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Summary:

Although the ad-driven business model behind Facebook looks similar to that of a newspaper, the crucial difference is that the social network knows a lot more about its users. The more focus that newspapers put on doing the same, the better off they will be.

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We’ve pointed out before how Facebook and Twitter face the same kind of problem that the mainstream media industry is struggling with — namely, finding enough advertising revenue to make up for the fact that they are essentially giving away their content (or in the case of Facebook and Twitter, giving away a platform for users to publish their own content). A recent piece in the Columbia Journalism Review argues that Facebook is much more likely to make this ad model work than a newspaper, but why is that the case? One reason is that the social network knows a lot more about its readers than any traditional media outlet does, and as the media business continues to evolve, that knowledge — and the larger bond that a newspaper or any other media entity can create with its readers — is increasingly important.

Ryan Chittum’s piece in the CJR takes issue with a recent Washington Post story on Facebook for a number of reasons, including the fact that he doesn’t think the paper really understands the social network or its finances. But he also finds it ironic that the newspaper — one of the few major metropolitan media outlets that hasn’t implemented a paywall, primarily because of chairman Donald Graham’s opposition to the idea — is castigating Facebook for pinning all its hopes on a free platform that is monetized by advertising, when that’s exactly the same model that the Washington Post is built on (Chittum recently catalogued some of the Post’s financial woes in a separate piece for the Columbia Journalism Review). As he puts it:

There’s all kinds of irony about the Washington Post slapping a company for a ‘give-it-away-free approach’ that has hurt share prices… But mostly it’s that the WaPo, instead of looking in the mirror, uses an extremely profitable company to frame a story about how hard it is to make money without charging on the Internet.

Does a paywall help you get to know your readers?

As Chittum notes, Facebook is currently making billions of dollars in advertising revenue (although that still isn’t enough to make many investors happy, considering the fact that the company has close to a billion users, and the social network continues to struggle with low engagement rates for its ads and skepticism on the part of advertisers). But why is Facebook profiting from this kind of model while newspapers like the Washington Post and New York Times continue to see ad revenues decline? One big reason, apart from the sheer size of the Facebook user base, is that users spend orders of magnitude more time on Facebook than they do at the average newspaper website or even with the average newspaper mobile app.

In a recent post about the news industry and metrics around journalism, media developer Stijn Debrouwere made a good point about how the media business tends to look at its users, by comparing it to the early days of both Twitter and Facebook. As he describes it, in the early days of Twitter the company was concerned about how few users they had, while Facebook paid more attention to the amount of time and the levels of engagement it was getting from its users, rather than the sheer number. The lesson to be learned, Debrouwere says, is that:

“Optimizing for retention is what allowed Facebook to become what it is today. The news industry is like early Twitter when we should be like early Facebook.”

So how do you optimize for retention? I’ve argued in the past that simply throwing up a paywall around all (or even most) of your content is no way to encourage a relationship with your readers, unless you want them to see you as simply an impersonal transaction. Instead, why not try to figure out what your readers or users are really interested in and then find a way to give it to them in a way that is appealing to them — so appealing that they might even volunteer to pay for it? This is the idea behind what former Washington Post managing editor Raju Narisetti and media analyst Jeff Jarvis have both called a “reverse paywall.” Instead of just hitting readers with a “pay me or else” notice, you offer them rewards — doesn’t that sound like a better foundation for a relationship?

Get to know them, and then sell them things

In a post at the Nieman Journalism Lab about the New York Times, digital-content veteran Rex Sorgatz outlines some of the things that the newspaper could do to build more of a membership approach — or what I’ve called a “velvet rope” approach — to its business rather than relying solely on the blunt instrument of a paywall. Whether it’s ebooks or live events or discounts on venues like the Museum of Modern Art, there are all kinds of ways the paper could get to know its readers and what they like, and then find ways of charging them for it. Newspapers like the Times of London are already doing this, and The Guardian seems to be moving in that direction as well (and we know that the NYT has looked into it before as well).

The best part of this model is that it doesn’t just try to replace advertising revenue with a paywall or subscription revenue — getting to know your readers and their interests better can also help a newspaper or any other media entity target advertising better. One of the reasons why advertisers are so enamored of Facebook and other social networks is that they can target specific niche groups or demographics or locations within the broader market, like expectant mothers or high-spending seniors. What do newspapers know about their readers? In most cases, very little, other than the vague generalities that phone surveys produce.

The sooner newspapers start to think about their users as partners with whom they have a mutually beneficial relationship — rather than as an undifferentiated mass of wallets who hit the paywall at some random moment and then get out their credit cards — the better off they will be.

Post and thumbnail images courtesy of Flickr users Montecruz Foto and Giuseppe Bognnani

  1. Well said! Do you think newspapers have the will to this? They seem to have embraced cost cutting (read gutting the product).

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  2. Abigail Irwin Tuesday, August 28, 2012

    As Kevin said…well said. I do believe that the newspapers will have the will to do this sort of thing. But, in most cases, some newspapers won’t agree on it.

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  3. Newspapers are such a mess…. everyone talks about how to possibly fix them but nothing changes.. wonder what the future holds. If they all got together abd made a pact to stop giving away content for free then theyd probably get sonewhere.

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  4. Greg Golebiewski Wednesday, August 29, 2012

    It is not only the newspapers that have little knowlege about today’s readers (as their audience was mostly advertisers) . Many industry analysts are in the dark as well, often repeating myths and “conventional wisdom.” For example, that young people do not read news, let alone buy digital content, or that paywalls create engagement, etc.

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  5. Finally a piece written by someone who seems to know what he is talking about. He has made a good point and stands out from most others that are writing about the future of newspapers.

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  6. Patrick O'Brien Thursday, August 30, 2012

    Nice article on a hugely important topic. Newspapers generally get a C- in knowing their readers, though most claim they know them well.

    It would be highly interesting for Mathew to follow-up with the post an demonstrate examples of what media companies besides Facebook are doing to get to know their audience. For example, there are simple tools such as those offered by http://www.civicscience.com
    that are very helpful.

    Events were mentioned, that’s a great way, but who is doing what?

    It’s important to also note that newspapers are notorious for collecting info on readers but then doing noting with that data.

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  7. Matt:

    The need for newspapers to move from focusing on a print-based production, to a service focused on one-to-one relationships with users was the topic of the 2010 Reynolds Journalism Institute white paper: “From Paper to Persona.” Check it out at http://www.papertopersona.org — Bill Densmore

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  8. The Day, in New London, Conn., is pioneering a membership model of engagement and retention with users. The September issue of the International Newsmedia Marketing Assocation’s “Ideas” publication will have a backgrounder on it. It’s online by Sept. 1 at:

    http://www.inma.org/modules/platforms/index.cfm?action=ideas_public

    The notion that newspapers must move from a business of printed products to one of providing a one-to-one service based on deep knowledge of their users’ interests is the subject of our 2010 “From Paper to Persona” white paper from the Reynolds Journalism Institute: http://www.papertopersona.org

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  9. The fundamental flaw with newspapers is that they moved to a business model that relied on advertising as the primary revenue generator. *News*papers should be about news. Newspapers have essentially become advertising companies disguised as purveyors of information. At some point newspapers became more about business than about news, and instead of putting public interest first they were required to put profits first. When advertising profits are the primary objective, the reader and the news are secondary and incidental to the business model. Doing a slightly different version of the same thing that got them here doesn’t seem to be a worthy alternative.

    We’ve institutionalized this mindset in our culture, and if newspapers are to survive (and I mean newspapers as the concept of purveyors of information that inform the public and hold government and private corporations accountable) we’re all going to have to start institutionalizing that this is something of quality that we want for humanity and that we’re willing to pay for. We need to move away from advertising-supported “news”, and move in a direction that is beneficial to humanity.

    If we maintain that news should be the bait that lures us to the advertising that compels us to buy products, it’s not the survival of the newspaper industry that we should be concerned about, but the values of humanity and the survival of the species.

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    1. mindctrl – I’m not sure how far back you’re thinking about when you imagine newspapers not supported by advertising, but it’s a long long time ago. Newspapers and other reputable news organizations have generally done an exceptional job serving both the public through reporting and commerce through advertising.

      Advertising is part of the information package, especially for local newspapers, where geography defines what readers are interested in — local shops, local events, and local services. It is even included in the Journalist’s Creed, written in 1906 by Walter Williams: “I believe that advertising, news and editorial columns should alike serve the best interests of readers; that a single standard of helpful truth and cleanness should prevail for all; that supreme test of good journalism is the measure of its public service.”

      Although I’d agree that newspapers need to do a much better job knowing their readers and partnering with them, publishers can’t lose sight of the responsibility to give the public what they need as much as what they want.

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    2. Yes. This.

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    3. How does institutionalizing make it successful? Whoever owns it has a vested interest in controlling it for their own purposes: money, power, prestige, etc. As long as there is a threat to the owner’s well-being, news will be filtered to accommodate the perpetuation of the institution. In the hands of the government, is unacceptable for obvious reasons, in the hands of corporations, nearly as bad, and in the hands of a privately held company, the best of a bad situation. What other option is there, and how would the controlling power be held accountable for the truthfulness of the reporting?

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