“What went wrong” with newspapers wasn’t what went wrong

by Jason Preston on April 13, 2009

I’m sure there are hundreds of stories of papers passing up winning business pitches. There are probably thousands of stories of papers passing up losing pitches as well.

From an article on Boston.com called “What Went Wrong?”:

He described Monster Board, his fledgling venture in Maynard that sold help-wanted ads online. Jeff Taylor proposed the Globe put up $1 million for an ownership stake that would give the paper a chance to put its lucrative classified advertising business on the Web – a step that might have cut into its revenue in the short term, but offered a chance to take the franchise national.

The answer was no. Sharing the newspaper’s nearly $100 million a year in help-wanted advertising didn’t make sense. “Our grandfathers would roll over in their graves,” Jeff Taylor recalled being told. Soon after, he sold his business to the advertising giant TMP Worldwide. It expanded into Monster.com, a website that in 2000 generated more than $500 million, marking the beginning of the end of newspapers’ near-monopoly on classified ads.

The thing is, it’s easy to look back and judge newspaper companies for missing opportunities. It seems so obvious. But it’s much harder to make the right investment or business decision at the right time than it is to decide what would have been best when looking back.

I’m not saying that newspapers have done everything right, because they haven’t. But I do think that they’ve done more than most people give them credit for. Maybe even all they can do.

It’s not the party you think you’re missing

In fact, if it makes the newspaper industry feel any better, think about the job listing and classified industry right now. You have Monster.com and you have Craigslist. And then you have a few small players.

Realistically, there was only room for maybe one or two newspapers to really make money in the market – the old days of classified ad listings are over, because the majority of all those ads are free. The geographically-agnostic distribution medium we know as the internet makes it a zillion times harder to segment the job or classified market, because the database is always more valuable when it’s bigger.

What’s better than fewer listings? More listings!

Where am I going to go look for a classified ad? Where there are the most listings!

Free content = original sin? I don’t think so

The other topic which has been hashed, re-hashed, and then blended, is this idea of paying for online content, and how we consumers are evil for not doing.

The fact is that there are fundamental economic forces at work that drive the price of online content down to zero. In the face of this kind of pressure, it’s pretty odd (not to mention pointless) to sit around thinking about how consumers could have been “trained” to pay for content.

If you’re looking to charge money online, you need to sell a generative; something that cannot be easily copied, and is therefore scarce.

There are plenty of issues facing the newspaper industry that deserve a lot of attention. But “what went wrong” was not “newspapers didn’t act like venture capital funds.”

Instead, “what is going wrong,” is that the new business models (note the plural) are in some ways parasitic to the old model, and it’s incredibly hard to cannibalize an institution’s existing business model so that it can move forward, especially when said company is publicly traded, as many newspapers are.

News is alive and well, and so is the business of news. It’s just twice as hard for existing companies to make the change than for new ones to take their place.

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04.16.09 at 5:22 pm

{ 7 comments }

1 Seth Long 04.13.09 at 1:35 pm

The Boston/Monster story reminds me of the crazy pitches we were getting during the Web 1.0 bubble. I remember regular pitch meetings with owners of would-be mega-sites that all crashed and burned.

2 Jason Preston 04.13.09 at 1:42 pm

Seth – having had many such ideas myself, I’m well aware that it’s a lot harder to “pick the winner” than it seems when you’re looking back at it.

“But it’s obvious! It’s Monster.com! How could it not work?”

“Let me count the ways…”

3 Curt M. 04.13.09 at 3:06 pm

This is like the stories from the 1950s of people who bought Polaroid when it went IPO and saw their stock skyrocket as the popularity of instant photography took off. But now … Polaroid has crashed and burned more than once. There’s no way to know about this stuff.

The response Jeff Taylor got was exactly what I’ve imagined newspaper owners saying as the net took off: Why should we do that? We’re making millions on our print classifieds. Why would we want to give that away?

Again, you just never can know what the best course is.

4 Johnathon Fitzpatrick 04.13.09 at 3:34 pm

If news is ubiquitous and the price of content in our saturated market is zero, doesn’t that just leave merchandising and grants, or is there truly a reliable revenue model for niche news? Most often news isn’t the source for revenue, it’s advertising. However rock bands make tons more money from their tickets and merch than from their their content, i.e. album sales. Shouldn’t we be following the music artist profit model instead of the RIAA model?

5 Jason Preston 04.13.09 at 5:31 pm

Johnathon – maybe, although the world only needs so many T-shirts 😉

6 Marika 04.15.09 at 1:24 pm

I really enjoyed this post – made me think in a different direction. I also resent you for making me think when it’s sunny out.

7 ColeenB 04.19.09 at 6:18 pm

I think the fact that the media is moving online is a good thing. We still have a market for national, international and local news. We may not need as many papers for the national and international news as we did before because everyone can have access to the few that are out there. It’s easier to start something that is unique and has value now because you can reach a broader audience.

The model of revenue from advertising is still there, it’s just more efficient. It still makes sense to advertise in a publication that is popular locally if you’re a local business.

And the search engines can identify original content and give credit to the person who did the work – with text anyway. Images are a different matter.

There have been numerous times throughout history when something became obsolete and was replaced by something else. It’s a painful transition for those involved, but I can’t imagine not moving forward.

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