Wednesday, November 16, 2005

Playing nicely with others

Now that we know one out of every four Internet users visits a newspaper web site, the question is whether this phenomenon is a solution or a problem for the publishing industry.

Being a glass-half-full guy, I am going to stick out my neck and say it could be the solution. Or, at least one of them.

The good news for newspapers is that traffic is growing sharply at their Internet sites, even as it generally declines in print. According to the latest statistics from Nielsen/NetRatings, the average number of unique visitors at the 10 busiest newspaper sites grew by 11% in the last year vs. a 3% increase in general web readership.

Interestingly, the combined traffic of the Top Ten newspaper sites (39.3 million unique visitors or 26% of the Internet population), would rank them as the seventh most active web site if they were a single entity. That would put them behind Yahoo, Microsoft/MSN, Google, AOL and eBay but ahead of Amazon, MapQuest, Real and the Weather Channel.

The action is heating up on newspaper web sites at the same time online advertising rates are on fire at such large portals as Yahoo, Google, AOL and MSN, according to the Wall Street Journal.

“More Web sites are hanging ‘sold out’ signs on their most coveted pages and dramatically raising ad rates,” says the Journal. Prime real estate at the portals is committed months in advance, leading to double-digit rate increases as advertisers compete for available spots.

AOL says it has raised prices 20% since January, while MSN is getting as much as $1 million for a choice, 24-hour ad on its home page vs. $25,000 to $50,000 for the same spot four years ago, according to the Journal.

Meanwhile, Google has launched its potential Craig’s List-killer, Base, which enables you to buy or sell goods or services with pinpoint geographic precision, thanks to mapping technology that gives you a convenient aerial photo of the dealership peddling the beater you long to buy.

Now, here’s what this means to publishers:

With formidable brand recognition; deep penetration in their respective markets; powerful relationships with local advertisers, and significant, fast-growing and locally targeted online traffic, newspapers are the perfect partners for the portals, eBay, Craig’s List, Amazon, Expedia and other Internet heavyweights.

If newspapers and the online sites treat each other like partners, instead of rivals, they both can increase audience and revenues by sharing content and advertising orders (at, presumably, ever-higher CPMs if the online ad "shortage" continues). If the next frontier in the battle for web dominance is local stuff -- a la Craig’s List, Kijiji, Google Base and the similar wannabes soon to emerge -- who is more local than your friendly, neighborhood newspaper?

The online operator smart enough to be the first to team with local newspapers will have a long-lasting, unfair advantage over all of its competitors, because (save for a few metro areas) there’s generally only one available newspaper partner per town.

If this is going to work, of course, publishers will have to get over the long-lasting allergy to electronic media that manifested itself when the first radio station signed on in the early part of the last century. And they will have to conquer the reluctance to play nicely with others that seems to characterize any industry that historically grew up in monopoly or near-monopoly circumstances.

The biggest obstacle to this obvious win-win opportunity, therefore, will be pride and petulance. Wonder if everyone can get over it.

Monday, November 07, 2005

Less may be more, more or less

Newspaper circulation dropped once again in the last six months, leading to the usual hand-wringing and crepe-hanging. But shrinking circulation isn’t necessarily a bad thing -- as long as it stops real soon.

Normally, I would be the first to agree that rising sales are better than falling sales, unless the products are cigarettes or assault weapons. But at least some of the circulation decline represents a strategic retrenchment by publishers shrewdly targeting their core audience while simultaneously reducing the high costs of superfluous and somewhat spurious promotional circulation.

The burning question, of course, is how much of the recent readership reduction was intended and how much was beyond the control of an industry battling the exodus of some of its patrons to the Internet, iPods and the other forest-friendly media.

On its face, the circulation trend is ugly. Industry-wide, daily circulation slipped 2.6% in the six-month period ended in September, following a slide of 1.9% in the prior six months and a stumble of 0.9% in the six months before that. In the same periods, average Sunday circulation fell, respectively, 3.1%, 2.5% and 1.5%.

To get a better understanding of what’s behind the numbers, however, look at one of my alma maters, the San Francisco Chronicle, where weekday circulation plunged a breath-taking 16.4% in the most recent six months to 419,358.

To be sure, some of the loss is directly attributable to people who have taken to Yahoogling the news or scanning one of the sevral free papers available around town or flat-out fleeing to Missouri.

But much of the sinking circulation results directly from the enlightened decision at the Chron to eliminate unprofitable readers in several of the more remote reaches of Northern California. The audience was not only expensive to serve, but it also wasn’t valued very highly by most of the advertisers paying for it.

Like the now-discredited online merchant who proudly proclaimed that he lost money on every sale but made up for it in volume, the Chron and other metro newspapers are finding that gross circulation numbers are more likely to gross out savvy advertisers than please them.

As the world moves rapidly to focused and empirically verifiable advertising, newspapers have come to understand, albeit belatedly, that they can and must become targeted media. Accordingly, they are paring their circulation rolls to concentrate circulation on the demographics and geographies that advertisers want to reach.

To some degree -- and we can't yet tell how much -- the junking of junk circulation is behind the hefty circulation declines witnessed this year in places like the Baltimore Sun (off 8.5% in the last six months), Boston Globe (off 8.2%), Los Angeles Times (off 2.9%), Miami Herald (off 4.3%), New Haven Register (off 8.2%), Philadelphia Inquirer (off 3.2%), Rocky Mountain News (off 4.5%) and St. Louis Post-Dispatch (off 3.4%), according to a Banc of America Securities analysis of data reported by the Audit Bureau of Circulation, the industry-funded group that monitors readership.

Like any subscription-oriented business required to continuously replace departing customers, the average newspaper has to recruit an amount equal to 56% of its reader base every a year. To battle churn, newspapers aggressively recruit new subscribers with discount subscriptions that require them to continuously scrounge still other fresh subscribers to replace the ones who melted away when the previous promotion expired. It’s an expensive exercise even known to be fraught with fraud on some occasions.

When newspapers do right by their advertisers, they will do well for themselves, too. In right-sizing their circulation, publishers will shed the significant costs associated with promoting, printing and delivering newspapers to people who weren’t serious about taking them in the first place. Quality circulation will merit premium advertising rates, thus protecting and potentially enhancing the top line.

The decline in circulation, while no cause to rejoice if you love newspapers, could be a sign that publishers increasingly understand the need to scale circulation down to a core level of committed, valuable readers.

When readership stabilizes with reliable customers paying full price, advertisers not only will be confident that they are getting what they paid for, but -- we hope -- they will pay handsomely for it, too.

Sunday, November 06, 2005

No debate about it

I am as big a fan of West Wing as the next guy, but NBC was wrong, wrong, wrong to run a bug in the corner of the screen proclaiming tonight’s fictional debate to be a live "news" event.

Beyond the false label, viewers of the fictional program were further confounded and befuddled to see the show hosted by network newsman Forrest Sawyer, who played himself.

With the news media in low public esteem, the network didn’t do itself -- or any of its peers -- any favors by presenting an entertainment program as news.

It was a cheap stunt. Shame on them.