Why won't this work?

[jlosasso]

I tried finding an answer to this on the boards but my search was unsuccessful.

I don't understand why the following model won't work for a newspaper's online content.

The newspaper offers free but limited content online to non-subscribers. The free users have ads on their version of the site. Enough ads that will make it profitable despite giving content away for "free", even if the ads annoys readers. If they are desperate enough for free information will they really care? Subscribers have unlimited access to all content that is exactly what is in the paper that day(like a pdf version or something), of course online would have more breaking news, online specific content and the subscriber does not have ads in their version.

I have seen this work for other online business ventures like gaming sites and I am curious why newspapers can't do the same thing. Will this not at revenue for a paper? Ever since I started reading newspapers online because it's easier for a college student, I never understood why a model like this is not implemented. I have seen other types of sites being successful under a similar model.

 

[NightHawk112005]

I think it's certainly worth a shot, if you can get other papers to do the same. I wonder if that might be the problem, nobody wants to charge while the competition is giving their content away. I'm honestly not sure.

 

[Inky_Wretch]

You mean like how subscribers here don't see ads but non-paying posters (and guests) do see ads? Less than 100 of us have volunteered to pony up some cash for that. Everybody else is reading and posting for free, despite the ads.

If people here won't donate to avoid ads, why would Joe Reader do so to avoid them at the Podunk Press Web site?

 

[blogismycopilot]

Couple points:

1) You say that newspapers could boost the number of ads they display, but I don't think their problem is the lack of ad space online. I could be wrong, but I think the problem lies in finding people willing to advertise online. Just because you boost the number of ads you are going to display doesn't mean you are going to find enough accounts to fill those ads.

2) I agree this is a monkey-see, monkey-do business, but there is some good reason for the trepidation to charge. According to a quick google search, one major metro web site had online ad revenue of $30 million in 2005, growing at a rate of about 20 percent a year. So let's say they made $50 million in online ad revenue last year. The equation becomes how much subscription revenue do you think you can generate versus how much ad revenue will you lose? Let's say you charge 10 bucks a month. That's $120 per year. You would need roughly 417,000 new subscribers to generate $50 million. Even if the web site maintained 3/4 of its ad revenue, you would still need 100,000 new subscribers. And that's at $120 per year, which these days is more than a lot of people pay for the printed product.


I think a web-based subscription model would work, but it will require time to make it profitable. And with the financial state of most newspapers, they can't afford time. At least, they can't afford time while still trying to shoulder the financial burden of turning out a daily printed product.

Which is why I think the future of a hypothetical company will be a web-only daily presence combined with various weekly niche magazines heavy on quality photography and writing (Globe Business Weekly; Globe Sports Weekly). As that business model generates more and more revenue, I think the company will gradually reintroduce a scaled-down printed product, because commuters, diners, and ****ters will always have use for one.

 

[RickStain]

Enough ads that will make it profitable despite giving content away for "free"

And here's where it falls apart. Online ads do not pay particularly well and it is more or less impossible to turn a profit on them while paying people to produce content.

 

[mustangj17]

The online ads don't make money. End of thread.

 

[RickStain]

The online ads don't make money. End of thread.

For a long time, newspapers more or less shared a oligopoly on audiences for advertisers with a few other sources.

The internet crushes that system and floods the market with sellers of audiences, driving down the prices faster than a dutch tulip.

 

[Magic In The Night]

They told us last year in a meeting that Internet ads accounted for only 2% of our income at the paper. Full-page newspaper ads still pay the bulk of the freight. But here in Detroit they are trying some of these things with the new system that goes into effect March 31. Cutting down to three days home delivery that are the only three days they make money on, apparently. On the other days, a much scaled-down paper comes out and is sold at newstands, stores, etc. Also, subscribers have access to a PDF-version of the paper daily. They said this plan will save "hundreds of millions of dollars."

 

[cranberry]

Porn and gambling probably have the most successful revenue models on the Web. There are probably some lessons to be learned there even if newspaper content can't approach the same levels of product demand.

 

[RickStain]

Porn and gambling probably have the most successful revenue models on the Web. There are probably some lessons to be learned there even if newspaper content can't approach the same levels of product demand.

People pay for porn. Gambling isn't paying people to produce content.

You can't support content creation with ads. You can have people make your content for you (YouTube), you can have them pay for it (porn), but you can't support paid content creators with advertisements.

 

[Frank_Ridgeway]

Why would advertisers want to do business with someone who tells the audience that the advertisers' existence is an annoyance, a punishment for those who are too cheap to subscribe?

And why would a local business want to reach the least committted/consistent members of their community? It's in their best interest to reach the people who can be counted on to visit every day and who demonstrate their civic-mindedness by subscribing to the local paper/Web site.

 

[cranberry]

Porn and gambling probably have the most successful revenue models on the Web. There are probably some lessons to be learned there even if newspaper content can't approach the same levels of product demand.

People pay for porn. Gambling isn't paying people to produce content.

You can't support content creation with ads. You can have people make your content for you (YouTube), you can have them pay for it (porn), but you can't support paid content creators with advertisements.

The question remains: Will people pay for online newspaper subscriptions in sufficient numbers to make it a profitable endeavor? I suspect many newspaper publishers are too scared to find out how little demand most of their products -- which they've willfully and greedily diluted in the name of profit margin over a period of decades -- will have as a subscription product. Those publishers who have invested in providing their readers a strong, compelling product over the years will have a chance to succeed. Those who haven't will need to invest quickly and heavily -- or fail.

 

[RickStain]

Profitable for whom? It'll be profitable for the owners, I'm sure.

But take a long look at the Seattle P-I model: 20 percent of the staff, significantly lower pay than we are used to in what is already the lowest-paid industry among college grads.

That's what we have to look forward to in the web-based business model.

 

[cranberry]

Profitable for whom? It'll be profitable for the owners, I'm sure.

Who else would need to profit? And what makes you so sure subscription newspapers (beyond national publications and major metros) will be profitable? I'm not ready to suggest that even if they invest heavily in their products it will produce sufficient online demand.

But take a long look at the Seattle P-I model: 20 percent of the staff, significantly lower pay than we are used to in what is already the lowest-paid industry among college grads.

That's what we have to look forward to in the web-based business model.

Ultimately, that not going to be a successful model, either. The P-I, like a lot of newspapers, is essentially paying for the death of one product (consider the lost investment in plant, machinery, distribution network, etc.) while trying to cheaply launch another.

Publishers who are losing money like this -- and there are many -- are the biggest hindrance to the online success of local news media because they are unwilling or unable to invest enough to make the online product compelling.

 

[zebracoy]

Does anyone else think that online ads don't make money because of who is advertising?

I mean, sure, I'm not going to click on "LOSE WEIGHT IN FOUR DAYS OR LESS!" or anything having to do with Geneology or whatnot. But would I be more tempted to click on something that advertised clothing or food or something you'd see in a newspaper or magazine? Yeah, probably.

I think that's the first issue. Ads aren't profitable online because they're all for junk and/or scams nobody wants or needs.

 

[Ace]

Does anyone else think that online ads don't make money because of who is advertising?

I mean, sure, I'm not going to click on "LOSE WEIGHT IN FOUR DAYS OR LESS!" or anything having to do with Geneology or whatnot. But would I be more tempted to click on something that advertised clothing or food or something you'd see in a newspaper or magazine? Yeah, probably.

I think that's the first issue. Ads aren't profitable online because they're all for junk and/or scams nobody wants or needs.

So you're not interested in my miracle system to remove hair from combs?

 

[Fredrick]

Each article should cost 25 cents to read. 10 cents if you must. Make it easy for the person to be charged for the story. If an article in a big city gets 50,000 hits you do the math. Story after story means some money.

 

[RickStain]

Make it easy for the person to be charged for the story.

Do you have an idea for how to do this? Dozens of companies have failed trying more or less since the internet began. Micropayment is a big problem on the web.

 

[cranberry]

Each article should cost 25 cents to read. 10 cents if you must. Make it easy for the person to be charged for the story. If an article in a big city gets 50,000 hits you do the math. Story after story means some money.

How many stories do you see each day that you would pay a quarter to read? For me, it might be a handful across a dozen or so major metros that I read on a daily basis. Probably NONE in my local rag, although Peter Abraham's blog is usually a pretty good read.

The Web isn't just a new distribution system; it's also a new competition system. I've got a vast array of content from which to choose -- not even just news content -- from around the world.

No one is captive to one or two newspapers anymore, which is the reason for the hyper-local movement. But hyper-local isn't enough. Hyper-local also has to be done well and in-depth if you want me to pay to read.

That means quality journalists given quality resources, two things that have been in shorter and shorter supply on the local news level for the past two decades as publishers continuously diluted their products.

 

[Bob Cook]

Part of the problem in monetizing Internet ads is not knowing who is reading. You can talk about page views and site visits all you want, but until you have a mechanism that tells advertisers the demographics looking at what content when, you'll be limited. I believe Nielsen is developing (or has something) like that now. They're trying to sell it to our trade pub, but it's expensive -- more than all but a few publications are going to pay now. Presumably with that information you can start selling for more because now you're assuring the advertiser it's going to get who it wants.