Revenue
NewBizNews Conference Videos: Ad Serving
Posted on 25. Nov, 2009 by Peter Hauck.
Representatives from Google, Adify, PaperG and Clickable discuss the basics of ad serving.
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NewBizNews Conference Videos: Selling
Posted on 25. Nov, 2009 by Peter Hauck.
Mel Taylor (GrowthSpur) and Greg Swanson (Prism) know ad sales. Here’s their presentation on selling:
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Next Steps: What We Heard, What We Need
Posted on 19. Nov, 2009 by Matthew Sollars.
At the end of our New Business Models for (Local) News Conference last week we asked a question we’ve been asking since our first go-round three years ago: What’s next? What do we, as practitioners of journalism, need to do to help sustain journalism in this new age?
It seems there is still a simple two-word answer: More training.
Sure, responses were all over the map (the full list is posted below the jump) and I’ll get to some of those in a moment. But, the most common request at root is for more help understanding our new media environment.
Some of the independent, hyperlocal startups (dare I call them bloggers?) in the audience said they could use help with everything from basic research and editing practices to selling and analyzing ads to understanding business finance. They also want to build a stronger indy-web community that, at a minimum, would be a forum to share best and worst practices.
The churched journalists in the room asked for some of the same instruction: editing for the web, learning the basics of graphics, and web literacy (tweeting, texting and blogging). But, like the indy’s, the guys inside established media organizations need help with the business side (see Jeff’s post on getting “theah from heah”).
Folks want to see programs for bringing business students into media management (much as we tried to do last summer). A few more suggestions:
- Future conferences organized around specific revenue opportunities – some people also want to have a conference organized around verticals and niche sites.
- Research into what kinds of advertising small businesses need.
- Strategies for making that advertising more valuable.
- Looking at what impact greater bandwidth and mobile devices will have on journalism and advertising.
One veteran journalist told me someone should create a not-for-profit, possibly based in a university, that offers free business consulting services to journalism startups. He said the consultancy could cultivate a thousand test cases for our business models – a much better approach, he says, than getting funding for a lab to test them out in one area (which was another suggestion from the panel).
Finally, here are two of my favorites: training for small communities that have lost their papers and a conference aimed at media in Africa and other parts of the world. It is important to keep these areas, so often left out of the conversation, in our minds.
As I said, there are a lot more topics below the fold. We’ll be doing more work on some or most of these suggestions in the coming weeks and months. Do you have more? Send them along!
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Tough love for news media
Posted on 06. Nov, 2009 by Jeff Jarvis.
Here’s video version of the talk I keynote talk I linked below for the Munich Media Days conference a week ago. I gave them tough love, saying I was concerned about the protectionist talk I’ve heard from Germany media, not unlike one what can here in the U.S. and elsewhere. I also talked about the New Business Models for News Project. The reactions from the audience of 500 German media executives surprised me. (Carta also put up a transcript.)
Jeff Jarvis: “Google is not an enemy, Google is a model” from Carta on Vimeo.
(The New Business Models for News is funded by the Knight Foundation, MacArthur Foundation, McCormick Foundation, and Carnegie Corporation.)
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NewBizNews HyperCamp Schedule
Posted on 28. Oct, 2009 by Peter Hauck.
We’re looking forward to the New Business Models for (Local) News HyperCamp, scheduled for Wednesday, November 11th.
The conference schedule is now available here and as a google doc. The day-long event will be held at the CUNY Graduate School of Journalism — 219 West 40th Street, 3rd Floor, NYC. Coffee and registration begin at 9:00 AM and the morning program gets under way at 10:00 AM. We’ll break for lunch at Noon and start the HyperCamp workshops at 1:00 PM. We hope you’ll stay for cocktails and networking following the last session.
We’ve already received over 120 RSVPs from a great mix of people — hyperlocal bloggers, journalists, website owners, entrepreneurs, investors, publishers, technologists, media executives and more. We look forward to sharing experiences and best practices as we explore new business models for journalism. Most of the day’s events will be livestreamed and we’ll use the hashtag #newbiz. (Space is somewhat limited so if you’ve RSVP’d “yes” and are unable to attend, please contact David Cohn — David@spot.us).
Please visit our website in the coming weeks for further HyperCamp updates. And take a look at the Project’s business models. We urge you to download and modify our spreadsheets by plugging in your own assumptions.
The CUNY Graduate School of Journalism is grateful to the Knight Foundation for funding our work on the New Business Models for News Project, which we presented in August at the Aspen Institute Forum on Communications and Society. We also thank the McCormick Foundation, the MacArthur Foundation, and the Carnegie Corporation for their support of this important work to sustain journalism.
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The model of the new media model
Posted on 03. Oct, 2009 by Jeff Jarvis.
Leo Laporte, creator of This Week in Tech and the TWiT network of podcasts, spoke before the Online News Association this week and presented the very model of the new media company: small, highly targeted, serving a highly engaged public, and profitable. (Full disclosure: I am a panelist on TWiT’s This Week in Google show.)
Laporte said he charges $70 CPMs for ads. Some questioned the $12 CPM we included in our New Business Models for News, though we went with a conservative middle-ground based on the experience of existing local businesses. If we had – as we will – instead forecast a new kind of local news business – highly targeted with a highly engaged public, like TWiT’s – the CPMs and bottom lines would have been exponentially higher. The companies are still small but they are profitable. Laporte said he has costs of $350,000 a year with seven employees now but revenue of $1.5 million and that revenue is doubling annually. It will increase more as he announces new means of distribution (to the TV; he believes that podcasting is too hard for the audience).
Rather than nickel-and-diming current business assumptions, we need to have the ambition of a Laporte and build the new and better media enterprise.
(The video is after this link; it unfortunately plays automatically, so we wanted to get it off the front page).
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The X Prizes for news (and media)
Posted on 25. Sep, 2009 by Jeff Jarvis.
A conversation with our Knight Foundation friends at Aspen inspired me to think through what an X Prize for news could accomplish. Then this week’s report in the New York Times about the awarding of the NetFlix X Prize – and the far greater value it created, not just for NetFlix, but for its participants and others – inspired me to buckle down and open that conversation here (and at my blog).
I’m not asking idly. With the right structure, I’d seek funding to administer such a prize at CUNY and we can hope that smart companies, organizations, and patrons will see that an X Prize could be a way to innovate aggressively and openly. Or is it?
We must start with a question: What is the core problem the prize is trying to solve? It can’t be just about getting more revenue for existing companies or thinking of another way to tell a story or, Lord knows, making something cool. The best expression of the problem will yield solutions that must be groundbreaking and new, quantum leaps undertaken on daring, hope, and hubris. Innovation won’t come from incremental changes to an existing structure. We know that too well.
Another key question is how success is measured – tangibly, metrically, from a distance, not emotionally. In something as amorphous as news, that’s going to be hard.
Next, we have to define news carefully – that is, broadly. News shouldn’t be defined as we do today, for the winners of the prize may create something we haven’t seen yet. Our definition of news is probably just about a community informing itself – better informed individuals and society (“better” as defined by them).
Finally, we have to recognize that the problems to solve are centered more on business issues than product issues – on sustainability – but that is not to say that the product should not be radically rethought as part of this process.
I see three key problems to solve for news (which I’ll make conveniently alliterative):
1. Engagement. In our most recent phase of the New Business Models for News at CUNY (funded by Knight), we used the sinfully low industry standard for engagement with newspaper sites: 12 pageviews per user per month. Facebook users have that much interaction with the service every day. Time spent online in social sites and blogs accounted for 17% of time overall – vs. 0.5% for newspaper sites, according to separate estimates (and advertising on social sites doubled while it plummeted for newspapers). For God’s sake, if news services were truly of their communities, they would have many times more interaction with many times more people in those communities and interaction would go far beyond reading.
Engagement is a core business problem. If you plug in higher numbers into our NewBizNews models – and we will, in our blow-out cases – you’d see much better businesses able to support much more news. You’d see news as a very profitable industry again.
So let’s say the first challenge is to multiply a community’s engagement with news. How is that to be done? Surprise me. Shock me. Invent entirely new ways, new platforms, means, and media to gather and share news.
How do we measure engagement? I would not measure by pageviews – in great part because I do not want contestants to just assume that it’s a site they’re inventing. See one more time Marissa Mayer on hyperpersonal news streams and me on hyperdistribution. News has to go where the community is and we no longer expect the community to come to it. It has to be of and among the community. Time is a slightly better measure of engagement but it, too, is shallow and can be manipulated with tricks.
No, engagement is more about ownership: people believing that and acting as if they owned this thing. It’s theirs – as Wikipedia’s and craigslist’s communities believe they own those properties and as each of us believes we own our Facebook pages or Twitter feeds or blogs. But an opposite danger lies there as well. One shouldn’t measure engagement by contribution (as many of us did in the early days of the web). Go to Wikipedia’s 1 percent rule.
So I’d say the measurement has to be made by a combination of metrics – say, time combined and attitudes: Take a baseline a survey of users of news sites today against certain beliefs – “My newspaper.com makes me part of the community of news”; “Newspaper.com is a member of my community of news just as I am”; “I feel a stake of ownership in newspaper.com”; “I feel a measure of control over newspaper.com”; “I feel a responsibility for newspaper.com”; “I am better informed with newspaper.com”. Then require that the new thing multiple some index of these factors by an impressive amount. If Facebook is 30 times more engaging than a newspaper site, then how about 10 times, even five times – that would make a huge difference in the business of news.
2. Effectiveness. This is effectiveness for media’s other customers, its paying customers: advertisers, or perhaps we should say marketers (to include ecommerce and not limit the business relationship).
News sites – like most media sites – are still selling what they used to sell in their old media: space, time, eyeballs, scarcity. Google won business away from them by selling something else: performance. Google thus takes on risk on behalf of advertisers – if Google doesn’t deliver relevance and you don’t click, it doesn’t get paid – and so its interests are now aligned with its advertisers’. And because Google created an auction marketplace that takes advantage of abundance – there is no scarcity on the internet – then prices are lower. For an advertiser, what’s not to love? That’s why I roll my eyes when old media people complain that Google stole their money. No, Google competed and saved advertisers their money.
At the same time, I believe that news and media will be supported primarily by advertising and so they had best figure out new ways to serve advertisers – even as advertising shrinks. For purposes of sustaining news, I think it’s best to concentrate on local advertising, because – in the U.S., at least – most journalistic resource is expended locally, much of government is local, there is opportunity to grow there, and the crisis in the news industry is primarily local.
The solution cannot be about increasing clickthroughs to banners. That merely extends the bullshit online media are selling. No, it has to be about much richer ways to measurably improve merchants’ businesses: to add value.
Ah, but measuring it is the tough part for that itself sets the shape of the invention: Is it more people to a web site, more people to a door, more sales of particular merchandise, better brand awareness, better relationships? Help! What do you think?
At CUNY, with additonal funding, we soon hope to do more research with local merchants for NewBizNews to get a better sense of their needs. But then again, they may not know it until they see it. I’ve spoken with advertisers who still don’t understand why a customer’s Google search matters to them.
So for the sake of discussion, let’s say that one could take a test group of merchants and used the methods and means created by a contestant to utilize a relationship with online media of some form (that is, advertising) to improve their sales by N percent over N period with at least an N return on investment. In the end, it’s simply about improving their businesses, isn’t it?
Any multiple of this effectiveness would also have a profound impact on the sustainability and profitability of news (so long as it’s a news entity that makes it possible). In our New Business Models for News, we used what we believed – though some disagree – was a conservative $12 CPM ad rate. It was also conservative to presume old ad models: i.e., banners. But then Google’s Marissa Mayer turned around and talked about hyperpersonal news streams, emphasizing the business potential: If you know that much about people to be hyperpersonal and if you are incredible good at targeting – at discerning intent and delivering relevance – then the efficiency, effectiveness, and value of marketing there would skyrocket. An X Prize winner would think this way.
3. Efficiency. This is to say cost. What does it cost to produce news, to gather and share what a community knows? The closer that marginal cost can be brought to zero, the more news we can afford. That’s good for society.
That may not sound good for professional journalists, I know. And employment of journalists has been the default measurement of the health of news. (This is why I have quibbled with BusinessWeek’s Michael Mandel’s analysis, here and here.) But I’m not suggesting that there are necessarily fewer reporters (there will be fewer production people). Indeed, in our New Business Models for News, we ended up with a equivalent number of people doing journalism in our hypothetical market, only they weren’t all in a single newsroom. Most worked in entrepreneurial ventures that many of them owned, and they as a group devoted far more of their time to reporting. The net result, we believe is more journalism because it is more efficient journalism.
So I’m suggesting that journalists be made as efficient as possible and the way to do that is to make them highly collaborative and to take advantage of the work people are willing to do just because they care – the hundreds of millions of dollars people contribute to Wikipedia, adding value to it and making it both supremely efficient and incredibly valuable.
So I suggest this prize start with the goal of maximizing the journalism, finding the best ways to get the most relevant news to the most people at the lowest cost: the best way to make the most people feel well-informed from a sustainable venture. Once again, we must be cautious about the definition of news, not limiting it to the broccoli served cold currently. What do people want to know and need to know and how can we get that? What is the news that isn’t shared that has to be reported and investigated and why and how do we get that? So I might start by finding communities and having them define news and what it means to be informed, what they need to run themselves. Of course, we also need to define quality. This needs to be reliable and useful information.
How do you make a measurable contest out of that? I’m not sure. Perhaps we find a community and find out how many people want to know about, say, their school board and town board and tow events and then measure what they want to know now. Then the winners made their community better informed by the greatest margin at the lowest cost while still not losing money.
In the end, if we can find new and daring solutions to these problems of engagement (formerly known as audience), effectiveness (advertising), and efficiency (operations), we can improve news as a product (and process), its relationship with its public, its value to its customers, and its sustainability. That’s the goal. It’s going to take new thinking and experimentation to get there. An X Prize is one way to get that.
What do you think?
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The Survey Results
Posted on 17. Sep, 2009 by Matthew Sollars.
The foundation of the business models we built this summer was data culled from an online survey we conducted of web entrepreneurs. We asked online startups from across the country to give us a confidential glimpse at the nuts and bolts of their businesses.
We sent invitations to hundreds of online news organizations, from hyperlocal blogs serving small communities to outfits that cover major American cities. In all, we received responses from 111 websites (81 for-profit, 30 not-for-profit). The entire interim report presented at the Aspen Institute last month is available here. (The New Business Models for News Project has been funded by the Knight Foundation.)
As expected, many of the for-profit ventures are bootstrapping their businesses with 20 employing 2 or fewer full-time editorial staffers (out of 27 businesses that answered the question). Meanwhile, 14 do not have any full-time workers on the business side. (Part-time staff levels at most sites are similarly low.) A majority of the sites, 58%, reported bringing in less than $500 per month in advertising–that won’t pay for a newsroom expansion anytime soon. However, we found plenty of room for optimism, too. A dozen respondents, or 14%, make more than $5,000 per month in advertising revenues alone.
Most of the folks running these sites are journalists with little business experience, so it is not surprising that many of the responses to the question ‘what are your biggest challenges’ revolved around getting help selling advertising and developing the business. Here is a sample of the comments:
Getting local businesses to understand the value of advertising on the internet. This problem is HUGE. Even with our large amount of traffic, it’s hard to get local businesses to take us seriously because we don’t have a print product.
***
Sales, sales, sales. And pricing. I think I have a service I can sell here. But I need to sell it and then handle the invoicing and record-keeping. Since this is something I’m doing on the side, I let the sales efforts lag while I spend most of my effort creating the content.
***
As the owner/editor/publisher, I have trouble balancing the news and administrative aspects of the job. I’m really a journalist at heart, so given a choice, I’d rather write a news story than work on a spreadsheet or a web page coding problem. I am actively seeking a publisher to join me, perhaps as a partner, to help guide the business side.
Here are the survey results from the for-profit news outlets. Click here to download.
New Business Models for News survey results — For-profit
The survey results suggest that the not-for-profit model has been more successful at building a larger staff, at least at the beginning. Roughly half of the not-for-profits, 12 of 30, reported having more than three full-time editorial staffers. Employment on the business side also trends higher.
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Membership has its meaning
Posted on 04. Sep, 2009 by Jeff Jarvis.
In newspapers’ game of revenue roulette, there’s a lot of talk lately about their trying to create membership plans. The New York Times and the Guardian, to name two, reportedly have visions of tote bags, mugs, and events in their heads. And I think that’s a fine idea. No salvation. But a fine idea. I’ll wear a Guardian hat proudly. I’ll go watch Nick Kristof present a slide show of what he did on summer vacation. (Other papers are merely using the m-word to cloak a pay wall; you know what I think about that.)
What the Times and Guardian seem to be considering is membership in the NPR mold – give us money and get a T-shirt to brag about it. That works at NPR because the network is a charity and supporting it is a political statement. The same might be true of the Guardian, which operates on a mission (“the world’s leading liberal voice”) and is owned by a trust. But the Times, as the product of a profit-making company with shareholders? I’m not sure. We’ll see.
In any case, the membership bar has moved up. It’s not enough to let people give you money and promote you. Now you have to invite them to have a real and meaningful role in what you do, even a sense – if not a stake – of ownership and, consequently, control.
Take Wikipedia. At the Aspen Institute two weeks ago, Wikimedia Foundation head Sue Gardner said they calculated the value of the work people put into editing entries. They could measure only the time that went into edits and updates, not the time writers may have spent elsewhere researching and writing. Even so, the value of time spent added up to hundreds of millions of dollars. That is how this incredible asset was built: minutes at a time. Note well that Wikipedia did not become valuable because it extracted money from the market and its users pockets. It became a great asset by enabling people to make it, to take control of it, to have a sense of ownership in it. It thus requires very little resource to run – and it gets the money for that from these users. Now that’s membership.
Note that Wikipedia is trying to figure out what value it needs to add back to its community’s product, not as a controller but as a contributing member itself. That’s part of the secret to successful networks: everyone’s a member, no one is king.
Now take craigslist. Craig Newmark was also at Aspen, befuddling the media machers, as he always does. But he shouldn’t. They are the ones who created his model. Newspapers created value by becoming the marketplaces in their communities for home, merchandise, and job transactions. Craig created the successor marketplace the best way he could: by being free. He extracts minimal value to grow to maximum size; those are the confounding network economics I describe in What Would Google Do?. The point is that Craig did not create a marketplace he would control, as newspapers did; he created a marketplace the community built and he supports that with customer service. He serves the community as a member.
When I was last in London, Guardian editor Alan Rusbridger was contemplating membership and he told me about the Barcelona Football Club, which is owned by its fans and in which members have the privilege to vote on leadership and more. Can a newspaper be owned by its community?
This morning, I recorded the next Guardian Media Talk USA podcast with Baristanet founder Deb Galant and Star-Ledger editor Jim Willse and we discussed the CUNY New Business Models for News recommendations, which center on creating collaborative networks among the new players in the next news ecosystem. Willse riffed on the idea of creating co-ops, like New York apartments, where the community sets its rules and hires the super to make sure the heat is on. All benefit, all have a stake in the success of the community.
Add all this together: contribution to a community to build it as an asset; ownership of the community by the community; members having a mutual stake in the community; members exercising control over the whole. That is membership. Not tote bags.
How far would and should news organizations be willing to go with this extended vision of membership? I can see newspapers as they have existed being quite uncomfortable with the idea of handing over control and even membership to the community. I can hear their fears of being co-opted or gamed. But that comes from still thinking of news as the property of a single company. Those days are soon over.
When you think of news instead as the province of an ecosystem that is distributed and owned at the edges by many players operating under many means, motives, and models, then the notion of contribution, ownership, and control changes. People own their own stakes but they benefit by joining together cooperatively. They create a tide upon which all their ships rise. That’s a network, not a company. Everyone contributes, everyone gains value and so does the whole: Everyone cooperates in systems of enlightened self-interest. Thus greater value is created (see: Wikipedia v. World Book) because more people contribute value but it is not owned centrally and benefit moves to the edge.
In the new post-industrial economy, I argue that there are three opportunities for growth and value: building platforms, building value atop those platforms (as entrepreneurs), and building networks to help these entities optimize their value. That is how news and many industries will be rebuilt, I believe.
In this vision, then, the basis of news is the platform, not the newspaper company. The value is built by owner-members, more than staff. The infrastructure for the network is a service to it, not a barrier to entry.
Yesterday, I was down visiting Vivian Schiller and her management team at NPR – who, by the way, are clearly having great fun (unlike other folks I know in the business). We talked about the New Business Models for News Project and NPR’s role in this new ecosystem. I think NPR and its stations can provide a platform and network services to many players in local markets and take a key role in the future of the news ecosystem. And NPR understands the beginnings of what it means to have members, so long as they move past tote bags.
So, yes, news organizations, please think about membership. But don’t think if it as merely a revenue opportunity. That is doomed. It is insulting. It brings to value to its members. It’s only a new price tag for a new product: a mug instead of news. No, instead use this opportunity to think about opening up as an enabler and member of a new network, a new club, and don’t think of yourselves as the owners of this club but instead as just another member. (The New Business Models for News Project has been funded by the Knight Foundation.)
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New Organizations, New Relationships
Posted on 19. Aug, 2009 by Matthew Sollars.
We’ve heard a lot about our forecasts for advertising revenues in the New News Organization this week (mostly asserting that our cpm and penetration assumptions are too optimistic). But, it seems our other goal–to envision a sustainable business built on a diversity of revenues–has been largely overlooked.
In fact, in year three of our NNO model, advertising accounts for 57%, or $11 million, of the $20 million in total revenue. The rest, or $8.6 million, comes from new business opportunities that have been so often neglected by existing media companies (or discounted because they were too expensive to develop in an era when margins on advertising were fat). In most cases, these new opportunities will require news organizations to forge new relationships with their readers and with the advertisers and businesses they serve, and to rethink some of the news content they provide.
We’ve written about a number of e-commerce opportunities already. We spoke with the Telegraph about their efforts to sell products in a contextualized format, taking fees for selling tickets and sports betting (there has even been chatter recently that legalized betting might help save the news industry). We’ve estimated just over $35,000 in annual revenue from ticket sales in our model. As Steve Buttry points out, we can go much further: obituaries are an opportunity to sell flowers and college football games are an opportunity to provide access to restaurant reservations before or after.
We also think that the advertising arm of the business should invest in training and/or consulting local businesses in online advertising and marketing. That service could bring in $480,000. Building a business-to-business marketplace where local entrepreneurs can list sales and post and reply to RFPs, could earn nearly $1.5 million in annual revenues by year three.
Hosting events is another item. Folks like the Voice of San Diego and Brooklyn Based say they view offline events as a new way to present their journalism. But, they can also serve as an important source of revenues, indeed events account for most of Brooklyn Based revenues. Events for readers could generate $330,000 by our estimates, and business-to-business conferences another $1.2 million annually.
Behind all of these ideas is the need for the new news organization to provide services to businesses and readers where they need them. As Steve Buttry pointed out to me today, in most cases, news organizations already collect highly valuable data, so all they need to do is figure out how to maximize that value for customers or businesses. In some areas the content itself might need to be reworked. He explained:
Perhaps the best example of thinking differently is in driving. Our automotive vertical is based on a job (buying a car) that most people do once every few years, so it’s not a routine and we don’t have a regular way that we do it. So it was easy for specialized car sites to steal the business away. But driving is a local job that most of us do every day. So if we develop a service based around driving, people will come to us every day. And that gives us an opportunity to become essential with some businesses that are not as big advertisers for newspapers (tire shops, auto-repair shops, auto insurance, etc.). And if we think beyond selling eyeballs, and think beyond print and start using the tool that most of us always carry in our cars, the model becomes entirely different. We think about being the conduit for text messages from motorists needing repairs today to garages with openings today. Filling that bandwidth has tremendous value to the business and identifying someone who can repair the car has tremendous value to the consumer. Win-win. (And, by the way, if you’re a car dealer and someone in your community develops a service like this, where do you think they will look first when they’re ready to trade up? So you’d better advertise there, too.)
Lastly, it’s important to make a point about the changes we think are coming in advertising. We’ve outlined new advertising units and ways to deliver them, including coupons and deals delivery, and we put them as separate line items in our model. But, it seems clear that advertising on the web will increasingly move towards the deals/coupon model eventually replacing display ads at nearly all levels. Online ads want to be transactional. We’ve already seen this with the launch of AnnArbor.com, which only publishes deals. The role for the news org going forward is to build a platform that serves the right ads to readers (much like it will need to serve the right news content). Also, the org will need to serve its advertisers better by working with them to develop messages and campaigns that work. It’s simple really, if they don’t do this in a pay-for-performance model, the advertisers will go elsewhere.
Not all of these ideas will pan out in all markets, or for all organizations. But it seems high time to give any idea with even a bare chance of succeeding a try. (The New Business Models for News Project has been funded by the Knight Foundation.)
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The New Ad Network
Posted on 19. Aug, 2009 by Damian Ghigliotty.
Ad networks have come a long way from those annoying punch-the-monkey banners used to fill remnant ad space.
But while innovative networks like Glam Media are continually building new tools and services to connect online publishers with highly targeted ads for their audiences, the majority of them still focus on national advertising paired with the content rather than the reader.
Within the new ecosystem and framework we’ve been outlining, the role of ad networks would expand to connect publishers with new advertisers, audiences, and other publishers on a local and metro-wide level.
The best way to do that is “to work with the content providers who know their local barber and their local pizza place and help them sell their ads in a larger network,” says Mark Potts, who recently launched GrowthSpur (disclosure: Potts’ played an important role in brainstorming the framework concept for this project.) Not only does his team provide a range of tools for content providers like invoicing, analytics and search engine optimization, they also provide professional training in how to sell advertising.
In line with Potts’ aim to rethink advertising, we also see several untapped opportunities for ad networks to bring in new revenue through increased interconnectivity. One way to do that would be for independent publishers to help larger media brands and news organizations reach audiences normally overlooked.
Imagine for example if a local sports blogger covering the Illinois State Redbirds was to run targeted ads from ESPN Chicago and maximize the dollars gained from those ads. Potentially, both content providers would benefit, as well as the advertisers. And that would also allow the content providers to focus on what they do best: providing content.
“It’s often harder for larger media sites to reach local advertisers,” says Potts. “But if someone is already out in a community selling those advertisers on their site, they can also sell ads for the larger sites as well.”
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Advertising in a Sustainable Not-for-Profit Model
Posted on 18. Aug, 2009 by Matthew Sollars.
We’ve been getting a lot of great feedback to our models, both online and out in Aspen, since we made them public yesterday. Some of the best comments have come from Jim Barnett, who questioned some of the results in our not-for-profit model both in the comments and later in a piece on theNieman Lab site.
He asks whether our model for the growth of advertising revenues–to 49% of all revenues by year three from 18% in year one–is possible or desirable at a lean not-for-profit new organization. First, to determine whether such growth is possible we looked to Joel Kramer, CEO at MinnPost.com. Kramer told David Westphal in a piece at OJR in October that he hopes 70% of MinnPost’s revenues will come from advertising by 2011.
Here’s the paragraph from the OJR piece:
Q. What was your hope, what is your hope on the mix of advertising and contributed revenue?
A. When we started we said our hope was, by 2011, 70 percent advertising, 30 percent membership. Right now it’s running about 50-50, maybe a little higher on the membership side. It’s pure guesswork because it’s a new model. The key is to get to a sustainable model by 2011. There are a lot of reasons to become optimistic, but the advertising side really needs to get better.
Kramer has since been hard at work developing display ad business (MinnPost was charging a $15 cpm earlier this summer) and new advertising units, including a Twitter-like service that he thinks could be a new form of classifieds for local news.
Our model only has 49% of revenues coming from advertising in the third year. Still, it’s a fair point to wonder whether not-for-profits should join the scramble for advertising and sponsorships when for-profits are having such a hard time of it themselves. Kramer himself comments on Barnett’s post to say our model appears to overestimate potential advertising and underestimate membership revenues. He also does a good job of answering Barnett on the pressures such a lean organization faces in separating business from editorial.
Again, we’d love to play that scenario out in our Google doc to see if those differences amount to a wash. (The New Business Models for News Project has been funded by the Knight Foundation.)
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Thank You and Keep ‘em Coming
Posted on 18. Aug, 2009 by Damian Ghigliotty.
So far we received a lot of interesting responses since the FOCAS conference kicked off yesterday and we look forward to reading more as we continue to break down our individual models.
This project is all about interactivity and we wouldn’t have moved past the theoretical phase without your input. That goes for our 113 survey participants and the 13 sites we profiled as well.
Keep the comments coming and give your own figures a shot using one of our spreadsheets. (The New Business Models for News Project has been funded by the Knight Foundation.)
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Hyperlocal Revenues, Yes, They’re High
Posted on 18. Aug, 2009 by Damian Ghigliotty.
The figures we used for our Hyperlocal model were based on three market sizes — small (20K), medium (35K), and large (60K) — supported by a broader Framework of local businesses and ad networks.
Yes, our work assumes that “in a metro market of 5 million people, the hyperlocal network will be able to get 1.75 million readers (35 percent penetration) in Year 1, growing to 3 million readers (60 percent penetration) in Year 3,” as TechCrunch points out.
That would allow a large blog to increase its gross revenue from $126,976 in the first year to $331,640 in the third, while growing its net income from $42,277 to $148,269 in the same period — assuming that staffing costs will also increase. Some sites are already coming close to those figures without optimization and efficiencies we believe ad networks and the framework would provide. Click here to view the Hyperlocal & Framework models as a Google Document. Be sure to click on the Revenues for Blogs and the Income Statement for Blogs tabs at the bottom of the spreadsheet to view all figures related to this post.)
We’ve compiled our numbers for each market size based on several revenue opportunities, including advertising, business-to-business services and e-commerce. While not all of these opportunities would work for all sites, our team found enough revenue models to support our assumptions.
And from what we’ve been reading, there is certainly strong interest in hyperlocal news these days. See the PBS Engage/Knight Commission online survey about community information needs published in April, as well as our post on ESPN going local. As a final note: to cover the largest targeted readerships we extended the taxonomy of hyperlocal to include vertical sites such as music, food, sports and mom blogs.
Again, we welcome readers to play with these numbers and see what they can come up with. (The New Business Models for News Project has been funded by the Knight Foundation.)
Download the Hyperlocal/Framework Excel file here.
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The Assumptions Behind Our Models
Posted on 17. Aug, 2009 by Matthew Sollars.
Some points about the assumptions baked into our models:
We settled on a $12 cpm as a conservative benchmark, based on feedback from a number of news organizations, large and small. Indeed, we commonly heard a range of $15 to $20 cpm. In terms of for-profit startups that replicate what we are calling the New News Organization, San Diego News Network is charging between $8-$10 cpm right now and they anticipate the rate will go higher once the economy recovers. For smaller startups and hyperlocals, we calculated a cpm from the time-based advertising rates. Here is a list of the folks who participated in our survey. Hopefully running through these two lists will answer some of your questions about where our numbers come from. Bottomline, we have data from a lot of sites that have been aggregated into the models.
Paul Bradshaw of the Online Journalism Blog asks why the development costs for our Not-for-Profit model is not higher in the first year? We have on-staff developers built into our New News Organization and Not-for-Profit models, in addition to the development line item in the budget. So, yes, we anticipate that future businesses will continuously spend to update themselves. Perhaps we haven’t factored in enough of a front-end development cost.
Bradshaw also questions one of our conclusions, that this new news organization can actually be as profitable as we postulate. He writes on Online Journalism blog:
Also, I’m somewhat baffled by the projected margins of 29% by year 3 – those are the sorts of margins news organizations enjoyed during the ‘print bubble’© and led to the sort of debts and shareholders that have been just as problematic as advertisers.
It’s important to separate profit margins from revenues. The news organization we envision is much smaller, with $20 million in annual revenues, compared to the hundreds of millions in revenues enjoyed by print newspapers today. Of course, the new organization’s costs are smaller, too, hence the profit margins. That means those margins don’t require the huge capital investments made by newspapers in the past. The new online news organization will necessarily be more agile and flexible.
A point for some of those folks who think our assumptions are overly optimistic. Our goal was to project what happens when the daily newspaper in a large city has gone away. That’s the context for our numbers: what will advertisers do when they need to go to an online-only publication? In all of these cases, we are testing hypothetical models. That’s why we’ve posted the spreadsheets online. We’re asking you to put in your own assumptions and share them with us, please put your versions in the comments. (The New Business Models for News Project has been funded by the Knight Foundation.)
