How Media Companies Can Compete Online

1Executive Summary

Publishers of traditional media (newspapers, magazines, print publications) have had at least a decade, if not longer, to get used to the disruptive effect the web is having on their businesses. But many companies continue to drag their feet when it comes to adapting. Some experiment with paywalls. Others hope that iPad apps will be the solution to their problems, now that Apple allows publishers to charge users directly through the tablet. And some companies have taken no action at all. But the lessons of how to adapt to the web and take advantage of it are not complicated, if media outlets are willing to listen. These lessons don’t just apply to mainstream media either — anyone whose business involves putting content online needs to think hard about applying these rules for new media to their product.

Newspapers in particular continue to come under pressure from the digital world. Forecaster eMarketer recently estimated that online advertising will eclipse newspaper advertising this year for the first time, a further sign of the declining importance of newspapers in the online commercial ecosystem, where Facebook and Twitter are getting more interest from advertisers than any traditional publication. Online, newspapers and magazines are just another source of content and pageviews or clickthroughs — they are no longer the default place for brand building or awareness advertising, nor are they even one of the most popular.

Rupert Murdoch, among others, seems to believe that paywalls are the route to success online and recently installed one at the Times of London and the Sunday Times in England. But paywalls are mostly a defensive move: Newspapers and magazines are fighting to try and keep some of their subscribers paying for the product. The editors of the Times have said they are happy with the response to their paywall, though their readership dropped by more than 99 percent following the introduction of subscriptions for the web site. That suggests it is far more important to the paper to keep even a few thousand paying subscribers rather than appealing to the vast number of potential readers who will now never see the site’s content. The New York Times is planning a similar attempt to block non-paying readers (although its wall is expected to have a few more holes to allow people to read links that are shared via social media).

It’s true that the Wall Street Journal and the Economist, among others, have been successful in getting readers and users to pay for their content — but it’s also true that not all publications can be the Wall Street Journal or the Economist. In other words, not everyone can command the kind of following and dedicated readership those outlets do. Whether you are a newspaper or magazine publisher, or whether you have some other content-based business that depends on online publishing in some way (advertising, for example), here are some of the lessons you need to absorb in order to take advantage of the web:

  • Forget about being a destination. In the old days, the “build it and they will come” way of thinking was enough, and everyone from AOL and Yahoo to existing publishers of content tried to make their sites a destination for users, complete with walls designed to keep them from leaving. But Google proved that successful businesses can be built by actually sending people away. Others, including The Guardian newspaper in Britain, have shown that value can be generated by distributing content to wherever people are, via open APIs and other tools, rather than expecting them to come to you.
  • Don’t just talk about being social. Social media is a hot term, but the reality is that all media is becoming social. That includes advertising and other forms of media content. Whether you are writing newspaper stories or publishing posts on your company blog, you will get feedback from readers — and you had better be in a position to respond quickly. If you don’t, or if you block your employees from using Twitter and Facebook and other such tools, you will not get any benefit. You will only be worse off as a result.
  • Get to know your community. This is something that new media outlets such as The Huffington Post have done very well — reaching out to readers and users, providing a number of different ways for them to share and interact with the site. News sites like Toronto-based OpenFile are designed around the idea that every member of a community has something to offer, and that allowing these ideas into the process via “crowdsourcing” can generate a lot of value. Even some older media players such as the Journal Register newspaper chain are opening up what they call a “community newsroom” as a way of building bridges with readers.
  • Use all the tools available to you. Large media entities — in fact, large companies of all kinds — often have a “not invented here” mentality that requires them to build or develop everything in-house. But one of the benefits of the distributed web is that there are other services you can integrate with easily in order to get the benefit of their networks, without having to reinvent the wheel. Groupon is a great example: Many publishers and web sites are implementing “daily deal” offers through a partnership with Groupon, while others are using a white-label service from a competitor called Tippr (they get to build relationships with retailers and keep a share of the proceeds). Take a look around you and make use of what you can.
  • Don’t pave the cart paths. Media outlets, including a number of leading newspapers and magazines, seem to feel that the ideal way of using a new technology such as the iPad is to take existing content from their web sites or print publications and simply dump it on the device. But why bother putting your content on the iPad if you aren’t going to take advantage of the features of the device, including the ability to share content? And yet, many major media apps provide no way for users to share or even link to the content they provide, and therefore don’t get the advantages that social media can bring in terms of word-of-mouth marketing.
  • Be prepared to “burn the boats.” Venture capitalist Marc Andreessen wrote about how media entities in some cases should “burn the boats,” as the explorer Cortes is said to have done in order to show that he was fully committed to his cause and would never retreat. The idea here is that if you are still mostly focused on your existing non-web operations and always see those as the most important, then you will inevitably fail to be as aggressive as you need to be when it comes to competing with online-only counterparts. That, of course, could spell doom. The Christian Science Monitor and several other newspapers and magazines shut down their print operations completely are now web only. Obviously not everyone must go to such measures, but sometimes drastic action is required.

It seems unlikely that Rupert Murdoch will ever be convinced that he has made a mistake with his paywalls, despite a track record of poor judgment calls such as the purchase of MySpace. And other newspapers and publishers of all kinds are of course free to make similar mistakes. But if you are engaged in a business that involves content and you want to remain competitive online, you have to become just as web-focused and adaptable as your online-only counterparts. Ignore the lessons, and you will wind up cornering the market in things that most people no longer want — or at least no longer want to pay for.

Relevant analyst in Media
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