Strong journalism needs a new business model

January 23, 2019

Media is defined as the means or channels in communication in society. It used to be pretty simple to distinguish media versus everything else. If you were watching television, you were consuming media. The conversation you were having at the local sports bar with a few friends was definitely not considered media. This distinction between these two situations is now virtually non-existent. What has changed is that we all now have devices in our pockets that allow us to be little media empires without any gatekeepers. In some cases, the word “little” doesn’t really apply. A whole new type of media can emerge even from a simple situation, even a few dudes talking sports at a bar.

The trend is clear. Media has become completely fragmented and legacy media models simply do not work anymore. Technology executives and investors understand quite readily that media has transformed due to information communication technology. However, many people I speak to in media still seem stuck in the old world – unwilling and sometimes incapable of accepting this reality.

Addressable advertising is the norm

When I started working in media in 2004, there was a big new trend that was emerging, addressable television. It was the opportunity to cater television ads to specific audience segments thereby reducing waste and increasing effectiveness. While still a distant promise for TV, this reality has come to pass for online advertising. The reach and targeting capabilities of online advertising today are unrivalled by other medium. A large reason for this is the data network effects the two large technology platforms enjoy, namely Google and Facebook.

Having access to user profiles at a global scale is every marketer’s dream, targeting specific audiences they want to reach. Without going too much into the technical details, the lead these platforms enjoy is nearly unsurmountable due to machine learning algorithms. More data equates better targeting. Thus, companies that already have lots of data will get even stronger. It doesn’t necessarily translate to other fields but it definitely helps their core field of excellence which is online targeting.

None of this of course is new. The battle for online advertising dollars was won years ago. We are simply living in a transitory period where all advertising dollars will slowly shift towards being addressable.

Advertising itself has changed

The very nature of what works in advertising is itself going through a transitory period. It is starting to resemble a barbell, heavily weighted at both ends and with nothing in between. On one end, you find sophisticated targeting on large platforms like Google and Facebook. An honorable mention goes to Amazon as well whose advertising platform is growing extremely rapidly. On the other, you find premium sponsorships and brand buys which take many forms like product placements or sponsored content. What isn’t working anymore are the models in between, attempting to be premium and targeted. Television advertising is a good example of a medium in a slow decline. Netflix has become the operating system of our televisions. The past holiday period is a good indication of the company’s dominance. Conversation around entertainment centered around Birdbox, Roma and Black Mirror, all of which were Netflix originals. It is estimated that Netflix accounts for 10% of all television viewing in the US.

The broader point is that interruption based advertising is waning. This loss of efficacy is shifting ad investment to the edges. Everything caught in between like newspaper, radio and TV ad buys are decreasing in importance for executives deciding on marketing capital allocation.

News is worth it

What is potentially harder to grasp is the massive societal impact this is causing. The foundational business model for journalism is ad based and the rug has been pulled from under them. Some publishers are overcoming this strategic deficit. Many articles have been written on how the New York Times and the Washington Post have succeeded in changing building differentiated business models with subscriptions. While these are laudatory achievements, many other media companies seem to ignore this at their peril. Focusing on advertising and analytics is simply no longer sustainable. Business models invented before the internet are no longer coherent with today’s economy. Every new CMO that is given responsibility over a marketing budget has only one fiduciary responsibility, increase revenues and profits for the brand they work for. Helping journalism used to be a happy by-product, now it is simply the victim. Claiming otherwise is shortsighted.

In this stark new reality, most publishers have realized that the cavalry isn’t coming. Even recent measures announced by the Canadian government to help newspapers isn’t sufficient. A one time cash injection with public funds is surely a welcome relief for publishers but doesn’t get to the heart of the problem. Journalism can no longer be supported by advertising alone.

What is journalism’s job?

The endless debate around paywalls, free access or reader donations misses an important point. If a sustainable model is not found soon, the time for experimentation will vanish. I imagine that this is already the top corporate priority for every journalistic organization. If not, it should be.

A clear warning sign is that even digitally native news outlets like Vice, Buzzfeed, Mic and Gizmodo are currently struggling to grow revenues. Either you are part of the Google and Facebook ad ecosystem or you are in trouble.

This begs the question, what is journalism’s real job? It isn’t to provide an outlet for advertisers to reach their “target audience” but rather serve citizens in a democratic society and offer a voice. As such, aligning revenue generation with readers makes more sense. It enables media companies to expose corporate crime even if those corporate benefactors are large advertisers.

Strong journalism needs a new business model

Traditional advertising will not disappear overnight as many brands will continue to invest in traditional media. However, the top priority should be to supplant advertising as the top source of income. This leads to the difficult question of how. There isn’t a definite answer and I can’t pretend to know the answer to a problem being faced by people smarter than I am. The one addition I can make to this debate is that there is only path forward, constant experimentation and iteration to generate multiple sources of revenue. For instance, take the Guardian’s approach with reader donations or even testing with blockchain technology that Forbes recently announced. There is a great deal of scepticism in partnering with the technology giants which is of course warranted. Notwithstanding, recent announcements from Facebook and the Google News initiative do appear to be genuine projects to support independent journalism. A cynic might point to the fact that these are politically motivated. It doesn’t change the fact they are an olive branch and a few success stories have emerged.

In today’s zeitgeist, most people value reliable and trustworthy sources of news and not being user profiles to be targeted. It is something that many people are willing to pay for. The importance of the fourth estate in a healthy democracy is self-evident as recent political events have demonstrated. Media executives and journalists themselves must take note. The only way to overcome this systemic industry change is to continuously adapt. Striving for diverse sources of income is not only commendable but primordial for an informed and aware society.