Inverting the business model question at Newsless.org

Inverting the business model question

278CommentsInverting+the+business+model+question2009-01-10+18%3A10%3A41Matt

Kevin Kelleher at GigaOm interviewed me yesterday for a good column hitting a few key topics. He zeroed in on something I’ve said before, and I think it’s worth reframing and reiterating. Kelleher quotes me as saying, “When you ask, ‘How do you support news organizations on the web?’ it looks completely daunting. But many successful journalistic enterprises on the web started out the other way. You had a few individuals creating enough value to be supported, and then building on that value.”¹

Conversations about the business model for news online still tend to take place at the organization level. That is, we keep asking how we’re going to support this organization that gathers the news. E.g. What would be the CPM/audience size necessary to sustain a $63 million annual budget? Framed that way, the task is clearly Sisyphean. You wind up with analyses that assert that news Web sites require audiences of at least 200MM pageviews each month to generate sustainable revenue.

When we break the newspaper down into its hundreds of component parts and build up, a different picture emerges. What size community might you need to build online to support a team of investigative journalists? You can start with 61,000 visitors. Now how many of those visitors can you convert into True Fans?

That’s how we’ll build sustainable coverage online. Investigating each of the functions the news organization used to (or neglected to) perform, and finding out how that function might be supported.

I’m certain this is a delightfully polished-up version of whatever I said. I may have started ranting about video games between some of those sentences. I don’t think I ever express a thought that coherently. Nonetheless, it totally captured what I meant. Thanks, Kevin. [↩]

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Written by Matt

January 10th, 2009 at 1:10 pm

Tagged with business model

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As we create C3, the Complete Community Connection, this is exactly our approach. How can we create economically supportable tasks, which have to be approached with a completely different mindset - atomized, networked, content in the first instance?

I will let you know how we progress!

Chuck

cpetersia

11 Jan 09 at 1:47 am

I think it might be helpful to consider two points. 1. Focusing on CPM or advertising as the primary revenue stream may turn out to be a blind alley. 2. My impressions is that one way to describe the culture of the web is "Read for free. Pay for Print." Consider the New Yorker magazine. My impression is that they are doing just fine. This might imply some serious thought about innovating Print products that could be sold directly to your readers. The recent improvements in the print process change the old rules about what is possible, how long it takes and how much it costs. POD is just the tip of the iceberg.

Michael Josefowicz

11 Jan 09 at 7:56 am

Matt, I transcribed that from my notes, so I'm glad it captured what you meant. Seems to me you were pretty articulate, though, even on the subject of video games. Kevin

Kevin Kelleher

11 Jan 09 at 9:33 am

@michael
The Fundamental Problem of Newspaper Websites - The Krugman Paradox and then my MA thesis explain how general interest news sites are economically unsustainable and talks more about the failure of display advertising, read more here: http://metaprinter.com/?p=1075

As far as "inverting the business model" I'm not quite sure what you mean. Are bloggers inverted business models? Are newspapers that cut costs and newsroom sizes until they have "few individuals creating enough value to be supported" an inverted business model? I'm sure you have a better explanation or example to provide.

robert ivan

13 Jan 09 at 2:05 am

@ robin,
thank you for the links. I' look forward to reading them after this post.. I agree that General Interest news is unsustainable and banner ads are a non starter. Even before I read why that's true.

But, niche publications for "fans" can be sustained. And sometimes the niches can actually be quite large. Imagine paperback books or newspapers focused on Science, Economics, Global Poltics and sold to K-12 to replace textbooks. Recent advances in Print tech make these products scalable. Tied to an XML content management system.maybe living in a wiki format, once an audience is identified Print products could be produced with previously unimaginable turn around times.

A natural niche are physical communities, especially in not major metro areas. I'm trying to get these ideas mainstream at my blog at http://sellingprint.blogspot.com

Michael Josefowicz

13 Jan 09 at 2:21 am

@ robert, sorry for robin. fingers faster than brain. my apologies.

Michael Josefowicz

13 Jan 09 at 8:13 am

Thanks for the comment, Robert. I think your post on Metaprinter illustrates what I mean. We all agree on several basics:

* Newspapers were very lucrative for quite a while there.
* Newspapers are expensive to run.
* Editorial payroll composes a fraction of that expense.
* Online advertising revenues per visitor provide a miniscule sum compared to print advertising revenues per subscriber.
* "Unique visitors" are really nothing like "print subscribers."

Given those basics, it's very difficult to take a newspaper's massive P&L and imagine how you scale it down to an online operation.

My point is that I think it makes more sense to build the business plan for an online operation (or a network of online operations) from the ground up, rather than attempting to map online revenues to a deconstructed newspaper P&L. This might mean you'd examine each of the beats/topics/niches the operation would strive to cover, and you'd ask questions like, "How big or how engaged of an audience might we need to support coverage on this beat? What funding models might we use to support it?"

It might become apparent from a perusal of the posts here that I'm not exactly bullish on general-interest news myself. I think the value online will be found primarily in the niches — i.e. devoted communities on specific topics. I think the sustainable news operation of tomorrow will involve a network of these communities.

mthomps00

13 Jan 09 at 8:19 am

I'm watching your experiment with great interest, Chuck.

mthomps00

13 Jan 09 at 8:19 am

I think you've hit on a path forward.."I think the value online will be found primarily in the niches — i.e. devoted communities on specific topics. I think the sustainable news operation of tomorrow will involve a network of these communities."

Next job is what are those communities for any locality. Consider that the number of active "fans" can be very low to start. But better 15 loyal fans than 1500 who sort of care. I think that was one of the lessons of Obama's campaign. Don't waste time trying to convert. Spend all your resources on connecting the converted.

Michael Josefowicz

13 Jan 09 at 8:30 am

I just got an email saying, "intense debate notification". I was expecting a sh!t storm on here when I arrived. Glad to see all i did was juice the dialog along.