Sunday, February 15, 2009

Tip-jar journalism: Slim pickin’s for pubs

Kachingle is not going to make the cash register jingle very loudly at most newspapers, so let’s skip the idea of installing electronic tip jars at websites in the hopes publishers can collect enough spare change to pay their reporters.

For those who missed the paean to Kachingle by my friend Steve Outing (and a follow-up here), it is a service that would let website visitors pay for content on the honor system. Here’s how it would work:

Instead of requiring surfers to pay for content before they view or listen to it, Kachingle would install a button on participating sites to enable a visitor, if so inclined, to tithe a few pennies to the publisher after consuming the content. It’s strictly voluntary. A skinflint could surf all day without spending a penny.

In all the 3,842 words of his original argument for Kachingle, however, Steve forgot to do the math. So, I did.

And I discovered that a Kachingle-like system might produce some decent revenues at the most heavily trafficked newspaper sites but wouldn’t make a material contribution to covering the costs of producing any paper’s website.

To calculate the potential of the tip-jar system, I obtained the number of page views for several newspapers in 2008 from Nielsen Online. I assumed that site visitors would click the Kachingle button on 2% of the pages, which is a reasonably high response rate for most sorts of voluntary activities on the web. I further assumed that the newspaper would get an average of 2.5 cents per click, net of the commission Kachingle charged to participate in its network.

As you can see in the table below, the tip system might generate revenues of nearly $3.7 million a year for the New York Times, the busiest of all newspaper sites with 7.4 billion page views in 2008. The $3.7 million would pay 24.5 journalists making an average of $150,000 per year. Although that sounds pretty good, bear in mind that the paper has a newsroom staff of about 1,300 individuals. So, Kachingle would cover the cost of only 2% of the staff.

In the case of the San Diego Union-Tribune, where web traffic last year was 110.3 million page views, the projected Kachingle revenue would be $55,154 per year. That’s enough to pay for three-quarters of a reporter making $75,000 a year. (In all cases but the NYTimes, I assumed average pay and benefits of $75,000 per reporter.)

The web traffic is too low for Nielsen to measure in places like Peoria, IL, New Haven, CT, and Tuscaloosa, AL. It seems safe to assume that tips from Kachingle would be proportionately modest in each of those markets, too.

On to the next idea…

10 Comments:

Blogger Crisatunity said...

So we have a business where consumers are willing less and less each day to purchase the paper-based product. And, you make a convincing argument that buying the web-based product is a itsy-bitsy revenue model.

I think the issue isn't that the Internet killed journalism. It looks like a plain and simple obvious fact that people just don't want journalism, at least how it is practiced (ruined?) by newspapers any more.

8:10 PM  
Blogger Steve said...

Alan: Perhaps you'll be interested in my latest blog item, a follow-up addressing criticisms of the network online content contribution model (Kachingle).

http://is.gd/jERq

Steve Outing

10:56 PM  
Anonymous Anonymous said...

Can we see similar math on your subscription model?

Oh, and don't forget to compare advertising revenue in both cases.

I agree that Kachingle won't save us, but at least it won't hasten our demise.

5:32 AM  
Blogger tom said...

Thanks, Alan, for doing the math.

Online Google ads already pay at least 10 cents a click ... and up to several dollars for well-targeted content that produces results.

Contextual, keyword-driven ads of Google's ilk are the only proven online advertising method, but they require a significant compromise on the editorial side: they only really work if they enable some kind of economic transaction.

So much of our coverage has no good-paying keywords that contextual advertising isn't really an option.

8:20 AM  
Anonymous Suzanne said...

The figure you use for traffic for San Diego News Tribune website must be average monthly page views, not an annual figure. Nielsen does a good job of measuring traffic to large sites and portals, but not such a good job of measuring traffic to small and mid-size sites. While I understand the model you're developing, I think the figures are faulty. I would prefer to see direct measurement of traffic (like Omniture numbers) for a site like signonsandiego.com to know if your model will hold water.

10:45 AM  
Blogger Newsosaur said...

In re Suzanne comment on Nielsen page-view numbers: Those are the annual figures reported by Nielsen for San Diego.

Many publishers have noted over time that Nielsen tends to under count what they see on their own logs. Because I do not have access to publisher information, this is what I use.

I should note that the Newspaper Association of America uses the same statistics from Nielsen, so - like them or not - at least there is some consistency among the data we all cite.

4:36 PM  
Anonymous Anonymous said...

Has anyone noticed the journalism links to the subject of Sunday night's 60 Minutes segment about crooked mortgage lenders? The segment centered on a former employee of World Savings who was fired when he tried to blow the whistle on all the bad loans the company was making. Herb Sandler, owner of World Savings, pocketed more than $2 billion just before the subprime implosion by selling his company to Wachovia, which has since collapsed under bad loans that came with the deal. Sandler and his wife have received warm coverage in the press and are known for putting up the money behind ProPublica, the marquee example of "non-profit journalism." Anyone who thinks rich benefactors are going to save journalism needs to realize they come with baggage, just like corporate media. Sandler refused to talk to 60 Minutes but gave them a written statement.

60 Minutes segment
http://www.cbsnews.com/stories/2009/02/13/60minutes/main4801309.shtml

ProPublica leadership
http://www.propublica.org/about/leadership#directors

7:18 PM  
Anonymous Charles Batchelor said...

My fear is Kachingle would damage the newspaper's local brand and undercut what they might charge for ads and subscriptions. I wish it were not true, but the reality is that many perceive value by price.

I am looking for, and trying to develop, ways for newspapers to add value and thus enhance their local brand.

Kachingle deployed carefully, however, on some products, in some markets, might even enhance a brand, making a blog or marketplace "of and for the people," for example. How a publisher packages it will make all of the difference.

But, as Steve Outing points out, newspapers need to seriously consider lots of different, little things. Kachingle is interesting and worth talking about. Outing initial column on Kachingle was, however, too enthusiastic for my taste.

The goal is to build the most powerful network locally for news, marketing and information. That will enhance their brand and their bottom line, both.

8:31 AM  
Anonymous Mike Kelley said...

Why would I pay anyone for online comment? I have found bloggers who do a great job and don't charge a dime for their stuff. There are some reporters who rank up there with the best bloggers, but most mainstream stuff is not that great and very biased. I almost never read an AP story anymore.

2:10 PM  
Anonymous Mike Kelley said...

Here is an article about where newmen get their news:http://media.nationalreview.com/post/?q=NDY5NTk2MzZhMjg4YzZiODFmODBlOTcyZGYyNjljMWM=

2:38 PM  

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