One Insightful M*******cker

This is my final project for Engl1B at SJSU. As always, read this as an inflammatory op-ed. It’s only factual enough for a lower division writing class.

Newsprint is dying. The writing is on the proverbial wall, and somebody somewhere is blogging about it on the Internet. Whenever there is a paradigm shift in any industry, it inevitable that there are casualties. Companies cannot cope with new business models; individuals lose their jobs, displaced by new techniques and smarter processes. But many times there are survivors, veterans in the displaced industry who adapt and fill a new niche in the new paradigm (Babu). However, in the current shift from hardcopy press to Internet news publication, there is no newsroom and there are no survivors. There is no giant, breathing, churning news company. On the Internet, the information already flows and aggregates itself. So where will the newspapers go? Internet pioneers have already defined how news is found and consumed. The Long Tail out performs the army of payroll journalists. And, at this point in history, newspaper publishers have already missed their opportunity to jump into the new paradigm and be leaders. Consequently, they will struggle, they will try to adapt, and they will be out competed in their current form. Regardless of how they try to adapt, publishers of traditional hardcopy press will not survive the paradigm shift to Internet news publication.

The Long Tail

It is because of the “Long Tail.” Any market can be divided into interests, or sectors, which, as a business, you can target. The laws of supply and demand state that creating a supply will cater to some non-negative demand. So, if you publish something, no matter how small the interest, there will be a demand. Practically, there are an infinite amount of different interests and niche markets to cater to, so in an environment like the Internet where anybody can connect to anybody else, servicing these small niches becomes possible and even advantageous. A smaller market, on the Internet, can be a good thing; something possible to own. The Long Tail is what one sees when graphing the demand distribution. For example, in a power law distribution modeling different levels of interests in books, the demand curve looks like a tall playground slide which quickly descends and then a long tail that goes off the end of the graph; The graph depicts a large amount interest for a few very popular books and a small amount of interest for a great many unpopular books. But in nature and in power law distributions, the sum interest of all the data points under the long tail is greater than that of the most popular few. An Amazon.com employee summed it up best: “We sold more books today that didn’t sell at all yesterday than we sold today of all the books that did sell yesterday.” (Longtail) To put it another way, on the Internet, it is possible to create a large absolute demand for a particular market producer even if the interest is relatively small compared to the total interest internet-wide.

Capitalizing on the Long Tail is a matter of either gathering all of a small market sector in a large total market (i.e. all of a small percent of the large internet audience) or gathering a small percentage of a large number of sectors (i.e. a little bit of everything). The paradigm shift with Internet news publishing is the new possibility for a publisher to move from the tall section of the demand curve to the Long Tail.

The Internet News Model

News publication is the business of advertising entrepreneurialism. News publishers first build an audience with interesting articles. Once they have subscriptions, they then sell space within their layouts to advertisers. Advertisers pay for space in order to attract customers in their desired demographic. It follows then that subscribers for a news publisher directly correlate to advertising value and income. Increasing throughput also increases income. Personals, classifieds, and diversified general topics all serve to increase readers to pages. However, online, many of the services that traditional newspapers filled have become specialized or obviated. Classifieds have become their own many separate entities. People can sell and trade things on Craigslist or Ebay. Jobseekers and Employers connect at Monster or Dice. Even the traditional sections of the newspaper have become their own entities. Movie reviews at RottenTomatoes, Sports at ESPN, Comics at the Artists’ own sites, Financials at E*Trade and Bloomberg, Travel at Expedia or Orbitz. The list goes on. Every market that traditional newspapers coalesced and serviced has been divested; these interests are now specialized and self-sufficient websites.
On the internet you can’t make money by getting in the way. Google has proven this by garnering 39% of the $20 billion online advertising market revenues with unobtrusive ads and smart, targeted ad impressions. Newspapers made money by being the distribution gatekeepers. In the online publishing world of the Internet, they are stripped of this strategic role and they are losing value. As the traditional hardcopy press subscribership moves online for their consumption, so does their money.

Hardcopy Press in the New Frontier

Subscribers pay the bills. Hardcopy press is built upon generating and controlling a finite space for interesting content. From the news room to the paperboy, newsprint culture revolves around distribution and the space of a printed page. In hardcopy press, publishers have a limited amount of space with which to service any given sector of interests. This is why newspapers charge by the letter in classified ads. Every bit of print space costs money to produce. So, inherently, newspaper articles and advertisements must cater to the largest possible audience by giving the most attention to the most popular interests. This has always been true for hardcopy press; so much so that newspaper publishers cannot comprehend the Long Tail. Hardcopy press publishers transitioning to Internet publication exhibit this ignorance by vehemently maintaining the most popular only publication pattern. As I write this, three out of four of the largest US newspaper publishers’ websites have headline articles about the same event. As popular events unfold in the world news, large newspaper publishers race to scoop each other in order to try and catch the highest percentage of the most popular market sector. They compete over the narrow section of the power law demand curve with not only each other, but millions upon millions of independent blog publishers. In traditional hardcopy press, the newspapers maintained a distribution monopoly. They remained viable by being the only print news supply available. However, on the Internet, the absolute market they are competing for is relatively small and highly volatile. By not jumping out of their paradigm they are relegating themselves to financial oblivion when their business model inevitably collapses.

There’s an audience for everything. It used to be that to be a successful journalist one had to specialize in a topic that a large percentage of people were interested in. This may also be true on the Internet, but the market dictates that the niches must be filled as well. And since the Long Tail is comprised of the niches, it is easy to see that limiting your content to only a few of the most popular topics, where competition is fierce, will be the unprofitable. The reasons for this are fundamental attributes of the Internet ecosystem. Costs are measured in uptime and bandwidth; however visits and income are not guaranteed based on those incurred costs. If distribution of hardcopy press is a “push” model, then distribution on Internet is a “pull” model. In hardcopy distribution, a paperboy throws the paper (printed hours ago!) to your door; On the Internet, you go out and search for news or find it amongst your aggregated feeds then you willfully consume it.

There is no way to force people to look at your content. You can’t sandwich advertisements between virtual pages for people to glance at as they flip through cyberspace; you can’t even guarantee people will visit your pages. With so many alternatives available, the content that has barriers between it and consumers will be ignored no matter how interesting. Consumers will visit content because it is available and searchable. As an online publisher, distribution requires trust that people will pull your content and consume it. Requiring registration, pop-over advertisements, partial unpaid content; online these methods only works for pornographers. Hardcopy press publishers moving to the Internet publishing are finding this out the hard way. Implementing these barriers, they see their traffic dwindle and the subscription growth stagnate. In 2005 when the online version of the Spokesman Review began charging for access to its news subscriber growth imploded, going from 40% gain to a 5% drop. After several years online, the New York Times’ experiment with online paid content ended with a whimper in September 2007. Even the Times online General Manager admits “We now believe by opening up all our content… that that will create a revenue stream that will more than exceed the [paid] subscription revenue.” Empirically, it seems the only way to successfully monetize content is to make it available and easy to retrieve. Advertising on the Internet works by proximity and relevance. This is common knowledge for Internet native publishers, knowledge that hardcopy publishers are learning through trial by fire.

The New York Times

The New York Times is hemorrhaging cash. They are in the middle of a mad scramble to transition their hardcopy business model to one of Internet publication, but they are losing their focus in the process. Executives at NYTimes are aware of the crisis in their industry and, consequently, there has been a strong and continuing effort at NYTimes to build the NYTimes.com site and business even at the cost of their hardcopy subscriber base. So much so that in the NYTimes 2006 Annual shareholder report the majority of the introduction, business objectives, and “forward-looking” statements focus on “Digital Initiatives.” Any mention of the hardcopy business is about “consolidation,” reduction, and transition.

1.5 million copies (search or “Times”) of the NYTimes Sunday edition go out every week. In the hardcopy market, The NYTimes is a market leader. Even online, NYTimes.com is a leader among newspaper publishers. But among all online news publishers, NYTimes is fighting for its life. According to Alexa.com ratings, in October 2007 NYTimes.com’s page views were half that of CNN.com and Digg.com. But compared to the largest blogging service Blogger.com, NYTimes.com is dwarfed on the order of over 25 to 1 in terms of daily page views. 2 year old Wordpress.com’s blogging service outpaces NYTimes.com in visits 3 to 1. The Long Tail demand serviced by digital natives grossly outstrips the narrow interest of this hardcopy immigrant. NYTimes reports selectively choose good looking ratings from online analytics services. But the management at the company aren’t fooled by their own propaganda. Business decisions in 2007 clearly illuminate the panicked fear at NYTimes.

In an effort to repent for mistakes made in their transition, NYTimes.com has undergone drastic changes in 2007. Paid subscriptions have been completely done away with in order to increase traffic; a reversal of more than $10 million worth of subscription fees. The hardcopy archives dating back more than 80 years have also been put online in an attempt at leveraging their vast wealth of content. The policies regarding Really Simple Syndication on NYTimes.com flip-flop and flagellate. It is a shotgun approach by the old guard to try to accidentally jump into the new paradigm.

Not understanding the Long Tail market dynamics, executive decisions naively order staff writers to service topics normally found on popular niche sites. Today on NYTimes.com you’ll find articles seemingly written for Slashdot, Tech Crunch
, Digg, and a whole host of other popular niche news sites. There are diversified articles, but not with subscriber worthy regularity or consistency. Also, as layoffs and hiring freezes continue, the staff of writers at NYTimes will find it increasingly difficult to diversify the interesting news they generate to compete with the niche sites. With the distribution monopoly gone and their capability to turn a profit decreasing daily, the shareholder confidence in NYTimes has plummeted. Between June and November of 2007 NYT stock has fallen 38%. NYTimes, the newspaper publisher, is thrashing wildly in the new paradigm and is desperate to find out how to survive. They haven’t yet figured out what many other publishers already bank on.

Boing Boing

Steam punk, trebuchets, and libertarianism. Boingboing.net has carved out its place as a news source by syndicating the Long Tail and serving as a filter for its audience. Articles on BoingBoing range from how to build medieval siege engines at home to historical 1950s science fiction comic books to the latest events in the fight for net neutrality. It is a carefully catered-to meme of a cultivated online community. Readers worldwide who share BoingBoing editors’ interests keep this niche publication in booming business. Since its debut on the web in February 2000, BoingBoing’s subscribership has snowballed passed one hundred thousand subscribed readers today (greader+bl). Bloglines’ “top 1000” lists BoingBoing with 63,409 active subscribers at fifth place above CNN.com at ninth with 59,055 readers and the New York Times Book Review at sixteenth with 46,274 readers. In the realm of online publication, BoingBoing’s six contributing editors are decimating top hardcopy converts whose arsenals include sprawling editorial staffs of hundreds and entrenched resources. And, as usual in the periodical publications game, subscribers translate into revenue. But more specifically, targeted subscribers translate into even higher revenue.

BoingBoing will generate advertising revenue on the order of $1 million in 2007. In July 2007 BoingBoing was visited by 2.6 million unique visitors. Because of the very specific nature of the readership on BoingBoing editors and advertisers can predict to a high degree what types of news and advertising will be successful. Advertising on BoingBoing caters to a highly targeted and specific niche market with massive numbers. “Advertising costs range from $350 to display a small button ad for one week to between $2,000 and $3,000 for the minimum 170,000 impressions on banner ads.” When compared to advertising in hardcopy press, the online model becomes evidently superior. Niche markets garner predictable reader demographics flush for monetization and BoingBoing proves this with dollars.

The market for targeted, online advertising is booming. With Internet access becoming ubiquitous in the US and many countries around the world, demand for a wide diversity of interesting news continues to expand. Tech news sites like Slashdot and Digg dominate the tech savvy reader market reaching audiences that rival hardcopy converts like the Washington Post. They’re examples of what to do right in the new paradigm. While the hardcopy converts struggle to find a place competing on broad audiences, specialty news sites embrace their niche market and flourish. In order to survive, hardcopy converts may soon realize that they will need to specialize and service a “smaller” market; though, less general is a very alien and scary concept to newspapers. It remains to be seen whether newspaper editors will be able to make this leap. In the mean time The Superficial will service celebrity stalkers, Make will service DIY fanatics, Fark will service post-frat boys, Gizmodo will service bleeding edge gadget seekers, IGN will service media hounds, and so on and so forth.

Market Opportunities for Transitional Companies

Newspapers have a well bankrolled funeral. The large newspapers, those that are left anyway, are now fully aware of their own danger of extinction and are desperately trying to penetrate the online market (Rosen). Their perspective of the online market, however, is skewed by a radically incompatible view of how news should and can be consumed. The problem is not so much that they lack the resources or capability to find a place in the new paradigm, it is solely that they lack the ability to clearly see and understand the factors for success in the new paradigm. Success lies in servicing what they see as a smaller, undesirable market; traditionally and for the better part of 150 years, a bigger and more general market has always been the hallmark of success for newspapers. So the newspapers will languish online. The centralized model of news story creation, incompatible with internet dynamics, will corral them into a low income, highly competitive arena where subscribers are just numbers. The hardcopy immigrants will struggle, earthbound, shooting at all the stars hoping some will fall. The digital natives will fly above them, their wings lofted by unique clouds with long tails.