Mudoch’s Vision Gets a Poke in the Eye

September 6, 2009

The International Business Times ran a story that poked Rupert Murdoch’s plan to charge for news square in the eye. The story you may want to read is “Charging for Web Content No Panacea for Newspapers” suggests that charging for content may not solve the woes of the traditional newspaper industry. The IBT writer marshals some interesting information. For me the most important comment was from a small consulting firm:

Ken Doctor, who leads Outsell’s news publishing research, says publishers need to be more imaginative about how to make money out of news. “The news industry has this myth … that there’s no money online,” he says. Doctor says online ads targeted at particular audiences, which offer better value to advertisers than traditional display ads, still have a long way to go in generating revenue. Better intelligence about consumers’ habits on the Web — while it can be controversial to gather — can lead to far more relevant and powerful advertising  campaigns. And rather than asking readers to pay for content, publishers should consider extra-value services like membership schemes, something the Guardian is looking at, he says. “The smart play here is to go with human psychology and not against it, and that is convenience, access, sharing, better social networking connections,” he says. “And you’re forging a deeper relationship with your readers.” Doctor cites as examples of companies that learned early how to make money online Elsevier scientific publishing and Google – the bogeyman of the news industry.

Let’s think about several of these points.

First, the money online requires competencies that the newspaper has not evidenced recently; namely, technical capabilities and financial wizardry. Google’s magical recipe for online revenue leaves other online vendors in the dust. Newspapers have a different definition of technology than an outfit like Google. And Google’s money making method is based on traffic, math, and timing. The consulting firm’s expert is saying words that sound okay, but the gap between what a newspaper can do and making sufficient revenue to return the newspaper industry to its hay days is wide indeed.

Second, the idea of using information about readers is an interesting one. First, the newspaper has to collect useful, high value information. Circulation databases are described as “crown jewels” and the ones with which I am familiar are more like the cubic Zirconias for sale on Fisherman’s Wharf from a street vendor. The high value data requires the core competencies referenced in the preceding paragraph. Without these competencies, the likelihood of doing much beyond the status quo with subscribed data is going to be tough.

Finally, monetizing “convenience, access, sharing and better social networking” sounds great, almost like the silly McKinsey report I wrote about a few days ago. Here’s the problem. “Convenience, access, sharing and better social networking” are already available and becoming more convenient and better by the day. Companies with these types of systems – Murdoch’s own MySpace.com, Facebook.com, and Twitter.com to name three – have to find ways to generate big time revenue. No one has cracked revenue from certain types of online services that is demonstrably sustainable. Instead, social systems seem to wax and wane. Maybe the solution is a giant Microsoft of Google system. But if that takes place, will the newspapers be much more than marginal players? I don’t think they will be much of a player at all. In the area of local information, it sure looks to me as if Craigslist.org and Yelp.com have stomped the traditional newspaper into the dirt.

What I find amazing is that the baloney from blue chip and azure chip consultants never ends. The cherry on top the cupcake of baloney in the consultant’s comments was the reference to Elsevier. Perhaps Elsevier looks healthy because it is a private company and not required to disclose its financial details. A better example would have made this addled goose quack happily. As the consultant’s analysis stands, the addled goose says, “Honk.”

Stephen Arnold, September 5, 2009

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