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Jan. 13, 2011, 10:30 a.m.

The Newsonomics of 2011 news metrics to watch

[Each week, our friend Ken Doctor — author of Newsonomics and longtime watcher of the business side of digital news — writes about the economics of the news business for the Lab.]

In the digital business, the old aphorism — “If you can’t measure it, it doesn’t exist” — is rapidly moving from article of faith to fundamental operating principle. Measurement systems are just getting better and better.

Yes, there are still quite a few naysayers in the digital news business, those who believe that editorial discretion is superior to any metric the digital combines can kick out. They’ll say you can’t measure the quality of journalism created — and, of course, they are partly right. The truth of the moment is that good (to great) editors, armed with good (to great) analytics, will be in the winners in the next web wars. The same is true for digital marketers working for news companies. Unless they combine their knowledge of markets, customers, and advertisers with often real-time numbers about performance, they’ll lose business to those who do.

The counting of numbers, though, is tricky. So many numbers, so little time, as 24/7 digital keystrokes stoke endless reams of data. Which ones to count, and which to pay closest attention? Meaningful numbers, of course, are called metrics, and meaningful interpretation of those numbers we now call analytics. These analytics, discovered or undiscovered, then drive the business, and they are particularly important in great times of change, when whole industries move profoundly digital. As that old investigative reporter Sherlock Holmes said, “Data. Data. Data. I can’t make bricks without clay.”

In the spirit of the new year, let me suggest some of the more valuable emerging metrics for those in the news business in 2011. Further, in that spirit, let’s pick 11 of them. These aren’t intended to be the most important ones — the mundane price of newsprint, trending up recently, still is a hugely influential number — but ones that are moving center stage in 2011.

1. How much are news companies getting for tablet advertising? Or, in more numerical terms, what’s the effective CPM, or cost-per-thousand readers? In 2010, those with tablet news products reaped a small windfall, gaining rates as high as $150 per thousand readers, which would be 20 times what many of them get for their website ads. Much of that business was “sponsorship,” meaning that advertisers paid simply for placement, not actually based on number of readers. It was the blush of the new, and the association with it, that drove that kind of money. While early 2011 pricing is still very good, as the tablet market goes mass, what will happen to the rates news companies can charge advertisers? This is a huge question, especially if tablet news reading does hasten movement from ad-rich newsprint (see “The Newsonomics of tablets replacing newspapers“).

2. What percentage of unique visitors will actually pay for online access? It’s going to be a tiny percentage — maybe one to five percent of all those uniques, the majority tossed onto sites by search. If it’s less than one percent, paid metered models may be of little consequence. At two percent, especially for the big guys, like The New York Times with its imminent launch, the numbers gets meaningful and model-setting.

3. Where are the news reading minutes going? The Pew study showing that Americans are reading news 13 minutes a day more, probably given smartphone usage, was a thunderbolt — a potential sign of growth for a news industry that has felt itself melting away. With tablet news reading joining even more smartphone reading (only 20 percent of cellphones are “smart” right now), each news company will have to look at its logs to see which readers are reading what with what kind of device — which will tell where reading is increasing and where (let’s guess, print) it is decreasing. Then comes the job to adjust products accordingly.

4. How good are the margins in the fast-developing marketing services business? Tribune’s 435 Digital, GannettLocal, and Advance Internet are among the leaders selling everything from search engine marketing and optimization to mobile and social to local merchants. It’s a big shift for big newspaper companies used to selling larger ticket ads to relatively few customers. There is no doubt that local merchants want help in digital marketing. The number to watch for the newspaper companies is their margin on sales — after paying off technology partners from Google to Bing to WebVisible. Once we see how those margins settle in, we’ll know whether marketing services is a big, or small, play to find local news company profit growth.

5. How much of digital revenue is being driven by digital-only ad sales? McClatchy has been a leader in unbundling print/online sales, with digital-only now approaching 50 percent. That’s a big number for all media companies to watch. Not only is the market pushing them to offer unbundled products, but the sooner they sell digital separately on its own merits, the faster they grasp the growing business and slowly cut the cord to the declining one.

6. How much of news traffic is now being driven by Facebook and Twitter? A few companies, including The Washington Post, know daily how much of their traffic is driven by social media; many others have little clue. Those that do watch the number know that Facebook and Twitter are the number one growth driver for news “referral” traffic, and that social traffic (friends don’t let friends read bad news) converts better to more regular readership than does search traffic. This metric then pushes newsrooms to more greatly, and more quickly, participate in the social whirl.

7. How much will membership grow at the highest-quality, online-only local news start-ups? MinnPost just hit 2,300, an impressive number, but it’s been a three-year road to get there. It is hiring a membership director and trying to better convert regular readers to members. The Texas Tribune is pushing toward 2,000 and Bay Citizen 1,500. Can membership be a significant, and ramping, piece of the new news business model, or will it have to look elsewhere — advertising, syndication, events, more grants — to find sustainable futures?

8. How many titles — and readers — is Journalism Online able to bring into its Press+ network? Journalism Online has moved from a question mark to a well-situated player in the iPad-fueled universe of paid content. Its Press+ network offers the promise of that elusive “network effect” — but only if it gets real scale.

9. How much “extra” do news companies charge for digital access? Okay, every publisher wants to be paid for news content. But as they test out pricing, they’re all over the board in how much to charge. Some want to charge as much for digital as for print; others are willing to throw in digital access for “free” if readers maintain print. The number to watch is one probably about 10-20 percent higher than print alone — as an opt-out upsell — and see how much that sticks with print readers. If that works, new “circulation” revenue helps replaces some of that disappearing ad money — and provide a route to a time of mainly digital, partially paid access.

10. What’s your cost of content? No journalist likes to be thought of as a widget producer, but news is a manufacturing trade, as the Demand Media model has shown us. How can news companies lower the cost of content while creating more? That’s why we see new Reuters America deals, Demand partnerships, more user-gen, more staff blogging. Editors are more needed than ever to make quality judgments about new content, but they and their business leaders must understand what content — high-end and low — really costs to produce.

11. How much do you spend on analytics? Ultimately, investing in the collection and interpretation of data is a big test of news companies’ ability to play digital. I’ve noted (“The Newsonomics of the FT as an Internet retailer“) how the Financial Times has set the pace for the industry in establishing a new team of (non-newspaper) people to run its analytics arm. That operation now numbers 11, up from nine last year. A good beginning metric for any news company to ask: How much money are we investing in understanding our business with the tools of the day?

POSTED     Jan. 13, 2011, 10:30 a.m.
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