2003 Predictions For Online News Biz

By: Steve Outing

For my last column in 2002, I’d like to reflect on the state of the online news industry and gaze ahead a bit. Where have we been? Where are we going?

While I don’t pretend to have all the answers to the latter, please allow me to offer some year-end thoughts, predictions, and recommendations. (No guarantees offered on the foretelling parts.)

The fate of Web advertising

With a continued sour economy, online news publishers weren’t exactly flush with advertising revenues in 2002. As a result, there was considerable movement to find alternative revenue streams — especially by charging for news content instead of giving it away for free. The advertising drought — called by some analysts the worst since World War II — affected all media, of course, but online was particularly vulnerable because advertisers haven’t assigned significant percentages of their budgets to the Internet yet.

But for 2003, things could be looking up. At a stock analyst meeting last week in New York, newspaper executives predicted that ad revenues would pick up next year — and they were optimistic that a good chunk will come to their online operations as well. The New York Times Co. is even predicting that its Web operations will generate $13-15 million in profits over 2001 figures.

What I found heartening from that conference were remarks by New York Times Digital CEO Martin Nisenholtz, who said the company remains committed to not charging for its news content online, and will continue to rely primarily on advertising revenues. He was quoted as saying, “We don’t want to create a front door that would make the audience smaller.” Other major online-news publishers like washingtonpost.com also remain committed to the free-content model.

As industry leaders, The New York Times and The Washington Post significantly impact the online-news trends for the entire news media. A move away from advertising-supported free content by those companies could set off a tidal wave of business-model change by news publishers. I’m glad to see that we’re not moving too far away from the free model for general news.

Locking down too much of your content is a loser’s game for most publishers (with the obvious exceptions to the rule — WSJ.com, ConsumerReports.org). That’s why I think that Time Inc. magazines’ recent decision to include their content exclusively on America Online is a mistake. Prediction: Time-AOL will realize their mistake within a year or two.

Recommendation: Don’t let panic about online advertising lead you down the wrong path. While it’s appropriate to charge for some content, news sites will be wise to ignore impulses to charge for everything. Maintain optimism about online advertising once we’re through this rough economic patch.

2003 prediction: Slow but steady recovery of the online ad sector, and gradual optimism on the part of Web publishers.

Advertising formats

I spotted a couple of trends in online advertising this year — seemingly, in conflict with each other. The obvious trend is larger, animated, and/or interactive, and more annoying Web ads on news sites. From the ever-obnoxious pop-ups and pop-unders (which at some news sites even come at you two at a time), to animations that move and crawl over editorial content, to just plain larger banners that are too big to ignore, the trend continues to be for more in-your-face advertising. It gets worse (from the online-user perspective) each year.

Trend No. 2 is the success of text ads on search engines, where advertisers buy words that when entered by a search user generate a paid-listings area of the search-results page. Google has excelled at this, and Overture has done well selling word-search ads on behalf of sites such as Yahoo! and InfoSpace. So, if you search Google for “camping Alaska,” for example, among search results will be a paid text link to such advertisers as Get Up and Go! Tours, which offers tours of Alaska. Word search ads were the only category of online advertising to grow this year, according to the Interactive Advertising Bureau in New York.

Recommendation: Don’t discount the power of text Web advertising. Google’s and Overture’s sales reps at first had trouble selling the concept to advertisers, but as tracking success rates of text ads showed outstanding results, the idea took off and became a significant business. News publishers should implement targeted text-advertising programs, too — with emphasis on “targeted.” While you probably can’t mimic how the search engines sell text ads, variations are possible for most news sites.

2003 predictions: Web advertising will get even more intrusive and obnoxious. But, we’ll start to see fewer pop-ups and pop-unders. Why?

1. Consumers hate them.
2. Pop-up blockers are becoming commonplace; they’re offered as user benefits by some ISPs.

Even though pop-ups are intrusive enough that they work better than the old standard Web ad banners, I think they’ll slowly die out due to consumer backlash.

Meanwhile, we’ll see increasing sophistication in rich-media advertising — more animations, video and sounds, and more slick interactive marketing applications. As more households get broadband Internet access, rich-media advertising will become more important — and publishers will make more by selling rich-media placements.

We’ll also see Web publishers making progress with better targeting of online ads — made possible by another trend, the increasing usage of user registration by news Web sites.

Free vs. fee

I said above that I don’t expect a wholesale migration of news sites to entirely paid content. But that doesn’t mean that paid content won’t be a significant part of Web publishers’ revenues.

The Online Publishers Association of New York notes that consumer spending for online content rose to $975 million in the first nine months of this year. But, as new media consultant Vin Crosbie (Digital Deliverance) notes, only around 15% of that figure currently comes from sales of news/editorial content. This indicates to me that there’s not yet enough monetary potential for online-content subscriptions to rely on as a principal revenue source. Indeed, reports from consulting groups such as Borrell Associates have made the case that news Web subscription-only strategies seen to date are financial failures (with a very few obvious exceptions such as WSJ.com).

Recommendation: This isn’t much different than what I’ve advocated in previous years. Look for high-value, premium content, and/or services that consumers will find worth paying for. Put a price tag on those services, but don’t devalue the free part of your site, because advertisers still will require high traffic numbers if they are to spend money with you.

I also strongly urge news publishers to implement paid-content strategies intelligently. That means that if you have articles on your site that require a fee to see, offer non-subscribers a glimpse of the content along with an offer to pay for it. A common mistake is to completely hide paid content — where an online user can’t even get a tease, only a demand for payment. Search engines should be able to find your paid content — they’ll send your site a lot of traffic — so that new users are tempted to pay to see the full article they were searching for. Don’t offer only a subscription option; also offer a modest pay-to-read-now alternative.

(Worth noting here are experiments this year by Salon.com and FT.com to tie viewing premium content to specific advertising — where an article or report that otherwise would require a fee can be viewed by a consumer willing to view an ad, and the advertiser pays for the premium-content access.)

2003 prediction: The rush to fee-based content will slow as the economy picks up and online advertising grows. As they start to feel less pressure, publishers will veer away from unwise strategies such as all-for-fee.

Searching for help(-wanted)

The newspaper industry’s Achilles’ heel this year was the help-wanted sector. While classifieds are pretty much a mess overall, the jobs category is the most troublesome. A Borrell report released this fall noted that in the previous 18 months, 40% of jobs classifieds revenue evaporated for newspapers — and due to online competition from the likes of Monster.com, which is very strong in serving local U.S. metro markets, there’s scant likelihood of it returning.

While a poorly performing economy is partly to blame, the larger reason is the trend of human resources professionals (and job seekers) to do their business — more efficiently — online in lieu of relying on newspaper help-wanted ads. It’s easier to seek out qualified candidates using online employment services and online matching tools. It’s cheaper and more effective for HR to use online services than print.

Recommendation: The trend in online recruitment is in providing better tools that allow HR people to find the right candidate for the job out of the online-database pool of hundreds or even thousands of applicants. It’s not enough to search a resume database and then comb through the resulting applicant pool. HR professionals need online equipment to help them better sort through the pile, and even pre-test applicants to see if they’re worthy of being in the finalists’ group. As companies that specialize only in online recruitment develop better and more sophisticated tools, the newspaper industry needs to keep up (or, better yet, move ahead). This means taking the focus off print help-wanted classifieds — which are dying anyway — and focusing on creating the best possible online recruitment section to serve a newspaper’s local market.

2003 prediction: Most newspapers won’t move quickly enough and will see further loss of recruitment market share to Monster.com, et al within their local markets. (Second recommendation: Prove me wrong!)

A Flash-ier & flashier Web

This past year has seen considerable advancement in the area of multimedia, or “rich,” content online. We’ve seen many more projects than in the past executed with advanced multimedia techniques. The use of Flash by online news designers and artists has grown, and the sophistication of Flash-based projects has seen great strides (thanks not only to hard learning work by Flash artists, but significant advancements in Flash technology). I say that as a judge in the SND.ies multimedia news content awards of the Society for News Design. We judges have enjoyed seeing online-content designers pushing the envelope and creating new, online-native forms of digital storytelling.

We’re still early in the game for multimedia content. Some of the SND.ies entries I’ve reviewed have been weak, even occasionally amateurish. But this is to be expected in an era of multimedia-content immaturity. It’s akin to the early days of desktop publishing, when a lot of awful self-published newsletters were created with the new application PageMaker and the early Macintosh computer.

On the other side of the coin, some incredible examples of online interactive storytelling have been done this past year — especially from news organizations such as MSNBC.com, ElPais.es, NYTimes.com, and Sun-Sentinel.com, among others.

Earlier this year I also was a finals judge for the Online Journalism Awards of the Online News Association and Columbia University. Among the winners of this year’s contest was Mark Fiore, who’s doing some incredible work with animated/rich-content editorial cartoons. (Fiore won the top prize in the online commentary category.)

Recommendation: 2003 is the time to take multimedia or rich content seriously. Broadband usage is ubiquitous in the corporate environment, and broadband to the home is growing rapidly. (One-third of all U.S. Internet users are currently broadband subscribers, and they account for about one-half of all Web traffic, according to recent figures from comScore Media Metrix.) The arguments against sinking resources into broadband content because few people can utilize it are steadily being chipped away.

2003 prediction: As online designers learn how to create better multimedia, interactive content, we’ll see more and more. Designers and online-news editors are learning that the best content for the Web is content that’s native to the online medium — that works only in an interactive medium like the Web. It’s what makes the Internet a communications medium that’s set apart from other media.

Why Wi-Fi?

Finally, I can’t end this column without at least mentioning the impact of wi-fi, the wireless Internet networks that are so popular and cheap. As a recent New York Times special report on the growth of wi-fi noted, the U.S. especially is fast being “unwired” — with public-access wi-fi networks enabling untethered broadband access in all sorts of places, from public parks and plazas, to airport lounges and coffee shops, to apartment houses and community centers.

The wi-fi “revolution” is moving quickly, and while now it’s mostly useful to laptop PC users and the rare person carrying a networkable PDA, other portable computing devices that will utilize wi-fi connections are on the way. Soon, carrying a Palm Pilot or other devices will allow you to get broadband Internet sans wired network connection and bulky laptop computer.

What does this mean for news publishers? First, it means that broadband access will expand not only to a larger population, but that Internet users will be capable of consuming multimedia/rich content either at their homes or offices, or when away from a wired network environment. That’s another strong argument for beginning to put more resources into rich-media content. It means that as an online publisher, you can reach people online for more hours during the day. That’s a good omen for the ultimate health of the news industry.

Wi-fi also enables more instant communication between people. Instant-messenger services are a popular application for wi-fi users on the go. Publishers should be thinking not just about delivering one-way content to online consumers, but in engaging them with interactive features and services. The untethered, broadband-connected laptop PC or portable digital device is a communications tool (among other things). Could news publishers serve their audiences and profit by facilitating communication between online users? Perhaps.

Recommendation: Sit back and enjoy the wi-fi revolution. It’s good for your business if you’re a news publisher. Think about ways to serve news consumers when they are away from their desks but still connected to the Internet.

2003 prediction: Wi-fi was hot in 2002; it will get even hotter next year. This is good news for news publishers — indeed, for anyone conducting business on the Internet. The online medium will grow greatly once users are reachable in places other than a desk with a computer locked to it.

I’ll see you next year. It should be an exciting one for the online-news industry.

Other recent columns

Walking the Convergence Talk, Wednesday, Dec. 11
Convergence For the Common Good In Rochester, Wednesday, Nov. 27
Have Newspapers Lost Help-Wanted Ads For Good?, Wednesday, Nov. 13
News Sites Need To Go On Diets, Wednesday, Oct. 30
Out With the Old Advertisers, In With the New, Wednesday, Oct. 9
Google News Could Change Online News Industry, Wednesday, Sept. 25
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