Ads alone won't save newspapers

Douglas McLennan wrote a post the other day titled Who Put These Guys In Charge? (Why Newspapers Are Failing), which is a damn good start to what appears to be a series of posts on, unsurprisingly, what newspapers are doing wrong.

As you might have noticed, I’ve been musing about the future of newspapers for a while now, so this is right up my alley. People might actually take me seriously if I ever took that geeky-looking videogame troggle out of the top left corner (not gonna happen).

McLennan points out in his post—and I think he’s dead-on—that newspapers are drastically under-utilizing their ad space.

I was recently talking to someone who, as an editor at a pretty sizeable newspaper, would know. He tells me that he thinks internet ad sales revenue drops so far behind print ad revenue for two major reasons:

1. The sales team doesn’t understand internet ads

2. The internet ad clients are different than the classic ad clients

That seems like a pretty big duh, but it’s also good news that newspapers employ people who do in fact, contrary to popular opinion, “get” the internet.

McLennan seems to imply that the answer is to lower ad costs and introduce a google-esque CPC ad system throughout a paper’s site. Having tried that system myself I can tell you: CPC ads are, by and large, a publisher’s worst nightmare.

I think introducing some CPC inventory for local advertisers and small fish to buy is a great idea. I think that trusting too much in CPC is a mistake. CPC ads are inherently flawed: they don’t charge advertisers for the very tangible benefits of brand affinity and brand exposure.

But the question remains: will ads alone save a newspaper? Will newspapers, more or less as they are now, become profitable with enough tweaking in the ad department?

This is going to require a good bit of guesswork and a few mystery numbers, so take this with at least five grains of salt, and a recommended two margaritas.

Let’s go hunting for some data. The data on numbers of unique audience members that McLennan points to is cool, rather hard to determine, and completely useless in determining what kind of revenue you might be able to suck from it.

What we’re really after is “page views.” This is, at least currently, the magic number, since it refers to the number of times any given page is “served” to a viewer. Consequently, it also means the number of times any given ad is displayed.

[ As a side note, reporters: you should be paying very close attention to how many page views your articles are getting when they are put online. This number will vary depending on how far down the rabbit hole they stick your headline, but it is going to become a VERY IMPORTANT metric for you in the near future. It is, in short, what you are worth to the online portion of the newspaper. ]

Let’s use the hallmark of internet newspaper success, the New York Times. TechCrunch lists the Comscore numbers (oh, to be Fred Wilson, and get at those numbers anytime you like) from last October as 181 million pageviews in that month:

[Image: comscore numbers]

Scale those two for “accurate” page views and we’re looking at about 170 million page views per month. This number is almost certainly inaccurate.

Now, we also need to know what the earning potential of those page views is. This is trickier, since sites use all different kinds of ad services to fill in the ad space, and different sites get different returns, and nobody publishes their numbers anyway.

Well, not quite nobody. You can click the little sitemeter icon on the bottom of Gawker blogs to get their traffic. If you check the stats for Gawker.com. They report an average of 496,967 page views per day.

This means that we can collect (or rather, other people already have) pretty accurate data on what kind of traffic the whole Gawker media network commands. Various people have estimated that gawker servers about 150 million page views per year and pulls in somewhere around $20m.

And that’s with an experienced internet ad team doing a damn fine job of selling ads. According to my voodoo, the NYT serves roughly 2040 million pages per year. If they sold like Gawker, they’d make $272 million per year. Is that enough to run the New York Times? I doubt it.

Even if my numbers aren’t accurate, someone at the New York Times can do the calculations themselves. I bet I’m not so far off that my conclusion is wrong.

The good news is that the Times has more inventory to sell than Gawker, and they have a much stronger MSM brand they can use to wrangle bigger ad deals. The bad news is that they’re already doing this, and we know it’s not enough. It’s a similar conclusion (and actually, more or less a similar revenue number, that others have reached by different methods).

Anyone looking for solutions in the newspaper industry needs to be looking beyond advertising solutions. A good place to start would be this post, which catalogues the current list of web-based business models.

Some of these models don’t apply. The New York Times proved already with Times Select, for instance, that freemium is not going to be workable for newspapers unless your value-added is something other than newspaper content. Two big ones that jumps out at me are API fees and alternate output.

Why not develop an API for your newspaper? For a fee, let other businesses plug into your system. Why not offer high-quality PDFs with print layouts for people to use on digital readers or to take on plane flights?

Why not sell “merchandise?” I’m willing to bet the New Yoker makes a fair bit of cash from letting people order any cartoon with their caption attached.

I’m sure that the costs of running a newspaper are far higher than many people account for. And I’m sure that many newsrooms are staffed with savvy, smart people who are hampered by a management system that is bulky and resistant to change.

But I share McLennan’s hope that with a little bit of ingenuity, newspapers can figure out how to effectively monetize their larger-than-ever audience. If there is ever a great time to be in the newspaper business—or any business, for that matter—it is a time like now, when the whole industry is reinventing itself.