The Columbia Journalism Review writes about The Chasm Between the Value of Print and Web Readers. Specifically, the analysis points out that the total revenues per reader of the print vehicle is $940/reader versus $46/reader on the web. This is due to lower ad revenues per reader on the web and to a less extent lack of consumer purchases. Many are commenting on this article, whom I reference below. Additionally, I reference others who have been discussing this topic in the many fragmented conversations going on. Here is my comment.
No matter how much you adjust circ numbers for "inflation" (and as a one time media buyer, I suspect the print circ is as inflated as internet unique visitors) the truth is plain to see - ad revenues are down. From my perspective as a former ad agency "suit" (representing Fortune 50 Companies), ROI on advertising has been eroding since the 1980's. A temporary boom in ad space & time demand during the Wall Street Internet boom in the 1990's lulled the industry into denial. Today's spending drop is a long time coming. I suspect that Alan Mutter is speaking from a similar "big picture perspective."
Anyone who claims to have THE answer doesn't. We need experiments. But experiments must have a theoretical
chance of replacing the current business model with a viable, sustainable
one.
Most of you are writers.
I am a marketer. You would probably write the following more succinctly
than I. Please indulge me more of
your attention than I deserve to tell you why I think there is good news to
capitalize on, although it will take disruption in all 4 "P's" -
product, price, place, promotion.
Most of you seem to think that pricing and placement are givens. Content has to be free. This means that ISPs, Wireless providers get to keep all the money they collect from consumers to distribute the content. As much as I agree with most of the analysis in "5 reasons newspapers are failing" by Bill Wyman - you guys are beating yourselves up more than you need to. Suspend for a moment the idea that "content is king" and you, therefore, are not responsible for all this.
The new insight I offer: what if pricing and place were not givens?
The good news is that the communication industry has a higher share of a consumer's wallet than ever before. In fact, according to Veronis, Suhler, Stevenson, even as ad spending grew dramatically in the 1990's, consumer spending (mainly for access via cable, ISPs, wireless) grew more, surpassing advertising in importance to the industry in 2004. The lines have crossed. And the gap is widening. While ad spending nose dived in fourth quarter, more consumers subscribed to premium channels like HBO than ever before and profit margins were at all time highs.
How do publishers and programmers get a bigger share of
these dollars? It will take a major
disruption to the relationship between publishers/ programmers with their
distributors (cable, ISPs, wireless).
This is not to disagree with Steve Yelvington, who calls for product (content) and promotion (ad sales) innovation, Steve Buttry, who is more specific: product (evolve beyond content provider to connection provider) and promotion (offer advertisers a direct sales/e-commerce medium not just an awareness medium) or even Paul Farhi's suggestion that newspapers should just exit the web and stick to print (If what he really means is - we deserve to be paid - our initial approach to the web was all wrong.)
What if publishers/programmers (aka media brands) owned the relationship with the consumer, collected the money and paid the distributors for their services?
This would be a disruptive innovation in the market as well
as internally. Most
publishers/programmers are not experienced marketers because they have relied
on 3rd party distributors to market to consumers.
Many journalists intuitively get the value of "owning" the customer relationship and are putting a lot of time into building their personal brands online. Publishers/programmers need to follow their lead and build a direct relationship with their customers. But first, we need a "frictionless" transaction system (Fred Wilson) to monetize the customer relationship.
What if there were a "frictionless" transaction system?
Jeff Jarvis evangelizes the value of the Link Economy. So far it is monetized by the recipient of the link via advertising revenues (which aren't too high as indicated by the above). What if there were a means to reward the linker and the linkee for creating curiosity (micropayments), establishing trust (subscribing to email updates), and building a sense of community (VIP membership to participate in more satisfying real time conversations from anywhere), creating a virtuous circle that encourages more linking and the quality of the content of both? The time is right. With Bewkes, Murdoch leading the charge on the programming side, publishing leaders should be collaborating with them on adopting a universal barter transaction system. (Maybe this is the role government could play?)
If you had a direct relationship with your customer, what kind of product and promotion possibilities would you imagine?
Once a universal transaction system exists, publishers, like John Robinson of the News-Record, will have an opportunity to experiment with building and monetizing their brand's relationship with the consumer on line. Specifically, start offering alpha's and beta's of new products to learn what is worth paying for. I don't mean "free for alls." I mean take advantage of existing assets to build "demos" and find out what creates new value for people. And I don't mean offer it for free and then ask what they'll pay. Price it from the beginning - and then learn what is optimal.
Ironically, marketers would pay a significant premium over today's advertising rates to a media brand with a direct relationship with its customers?
And don't you think that you would have more freedom if you were more dependent on readers than advertisers?
Bottom line: disrupting all four "p's" could be a lot more rewarding and a lot more profitable than this.
