Talking New Media

Remembering what paid for all those editorial sections filled with few ads, and the real reasons newspapers were so profitable

The golden age of newspapering was not one where readers paid through the nose to subscribe to the paper, it was an era where publishers could afford to run sections with few ads because the classified section (and other ad products) were paying the bills

The world of newspaper publishing has been obsessed with reader revenue for about a decade now, so it might be a good time to remind those who haven’t been in the business longer than that why and how newspapers were once so successful.

The first point probably should be to make sure one myth of the ‘good old days’ is quickly refuted: the last time newspapers actually made money from its circulation was likely when William Randolph Hearst was still a publisher. For much of the last half of the 20th century, newspapers just hoped they didn’t lose that much from circulation. The goal was to have a dominate position in the market, reaching lucrative readers, and selling them to advertisers. Once the accounts and journalists began to take over costs were cut from the circulation department, boys and girls were let go as carriers, and independent contractors who didn’t know the names of their customers began throwing the paper into the bushes.

Much of the newspaper was published at a loss.

The Monday sports section is a good example. One would think that advertisers would love to appear inside the section, what with all the football and baseball news that would appear. But no, advertisers back then were like they are today, concentrating on the weekend editions. That doesn’t mean there were no ads — at many papers Monday was tire day, when repair chains advertised replacement tires — just that when a P&L would be done on the section it was always found to be a money loser.

So, why would newspapers produce seven day a week sports, business and entertainment/lifestyle sections? Because they could… thanks to highly lucrative classified sections, as well as Sunday inserts, weekday food sections, etc.

In other words, newspapers were at their most profitable when they sold advertising that had little to do with the main editorial sections they were producing. Yes, big, successful papers sold lots of retail advertising, too. But without those ads that never touched editorial the papers would not have been as successful.

This why I fear that most papers will never make a go at paid content strategies. Getting readers to foot the bill at The New York Times or The Washington Post might work (the jury is still out, but I give them at least a 50-50 chance long term), but for the majority of papers it won’t. But they will continue to try and fail.

The solution is, like a lot of businesses, to have a diversified revenue strategy.

Two months go TNM had a story about GeoTix, a new software-as-a-service (SaaS) solution that helps publishers get into the local events ticket sales game.

Deb Fellows, founder and editor-in-chief of MyNorth Media, got into the business for the same reasons many might, because she needed more revenue sources during the 2007-8 fiscal crisis.

“Like so many of us, we tried to figure out how to innovate our way out of that time period,” Fellows said. “We have to learn as an industry, and I had to learn as a company, how to become less dependent on advertising as our sole source of revenue. I started asking ‘what can we sell our audience, based on the content they come to us for. What are they going to go purchase any ways?’”

When I launched TNM in 2010, I felt that the rise of smartphones (and to a certain extent tablets) would be a perfect opportunity for publishers to win back some of their lost local retail and classified business. Consumers were using mapping apps and wanted to know about local businesses. Google would be selling local retail via their national advertising contacts, but who would be selling the local businesses? Wouldn’t newspapers be in the best position to do this?

Instead, many newspaper publishers decided not to build their own apps, and instead used third party vendors, some of who sold them on the idea that they would sell advertising for them. They didn’t, and couldn’t, because they did not have the local contacts.

It was a missed opportunity, but one likely to have occurred because the ad folks were not part of the decision making process. I know that at the NYT, the ad folks were only brought into app discussions well after all the decisions were made. No surprise then that the NYT has never had much success with its apps except as appendages to their main website strategy (but a digital subscription and get to use the app for free).

Fighting the good fight for a diversified revenue strategy is getting tougher and tougher. No matter how many bad quarters publishers have, they are not going to change their strategies when they were hired because they were advocates of the next shiny thing. I get that. But I believe many smaller publishers still have a chance to change gears and be more flexible regarding how and where they get their revenue. Community newspapers are particularly vulnerable right now, many being closed by their corporate owners in order to cut costs and competition (see what has happened in Canada as an example).

So, what am I advocating? That publishers think seriously about bring in a new generation of revenue professionals, and not just digital ad sales people. Events, programs, custom publishing, printing, web hosting and design… who knows what will work in your market, but publishers need to figure it out. They can do these initiatives along side their reader revenue strategies, there is no reason they cannot live side-by-side.