And it has to stop, if publishers have any hope of retaining a semblance of the relevance, readership, and revenue that historically made them the influential and commercially successful enterprise they would like to remain in the future.
Although readers and advertisers are flocking to the proliferating digital media as fast as they can, the stubborn fact is that most newspapers derive only about 10 percent of their revenue from digital products. While it is true that the relative digital contribution to newspaper revenue has grown in recent years, the gain has more to do with the 50 percent plunge in aggregate advertising sales since 2005 than a truly meaningful increase in digital revenues. In other words, the numerator looks bigger because the denominator shrank.
If publishers want to get serious about adopting real digital business models, they have to address four enormous problems:
Weak digital product portfolios
Instead of using the Web, mobile, and social media to connect with new readers and customers, the typical newspaper dedicates the majority of its digital efforts to faithfully porting its print product to pixels. The typical newspaper website is heavy on words and light on interactivity. Most mobile products fail to leverage the power of this intensely intimate medium to deliver personalized and localized information to solve immediate individual problems. The “we talk, you listen” Facebook pages maintained by most newspapers almost universally fail to build community, which, of course, is the entire point of social media.
Aging, undiversified audiences
In light of the above, it is not surprising that the audiences attracted to newspaper-centric digital products look remarkably like print customers. “The average print reader is a female nearing 60, when the age of the average population is 43,” said Greg Harmon of Borrell Associates, which has been tracking Web readership at newspapers for a decade. “The user of a newspaper website is a little less female than the print subscriber and just over 50 years old, but the average age of the online newspaper audience gets one year older every year.” Unless publishers use their digital media to attract younger and more diversified audiences than they have today, the future of their business would seem to be limited to the life span of their aging readers.
Limited revenue opportunities
While online ad spending is expected by PricewaterhouseCoopers to double from current levels to $62 billion by 2014, newspapers today have no ability to compete in such fast-growing categories as search, mobile, social, video, and targeted banner advertising. Because they have not invested in modernizing their advertising capability, publishers are stuck with offering un-targetable banners and online upsells from their tattered print classified business. Further, researchers say the folks who formerly bought local advertising are spending ever-greater portions of their budget on direct contact with consumers via websites, search-engine marketing, daily deals, couponing, contests, social media, and e- or snail mail. Borrell said as many as $3 out of every $4 spent on local digital marketing this year will go to non-advertising venues. Most newspapers have few products to capture those dollars.
Growing digital sales competition
In addition to traditional broadcast and Yellow Pages sales pressure, newspapers today must compete with a growing number of digital reps for everyone from Google and Groupon to local webmasters and social media agencies. Estimating that there now is one digital rep to rival every three salespeople fielded by newspapers, Borrell said that the typical small business gets more than 20 pitches a month from an advertising or marketing representative. Although research shows many businesses continue to value their newspaper reps, even the best relationships can’t make up for the lack of digital and marketing products that merchants increasingly are buying. In perhaps the single biggest challenge the industry must overcome, newspaper reps can’t possibly sell digital products they don’t understand, can’t explain, or don’t believe in.
Now that I have your attention …
Though most publishers are further behind the curve than they ought to be, newspapers continue to possess powerful brands, content-creation capabilities, sales relationships, and marketing muscle.
The first step to getting serious about digital publishing is to develop a strategic commitment to building relevant and remunerative products. Because most profit-pinched newspapers lack the time, money, and in-house talent to develop such products, it makes sense for the industry to pool its resources to create a Digital Widget Works to build products to compete with the upstarts.
The time to act is now. The contest will only get more intense, with Groupon, LinkedIn, Facebook, Twitter, Yelp, and a host of wannabes feasting on fresh capital faster than you can spell IPO.
Alan D. Mutter is a newspaperman who became a Silicon Valley CEO and today is a technology consultant to media companies. He blogs at Reflections of a Newsosaur (newsosaur.blogspot.com).