“Go Digital or Go Home” is Not a Growth Strategy


UPDATE: I wrote this piece in 2012 at the height of the “digital first” movement.
On October 17, 2016, I felt completely vindicated and downright prescient when Politico ran an article by Jack Shafer titled “What if the Newspaper Industry made a Colossal Mistake?
It’s conclusion? That the tech-heavy Web strategy pursued by most papers has been a bust.

Why Newspapers Must Stop Force-Feeding Digital

Newspapers always seem to be on the wrong side of the digital transition. First, they were in complete denial and believed the advertising shift to the Internet was only temporary. Then, as their financial base started to crumble, they frantically looked for ways they could fit a few digital ideas into the old print model, which usually just resulted in an updated web site.  Now that they are on life support, some news gurus are trying to push the market ahead of itself. They want to end print now, because they can’t stabilize legacy costs, and they’re trying to force digital down the throats of a large customer demographic that isn’t ready to go there…yet.

There can be no doubt that the future of news is “digital first.” The question is whether it’s going to be “digital only.” My answer is a qualified “Yes,” eventually. But ‘eventually’ is probably decades away. Here’s why.

The “digital only” news market is very small

A weak minority of readers is “digital only.” As WAN-IFRA’s 2012 Press Trends report confirmed, print and print/digital combinations still comprise the lion’s share of the world’s news market:

  • More than 2.5 billion people read newspapers in print at least once a week and [only] 600 million read newspapers online. Of those online readers, 500 million read both print and online, and 100 million access newspapers in their digital version only.
  • More than 40 per cent of the world’s digital audience read a newspaper online, up from 34 per cent a year ago. But while newspaper websites attract massive numbers of people…, a major challenge remains frequency and intensity of the visits. While nearly 7 in 10 internet users in the United States visit newspaper websites, only 17 per cent visit daily.

The “digital only” revenue stream is even smaller

WAN-IFRA also reveals that print and print/digital subscriptions and advertising comprise almost all of newspaper revenue production. Digital alone would barely cover the utilities.

  • Print continues to provide the vast majority of newspaper company revenues, with circulation alone accounting for nearly half of all revenues.
  • While the overall digital advertising market rose from US $42 billion to US $76 billion from 2007 to 2011, only 2.2 per cent of total newspaper advertising revenues in 2011 came from digital platforms.

The “digital only” advertising model is too volatile

If you believe some self-appointed news gurus, the future isn’t just “digital only,” it’s “mobile only.” So they are now encouraging the industry to focus its advertising strategy on the mobile market — primarily tablets, since consumers are largely rejecting smartphone advertising.

The good news here is that WAN-IFRA’s research indicates tablets and e-readers have convincingly increased news readership:

  • More than half of tablet owners say they consume news on their tablet daily, and 30 per cent say they spend more time with news than they did before purchasing the tablet. A majority say they prefer the tablets over traditional computers, print publications or television.

The bad news is that there is a strong and growing backlash against online and especially mobile advertising (see this Adobe study). And unlike print, the online news market is particularly vulnerable to this backlash. Online advertising is valuable and effective only if companies can “track and optimize” user activity and preferences. That’s why Microsoft’s “Do Not Track” feature that allows users to opt-out of such ad tracking has evoked fear and vehement criticism from advertisers.

But “Do Not Track” is only the beginning. AdTrap portends the future. AdTrap is developing a box that will sit between your cable modem and wireless router and block every kind of ad that can be delivered over the Internet. It has a working prototype and has already reached 2/3 of its funding goal on Kickstarter, where you can pre-order the device with a contribution.

Consumer advocacy in this area has been intensifying the last few years. People are sick of being bombarded with advertising everywhere they turn and the market is heeding their cries with this kind of product and app development.  Eventually, advertisers and consumers will find a happy medium, because customers do want to stay informed about new products and services, and particularly money-saving deals. The point is that online advertising models and their resultant revenue are going to be in flux for some time to come, and newspapers cannot afford to bet their future on them.

If online ad blocking efforts are successful, will advertisers return to print? The print ad boom days are gone forever, but advertisers could begin to hedge their bets by balancing more between print and online promotion — especially if print and print/digital news subscribers continue to far outnumber digital only. And therein lies the rub. If this occurs, companies will be looking for quality print products to advertise in, which the news industry is currently in the process of strangling to death.

By downgrading news staffs and decimating its print products, the news industry is not only alienating its most valuable (and most loyal) customers, but likely limiting future advertising opportunities. It’s more than dangerous to assume that by strangling the print market, print customers will turn exclusively or even primarily to digital news. It’s just as likely that a large part of that market will turn to television.

Fortunately, newspapers like the Orange County Register and Minneapolis Star Tribune have started to realize that they need a more balanced approach for a successful digital transition. These newspaper owners and executives are actually investing in print by beefing up news staffs and improving the quality, community service and circulation of their print products — while simultaneously finding ways to incentivize their print audience to move toward digital. They are experimenting with metered paywalls and subscription models to get out from under the advertising headlock, believing that only a quality product will bring them long-term stability.

On the horizon as well is the growing popularity of free newspapers and nonprofits that are particularly popular with young readers and “generate equivalent reader per copy levels as paid-for newspapers and have similar advertising yields,” per WAN-IFRA.

It may serve the short-term interests of certain cannibalistic investment fund managers to sell off everything related to print, but it will doom the business long-term. While the news industry clearly ignored the financial realities of its business side to its peril, it has now swung in the other direction of being in the hands of people who are simply interested in maximizing financial return — to the long-term detriment of the newspapers they own and the communities those newspapers serve. 

In the end, it all comes down to sales. And any successful salesperson will tell you that closing a sale is all about being a good listener.  Listen to your customers and give them what they want, so you’ll then have the opportunity to sell them more of what you have. You might then be able to convince them to buy something they didn’t know they needed. What a novel idea.

Jassa Skott  ~  11/11/12

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