By: Tom Mohr
At the Newspapers Next/API symposium two weeks ago, 140 anxious senior executives from newspaper companies across the U.S. and beyond came looking for salvation. What they received instead was an innovation game plan from a team of consultants as the answer to the industry’s growth ills. For seven hours, CEOs and publishers were peppered with pointers on what individual newspapers must do to create an innovation culture. Then, finally, in the last 30 minutes of the day, the subject moved beyond actions individual newspapers could take to actions the newspaper industry might take — especially online.
Thank God for those last 30 minutes. I wish it had been more.
The moment was not to be trifled with. Here, at Gannett’s headquarters in Washington DC, was the industry’s top leadership. If ever there was an opportunity to begin a serious dialogue about the need to win online, and the price in collective action that is required to do so, this was the time and place. The good news is that for that brief half hour or so, the topic of industry-wide online collaboration was engaged. That thin reed of a beginning is all I need to say more about the topic I have written two articles about: how newspapers can win online.
The Innosight consulting group which led this Newspapers Next project for the past year conducted some fascinating research. A survey was given to top newspaper executives — the CEO, division head or publisher and the top interactive executive at each of the top 25 newspaper companies and top 25 newspapers (by circulation) in the U.S. and Canada, according to the Innosight report. Out of the 95 executives contacted, 39 responded.
Here are some of the findings:
–72% agreed or strongly agreed that the newspaper industry is missing large online opportunities because newspapers rarely collaborate.
–69% agreed or strongly agreed that non-newspaper companies are pre-empting large national online opportunities that newspaper companies could win through collaboration.
–Only 49% agreed or strongly agreed that newspaper companies are capable of successfully organizing and managing joint online initiatives.
Why does such a large majority of top newspaper industry leadership believe that we have missed big opportunities by failing to effectively collaborate? I believe senior leaders have come to terms with a simple truth: the structure of the Web mandates that a local-only position is indefensible online.
Look at it from the consumer’s vantage. There are four gates that many consumers go through before they get to a destination site. These gates are powerful positions, and titanic battles are underway at each — battles the newspaper industry needs to understand and take advantage of.
First there’s the device (whether that be a laptop, a desktop, a cell phone or PDA). Then there’s connectivity (DSL, cable, WiFi, WiMax). Then the browser. Then search. Only then does the consumer get to destination sites.
At the first gate, carriers, device manufacturers and mobile content providers are rapidly carving up the fast-growing mobile marketplace. Do newspapers participate here? No. The content deals being done are only with the scaled national content players: ESPN, Disney, CNN, etc.
At the connectivity gate, well-funded start-ups are introducing new wireless transmission technologies. These wireless broadband solutions may require consumers to go through a set-up page. Whose content and whose search bar might appear on that set-up page? Newspaper content? No. Connectivity players would not be interested in holding hundreds of separate negotiations with individual newspapers.
At the next gate, there are the browser wars. Internet Explorer is being challenged by Firefox, new entrant Flock, and Maxthon. If you’re wondering what that has to do with content and advertising, consider this: Flock’s and Maxthon’s browsers incorporate various types of content into the browser itself. In fact, Firefox just cut a $78M deal with Google — because the browser stands in front of search in the gate sequence. Newspapers have no effective means of participating here either.
Next, of course, comes search (Google or Yahoo! being the most common default settings in most peoples’ browsers). Search is still the most powerful gate in the sequence from an ad revenue standpoint. Search stands in front of destination sites, and because consumers reveal their intentions through their keyword entries, search has claimed the largest slice of the online revenue pie. Newspapers have given search engines free access to summaries of their content, handing over the first ad monetization opportunity to Google and Yahoo!.
Finally, we get to destination sites. The fact that destination sites sit behind search (and aggregation sites of all kinds, for that matter) and the prior gates means that even the largest destination sites are somewhat disadvantaged in the monetization of eyeballs (the eyeballs have to go through the other four gates first).
By now it should be abundantly clear why local is such a disadvantaged position online. To be at the fifth gate AND to be limited to just a local footprint, unable to cut deals with the big revenue-driving heavyweights such as Monster, Google, AutoTrader and so forth, is a marginalized position indeed.
It’s not that local news and information have no value. On the contrary, for consumers of local news and information in cities and towns across the U.S., hometown news is a very important thing. For these consumers, “”local”” is vital and no there is no better source than newspaper websites. However, the web has split news content away from advertising. Unlike the newspaper, people can get car, job, shopping and real estate information online without looking at news. The only way to cut good deals with the leaders in these key advertising verticals is to have scale. On their own, newspapers are just too small.
Compare that to a world in which the newspaper industry — or even, practically speaking, a significant percentage of the top 100 markets — sits in a consortium, on a common platform. If the industry empowers the consortium and implements the migration to common platforms successfully, the consortium can suddenly act like an online heavyweight itself. Now, each newspaper participates in the economic benefits that come with industry-wide scale.
The consortium can cut a deal for geo-located content on mobile devices with one or more major carriers for the entire country. It can negotiate a deal with a major search player, as MySpace (at 2/3 the number of unique visitors as U.S. newspaper sites) did for $900 million (Google again). It can cut the deals necessary to bring a branded top online player into every newspaper across the U.S. for every ad vertical that matters: jobs, cars, shopping, directory, you name it.
This is the kind of online scale the newspaper industry needs. In “”Winning Online: A Manifesto,”” I estimated that an industry-wide consortium would deliver $4 billion in incremental revenue to the U.S. newspaper industry by 2010. In a consortium and on common platforms, bargaining power and negotiation efficiencies could be gained while operational complexities (especially technology interface issues) were significantly reduced.
Much has been said since my first article about the feasibility of creating a newspaper consortium. Many believe it is fantasy. I disagree.
First, consider the fact that many such consortiums exist in media and beyond. There’s agency.spotcable.com in the cable business, a common ad entry portal for all cable company owners in the U.S. The MLS/board of realtor system in real estate, Sabre in travel, and the credit card infrastructure in banking are all examples.
Probably the best example in the newspaper business is in Switzerland, where Publicitas is the consortium. 100 daily newspapers, along with 500 magazines and weeklies share a common ad order entry and billing infrastructure and common classified systems on the print side; they are in the midst of migrating to common online classified systems with web-to-print capability (10 companies currently on the system). Even the ad sales staffs of these newspapers are outsourced to Publicitas. The network boasts more than 100 branches, 1,352 employees, around 15,000 advertisements handled daily, over 600 titles which have outsourced their entire advertising management and cooperation agreements with nearly all publishing houses. Newspapers’ share of total ad spend in Switzerland is 63%, about double U.S. newspapers’ share.
That’s the power of a network.
So how, specifically, might the industry move into a consortium?
It’s pretty straightforward. Create one.
Three to five newspaper companies would put up the capital. In the early stages, I would focus on companies with large markets — just the top 100 — but not Gannett, Tribune, New York Times or the Washington Post, who have unique attributes due to their position in the industry. All other newspapers and newspaper companies would become affiliate members. Individual newspapers would migrate off of their current online platforms (content management and classified) and migrate to a common online technology platform managed by the consortium.
The consortium would be empowered to manage all vendor relationships, and cut partnership deals in all the ad verticals and with the search portals. Local markets would retain control over the look and feel of their sites, the news product, branding and advertising content. However, the basic navigational structure and ad positions would be consistent across the network so as to enable efficient network-wide content and ad deals. The producer toolkit would be the same in all markets.
With scale and a common technology foundation, the consortium could engage in efficient conversations with key partners, opening new doors and closing big deals. That’s the point of scale. We take the noise of a thousand small conversations out of the mix, and create the opportunity for one powerful conversation with online heavyweights.
Are there other ways to go? Sure. Individual newspaper companies could cut an ad deal with Yahoo! or major vertical ad partners without moving everything into an ongoing consortium and onto common platforms. This could be a good interim move at least until a common platform infrastructure can be built. But real bargaining power comes when a single consortium, backed by common platforms, can engage in competitive bargaining with all search players, all top shopping sites, all top classified vertical players for most of the top 100 markets in the country. It can then can pick the winning bid in each area, and implement it seamlessly across the network.
Let’s get back to the Newspapers Next survey of executives. Respondents were asked to rate their interest and sense of urgency in pursuing 25 different types of online collaboration opportunities.
The top seven areas of online collaboration were:
–Sales efforts (i.e., a national online sales network)
–Ordering / invoicing infrastructure
–Inventory monitoring and control
–Ad types and sizes
–Content management system
Take a close look at these seven items. I would suggest that they are best thought of as components of one collaboration initiative. Yes, each item could be approached separately. But such a piecemeal approach would create a complex mishmash of initiatives, all suboptimized because the organizations and technologies are separate.
The right way to pursue this is to build a common platform that is an ordering/invoicing infrastructure which can an ad-serving platform which can monitor and control inventory, analyze and standardize traffic metrics and is leveraged by a national sales network. In short, the industry needs a unified consortium leveraging a unified technology infrastructure.
To summarize, the common platform would be comprised of the following:
–A common content management system for every newspaper in the network
–Common basic navigation structure
–Common ad positions
–Common producer toolkit which allows significant local “”look and feel”” customization
–Local control over news content and presentation
–A classified marketplace supporting merchandise, auto, real estate and recruitment categories, with tabs for local listings and the national database
–An ad order entry infrastructure that serves both local and national advertising placement
–An ad serving infrastructure that supports both local and national ad serving for the entire network of sites
–An ad inventory management system that enables the efficient forecasting of inventory availability, for both local and national advertising
The consortium would be given the following decision making powers:
–It decides which vendors to use to support the content management system and classified system.
–It negotiates all vertical partnership deals (for all ad vertical categories), on behalf of the entire network.
–It negotiates any deals with the search portals
–It negotiates any mobile carrier deals
–It offers centralized content channel management in the areas of national news, travel, business, entertainment, and technology, with local override capability enabling local stories first, followed by deep centrally created content and functionality.
Does this seem like a loss of local control? It is. But we need to be thoughtful about where local control adds value and where it doesn’t. Local control matters in news judgment and presentation. It matters in advertising sales. But it does not matter — indeed it gets in the way– in basic navigation structure, ad positions, underlying platforms, producer tools and vendor relationships. Nor is it effective in managing strategic partnerships. Individual newspaper companies need to push decision making power into the consortium, so as to gain economic power. It’s a necessary tradeoff, for one simple reason: a local-only position is indefensible.
The time is right; a path can be forged. It’s time to press the debate. What are the pros and cons of sacrificing local control? How do we address competitive market issues? How do we resolve questions of governance and affiliate relationships? It’s time to move from discussions of “”whether”” to discussions of “”how.””