It’s Time for a Revenue Revolution

    by Dan Pacheco
    July 24, 2008

    In Chicago this week, I had a conversation with fellow News Challenge winner David Cohn (creator of the very cool Spot Us community-funded reporting system) that got me thinking. David is skeptical of relying too much on advertising to fund journalism. He has various reasons for this which he can explain much better than I, and he has some good points.

    One thing that we can both agree on 100% is that advertising that is not fair and honest is incompatible with the goals of journalism. But where we don’t completely understand each other yet is over the idea of what advertising actually is, and what it can be.

    So for the purpose of this post, I’m going to intermittently substitute the problematic term “advertising” with the phrase “business marketing.” Regardless of how you feel about the ability of advertising to fund journalism — and I will be the first to agree that the current models are clearly crumbling, especially for newspapers — I don’t think anyone will disagree that businesses have the need and even the right to get the word out about their services.


    The whole basis of business marketing, of which advertising is one piece, is the need for a business to deliver messages about its products and services to a target market. Marketing is essential to the very survival of a business — something I’ve experienced firsthand in launching and promoting 10 niche-focused community sites and publications from scratch in Bakersfield. We tried everything from Google Adwords and flyers, to having booths at events and reaching out to local bloggers.

    Every one of those activities cost time and money, which is to say that they all cost money since my time was paid for by The Bakersfield Californian. When we continued to invest in those activities, site traffic and usage blossomed, and when we didn’t it started to fall. That was business marketing, and that’s really what I mean when I use the term “advertising.”

    Responding Positively to Relevant Ads


    But there’s another aspect to business marketing: people like to see ads for products they like, and some even pay for that privilege. Over the years, I have noticed that many journalists cringe at the fact that lots of newspaper readers see advertising as valuable content, especially in the Sunday paper. The core of this audience for newspapers is women who look for specials and coupons, but the phenomenon is not limited to them. I know quite a few guys who look forward to the weekly Best Buy insert so they can stay up to date on new tech toys and HDTVs and get them when they go on sale.

    The reality is that we’re all consumers and we like to buy things that speak to our needs and tastes. For that reason, we respond positively to business marketing that matches our interests, and we ignore or respond negatively to messages that don’t match our interests — or messages that annoy us. A good example of the latter is the “Are you overweight?” Facebook flyers that disproportionately target middle-aged women, and “Get in shape” ads that target 36-year-old guys like myself. Yes, I feel fat and need to get in shape, but reminding me of that doesn’t make me feel good about your business and, in fact, makes me want to ignore and boycott you.

    So why are so many journalists who confess to being distrustful of advertising talking about how to improve it — including people like me who came out of newsrooms and pure online community? Because the print display advertising that used to fund the journalism product is faltering. At a Knight Digital Media Center leadership seminar I spoke at last week, I heard one online newspaper editor say that he’d gone as far as getting approval to hire his own ad salesperson within the newsroom. He was willing to do that because he wasn’t satisfied with the track record of the advertising department, whose failure to grow revenue was requiring him to lay off reporters.

    The larger context for this trend is that news organizations are dependent on advertising to continue to produce good content. But the advertising model that’s still paying most of the bills is out of synch with the direction that online business marketing is going. It’s difficult to see how locally-sold online advertising can fund journalism when advertising is so much cheaper and efficient on the Internet. If you want to learn more about why, read up on media consultant Vin Crosbie, who points out that eliminating a printed paper would remove 90 to 95 percent of a newspaper’s revenue but only reduce expenses 40 to 50 percent — thus putting a newspaper in even worse financial shape.

    Novel Ideas for Funding Journalism

    But the bigger issue is that Internet advertising is just too dang good for the good of journalism. When you compare the cost of a Google Adwords marketing campaign, in which you pay only for the 1% of people who are actually interested in what you’re selling, to that of newspaper ads, in which you also pay for the 99% of people who most likely won’t want to buy your stuff, the end result appears clear. Relying solely on targeted local online advertising as it exists today — and especially the Google model, which works great for Google due to its global customer base but yields less for one geographic area — is not going to cut it. We need new models, and more of them, to continue to fund the audience-based activities that drive our local value. 

    That’s what leads people like David to come up with novel ideas like Spot.us, where individuals in a community volunteer to fund specific stories because they think they’re important. And it’s also behind the idea of Richard Anderson’s Village Soup, which charges advertisers a set monthly fee for the right to publish messages about their products and services to a local community, and also publicly converse with a community. The LJworld Marketplace does something similar by charging a monthly fee for enhanced business profiles. We plan to follow that path in Bakersfield with enhanced profiles in our Inside Guide. (The only reason we haven’t done it yet is because it’s taken much longer than expected to build a directory of 26,000 businesses in town — if you’re considering such a directory, don’t underestimate how much time it can take to get it right).

    Printcasting will pursue a hybrid revenue approach. I will be posting more about this as our ideas start to take shape, but the underlying principle is to make it easier and cheaper for local businesses to get their messages out on the street in community-produced print publications than is possible with the local newspaper. We’re doing this not just to make a buck, but also because the health of local businesses is important to us. If you think advertising is evil, think about how you feel the next time your local bookstore goes out of business because it couldn’t compete with Amazon, Borders and Wal-Mart. Efficient, targeted local marketing is absolutely critical to the survival of the local franchises that help define our communities.

    We know that around 60% of businesses in almost any city can’t afford to place ads in the daily newspaper — what’s now referred to as the “long tail” of advertisers — but they can afford the rates of our 6 smaller niche print publications. You would think that online ads in niche products would be perfect for them, but we’ve found that online is still a hard sell (this is also seen nationally, with only 22% of small businesses marketing online in any way in 2006/2007, according to Intuit’s Steven Aldridch. Many also prefer the smaller publications because they reach a more defined audience.

    One of our goals for the end of Phase 2 of Printcasting (September 2009) is to have at least 100 niche publications that are produced by the community and printed on home printers. In addition, the Californian will print and locally distribute a subset of those that show the most promise in exchange for the right to sell additional ads into them.

    Printcasting’s Advertising Vision

    Our vision is to make local niche advertising as easy as posting a blog entry, or posting something in Craigslist. We’ll give them a way to type in very simple messages that appear in both the PDFs, and the versions we print and distribute around town. They’ll then choose the publications where they want their ad to appear, or let us choose publications that match their target demographics, and their messages will automagically be turned into very nice-looking display ads. It’s similar to the approach of Village Soup, but with some back-end magic that makes these messages look great automatically in printable magazines.

    Why spend all this time making ads look great in print, using online tools? For all the talk about ads on Web sites and even cell phones, nothing is more powerful for a business in a small local community than seeing someone walk in the door with a printed coupon it paid for.

    Are Printcasting ads, and Village Soup conference-room-floor style marketing feeds, and Spot Us tip jars going to save journalism? I’ll answer that right now: no! Because not any one of these approaches alone is going to come close to replacing the millions of dollars in local ads that a typical printed newspaper produces. But I’m fairly certain that each one of these efforts will tap into new revenue streams that the daily newspaper has never gotten before.

    It will require new innovations like these, plus many, many more, to preserve the news function of local communities. I think the fact that more of us “content types” are working on such ideas says a lot. We care so much about quality local journalism and community information-sharing to put ourselves out on a limb and experiment with new models. I hope that all of us would agree that the time has come for more true innovation in revenue to come from the advertising departments at newspapers (and from without). If you have such an idea, I urge you to submit it to the 2008/2009 News Challenge.

    It’s my sincere hope that our successes, failures and resulting iterations inspire more people from all disciplines to not just discuss, but actually do something that answers the question on everyone’s mind: How will we continue to pay for all this journalism?

    Tagged: digital revenue newspaper business models printcasting spot.us village soup

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