Years ago, when I interviewed billionaire J.R. Simplot, I found him in a foul mood because the Dominican Republic had just nationalized "my gold mine."
Newspaper owners and employees can empathize with Simplot. The industry's "gold mine" has been taken away by the disruptors who have capitalized on digital age technology.
Just a few examples:
- Google, with the promise of doing no harm, has parsed and redistributed content, all the while aggregating millions, if not billions, of eyeballs to dominate online advertising. It seems now that if the industry wants to garner digital advertising, it needs to do so in partnership with Google.
- Monster.com intentionally and successfully set out to take over the newspaper industry's dominance in employment advertising. Its founder now wants to replicate his success by taking away the obituary business from newspapers.
- Craigslist used the newspaper's industry failure to react quickly to destroy the general classified business.
- And most recently, one king of disruption, Facebook founder Mark Zuckerberg, said publicly that he wants to go after what's left of the industry. "Our goal," Zuckerberg announced at a public forum in November, "is to build the perfect personalized newspaper for every person in the world. We're trying to personalize it and show you the stuff that's going to be most interesting to you."
Many in the industry believed that "local, local, local" would be the savior of the community newspaper. Forget about wire news, stock tables, sports agate, and the like, and concentrate on covering everything local in "your" community. But what can be more local than Facebook, what with Aunt Gertrude, Cousin Peter, and your friends and neighbors acting as reporters providing Zuckerberg's product with micro-local content at no charge. (Where's the Guild when we need it, damn it?)
On top of the amateurs, virtually every professional publication is contributing wittingly and unwittingly to Facebook, Google, YouTube, Twitter, and other disruptors. The newspaper industry has allowed, and often helped, the disruptors—aggregators, bundlers and owners of Internet platforms—to take center stage, the best lines, the audience, and the box office proceeds.
Plenty of voices warned the industry that the Internet was going to change the way consumers interact with media. A few in the industry believed the warnings, and tried to react but were blocked by legacy systems and thinking. Others resisted in efforts to protect the great, historic revenue streams and profit margins. Others told me they hoped only to reach retirement before the tsunami reached them.
It's often said that the industry is trying to replace print dollars with digital dimes. But it's worse than that. Advertising agencies have developed, or are using, computerized systems—they call it programmatic advertising—that determine pricing, bidding, selection, targeting and billing of digital ads—all in just seconds. "A far-reaching surveillance system is at the heart of the new media ecosystem," Jeff Chester, executive director of the Center for Digital Democracy, said at an April 8, 2011, National Conference for Media Reform session in Boston. "It’s your identity that's for sale in 20 milliseconds to the highest bidder." This technology turns most advertising spots on websites into digital commodities. Prices for national, mostly remnant advertising, have plummeted, often to less than one-dollar-per thousand impressions.
Success at most newspapers now is judged by reducing the rate of decline. Matching last year's advertising and circulation revenue is cause for celebration. By my count, more newspapers than ever before are on the market. Those staying in the business focus on efficiencies and expense management. Already, more than 19,000 journalism jobs have been eliminated.
What are we to do?
Most importantly, we have to better understand digital technology and its implications so we can better serve our newspapers, and the newspapers' customers.
I see three technological trends emerging: segmenting, networking, and developing technologies, for example, hashing.
- We can reduce the commoditization of our advertising by segmenting readers by all kinds of demographic targets. Computerized programmatic advertising systems will pay more for segmented content. Segments can be as simple as "above the fold," or "male" or "female." More complex segments—for example, females, ages 25-34 who own sailboats—will attract higher-paying programmatic advertising.
- Networking within ownership groups (and hopefully across the industry), can provide means to internally redistribute and re-use content that has been produced and edited by professionals. Instead of (or in addition to) stories being reused only by outside aggregators, members of a network can share their own content. This can help programmatic ad rates, too, by driving traffic volumes up.
- Hashing for marketing/advertising purposes is relatively new. Originally hashing was created as a security measure to protect email addresses. Marketers have figured out how to use the unique values created by the hashed emails to track active users on the Internet. So, give your email to a retailer, and they can identify you when you have logged on to a web site with your email address. Retailers are now asking media companies for hashed emails. The news media have been slow to understand and react to the implications of the latest technology developments. Entrepreneurs and venture capitalists focus zealously on how to use technology—too often with the stated purpose of disrupting existing businesses, such as the news industry.
To protect our franchises—our gold mines—we need to be smarter and more nimble. We need to build on our historic strengths, and begin a new heritage of understanding the changing times.
Marc Wilson (email@example.com) is TownNews.com's Chairman and CEO.