How Will Online Journalism Ever Make Money?
Online Ad Spending by Format (in millions), 2009. Source: The Atlantic
Thus asks Derek Thompson of the Atlantic, who offers some depressing statistics for those folks hoping to make a dollar or two in online journalism.
Thompson emphasizes the lack of profitability for the percentage of audience ushered in through search engine results. Like someone looking for a specific number in a phone book, people who enter via Google and its fellow search engines come with tunnel vision – they know what they want and tune everything else out. Online advertisers know this too, so the audience is effectively reduced by almost half right away. Rich media ads are still not fully developed, and competition from Craigs List and eBay has eviscerated the classified advertising market.
In a prior post, I discussed this issue in light of a talk with Walter Hussman, publisher of the Arkansas Democrat-Gazette and firm believer in the power for paywalls for local content. Hussman believed that people would pay for local news for which the national media and bloggers could not devote sufficient resources to compete. People are willing to pay for local news and quality niche content such as that offered by The Wall Street Journal, but are not as eager to pay for general content, even from brands such as the New York Times. Newsday, Long Island’s chief local newspaper, recently switched to a Hussman-type local paywall model and only attracted an initial readership of 35 people.
Newsday and other would-be local media behemoths are plagued with mite-sized competitors – mini-local dailies that operate with lean staffs and rely heavily on freelancers, who in turn barely eek out a living. Former internet behemoth AOL has also entered into local markets through its Patch local dailies. Competition from local cable news stations and bloggers makes even the local solution to sustainable profits less than optimal.
A real solution might lie in the shoals of our flagging economy. With venture capital drying up, local startups may be unable to attract the necessary capital to compete with incumbent news carriers, even with lean staffs. Incumbents can survive on brand equity when investment capital is scarce. “Ride out the storm,” say the wise men, failing to mention that such advice has been offered to online ventures since the birth of the internet.
Media watchers have long theorized solutions such as micropayments as a possible solution to media unprofitability. Readers might be willing to pay a penny per article, so the theory goes, so why not squeeze those pennies and watch them add up to real cash? Unfortunately, the idea has never really taken off.
Thompson teases his readers by promising a near-future update with solutions beyond online advertising and paywalls erected by newspapers such as The Wall Street Journal. He would be a Pulitzer-level media hero if he could offer wisdom to reverse the slide, which promises razor-thin profits at best for the foreseeable future.
