So long again, Chicago Daily News

On March 4, 1978, the presses fell silent for the last time at the Chicago Daily News, an iconic and crusading newspaper that was unable to adapt to changing times. The following article, which originally appeared here in 2005, is reprinted as a reminder of what happens when a paper runs out of readers, revenues and ideas.

"It's fun being the publisher when things are going well," squeaked the young man who stumbled awkwardly to the top of a battered desk in the unusually silent newsroom of the Chicago Daily News. "But it's no fun today."

Swallowing a nervous giggle, Marshall Field V cleared his throat and read the assembled staff the short, typewritten death warrant of one of the most distinguished newspapers in American history.

An agonizing month later, on March 4, 1978, the Daily News signed off with the jaunty banner, "So long, Chicago."

The line was written by the late nightside copy desk chief, Tom Gavagan, a chain-smoking, working-class Irishman who seemed to own only two shirts -- one in burnt orange, the other in avocado green. The tears in Gav's eyes weren't from the smoke.

Although it happened 35 years ago, the story is worth telling today, because many of the zany, brainy people who made that paper sing aren't here to talk about it any more. They were my mentors, comrades and friends, and I cherish their memories.

But this isn't just ancient history. It is a valuable reminder to today's media companies of what happens when you run out of readers, revenues and ideas all at the same time.

The Daily News, like most afternoon newspapers, succumbed at the age of 102 to a declining audience and rising expenses.

Its readers had moved on. On to the suburbs, where delivery trucks couldn't reach them with a paper that didn't come off the press until afternoon. On to the sofa, where they favored Three's Company on television.

There were no home computers, no Internet, no iPods and no cellphones to get between our readers and us in 1978. Still, circulation dropped. The management was changed. Circulation dropped. We redesigned the paper. Circulation dropped. We tinkered with the product. Circulation dropped.

In the end, there was nothing left to do. Some 300 people lost their jobs, and Chicago lost a great newspaper.

The Daily News, in its best days, was a cutting-edge conscience in conservative Chicago, a husky, brawling town that wasn't always ready for reform. The paper stood fast against official incompetence and government corruption and stood tall for civil rights and the little guy. For years, the Daily News stubbornly held its price to a penny, so as to be affordable to laborers heading home from work.

It was one of the first newspapers to have foreign correspondents, to print photographs or to cover that new-fangled medium, radio. Its widely syndicated coverage won 13 Pulitzer Prizes, including three for meritorious public service.

The Daily News cultivated a limitless array of talent over a century, including Eugene Field, George Ade, Ben Hecht, Finley Peter Dunne, Carl Sandburg, Peter Lisagor, M.W. Newman, Lu Palmer, Lois Wille and our latter-day franchise player, Mike Royko.

The list is too long to print here. But the Daily News, in its classy way, printed the name of everyone working on the staff on the day the paper folded.

My name was on that list. It remains one of proudest, and saddest, moments of my life.

How publishers can fight ad blocking

Publishers and advertisers have only themselves to blame for the revenue erosion caused by the rise of ad-blocking software. Now, it is up to them to solve the problem. 

That’s the bracing conclusion of a new white paper from the International News Media Association that is being released today.  The paper was written by Johnny Ryan of Page Fair, an Irish company that advises publishers on how to respond to the easy-to-install programs that prevent ads from loading on web and mobile sites. The report is available here for purchase.   

As illustrated below, ad blocking has risen steadily in recent years to nearly 200 million consumers, representing some 6% of global Internet users. Taking note of the acceleration, Ryan urges publishers to band together to address the proliferation of intrusive advertising that has accompanied the growth of the Internet. 

“For the first 20 years of the commercial web, it has been advertisers and ‘ad tech’ for the most part who have made the decisions on advertising,” writes Ryan. “The rise of ad blocking is a rebellion against the legacy of…annoying ads and a system that permits a panoply of advertising technology companies” to capture user data and then trade on the information “without benefit to the publisher.”

The impact of ad blocking falls unevenly on publishers, according to Ryan. While blocking has cannibalized between 25% and 60% of some of the gaming and video sites frequented by tech-savvy Millennial males, Ryan says the revenue loss at mainstream news sites averaged about 10% in 2015.  

The appeal of ad blockers is undeniable: The programs and apps are easily acquired and often free of charge. Once installed, blockers speed page loading (as discussed here in this must-read piece by the New York Times), reduce page clutter and prevent marketers from surreptitiously gathering information about the user. 

Although ad blocking has gained in popularity, Ryan says the adoption to date has been linear, instead of exponential.  “The commentary referring to an ‘adpocalypse’ and so forth,” he says, “is very likely to have overstated the immediacy with which ad blocking will decimate mainstream advertising.”

Nevertheless, he says the problem remains a challenge for revenue-hungry publishers and endangers the open flow of information on the web.   

Arguing that it is impossible for publishers to win any sort of  “cat and mouse” technology battle against ad-blocking companies, Ryan says publishers must take the lead in “setting the standard” for what he calls Advertising 2.0.

“The industry must move towards a model that does not allow third parties to snoop on users’ data, that uses high-quality and respectful advertising, and that respects the user in order to support the publisher,” says Ryan. “As an industry, we have one chance to redefine how advertising works and save the mechanism of advertising that supports editorial content on the open web.”

Tear down those paywalls!

The newspaper publishers who put paywalls on their websites in the last few years should declare victory and tear them down before the barriers become more trouble than they are worth. 

It’s true that paywalls slightly ameliorated the 40% dive in the industry’s aggregate revenues in the last decade. But the continued use of pay systems is bound to limit audience growth at a time when fully 79% of the traffic to the typical news site comes from casual visitors, instead of people navigating directly to NewspaperSite.Com. 

More on that in a moment. First, the background: 

After giving away their content for free for more than a decade, a growing number of newspapers in the last few years began putting paywalls on their websites.  In all, about 450 of the nation’s 1,300 papers operate paywalls, according to News & Technology Magazine. 

Publishers opted for paywalls, in part, because they wanted to emphasize the value of the content they invest in producing. Even though 2 of 5 newsroom jobs has been eliminated by expense cutting in the last decade, newspapers still put more journalistic feet on the street than any other medium. 

The primary reason publishers installed paywalls was to help offset a catastrophic collapse that took industry sales from a record $60 billion in 2005 to an estimated $34 billion in 2015. (The revenue statistics cited in this article are from the Newspaper Association of America. After publishing detailed data since 1950, the trade association stopped issuing sales reports as of 2013, requiring folks like me to project performance in subsequent years from the financials of the publicly traded newspaper companies.)

When publishers launched their paywalls, they hoped to attract bazillions of new customers itching to pay for digital content. Unfortunately, that didn’t happen. In but one example, the Gannett Co., the biggest newspaper publisher in the land, reported a while back that it had acquired fewer than 60,000 digital-only subscribers – a sum equal to about 2% of the 3 million print copies in sold on an average day.  

Yes, the Wall Street Journal and New York Times each has about 1 million digital-only subscribers. But they are unlike the typical newspaper in that they are mission-critical reading for the international elites in government, business and academia, whose readers for the most part pay with the boss’s credit card. To put those achievements in perspective, 1 million paid readers represents a puny penetration of 0.03% of the 3 billion Internet users in the world.  Further, 1 million paid subs pales against the 65 million subscribers of Netflix and the 20 million subscribers at Spotify.  

Even though newspapers failed to sign up significant numbers of digital subscribers, they usually coupled their paywall launches with hefty increases in the price of their print products. To ease the pain of the rate increases, publishers gave print readers free access to paywall-protected content. 

Fortunately for publishers, most print readers accepted the rate increases, so the industry’s collective circulation revenues climbed to almost $11 billion in 2013 after slipping to a bit less than $10 billion in 2011. The extra billion took some of the edge off the revenue dive. But not much. 

Now that publishers have conditioned their print subscribers to paying an ever-greater share of the costs of producing and delivering the paper, they should declare victory and turn their attention to building robust and loyal digital audiences. They’ll need ever more digital readers to sustain their franchises as their superannuated print readers – the median readership at most papers is 60-plus – head toward the demographic cliff. 

The digital pivot won’t happen very effectively if casual readers encounter pop-ups that either block, or threaten to throttle, access to the content they want to view. With so much news available for free on the web, paywalls are distinctly inhospitable – especially the young cosnsumers coveted by publishers and their advertisers.  Repelled once or twice by paywalls, most incidental readers depart and seldom return. 

As much as editors and publishers believe readers venerate their brands, the truth is that most of the traffic to a typical news site comes from incidental readers steered to the site via social media, a search request or another external source. 

In a recent study, an audience-analytics firm called Parse.ly found, notab.ly, that 79% of referrals to 400 media sites were from external sources. 

With more people than ever relying on news-aggregating apps from Google, Facebook, Apple and others, newspapers in the future are bound to get even more referral traffic than they do today.  They can’t afford to let paywalls antagonize the new readers they desperately need. 

© 2015 Editor & Publisher

Ad-block surge challenges digital publishers

The number of consumers actively blocking digital advertising has grown dramatically in the last five years, posing a difficult and daunting challenge to publishers across the web. Now, new developments may accelerate the troublesome trend. 

Between 2010 and the first half of this year, the number of global consumers installing ad-blocking technology on their browsers grew by nearly tenfold to 181 million, according to a survey published recently by Page Fair, a company aiming to help publishers and marketers reverse the tide.  

While active ad-blockers represent only about 7% of the world’s wired population, the practice has been adopted widely in the United States and United Kingdom, according to the Reuters Institute of Journalism at Oxford University. 

“Forty-seven percent of our U.S. sample and 39% in the U.K. don’t always see ads because they use ad-blocking software to screen them out,” said the Reuters Institute in its comprehensive annual survey of the media business. 

Elsewhere in the world, Page Fair found ad blocking ranged as high as 37% and 35%, respectively, in Greece and Poland and as low as 13% and 10%, respectively, in Italy and France.

In addition to those who actively block ads, the Reuters Institute found that 30% of respondents in the U.S. and 39% of respondents in the U.K. ignore ads when perusing the web. Further, the institute discovered that 3 in 10 respondents in the U.S. and U.K. “actively avoid sites where ads interfere with the content.”

Although marketers will be disappointed to learn that so many people tune out their carefully crafted messages, publishers at least get paid for ads that visitors ignore when visiting their sites. 

When blocking technology prevents an ad from being served, however, the publisher doesn’t get paid. And that is turning into a growing problem for everyone from gaming-site operators to the news media.

Page Fair estimates that ad blocking will deprive digital publishers worldwide of $22 billion in sales in 2015 – a sum projected to nearly double to $41 billion in 2016. The company estimates that blocking cost publishers $7 billion in sales in 2013.  

About half of the global revenue loss occurs in the United States, where Page Fair projects that blocking may crimp digital ad expenditures by 22% to deprive publishers of some $20 billion in revenues in 2016. Some analysts argue that the estimate is too high, leaving the magnitude of the potential revenue loss open to debate. But there can be little doubt that ad blocking is gaining steam.    

The reason ad blocking has accelerated in recent years is that the popular web browsers began providing free plug-ins to automatically nuke most ads. In the first six months of this year, the number of users enabling the ad blocker on Google Chrome climbed 51% to 128 million, the number of ad blockers on Mozilla’s Firefox rose 17% to 48 million and the number of blockers on Apple Safari grew 71% to 9 million. 

The majority of the ad zapping to date has occurred on desktop computers, because the penetration of ad blockers is far lower on mobile devices than desktops, according to Page Fair.  But that is about to change, because Apple, which came later to the “block party” than its competitors, is throwing its considerable weight behind improved ad blocking for its widely deployed Safari browser. Here’s why this is a big deal:

Even though Firefox holds only a tiny share of the mobile browser market, its users account for 40% of the ad blocking detected by Page Fair, thanks to the long-standing availability of ad-zapping software on Firefox. 

Safari, which is a far bigger player than Firefox because it enables 52% of mobile browsing activity, heretofore has not had a competitive ad-blocking capability. But that changed with the introduction of the recently released iOS9 operating system. As the new operating system rolls out, Page Fair expects “ad blocking on mobile Safari to trend towards the levels seen in the mobile version of Firefox.”

A number of analysts and commentators share Page Fair’s belief that the widespread adoption of ad blocking on mobile Safari will accelerate the growth of a challenge that publishers and marketers to date have been largely helpless to counteract.

Page Fair, among other companies, encourages publishers and marketers to improve the relevance of their ads while also paying ad-blocking services to let ads from their clients slip through the filters.  In addition to such efforts, some publishers have resorted to warning visitors that their sites could go out of business if too many users block too many ads.   

While there is nothing wrong with any of the above strategies, none to date seems to be slowing down ad zapping. It looks like advertisers and publishers have more work to do. 

© 2015 Editor & Publisher

Should newspapers abandon digital?

Newspapers are so bad at digital publishing that they should just give up and focus on print. 

That’s the bracing thesis of a recently published mini-book from journalism professor H. Iris Chyi of the University of Texas, who likens what she calls the “inferior quality” of online newspaper offerings to the desiccated ramen noodles that constitute the primary food group for many a starving student. 

Her publication is titled “Trial and Error: U.S. Newspapers’ Digital Struggles Toward Inferiority.” It is available here. 

Observing that newspapers have been experimenting with “new media” for the better part of two decades, Chyi marshals a raft of research to conclude “the performance of their digital products has fallen short of expectations.” 

She urges publishers to “acknowledge that digital is not your forte” and abandon the “digital first, print last” strategy that has been widely adopted in the business. 

“That is not to say that you don’t need to offer any digital product,” she adds, but “one may conclude that it is easier for newspapers to preserve the print edition than to sell digital products.”

Newspapers certainly have fallen short of expectations in the digital realm. Although interactive newspaper revenues have nearly tripled from $1.3 billion in 2003 (the first year the industry started reporting online ad sales), the over-all digital advertising market has soared by more than sixfold since then. 

But doubling down on print hardly seems to be a foresighted strategy when readers and advertisers increasingly are flocking to the digital media. We’ll get back to this in a moment. First, here’s Chyi’s take on where the industry went wrong: 

“In retrospect, most U.S. newspapers outsourced their homework to business consultants such as Clayton M. Christensen, whose disruptive technology thesis served as the theoretical foundation behind the newspaper industry’s technology-driven approach. The problem is that most assumptions on the all-digital future have no empirical support. As a result, during nearly 20 years of trial and error, bad decisions were made, unwise strategies adopted, audiences misunderstood and product quality deteriorated.”

Pointing to research showing that people who like to read newspaper-y kinds of articles will pay substantial sums to spend quality time with print, Chyi argues that the digital version of the typical newspaper is “outperformed by its print counterpart in terms of usage, preference and paying intent.”  

And she is right. Any publisher will tell you that print is more profitable than pixels. 

The problem with ditching digital, however, is that the number of readers and advertisers who value print has been steadily shrinking – and likely will continue to do so, owing to these seemingly irreversible market phenomena:

:: Tumbling print circulation. The print circulation of the nation’s newspapers has dropped by nearly half in the last 10 years, according to this analysis. While continuous changes in the way publishers report their circulation have made year-to-year comparisons increasingly difficult, most anecdotal evidence suggests that print circulation is continuing to erode.   

:: Dramatically aging readership. The New York Times recently reported that the median age of its readers is 60 vs. 37 for the U.S. population, making its audience 1.6 times older than the population as a whole. The average life expectancy of a 60-year old man is 21 years, while 70- and 80-year-old gents statistically have respective lifespans of 14 and 8 years, according to the Social Security Administration. Even though some readers will live longer than the predicted average, the superannuated readership of newspapers suggests that significant numbers of loyal readers will begin dying off in the next 10 to 15 years. (Women will be glad to know they get an extra couple of years, but not enough to reverse the trend.) Most publishers will tell you that the median readership of their newspapers is as senior as that of the Times, if not older.    

:: Steadily contracting ad sales. Fully two-thirds of the print advertising at the nation’s newspapers has dried up since hitting a record high of $47.4 billion in 2005. Most of the publicly held publishers reported sales declines in the first half of this year, suggesting that revenues are on track to slide for the tenth straight year in 2015 – unless an unforeseen miracle occurs.  

:: Declining economies of scale. Unlike websites that can serve one page or 100,000 pages at little incremental cost after they go live, print publishers must sustain substantial manufacturing and distribution investments in order to print a single paper. If circulation falls another 50% or print advertising slides another 67% in the next 10 years, will there be sufficient print subscribers and advertisers keep the business viable? This is the existential question facing the industry.  

As poor as the industry has been at finding its footing in the digital age, it’s hard to imagine how newspaper companies can survive over the long term if they put their primary focus on print. 

© 2015 Editor & Publisher

Apple, Google and Facebook zero in on news

With Apple, Facebook and Google promoting powerful news-delivery platforms, the best days may be in the rearview mirror for the dedicated news apps produced by media companies and a host of independent players. 

Leveraging their enormous audiences, vast troves of user data and state-of-the-art targeting algorithms, the Silicon Valley behemoths have created master applications to deliver personalized feeds to serve everyone’s individual news, information and entertainment needs. They’ll use those platforms – and the rich user data they generate – to deliver premium-priced advertising to the right customer at the right place at the right time. 

Although the emerging news services may delight consumers and advertisers, they pose a significant threat to not only legacy news organizations but also to the many free-standing aggregation services that sprang up over the years to help users discover and organize information. We’ll discuss those challenges in a moment. First, here’s how the technorati are vying to be your go-to news destination:

Google. The granddaddy of aggregators is Google News. Founded in 2002, the site automatically culls, categorizes and personalizes articles from thousands of global publishers. Recognizing the considerable time people spend with their mobile phones, the company has super-charged its Google app so it can serve as both your primary news source and the roadmap to your life by tracking your calendar, your take-out orders, your shopping list and much more. Seeking to capitalize on the popularity of mobile video, Google’s YouTube subsidiary recently launched a news-aggregation site called NewsWire.

Facebook. Facebook ventured into news delivery in a serious way a year ago, when it introduced its well-regarded Paper app. In spring, the social network upped its game with Instant Articles, a system for delivering entire stories, videos and visualizations at speeds up to 10 times faster than previously possible.  Publishers from BuzzFeed to the New York Times are contributing their content to Instant Articles to get in front of the network’s 1.4 billion global users. 

Apple. Apple’s freshly minted News app promises to consolidate and personalize content drawn from far and wide. The app, which is installed by default in the latest version of the company’s mobile operating system, will go beyond acquiring and organizing content from the usual name-brand publishers. It also will carry the RSS feed of any independent content creator who is willing to permit Apple to use her content without payment and to indemnify the world’s most valuable company in the event someone files a libel or copyright complaint against something she wrote.

The Big Three are not alone in focusing on news delivery. Snapchat earlier this year launched a feature called Discover, which contains news and infotainment blurbs provided by a dozen partners ranging from ESPN to Vice News. Twitter and Instagram reportedly are crafting better ways to aggregate and organize news, too.

Taken together, these moves aim to capture as much screen time as possible from the booming audience for mobile news. With the typical owner poking at his smartphone nearly three hours a day, it is perhaps no surprise that two-thirds of the traffic at the nation’s 10 busiest news sites arrived via mobile device. 

The mobile-news frenzy in Silicon Valley poses profound questions for the incumbent players in the media ecosystem. 

Legacy publishers and broadcasters are being forced to decide whether to contribute their expensively produced content to the master apps – or risk being marginalized as consumers forsake their carefully tended digital brands for the convenient and compelling aggregation platforms fielded by the tech giants. 

The argument in favor of sharing legacy content is that media companies can expand their audiences at the same time they share in the fresh revenues generated by the superior reach and marketing power of their newfound technology partners. As discussed above, several major media shops already signed on to such arrangements.

But industry sentiment has not been unanimous. Will Lewis, the chief executive of Dow Jones, recently asked if publishers should “run, headless chicken-like, towards offers from companies like Apple and Facebook to put our content in their walled gardens.” 

While legacy publishers may have options, the techno behemoths could squeeze the life out of many of the independent news-aggregation sites that emerged over the years. Those indie efforts range from Flipboard, the most prominent and innovative of the ilk, to Circa, which succumbed over the summer for want of audience, ideas and cash. The increasing competition from Silicon Valley probably contributed to the Circa’s demise. 

In the final analysis, history may well regard the indie sites as point solutions, which is what folks in Silicon Valley call a spreadsheet that can add and subtract but cannot multiply and divide. Though the innovators in news aggregation pointed the way to better user experiences, they’re probably not destined to dwell in the Promised Land. 

© 2015, Editor & Publisher

Retail ad spending is speeding to mobile

There are few industries where mobile is having as big an impact as the disruption it is bringing to retailing. This should make publishers nervous. Very nervous. 

Though the rising popularity of mobile commerce may be great for consumers and could be pretty good for merchants, the phenomenon poses a sharp challenge to newspaper publishers, who rely on retailers to generate half of the roughly $20 billion in print and digital advertising they are likely to sell this year. Here’s why millions in newspaper advertising could be at risk:  

Now that three-quarters of Americans have smart phones, more than two-thirds of those consumers use their phones at some point in the shopping process. The Deloitte consulting group says that nearly a third of the $3.4 trillion in U.S. retail sales in 2014 were either influenced by, or actually took place on, a small screen – a six-fold increase from smartphone-shopping activity in 2012. 

In the interests of intercepting mobile-ized shoppers as they search for products, read reviews, compare prices and eventually click to buy, retailers this year are expected to spend nearly twice as much on mobile advertising as will be spent in any other digital ad category, according to eMarketer, an independent research service. eMarketer reckons that merchants will buy nearly $6.7 billion of mobile advertising, or about a third of the sum they’ll spend on retail ads in newspapers.  

Given the growing reliance of consumers and retailers on mCommerce, it seems fair to conclude that a certain number of the ad dollars formerly spent at newspapers will be diverted to the mobile channel as retailers embrace digital marketing. 

Retailing no longer is a matter of stocking shelves with cool stuff, buying some ads, throwing open the doors and hoping for customers. In the mobile era, retailing is becoming a subtle, sustained and increasingly sophisticated process of psyching-out customers through a relentless blend of cyber-sleuthing, cyber-seduction and cyber-salesmanship. It works like this: 

Tracking. The process starts when the consumer starts browsing, regardless of whether it is online or in a store. Merchants use cookies to track consumers who visit their sites, visit social networks and visit other digital venues to research products before heading to a store. Once in the store, customers can be tracked with the loyalty apps developed by most big merchants or with low-power devices called beacons that communicate automatically with a shopper’s smartphone. Although cookies have been around for a long time, Apple, Google, Facebook and other tech companies recently have launched aggressive programs to honeycomb retail locations with beacons. Business Insider predicts that more than 3.5 million beacons will be in place in American shops by the end of 2018.  

Attracting. To catch the attention of media-saturated customers, merchants will quadruple their investments on in-store digital signage to $27.5 billion by 2018, according to International Data Corp. Many of the flat-panels heading into stores will have touch screens enabling consumers to change the program by themselves, while others will have cameras that can detect a shopper’s age and gender to tune the content to her predicted preferences. 

Paying. Apple, Google, PayPal, Square and a host of other companies are jockeying for dominance in mobile payments. In addition to offering convenient smartphone apps, they and other digital platforms like Facebook, Pinterest and Twitter are adding buy buttons to their websites to capture transactions faster than you can say “shopping cart.” In addition to making it easier for consumers to part with their money, many of the payment systems are seeking to capture detailed information about customers by establishing loyalty programs that give points for every purchase someone makes. Even American Express has gotten into the act with its Plenti program, which gives points for purchases from partners as diverse as AT&T, Exxon, Macy’s and Hulu. The points can be exchanged for cash or credit.
  
Personalizing. Data captured from cookies, beacons, interactive displays, payment systems, product searches, purchase histories and loyalty programs can be combined with inferred and volunteered customer data to produce rich individual profiles and, thus, personalized offers tuned to a customer’s income, demographics, location, lifestyle and more. 

Engaging. The more retailers interact with customers, the more they will know about them. This will enable merchants to efficiently build the long-term individual relationships that they hope will lead to future low-friction, high-yield transactions. 

Unfortunately, print ads and much of the digital advertising sold by most newspapers do not capture the granular data that is the essential ingredient in the smart marketing programs that retailers are cooking up for smartphone owners. 

The more merchants require actionable data, the more they will put their marketing dollars into the digital media that deliver it. The shift in priorities could come at the expense of newspapers. 

© 2015 Editor & Publisher

What good is the Apple Watch, anyway?

The smartwatch market is so small that it only took a day or two for the Apple Watch to emerge as the biggest selling techno-timepiece in history. 

Now that it has been a while since the world’s most expensive Mickey Mouse watch has been glitzing the wrists of a few million early adopters (Apple coyly won't say how many), it’s time to ask what the thing is good for, anyway. 

The positive perspective from – full disclosure – this Apple shareholder is that I think the bauble may prove to be no less than the precursor of a paradigm shift in personal computing. More on that in a moment. 

But, first, I have to say that I am skeptical about whether smartwatches can deliver much value to media companies desperately seeking to burnish their digital bona fides. In fact, I think publishers should be cautious about dedicating significant resources to developing smartwatch apps, because the best ideas that publishers have marshaled so far verge on being downright irritating to consumers. Here’s why:  

Given the teensy size of smartwatch screens, it is not possible to tell full stories on them – and the user experience would be unpleasant if publishers tried. Recognizing this limitation, most publishers have elected to publish one-screen text alerts, which buzz the user’s wrist when a new one arrives. 

The problem, as noted by many early reviewers of the Apple Watch, is that they are inundated not only with pings for breaking news but also with daylong vibrating alerts to incoming emails, tweets, texts, meeting reminders, pizza deals and, well, you get the idea. 

While users will welcome the sparing use of text alerts for truly significant events – like an incoming tornado – publishers need to eschew text as much as possible in favor of graphically packaged information that can be consumed at a glance. So far, we haven’t seen much of that sort of creativity.

Because even animated emojis get old fast, the first order of business for many Apple Watch users is figuring out how to reduce incoming alerts. Therefore, it is fair to conclude that publishers who think relentless news alerts are the killer app are likely to find the only thing getting killed is their audience. 

Fortunately, there are better ideas. Instead of using smartwatches to distribute information, publishers should use them to interact with consumers in new and innovative ways through crowd reporting, polls, surveys, games, quizzes and other initiatives that take advantage of the persistent presence of the what Dick Tracy would instantly recognize as a two-way watch radio. These activities can be coupled with subtle and sensible commercial promotions to (a) boost revenues, (b) capture granular data that publishers can sell to advertisers and (c) leverage the very same data to enhance publisher marketing capabilities. 

Now, here’s why the Watch bears watching: 

The old way of computing required active engagement and considerable skill on the part of users to persuade the clever but obstreperous machines to serve their needs. Smartwatches are different, because they are passive devices that are unobtrusively strapped to your body throughout the day. The ubiquity and intimacy of a computing device that knows your heartbeat better than you know it yourself is unprecedented in the history of computing.

With scant effort on your part after you fire them up, smartwatches monitor your health by tracking your footsteps, your sitting time and the intensity of your workouts. They can serve as personal assistants, keeping you on schedule, routing you around traffic jams, presenting your boarding pass and unlocking your room at certain high-tech hotels. They can remember where you parked your car, remotely start the engine, unlock the doors and open the garage when you near home. They already can complete credit card transactions with the flick of a wrist and in the future could become repositories for your identity, replacing your driver’s license, serving as your office badge and archiving vital medical information like your DNA. 

Smartwatches could well emerge as the master controllers in the so-called Internet of Things, because they will be the single device that knows who you are, where you are, what are doing and what you are likely to want to do next.  

As discussed earlier here, it won’t be long before the techiest homes are wired with sensors, microphones, projectors, speakers and wall-sized displays that provide on-demand access to sports scores, shopping services, cooking videos, music and anything else you please.  

The Apple Watch, the Pebble and other competing smartwatches may not turn out to be the direct forebears of this sort of ubiquitous computing, but something awfully close to them will be. So, yes, smartwatches matter. Only time will tell how much they can do beyond just telling time.

(c) 2015 Editor & Publisher

Mobile moves to digital ad domination

Any day now, we will cross another technological tipping point, as the majority of digital advertising purchases moves to mobile devices from desktops and laptops. 

The shift could happen before the end of this year or early in 2016, according to a variety of industry prognosticators. Either way, the move will be profound in the coming years, with eMarketer forecasting that mobile will account for 72% of the $93 billion expected to be spent on digital ads in 2019. 

The reason is simple: Mobile is where the eyeballs are. 

The Pew Research Center reported in a comprehensive study in April that more than 90% of Americans owned some sort of mobile phone and that two-thirds of the devices were smart ones.  Meanwhile, eMarketer.Com reported that Americans were spending just short of three hours a day on their mobile devices, as compared with only 24 minutes a day in 2010. 

With growing attention riveted on these pocket-sized media machines, it’s no surprise that ever more advertising dollars are shifting to mobile from the traditional print, broadcast and digital media. Mobile will capture nearly a quarter of the entire ad spend across all media in the United States in 2018 vs. only 3% in 2012, according to eMarketer. Assuming the projection holds true, mobile ad spending could be second only to television within three years, which captured 39% of the ad dollars in 2012 but is projected to shrink to 36% in 2018.  
Mobile’s momentum creates major opportunities and challenges for marketers and publishers, given the following superpowers: 

It’s addictive. Because mobile phones are always there and always on, they represent the most intimate, immediate and individualized media experience ever created.  In its April study, Pew found that 67% of smartphone owners frequently check their devices even when they don’t ring or vibrate, 44% said they slept next to their phones to avoid missing calls and 29% said they “couldn’t live without” their ubiquitous electronic companions. The powerful attraction that mobile phones hold over their owners overcomes the single greatest challenge facing advertisers: capturing a customer’s attention. 

It’s targetable. Because mobile phones have the capability of knowing who you are, where you are, where you are going, what you are reading and where you are shopping, they represent an unprecedented opportunity to send targeted offers to the right customer in the right place at the right time.  The more consumers use their phones, the more data is potentially available to marketers to create compelling and customized offers. Magna Global, the international ad agency, predicts that 82% of digital display ads will be bought and sold by computers, not Mad Men, by the end of 2018. That represents more than $25 billion in volume.  

It’s social. Although smartphones are used to surf the web, shop, play games, listen to music, capture images and sometimes even make telephone calls, the top activity among young consumers is interacting with their social networks. In its study earlier this year, Pew found that 91% of users between the ages of 18 to 29 used their smartphones to interact with their friends. If word-of-mouth is the Holy Grail of advertising, then it’s easy to see why marketers worship this platform.

It’s transactional. While your fingers may have done the walking in the olden days of the Yellow Pages, your thumb does the shopping today on a mobile device – pointing, clicking and buying in one, smooth motion. Global mCommerce sales are forecast by Goldman Sachs to triple to $626 billion in 2018, a sum almost equal to all the stuff sold on all the world’s digital platforms in 2013. The convenience and customization of mobile shopping streamlines commerce like never before. 

It’s measurable. The bundles of Big Data captured through mobile computing give marketers the ability to generate an unprecedented amount of actionable insights about consumers. As the art and science of targeting improve, marketers will further sharpen the pinpoint propositions they put to individual consumers. At the same time brands use data to boost the efficiency and efficacy of their advertising, they will tally clickthrough, sellthough and other metrics to continuously fine-tune their tactics.

It’s unavoidable. Because mobile advertising will force marketers to be accountable for the costs and results of their campaigns, advertisers are bound to hold publishers accountable for their performance, too.  

As mobile becomes the primary platform for digital – if not all – publishing, it will demand ever greater sophistication from every publisher aiming to succeed in the interactive realm. Publishers will have to have the technology and the personnel necessary to capture data, categorize customers, target offers, analyze performance and dynamically tweak their content and advertising offerings to continuously improve performance.  

In other words, legacy media companies hoping to succeed in mobile publishing can’t get away with simply selling buckets of miniaturized, run-of-site banners.   

© 2015 Editor & Publisher

1 of 4 news start-ups flamed out

In 2009, David Boraks wrote an inspiring guest post here about the launch of his hyper-local news site in Davidson County, NC. Last week, he reluctantly shut it down, saying, “Alas, we haven’t turned it into a sustainable business.”

He is far from alone. One of every four news startups has failed, according to a survey I conducted of the 141 ventures listed in an online directory published by the Columbia Journalism Review since 2010. 

The survey methodology was simple. I searched for every site listed in the CJR list and counted the number that either were defunct or had not posted any new content since 2014. Because CJR depends on news entrepreneurs themselves to list their efforts, not all start-ups – or eventual crackups – are included. 

But the CJR sample is big and diverse enough to alarm those who hope grassroots journalism will replace the news-gathering resources that have been reduced over the years by newspapers and other local media. Since 2000, one out of three newsroom jobs has been nuked at the nation's newspapers, according a survey by the American Society of News Editors.    

The idled projects on the CJR list range from A2 Politico, an Ann Arbor (MI) effort which evidently has not been updated since 2013, to Yadkin Valley (NC) Sports, whose web address leads to a placeholder site with no content whatsoever. 

The toll also includes such high-profile, well-funded and ill-managed ventures as the Chicago News Cooperative and the Bay Citizen in Northern California. A late-breaking addition is the Bold Italic, a recently discontinued effort in San Francisco that had been funded by Gannett as a digital innovation laboratory. 

Although my survey did not delve into the circumstances contributing to the demise of each of the various news ventures, the cause of death in most cases likely was the one cited by Boraks in the farewell message to his readers in North Carolina:

“We’ve been unable to sell enough advertising to local businesses to sustain the sites, to pay me and, lately, to pay our staff,” he wrote. “At the same time, voluntary support from readers – which has always been limited – has dropped off.”

Although it is painful to watch  journalism entrepreneurs flame out, it is important to note that far more new businesses fail than succeed. Even in the technology world, where a handful of garage tinkerers indeed became billionaires, some 80% to 90% of all start-ups fail.

Failures occur in Silicon Valley in spite of the millions of dollars in reasonably patient venture funding that supports most nascent companies. Further, there is an abiding focus, if not to say frenzy, at nearly every start-up company on building the value of the enterprise as quickly as possible so it can go public or get bought by a sugar daddy like Google or Facebook. 

Neither of the above conditions is present at most news ventures, where the founders are admirably intent on afflicting the comfortable and comforting afflicted but put scant attention into funding the next payroll.  

As reported previously here, the Pew Research Center found that nearly a third of news start-ups spent less than 10% of their staff time on business development, while more than half said such activities occupied between 10% and 24% of their time. By contrast, 85% of the ventures said editorial tasks consumed at least half of their time. 

Unless and until people conducting news ventures take the business of their businesses as seriously as they take their journalism, the failures will continue.  

Saying he had struggled to save his news project from a number of near-death experiences over the years, Borak clearly was intent on building a sustainable business.  The lack of support for his effort among readers and advertisers suggests that the most intractable problem for news ventures may be a hopeless reluctance in the marketplace for paying for what journalists do.
    
Even dedicated newsmen can’t afford to work for nothing. As rewarding and exhilarating as the experience was, Borak told his readers in his final missive, “We’re in debt, we’re exhausted and it’s time to go.” 

Why publishers had to partner with Facebook

The natural order of the universe was disrupted yesterday when BuzzFeed, NBC News, the New York Times and a number of other prominent media companies shockingly ceded to Facebook the marketing and monetization of portions of their valuable content. 

The move, which represents a further step in the transfer of power from the media tribe to the technology tribe, means that some of the biggest names in media have conceded that they are neither large enough nor strong enough to thrive as independent digital publishers without the help of at least one of their fearsome frenemies in Silicon Valley. 

In addition to Facebook, the other frenemy, of course, is Google. Although the media companies like to think that the quality of their work speaks for itself, Facebook and Google referrals steer the preponderance of the traffic to almost every news site. 

The Facebook deal institutionalizes as never before this long-running dependency. In addition to the trio mentioned above, the other media companies who will be funneling content to Facebook are The Atlantic, BBC News, Bild, The Guardian, National Geographic and Spiegel Online. Fearful of being left behind, it is fair to assume additional media names in the not-too-distant future will feel obliged to join, too.  

Here’s how the deal works: 

The media companies will give full articles and videos to Facebook, so the social network can distribute them among its more than 1.4 billion users. Publishers can keep all the revenue from any ads they sell to accompany the content they allow Facebook to post. When Facebook sells ads against the content contributed by the media companies, both sides will split the proceeds equally. 

The choice to throw in with Facebook could not have been easy for the proud media companies. Historically, the last thing they wanted was to give their expensively produced content to another brand competing for the same eyeballs and ad dollars. But that was then and this is now. The media swallowed their pride because they know they lack the sort of massive global reach that only Facebook can provide.  

Difficult as the decision may have been, it was inevitable, given the several critical capabilities that Facebook has developed. These are its not-so-secret superpowers:

Superior mobile prowess. In addition to the sheer size of its audience, Facebook has mastered the art and science of mobile publishing better than almost anyone. In the first quarter of this year, the company reported, 65% of its traffic and 73% of its ad revenues came from such highly optimized mobile sites as its Paper app. 

Superior audience engagement. Based on the amount of time people spend on Facebook, it is fair to say its users are considerably more passionate about the service than the visitors to a typical news site. According to Alexa.Com, the average user spends 18.4 minutes per day on Facebook, as compared with 9.5 minutes at the New York Times, 6.4 minutes at NBC News and 5.4 minutes at BuzzFeed.  

Superior customer data. Because enthusiastic users frequently and liberally update the site with a plethora of personal data, Facebook knows more intimate and accurate details about more people than any company in the world. The information is updated dynamically in real time, as people report everything from their favorite new song to the jeans they want to buy to the fact they will have a baby in six months.  

Superior ad intelligence. Facebook enables advertisers to target messages with heretofore unprecedented precision, thanks not only to the rich information supplied by users but also by analyzing information captured from the friends in their networks.  The ad-intel is supplemented with location data acquired from Facebook’s popular mobile services. 

Superior content targeting. In the same way data is used to target commercial messages, Facebook has the capability to match the right content with the right user by monitoring her searches and media consumption. If Facebook sees that someone likes cooking Italian food, it can slip relevant recipes from the NYT food page into her news feed, paired conveniently with an ad for a pasta maker. When Facebook recognizes that a bride is planning a honeymoon in Florida, it can send her travel videos embedded with customized hotel offers. 

With everything Facebook brings to the party, the partnership ought to be a plus for the participating media brands. But some media partners are experiencing pangs of buyer’s remorse, because they fear Facebook may trim their split after they get hooked on this welcome new stream of  incremental revenue.  

It seems fair to conclude that the media companies who took the leap felt they were damned if they did and damned if they didn’t. In the end, however, this was an offer they couldn’t refuse.  

The LAT and U-T merger: Double trouble?

The pending purchase of the San Diego U-T by the Los Angeles Times represents a synergy not of strength but of tsoris.  

Tsoris, for the uninitiated, is the Yiddish word for trouble. And woe – unlike readership and revenues – has been plentiful at both of these newspapers in the last decade.  

As illustrated in the graphic below, the upcoming merger combines a faltering pair of former publishing powerlifters whose businesses are sagging as much today as the pecs of Arnold Schwarzenegger, the only governor in the history of California unable to correctly pronounce the name of the state (video). Here are the sobering metrics for the SoCal publishers:

Both newspapers lost more than half of their weekday print circulation between 2004 and 2014, dropping their respective market penetrations to 15.6% of the households in Los Angeles County and 17.8% of the homes in San Diego County. Circulation data comes from the Alliance for Audited Media, an industry-funded group. 

In the same period, Sunday print circulation – which typically delivers half of the revenue and more than half of the profits at a newspaper – fell by 48.1% in Los Angeles and 45.6% in San Diego. 

While the financial performance of the two publications is not publicly available, it is possible to gauge the general health of the newspaper business by comparing the 10-year financial performance of Tribune Publishing Co., the parent of the LAT, with the publishing division of its predecessor company.  

The annual reports issued by the companies show that Tribune publishing revenues tumbled by 58.5% to $1.7 billion in 2014 from $4.1 billion in 2004.  In the same period, earnings before interest, taxes, depreciation and amortization (EBITDA) fell 63.6% to $260 million in 2014 from $730 million in 2004.

It must be emphasized that Tribune’s holdings were not identical over the 10 years, so this is not a strict apples-to-apples comparison.  The predecessor company, which was roiled by the Zellistsas and an epic bankruptcy before it jettisoned its newspapers, divested Newsday in 2008. The new standalone publishing spinoff has started making fill-in acquisitions in the Baltimore and Chicago markets. 

Notwithstanding the imprecision of the available financial data, it is fair to conclude that both of the once enviable SoCal publishing franchises have seen better days. Hence, the question: “Why would anyone want to put these two struggling companies together?” Here’s a plausible answer: 

Tribune announced last week that it will pay $85 million to buy the U-T with an eye to consolidating operations as much as possible between the two newspapers. Normally, this means moving to a single production facility, a single administrative infrastructure, a combined advertising staff and a streamlined newsroom that can share content across the various titles.   

In other words, Tribune instantly can cut expenses by cutting staff in a way that is not readily visible to readers and advertisers.  At the same time, there theoretically is a chance to boost revenue for the consolidated operation because the ad staff efficiently can offer both wider and more targeted regional coverage. 

Interestingly, the San Diego purchase could turn out to be only the first step in a multi-phase plan to consolidate all the major dailies from the Tehachapi Mountains at the north end of the Los Angeles basin to the Mexican border.  

After struggling under the erratic management of Aaron Kushner, it is entirely possible the Orange Country Register soon could be up for sale.  If LAT bought the Register, it would own the only major paper separating it from San Diego. 

In the meantime, a group of smaller dailies in markets like Long Beach, Van Nuys and Whittier are immediately up for grabs as part of the auction of Digital First Media, a coast-to-coast publishing company that is being dumped by the disenchanted private investors who own it.  
While bigger may be better in many things in life, this seldom is the case when it comes to compounding woes. And that’s what the LAT is doing in buying the U-T. 

Even when two businesses are humming along smoothly, a merger takes months – if not years – to complete.  A merger profoundly distracts the managers and employees in both companies, taking their eyes off the ball of their day-to-day jobs because each is wondering whether she will survive the inevitable game of musical chairs.

The challenge is compounded when the business is troubled, because the mechanics of the merger necessarily have to take a back seat to the immediate problem of shoring up sales and meeting demanding profit targets.  This is all happening, remember, amid recurring rounds of musical chairs. 

The challenge is most formidable of all when the reason the business is weak is because there is shrinking demand for your product in the marketplace. And this is precisely the problem that every newspaper faces. 

Without question, an ever-growing number of readers are shifting their attention to the digital media and an ever-growing number of brands are shifting their advertising budgets to pursue them.  That’s why newspaper circulation, sales and profits have dived precipitously in the last decade.  

A roll-up strategy would make sense if Tribune had a plan to pivot its troubled newspapers to viable business models that would flourish in the digital era. But no such plan is evident.  

While the digital traffic reported by the LAT and U-T in the accompanying table looks impressively large, a quick check of census data raises questions. The 35 million unique monthly visitors claimed by the LAT is fully three times greater than the population of its home county. That is a hefty number, even if you credit the paper with a certain degree of national and global appeal.  Similarly, the 3.4 million uniques reported at the U-T suggest that everyone in the county visits its digital sites at least once a month. That would be nice, if true.  

The nose-counting problem is common throughout the entire digital publishing industry and newspaper companies can’t be blamed for the limitations of the technology. But it’s important to keep these vagaries in perspective.    

There is no doubt, however, that Tribune, whose eroding top-line revenues faltered another 5.7% as recently as the first three months of this year, is underperforming its peers when it comes to digital revenue production. 

While the U.S. newspaper industry in 2013 generated an average of 16.5% of its ad revenues through the sale of digital advertising, digital media produced only 12% of Tribune’s sales in the first quarter of this year.  The industry-wide figure for 2013 is the latest information available from the Newspaper Association of America.  The Tribune’s performance is called out in its quarterly earnings statement, where the company promises little more than to do a better job of selling ads.  

So, there you have it: Falling readership, tumbling sales, shrinking profits and a questionable digital strategy.  It makes you wonder why Tribune wants to double its troubles.