Millions Of Visitors, No Revenue

May 17, 2011

It’s tough to make money in online news. That’s the conclusion of a massive report issued last week by the journalism school at Columbia University.

That comes as no surprise to print and broadcast executives, who have seen their once-mighty monopolies erode in recent years faster than a Mississippi River levee at full flood.

But the report makes for fascinating reading for anyone interested in the massive communications upheaval we’re undergoing — and whether we can preserve the news gathering needed for an informed society.

In clear and compelling language, backed by research and extensive interviews, the authors tell the story of how traditional media were blindsided by a change that few saw coming.

And they strive to answer the fundamental question of online news: Why do so many digital users generate so little advertising revenue?

Consider these examples:

• A TV station in a top-five market gets seven million page views a month on its website, yet the site generates only 1 percent of the station’s advertising revenue.

• Believing that videos would boost its web audience, the Miami Herald devoted significant resources to producing its own video reports. Yet Herald-produced videos bring in ad revenue of only $4,000 in an average month.

• As its traditional base of large advertisers shrank, the Houston Chronicle began targeting neighborhood, mom-and-pop businesses that it once ignored. Using an innovative business model, the Chronicle sells an array of digital ads and services, including helping its clients build their own websites and improve their search engine rankings. But even if the new approach succeeds, the paper’s publisher figures it will do no more than match the current revenue from just one of the paper’s largest advertisers. “This has become a nickel-and-dime business,” Publisher Jack Sweeney said. “And you need a lot of nickels and dimes.”

The authors cite some success stories, to be sure. But many of them involve media companies in small cities, where advertisers have fewer options and also may be motivated as much by civic pride as by cold financial facts.

Meanwhile, traditional media are under attack by so-called “aggregators,” sites that scoop up news stories from everywhere, slap new headlines on them and run summaries on their own sites. The Huffington Post is one well-known example, but there are thousands more.

Said Aaron Kushner, an investor who’s trying to buy the Boston Globe, “The definition of a competitor now is someone who gives away your story for free.”

The report offers some suggestions for the traditional media: develop targeted local content that can’t be found elsewhere; strive to build a loyal audience rather than chasing large numbers of casual visitors; and look for ways to break the stranglehold of the CPM (cost per thousand) pricing system, which relies completely on the number of eyeballs that see an ad but doesn’t do a good job measuring loyalty or engagement.

The authors conclude with a hopeful exhortation to news organizations: become smarter, more nimble, more innovative — and you may become more profitable.

It’s a fine sentiment. But it’s easier said than done. Still, this report is an absorbing and insightful read for anyone who cares about the news.

This is John Reinan’s weekly marketing column for MinnPost.com.