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This week the Internet is abuzz with news of all of the new news sites being launched online. Both William Lauder’s piece in the Wall Street Journal “News Websites Proliferate, Stretching Thin Ad Dollars” – http://tinyp.as/1iQzswk – and Ken Doctor’s piece on The Neiman Labs web site “The newsonomics of why everyone seems to be starting a news site” – http://tinyp.as/1ejAkpW – do an excellent job of running down the litany of new entrants.
If the new publishers are confident in their prospects based in part on “new forms of digital advertising” they are going to be sorely disappointed. The Journal article points out that:
“… ad buyers and industry executives say the proliferation of new sites and automation in ad sales is driving down advertising pricing—by as much as 70% in some cases—making it tougher for sites to turn a profit from traditional online advertising. More news sites means more ad space is available.”
To the publishers’ credit, many recognize that building their businesses solely based on advertising isn’t tenable. Jim VandeHei, the president and CEO of Politico and Capital New York, said as much to the Journal’s William Lauder:
“People don’t appreciate how difficult it is to do interesting journalism that is monetizable and sustainable over time. We would never build a media product based around [web] traffic and advertising. That is a fool’s play in this day and age.”
The article goes on to say that VandeHei hopes subscriptions will eventually account for about half of his revenue.
What Politico and others publishers moving toward hybrid paid/ad supported models don’t appreciate is how difficult it is to build, support, and evolve a paid content platform. We’ve seen this phenomenon first-hand. Publishers set out on their own and build the most basic homegrown solution, perhaps a monthly recurring subscription, only to quickly find that they are out of their depth.
When an audience becomes something more than a monolithic eyeball, what were once anonymous readers are suddenly paying customers. Paying customers come with their own set of demands, from account management and security needs to cross-device access rights and in-app authentication. Paying customers also create data, lots of data that in turn requires a sophisticated analytics package to glean and analyze. Does the publisher’s homegrown system come with its own analytics package?
The aforementioned is just the tip of the iceberg of things that publishers need to consider as they rightly seek to diversify their revenue streams. What happens six months down the road when the publisher needs his or her homegrown system to offer a promotional code, a discount, new pricing and access rules, mobile compatibility, support for new payment methods, support for multiple media types – access to web pages, podcasts, MP3s, PDFs, live and on-demand video, etc., etc. You get the point.
We are thrilled by all the new entrants in the online media space and we wish them all the best. By focusing and innovating on what Tinypass does best – ecommerce for content – publishers are free to focus and innovate on what they do best — creating valuable, compelling content that resonates with their audiences.