Are We at a Tipping Point Against the Dominance of Ad-Supported Journalism?

    by Hampton Stephens
    March 22, 2016
    Stock image. From kaboompics.com

    The following opinion piece is a guest post and does not necessarily reflect the opinions of this publication. Read more about MediaShift guest posts here.

    A year ago, after two decades of morale-sapping uncertainty about the viability of its business model, the journalism industry was feeling optimistic. Late 2014 had seen a dramatic vote of confidence in its future, as several startup digital publishers received lavish investment from both venture capitalists and large media companies.

    "Executives of subscription-supported media companies are not alone in beginning to question the wisdom and sustainability of an advertising-dominated media landscape."

    “Big money is beginning to wash over the media landscape,” the Wall Street Journal reported in January 2015.


    Reports of these developments hopefully suggested that the difficult economic puzzle of digital-age journalism had been finally solved, and that new innovations like native advertising would sweep away old notions about how journalism was done and financed. Coverage of advertising-supported new media juggernauts like BuzzFeed, Business Insider, Vice and Vox was ubiquitous.

    Comparing BuzzFeed’s native advertising model to financing journalism with display ads, technology analyst Ben Thompson was almost giddy in his belief that the future of journalism had arrived. “BuzzFeed’s writers simply need to write stories that people find important enough to share; the learning that results is how they make money,” Thompson wrote. “The incentives are perfectly aligned.”

    Of course, importance, in the sense that one would describe a piece of journalism as “important,” does not realistically describe what motivates most sharing on the Internet. In fact, this wave of media startups was built on the foundation of business models that are better suited to producing entertainment than to sustaining quality journalism. But this was not of widespread concern. Nor was much attention paid to the glaring irony that advertising had become the major focus of business innovation in the journalism industry, even though the massive Internet-enabled disruption of advertising markets had gotten journalism into such dire straits in the first place. Even less attention was being paid to subscription models and other forms of direct reader support.


    But that was then. What a difference a year makes! In recent months, a growing chorus is questioning the ability of advertising alone, no matter how novel or innovative its form, to support the kind of consequential journalism that is a pillar of democracy.

    “The business model around news is broken,” Jessica Lessin, founder and CEO of Silicon Valley subscription news site The Information, told Digiday earlier this year. The massive audience scale required by advertising-supported journalism risks creating a homogenous media landscape in which only the most popularly appealing stories are pursued, she explained. “We are overwhelmed by this race for traffic and pageviews over focusing on delivering value to an audience.”

    Executives of subscription-supported media companies are not alone in beginning to question the wisdom and sustainability of an advertising-dominated media landscape. Newsroom veterans who know all too well the exigencies of the digital advertising economy have also begun to sound alarms.

    “One of the few workable business models in this age of digital disruption has been to produce as much content as cheaply as possible,” Kevin Anderson, a media consultant with newsroom experience at the BBC, The Guardian and Gannett, wrote in January. “But flooding a glutted market only leads to a deflationary spiral until it becomes completely uneconomic to produce that commodity. It is a simple matter of economics, and it doesn’t matter whether that commodity is maize or media.”

    The demoralizing effect of being measured primarily by the volume of attention one’s work attracts has been most keenly felt by front-line journalists. Hamilton Nolan captured this angst in a darkly comic, nihilistic cri de coeur he penned for Gawker in January.

    “Maybe there is a talented young writer out there with a dream of starting the very best, smartest magazine or website that has ever existed, and building it into their very own historic legacy,” Nolan wrote. “I am here to tell you that it will not work. The business of media has very little, if anything, to do with quality journalism. If you aspire to be a Writer of Legitimately Good Things, the best you can hope for is to get the prestige spot that is paid for by the garbage.”

    It’s a testament to advertising-supported journalism’s dominance of public attention that Nolan’s piece, despite its desperation, did not even consider the alternative of direct reader support, which doesn’t necessitate the soul-killing compromises he laments. Though it’s easy to forget in the current environment, the most successful producers of quality journalism have always relied significantly on direct reader payments, even when they held monopolies in advertising.

    “In the history of the world, it would be hard to name the quality journalism organization that existed solely on advertising revenue,” notes entrepreneur and journalist Steven Brill, who co-founded Press Plus in 2009 to help newspapers institute paywalls.

    Reader Support

    With the economics of advertising now immeasurably worse for news organizations, the most successful digital purveyors of journalism are relying even more heavily on reader support.

    The New York Times Company recently reported that its digital subscriber revenue increased 13.8 percent in 2015, to $192.7 million. The company’s online subscription revenue is set to outpace online advertising revenue this year – a remarkable development for a company whose digital subscription revenue was at zero just five years ago, and after many years of conditioning readers to expect online news for free. The digital subscription businesses of the likes of the Financial Times and the Wall Street Journal are similarly thriving.

    But times have changed, argue media watchers who look to Silicon Valley, not history, for strategic inspiration. It would be foolish, they say, for new media companies to emulate these dinosaurs, which have been forced to adapt legacy cost structures to a new digital world that they still don’t really understand. Isn’t it better to go after massive audience scale by remaining free and leveraging the Internet, the mobile web, and social media to achieve distribution on a scale never before possible? Indeed, the fast-growing digital media startups that rely exclusively on advertising point to their mastery of distribution through these platforms as their main competitive advantage.

    It’s true that the massive technology companies that control the applications and hardware on which consumers spend their time, attention and media dollars are hugely important players in news. But a close look at the evolving news distribution plans of companies like Facebook, Google and Apple indicates that the tech world is also beginning to understand the importance of reader payments for the future of news. These developments provide the most hopeful signal yet that the next wave of digital journalism startups will adopt more-balanced revenue models, and will thus be better able to produce consequential journalism.

    Smartphones As The Distribution Model

    Photo by Flickr user Japanexperterna.se and reused here with Creative Commons license.

    Facebook, Google and Apple are all looking to smartphones as the most important future distribution channel for news. With their Instant Articles, Accelerated Mobile Pages (AMP) and News app, respectively, the three companies are all now seeking to improve the user experience of mobile news.

    Google, for example, is touting AMP’s ability to integrate with publisher paywalls as a major differentiator against other mobile news distribution solutions.

    “We believe the AMP Project will fundamentally change how users discover and consume content, and we’re hard at work as an industry to make subscription content a first-class citizen in this journey,” Ashwin Limaye, the company’s AMP project manager wrote Feb. 9 in a marketing document touting AMP’s accommodation of paywalls.

    With its News app, which is automatically loaded on any iPhone running the latest version of its iOS, Apple too appears to be moving toward accommodating direct reader payments. When Apple first announced the News app in June, it was overshadowed in media circles by another announced change to iOS: the inclusion of native ad-blocking on the company’s Safari web browser. Most observers interpreted this as Apple’s attempt to hurt Google’s mobile advertising business. Given Apple’s history, however, it’s possible that it was the beginning of a change in the company’s vision for online media. Apple, after all, rescued digital music from an era of rampant piracy when the iTunes experience proved satisfying enough to entice consumers to pay for music. Could Apple’s foray into ad-blocking have been a signal that it sees consumer payments as the way forward for news as well?

    The jury is still out on that question, but a recent report provides some evidence for the affirmative. Reuters reported in January that Apple is working on ways to incorporate publisher paywalls with the News app, which is now installed on more than 500 million iPhones and iPads around the world, according to best estimates. When and if this change occurs, Facebook’s Instant Articles would be the only one of the three major mobile news distribution projects not to support direct reader payments.

    Instant Articles, announced in May, was supposed to increase readership by delivering the articles of partner publishers within Facebook’s news feed at lightning speed. But publishers soon complained that the project was not generating enough ad revenue to justify ceding such control to Facebook. To appease its publisher partners, the social network has since increased the volume of ads it serves around Instant Articles.

    Meanwhile, Blendle, a tech upstart that has already had success in changing the way news is consumed in Europe, is set to enter the United States. (Disclosure: World Politics Review, of which I am the founder and publisher, is a publishing partner in the U.S. launch of the Blendle platform.) Often referred to as an “iTunes for news,” Blendle plans to launch its pay-per-view premium news platform by the end of March, with several large publishing partners already on board, according to news reports. The venture, whose investors include the New York Times and German media giant Axel Springer, is the first significant attempt at a viable micropayments system for news, an area ripe for innovation that until now has been neglected.

    The online news economy has come a long way over the past year. Publishers have begun to more fully appreciate the long-term value created by building a paying audience. Journalists who want to report and write important stories, rather than to create entertainment, are also looking to a more healthy balance between reader and advertising support to provide better career options. Consumers of journalism, and those who wish to live in a society in which the fourth estate holds those in power to account, will no doubt follow suit, especially as the software and the devices in their pockets, homes and offices make it easier for them to dedicate a small fraction of their income to supporting quality journalism.

    Hampton Stephens is the founder and publisher of World Politics Review, a digital publisher of international affairs information and analysis.

    Tagged: advertising Google amp instant articles paid content reader support subscription

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