Newspaper Industry Online Revenue Model?

I believe many are seeking the perfect online model for the newspaper industry. The big question being, how do we create and fund the content when it is currently free for the taking? I was recently reading a column by Jeff Bercovici of FT.com, and he had some interesting thoughts on how a new online model and how it might be viewed or used. While it still didn't address the money angle, I'll do that at the end, it did spark some ideas on how newspapers may be able to turn visitors into dollars.

Here are is a portion of the column.

As you browse FT.com, you have a small status bar at the bottom of your screen, akin to the "life bar" in first-person shooter games that shows you how healthy or injured your character is. In this case, the status bar shows you how many free page views you have left.

If you want to exceed your quota but you don't want to pay, there are other ways. In video games, you can usually replenish your life bar by collecting floating gold coins or stars or mushrooms or what have you; why not do the same on a newspaper site? Scatter them about randomly so that readers are rewarded for exploring different sections of the site, reading to the end of stories, etc. And extra free page views could be only one of the rewards. Readers who compile enough coins/stars/mushrooms could win all sorts of goodies: Free admission to FT conferences, lunch with an FT writer, and so on. (Or maybe this isn't such a good idea, given the evidence that performance-based rewards undermine intrinsic motivation.) Meanwhile, those wet blankets who don't want to play always have the option of handing over their credit card numbers.

End quote.

Now, while this has it's upsides and downsides and is certainly fraught with challenges, it is an interesting thought process. What if in order to obtain additional time on the site, in lieu of cash we offered then the opportunity to circumvent the cash option by obtaining additional information such as addresses, e-mail addresses, permission to send e-offers, marketing information and so forth which can be monetized in other ways? What if readers were given credits for each story they read allowing them to read more? Those are pretty traditional ideas and thinking, but let's take it to the next level.

In order to get to the crux of the problem we must realize that our ultimate online goal is to gain results for our advertisers; thus how do we do that? What if we offered incentives to our readers for clicking on and purchasing items from our advertisers on the sites, I.E., someone takes advantage of a downloadable coupon shown on our site and that counts as credit towards further site usage. Better yet, why not figure out a way in which we reward our readers for producing results for our advertisers. In other words, we let them know that our site is paid for by the local advertisers and when you purchase gift certificates from any of our advertisers advertising on the site via the site, that is the same as paying to use the site and you receive site credit for that purchase.

The key to this however would be to have advertisers offering gift certificates for items such as food, gas and so forth that everyone needs anyway. This will seem less demanding and most will assume it is a small price to pay and they have to pay it anyway. On the flip side, forcing site visitors to buy a car in order to utilize the site won't work real well, however if someone does buy a car, they should certainly be rewarded with a lifetime site pass for doing so.

Certainly not perfect and I'm sure many have had thoughts similar to these. The bottom-line is simple, we need to figure out ways to better monetize the online venue. The current push to sale banners, video and so forth is certainly important, but it is really only a means to an end. Fact is that even if we controlled 50% of all the online ad spending in our markets, we're still up a creek without a new angle to this problem of survival.

The world is certainly moving rapidly towards the digital age, print while a player in the game is becoming less so and this trend will no doubt continue. I do believe that print has a life cycle left, only that life cycle is far different than what we currently tend to hold on to.

Now Here's A Game Changer For The Industry?

What happens when the rules of the game no longer allow you to win the game? Do you keep playing the game or do you change the rules to level the playing field? Using that as backdrop, let's take a look at one major newspaper industry category who's revenue is not only at risk with cutbacks in advertising; but may be at risk and lost forever to the slumping economy and online competition - that would be the real estate category.

How to change the rules! First, let me preface these comments with a short disclaimer stating this course of action isn't for the faint-hearted, however it is certain without exception to change the rules in your market. In addition, it won't win you many lunch dates with local brokers and agents. Secondly, I personally wouldn't embark down this road until you felt your local real estate revenue had dipped to far and wasn't likely coming back. With that caveat, here we go.

Once you've practically lost the real estate category; why not just jump into the real estate game or business as a company? I submit that it would actually be quite easy. Simply venture into your local market and find a good broker that doesn't have the highest marketshare, meet with him and lay out your new business proposal. Simply let him/her know your newspaper company has decided to open a real estate brokerage and is seeking a broker/manager of the new operation. Explain that this new brokerage will spare no advertising expense and will reward the brokers and agents with outstanding commission splits, the best around. Lastly explain to the broker, he/she will be provided with a base salary along with a piece of the action. What appetite wouldn't be wet at this point, but let me go on.

To convince the potential broker that this is in his/her best interest, you simply convey that you will be making a print/online commitment far greater than any real estate company has seen before. You buy ink by the barrels and sellers will have their homes in print 2-3 times each week; you have the most visited website in the area that will displayed listings online as long as the home is on the market. You will provide a non-stop stream of bill stuffers targeting potential buyers and direct mail will be available. In a nutshell, their promotional package will be second to none. Office space will be provided to the broker and agents at no cost along with the services that go along with an office. (Most of us have plenty of extra desks at this point, won't cost us dime.)

Furthermore, you might explain that home sellers in your market will flock to the new brokerage once they see how often the homes appear in print and are aggressively promoted. Agents will flock to the new brokerage that offers a nearly unlimited promotional budget while allowing them to list homes a slightly lower rate for the sellers.

If you play your cards right, you could become the largest brokerage in your market almost overnight, thus attracting even more business. It would force the other brokers to advertise more or slowly become irrelevant in the marketplace. On the other hand, why not invite all brokers to participate in this new venture thus capturing the entire market and getting a piece of the whole pie in lieu of just a portion. While the newspaper brokerage could certainly keep more than 1-2 percent (most brokers keep 3-3.5 percent), if they only kept 1-2 percent while giving the brokers/agents the other 4-5 percent; a newspaper could generate approximately $300,000 for every 100 closings handled each year. (That is based on a $150,000 sales price, most markets would be much more) Multiple this by the potential transactions in your area and you can see how fast this ads up.

As I said, this isn't for the faint-hearted, but it would drastically alter the rules of the game. What if newspapers around the country did this creating the largest national brokerage in the country and shared referrals as well? There is no end to where it may go and just think what it might do for readership as once again, a robust real estate offering is appearing in your pages and online.

Is this feasible in the real estate market, maybe and maybe not? But regardless, I will submit this type of thinking is what is needed for our industry to make a comeback. We must stop thinking outside the box and blow-up the box. This type of thinking is a potential game changer. Like all ideas, I can't take full credit. I have thought through this similar business model or process with other business categories; as an example we have become a Penske truck rental dealership here in Ottawa allowing us to get discounted trucks for our transportation needs and then getting paid a commission for renting to ourselves as well as those we rent out to the community. While Budget and U-haul don't much care for us, they never advertised anyway. So while I have thought about this in other arena's, I must give Brent Low in Salt Lake credit as he has sparked my imagination as to the real estate opportunities, so thanks.

Maybe it would give many business categories cause to reflect on the consequences of leaving the print product. After all, who wants competitor that owns a press and barrels of ink in the marketplace?

Can We Create a Virtual Newsroom?

For far to long now, the newspaper industry has been content to follow the ground rules laid out by visionaries outside of our industry. We have let others dictate the rules of the game for us and we've been willing to settle for whatever rules have been thrust upon us. I would submit that when the rules no longer benefit you and in fact they become a shackle around your ankles; it is either time to get out of the game or it is time to change or make-up new rules. That is where newspapers are today, it is either time to start changing the rules of the game quickly or it is only time before our demise is complete.

My last post dealt with some of the changes we are contemplating in our circulation department. This post acts as a follow-up to a question I submitted on LinkedIn to fellow newspaper executives throughout the country. Bear in mind, this is a work in progress and will be an ever-changing target, a few of the thoughts here have been contributed by some of the many that responded to my questions previously.

Let me preface this with a few statements I believe to be true.

1) Without some major donors willing to throw money at it with no real return other than goodwill (which may happen in a few markets), the current newsroom model is unsustainable at best and is but a few years away from extinction.

2) Not only is the current newsroom model unsustainable, the current newsroom model is also one of the major drags on the entire business model and will spell the demise of the entire industry if nothing changes quickly.

I don't believe anyone under-estimates the importance of the newsroom, after all without content, there would be nothing in which to place ads around. That said, we have to question if the content we currently provide is not only the right content, but is it gathered in the most efficient manner. That said, what are the questions we need to ask? Here are a few:

Let's start with a real controversial issue, do we have to be fair and balanced? Maybe it is only me, but most National media has not been fair and balanced for about as long as I can remember. Sure, most try and present facts, but usually only the facts that further their world view at the time. CNN is who they are, FOX is who they are because they tell people listening to them what those people want to hear to substantiate their world view. Readers don't want to be told how wrong they are all the time, they want to be told things that reinforce their view of the world. If I am a newspaper in a red state, maybe it makes sense to write in such a way as to appeal to our readers, the same holds true of a newspaper in a blue state. The bottom-line, if you are blue state newspaper in a red state, you will lose readers and subscribers over time faster than the normal circulation declines may be; you can bank on that. Maybe that is also why local citizen journalists when found seem to do so well; they are the look and feel of the community they write about. Now on to less dramatic issues.

How should we measure and compensate our newsroom? For to long, we have avoided solid metrics or measurements. How is it that a writer can produce 200 inches a week on average in one market and only 40-50 inches in another? Granted, each market and beat offers varying opportunities, however we still have to fill space with quality content. Why shouldn't each writer have a set space to fill each day or week and then be expected to fill it? If all else fails, they can produce a little enterprise to make ends meet. Yes, measuring by the inch is fraught with pitfalls, but measuring by the inch can be a powerful tool if coupled with quality measurements as well. I realize I may get shot for this, but what if just like a real estate agent, writers/reporters leased seats in the newsroom and were then compensated for the quantity and quality of their work? Talk about an increase in production!

When will we start utilizing 'Citizen Journalists' to a great extent? The website www.ohmynews.com in South Korea was built around the concept of citizen journalism. This online only product was so successful, they spun off a print product that became the 4th or 5th largest newspaper in the country in less than 4 years. When it comes to local content, there is nothing more powerful than fellow citizens providing local content. Sure there are issues of consistency, editing, legal and so forth, but the cost for citizen produced content is pennies on the dollar compared to what we produce and the readership is oftentimes much greater. Not to mention, you really have those same issues with employees, just a tad more control over it; but I suspect that control is what most Managing Editors like.

When will we actually only use 'Multi-Platform Journalists' and nothing else? The days of being only a writer need to end and they can't end to quickly. Our writers/reporters need to be writing, snapping the pictures, taking the video, blogging, twittering, and doing 90% of their own editing. Let's compensate them for interest; are people following them on their blogs and is the story getting clicks online? Was a picture or video submitted with the story or feature? Did they write a short and long version of the story, one for the web and one for print?

How should we compensate Managing Editors? Every position in our companies, including the newsroom should be heavily compensated with a performance based metrics. Salaries ought to be low and the at-risk portion of the compensation high with excellent levels of reward for those great ones. Compensate them on the number of quality contributing citizen journalist inches, compensate them on the online traffic to the newsrooms stories and newsroom generated blogs. Compensate them on the production of those in the newsroom with the bar being raised dramatically and the expectations being high. Have a staggered base where half or more is at risk if the above and other objectives aren't met. They are the team leaders, without their push, it will fail.

I could ask many additional newsroom questions, but the intent isn't to address or provide all the questions and answers, those questions and answers will certainly vary by property. One of the responses to the original question was by Bill Long when he said, "the nice part is that increased local content doesn't have to come from reporters working harder; just smarter and more efficiently. Most of this goes to planning and that starts with the managing editor."

Back to the title of this blog entry, can we create a virtual newsroom? It is my estimation that we can without any doubt in my mind create a virtual newsroom. With modern technology, stories can be filed by our writers, reporters and citizen journalists from anywhere in the world, the same goes for photo's and video, they can be edited by retired editors from home, pages can be laid out by stay-at-home moms on home computers, planning can be virtual as well. Managing Editors in a sense would become traffic cops coordinating the same things they do now, only in a different fashion and using different methods. Is this the answer to our current problem, maybe and maybe not. I suspect that somewhere in the middle is where we will find the common ground that allows us remain a viable newsroom and industry.

As we are working towards a total newsroom transformation here in Ottawa, I am very interested in comments and ideas, please comment or e-mail me directly with your thoughts.

The Word 'Subscription' is Dead Terminology!

I have mentioned in my two previous posts this blog is all about ideas and innovation. I will start today looking at our industries broken circulation and/or subscription model; one that is coming to an end very quickly if we don't take action today - actually yesterday. Coming through the industry ranks on the marketing, circulation and business side, I've often felt the key to maintaining a strong print product in the future is tied to the bundling of our products with other products and/or services. To often I hear industry veterans tell us that all we need to do is promote what is in our various products better, or in other words, enlighten our readers as to how good we really are.

From a marketing perspective, nothing could be more outlandish; yet it does reek of the traditional mindset so prevalent in our industry. You know that mindset that we know what is good for the readers and they just need to rely on and trust us. Sorry folks, that mindset went away with 8-track tapes, record albums and pet rocks. From a business and marketing perspective, we can judge our products on one thing and one thing only, how many people will buy what we are peddling. Money talks, tradition walks.

Don't take that the wrong way, offering a compelling message or marketing campaign certainly can and will bring people in the front door or into our pages; however keeping them there is the real battle. That requires long term strategies and hooks that hold in many ways. The bottom-line is that anyone that takes a trial subscription for 13 weeks and then quits has spoken to us with his/her pocketbook, saying you don't have enough value for me.

Now here is a somewhat tame, yet potentially powerful thought. What if we no longer offered subscriptions? What if our newspaper became but a small piece of a much bigger package that readers couldn't say no to? What if that bigger package was priced even higher than a traditional subscription to a daily newspaper? I do believe that our print products aren't dead yet and even may have a bit of a run left in them, just not under the traditional format we have grown accustomed to in our industry.

Why not convert our subscriber base before it shrinks any further and create the largest Co-op or buying club in the area patterned after a Sam's Club or Costco etc? However, as the largest and most trusted media medium in the area, it could be taken to a completely new level, let me explain further.

As a new co-op club member I would receive the following based on my relationship with the Newsmedia company.

1) Newspaper delivered 1-6 days per week (member's choice) and unlimited online access.

2) Buying club membership. (Each month, as a group I am offered the opportunity to purchase food or gas at greatly reduced prices because we purchase in bulk to the winning bidder.)

3) Free auto buying services. (I simply submit the type of vehicle I am looking for, the co-op places that request to bid with all their suppliers (advertisers) and presents the buyer with the bids acting as the 3rd-party - of course the winning bidder has built-in the finders fee to the Newsmedia company and the buyer just goes in and picks up their new vehicle at the best price without dealing with the car sales hassles or routines.)

4) Free other buying services. (See #3 and expand to real estate listings, insurance, legal services and let the mind wonder - could be a great new revenue stream)

5) Free local e-mail offers. Members can sign-up for weekly, monthly or whatever e-mail blasts listing the special offer of the week at local restaurants or businesses and so forth. (Of course, we go to local businesses and pitch they now have access to the largest co-op buying group in the area. Think what that e-mail blast might be worth in your market)

6) Free classifieds (we're going there anyway)

7) Free magazine subscription of their choice. (Magazine companies offer highly discounted subscriptions when in bulk, give the members a choice of about 10-15 highly read magazines such as TV Guide etc. - only cost the co-op about $1 - $2 per year.) Side note: maybe it is worth it to just purchase a TV Guide for everyone in the market to avoid our weekly newsprint cost.

8) Free 11x17 color replica of any page in the newspaper throughout the year. (1 per household)

9) Other discounted services as acquired throughout the year, let you imagination run wild.

The trick to making this work isn't offering this as an option, you simply convert your entire subscriber base to co-op memberships with no options. Even if 10% of your subscriber base opted to stop the newspaper in lieu of being a member, you'll lose that many in a few years anyway. Additionally, I would consider offering tiered levels of membership benefits based on length of subscription or club membership to encourage longevity and consistency. There is no end to what could be offered to the members and monetized by the Newsmedia company.

Lastly and most importantly, I would charge an extra $2.00 to $5.00 per month for the privilege of being a member with a money back guarantee that if they haven't saved more than the price increase throughout the year, you refund their money. For every 10,000 in circulation, your Newsmedia company would see $240,000 - $600,000 in additional revenue, with very little incurred cost and multiple renewed revenue opportunities.

Does this idea have flaws? Absolutely! Is it doable? Without a doubt! I can think of a few questions and concerns, after all anything worth doing will require a few risks and chances; but I would submit this line of thinking is where we need to be going as an industry. Our industry doesn't have time for evolution, it is time for the revolution to begin. We need to change the rules of the road more to our advantage or change the road we are traveling on. Please feel free to pick this apart as we will most likely be going down this path at our newspaper in the near future and we certainly would appreciate any feedback from you.

Hope and Fear Are Not A Viable Strategy!

All to often many confuse hope as a strategy, it is not. However, even worse than that, we often let our fears dictate our business strategies. Don't get the wrong impression, both are needed to balance the scales when moving forward with various business plans, but hopefully the business plan is based on sound economic circumstances and judgement.

I would like to quote Amy Cosper from Entrepreneur magazine; "Call it what you will - recession, depression, correction - the economy is sobering and pretty scary. It's bad enough that Detroit is wheezing and Rome is burning, but what is worse is that the situation is making normally rational people act like loonies. It's fear. And it's a real business issue these days. But fear makes for a really crappy growth strategy.

Fear makes us irrational - like thinking cutting and growing are the same thing. Cutting costs does not equal growing sales. Never has. Never will.

Mark Richtermeyer, CEO of the Spitfire Group, is a wildly successful serial entrepreneur and motorcycle speed demon - and about as fearless as they come. But even 'Fearless Mark' is not completely immune. After one full day of poring over his companies financials and doing nothing else, he had this to say.

Everything was bumming me out. I was interviewing salespeople who said they'd work for commission only. I was worried about making sales, fearful of the economy. Where could I cut costs? I was worried about keeping my company relevant in a recession. Everything was bringing me down. I was grumpy and grousing around, and the sky was falling. I was completely focused on myself. And then it dawned on me; I have to start acting and thinking like an entrepreneur again. I let fear affect me, and it completely set my business and me back."

Yes, a healthy dose of fear can be good as long as it is tempered with reality. Let's not forget that products such as Campbell's Chicken Noodle Soup, fluorescent light bulbs, McDonald's and Diet Coke were all created in the dark days of prolonged recessions - now is the time to become more fearless than ever, and recreate our future changing the rules of the game.

Starting with my next post, we will explore ways in which to reinvent the game and adopt the rules better to our liking.

It's Time To Take The Offensive!

For the last couple years, newspapers have been on their heals feverishly trying to follow the rules of the new game unfolding before our eyes. A smart businessman understands that in order to succeed, one must either follow the rules or if the rules don't conform to your world view and outlook, you must change the rules of the game to your advantage.

Newspapers currently have so many opportunities it is astounding, but many of these opportunities involve rewriting or revamping our business model and changing the rules of the game.

In addition to changing the rules of the game, newspapers must come to the realization their business model is unsustainable at best and WILL fail if we maintain the same business course we are on. Until we can face that stark reality, we will be unable and unwilling to stare reality in the face and make the business decisions needed to succeed over the long haul.

This blog is all about throwing out old assumptions, reinventing our business model, changing the rules of the game, instilling the ability to innovate and lastly CHANGE. It is the ability to change that allows all the other needs mentioned above to surface, change is an art as well as a science; mastering change takes practice. I recall a few years ago I was presenting a project that required several minor changes in order to implement fully, I was accused of changing for the sake of change, I stand convicted. Yes, oftentimes change for the sake of change is actually the only smart thing to do - for it is through those little changes that we develop the habits we desperately need to change. It is those that are practiced at change that can change quickly when it is no longer a fire drill and real change is needed and needed now. Our industry no longer has time for fire drills, the flames are growing and drills are history.

I invite you to join with me as I throw out potential solutions, some small and some quite large that will help our industry change the rules of the game and re-establish the confidence we need to succeed.