From DESIGN, Fall 1996
Where's the revenue?
Newspapers seek ways to make their online children profitable
By Alan Jacobson, Brass Tacks Design
On-line magazine Mr. Showbiz (http://www.mrshowbiz.com) attracts 23,000 visitors daily with a mix of entertainment-industry reporting and gossip. According to Deputy Editor Jim Albrecht, "Like every other site on the internet, it's a money loser. I've never heard of a site that makes money. The gamble is that this is going to be a big advertising industry."
As Jim Albrecht says, many on-line content providers believe "If we build it, they will come." But declining newspaper penetration indicates that providers will need to deliver extremely relevant content to compete with all the needs and distractions of today's busy lifestyles. And they will need to make the experience of using the web a pleasant and engaging one.
Just like the communication technologies that preceded it (film, radio, television) most content providers are replicating the programming of previous forms. And just like their predecessors, they have not fully understood the advantages and limitations of the new form and tailored their content and commercial opportunities accordingly.
In addition to misunderstanding the nature of the web, on-line newspapers make a mistake when they seek an image that distances them from print newspapers. Instead of building on established brand names, these on-line newspapers want to appear to be more "fun" than the print products from which they get their content. Discarding a brand name for Hawaiian-shirt colors, playful typography and an overuse of the words "neat" and "cool" is not a strategy to generate a loyal following of readers or advertisers.
Once all the Internet hype and hoopla is over, it will come down to content because content generates the traffic advertisers seek. On-line newspapers depend heavily on the content of their newspapers' daily report. But these on-line newspapers deliver just a fraction of the report provided to most internet-accessible households by the easy-to-use and portable format of the print newspaper. This incomplete duplication of content in the oft-times frustrating on-line format will not attract enough users to meet advertisers needs.
Web sites have world-wide distribution in contrast to the market for local newspapers which is limited by the physical size of circulation area. On-line sites produced by newspaper companies should provide content that appeals to a physically-extended "community of interest" instead of the local community better served by the print newspaper.
Rather than create new content, newspaper sites should leverage existing content to attract these communities of interest. For instance, the Indianapolis Star has a web site based on auto racing (http://www.starnews.com/speednet), drawing on their expertise in covering the Indianapolis 500. Almost every newspaper gathers and archives information that appeals to a community of interest extending beyond the physical boundaries of its local market.
Another example of leveraged content is the on-line database of classified ads provided by Landmark Specialty Publication's Collector's SuperMall (http://www.csmonline.com). A computer program draws from the classified ad database used to produce Landmark Specialty Publication's print products and automatically posts electronic ads on the Internet. Collector's SuperMall generates $250,000 annually by charging customers an additional dollar to post on line the classified ads ordered in Landmark's print products.
Content opportunities should also capitalize on the inherent advantages of the web, such as searchable databases. Like many newspaper sites, Pilot Online provides searchable databases of the editorial and advertising content of The Virginian-Pilot. Back issues are archived at the Virginian-Pilot News Archive (http://scholar3.lib.vt.edu/VA-news/VA-Pilot/VA-Pilot.html); Classified ads are updated by 8 p.m. the night before publication (http://www.infi.net/pilot/classified/index.html).
Searchable databases of retail advertising, such as real estate listings, can also be a source of revenue. But providers should not charge on a per entry basis because this will discourage advertisers from keeping the database up-to-date and complete. Users will turn toward the MLS book and away from on-line listings if the electronic version is not comprehensive.
Along with content, commerce opportunities should match the wants and needs of communities of interest. For instance, The Virginia Diner (http://www.infi.net/vadiner) has wed its existing fulfillment mechanism to the reach of its Internet site enabling it to sell its products world wide.
Clearly, seeking a community of interest apart from that served by the print newspaper is a reasonable strategy for generating revenue. Another strategy calls for some "out-of-box" thinking based on actual experience with a newspaper product.
In 1987 I created a highly successful total-market coverage product for The Virginian-Pilot. Back then virtually every TMC tried to appeal to non-subscribers with the best content of last week's newspaper while providing advertisers a means of achieving 100% household penetration. And like virtually every other TMC, the Pilot's old product did not effectively appeal to non-subscribers or advertisers.
As I began the redesign, I concluded that it was foolish to try to attract non-subscribers with the very content they had chosen not to purchase. It made more sense to offer content not available in the daily newspaper. In addition, I understood that the primary mission of a TMC was to appeal to advertisers.
These two assumptions lead to the creation of łThe Express Line.˛ In its first year, The Express Line generated 44% more revenue the product it replaced. It was eventually syndicated nationally by The Virginian-Pilot. Today, Media General, Thomson and The Tribune Company produce similar products.
The failure of traditional TMCs and the success of these syndicated products suggests this strategy for on-line newspapers:
On-line newspapers shouldn't try to generate the traffic that advertisers seek with content that already appears prominently in the print product. Instead, on-line newspapers should emphasize the content not available in the print product, such as searchable databases of editorial and advertising content. In addition, on-line newspaper sites should be designed to put advertisers first and content second no different than the inside pages of most newspapers. Every content page could be dominated by an engaging display ad that links to an advertiser's pages hosted at the newspaper site. Unlike most on-line newspaper advertising sites, these pages should possess all the interactivity and design sophistication of content pages. This can only be accomplished when on-line newspapers put as much effort into their advertising pages as their content pages.
So how can on-line newspapers generate revenue?
Daily content is not likely to generate the volume of traffic advertisers seek. The print product is better suited to this task. And despite the quality of any site's content, users remain resistant to paying for it. Micro-payments are not likely to produce enough revenue unless the content appeals to a very large audience. Counting on significant revenues from subscriptions does not seem like a prudent strategy.
Many newspapers offer access to the Internet, using these access fees to support the cost of maintaining their sites. This revenue stream is likely to slow to a trickle as major players like AT&T become internet service providers. The cost of access and the revenue it provides will drop as competition heats up.
Newspapers should build on-line sites that meet the wants and needs of communities of interest - markets different from those served by print. And newspapers need to move quickly to develop more and better commerce opportunities that exploit the advantages of on-line delivery.
Currently, I am pursuing two strategies with a major on-line newspaper: development of a site appealing to a community of interest and redesigning an existing site to put the advertiser first. Only time will tell whether either of these strategies is effective, but time moves more quickly on the Internet than any other medium. We should have an answer soon.