Many predicted that the rise of the Internet and online publishing meant that mainstream media organizations would lose their readers and viewers, with technology breaking their oligarchic control over news. But that’s not the overall picture.
Yes, people are migrating online. In 2010, the Internet passed newspapers for the first time as the platform where Americans “regularly” get news, according to survey data from the Pew Research Center. Forty-six percent of adults say they go online for news at least three times a week, as opposed to 40 percent who read newspapers that often. Only local television news is a more popular destination, at 50 percent.
But online news consumers are heading primarily to traditional sources. Of the 25 most popular news Web sites in the United States, for instance, all but two are “legacy” media sources, such as the New York Times or CNN, or aggregators of traditional media, such as Yahoo or Google News. Of the roughly 200 news sites with the highest traffic, 81 percent are traditional media or aggregators of it. And some old media are seeing their overall audience — in print and on the Web — grow.
The crisis facing traditional media is about revenue, not audience. And in that crisis, newspapers have been hardest hit: Ad revenue for U.S. newspapers fell 48 percent from 2006 to 2010.
Such hopes are misplaced. In 2010, Web advertising in the United States surpassed print advertising for the first time, reaching $26 billion. But only a small fraction of that, perhaps less than a fifth, went to news organizations. The largest share, roughly half, went to search engines, primarily Google. The newspaper industry illustrates the problem. Even though about half the audience may now be accessing papers online, the newspaper industry took in $22.8 billion last year in print ad revenue but only $3 billion in Web-based revenue.
Journalism thrived in decades past because news media were the primary means by which industry reached customers. In the new media landscape, there are many ways to reach the audience, and news represents only a small share.
The syllogism that helped journalism prosper in the 20th century was simple: Produce the journalism (or “content”) that people want, and you will succeed. But that may no longer be enough.
The key to media in the 21st century may be who has the most knowledge of audience behavior, not who produces the most popular content. Understanding what sites people visit, what content they view, what products they buy and even their geographic coordinates will allow advertisers to better target individual consumers. And more of that knowledge will reside with technology companies than with content producers.
Google, for instance, will know much more about each user than will the proprietor of any one news site. It can track users’ online behavior through its Droid software on mobile phones, its Google Chrome Web browser, its search engine and its new tablet software.
The ability to target users is why Apple wants to control the audience data that goes through the iPad. And the company that may come to know the most about you is Facebook, with which users freely share what they like, where they go and who their friends are.
Actually, print circulation worldwide was up more than 5 percent in the past five years, and the number of newspapers is growing. In general, print media are thriving in the developing world and suffering in rich nations. Print newspaper ad revenue, for instance, rose by 13 percent in India and by 10 percentin Egypt and Lebanon in the last year for which data is available. But it fell by 8 percent in France and 20 percent in Japan.
The forces tied to a thriving print newspaper industry include growing literacy, expanding population, economic development and low broadband penetration. In India, for example, the population is growing and becoming more literate, but a substantial portion is not yet online.
By and large, American newspapers are suffering the most. Roughly 75 percent of their revenue comes from advertising, vs. 30 percent or 40 percent in many other countries, where papers live and die by circulation. That means the collapse of advertising is not hitting papers elsewhere as hard as it is hitting them here. It also suggests that the need to charge for online access may be even more important abroad.
Going “hyperlocal” was the war cry of Wall Street to the news industry five years ago. The reasoning was simple: In the Internet age, when users can access content from anywhere, it didn’t make sense for local operations to compete with the big national news providers.
The problem is that hyperlocal content, by definition, has limited appeal. To amass an audience large enough to generate significant ad revenue, you have to produce a large volume of content from different places, and that is expensive. On top of that, many hyperlocal advertisers are not yet online, limiting the ad dollars.
Now we are entering what might be called Hyperlocal 2.0, and the market is still up for grabs. Google, which garners two-thirds of all search advertising dollars nationally, doesn’t exert similar control over local advertising. Locally, display ads — all those banners and pop-ups — are a bigger share of the market than search ads.
But how to produce local content remains a mystery. Can you put paywalls around it? Can you build a “pro-am” model, in which professional journalists work with low-paid amateurs to produce a comprehensive report? Or will the winner be something like AOL’s Patch, in which hundreds of hyperlocal sites are owned by a single company that can connect those readers with major advertisers?
So far, no one has really cracked the code for producing profitable local news online.
Tom Rosenstiel is director of the Pew Research Center’s Project for Excellence in Journalism. He is the co-author, with Bill Kovach, of “Blur: How to Know What’s True in the Age of Information Overload.”
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