CAN NEWSPAPERS STAY STRONG ONLINE?

By: Jennie L. Phipps Newspapers Have Missed Opportunities, Say Online Advertising Folks





The future of newspapers - online and off - is a subject that just won't go away, particularly as Internet investors demand greater returns and making money from online content seems hopelessly challenging.



For days now, the discussion dominating the Online-Ads mailing list, a 2,000-member e-mail discussion list dealing with the intricacies of online advertising, has been about newspapers' future.



Some list members have argued vehemently that newspapers will soon join clay tablets in the annals of communication. Others have zealously defended them, including Michael Hiles, an executive with Reach Publishing, a Val-Pak coupon franchise group. Hiles reaffirmed his online post via phone:



"In Cincinnati, we are fortunate to have competing broadband carriers and a very high household connectivity base," he said. "Our local market research shows only 3% of all households get their news exclusively from the Internet, but 100% of those who get their news online get it from the Internet versions of the local media. ... And that is why the paper 'ain't goin' nowhere, baby.'"



Hiles' conclusions mirror those reached by an international marketing research firm, NFO Ad Impact, which released a survey in September pointing out that when users surf online for local information, the first place they are likely to go is their local newspaper's Web site.



The survey examines the habits of 10,000 online consumers across 17 major local markets between January and June 2000. It compares familiarity among consumers with city guide sites like America Online's Digital City service, Lycos Cityguide and Ticketmaster CitySearch, with their familiarity of these online newspapers:



Atlanta and the Atlanta Journal-Constitution's ajc.com;
Boston and New York Times Digital's boston.com,
Chicago and Tribune Interactive's Chicagotribune.com,
Denver and the Denver Post Online,
Detroit and KnightRidder.com's Detroit Free Press,
Ft. Lauderdale and Tribune Interactive's Sun-Sentinel.com,
Los Angeles and Latimes.com,
Miami and Knightridder.com's The Miami Herald Internet Edition;
Minneapolis and StarTribune.com,
New Orleans and Advance Internet's NOLA Live,
Orlando and Tribune Interactive's Orlando Sentinel Online,
Phoenix and the Arizona Republic's AZCentral.com,
Portland and Advance Internet's Oregon Live,
Charlotte and The Charlotte Observer's Charlotte.com,
Salt Lake City and the Salt Lake Tribune's Utah Online,
Seattle and the SeattleTimes.com; and
* Washington, D.C. and WashingtonPost.com.



The study's findings show that local newspapers dominate while out-of-towners are hardly in the game. Across the country, about 66% of the representative sampling, which was balanced by demographics and technographics, knew about their local newspaper's Web sites. Nearly 48% of them had visited the site - 22% in the past 30 days.



In contrast, across these same markets, only 16% of online consumers had ever visited the local city guide sites and fewer than 5% had visited in the past month. About 66% didn't even know the sites existed.



Jade C. Cusick, vice president of NFO Ad Impact, isn't particularly familiar with the newspaper business. His company doesn't have clients in the publishing area and the survey wasn't done, he said, to win them, although he won't turn them away if they are willing to pay the annual subscription rate, which is between $20,000 and $30,000 annually depending on the market.



NFO Ad Impact is a part of NFO Worldwide, which considers itself the largest custom marketing research firm in North America. Usually, its customers come from industries like healthcare, financial services, and automotive. The information derived from this survey will help those clients identify advertising opportunities.



Cusick's survey should please online newspapers that doubt how others have attempted to accurately count site users. NFO gathers its numbers differently than Media Metrix. NFO studies what people say they do rather than counting online traffic. That method eliminates the issue that makes online newspaper numbers look low in a Media Metrix audit, which struggles with counting people who use the Internet from work.


Cusick says his research method is traditional, and while it won't replace Media Metrix, "There's a place for both methods."



After taking a hard look at online newspapers, Cusick says his company intends to point out these advantages to clients:



Brand. Everybody knows the newspaper.
Feet on the street. An established sales force with connections to local advertisers.
Community connections. This makes forming strategic partnerships easy.



All three factors make online newspapers attractive to other industries searching for partnerships and advertising. But Cusick doesn't think newspapers have exploited their advantage.


"If they tried, they could own the local online shopping space," he said. " I don't think that they have aggressively pursued that local space, and I'm not sure why."



Meanwhile, over on the Online-Ads mailing list, the naysayers persist. David Yancey, chairman of Internet Business Forum Inc., contends that it's not inertia but e-mail that will deal newspapers the final blow.



He writes: "Newspapers are threatened by the ability to understand and manage individual preferences, coupled with the near-zero cost of content, the near-zero cost of e-mail-based delivery and the fantastic increase in ad-dollar performance that is made possible."



But Shawn Merwin, director of communications at Visionary Software, is doubtful. He concludes: "We've probably all thrown out important documents that came hidden underneath a pile of junk mail in our e-mail boxes. We don't throw out the newspaper by mistake, because we recognize and trust it. This trust can be more valuable, online and off, than technological advances."



Rich Gordon, chair of the new media program at Northwestern University's Medill School of Journalism, concurs that trust and brand are valuable commodities online, but he doesn't think the traditional advertising business model is nearly as resilient.



"Simply publishing editorial content that could just as easily be published on paper - long narrative texts - isn't going to make enough people come back to the site to support a revenue stream," Gordon said.


That's a fundamental challenge for newspapers because the industry has based itself on publishing lots of content that people need to know without much regard for whether or not they want to know it. Gordon, who was previously director of new media at the Miami Herald, thinks economics will cause some serious re-evaluation of what's published and what isn't.



"I don't think we have to get to the point that any individual article has to pay for itself. But I think we are already at the point where a site isn't going to develop a new editorial area until it is persuaded it can develop revenue that will support it," Gordon said. "So the challenge becomes how to develop a revenue model that will support content with integrity. We want to have the revenue that we need to do good journalism online."



Looking to a television company for inspiration about the potential for profitably selling content with integrity might seem ludicrous to some, but CNET Networks Inc. expects to report a profit margin of nearly 25% in 2000. They're doing it by selling information about technology that is reliable, unapologetically critical, and supported by the same companies that are frequently targets of the criticisms.



CNET's 34-year-old CEO Shelby Bonnie says his company, which launched in 1995, went into the business with a focus on serving users, which allowed them to approach things differently. "Other people were approaching the same things and saying, 'I'm a publishing company. How can I replicate existing models?' We approached it uniquely and that allowed us to empower this medium to do different things," Bonnie says.



Is there one important factor in the company's success?


"I think that in some ways editorial credibility might be the most important thing," Bonnie said. "Certainly, it is more important now than it is has ever been. We're dealing with the creation of new brands. An undying commitment to the highest journalistic standards is what makes people willing to trust our brands."



But can the newspaper business continue to afford to do the right thing - online and off? Adam Clayton Powell III, vice president of technology and programs for the Freedom Forum, is dubious. He wonders if there will be an online newspaper shakeout because stockholders will get antsy. "Think about what the Internet is for most newspapers. It's a medium in which you have to spend money to cover the news for an audience that is unwilling to pay for it - newspapers just aren't accustomed to that."





Jennie L. Phipps (jennielp@bignet.net) is an independent writer and editor based in Farmington Hills, Mich. She writes frequently for E&P Online.





Copyright 2000, Editor & Publisher.