Today’s local paper brought news of yet another cutback in the size of its staff and itself. The company is contending with “one of the worst advertising slumps in its history”, citing particular pressures in real estate, employment and automotive advertising. It is the third such cut in the last five months.
The number of full time staff will be reduced, and the paper itself will run 10 fewer pages per week.
This is sad, but it looks like it is headed into an irreversible spiral down.
1. Ad revenue slows
2. Reduce staff
3. Shrink size of paper
4. Readership declines
5. Repeat as long as possible
Or is it irreversible? Let's see if innovation can play a role.
This cutback highlights a risk with an increasingly popular form of business model: the ad-supported subsidy. Any business that depends solely on revenue from advertising dollars works for only the advertisers. You do not work for the people you call your “customers” or “users”. Your true customers are the people that pay you.
Newspapers have a hybrid business model, with subscribers (readers) and advertisers both paying. It seems like the subscription basically covers the cost of distribution, and ad dollars pay to produce news and editorial content. This is necessary -- people simply won’t pay enough for a subscription to foot the bill to profitably produce a daily paper.
There’s a two things about ad dollars: there’s only so much of them; and they only go where they can be shown to work. If advertising revenue is decreasing, it is a function of one, the other, or both of these factors.
The first factor means that you will need to compete for ad spending. The second factor is how you will compete. You will need to show that your customer will do better by spending money with you than with all the zillions (and growing) of other places that their ad money can be spent.
There are a couple reasons why money is spent on advertising. First is to build awareness. The second (particularly in the employment and classified advertising) is to generate action (apply for a job; call and buy the item).
Advertisers presumably want to know that the audience to which they are pitching their wares is likely to buy those wares. They want to know that they are reaching a sizable number of those people per dollar spent. So the question is how to recruit and retain a sizable, loyal audience of people who have a preference of deciding to buy things based on ads in the paper?
The traditional way is to have enough content that people find essential to their existence that they will read the paper cover to cover, and linger on the ads to see which businesses offer what they need to buy at that time. This isn’t very targeted, and relies on a host of assumptions about subscribers’ buying habits.
However...the number of people who depend on a daily newspaper is shrinking, and those people are older. Older people are not as susceptible to advertising (if, in fact, anyone still is), but they have more disposable income than the young. (An aside: The only reason that I can fathom that the 18-34 year old male demographic is regarded as the most desirable for advertisers is that 18-34 year old males spend money like drunken monkeys. By the time they turn 34, they have either run out of money; gotten married and have to answer for their financial indiscretions (personal experience speaking); they have already bought everything worth buying; or they simply grow up.)
How do we make this model work with the constraints of a smaller, ad-resistant readership? The answer is to produce something of value to that readership, and perhaps others.
This is about innovation. Businesses must innovate and separate themselves from their competitors. There are not a great many inspiring stories of businesses cost-cutting their way to growth and success.
What is it that papers are good at? I think that it is in editing, printing, and distributing. Putting stuff into the printing press, and distributing what comes out of it.
Content typically comes from the reporting staff, augmented with national and international wire services. The staff is typically focused on local information and opinion.
Is there an opportunity for innovation here? Is there a way for low-cost (or even free) content generation? How about giving subscribers a free website and/or blog in return for the right to harvest what they put on those websites and blogs? Use the editorial and management skills to build a daily report of the most compelling and newsworthy sources. Use technology to search, sort, and harvest content from the blogs and websites, and organize it into these new editions. Print that and distribute it.
It would be easier to target advertising on the blogs/websites themselves than in a traditional paper. Or, better yet, publish several editions, aimed at different audiences. For instance: a political edition, a business edition, a lifestyle edition, a technology edition, and so on. Advertisers might just like to see such targeting. People might even subscribe to several of these editions, instead of one. (I subscribe to two dailys, plus another dozen or so magazines.) The operating principle is called “mass customization”.
Perhaps the days of a single flagship daily per city are gone. In their place, though, the same organization that stood behind that single flagship daily could be producing multiple, focused, dailies. (Or biweeklies, or.....) Maintain a solid, consistent editorial policy, and stay a force in government and open, civil, discourse.
Who knows? It could just work!