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Jan. 17, 2013, 11:47 a.m.

The newsonomics of the body shop

The arrival of the web knocked the news industry’s relationships — with advertisers and with readers — out of alignment. But there are signs a few small repairs are working.

We can look at the first 15 years or so of newspapers on the web as a slow-motion car wreck: agonizing to live through, fascinating to watch.

As we pull the pieces apart, we find one key culprit: misalignment. Now, in the age of paywalls, membership, and marketing services, we’re finally seeing a time of realignment. The wheels are back on the car, though still wobbling, as they try to regain forward direction and speed. Yet it’s still too early to know what will happen as publishers try to accelerate their increasingly digital businesses.

Before we look at how the realignment is coming together, we’ve got to understand what caused the problems in the first place. Sure, it’s easy to say that the great digital disruptions upended business models, turning dollars and euros into dimes. More important, as we look back, is what we miss in our retelling of history.

Digital disruption pushed publishers and editors to weaken relationships with their customers, to lose an alignment with advertisers and readers that had sustained the business for decades. The customer fit got out of whack.

For decades, that value chain was clear and fairly unquestioned. For readers, it was the daily download, the world in 28-64 pages. Must-reads plus serendipity. For advertisers, while they grumbled about high rates, they willingly bought a mass market they could not otherwise reach. In a word: alignment. Publishers’ interests aligned with readers. Publishers’ interests aligned with advertisers.

As the great disruption began, we can now see, publishers and editors lost their way, meandering off down dead-end roads, running out of gas in cul de sacs, and investing in construction that hit brick walls. Wheels a-wobble, traction difficult. Out of rhythm, and almost out of gas.

Let’s go back to the ’90s. A relatively small group of us back then championed the Internet as a future of publishing. Early demonstration projects bloomed, some given the silly “skunkworks” monicker, though that well described the growing “us and them” divide. Web publishing was considered experimental, something added on, and certainly not a part of the wider journalistic or ad-selling craft.

If culture has been a continuing issue, then the business models of a decade and a half made it worse. It was the dedicated-to-print (how’s that for an epitaph?) people who brought in the money, while the digital people still played in the sandbox. The “dollars-to-dimes” myth reinforced how low-value the digital end of the business was. The fact the print readers paid a couple of hundred dollars a year, minimum, for the product while freeloaders consumed web news simply reinforced the division. Readers themselves knew their papers were doing something on the web, but didn’t connect it strongly with the print products they were using to getting; one was expensive, the other free.

Misalignment grew, with readers and advertisers, as both themselves went increasingly digital. Think about it. In the old print world, advertisers paid up but really got a huge — and effective — audience, which moved goods and services. In this new digital world, they could buy online display that has never approached the results of print. Clickthrough rates tumbled toward the miniscule, tangible evidence of the growing disconnection. Shoppers found little usefulness in the advertising. Online advertising may have brought in a few billions, but publishers came nowhere close to creating the kind of local marketplace the newspaper had created.

Cultural misalignment. Reader misalignment. Merchant misalignment. Shopper misalignment.

Publishers searched for new models but came up short, and too many stayed the course as the world was changing. You can listen to Click and Clack and realize that lots of people, including publishers, drive ailing vehicles for way too long.

Now, though, finally, publishers and editors have been heading in for some repairs — clearly still bodywork in progress — and getting better realigned. Let’s call this the newsonomics of the body shop, the realignment of business models and mindsets.

This realignment is fundamental to the survivability of the news industry. It is taking a number of forms. While many of us look at this through the prism of business model, this realignment first and foremost rests with relationships. Start with the relationship — “If there’s one reason we have done better than of our peers in the Internet space over the last six years, it is because we have focused like a laser on customer experience, and that really does matter, I think, in any business,” says Jeff Bezos — and the business model will occasionally follow.

As we survey the news initiatives and innovations of the moment, let’s look how they focus on customer relationship. That’s the unseen thread that connects them and offers us hope that the news industry may have the capacity to revive itself — because no one else is going to do it. Let’s look at how re-aligning with customers is at the root of the major change initiatives underway at the press worldwide:

  • All-access circulation: We can look at paywalls in many ways. Let’s look at in this simple context. Go back to 2010, when very few news readers found any kind of limits to access, save on business news sites. Consumer choice was this: Pay several hundred dollars a year for print, or pay nothing for web. People aren’t stupid, and as they got increasingly comfortable with digital reading (as years of Pew charts have demonstrated), more and more stopped their print subs. That movement was relatively slow (print habits die slowly), but demonstrated in circulation numbers. Web freeloaders were still decried by newspaper people and newsroom people.

    Flash forward to 2013. All-access circulation has been radically realigned the consumer proposition. Now the choice is to pay for print, or pay for digital, or pay for both, in varying combinations. Core readers — buyers and customers — are once again getting aligned. Newspapers have begun to close that loopy distance between print and digital, between consumer and freeloader. Newsrooms can rejoice in serving people who pay for their work, even if the repair work in progress offers no long-term warranty.

    Further, newspaper and magazine companies can do all-access better than the digital competition. Buy a newspaper or magazine product from Apple, and you can only get the iPad or iPhone versions; you can’t get web access or print included. In this case, publishers’ and consumers’ interests align as well, as newspapers and magazines themselves can offer the best deals and the easiest one-step fulfillment.

  • Membership: Still a hazy concept, membership aspires to build stronger relationships with readers. It elevates subscribers (a mere act of paying) to members, trying to forge a connection. The Day’s program is prototypical among smaller dailies (“The newsonomics of 100 percent reach”). Major metros like The Boston Globe and L.A. Times have adopted the same notion. Changing the historic “you buy, we deliver” relationship is a tall order. Will special content (Globe Insiders) or special members-only events and forums convince a critical mass of customers that their news company wants to do more than deliver the daily report? “Special offers” form a part of all these packages, but in the age of 24/7 targeted deals, newspaper companies must do far more with these than connect advertiser inventory and reader discounts — the public isn’t easily fooled. The key word in this wannabe alignment may be “community,” as newspaper companies struggle with that very word and its meaning.
  • Marketing services: Clearly emerging as the hoped-for third revenue stream, after circulation and advertising, is marketing services. At its center — and its best — it, too, is based on longer-term alignments with many merchants. You can see the scale of possibility laid out by Jeff Griffing, the Star Tribune’s chief revenue officer.

    “85 percent of the people who are selling for me came from digital or owned their own small businesses,” says Griffing, who last fall launched a regional digital agency, Radius, based on Hearst’s LocalEdge platform. He hired 20 new representatives. Their backgrounds are instructive: “Nobody from advertising sales. Nobody. A couple of people who were B2B salespeople for companies like 3M. They are used to walking into businesses and being truly consultative.” That’s consultative, as compared to the term long-used to deride the sales and relationship abilities of traditional newspaper ad sales people: order-taker.

    For decades, you could just take orders. And the relationship between the newspaper and the advertiser was this: We sell you space and big audience. You fill it with what you want — and good luck. If it doesn’t work, try something else. All the risk was with the advertiser; the publishers’ reward was handsome. Marketing services (“The newsonomics of small things”) forces its practitioners to continually prove out their value propositions (working the various knobs of SEO, SEM, content marketing, social hooks, and more) to help businesses find and retain customers. It’s a relationship, and guys like Griffing see that if it works, a metro paper can work a big playing field — some 30,000 small- to medium-sized businesses who believed, rightly, their old newspaper company didn’t want much to do with them.

  • Consumer e-commerce: The consumer sales cycle has sped up from hours and days to instants, courtesy on Amazon’s 1-Click and related simple buying propositions — including, now, digital circulation. Yet newspapers, once the beginning of the old aligned value chain — read ads, shop, buy — now find themselves holding on to few marketplaces. Schibsted, the fastest growing news company worldwide, has hit upon one solution: e-commerce, from lending to travel booking to price comparison. New alignments with readers, through new business lines, have created a 20-percent-plus growth business.
  • Greater local reporting: The poster child here, of course, is the Orange County Register. Editor Ken Brusic is one of very few editors seeing a new cavalry rush in. New owner Aaron Kushner is a contrarian to watch. He’s been outspoken in his belief that adding reporters — more than 100 planned at last look — will reconnect with readers craving deeper, broader and more local news (“The Orange County Register is hiring dozens of reporters, focusing on print-first expansion”). The print basis of the plan — 40 percent more news space than under previous ownership — has been well highlighted. The business question is going to be how well Kushner markets and sells the hell of the new print — and digital — products, with innovative all-access circulation and advertising/marketing services programs that take advantage of all that content.
  • Actionable customer knowledge: We’ve seen a slow growth in “audience development” operations among the smarter news companies. Here, alignment works this way: Find out what your readers actually do, and then integrate that knowledge into your product development and marketing. The Financial Times is a clear leader in the field (“The FT as an Internet retailer”). It’s built a smart consumer-based team of analytics experts, and then makes daily usage of the data flowing in through the metered model it pioneered and its direct enterprise licensing initiative. On the ad side, it shares some advertising response analytics — opening a kimono usually well-tied in the industry — with top advertisers. The notion: In the long term, publisher and advertiser interests must be aligned if business is to grow.

What else can news people do? What comes to mind: new features, new apps, new community involvements, more ways for readers and merchants to both get good deals. Jeff Bezos’ approach is one that should apply in our new business, too: “You have to use your judgment. In cases like that, we say, ‘Let’s be simpleminded. We know this is a feature that’s good for customers. Let’s do it.'” How we all need to hear that more from people within news companies of every kind.

In the arena of relationship marketing, publishers and editors are latecomers. They borrow key lessons from the biggest, fastest growing companies of our, or any other, day. Bezos’ Amazon built a juggernaut (annual growth rate of 28 percent) by aligning so smartly with the needs of its consumers, removing little friction after little friction (customer reviews, easy returns, 1-Click, same-day delivery, etc.) from its service. Google makes lead generation so direct with paid search “intent-capturing” advertising that it owns 79 percent of that market. Apple seamlessly integrates music — through iTunes and iPods — and is now on a mad march to do the same with as much media as it can on iPhones and iPads. Facebook, with its new Graph Search, attempts to make our social connections semi-automatic; think people, find people. All operate on the notion that selling — to individuals and to merchants — is an ongoing process.

That way of thinking was well summed up by David Edelman, co-leader of McKinsey’s global digital marketing strategy practice, when he described in Harvard Business Review the new relationship companies have with consumer. He calls it the customer decision journey. The CDJ touches a number of points — sharing, experience, price comparison — that make common sense. They culminate in the “loyalty loop,” keeping customers coming back. This is one tough journey for modern media companies, yet their willingness to undergo it is underlined by one clear reality. Contrary to folklore, the wheels on the bus don’t go round and round forever.

POSTED     Jan. 17, 2013, 11:47 a.m.
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