Nieman Foundation at Harvard
HOME
          
LATEST STORY
Spain’s Eldiario.es has 18,000 paying members, and its eye on the next several million
ABOUT                    SUBSCRIBE
June 12, 2014, 4:15 p.m.
Business Models
LINK: www.aeaweb.org  ➚   |   Posted by: Caroline O'Donovan   |   June 12, 2014

A paper by the University of Chicago’s Matthew Gentzkow, published last month in the American Economic Review, is making headlines. “Trading Dollars for Dollars: The Price of Attention Online and Offline” looks at advertising spending based on time spent engaging with news content. In it, Gentzkow contends that the conventionally held belief that the dawn of the Internet destroyed the business model for print newspapers is false.

Contrary to most popular accounts, the growth of the Internet has not obviously caused a large decline in newspaper readership. Readership has fallen steadily since the Internet was introduced in the mid-1990s, but it had been falling at almost the same rate since 1980, and the small acceleration of this trend accounts for a drop in readership of only about 10 percent. This is consistent with more systematic evidence in Gentzkow (2007) and Liebowitz and Zentner (2012), suggesting that online-offline substitution is relatively limited, as well as survey evidence showing that the Internet currently accounts for less than 10 percent of total time spent consuming news (Edmonds 2013).

In addition, he says print news lost more revenue when it lost its classifieds to sites like Craigslist than it ever did to online news.

For data, Gentzkow relied on comScore for online news traffic and the Video Consumer Mapping Study for print. Obviously, it’s much harder to measure minutes spent reading print than spent reading online, however, Gentzkow writes in an email:

…they actually had observers follow participants around and record what they do minute by minute. They find that the average person who reads a newspaper on a given day reads for 41 minutes.

Now these aren’t exactly comparable — one person could make multiple visits to a website on a given day, and subscribers probably read more than the average reader. But I think it’s clear as a ballpark estimate that the print number is an order of magnitude bigger than the online number.

Based on these numbers, Gentzkow calculates that, although more money is spent on print advertising, when you look at spending per hour of attention, the rates for online are much higher.

Screen shot 2014-06-12 at 2.42.40 PM

Gentzkow offers a a few rationales for why online advertising might be valued more highly in the market.

Each newspaper has physical space for exactly one advertisement. All readers of the newspaper must see the same ad. The marginal cost of printing ads is zero. Each website also has physical space for exactly one advertisement, but these ads are targeted, so the website can show different ads to different consumers. Consumer types are observable to websites.

In other words, whatever online news lacks in eyeballs, it makes up for in delivering the intended viewer.

Show tags Show comments / Leave a comment
 
Join the 15,000 who get the freshest future-of-journalism news in our daily email.
Spain’s Eldiario.es has 18,000 paying members, and its eye on the next several million
“We have a potential of six million readers. You may not convince all six million people to be your socios, but if you learn more about their interests, you can get closer.”
Chasing subscriptions over scale, The Athletic wants to turn local sports fandom into a sustainable business — starting in Chicago
“It’s very easy today to be click-driven and produce articles that don’t have a lot of substance or depth and don’t cost that much to produce, but that dynamic is disappointing for fans who want higher-quality content.”
Hot Pod: We now have new, free rankings to show how podcasts stack up against each other
Plus: Parsing the RadioPublic announcement; premium podcast subscriptions; Bill Simmons oversimplifies things.
What to read next
0
tweets
Hot Pod: As more podcasts become TV shows, can their founders retain creative control?
Plus: Podcasts as time-shifted cable TV; MTV News launches its first podcasts; Postloudness moves beyond Mailchimp.
0The Hindustan Times is working to build the definitive online source of real-time air quality in all of India
In addition to pulling in data from government stations for its map, the organization is deploying and testing its own air quality sensors across the country.
0A new growth area for foreign reporting: podcasts? With reporters in-country, GroundTruth hopes so
“There’s pretty much nothing, as far as I can tell, in terms of real, international, on-the-ground reporting in the world of podcasting.”
These stories are our most popular on Twitter over the past 30 days.
See all our most recent pieces ➚
Fuego is our heat-seeking Twitter bot, tracking the links the future-of-journalism crowd is talking about most on Twitter.
Here are a few of the top links Fuego’s currently watching.   Get the full Fuego ➚
Encyclo is our encyclopedia of the future of news, chronicling the key players in journalism’s evolution.
Here are a few of the entries you’ll find in Encyclo.   Get the full Encyclo ➚
EveryBlock
Hacks/Hackers
Los Angeles Times
DNAinfo
MediaNews Group
Mother Jones
New West
Davis Wiki
Global Voices
The Daily Beast
Al Jazeera
Bayosphere