverage. (For future Wikipedia articles on link journalism: To my knowledge, theirs was the first example of networked link journalism across media companies.)

He noted that “Her newspaper is a direct competitor with a group of our community weeklies.” In the old world, that would have made collaboration a non-starter. But today readers rightly come first. As Seth said, “My perspective is that our job is to serve our communities as best we can.”

Innovation that’s easy, popular, and cheap

The Washington link projects should serve as models for the entire news industry. They show that collaborative linking draws readers, is easy, and costs nothing more than time (and not even much of that).

Seth said the December snowstorm link roundup was on the homepage for three or four days — but it was the site’s most-trafficked story for the entire month. (This tracks with Knoxnews.com’s success with a popular football link roundup.)

Angela described some of the other benefits of collaborative linking:

I think it’s especially useful in situations like these, where events affect a large region. I can also see it being used as a way to track things like state government news, or any broad-reaching issue that your readers will be talking about.

Having a group of people adding the links just makes your job that much easier. As both a reader and a web editor, I can keep updated on what’s happening on a particular topic without opening and slogging through a dozen web sites.

This is the power of collaborative news networks. By forming a network, newsrooms can discover not just a greater volume of news, but a greater volume of relevant, high-quality news than one person, one newsroom, or one wire service could alone.

Compare the Washington group’s great waflood link roundup to a Google News search for “Washington flood” — I know which one I’d rather have as a resource if I lived in that area.

Doing this isn’t complicated. In an email, Brianne described the extent of her planning: “I follow the others on Twitter, and they had started a hashtag, #waflood, and then mentioned using the same tag for publish2 links.”

That’s it! Any group of news organizations can do this, even if they’re not Twitter-friends.

A good way to start is to set up a Publish2 newsgroup and invite other journalists (as Angela did with a Northwest News newsgroup in December). Collaboratively save links about a couple of non-breaking-news subjects to get a feel for it, and try publishing feeds of those links. Then when a big story breaks, it’s a simple matter of choosing a common tag and alerting everyone in the newsgroup.

Don’t get hung up on worries about sinking a lot of time or money into this. As Angela said, “There’s a perception that with some tools, it’s a lot of extra work, but — I’m specifically talking about the Publish2 model — when you realize how little time it really takes to bookmark a page you’re already reading, it’s a wonder you weren’t doing it before.”

As for money, when the technology is free all you need to invest in is smart journalists. Here’s what Paul had to say Wednesday:

I think it’s worth pointing out that everything we did today cost us $0.

That, too, is the spirit of journalism’s future. I can’t wait to see what this innovative crew cooks up next in that spirit — and who will be the first to follow their lead.

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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.)

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One reason mainstream news organizations haven’t embraced the concepts may be that the spirit (if not the letter) of the cit-j discussion tends to focus on the people involved rather than the news being covered. That is, the tonal takeaway is often something like “Who needs professional journalists? Throw the useless bums out of their tower!”

These ideas might get a better reception if the discussion instead focused on which kinds of news are best suited to coverage by people outside the newsroom.

Scrapbook news offers an interesting example. Matt Waite wrote a great comment about this kind of news on my previous post:

When I was a kid — the 80s — when I or a group I was part of did something scrapbook worthy, my mom would type up a little announcement about it and bring it to the local twice weekly. Next edition, there it was, almost unchanged. Scrapbooking would ensue. Far from an experiment in crowdsourcing, this is the way it’s done in small towns across the country. The only experiment is how to scale it from a community of 6,000 to 60,000 to 600,000.

In the past, my cynical response to news items like that would have been “What’s this doing here?!? It’s not news!!” But to many people, it is news. For most readers, seeing their name in the paper is worth more years of goodwill and subscriptions than any blockbuster investigative story.

A more appropriate response (for cynics and non-cynics alike) would be: “Why are we spending time on this when readers could do just as good a job, and in doing so become more engaged with the paper?”

The truth is, scrapbook news written by journalists is effectively the same as scrapbook news submitted by the would-be scrapbookers. If the story is “Megan won the 4-H award at the fair,” how much of a difference does it make to have a journalist write the story rather than Megan’s mom? (Though you’d probably still want some minimal level of editing so every item didn’t say “Goooo, Megan!” Or maybe that would be ok too.)

The key would be to acknowledge that while scrapbook news is news, certain kinds of news might not carry the same burden of expertise, professionalism, polish or “objectivity” (if you believe in that sort of thing) as city council coverage might.

Come to think of it, even some city council coverage could fall under this category. As more governing bodies stream their meetings online and provide downloadable transcripts and video, why couldn’t gadflies and other interested people cover some meetings, with full-time journalists focusing on follow-up reporting? (For a contrary view, see Daniel Victor’s excellent series of posts on crowdsourcing.)

Similarly — though on a subject of less civic importance — why couldn’t sports fans provide some game coverage? Are readers really that much better served by a journalist giving a play-by-play rundown of a game that anyone with the right satellite-TV package can see, topped off with a handful of clichéd quotes?

I’m not suggesting sports reporters never do serious reporting. But fans are so immersed and educated in sports minutiae that they could point out key plays and strategies just as well as a journalist can, which would free up sports reporters for more non-game reporting. And the world would be a much better place if there were fewer quotes about wanting it the most, winning it in the trenches, doing what we came to do which was to win, just taking it one day at a time.

Letting outsiders cover some of these topics doesn’t have to mean abandoning editorial standards. Newsrooms could require that any contributors attend a session about journalism and editorial standards. Once it’s contributors’ name on the story and readers start lobbing criticism at them, they’ll realize that adhering to those standards is the best defense.

So let’s review: Reader-contributors get as excited about seeing their names in the paper as li’l Matt Waite’s mom was back in the day. Strained newsrooms are relieved of some of their burden without stinting on certain coverage. Journalists stop hearing that Random Person #72 could do their job better, because the journos now have more time to focus on the reporting that no random person could do.

What newsroom would say no to that deal?

UPDATE: This is linked via trackback in the comments, but be sure to read John Zhu’s tour de force response post. He raises lots of good questions. I’ll try to respond once I’ve had a chance to process all of it.

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That proposal is similar to one put forth for newspaper companies by API’s Newspaper Next project. Says managing director Stephen Gray:

“[Newspapers] should become the leading local Internet ad agency, which goes against ancient newspaper instinct of not ever helping anyone who is your competitor,” he said. “But the fact is that audiences have split in a million directions, so here we are in a local market and our job is to help businesses in our local market succeed. If that means we are placing ads on Google and Facebook for local businesses, so what? That’s what it takes to succeed and ad agencies have been making a living off doing that for some time.”

It’s a actually not a bad idea (and I’ve seen some newspapers do it successfully). Except it seems to be tantamount to recommending that newspapers get out of the newspaper business. And if they become ad agencies, then newspapers really aren’t newspapers anymore, are they? And then there isn’t really a need for all that expensive journalism anymore, is there?

This is the problem with the idea of coming up with a “new business model” for newspapers. If you have a new business model, then you’re not in the same business anymore. But you hear it discussed as if newspapers and journalism can remain fundamentally what they are, just with a new “business model” plugged in. Like a toy car that just needs new batteries to keep running.

It’s the same type of thinking that leads to statements like this from the API CEO Summit:

The summit conference was a constructive dialog among senior industry leaders, serving as a catalyst for continuing conversation and efforts at reversing declining revenue and profit trends.

“Reversing declining revenue and profit trends” — I just love that phrase. To continue the car analogy: Is your business going in the wrong direction? Oops, you must have it in the wrong gear. Just throw it into reverse.

Look, I’m not saying that media companies shouldn’t offer marketing services — they’ve been doing so for decades (e.g. custom publishing). And as brands increasingly want to provide content directly to consumers, marketing services may be a big growth area for media companies.

The problem is that once you cross the line to selling other companies’ media because it’s more valuable than your own, then you face a fundamental question about why you’re going to the expense of producing your own.

Follow the logic here:

What’s not being done is realizing that in your community — say, a 50,000 person community, you have 1,500 or 2,000 active advertisers but there are 8,000 businesses that serve consumers in your market. So three-quarters of them are not your customer. The difficult part is helping newspapers understand that if they want new business they need to get a new job done for businesses that they’re not serving.

It’s not that we don’t know what that is. Some of what they want is: a one-to-one relationship with customers; a way to respond to what’s going on in customers’ lives; make sure they hear about me when they make a choice. The traditional product built on that job is the Yellow Pages, but I just read an article saying the Yellow Pages are expected to lose 39% of revenues in the next four years. Increasingly if we want to find something, we don’t go to the Yellow Pages, we go online, and Google doesn’t always work well.

Google isn’t doing it all that well yet, and the Yellow Pages aren’t doing it that well, so we’re saying, ‘Look this is where you [newspapers] should be.’ It’s very hard for ad staffs and management at newspapers to get their minds around the fact that not everyone wants mass reach, and once you understand the needs, you take the technology available today and use them to get the job done.

So newspaper should sell ads on Google because there is more value there for more businesses. That makes sense on the face of it. But what happens when those 1,500-2,000 newspaper advertisers also decide there’s more value on a highly targeted Google search result page then in the mass medium of the newspaper?

Again, I’m not saying that newspaper companies shouldn’t try to transform their businesses — most of them will have to in order to survive.  But companies that reinvent their business models typically find themselves in very different businesses, with very different products.

Just look at IBM. They used to sell mainframe computers — big pieces of enterprise hardware. Now they sell “solutions.” IBM transformed itself into a services company. Their business is no longer principally about hardware.

Newspaper companies could conceivably transform into local marketing services companies.

But if that happens, will their business still be principally about newspapers?

Will there be a place for journalism in a local ad agency?

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[T]he market and the internet don’t care if you make money. That’s important to say. You have no right to make money from every development in media, and the humility that comes from approaching the market that way matters. It’s not “how can the market make me money” it’s “how can I do things for this market.”

and

The market doesn’t care a whit about maintaining your industry. The lesson from Napster and iTunes is that there’s even MORE music than there was before. What got hurt was Tower and the guys in the suits and the unlimited budgets for groupies and drugs. The music will keep coming. Same thing is true with books.

When I read this, I thought immediately of many assumptions the newspaper industry is making as the decline of its business model accelerates:

• There has to be a new business model to support journalism with the same profit margins as newspapers have enjoyed in recent decades.
• There has to be a way for newspapers to “reverse” the declines.
• Newspapers will eventually find a way to make their web operations as large and profitable as their print operations once were.
• Newspapers can’t be permitted to die, because then journalism will die.

But the reality is that all of these assumptions may be wrong.

Why? Because the web and the market don’t care. The web is the most disruptive force in the history of media, by many orders of magnitude, destroying every assumption on which traditional media businesses are based.

But the market should care, you say. What would happen if we didn’t have the newspapers playing their Fourth Estate watch dog role?

Here’s the bitter truth — the feared loss of civic value is not the basis for a BUSINESS.

The problem with the newspaper industry, as with the music industry before it, is the sense of ENTITLEMENT. What we do is valuable. Therefore we have the right to make money.

Nobody has the right to a business model.

Ask not what the market can do for you, but what you can do for the market.

Every conversation about reinventing a business model for newspapers begins, it seems, with a question about how to find a way to pay for what we value in the current product. In other words, how do we find a way to keep doing what we’ve always done and make as much money as we’ve always made?

I’ve rarely heard anyone start by asking what the market values. Where are the pain points in the market? How can we solve problems for people?

You know, business 101.

At Jeff Jarvis’ conference last month on new business models for news, I heard more out-of-the-box thinking in one day than I’ve had in the probably past year. But everyone had to constantly shoo the sacred cows out of the room.

I’ve been accused in recent months of Google worship, because I keep coming back again, and again, and AGAIN to Google’s business model.

Why? Because it’s the most successful media business on the web, by many orders of magnitude.

Why? Because Google solves a big problem for consumers. It helps them find stuff on the web they could never find on their own. And it solves a big problem for advertisers. It lets them buy traffic.

So what’s a problem in the market that newspaper companies could solve? When I know what I’m looking for, Google helps me find it. But when it comes to news, I don’t always know what I’m looking for, because, well, it’s NEW. And I want the best of what’s on the WHOLE web, not just what one news brand has to offer.

That problem is still largely unsolved.

And it’s just one example (and you can disagree about whether its a problem).

But Google as an icon is a double-edged sword. Google gave birth to the most destructive, soul-sucking, innovation-destroying notion in media today: monetization.

Nobody thought search was a business, until Google found a way to “monetize” it. Now everyone with something big, e.g. Facebook, YouTube, Twitter, etc., assumes there must be a way to monetize it, like Google did.

Newspapers and other traditional media put their content online and try to “monetize” it. We have it, therefore it must be worth something.

We’ve got lots of page views, therefore they must be worth something. We’ve got lots of ad impressions, therefore they must be worth something.

But here’s the problem — so does everyone else.

Everyone is chasing more TRAFFIC.

You know, just like everyone wanted “eyeballs” in the 90s.

We’ve got some traffic, let’s monetize it.

But, frankly, the market doesn’t give a shit about your traffic.

So what does the market care about?

Networks.

The web media market is a giant network. Google figured out how to harness the network. But nobody else has yet.

That’s not surprising. Media companies can only think about their own properties, their own content. They can’t let go of the monopoly control business which the web has already destroyed.

Since you made it this far in this post, I’ll tell you a secret, since this post was not meant to be defeatist, but rather a swift kick in the head.

So here’s the secret. Legacy media companies can’t create a new business model for news and journalism by themselves.

They have to work TOGETHER, to build a network — a giant network of much smaller pieces, loosely joined.

I’ve said this before. And I’ll surely say it again.

But most of the media company executives who read this blog will shrug and go back to trying to figure how to prop up their monopolies.

And those monopolies will continue to crumble faster every day.

I’ll write more about networks and media company collaboration in another post. In the meantime, I’m going to watch the the web’s disruption continue to blow up everyone’s assumptions (including whatever assumptions I still have left).

Newspaper CEOs are meeting for a closed-door summit this week. Maybe someone will forward them this post. Or print it out and set it on fire in the middle of the conference table. Whatever works.

And as for Journalism, I’m less worried.

I’ll repeat Seth: The lesson from Napster and iTunes is that there’s even MORE music than there was before.

We’ve got highly entrepreneurial, creative, and driven people like David Cohn — who’s launching spot.us this week — working hard outside of newspaper company walls to invent new models for journalism

Journalism will find a way. Even if the industries that once supported it do not.

It took the ruination of the Bush Administration to create the right conditions for electing Barack Obama. Sometimes it has to all be torn down before you can begin to build it back up again.

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Crazy? Well, actually it makes perfect sense.

I spoke with Eric Pianin, the Politics Editor for washingtonpost.com, who explained that The Washington Post sees an opportunity to extend their highly respected politic news brand to filtering the political web.

And filtering is a BIG opportunity on the web.

In fact, Political Browser was born of a determined effort by The Post to get into the news aggregation game. Eric told me that interest in news aggregation extends to the highest level of The Post’s senior leadership, including Katharine Weymouth — they have been “fascinated” by the success of aggregation sites like Drudge, Huffington Post, Hotline, and others.

Eric acknowledged that washingtonpost.com is “late to the party,” but in fact the Political Browser puts the Post way out ahead of many other news sites — while many have begun to recognize the value of aggregation and links, most have been slow to act.

As Eric points out, it’s “not just aggregation.” (Heck, any algorithm can do aggregation — that’s increasingly a commodity.) What Political Browser has set out to do, according to Eric, is put The Washington Post “stamp of approval” on the choice of stories, and to provide “insight” into what’s important in the sphere of political news on the web.

Also looking beyond commodity aggregation, The Post believes, with good reason, that a lot people who are interested in political news and in the Post’s political reporting would find it interesting to get “inside the heads” of Post journalists, to see what they are reading and what is informing their reporting.

One of Political Browser’s features is literally called “WHAT STAFF WRITER MICHAEL ABRAMOWITZ IS READING TODAY”

What are E.J. Dionne, Eugene Robinson, and other Post journalists reading that’s informing their perspective? Political Browser is taking the Post down a path where we can find out.

Political Browser is about the “news judgment” of Post journalists — and isn’t that, at the end of the day, what reporting and editing have always been about?

And here’s the really intriguing news — Eric reports that Political Browser is generating a lot of interest among Washington Post editorial staff to take part in the news aggregation effort, to influence what stories get linked.

And it makes sense — what journalist wouldn’t want to tap into a new vehicle for influence? And The Post aims to make Political Browser a major influence in the political web.

Political Browser’s Required Reading section synthesizes the judgment of The Post’s politics staff about the most important political stories of the day:

An essential feature of the Required Reading section are the brief comments that accompany each link. While the choice of stories is the core value, it’s The Post’s comments, summing up the significance of the story or adding perspective, that make Required Reading a unique and valuable editorial feature. It’s like a mini link blog — something that every news site should be doing on all of their topic pages. (Something that every journalist, really, should be doing.)

Required Reading may include a link to a Post story, but not necessarily — and that makes the feature an honest broker, avoiding conflict of interest with The Post’s own original content.

There is a section, Best of The Post, that exclusively links to Post political stories, but even this feature is groundbreaking in its own way. Most topic pages on news sites display a laundry list of ALL content. Here, the Post applies the same filter to its own content, helping to prioritize your reading.

The anchor of the Political Browser is The Takeaway, written by Ben Pershing — as Eric describes it a “clever, breezy, irreverent, but highly informed” look at the most important stories and buzz on the campaign trail.

It’s a classic link blog, featuring plenty of links and attitude, and serves, as Eric points out, as a complement to the Post’s other successful political blogs.

Work on The Takeaway begins at 8 a.m. with a first post and extends throughout the day as political news evolves and breaks.

Political Browser has a further assortment of short, punchy link features, such as Trench Warfare, with links to stories and commentary from the left and right.

There’s also Blunder Box, i.e. “gotcha journalism” as Eric describes it with tongue in cheek — but it’s done with a link, so that means the blunder is already out there (e.g. this McCain ad declaring victory in the debate, which ran before the debate), so it’s not really a gotcha in the sense that journalists are typically accused.

The effort to compile links for Political Browser begins around 6 a.m. and by 8 a.m. a fresh page is up. Currently, the process involves emailing journalists to see if they have any additional links to contribute. It’s a tremendous step forward that The Post has begun developing an editorial workflow for links, which most newsrooms lack, so that they don’t lose the value of what reporters and editors are already finding in their daily reading.

And here’s where technology could give The Post a competitive advantage in the developing their editorial workflow. A web-based editorial system for links could optimize this workflow and make it easier for journalists in the newsroom to contribute links, and for Political Browser editors to edit and publish those links. Imagine getting the entire Post newsroom set up to do link journalism, to contribute dynamically to the news aggregation effort.

The big opportunity for The Post in leveraging web technology is efficiently tapping into the collective intelligence of ALL of their journalists. Sites like Digg have demonstrated what a powerful and dynamic filter can be created using social web technology to enable people to collaborate on filtering the web. Imagine dynamically connecting the news judgment of the entire Post newsroom — tapping into editorial network effects among journalists.

There’s still so much untapped potential in news aggregation, and The Post is ideally positioned to realize that potential.

Political Browser is only about a week into its new life, so it’s too early to talk about traffic or other such measures of success. But the Post is committed to testing how well they can build an audience for news aggregation and link journalism. And the commitment to experiment is one of the most notable features of Political Browser. These days, all innovation in the news business is experimental by definition. Eric says that they don’t know yet now Political Browser will evolve, which actually increases the chances that it will evolve into an even greater innovation.

Still, attempting to build an audience for a page of links, as an influential destination, feels like a good bet to be making on the web.

One immediate response The Post has seen is other news sites getting in touch to discuss reciprocal linking deals. Of course, linking in the form of “deal” drains a good deal of the editorial value — in fact, you might argue that such arrangements compromise the editorial independence of the link journalism. If Political Browser links to Politico, you want to know it’s because the Browser’s editors think the story is worth reading… not because Politico is linking back.

What would be much more interesting is an open editorial system for exchanging links, where sites could get links to their content on other sites based on editorial merit rather than deal making. Think of it like a newswire for links.

What’s most radical about Political Browser is that the Washington Post has committed to creating significant value with their editorial brand beyond their core mission of original reporting.

But how better to unlock the value of The Post’s brand on the web than to apply human editorial judgment to the challenge of filtering the web? Algorithms can beat humans at comprehensive web search, but humans should be able to beat algorithms at news aggregation.

And I would argue that the links on Political Browser are a form of journalism — and that news aggregation and filtering the web will be an essential function of news organizations going forward.

As Philip Meyer observed in AJR:

The old hunter-gatherer model of journalism is no longer sufficient. Now that information is so plentiful, we don’t need new information so much as help in processing what’s already available. Just as the development of modern agriculture led to a demand for varieties of processed food, the information age has created a demand for processed information. We need someone to put it into context, give it theoretical framing and suggest ways to act on it.

“we don’t need new information so much as help in processing what’s already available”

It’s a radical idea, still, for many news organizations. But not for The Washington Post — they are aiming to excel at BOTH, at the original reporting that surfaces essential new information AND at processing the information that’s already available.

Of course, filtering the web with links is not really a radical idea for the thousands of journalists who read Romensko every day or who chase after links on Drudge.

They just need the courage to try it themselves.

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So who sets the news agenda now? One significant influence is a guy with nothing but a page full of links (you know, the kind that “send people away”).

In a post the other day, Washington Post’s Chris Cillizza called Drudge “the single most influential source for how the presidential campaign is covered in the country.”

That’s quite a claim. Chris adds in a parenthetical:

A quick note to preempt the inevitable argument that Drudge’s influence is overblown. Tomorrow morning, take a minute to look at the stories Drudge is highlighting. Then, later in the day, watch a few cable channels to see what stories they are talking about. It will open your eyes.

As to the particulars:

The increase in positive McCain stories featured on Drudge has coincided with more skeptical coverage of Obama’s candidacy. In recent weeks, Drudge has featured in his center well spot: A picture of Obama shooting at a far off basketball hoop with a subtitle asking “Will he get his groove back?”; an image of Obama sweating on stage at the Democratic National Convention during the Illinois senator’s acceptance speech; and heavy coverage of the “lipstick on a pig” comments.

Interestingly, Greg Sargent over at Talking Points Memo took issue with Chris’ example of Drudge’s influence:

This strikes us as an unfortunate example, particularly in a column arguing (as Cillizza does) that the source of Drudge’s power lies in his influence over the cable networks. Because one of the stories ignored by Drudge actually got a whole lot more coverage on cable yesterday than the one Drudge pushed all day in that supposedly hypnotic banner headline of his.

But Greg’s push back is on the particulars, not the question of whether Drudge influences the news agenda at all:

Look, far be it from me to question the notion that Drudge has influence over network producers. Of course he does. But if we’re really going to devote so much time to flacking Drudge’s influence, how about a real and nuanced discussion of it?

And he adds at the end:

If Drudge is going to consume our attention, how about a real discussion of Drudge and what the Drudge phenomenon says about the journalism profession — one that goes beyond the narrow question of how influential he is?

Indeed, I agree the pertinent question is not the magnitude of Drudge’s influence. The real question is: WHY is Drudge influential at all, when all he does is link to news?

The answer is that Drudge, along with Google, figured out that in the web media era, when all news content is accessible by anyone, anywhere in the world, and no news brands no longer have a monopoly over news distribution, the power of influence lies in the ability to FILTER the vast sea of news.

Newspapers were once THE most important filters for news. But they gave up this role on the web, because they didn’t see that the web analogue to what they did on the front page in print was NOT taking the same content and putting it on a website front page. In fact, you could argue that this is the single biggest mistake that newspapers have made on the web.

What they failed to see is that the web analogue to the newspaper front page is LINKS to where the news IS. That’s Drudge.

The web is about CONNECTIONS, and newspaper website front pages don’t connect anything to anything. That’s why they have so little influence.

And here’s a hard truth about the current newspaper web strategy: Focusing exclusively on local isn’t going to bring back the influence of the newspaper front page.

Newspapers can’t just set the local news agenda. They have to set the WEB news agenda.

So while newspapers focus on new modes of content — video, audio, photos, interactive graphics — they are missing the BIG opportunity on the web.  The opportunity to regain their position of influence.

And newspapers won’t regain that position of influence by hosting more content, whether it’s multimedia or user-generated.

Yes, any one piece of content can be very influential, but systemically, content is not the source of influence on the web.  (Think about that for a while.)

LINKS = Influence on the web.

If newspapers want to regain their influence, they have to focus on LINKS.

The web, after all, isn’t really about content. It’s about connections between content, people, and ideas.

So before anyone in the newsroom gets trained on Flash or databases or digital video, they should receive the most fundamental training that anyone who works on the web MUST understand:

How to link.

You know, <a href=”WHERE THE NEWS IS

Is there ANY newsroom out there that trains their staff how to link? (If so, please get in touch.)

The lessons of how to be influential on the web have been around for a decade.

Isn’t it finally time to learn them?

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A print ad offered as added value for online advertising. Now THAT’S a reversal.

Here’s more:

NYT is trying to reverse the economic polarity of its business.

Is this kind of offer a trend?

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The old syndication model in the old content economy just won’t work today when all the world needs is one copy of a story up in the cloud with links to it. Today, the more links that article can get, the more valuable it is. So sharing value with those who send links to it only makes sense.

An AP representative commented:

We believe AP news is a critical ingredient for all news reports, both directly and as a foundation for many other sources of news. Breaking news from AP journalists around the world and in the United States, for example, serves as the origin for stories pursued by both AP members and many other news organizations.

AP still plays an important role in producing original reporting, but it’s now just one of many sources of original reporting that newspapers can tap into, as the Star Ledger did:

New Jersey’s Star-Ledger today put out an entire edition without anything from the Associated Press within. The sharp-eyed reader will notice lots of local news by staff plus articles from other papers–Washington Post, LA Times, McClatchy, the Glouceseter County Times–and content from online services such as Sportsticker.

AP publishes all of their original content on Google and Yahoo — on the web, any news site can link to that content, without having to license it. AND, they are not limited to linking to AP — they can link to any original reporting on the web.

A commenter on responded to the AP rep:

But Paul, how will the AP retain it’s value when
1. The web is a pretty good newswire and it’s free.
2. When, like Jeff said, you only need one copy of a story online and everyone else can just link to it.
3. When, even if the shared content model works in print, it is actually worse than useless online – and everyone’s moving online?

The web is already a “pretty good newswire” — and with collaborative tools that enable newsrooms to discover, share, and publish links to the best content, it can be even better.

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But what if a newspaper company were to launch a website in a market where they didn’t publish a print newspaper?

That’s exactly what Gatehouse Media is doing in Batavia, NY.

Back in April, I visited GateHouse’s corporate headquarters in Fairport, NY and took a ride with Howard Owens and Ryan Sholin on a “secret mission” to Batavia, NY. They were scoping out office space for a website that GateHouse was about to launch, The Batavian.

Why was this a secret mission? Because GateHouse does not publish a print newspaper in Batavia, NY. And the family-owned incumbent newspaper, The Daily News, has no content on its website (the site is barely a brochure).

So the strategy is to launch an innovative news and community site that will eat the lunch of an incumbent newspaper that has ignored the web.

The Batavaian practices what Howard preaches — the site is anchored by a blog and has a full suite of community features (powered by Drupal), including blogs for registered users. The homepage features blog posts from community members.

Many of the posts have generated lively discussions in comments, such as this post by a reader about the local mall, which many residents would like to see torn down. The comments discussion features none other than the city council president.

The Bavatian set up an office on Main Street, and editor/lead blogger Philip Anselmo is in town everyday, connecting with the community.

The Batavian is an experiment in whether a new web-native journalism can better serve a community. Here’s Howard on “Exploring the complexity of community issues as a community”

Digital communication allows all members of the public — the press, the politicians, the government agents and the citizens — to discuss choices, consequences and conditions as equals.  Reporters need no longer be bound by the limitations of print and present just the so-called objective report, but rather explore, examine, raise and answer questions, and start conversations.

We saw an example of this style of journalism played out last week in The Batavian.  Editor Philip Anselmo interviewed Councilman Bob Bialkowski.  Mr. Bialkowski said that one of the problems facing Batavia is declining neighborhoods.

He says that “entire neighborhoods are a problem — trash all over, abandoned cars in the back yard.” Head over to the southside of the city, to Jackson Street, over near Watson and Thorpe streets, State Street, and you’ll see what he’s talking about.

So, Philip took his advice, drove around those neighborhoods and didn’t find a lot of evidence of decline.  Philip, who is well traveled and has covered such small cities as Canandaigua, where there are some pretty sub par neighborhoods, did a follow up post saying he couldn’t find the decline.

This prompted a rejoinder post from Council President Charlie Mallow, who wrote:

There have been a few postings about the state of our neighborhoods and people’s opinions of the rate of decline. From someone new to the area or familiar with big city living, some missing paint and a little litter are not anything to be concerned about. People in big cities have had to live with falling property values, absentee landlords and drug activity for years. The obvious question is, why wouldn’t the people of Batavia point to the precursors of decline and pull together to keep the quality of life we have always enjoyed?

Notice a trend here? Same set of facts, different perceptions.  And if you follow the conversation in the comments as well as the related blog posts, a clearer picture emerges of the goals and aspiration of the City Council to clean up the city before things get too far gone.

Traditional, print journalism could never achieve this depth of coverage of a single issue.

In just the four months since its launch, The Batavian already has 5,000 unique visitors per month, out of 15,000 who live in Batavia and 60,000 live in Genesee County.

Here’s a radio commercial for TheBatavian.com

The plan is for Philip to jump start the site, and then hire a staff locally — The Batavian has already hired an experienced sports reporter from the region, who will start on Wednesday.  Here is some of The Batavian’s coverage of the Muckdogs.

It’s still too early to know whether the site will succeed as a business, but they’ve already started talking to local advertisers. And they are giving away classifieds for free to residents.

With no print operation — no paper, ink, presses or delivery trucks — The Batavian will obviously be able to operate with a much lower cost structure. The vast majority of operating expense will be staff.

The Batavian may is one of the most disruptive efforts I’ve seen coming from an incumbent in an industry where many still take a conservative approach despite rapidly deteriorating economic conditions. It’s a newspaper company thinking and acting like a startup — which is what every media company needs to do to survive the digital transition.

(Disclosure: Howard Owens is an advisor to Publish2.)

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Most media types probably thought Nick Carr’s article in the July/August Issue of The Atlantic, “Is Google Making Us Stupid?,” was the most interesting and relevant to media. But Jonathan Rausch’s piece on GM’s last ditch effort to transform itself by producing the world’s first mainstream electric car ( after it failed to do so in the 90s), is a tale of do or die innovation that everyone in the newspaper industry — and media generally — must read.

Here are some of the key passages:

When one of the world’s mightiest corporations throws everything it’s got at a project, and when it shreds its rule book in the process, the results are likely to be impressive. Still, even for General Motors, the Volt is a reach. If it meets specifications, it will charge up overnight from any standard electrical socket. It will go 40 miles on a charge. Then a small gasoline engine will ignite. The engine’s sole job will be to drive a generator, whose sole job will be to maintain the battery’s charge—not to drive the wheels, which will never see anything but electricity. In generator mode, the car will drive hundreds of miles on a tank of gas, at about 50 miles per gallon. But about three-fourths of Americans commute less than 40 miles a day, so on most days most Volt drivers would use no gas at all.

That March, the group laid its conclusions before Rick Wagoner and the rest of the top leadership. Preuss and Larry Burns, who runs the company’s research operations and is regarded in the industry as something of a visionary, did not pull punches. GM had to show a real change of mind on the environment and sustainability or remain Toyota’s doormat. It had to lead on plug-ins or get left behind in yet another new market. It had to restore credibility damaged by the mishandling of the EV1, the abdication on hybrids, and the repeated failure to deliver on promises. It needed not just one more in a long series of research programs and concept cars but a real-world product, one ambitious enough to impress even the cynics.

The group proposed a plug-in that would drive at least 10 miles on a charge. It would be a cool, stylish, high-tech car, marketed to trendsetters. They called it the iCar.

The company then made a series of decisions that look, in hindsight, startlingly audacious. Instead of becoming a safer bet as it ran the internal slalom, the iCar became more ambitious. Its target range on a single charge increased from “at least” 10 miles to 40—the outer limit of what seemed possible. Not a few outsiders think this decision was misguided; a 20-mile battery, say, would still allow many commuters to drive gas-free most days, and it would be easier and cheaper to build. But Lauckner, always pushing, insisted on a car that the public would perceive not just as saving gasoline (that was Prius territory) but as replacing gasoline. The Volt, as the iCar was eventually renamed, had to be perceived as severing the umbilical cord between the car and the gas pump, and nothing less than the longest feasible gas-free range, he believed, would accomplish that.

Perhaps most audacious of all was a decision to allow unusual public access to the Volt program. The industry’s standard procedure is to develop new products, especially risky ones, out of sight, unveiling them only when proven. GM decided to do exactly the opposite. The PR department flung open the doors. GM executives discuss the program’s progress as publicly as if it were a bill in Congress. They show off photos of batteries under development. They promise to let reporters ride in test cars. They lead them through the labs and design centers and even into the wind tunnel. They run ads, for instance in this magazine, touting the Volt in the present tense, as if it already existed. By earlier this year, expectations were so high that President Bush was commending the car, and it had developed a national grassroots following. This article is itself a product of the fishbowl strategy.

All the talk about “saving newspapers” is focused on finding new business models to keep doing what they’ve always done — which is like GM looking for a new business model to sell the kinds of cars they made in the 50s and 60s. What the newspaper industry, if it is to survive as such, must find is a radical new value proposition for news — something so audacious, so self-evidently valuable that, if they can find a way to deliver it, would lead to the rebirth of newspaper journalism.

Is this a panacea? Of course, not. Nor is it for GM:

On the other hand, if it fails, it will fail in full view. GM will have given its critics the most spectacular example yet of a broken promise, and Toyota will look prudent instead of timid.

Despite its head start, GM will have to fight to be first. In January, after a year of watching GM bask in the Volt’s publicity, Toyota reacted. At the 2008 Detroit auto show, Katsuaki Watanabe, the president, announced that Toyota would produce a lithium-ion plug-in car of its own, and would have it on the street in test fleets “not at the end of 2010, but earlier than that.” Toyota was talking about a few hundred experimental cars in a controlled setting, not tens of thousands of cars in dealer showrooms, a much less ambitious goal than GM’s. But Toyota is famous for under-promising and over-delivering.

In February, Tesla, the Silicon Valley company, announced plans for an electric sedan with a gasoline-powered generator, like the Volt—but set to arrive a year earlier, in late 2009. In March, BMW said it might produce an electric car for the U.S. market, and in May, Nissan said it would have one in test fleets in 2010. The drumbeat seems likely to continue. Simply by announcing the Volt, GM has attracted a bevy of competitors, bringing the electric car’s mass-market advent from over the horizon to around the corner.

A bold new vision won’t immediately turn the economic tide, but it could turn the tide of defeatism.

GM is using the publicity to excite the public, of course. It is also using the publicity to push itself. “We thought it would be a motivating thing to do,” Wagoner says. “Certainly it gets everybody aligned”—not always easy in a giant corporation. And GM wants credit for trying, which it never received for the EV1. “If it fails,” Harris says of the Volt, “we want people to know exactly why it failed. It wasn’t lack of commitment or passion on our part; we hit a hard point we couldn’t get around.”

GM’s leaders, needless to say, do not particularly welcome the competition from a business point of view. But they relish it from a psychological one. When I asked Larry Burns, the R&D vice president, how he felt about Toyota’s plans, he said, “Paranoid, because they’re good.” But the real answer was the grin that spread across his face as he recalled Watanabe’s announcement and said, savoring each syllable, “He was a follower.”

The newspaper business is being crippled by competition, which, like Toyota in the case of GM, is doing a better job of delivering what the market wants and needs. GM realized that to survive they couldn’t just catch up to the competition — they had to surpass it — and they had to do so by delivering the holy grail for consumers.

How can newspaper companies surpass the competition? How can they be better than Google? Those are the kind of questions that newspapers should be asking — and then pursuing bold answers.

Newspapers need to stop trying to save the old business or searching amorphously for new business models and instead figure out what needs are going unmet in the market for news — and then be first in the market to deliver breakthrough solutions.

And they need to do it FAST:

Moreover, improvements were being incorporated as fast as they could be conceived; the battery would be on its second generation in January, its third in June. “It’s incredible,” Turner said. “The design they’ve come up with for thermal changed 10 times before they delivered the first battery.” And all of this was before the arrival of a competing battery that might be as good or even better, designed jointly by the Massachusetts-based company A123 Systems and the German company Continental A.G. “We’re inventing and creating on the critical path,” Turner said. He was using the industry jargon for the countdown to production, when time is money and delays can cost millions. “I’ve got guys trying to release things before they’re actually invented.

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In print, a design flaw is unlikely to cause a reader to abandon a newspaper or magazine entirely — they are a largely captive audience. But it will cause them to abandon a website.

Google understands this better than any web company, which is why they are the most successful. Google is obsessed with making sure its users never fail, no matter how “stupid” they are. Google makes users feel smart. That’s why they keep coming back.

Invariably, when I write about a negative experience with a website, e.g. Twitter or WashingtonPost.com, someone puts forth what I call the “stupid user” argument — essentially, I failed because I’m a stupid user. And if I were a better user, I would have been more successful with the site.

For example, I discovered that WashingtonPost.com has a local version of its homepage, which it displays to logged in users. Creating different versions of a site for different users is web-savvy. If I had been logged in, I would have found the content I was looking for on the homepage. That’s all good, and much to their credit.

Unfortunately, I never log in to WashingtonPost.com, although I read it frequently. Therefore, the “stupid user” argument goes, the failure to find the content I wanted was my fault.

Here’s the problem — my failure to find the information I wanted is not MY problem, because I went to Google and found it. I succeeded. The failure is the site’s problem, because I abandoned it and went instead to a site that would help me succeed without having to be smarter.

WashingtonPost.com and, to be fair, most other sites that require registration assume that users will register to help the site achieve its goals, whether customizing content or targeting advertising.

But users don’t care about the site’s goals. They care about THEIR OWN goals.

Nowhere on WashingtonPost.com’s homepage do I see clear a message that registering or logging in will help me achieve MY goals. There’s a link to the Washington version of the homepage in the upper right corner, which has the best of intentions, but because I didn’t find it, it might as well not exist.

This is why Google rules the web. In Google’s world, the user is always right. Google knows that if users fail at their task, they will abandon Google in a heartbeat. Google’s dominance is EARNED, with every search, every click.

I saw Google’s Marissa Mayer give a talk at Web 2.0 a few years back about Google page load times — the talk had a narrowly focused, OCD quality to it. It was weird on the face of it. But this is how Google wins. By obsessing over user experience above all else.

This is also why Google punishes advertisers who try to trick users or provide a poor user experience. Because it reflects poorly on Google. And users don’t come back.

A commenter argued that I should have asked the Washington Post for a comment before publishing a critiquing of their site. My response was that in an analysis of a user experience with a web site, the publisher’s intent DOESN’T MATTER. Web users are utterly unforgiving. If it doesn’t work the way I want, I’m gone in a click. There is no other side to the story.

That’s brutal and, as the commenter asserted, rude and irresponsible. It just doesn’t seem fair.

But it’s also the reality of the web. Google understands this. If publishers want to compete, they need to accept this reality, swallow their pride, and realize that the user experience is EVERYTHING. Design on the web is not about ideals — all that matters is whether the user succeeds.

Before the web, having great content was enough. The irony of my critique of WashingtonPost.com is that it wasn’t a critique of content. They had GREAT content, when I actually found it — there weren’t really any editorial shortcomings. The critique had much more to do with software design than with editorial quality or judgment. News organizations need to add software user interface design to their core competencies.

Lesson for publishers: The web is more about applications than publications.

This is why it’s so damaging for news organizations to apply the standards of print publishing for design, content, and experience — they simply don’t apply on the web. The reality is that designers didn’t necessarily know if they were successful in print, because people kept subscribing to the newspaper anyway. But on the web, success or failure is evident with every click.

Perhaps the biggest problem is that user interface and user experience design are HARD. Even the best designer can’t always anticipate what users will do — or fail to do. Sites need to create a continuous feedback loop with users and improve their design and user experience over time.

WashingtonPost.com’s homepage has a far better design than many other newspaper websites, but its relative merits didn’t matter for my specific use case.

And to be clear, helping users succeed isn’t about pandering. My goal in going to WashingtonPost.com, as it frequently is, could be to find out what’s going on in the world. How I determine whether I’ve succeeded can be much more a function of the quality of editing and content. But when I want specific information, my criteria are far more narrow, and much more unforgiving.

According to usability guru Jakob Nielsen, web users are actually getting MORE hyper-focused and. unforgiving

To remain relevant as a destination, news sites need to help me achieve ALL my objectives ALL of the time.

Just like Google.

UPDATE:

Google is inviting users to help them test out new features of Gmail. Can you imagine your average news site integrating users this deeply into their design process? I know that some have made meaningful efforts to test new designs, but Google keeps upping the ante on the embrace of users.

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There were severe storms in the Washington area today, and the power went out in our Reston office. I wanted to find some information about the status of power outages to see whether we should go into the office tomorrow. Here’s what I found on the homepage of WashingtonPost.com:

This is the WASHINGTON Post, right? So where’s the news about Washington? We just got pounded by a nasty storm — but it’s not homepage worthy.

Fortunately, although it’s not top of mind for the homepage editors, it is top of mind for readers — I found the article about the storm in the list of most viewed articles in the far corner of the homepage. I go to the article, where I find highly useful information like this:

“We have a ton of trees down, a ton of traffic lights out,” said Loudoun County Sheriff’s Office spokesman Kraig Troxell.

Great, that’s very helpful.

So what’s my next step, when I can’t find what I want on the web? Of course:

Thanks, Google, just what I was looking for:

Wow, I thought — it can’t be that bad, can it? So I went back to the WashingtonPost.com homepage. This time, I clicked on the Metro section in the main navigation. Sure enough, the storm was the lead story.

And there at the top was the link to the same useless article. But then below the photo was this tiny link: Capital Weather Gang Blog: Storm Updates

I clicked on the link, and wow:

Real-time radar, frequent storm warning updates with LINKS, and… a link to that page I had been SEARCHING for on Dominion Power about outages. (Note the link to the useless news story buried at the bottom.)

It was a brilliant web-native news and information effort — BURIED three layers deep, where I couldn’t FIND it.

Is it any wonder why Google makes $20 billion on search?

And what’s the root cause problem? The useless article with no real-time data and no links was written for the PRINT newspaper. And the homepage is edited to match what will be important in the PRINT newspaper. And the navigation assumes I think like I do when I’m reading the PRINT newspaper. Want local news? Go to the metro SECTION.

The Capital Weather Gang blog is a great example of “getting” the web — but then making it impossible to find…

Oh, and if you click on the tiny Weather link on the homepage (which I only noticed on my fourth visit), you get a page that looks like the weather page in, you guessed it, the print newspaper — all STATIC.

Again, it takes another click to get to the dynamic, web-native weather blog.

Yesterday, I saw a ranking of the top 25 “newspaper websites” — and that’s exactly the problem, isn’t it? These are newsPAPER websites, instead of WEBsites.

WashingtonPost.com ranks #5, with this comment:

The figures from the WPO 10-Q indicate that revenue for the company’s online business is relatively small and represents only a modest part of the sales for the newspaper group. That is unfortunate. If any company should be right behind The New York Times in internet revenue it is the Post.

So much potential, like the hugely innovative weather blog, crushed by the weight of tradition. And it’s not just the Post, of course (not to unfairly pick on them) — it’s every print publisher boxed in by the legacy business.

Here’s an idea for newspaper website homepages — just a search box and a list of blogs. Seriously. Instead of putting all the web-native content and publishing in the blog ghetto, like NYTimes.com does, why not make that the WHOLE site? (I mean seriously, having a blog section on the website is like having a section in the paper for 14 column inch stories.)

It’s like newspapers on the web as saying: here’s all the static stuff we produced for the paper — you want all of our dynamic web innovation? Oh, that’s downstairs, in the back room. Knock twice before you enter.

It’s a shame — so much marginalized value.

I bet I could stop going to the New York Times site entirely and just subscribe to all of their blog RSS feeds, and still get all the news, but in a web-native format, with data and LINKS.

Of course, the only way to do that is click on 50 RSS buttons one at a time. And they only publish partial feeds.

Sigh.

UPDATE:

Mark Potts had a similar frustration with the storm coverage — and it looks like he never even found the weather blog.

Another big missed opportunity — the Dominion electric site can’t tell me specifically if the power is still out in our office in Reston. But I bet Washington Post readers with offices in that area – or even in our office condo — could help me out, if someone gave them a place to do so. The Post weather blog has a ton of comments, but information is haphazard — how about a structured data form where you can post your power outage status, maybe map it on Google maps?

Lastly, at least Google knows how to make the Post’s weather blog findable:

UPDATE #2:

Jonathan Krim, the local editor from WashingtonPost.com, offers an important clarification:

As the editor for local coverage, I appreciate the comments on our coverage yesterday. But I am compelled to point out:

The page Scott uses for his example is not our home page for local users. We have one for our very large non-local audience, which is what you display in your blog post. You can change your settings, making the Washington home page your default, by clicking at the very top of the page. Had you looked at our local home page, you would have had a different experience, with very prominent display links to our capital weather gang coverage.

My response:

Jonathan,

Thanks for the comment. I had already heard that others who were logged in had a different experience. Perhaps the lesson then is about assumptions around user registration and login. I’m a dedicated reader of WashingtonPost.com, but I never login. It may be necessary to supplement the customization for logged in users with geo-targeting based on IP address, which isn’t perfect, but it might have worked for me yesterday.

I also think you should integrate the Capital Weather Gang blog into the main weather page, instead requiring another click to get to it.

I think the main lesson is the tremendous pressure that Google puts on every site to make the user experience perfect. You had the data and coverage I wanted. You had the customization for local users. But somehow I still missed it and went to Google instead.

UPDATE #3:

Several people have commented that my not finding out about the Post’s local customization for logged in users, either from the Post directly or through another source, means I didn’t have all the facts. In one sense, that’s true, but the example here is not about WashingtonPost.com as an object in a vacuum with a certain feature set, or what the WashingtonPost.com thinks about how their site works, but about MY EXPERIENCE using the site. My experience was lacking, and therefore I concluded that it would be lacking for other users like me. Some people might have clicked on the Weather link, or gone straight to the Metro section, or were logged in. But my experience represents this is not true for all users.

And the point of this post is not about the extent of WashingtonPost.com’s shortcomings, which may not be that significant, i.e. they are easily correct, but about the demands of the web as dictated by the existence of Google. Google is obsessed with not letting any users fall through the cracks. Despite having customization for local users and the right content, I still fell through the cracks as a user of WashingtonPost.com. And that is the key fact of this post.

That’s the brutal reality of the web that we all live by. We can have all these features and content and design and intent, but the user experience is the only arbiter. Google understands this better than newspapers. If newspapers understood it better, their sites would get better, which would create more economic value for them on the web.

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I received this offer in the snail mail this week from the New York Times:

As I observed previously with my critique of the Washington Post’s circulation marketing, this marketing piece gives me, an avid reader of NYtimes.com, no explanation whatsoever as to the value of also receiving the New York Times in print (with the exception of receiving free access to some premium online services, which has nothing to do with the value of the print edition itself).

It appears the objective of this marketing pieces is strictly to convert people who already read the New York Times print edition or who are predisposed to read newspapers in print — and we all know this group of people is shrinking. For the six-month period ending March 31, 2008:

The New York Times lost more than 150,000 copies on Sunday. Circulation on that day fell a whopping 9.2% to 1,476,400. The paper’s daily circulation declined 3.8% to 1,077,256.

The New York Times is clear trying to bolster this declining print circulation by marketing to prospective non-local subscribers like me. The problem is that as a reader, I have little or no value to local New York City advertisers, especially classified advertisers.

This presents a quandary for “national” newspapers like the New York Times, particularly in light of the online readership of NYTimes.com.

According to Nielsen Online, NYTimes.com had 18,869,000 unique visitors in March 2008, up from 17,502,000 in October 2007, a 7.8% increase.

Nielsen’s numbers are estimates, but assuming they are directionally correct, think about the orders of magnitude we’re talking about here: 1 million vs. 18 million

You would think a media property with an audience of 18 million would be worth more than a media property with an audience of 1 million.

And yet it’s not. This is the ten percent problem.

I’m still more valuable to the New York Times as a print subscriber than and as an online reader because my advertising value is still so much higher in print — despite my not living in New York City.

Here’s the economic reality for national newspaper brands: Print readers are scarce. Online readers are a commodity.

Just look at the numbers: Washington Post Sunday print: 890,163; monthly online: 8,929,000 (almost exactly 10x); Boston Globe Sunday print: 525,959; online (boston.com): 4,184,000

But why aren’t these newspapers’ online businesses 10x larger than the print businesses instead of 10x smaller?

Here’s the bottom line business model problem: Unlike in print, newspapers create no unique value for advertisers online.

Newspapers had a monopoly over print advertising in a defined geographic area, which provided a lot pricing power for ads that were uniquely local and uniquely suited to print, e.g. classifieds.

Look carefully at the online advertising formats of most newspaper websites, and you’ll notice two things:

• Most are direct analogues of print advertising formats
• Most are the same as ad formats on thousands of other content sites

Take a look at the New York Times online ad formats. It seems like an impressive product list at first, but what it boils down to is a fancy list of display ad offerings.

And how many other places can you buy display ads on the web?

Just look at the name of their large rectangle display ad unit: Big Ad — you know, like that full page ad in the paper — you see it and think, wow, that’s a big ad. Problem is the BIG ad on the web site is a whole heck of a lot smaller than the big ad in the paper, despite being a whole heck of a lot more interactive and measurable.

Which gets to the problem of non-local readers.

In the market for local advertising on the web, newspapers are competing with other traditional local media companies, e.g. TV station, as well as with new web-native local publishers, and with search engines — this is a newly leveled and expanded competitive landscape, but still limited.

For non-local readers, on the other hand, newspapers are competing with hundreds, even thousands of other content sites.

That’s why the NYT’s 1 million print readers are more valuable than their 18 million online readers.

For example, here are the NYT print rates for the Technology category:

If you do the math, the cost of 1 page, or 126 column inches at the National Weekday rate of $1,233 is $155,358, to reach 1,077,256 weekday subscribers. That works out to a cost per thousand (CPM) of $144.

Compare that to the $15-40 CPMs that TechCrunch gets for displays. Imagine what TechCrunch’s business would look like if it could command $144 CPMs.

So given that the New York Times can charge 3-4 times as much to show me a technology-related ad in print than TechCrunch can charge online, is it any wonder that they are trying to convert me to a print subscriber?

The issue is even more acute because at least TechCrunch can prove that the ad was displayed, even if I didn’t pay attention to it. NYT can’t even prove that I didn’t throw the paper straight into the recycling bin.

It would seem this is a market anomaly that can’t last.

So what should newspapers with a national audience online do?

Well, one obvious choice is to stop trying to be both a local and national (and even global) media company. The problem is that for companies like the New York Times, the local newspaper supports the global news enterprise — but that state of affairs is in rapid decline.

Another choice is to produce a local print product that MORE people want to read, not fewer — the perceived infallibility of the current declining print product is a subject for another day.

There’s one other choice that you don’t often hear discussed: Find new ways to create value for advertisers online.

That’s what Google did. The value proposition of search advertising has no analogue in print or anywhere offline. That’s where the pricing power comes in.

Creating unique value for advertisers online could also help newspapers better compete for and better price local online advertising as well.

So how can newspapers and other news brands create unique value for advertisers on the web?

I’ll have to get back to you on that one.

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What’s so interesting about this case is that all the reporting on this story from Friday — when business news usually takes a break for the weekend — quickly became utterly old and outdated when the deal was announced on Sunday. As of Friday, it was clear that Bear Stearns was headed for a government bailout, but the fire sale price really took everyone by surprise.

This deal was rushed to closing on Friday to try to prevent a market meltdown from beginning in Asia before the start of U.S. “banker’s hours” on Monday. So you’ve got the fifth largest investment bank sold for almost nothing and international markets opening with a scream — all on a Sunday evening.

What’s a newspaper to do? Especially when this story will continue to unfold throughout the day on Monday. Printing the paper Sunday night must feel like shooting a movie with a still camera — you capture a moment in time, but the action is already moving on.

In my first issue of the Washington Post Sunday edition today, the front page lead is a local story on D.C.’s gun ban, and the business section lead is an evergreen story about getting your own health insurance — nothing on the Bear Stearns story — and I say, well done. There is plenty of non-breaking news content in the paper that looks interesting to read later in the week, if I have time, and that’s the way it should be. I’m planning to read a piece on Eliot Spitzer by fiction writer Richard Russo — a reflection on the story after the news is done breaking does well in print.

In contrast, the fast moving Bear Stearns story and its reverberations in the financial markets belongs on the web, a medium much better equipped to handle it.

But there’s a lot for news organizations to learn about how this story is covered and presented on the web — and how a news consumer can follow it and find interesting coverage.

Here’s what the NYTimes.com homepage looks like right now:

They’ve clearly got the story covered, but the homepage has changed greatly throughout the day as the story broke — and there’s no way to look back. The homepage is still operating like a print newspaper, capturing a moment in time.

Compare that to the NYTimes.com’s DealBook, a web-native “section” of the site, which displays it’s reporting in reverse chronological order, so that you can actually look back at how the story unfolds. Here’s what I see now in the Investment Banking topic:

JPMorgan’s Expanding Campus

March 16, 2008, 11:26 pm

Remembering the Fed’s Last Bank Bailout

March 16, 2008, 9:20 pm

Recapping the JPMorgan Conference Call

March 16, 2008, 8:07 pm

The Cost of Bear’s Crisis to Its Employees

March 16, 2008, 6:21 pm

Update: Bear Stearns has agreed to sell itself to JPMorgan Chase for $2 a share. The firm’s shares closed at $30 on Friday, giving it a market value of $4.1 billion. For DealBook’s full coverage of the Bear Stearns crisis, go here.

Paulson Defends Fed Bailout of Bear Stearns

March 16, 2008, 3:51 pm

For this story, DealBook’s blog format is much more useful — especially since they can update a post with new facts, but still leave it as part of the chronology.

News is not static — it’s constantly in motion. But it also has a narrative, a story arc that it is often very instructive to follow. The New York Times has a wealth of reporting that covers a story as it unfolds — but the homepage is useless for looking at the story arc. NYT also segments its main news reporting, i.e. what goes in the print paper, from its web publications like DealBook, making it impossible to get a coherent view of all its content.

Here are some more observations:

I get NYT headlines on Twtitter, but I heard about the story from Howard Lindzon long before the NYT story hit my Twitter feed.

All I get on the NYTimes.com is the perspective of NYT reporters, who are top notch, but I had to go to an aggregator to find other perspectives. Gabe explains why I found what I was looking for on Techmeme:

Techmeme dampers stories outside of its own idiosyncratic concept of “tech” news. But stories of Bear Stearns magnitude can break through…

Digg had nothing on the story because business and the economy don’t really interest most Digg users:

Digg’s Business & Finance Top in 24 hours page has all of four stories on this unbelievably busy business news day:

Even Business & Finance Most Recent has nothing on the deal closing:

When a story interests Digg users, it’s a lightning fast news source, but here, not so much. And did I really need Digg to tell me to check out WSJ or CNN? Also notice it’s just a few users submitting most of the stories.

The problem with following the Bear Stearns story on the web is that traditional news brand sites are too conflicted between serving print readers and serving web readers, and many aggregators are too narrowly focused to do handle business and the economy.

Just as with election news, there’s a huge untapped opportunity to help news consumers on the web find and follow the best coverage of a breaking business story.

Of course, there’s always Google News — if you can figure out which of the 3,920 stories are worth reading.

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Let’s compare three news site homepages — TechCrunch, Digg, and New York Times.

TechCrunch is published using blogging software, so the stories on the homepage are presented in reverse chronological order — this is an approach to news publishing pioneered by blogs (through the software’s default functionality) that is truly web-native.

Why publish in reverse chronological order on the web? Because news is 24×7, breaking throughout the day. Which means that news consumers come to a news site more than once a day — checking the homepage is just a click away, and news consumers on the web click often.

When someone visits a news site on the web, what’s the first thing they want to know?

What’s NEW.

TechCrunch publishes multiple posts per day, but when you visit TechCrunch’s homepage, you can always figure out what’s new, because it comes first.

This approach aligns with RSS syndication — a news feed is a chronological stream of stories.

Now let’s look at Digg, which also presents news on its homepage in reverse chronological order. This can be disorienting to new users, because the number of Diggs are not in order. But it works great for power users who visit the site multiple times a day, because they can easily see what’s new.

Digg takes it a step further, allowing users to rank stories by number of Diggs, displaying what Digg users think is most important.

But it’s notable that Digg’s default is most recent, not most Diggs. This makes sense on the web, where people visit sites frequently throughout the day to check for news or read via RSS.

But beyond the default, Digg’s approach to presenting news is so innovative — and so web-native — because users have the option of viewing what’s new OR what’s most important.

Speaking of which, why isn’t this a feature of blogs — to allow users to rank posts on the homepage by most important or most popular? There’s lots of available data for that ranking, e.g. Alex King’s Popularity Contest WordPress plugin would work, if you wanted to rank by popularity. (Hey WordPress and Movable Type, stop posturing and spend some more time innovating!)

Of course, there are more interesting, distributed models for ranking importance (see Digg), but even ranking by most popular would be a worthy start.

Now let’s look at the New York Times. It’s homepage is arranged, like most traditional media brand sites, by what is most important.

Here’s the problem — if you visit the New York Times throughout the day, and no important news has broken, the homepage remains largely unchanged, static, like a print newspaper.

Organizing news by importance as the default makes sense when you’re only delivering the news once a day (and the “default” is all you get). But when news publishing is continuous, it’s not the best way to server frequent news consumers.

I used to take breaks to check the homepage of NYtimes.com throughout the day, but I stopped doing it when too many times I came back only to find the homepage hadn’t changed much — or at all.

Imagine — I’m visiting the homepage of the NYT, archetype producer of original content, and they didn’t seem to have anything new.

To be fair, NYTimes.com, like many other traditional news brands, have embraced blogs, which do display the stories in reverse chronological order. In fact, the NYtimes.com is now publishing a prodigious amount of blog content — but you wouldn’t know it going to the homepage — you have to go looking for it in the blog ghetto.

Why should NYTimes.com’s web-native publishing be relegated to one corner of the site? Why shouldn’t the WHOLE site — especially the homepage — be aligned with the web, instead of aligned with the static print product?

Dave Winer, who first got the NYT to adopt RSS, has been advocating this forever with his NYT “river of news” publications.

So here’s another challenge to print publishers with websites: When are you going to become web publishers with print products, i.e. care more about your web readers than your print readers? Or at least do what makes most sense for each medium?

If traditional news brands were really up to the challenge, they would listen to Howard Owens advocating blogging as the key to transforming how editors and journalists think about creating content on the web:

Too many publishers, or more to the point, the editors and reporters they employ, still see online as just another place to shovel the same journalism they’re doing in print or in broadcast.

Online is different, and blogging is the key that unlocks the kingdom of how online is different. If you can get blogging, you can get online.

If traditional news brands REALLY wanted to embrace the web, they would make their homepage into a blog — or even better, make it like Digg, so users can view content ranked by most recent OR most important.

Want your readers to check your site’s homepage frequently for news? Then show them what’s NEW.

Of course, you could argue that the entire notion of a homepage has radically changed on the web. Here’s my new NYT homepage:

And this is the other homepage the New York Times cares about:

With all that NYT’s web savvy, why not take the many NYTimes.com homepage out of the newpaper and actually put it on the web?

UPDATE

Quick clarification — adopting elements of Digg doesn’t necessarily mean letting readers decide what’s most important (although it certainly could). The element I wanted to emphasize in this post was presenting news in reverse chronological order by default, and give users the choice of whether to sort news by date or by importance, i.e. web-native news presentation.

How importance is determined is a whole separate — and “important” — discussion.

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I don’t think print newspapers are dead — they just need to radically evolve.

But evolution is a process that has to start somewhere, and I want to understand better where print newspapers actually are. And the only way to do that is to read a print newspaper on a regular basis.

I’ve been thinking about ways to frame the evolutionary process for print newspapers — one that states the goal, not just the problem.

In a recent Charlie Rose interview with Chris Anderson of Wired, I was struck by the following exchange (see 11:12 in the embedded video below):

Charlie: Do you have to be a print publication? [Holding up an issue of Wired magazine]

Chris: What we’re learning now, in an era where people have choices, is that the job of every print publication is to add value to the web. If you’re a newspaper, and I say this as someone who loves newspapers, arguably you are a value-subtracting medium. The same product, 18 hours later, that leaves smudgy ink on your fingers.

This is not an indictment of the value of print newspapers conceptually — it’s an indictment of newspapers that are still publishing the same content on paper as they are publishing on the web.Newspapers used to see the web as a complement, a value add to the print edition. Now they have to flip the equation.

The web is at the center, and the print newspaper must add value, as a complement.

But that doesn’t mean the print newspaper should become merely a reference point or marketing vehicle for the web.

(Click cartoon to see the whole thing. More Arlo & Janis cartoons, via Comics.com)

It means making sure that all of the precious, expensive, resource intensive column inches in the print product complement what is more easily and efficiently published on the web.

Craig Stoltz (a former Washington Post editor) recently offered a “modest proposal” to tax newspapers that still insist on printing daily stock tables:

Any other daily newspaper that publishes daily closing prices of individual stocks should pay a tax equal to one-half the cost of the newsprint required to publish them. (I’m told this cost can range from $500 to $5,000 per page per day, depending on size of print run, page, stock used and other factors.)

This new tax will have two salutary effects:

It will provide newsroom management with incentive to quit a counterproductive old habit. Nothing else seems to be working. Each paper that has done buyouts or layoffs before cutting stock tables should be ashamed of itself. It needs a financial gun to the head–and a moment when they have to make the case to the newsroom staff for continuing a counterproductive practice at the expense of headcount.

It will make some money available to the paper for newer kinds of dynamic, multimedia, user-centered business coverage that may drive revenue for the website and other distribution platforms

The future of print newspapers is a zero sum game — column inches, staff resources, and capacity to print and distribute are all limited. Nothing in the paper can be there because it’s always been there — everything needs to be rejustified, or reinvented.

(I realized I keep using the oddly redundant phrase “print newspapers” to distinguish from the equally odd web-based newsPAPERs — there’s the problem in a nutshell.)

Each week when I receive the Sunday Post, I’ll be offering comments on what actually complemented my reading of WashingtonPost.com, what was duplicative, what was a complete waste of resources and, ideas about what’s missing.

I’m just one reader, of course — but my intent is to bring the debate about the future of print newspapers out of closed editorial meetings and into the open.

Speaking of wasted resources, when I told my wife that I was subscribing to the Post Sunday as part of writing about the future of print newspapers, her first reaction was, “What a waste of paper.”

To be clear, this is isn’t an anti-print publication attitude — our house is filled with magazines. And it certainly isn’t anti-Washington Post — my wife is a very avid reader of WashingtonPost.com.

But I share her sentiment about the paper — in fact, I hesitated on subscribing for several days because I had so much trouble justifying the paper. Certainly it wasn’t the $12.74 (which interestingly is never actually displayed as a total price when you subscribe, just $0.49 for 26 weeks, you do the math.)

So I was surprised to discover, when I was placing my order online, this pitch for “upgrading” to a daily subscription, with its larger volume of paper:

Now there’s a circ marketing idea — subscribe (not just the upgrade) and we’ll plant a tree. Of course, that doesn’t compensate for the barrels of ink, or the gas for the delivery trucks, or the exhaust from those trucks… etc.

And the final irony would be delivering such an subscription offer by postal mail — on a piece of paper.

Oh well — despite all that, I’m eagerly looking forward to my first issue of the Sunday paper, which I plan to read on the couch, with the laptop shut down and the Blackberry off (OK, well, maybe not that… got to take this one step a at a time).

And I intend to plant a tree.

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You can mouse over each candidate and see their position, and also click through to see a whole rundown of their positions.

Perhaps most interesting is a feature that allows people to plot their own views on the issue, to see which candidates they most closely align with:

When I asked Craig for his thoughts on the site, it was notable that his first response was all about the journalistic process — which is as it should be. If it had been a two-page spread in the Washington Post newspaper, he wouldn’t have commented on the type of ink used, the software the news designers used, or how the printing presses were run. Any news organization who looks at this site and wonders first about the technology is not just behind the curve on innovation — they are behind the curve on what are increasingly fundamental tools of journalism.

Here’s Craig on the journalism:

The journalistic process, frankly, is one of the most rigorous I’ve ever had to do, and that includes my 12 years at The Washington Post. To plot a candidate’s position with some accuracy and intellectual honesty, you need (a) a methodology to determine what kind of statements, actions, voting record, etc. you’ll take into account to place them on a graph; (b) a very ambitious effort to gather data completely; and (c) the willingness to spend long hours parsing it and figuring out whether (say) two votes against gun registration outweigh a strong rating from the gun control community. This requires brain work.

We did not interview candidates or staff. We decided that the public record was likely a more accurate, telling source of what a candidate really believes than anything they’d say to spin our staff. Others may disagree with this approach.

News organizations need to get beyond the problem of fundamental technology skills, i.e. people who can build databases and Flash applications, and get to the real challenge of evolving the practice of journalism:

This type of journalism does not require much writing. The real work is in smart people analyzing data and the team finding ways to present it visually. This is journalism without pithy quotes, gotcha moments, spin vs. counterspin, etc. I’m not sure what precisely the skill set is–a taste for digging, a facility with Excel, a talent to imagine how differences “look” instead of “read.” A familiarity with the Flash guy who sits in the dark cube with the funky lamp helps too.

The output (I argue) is far more engaging–and therefore of greater civic value–than much bigger volume of quotage, paragraphs of explanation, facts delivered in sentences or even charts. This isn’t just pushing data at people in a visual way. By inviting them to take a quiz and see themselves on the same graph, I dare say we almost make the issue of, say, approaches to drug price controls fun.

The approach itself is full of possibilities for journalism of many types. We used a left-to-right axis because most healthcare issues on the national level break down that way. But for a local election–let’s say you’re comparing mayoral candidates–the axes should be very different: support-vs.-control development; tax incentives for growth vs. regulations; gun control vs. 2nd amendment, etc.

So here’s my thought — wouldn’t it be great if every newspaper in the country could create an application like this that graphs each of the presidential candidates against issues of local importance? And probably more important, as Craig suggests, newspapers could do this for state and local elections. Shouldn’t such a technology-enabled voter education tool, based on solid journalism, be as fundamental to every newspaper as traditional campaign coverage and a candidate endorsement on the editorial page?

I asked Craig about the issue of newspapers getting the right technology skills for this kind of journalism, and like so many advocates of change these days, he doesn’t really have strong feelings on the subject:

I feel like until you have this talent in house and part of the creative team–present from the moment of conception– you’ll keep assigning and publishing 45-inch articles on stem cell research. Trees, readers, newspapers all continue to die.

Happily, I think the budget realities of newsrooms today create a great opportunity for managers. Next time a journeyman Metro reporter takes a buyout, replace her with a database or Flash resource. Choices like that can drive transformation that will help the newspaper survive, maybe thrive, in the coming era. Hiring another Metro reporter won’t.

In its day, the printing press was a powerful tool for technology-enabled journalism. Technology evolves — rather quickly of late — and so too must journalism along with it.

And to those who have rightly lost patience with merely talking about the need to change, here’s a great example — follow it.

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But on the web, where anyone can access any information source in the world, news wires no longer makes as much sense, for the inverse reason that they once made sense — why should every newspaper carry the same version of the same story which can be accessed anywhere, including news portals, like Yahoo News, and now…Google News?

The wire version of a story used to be a valuable resource for a print newspaper. Online, it’s now a commodity, and Google has just completed the process of commodification.

The most salient line from Google’s announcement that Google News will now be hosting the full text of wire stories from four different services is this:

“Because of Google’s campaign to simultaneously reduce duplicate articles, the original wire service article is likely to be featured in Google News instead of versions of the same article from newspaper customers, sapping ad revenue to those newspapers.”

Google has long waged a battle against “duplicate content,” because it was a strategy for spamming the search index — Google punishes sites that use many versions of the same content to get try to get a more prominent search ranking for that content.

Now it appears that Google is taking the same approach to syndicated content — wire services like AP may be responsible for more duplicate content on the web than any other publisher.

There has been much hand-wringing about how local newspapers that publish “duplicate” AP content will no longer get traffic from Google News. These newspapers have been competing with the Yahoo News version of the AP stories for a long time in any case.

As William Hartnett points out, this traffic was probably not worth much anyway:

Were you getting loads of high-quality traffic, as opposed to drive-by one-timers, to generic, non-local wire copy on your site? Were people on The Internets beating down the virtual door of your localnewspaper.com looking for the latest, already-available-everywhere updates on big national and international stories?

Here’s the next question that all news organizations need to ask themselves — what’s UNIQUE about your coverage of a big story? Google News has purged all of the word-for-word duplicate content generated by wire services, but if you click on the 1,000+ other articles for any story on Google News, you’ll find dozens of news organizations covering the same story, often with all of the same facts.

In a siloed media world, this made sense. In a networked media world, is it really the best use of resources?

Matthew Ingram, as usual, puts his arms around all of the perspectives in this debate.

I’ll add one other observation — Google’s hosting wire stories will have an even broader impact, now that Google is featuring Google News results so prominently in its main web search results.

For example, many people don’t go to Google News to find out about a news story — they go to the main Google search. So let’s try searching for a story that is now in the news — one where people would likely want to find out more — “spinach recall”

If you look closely, you’ll notice something I don’t think I’ve ever seen before in a Google search result — the first three links all take you to another Google page.

Google used to be ALL about sending you elsewhere — but now Google may be shifting its focus to keep you on Google.

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“You’re almost always going to be able to find inventory,” says Jordan Bitterman, director of media for Digitas, which buys Internet advertising for American Express, AT&T and General Motors. “So the buyer has more leverage than in the print category.”

Advertising in traditional media, whether newspapers, magazines, or TV, is all about selling a scare resource — space.

The problem is that on the web there’s a nearly infinite amount of space. So when traditional media companies try to sell space online the same way they sell space offline, they find they only have a fraction of the pricing power.

That’s why the newspaper industry is worth about $60 billion offline but only $3 billion online — they only have about 5% of the pricing power that they did when there was only a finite amount of space in for printing ads.

Newspapers sell classified “listings” in print and they sell the same listings online. But in a newspaper, there’s only a finite amount of space for those listings. Online, on Craigslists and dozens of other “listing” sites, there’s an infinite amount of space.

So what’s the lesson for newspapers and other traditional media companies trying to transform themselves into online publishers?

Stop selling space.

Google doesn’t sell any space. It sells user intentions, i.e. what’s on people’s minds. And that’s a scare resource — there’s a finite number of people thinking about buying a digital camera today.

So what else is a scarce resource online? Locality.

There are only a finite number of people in ever city and town. Only a finite number of customers for every local business. Online a finite number of people in a particular locality seeking news and information online.

Wherever there’s scarcity, there’s opportunity.

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NYTCO enjoyed 23.4% growth in online revenues in the second quarter–to almost $81 million

and then

NYTCO’s newspaper ad revenues fell 5.7%, as earnings fell from 37 cents a share to 34–an 8% decline, compared to the second quarter of 2006.

You could easily conclude that it’s PRINT ad revenue that fell 5.7%, when in fact the 5.7% drop in ad revenue INCLUDES the 23% increase in online ad revenue. Let’s look at the earnings press release from NYTCO (bold is mine):

Total revenues decreased 3.7 percent to $788.9 million from $819.6 million. Advertising revenues decreased 5.7 percent; circulation revenues decreased 0.5 percent; and other revenues rose 2.2 percent.

Total News Media Group revenues decreased 4.5 percent to $764.2 million from $800.2 million. Advertising revenues decreased 6.9 percent due to weakness in print advertising across the News Media Group, partially offset by higher online advertising revenues.

Total About Group revenues increased 27.0 percent to $24.7 million from $19.4 million due to increased display and cost-per-click advertising as well as revenues associated with the acquisition of ConsumerSearch.com in May 2007.

Here we learn that the 5.7 decrease in advertising revenue is actually for the whole company, which likely includes some significant portion of the 27% increase in About.com revenue. If you pull out the News Media Group, which is really the “newspaper” ad revenue, the decrease is actually 6.9 percent.

But here’s the BIG question that goes unanswered in all this data — how much did PRINT advertising decline? All of the advertising revenue numbers are reported with online ad revenue included, and while online ad revenue gets broken out, we never see PRINT ad revenue broken out.

I can’t blame MediaPost for the lack of clarity in its coverage, since the data that the NYTCO releases is so difficult to parse.

For a previous NYTCO earnings release, I rolled up my sleeves to figure out exactly how much print advertising had declined, but that’s not an exercise that most investors or industry observers will take the trouble to do.

Honestly, I can’t really blame NYTCO or other newspapers for hiding the details on their bad news. If I were in their position, I’d be very tempted to do the same. But the MediaPost coverage really highlights how easily withheld information can lead to confusion, misunderstanding, or outright disinformation.

All newspapers are working overtime to find ways to overcome the decline in print ad revenue, which is outpacing the growth in online ad revenue, but those that are public companies have a fiduciary responsibility not to hide the ball. (Of course, most public companies hide the ball on bad news, but that doesn’t change the principle.)

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Page view-driven advertising is a product of Internet 1.0 advertising, which was modeled after traditional media advertising. But its actually worse than that, because even traditional media values audience above all. Selling online ad impressions is a holdover from a time when online audiences were difficult to measure because people used different IP address and different computers — oh, wait! Online audiences are STILL difficult to measure, with rampant cookie deletion and the same problem of multiple access points for the same person. So instead of delivering advertising to people, we deliver it to pages. And when you charge by the page/impression, the more pages the better.

That’s why online advertising economics are so messed up. Actually, there are two online advertising economies.

There’s search advertising, which ingeniously targets ads to keywords, which are a direct reflection of what’s on someone’s mind. No demographics, cookies, or individual identifiers necessary. It doesn’t matter where I use the search box — the advertising always works. A search results page is microcosm of the larger search advertising economy — it’s profitable at any scale.

The page view/CPM advertising economy is a raw volume game — the Web is awash in page views, and since advertisers are buying page views in large volumes, that forces publishers to bulk up their share, even as the over-supply drives down the price. Behavioral targeting is addressing the problem of huge amounts of low value page views by targeting people rather than pages, based on their use of the high value pages. This is akin to targeting search keywords, but unlike pay-per-click text ads, behavioral targeting display ads are still caught up in the page view economy, which makes it an uphill battle.

As Larry Allen of newly acquired behavioral targeting pioneer TACODA pointed out in an interview with me, online ad spending is still relatively low (particularly as a percentage of all ad spending), so those ad dollars get spread thin across the ever-increasing page view inventory:

There is still a large gap between the volume of ad inventory on the Web, especially when you consider news and social media, and the amount of ad dollars being spent.

But the biggest problem with page views/CPMs is that there could not be a more blunt, less nuanced metric for valuing online media. The newspaper industry, as with so much else in the rapidly evolving media industry, brings this problem into sharp relief.

The Newspaper Association of America just released the results of a custom study done by Nielsen/NetRatings, which had findings that sound like great news:

An average of more than 59 million people (37.6 percent of all active Internet users) visited newspaper Web sites each month during the first quarter, a record number that represents a 5.3 percent increase over the same period a year ago, according to Nielsen//NetRatings NetView custom analysis. During the same time period, the overall Internet audience grew just 2.7 percent.

Even better than the increasing headcount, these people who visit newspaper websites have great attributes:

• Nearly 12 percent (11.9 percent) of those who have visited a newspaper Web site have annual household incomes in excess of $150,000 compared with less than one in 10 (9.3 percent) of the overall Internet audience.
• Nearly nine in 10 (88.1 percent) newspaper Web site visitors have made a purchase online in the last six months compared with 78.9 percent of the overall Internet audience. Four in 10 (41 percent) newspaper Web site visitors are employed in professional or managerial occupations compared with one in three (32.7 percent) of the overall Internet population.
• Nearly three in 10 (28.9 percent) newspaper Web site visitors have sought out or posted a product review online in the past month compared with 16.1 percent of the overall internet population.

So where’s the problem? The only way that advertisers have to value newspaper websites at this media category level is by page views (via MediaPost, since this data is oddly not in the NAA press release):

These same visitors generated nearly 2.7 billion page views per month throughout the second quarter, the NAA reported Monday. That compares to slightly more than 2.5 billion page views during the same period last year. It represents a decrease from 3.0 billion page views in the first quarter.

OK, so page views are down slightly this year, but still, 2.7 billion page views is A LOT — except that, in the page view/CPM economy, it’s not as much as you might think.

Let’s say newspaper websites have an average of 3 display ads per page, which would be 8.1 billion ad impressions. If you divide 8.1 billion by 1,000, you get 8,100,000 thousands of page views. If an advertisers paid (a generous) $30 CPM, that would be $30 x 8.1 million, which is $243 million per month or $2.9 billion a year.

OK, that’s a lot of money, so where exactly IS the problem? Well, that’s $2.9 billion in CPM-driven online media value for the ENTIRE NEWSPAPER INDUSTRY! An industry that NAA currently values at $59 billion.

But this is all just silly back-of-the-envelope math, right? Well, actually…

Advertising expenditures for newspaper Web sites increased by 22.3 percent to $750 million in the first quarter versus the same period a year ago, according to preliminary estimates from the Newspaper Association of America.

So, $750 million per quarter is…that’s right, $3 billion a year. Looks like newspapers are indeed monetizing their page views at an average rate of $30 per thousand ad impressions, or $90 per thousand page views, using my assumption of 3 ads per page. Not too shabby by online media standards. Of course, newspapers don’t sell anywhere near all of their online advertising on a CPM basis, but it sure puts all the numbers in perspective.

That said, here’s the real scary math:

On a CPM basis, to make $59 billion in online ad revenue, at a $30 CPM, you need 1,966,666,666,666 ad impressions. That’s right nearly 2 TRILLION impressions, or 655 BILLION page views at 3 ads per page, which is 24 TIMES as many page views as newspaper websites currently have.

I’m picking on newspapers here because they are at the nexus of the transformation of media, but the problem with the page view/CPM economy applies to every online media company, including every traditional media company website and every Web 2.0 startup.

Google was the first online media company to break out of the CPM/page view trap in a big way — no wonder they have $10 billion in ad revenue.

Search advertising, driven by a dynamic marketplace for keywords, was a BIG idea. Behavioral targeting might prove to be a another big idea. But it’s going to take a lot of big ideas for the online advertising economy to cast off the page view/CPM albatross.

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What’s becoming clear is that blogs are now the organizing principle for newspapers’ original online content. And these are “real” blogs, i.e. driven by one or two individual bloggers, with (often active) comments, RSS feeds, the whole nine yards.

Washington Post’s newly launched hyperlocal site, LoudounExtra.com, is anchored by a strong blogger, and the site maintains a list of local bloggers. Sites like the Houston Chronicle have had a lot of success with setting up high-quality freelance blogs — this is not “citizen journalism” or reader blogging (as the Chronicle calls them — but they’re not readers anymore when they’re writing!) or (even worse) “user-generated content.”

These are freelance journalists, who happen to be doing it in their spare time and who happen to be using blogging software.

The word “blog” has way too much baggage — it’s too often equated with opinion. But a blog is just a content management system, and you can use it to publish shrill opinion, or you can use it to publish traditional journalism…or you can use it to publish journalistic reporting with a bit more point of view.

Most newspapers are actually using blogs as platforms for daily online publishing — platforms that allow one person to publish a “mini-publication.”

This got me thinking — maybe what newspapers should become in the digital media era is a network of local bloggers — some of whom are staff writers and some of whom are freelancers. Maybe most of them are freelancers. Maybe the full-time reporters are dedicated to beats like covering local governments, which require more time-intensive reporting to fulfill the Fourth Estate mission, but which can be supplemented by freelance reporting.

Maybe there are three tiers of journalists at these blog network “newspapers”:

1. Full-time reporters and editors, who ensure breadth of coverage, quality and standards, and public mission
2. Paid freelancers who write on a regular basis, but not full-time — these can be stay-at-home parents looking for supplemental income, retirees looking for extra income or to keep busy, college students, etc.
3. “Witness” reporters (avoiding “citizen journalist” on purpose), who contribute to the reporting effort when they witness news in some form

Many newspapers are closer to this model than they may realize, but there a few radical steps required:

• Use more freelancers who can post to blogs part-time
• Create a platform for anyone to report news — but on the established blogs, not in some big sloshing vat of random submissions — if someone wants to contribute regularly, give them their own blog, a focus, and (just enough) structure

To really take advantage of the economies of this model, which could actually enable MORE local reporting, newspapers need to consider one final step — stop publishing in print.

The big problem with transforming newspaper business models is that there’s still so much less revenue online, and only the print revenue can cover the huge cost base of publishing the print paper.

But if newspapers adopted this lean, flexible, networked blog model, and stopped publishing in print, they would shrink costs radically, and, maybe…increase online revenue enough to make it work, IF online was the only game in town.

Most papers aren’t ready to seriously consider ceasing to publish in print, but they are ready to more deliberately restructure their news operations down the blog path they’ve already taken, so that when the time comes to consider stopping the presses — in five years, two years, next year — they will be prepared to survive the transition.

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Check out the lead story in my own local newspaper that arrived on my doorstep today, which demonstrates the point with appropriately deep irony.

Here’s a round-up of newspaper news just from the last few days:

Newspaper Ad Sales Show Accelerating Drop
This piece is just a round-up of declines in newspaper ad revenue from the first quarter, with anticipation for more bad news in the Q2 earnings releases, but this chart brings the situation into sharp relief:


Audit Bureau of Circulations will start counting newspapers’ online audience
This gets to the problem I was looking at yesterday — the huge imbalance between the ad revenue per reader in print vs. online. But counting online audiences, although a critical first step, doesn’t get at the core issue of how these audiences are valued — and how newspapers can value their online audiences more (A LOT more).

Dow Jones Board Approves Sale to News Corp
Maybe the last great newspaper M&A after Tribune’s sale to Sam Zell — or maybe the first in a wave of consolidation.

Jon Fine’s BusinessWeek media column challenges the San Francisco Chronicle to be first to stop publishing in print
Jon makes an entirely rational economic argument that the best candidate to be first to make the bold move of giving up publishing in print is a newspaper like the Chronicle that’s bleeding cash. Jon sees it 18-24 months out. I could see it happening in the next 12 months. The conversations are already happening.

Fisher Communications Acquires Hyperlocal News Pioneer Pegasus News
What’s notable is that Fisher Coomunications is not a newspaper company, but rather an owner of local TV and radio stations, which have realized that they need to compete head-to-head with newspapers online for local ad dollars.

Washington Post Launches Hyperlocal Site LoudounExtra.com
This is a play for the local small business ad dollars that Washington Post can’t get in print, and which represent the long tail that they need to capture in order to shift the business’s center of gravity online.

Google Expands Its Print Advertising Program
Speaking of long local ad dollars, this is the deepest irony — Google, the archetypal digital media company, is — all at once — squeezing the inefficiency out of, disintermediating, and propping up newspaper PRINT advertising through its dynamic AdWords marketplace.

Yahoo, the other iconic digital media company, is coming at it from the other end with its Newspaper Consortium program that seeks, among other things, to bring market efficiency to local ad ONLINE sales by leveraging and evolving local ad sales channels.

It’s no accident that Google and Yahoo are so focused on newspapers. First, newspaper are close to — and have sales channels into — the still largely untapped markets that comprise thousands of local business who don’t yet advertise. Second, newspapers are the most fertile ground, given the harsh economic realities they face, for the kind of bold experimentation that is required for traditional media companies to survive in the digital age — and that will determine the fate of the billions of ad dollars still tied up in traditional media.

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Bill Keller, the New York Times Executive Editor and excellent editorial emissary, made the following comment in an interview:

But the Web audience is growing at a great clip, while print circulation is not. And online revenues are growing faster, too, albeit from a smaller base. If the trend continues, there’s little doubt that — “eventually” — online becomes the main business.

Most newspaper executive use words like “eventually” to push off into a fuzzy future a transition that they know needs to happen sooner rather than later, but still find impossible to conceptualize because of the 10% problem.

What is the 10% problem? Let’s look at the New York Time’s numbers. According to the NYT online media kit, here are the print and online audience numbers:

• Online unique users (12 month average): 13,372,000
• Print circulation – weekday: 1,120,420
• Print circulation – Sunday: 1,627,062

NYT doesn’t report ad revenue for NYTimes.com broken out from its News Media Group (which includes mostly other local newspapers, but is likely dominated by NYT revenue)

• Total advertising revenue: $483,594,000
• Online advertising revenue: $51,000,000

Let’s assume that the NYTimes.com has roughly the same portion of ad revenue coming from online. What you find, with some modest rounding, is that print circulation is about 10% of total audience reach, while online advertising revenue is 10% of total ad revenue — the economics are nearly the perfect inverse of what they should be.

But why is this so? Let’s take a look at NYT print and online ad rates, using employment as an example. Here are the print display ad rates for employment:

And here is the rate for an online employment display ad in the job market section of NYTimes.com:

It’s hard to compare apples and oranges — a big pat of the problem — but the online ad looks like about a quarter of the screen:

So let’s say I wanted to buy a quarter page ad in the Sunday edition for each of four weekends across a month. A half page is 63 column inches, so four quarter pages would be 126 column inches for the four ads. At a half page rate of $1,247 per column inch, that’s $157,122 for the four quarter page display ads in print.

Those ads would run in the Money, Business, or Week in Review sections, so would reach people who didn’t necessarily look in the employment section. It’s difficult to compare it then to the $7,500, which gets you a 20% share of voice display ad in the online job market section. But given that the NYTimes.com has nearly 10 times the reach of the Sunday print edition, $157,122 vs. $7,500 is a pretty eye-popping disparity.

Let’s try another print/online comparison. NYTimes.com also has a package called Employer of the Day, which gets you an ad on the homepage of NYTimes.com:

The homepage of nytimes.com is viewed by more than 1 million unique visitors every day. For Job Market advertisers seeking quick access to an extremely large audience, the Employer of the Day position can deliver a branded message twice per week.

Attract passive jobseekers
This position exists on the homepage of nytimes.com in order to attract jobseekers who may not be visiting nytimes.com specifically to visit Job Market. This provides you with an outstanding opportunity to woo potential jobseekers, who may be on the site to read articles, view award-winning multimedia content or use any one of our other services. By becoming the Employer of the Day, all visitors to nytimes.com become potential jobseekers for you to target.

Here’s the pricing:

So for $10,000, you get a 20% share of voice on the homepage for a full month. For the same $10,000, you can also reach about 1 million people in the daily print edition, for ONE day, with a 10 column inch ad (based on open rate of $1,056 per column inch), which is about 1/12 of a page.

With such a disparity in how the New York Times values its print advertising and how it values its online advertising, is it any wonder that it suffers from the 10% problem?

Of course, the New York Times can’t just go charging the same rates for online employment ads as it does in print. In print, no other channels reach the same high-end national audience — but online, the competition is fierce.

Still, it seems impossible for the New York Times or other newspapers to overcome the 10% problem without beginning to value online ads at a premium, the same as they do in print, rather than making online look like a giveaway by comparison.

Here’s a telling line from the NYT’s Display Advertising: Print+Online Packages:

Print and online are powerful, and complementary, recruitment channels; Job Market integrates both to provide an unsurpassed employment marketplace. All of our display listings now go online for 30 days at nytimes.com so that you can recruit from two top-quality audience pools.

I’m sure it’s true that both audience pools are “top-quality” — it’s just that one happens to be 10 times as large — the challenge is to bring ad rates in line with that disparity in the face of fierce competition online.

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It so happens I live in Loudoun County, and with that context, here’s my first take — LoudounExtra.com isn’t hyperlocal enough.

Here’s the problem, which I think is a more fundamental issue with hyperlocal and not a failure of execution on the part of WashingtonPost.com — hyperlocal is most meaningful at community level — even the county level is too big. Here’s a map of Loudoun County:

Loudoun County includes extremely diverse areas, including the highly developed zone on Route 7 east of Lessburg, the major city (where I live), and the rural western areas that border on West Virginia. In fact, Eastern vs. Western Loudoun is a major divide on issues of development, schools, transportation, etc.

But even within the east of Leesburg corridor, it segments further — down to the level of individual subdivision home owners associations (you can’t escape HOAs around here). News of what is happening in other HOA communities is typically of tangential interest for me at best.

Living in LoCo, WashingtonPost.com’s excellent blog about Loudoun County, which is now located on LoudounExtra.com, has done a great job of covering my community, but only when there is big news, not the day-to-day mundane news that is still of interest to residents.

LoudounExtra.com does have a nice list of other local blogs, including one dedicated to my community, Lansdowne…Out in the Open.

Listing links to blogs is the first step — the next step should be to create a network out of those blogs and use them as a platform for local advertising, which is what Washingtonpost.com is aiming at with this and other planned hyperlocal sites:

“Local retail advertising has not been as successful on the Web as it has been in print,” said Caroline H. Little, chief executive and publisher of Washingtonpost.Newsweek Interactive. “I think we’ll have a much greater opportunity to reach out to smaller advertisers who are not going on Washingtonpost.com.”

To really go sufficiently hyperlocal, LoudounExtra.com needs to identify EVERY discreet community and determine whether someone is already blogging about the community to include them in their blog network. If not, then LoudounExtra.com should recruit a blogger to write on regular basis about that community, e.g. attend all of the HOA meetings, attend all community events, interview neighbors, etc.

My community, Lansdowne, has a Town Center — I’m sure businesses here would be most interested in targeting Lansdowne residents and the handful of communities in easy driving distance, rather than people in western Loudoun, who are probably much less likely to drive here. The blog network would be a perfect way to target those ads to the right level of hyperlocality.

Two potentially killer features that LoudounExtra.com seems to have set up nicely and just need to be filled out are the event calendar and the restaurant guide — new restaurants are opening in Loudoun every day, and Loudoun is typically ignored by local restaurant guides, such as in the Washingtonian. I’ll be watching to see if people start adding reviews to the restaurant page.

The other element missing from LoudounExtra.com thus far is the key ingredient of hyperlocal, as Jeff Jarvis pointed out — people. I can’t tell whether Washingtonpost.com has implemented the same Pluck social networking and profile features that they have on the main site, but if they haven’t, they absolutely should — giving commenters, reviewers, bloggers, etc. a consistent identity on the system is essential for building the community around people.

On restaurant reviews, for example, it will be interesting to see if LoudounExtra.com can compete a site like Yelp, which is laser focused on building a people-driven community around local reviews.

Overall, what I like best about LoudounExtra.com is that it exists — the only way to figure out hyperlocal is to experiment, and WashingtonPost.com has wisely committed to the hard work of experimenting.

UPDATE
Mark Potts, co-founder of Backfence, has posted an excellent meditation on lessons learned from Backfence, which should be required reading for everyone experimenting with hyperlocal.

* Hyperlocal content is really mundane. We heard this criticism all the time. You bet it is—if you’re an outsider looking in. To members of the community who actually live with these local issues, it’s vitally important. It’s precisely that mundane content, and the conversations around it, that brings life to hyperlocal sites. I find that when I look at supposedly thriving hyperlocal sites, they seem boring and pedestrian to me. Exception: WestportNow.com. Why? Because I grew up there and know the place and its players. It’s that simple: It’s relevant to me. From outside, hyperlocal content all looks mundane. But it’s information and conversation that’s important to a specific local audience and flat-out unavailable anywhere else—the far end of the Long Tail. That’s not mundane—it’s competitive advantage.

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Kijiji, a site eBay has operated overseas for two years, is now available in about 220 cities across the United States, spokesman Hani Durzy, said Tuesday.

“We’re targeting young people and young families looking for bargains locally,” Durzy said. “For now it’s a free service and our focus is on building the user experience.”

So how much additional havoc will Kijiji wreak on the newspaper classified business? All the talk around the announcement is about Kijiji competing with Craigslist, rather than newspapers, since a free product vs. paid product is a less interesting competition (such as it is).

EBay knows a thing or two about connecting buyers and sellers online. And it so happens that eBay has had a seat on the board of Craigslist since eBay bought a 25 percent stake in 2004.

So far, there aren’t many ads on Kijiji — but I’m sure many newspaper classified advertisers (particularly those fond of eBay) will discover it soon enough.

Ouch.

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But no more. Yesterday I took a river boat cruise on the Potomac river with some visiting family, and was fascinated to hear what the tour guide said about this innocuous building.

This is a warehouse where the Washington Post receives shipments of these giant rolls of newsprint.

Earlier, I had been reading reviews of restaurants in Georgetown on WashingtonPost.com on my Blackberry, and it suddenly struck me what an anachronism that warehouse has become.

On the same boat trip we passed another victim of technological advancement:

These steps lead up from the Potomac River to the Lincoln Memorial and were designed by Washington’s architect and urban planner, Pierre Charles L’Enfant, to be a grand gateway to Washington, where dignitaries arriving by boat would be received and whisked off in carriages. But dignitaries stopped arriving by boat, and instead arrived by train and later by plane. Now the steps are used by runners for a stairmaster workout and by tourists sunning themselves near the river.

I’ll bet that in ten, maybe even five years, that warehouse on the river will be storing something other than newsprint — or it will be demolished entirely.

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I wrote here last week that I believe newspapers, despite their current hard times, will ultimately survive. I think the print edition will probably endure to some extent, but, without any doubt, the future of daily journalism is digital, not because it is the latest thing, but because it is, quite simply, a far better medium than paper and ink.

There are many editors who would still blanch at the idea that digital media is better than print media in all instances — but for news, it’s really hard to argue that it isn’t. Mobile device manufacturers (e.g. iPhone) are making progress on the portability issue every day.

Most newspaper sites are little more than Web editions of the paper product, and more difficult to use. They are a little bit like early movies, in which the director essentially filmed a stage play. But because journalism itself has value, eventually publishers will work out the profit problem.

It’s amazing that after 10 years on the web, newspaper websites are still so much like print newspapers. Many newspapers have launched innovative online video editorial products, aiming to compete with local TV stations, but those innovations are still dragging the rest of the site along like an albatross.

Unlike with TV and radio, which are stuck with people reading out loud, customers of digital journalism will get the best of all media forms. They can wade into any story that attracts them as deeply as they wish. Readers will gravitate toward prose, while those who prefer sounds and images can simply watch and listen. The digital report will not be locked into the strict chronological format of TV and radio news, but will be much more like a newspaper, which permits you to begin with sports and weather, if you wish, or go right to the editorials or comics.

I agree that atomization of video news, combined with text-based versions, is what will pull people away from their TV newscasts and their print newspapers to a fully digital news experience.

For example, the Washington Post’s latest package on ongoing inadequacies of care at Walter Reed Army Medical Center includes a video series, a narrated slide show, and an online discussion, all of which do what neither newspapers nor TV nor radio could ever have done alone:

Of course, it would be great if the Washington Post made it’s video and slide players embeddable, so that they could be distributed at a grassroots level.

For newspapers, the business challenge is to find a way to subsidize this kind of multimedia investigative reporting — if the future of journalism is indeed digital, then at some point newspaper will have to consider laying off the printing presses.

Bowden also points to a much discussed model where staff journalists collaborate with citizen journalists, thus expanding what each person on the payroll can accomplish.

The old idea of reporters covering a beat might well be replaced by an online reporter/editor who oversees a subject area driven by the entire community – a constantly updating police blotter or transit map, for instance. Digital thinkers refer to this as a pro-am (professional-amateur) model, in which the reporter is corrected, tipped off and guided – just as I was with Black Hawk Down – by the expertise of his readers. Blog sites offer a rudimentary working model.

It’s a model that newspapers need to hurry up and develop while their businesses can still support a staff to learn it.

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But the real fear inherent in the distrust of aggregators is that they are destroying the direct brand relationships that newspapers and other branded media have traditionally had with their audience.

Here’s a telling reaction to a finding from a global study of youth media behavior commissioned by the World Association of Newspapers:

But this just brings up another problematic finding for newspapers from the survey: often, young people “do not realize they are reading online versions of newspapers.” The culprits, according to WAN, are the very aggregators that can get newspaper content in front of young people to begin with. Newspapers are still struggling with this conundrum, seeking ways to brand content so it can be both recognized by the reader and monetized by the newspaper–but there’s no clear solution in sight.

The problem that newspapers and other traditional media brands have is that they still see branding as a function of controlling the distribution channel, rather than branding each unit of content that must now live and survive on its own in a disaggregated online media ecosystem.

But the real missed opportunity for newspapers is in optimizing their content to convert user who find their way to newspaper content via search and other aggregators into subscribers and direct users of the brand. The New York Times, having learned from search master About.com, is using this approach with its Times Topics pages, which rank high in Google for generic terms and draw users in to the universe of NYT content.

Here is a Google search for “global warming“:

Which leads to this global warming topic page on the Times:

Notice the ad for the print version of the New York Times. Also notice that the Times includes many third-party links on the topic of global warming, in addition to aggregating its own content:

The New York Times is being discovered through an aggregator and immediately demonstrating its own utility as a destination source. I don’t know what kind of conversion rate the Times has, but I can extrapolate from experience on this blog.

Publishing 2.0 gets 73% of its traffic from search and referring sites, which include aggregators like Techmeme. Some of my content is also syndicated in full text on Seeking Alpha, Yahoo, and Digital Media Wire (with links back to the site, which yield significant traffic) — this is anathema to the traditional media mindset.

Yet the only way to consistently get all Publishing 2.0 content is to subscribe — the result is that Publishing 2.0’s RSS and email subscribers are growing at a compound monthly rate of 16%, meaning the subscriber based doubles about every 5 months. That means that although my content is distributed across the web through channels and applications that I don’t control, people are finding enough value in the content that they discover through aggregators or other referrers — either the first time or after multiple interactions — that they choose to subscribe to the source.

The site traffic statistics that show 27% coming to the site directly don’t take into account all of these RSS and email susbcribers, who typically read Publishing 2.0 content without coming to the site. Feed item views — a metric that many traditional media sites have yet to discover — have been growing a torrid pace, nearly doubling over the last several months as I’ve been posting more frequently.

I’m sure there are plenty of people who continue to discover my content on an episodic basis and choose not to subscribe, but that will always be the case on the Web. But newspaper will never grow their online “subscribers” by being hostile to aggregators — which is essential being hostile to the Web.

Newspapers will also limit their growth by focusing only on their own content — the New York Times and many other mainstream media sites have embraced aggregation themselves, as blogs have done for years, by linking usefully to other sites, which only increases their value as a destination.

None of this will save newspapers from declining print circulation, i.e. it won’t turn young people who don’t read print newspapers into print readers. But it can help people discover the newspaper’s original content online — and if they discover it enough times, some of them will start going to these newspapers directly as a source.

This is essentially a reinvention of the circulation department — but it’s the only way for content creators to survive in a world where they don’t control the “pipes.”

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Broadcasting & Cable has a great write-up of the newspaper video phenomenon:

In the race to capitalize on the popularity of broadband video, newspapers are continuing to take a page from TV stations? playbooks by producing increasingly sophisticated newscasts and other Web programs. And although the newscasts may not pose a threat to stations? ratings, newspaper executives are hoping they will help secure their lead over broadcasters in the battle for local ad revenues on the Web.

Local TV stations are dismissive of newspapers venturing into the video medium, asserting that they just don’t have the talent assets:

?A lot of what goes into a TV newscast is the appeal of the presenters because of their communication skills,? Horlick says. ?If you don?t have credible presenters, [the user] can just click on the stories. I?m not terribly concerned with newspapers as competition with their newscasts.?

That may be true for now, but there’s no reason why newspapers can’t develop the talent to do video well, as some have already done — and in many cases it may not matter, as the online video grew to prominence through the wide distribution of low production value videos. The content still needs to be compelling, but the standards for successful online video may be very different from that of traditional broadcast TV.

Here is the Miami Herald’s edgy What the 5! newscast, which seems well-produced, although I think they are making a mistake of doing non-local stories like cell phones for dummies, MySpace vs. Facebook and the final episode of the Sorpranos. They need to be focusing on unique local content, which they have done to some degree, but not exclusively.

Here is HamptonRoads.tv, which also seems well-produced, and includes an ad for a local car dealership, demonstrating that they are already getting local TV ad dollars. The newscast also includes a nice cross-promotion to a story from the newspaper (almost makes you want to say “synergy.”)

A big issue here is scaling and cost structure — newspapers have the advantage over TV in that they aren’t obligated to broadcast all day — they can create highly targeted shows that have the greatest potential to differentiate from other video content (and that have the greatest advertising potential). Again, I think the key is to focus on local topics.

But it’s still not cheap to produce video, especially above a purely amateur standard — but it’s cheap to distribute video online, so newspapers may need to consider shifting some of the resources they use to produce and distribute their paper product, at great expense, to the production of online video.

Speaking of cheap distribution, newspapers with video are missing a huge opportunity for free distribution by making their video players embeddable by local bloggers.

The overriding question is whether focus on video can help newspapers with the transitioning their businesses from print to digital — without going out of business. The TV business is in the midst of the same painful transition as newspapers, so it’s not as if there are established models to follow. But that’s why this may be a golden opportunity for newspapers — if online video ends up being a lucrative business, newspapers can compete without the infrastructure overhead that broadcast TV has — just as native online publishers have done to newspapers.

If you look at the top online news sites, you’ll see that Internet Broadcasting, which provides infrastructure for local TV station sites, is high on the list, but the top newspaper chains combined (Gannet, Tribune, McClatchy, MediaNews) actually have greater reach (via Cyberjournalist, which provides these numbers from Nielsen on a regular basis):

Hearst-Argyle Television just signed a distribution and advertising deal with YouTube — clearly there’s money in them there hills. Newspaper, with their strong local brands, should think seriously about going after it in a big way.

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I think it’s in the digital area, digital and TV. And I think we’ve got to pour some money into digital. We’ve got to do a lot of things there… There’s so much going on on the Internet. We’ve got to find new ways and new business models to get revenues. Or else the world is going to be owned by Google.

Pour money into digital, find new business models, or be owned by Google. Pretty straightforward.

I mean there are so many new pipes in how you deliver these things. And so on. We’ll just have to use them all and see what’s economical. I had a study done, and I think you’ve had many more studies done down there. What if they made The Wall Street Journal free instead of charging 80 bucks?

“New pipes”? Is Murdoch part of the Ted Stevens school of Web conceptualization? Pipes are emblematic of the old monopoly distribution models that put Murdoch on top — wishful thinking.

You’d have 10 times as many visitors and lets say five times as much advertising. But you’d lose the other, it works out at about a push…. So, the problem with a regular newspaper is how do they replace or hold their revenue models. It’s not all been about the Internet. Change of lifestyle, people’s time. Circulation really has been going down for 20 years before the Internet. And on top of this, in this country you have the impact of the discounters. The Targets and the Wal-Marts and what they’ve done to the department stores… So what’s happened at papers like the LA Times. Used to see pages and pages of five different department stores. Now you get a couple of pages from one … We’ll see how Mr. [Sam] Zell handles that.

So newspapers have been dying for a while. The Internet is just the coup de grace.

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The question of whether Dow Jones — whose market capitalization has jumped to more than $4.5 billion since Mr. Murdoch’s bid — has enough scale to compete globally is fueled by recent upheaval in the news and financial-information industries, including the migration of news online and a broad decline in advertising and circulation in the newspaper industry.

And from the New York Times:

“After a detailed review of the business of Dow Jones and the evolving competitive environment in which it operates, the family has reached consensus that the mission of Dow Jones may be better accomplished in combination or collaboration with another organization, which may include News Corporation,” a statement from the family said.

and

More decisive was a presentation given by the chairman of Dow Jones, Richard F. Zannino, that laid out the company’s future with and without a sale. For several family members, Mr. Zannino was far more persuasive in describing the former, suggesting that the company was unlikely to achieve results that would match the value of Mr. Murdoch’s offer.

Interesting that the Wall Street Journal article spelled out the issue while the New York Times articles leaves you to extrapolate what is meant by “evolving competitive environment” and “company’s future without a sale” — but it’s a given now that the digital media revolution is the handwriting on the wall for every traditional media company.

There has been much hand wringing over what Rupert Murdoch might do to the Wall Street Journal, i.e. compromise its editorial integrity. You can see the hand wringing in the New York Times lede:

The family that controls Dow Jones & Company, publisher of The Wall Street Journal and one of the great names in American journalism, announced yesterday that it would consider selling the company.

From one “great name” to another. At the D5 conference, News Corp COO Peter Chernin said:

The notion that we would change The Wall Street Journal is counterintuitive. The reason we are offering a premium is because we believe that it’s a fantastic publication. I would argue that we are the publisher and guardian of some of the finest publications in the world. We would never ‘Page 6-ify’ The Wall Street Journal.

The concerns over journalistic integrity, while having some substance, are largely a red herring. The real issue boils down to whether News Corp, owner of MySpace and Fox Interactive Media, can enable the Wall Street Journal to thrive in a digital media world that is threatening newspaper brands with extinction.

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Here are the highlights:

Fewer resources will be available to investigate stories as nationally significant as the BALCO scandal, for example; fewer professionals to doggedly uncover shady financial practices at the University of California, forcing top officials to publicly acknowledge their mistakes and work to fix them; fewer journalists to cover local city halls, courts and schools, reporting community news that the public often takes for granted — and which other media, including local television and radio outlets, rely upon to set their own news priorities.

I see a world where corporations such as Google and Yahoo continue to enrich themselves with little returning to journalistic enterprises, all this ultimately at the expense of legions of professional reporters across America, now out of work because their employers in “old” media could not afford to pay them.

It is no longer acceptable for Google corporate executives to say that they don’t practice journalism, they only work to provide links to “content providers.” Journalism is not just a matter of jobs, and dollars and cents lost. It is a public trust vital to a free society. It stands to reason that Google and corporations like it, who indirectly benefit so enormously from the expensive labor of journalists, should begin to take on greater civic responsibility for journalism’s plight. Is it possible for Google to somehow engage and support the traditional news industry and important local newspapers more fully, for example, to become a vital part of possible solutions to this crisis instead of a part of the problem?

Google Didn’t Destroy The Newspaper Business, The Web Did

First, to address the claim that “Google and Yahoo continue to enrich themselves with little returning to journalistic enterprises” — I suggest that Professor Henry ask the New York Times how much Google and Yahoo return to them — the New York Times has embraced search engine optimization and now gets more than 20% of its traffic from search.

But let’s be clear — the New York Times can’t monetize that search-driven readership with the same monopoly pricing that it enjoyed in print. But that’s not Google’s fault. That’s the free market.

The newspaper business is based on monopoly control over the distribution of news and information in a given region. The Web destroyed those regional monopolies by making it cheap and easy to distribute any information anywhere in the world instantaneously. The car killed the horse and buggy industry. Digital cameras killed the film industry. Technology happens — but technology itself isn’t destroying journalism. It’s simply destroying the business that subsidized journalism.

And, let’s not forget, it’s technology, i.e. the invention of movable type and the printing press, that enabled journalism in the first place. Demonizing technology, as Professor Henry does when he references the “threat ‘computer science’ poses to journalism’s place in a democratic society” is, with all due respect, rather medieval.

Google Could Subsidize Individual Journalists

That said, as to the suggestion that Google should subsidize journalism — it’s easy to dismiss this out of hand, because it’s not Google’s fault that the web destroyed the newspaper business, which in turn destroyed journalism’s source of subsidization. And the fact is that Google search results that include content from newspapers probably represents a relatively small percentage of all results — Google would probably still make $10 billion in advertising without newspapers.

But what if we look at Professor Henry’s suggestion through the lens of corporate social responsibility, as he tries to do in this more sober section:

Is it not possible for Google and other information corporations to offer more direct support to schools of journalism to help ensure that this craft’s values and skills are passed on to the next generation?

Is it not possible for these flourishing corporations to assist and identify more closely with the work of venerable organizations, such as the Society of Professional Journalists, in support of their mission and to preserve this important calling? I like to think such things are possible.

Henry cites Google’s Marissa Mayer, who stated, “We are computer scientists, not journalists.” That’s true, but for a company that is increasingly hard-pressed to stand behind it’s motto of “Don’t be evil,” it would seem there’s a huge PR opportunity in doing what Henry suggest — although not as an admission that Google bears responsibility for the sorry state of newspaper economics.

I like the idea of Google supporting schools of journalism and the Society of Professional Journalists, i.e. instead of propping up failing newspaper businesses, Google could focus on supporting individuals who want to dedicate their lives to serving the public good. For example, Google might run free training for young journalists to teach them how to thrive in a search-driven, online media world — particularly if these journalists want to try their hands at independent online journalism, i.e. blogging.

The opportunity here is to stop taking less constructive actions like pointing fingers and abdicating responsibility, and instead look at constructive ways that technology can actually enhance and evolve the practice of journalism, far beyond what was ever possible with print publishing technology.

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Here’s a small but telling example:

AUGUSTA (May 23, 2007): A legislative committee has voted 11-2 in support of a bill that would no longer require the state to put legal notices in newspapers, and instead use the Web to keep the public informed – a plan opponents say would leave those without an Internet connection out of the loop.

The bill is being sponsored by Rep. Teresea Hayes, D-Buckfield, as a way to save state government an estimated $750,000 a year – money that newspaper executives readily admit would hurt their bottom lines.

It would require the state to maintain a Web site to post those notices, including upcoming public hearings on legislative bills and rule changes proposed by state departments and agencies.

State agencies aren’t exactly billion dollar ad spenders, but they are part of the traditional advertising ecosystem. Now that a state agency can create its own media, i.e. just put up a site, findable by search, there’s no need to pay other media, i.e. newspapers, to distribute the information to the public.

On the other hand, it may be that the ad revenue still exists, just not in the same form. Here’s what you get when you search on Google for “public notices augusta“:

The ad revnue is indeed there — it’s just going to Google instead of local newspapers.

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What I think is occurring is that we news types are mourning our lost autonomy and power. We’re angry that, like everyone else, we’re subject to business and financial pressures. Editorial independence has subtly eroded. Decisions about what topics to cover (health, technology) are increasingly tailored to appeal to advertisers. Splintering media markets have weakened the economic base for newsgathering. In 2005 and 2006, Time magazine cut its news staff by 14 percent, says the Project for Excellence in Journalism; it reckons that NEWSWEEK’s staff is half its 1983 level (though Web hiring has offset some losses). Even if the Journal rebuffs Murdoch, it cannot escape these pressures. It has already put ads on section fronts.

The changes involve more than economics. When I started, print journalism required two basic skills: reporting and writing. Now, journalists are expected to be multimedia utility players, feeding Web sites, posting videos and doing TV. Up to a point, this is valuable: finding new ways to engage and inform. But it’s also time-consuming and detracts from reporting. Just what constitutes journalism is less clear. Hitwise, a survey firm, counts 8,001 news and media Web sites. The largest (Yahoo! News) has only 7 percent of the traffic. The skills that are rewarded are shifting from diligent, curious and clear, to tech-savvy, quick and edgy.

vs.

I think the big long-term distinction between what Google considers low quality and of quality is going to be brand equity. Do people visit your site from channels other than Google? Large brands get more return out of buzz marketing, while smaller businesses lean hard on search. inbound made a great post in that WMW thread about the arbitrage and MFA changes, which notes that Google is getting better at coming up with proxies for visitor value.

Based on Google’s authority-centric relevancy algorithms and this move it is clear that Google wants to trust the larger businesses so they have less work to do policing the web. The way around getting forked by Google is to create something that does not need Google to exist. Create the type of site that people would link at if Google did not exist, and the type of site that they would want to advertise on directly. I have a large AdSense site that needs a re-brand and some serious work on content quality if it is going to stay viable in years to come.

Can you identify the source of BOTH of these quotes? I’m guessing most people can’t — in fact, I might lay claim to being the only person on the web who reads both Aaron Wall’s SEO Book (second quote), a blog about search engine optimization, but also, more deeply, about the fundamental dynamics of the web, and Romenesko, a Poynter Institute blog that covers the news businesses with an emphasis on the newspaper industry, which is where I found the first quote from a Newsweek column by veteran journalist Robert Samuelson. (It’s a shame if I am in fact the only crossover reader because Romenesko readers could learn a lot from Aaron about how the web really works.)

What linked these two articles in my mind is that they are both lamenting the loss of content business models, but at opposite ends of the content quality spectrum.

On the one hand, Google (as emblematic of the web’s content economy) punishes publishers that spend too much money creating content that can’t survive in the web’s brutally efficient disaggregated content market, e.g. investigative journalism. On the other hand, Google is now also punishing publishers in its AdSense network who spend almost nothing on content, just enough to hold the ads together.

The grand irony here is that Aaron is advising new media Made For AdSense publishers to be more like old media, i.e. develop a brand that people would seek out even if Google didn’t exist, and Robert Samuelson is advising old media journalists to relax and embrace new media. Compare:

The real news about the news business is that it isn’t collapsing. It’s merely changing.

vs.

From a risk management perspective, I think every web publisher should own at least one real branded site, even if it offers low returns for the amount of work required to maintain it.

Even more interesting is the net effect on content — a regression to the mean of content quality. Neither hacked together crappy content, on the one extreme, nor Pulitzer Prize journalism, on the other, can any longer thrive in a Google-driven content ecosystem.

Why? Because most people don’t find either to be sufficiently valuable. Not valuing Made For AdSense content isn’t difficult to fathom. As for investigative journalism, etc., it’s not that people didn’t value it when it came packaged with the newspaper. It’s just that most people don’t search for it (and search drives the web), and there isn’t a market for running ads next to it.

This doesn’t mean that investigative journalism will cease to exist or that clever online publishers won’t find ways to make money from online advertising without investing in content. It’s just that the economics of both have shifted to the middle — at least for now.

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What’s odd about how this debate has played out is the focus on Google News rather than Google’s main web search results — it’s now particularly odd in light of Google’s new Universal Search, which integrates Google News results into Google’s main web results. But the reality is that news stories have always appeared in the main Google results, which is significant because:

• Google has been running ads next to indexed news stories for years, even though it hasn’t yet done so on Google News
• News sites receive every-increasing traffic from Google

• Many news organizations, including the New York Times, are aggressively optimizing for search

One of the lead stories on the New York Times today is about the immigration bill. If you Google “immigration bill,” the first results is indeed Google News results, but the rest of the top results are from news sites, including Washington Post, Fox News, CNN, LA Times, New York Times, MSNBC, and CBSNews.

Google is selling ads alongside these excerpts from news sites, but look at who the third advertiser is:

The New York Times’ SEO effort puts the issue of Google’s relationship with news organizations into persepective. In fact, the New York Times recently got caught violating Google’s webmaster rules by ranking search results in Google using the domain query.nytimes.com. For a while, the search results for “sex” at query.nytimes.com was ranking in the top five for a search on “sex,” although it’s now been removed after SEOs accused the Times of spamming Google. Danny Sullivan has a great write-up.

As John Andrews observed:

We knew it was coming, and we knew the New York Times was “getting” SEO. And it didn’t take long. The King of Content is now dominating the Google SERPs across a wide swath of the keyword space, via the re-published, re-purposed, New York Times Archives. Each “article” is re-purposed on a clean, CSS-driven text page, clearly dated TODAY and not-co-clearly labeled as “originally published” back in 1997, 1998, or whatever all the way back to 1981. Of course cross-referenced, categorized, sub-categorized, ad-infinitum.

Here’s an excerpt from the New York Times’ Q1 2007 earnings call:

As of March, the Times Company was the 12th most visited parent company on the web in the United States with 43.5 million unique visitors, up 12% from March of 2006, according to Nielsen NetRatings. Traffic growth has been accelerating as we optimize our website for search.

And here’s what New York Times Chairman Arthur Sulzberger had to say about the importance of search at the recent New York Times shareholders meeting:

Moreover, About is having a powerful effect on our Company by providing NYT.com, Boston.com, IHT.com and our regional sites with critical, digital expertise. This includes optimizing content so that it is more visible to search engines, which leads to significant increases in traffic and thereby makes our online pages more profitable.

Compare that with:

Sam Zell, the tycoon behind the recent purchase of US group Tribune, indicated that he might challenge Google’s use of his company’s content, and Daily Telegraph editor Will Lewis recently attacked Google during a speech at the Ifra conference in Paris.

“Companies such as Google and Yahoo are seeking to build a business model on the back of our own investment without recognition. All media companies need to be on guard for this,” said Lewis.

How can news sites claim that Google’s “copyright infringement” is damaging their businesses when the New York Times, the paper of record, is managing to profit from its inclusion in the Google index?

The real issue here has nothing to do with Google or any other aggregator — the problem for news organizations is that online ad revenue, even for optimized online news businesses, will never replace declining print ad revenue. Newspaper print ad revenue was based on monopoly pricing, and those monopoly market conditions are now a thing of the past.

Google is walking a fine line between quietly cutting deals to make the “issue” go away and publicly fighting it as they chose to do with Viacom’s YouTube copyright lawsuit.

One way Google could deal with news sites crying copyright infringement — cut deals for including content from those news sites in Google News, then exclude those sites from the main Google search results, which would force all search traffic to go through Google News to discover those news sites, thus compounding the disintermediation.

But the ball isn’t really in Google’s court — search and other aggregators are increasingly the gatekeepers to online content, and it’s up to news organizations to decide whether they want to be a thriving part of the online ecosystem or an island in a networked media world.

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Thinking about it, I realized there are many analogues between what upstarts like Toyota and Honda did to the Detroit auto industry and what online and digital media is doing to traditional media:

1. More efficient product

While Detroit indulged the American obsession with gas-guzzling vehicles, Toyota and Honda pioneered fuel efficeint vehicles, including the increasingly successful hybrid technology. While traditional media companies tried to bolster inefficient packaged media, like CDs and newspapers, online and digital platforms like search and iTunes gave consumers access to precisely the a la carte content they wanted, without any waste.

2. Less expensive product

Toyota and Honda established their brands by giving consumers more for less. Online media is still wrangling with the old debate over whether information wants to be free, but Google has certainly perfected giving users more for less, by using advertising to financial all of its free services.

3. More technologically advanced product

It goes without saying that online and digital media are more technologically advanced, just as the engineering of a car like the Toyota Prius puts Detroit engineering to shame. But it’s not just advanced technology — it’s transformative technology. Driving a Prius is like searching for and consuming news and information on the web — a different in kind experience.

4. More nimble company

Detroit has been crushed under the weight of its pension and other HR obligations, while Toyota, Honda, and other foreign makers avoided such liabilities. Online publishing — witness solo blog publishing — is vastly more cost efficient than traditional publishing operations, from staffing to printing to distribution. And then there’s the ability to make money off of the long tail, which benefits all online and digital media. (Online video infrastructure still isn’t cheap, but there’s still a huge potential for high profit margins if the top line can catch up with that of the traditional video businesses.)

Does this mean that both Detroit automakers and traditional media companies are destined for extinction? Unlikely, at least in the near term, but for these legacy businesses to survive they will have to undergo a radical transformation to keep up with the upstart companies that are leading their industries into into the future.

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Again with perfect hindsight it seems inevitable that Facebook would offer free classified ads, given the huge advantage that the closed network offers to establishing trust between prospective buyers and sellers. Ebay demonstrated long ago how important trust is to online transactions. Facebook users can post classified ads to their trusted networks based on friends or affiliations, most notably schools, but increasingly companies and other groups as well.

Imagine the impact this could have on housing ads, such as searching for a roommate. Neither Craigslist nor newspapers can compete with prospective roommates being able to size each other up based on their Facebook profiles.

Facebook could also achieve a Google-like disruption by offering the ads for free to increase Facebook usage and monetizing that usage in other ways. According to Facebook’s Zuckerberg:

“We don’t try to lock people up or take more of their time, but we try to provide them with easier ways to do the things they want to do on the Internet,” said Mark Zuckerberg, Facebook’s founder, who noted that more than 60 percent of the site’s active users log in each day. “If we can provide people with efficient tools, they will use the site more.”

It also seems inevitable now that social networks are the perfect platform for all online transactions that involved connecting individuals, and even transactions that involve connecting companies.

If I were a newspaper exec, I’d thinking long and hard about how to create a social network around the one element that newspapers still have claim to — locality. People who live in a city or town have an instant connection. Newspapers should focus on how the help people in their communities leverage that connection.

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Reading this analysis by Compete was one of those Doh! Of course! moments (and, as a commenter on the Compete post points out, obvious to anyone who bothers to look at listing counts on Craigslist). Sex-related content has lead every technological revolution in media. Why should classifieds be any different?

To get a sense for how newspapers measure up again Craigslist, I checked out the personal ads on the New York Times, Washington Post, and San Francisco Chronicle. So what’s the big difference between web-native Craigslist and the newspapers’ online version of their print cash cow?

Craigslist is an open platform.

The Washington Post and San Francisco Chronicle required registration, clearly with the intent of legitimizing all participants in the personals marketplace. The Chronicle’s registration process is quite intensive, with minimum word requirements for describing yourself. The New York Times has this barrier:

To respond to an ad call: 1-900-226-7144 ($2.99 /min with a $2.00 connection fee.) Must be 18 years or older to call. Charges are accrued for each minute for the duration of the call. If you would like to pay via credit card: 1-866-423-7761 ($3.49 per minute)

On Craigslist you post for free, and respond for free by email — quick, easy, no friction.

The big question, of course, is this: Is Craigslist better because it has no bariers or standards, or worse? I guess it all depends on who you are and what you’re seeking.

Newspapers probably have the right positioning with their barriers to entry for personals — TRUST is the only reason to choose a familiar local newspaper brand over Craigslist. If you don’t want a newspaper acting as a filter in your quest for intimacy, you’d better be prepared to BYOFilter.

In any case, Compete also points out interestingly that Craiglist, for all its glorification, hasn’t cornered the classified market for everything:

Local news, business supplies for sale, real estate and web design are probably better off advertising somewhere else since they contribute less than a whisper to the overall site traffic.

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