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Once upon a time owning a newspaper was something to be admired as well as providing a route to even more riches.  So newspapers were nearly always exclusively owned by very wealthy men.  Rupert Murdoch is a good example of the old style media baron.  He once famously called newspaper classified advertising (the small personal and for sale ads) “rivers of gold” because, although reasonably priced individually, there were so many of them that they continued to increase his fortune handsomely.  That was in an era before eBay and Gumtree. Today only people of a certain vintage remember this period, as well as the newspaper print rooms bustling with highly paid union members operating printing machinery that dated back to the turn of the twentieth century.  The Internet has almost destroyed this profitable business as it enables virtually anybody to create and publish digital content for the world to read and discuss for very little cost.  As early as 2005 the prescient Rupert Murdoch was beginning to think the unthinkable and he remarked: “sometimes rivers dry up.”  And dry up they did at an alarming rate.  As I wrote back in March 2010: press classified advertising had shrunk by minus 37.3% in 2009.   Yet despite this setback print newspapers haven’t declined much in political influence as their opinions still get amplified by television and radio programs like “What the Papers Say”.  Although the BBC’s influential program, Today, broadcast on Radio 4, now refers to what the papers “and news websites say.”  The reason I remain interested in the decline of newspapers is that between 2004 and 2006 I was consulted separately by two UK national newspapers on how to come to terms with the Internet.  As I explained here, in an article written in 2012, my clients simply couldn’t or wouldn’t accept that their newspaper businesses were going into permanent decline, despite my evidence.  I’d developed some novel marketing research techniques, using my own software, and been able to study people’s real online behaviour in depth.  It was revelatory.  I showed my newspaper clients the results of that research and explained that they could chart the decline of their printed newspapers by studying how fast three trends were growing.  In that pre-smartphone era those trends were all price related: broadband expansion, lower laptop costs, and the spread of home wireless networks.  At that time many people who had WiFi and a laptop quickly gave up buying printed newspapers.  As one women explained to me - before having WiFi only her husband could read the news online.  But WiFI enabled all the family members to share connection to the Internet, and online news was a primary destination. With the help of the chart above, using data supplied by OC&C Strategy Consultants, I can expand a little more about the reasons behind the decline of newspapers.  This is an aggregated view of the entire U.K. newspaper industry and within this there are some specialist newspapers, such as the Financial Times, who remain exceptions to the average. This is a tale best understood by seeing it through the lens of atoms and bits, a concept I first came across in 1995 reading the hardback book Being Digital, by Nicholas Negroponte.  It helped shape what I told those two U.K. newspaper companies a few years later.  Rereading that book now, I’m astounded at how much Negroponte had foreseen.  Using the model of atoms and bits breaks the world into two domains: atoms - the physical world e.g. printed newspapers, and bits - the digital world of data and information.  Printed newspapers necessarily have high fixed costs of production.  In fact, in hindsight we can see that these costs can only be paid for by expensive advertising resulting from having a guaranteed high circulation.  Whereas online news websites exist in the world of bits and therefore can have comparatively low fixed production costs.  Nevertheless, in an era where virtually all the news you can eat is for free, even online news websites are struggling to make money. My thoughts about this, and hence this article, were triggered by the news that Mashable has just been sold for $50 million, a fifth of the valuation set by the venture capital owners.  Fresh investment had dried up because profits seemed to be a long way into the future.  If it has been this tough for Mashable then what hope is there for existing printed newspapers struggling to adapt to the Internet?  I really like Mashable and to my mind they have done everything an online news website can do to be successful.  Mashable has adapted to the global nature of the Internet by having international versions for the U.S., the U.K., France, India, Asia, and Australia, as well as offices in all these locations.  Small, efficient teams of people, spread across their offices, produce the content for the different editions so the website is continually being refreshed.  Mashable is free to view, paid for by every form of advertising available online, including editorial sponsorship, advertorials and affiliate links.  Importantly they have their own video production facilities and control their own video advertising, the most profitable type of online advertising, so they make the money and not Google (which would if they used YouTube).  Mashable was designed from scratch, with no legacy structure dragging them back, so it is as fit for the online social media world of today as it is possible for a news website to be.  And everything on the site is mobile friendly because they know that that’s how 60% of their visitors use the website. Yet, despite all these pluses, in 2016 Mashable made a loss of $10 million and the sale of the company for such a low price doesn’t bode well for their financial results in 2017. Up until now I always thought that a news website, properly adapted for the 21 st  Century, could be profitable.  Mashable proves that assumption to be totally wrong which means that legacy news brands that are relying on online riches are in for a very rough future.  Look at the chart above and you can see that in the last eleven years the U.K. newspaper business overall has had to cope with a near halving of its income.  Although revenue from digital advertising and digital subscriptions has grown, it is never going to make up for the loss of print subscriptions and print advertising for most newspapers.  And sadly, Mashable shows that even without vast investments in the atoms involved in buying printing machinery and plant, an online news operation is not a route to gold but one of huge potential losses. Looking at the chart above now, I think my client recommendations, made well over a decade ago, still hold.  I basically said they should be prepared to manage decline and make money in bits and pieces anywhere and anyhow they could.  It really is a question of adapt or die. The newspaper industry can never be as profitable or as large as it once was.  Online the real money will be made by Google as it directs the traffic and owns the software platform which runs the bulk of digital advertising.  As well as with Google, online newspaper advertising now has to be shared with Facebook, which leaves even less for companies that don’t own an advertising platform. U.K. newspaper groups haven’t been imaginative or bold enough in making money wherever they can.  I remember suggesting to one tabloid editor in 2004 that his newspaper could own football online if they gave their website some serious investment, with all the opportunities for live events and merchandising that that would eventually offer – but such ideas fell upon deaf ears.  He couldn’t see the extent of the tsunami that was about to hit his company.  But other people have been far more creative: In search of new opportunities presented by the Web, one Brazilian media group has become the largest wine distributor in Latin America.  How’s that for lateral thinking?  But despite what I have said so far, I would emphasise to all editors the importance of not giving up on those people who still enjoy reading their printed newspapers - and there are many, many of them.  Some of this group may well be a declining breed but all them are still willing to pay for the privilege of reading their papers, and they obviously find it acceptable to view printed advertising.  Such loyal readers should be treasured: they produce around four times the income that a digital subscriber generates for most newspaper businesses.  And in a world of bits and a fascination with all things digital, it’s intriguing to note that unfashionable atoms can still make more money. November 2017 
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News minus newspapers.

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News minus newspapers.

Once upon a time owning a newspaper was something to be admired as well as providing a route to even more riches.  So newspapers were nearly always exclusively owned by very wealthy men.  Rupert Murdoch is a good example of the old style media baron.  He once famously called newspaper classified advertising (the small personal and for sale ads) “rivers of gold” because, although reasonably priced individually, there were so many of them that they continued to increase his fortune handsomely.  That was in an era before eBay and Gumtree. Today only people of a certain vintage remember this period, as well as the newspaper print rooms bustling with highly paid union members operating printing machinery that dated back to the turn of the twentieth century.  The Internet has almost destroyed this profitable business as it enables virtually anybody to create and publish digital content for the world to read and discuss for very little cost.  As early as 2005 the prescient Rupert Murdoch was beginning to think the unthinkable and he remarked: “sometimes rivers dry up.”  And dry up they did at an alarming rate.  As I wrote back in March 2010: press classified advertising had shrunk by minus 37.3% in 2009.   Yet despite this setback print newspapers haven’t declined much in political influence as their opinions still get amplified by television and radio programs like “What the Papers Say”.  Although the BBC’s influential program, Today, broadcast on Radio 4, now refers to what the papers “and news websites say.”  The reason I remain interested in the decline of newspapers is that between 2004 and 2006 I was consulted separately by two UK national newspapers on how to come to terms with the Internet.  As I explained here, in an article written in 2012, my clients simply couldn’t or wouldn’t accept that their newspaper businesses were going into permanent decline, despite my evidence.  I’d developed some novel marketing research techniques, using my own software, and been able to study people’s real online behaviour in depth.  It was revelatory.  I showed my newspaper clients the results of that research and explained that they could chart the decline of their printed newspapers by studying how fast three trends were growing.  In that pre-smartphone era those trends were all price related: broadband expansion, lower laptop costs, and the spread of home wireless networks.  At that time many people who had WiFi and a laptop quickly gave up buying printed newspapers.  As one women explained to me - before having WiFi only her husband could read the news online.  But WiFI enabled all the family members to share connection to the Internet, and online news was a primary destination. With the help of the chart above, using data supplied by OC&C Strategy Consultants, I can expand a little more about the reasons behind the decline of newspapers.  This is an aggregated view of the entire U.K. newspaper industry and within this there are some specialist newspapers, such as the Financial Times, who remain exceptions to the average. This is a tale best understood by seeing it through the lens of atoms and bits, a concept I first came across in 1995 reading the hardback book Being Digital, by Nicholas Negroponte.  It helped shape what I told those two U.K. newspaper companies a few years later.  Rereading that book now, I’m astounded at how much Negroponte had foreseen.  Using the model of atoms and bits breaks the world into two domains: atoms - the physical world e.g. printed newspapers, and bits - the digital world of data and information.  Printed newspapers necessarily have high fixed costs of production.  In fact, in hindsight we can see that these costs can only be paid for by expensive advertising resulting from having a guaranteed high circulation.  Whereas online news websites exist in the world of bits and therefore can have comparatively low fixed production costs.  Nevertheless, in an era where virtually all the news you can eat is for free, even online news websites are struggling to make money. My thoughts about this, and hence this article, were triggered by the news that Mashable has just been sold for $50 million, a fifth of the valuation set by the venture capital owners.  Fresh investment had dried up because profits seemed to be a long way into the future.  If it has been this tough for Mashable then what hope is there for existing printed newspapers struggling to adapt to the Internet?  I really like Mashable and to my mind they have done everything an online news website can do to be successful.  Mashable has adapted to the global nature of the Internet by having international versions for the U.S., the U.K., France, India, Asia, and Australia, as well as offices in all these locations.  Small, efficient teams of people, spread across their offices, produce the content for the different editions so the website is continually being refreshed.  Mashable is free to view, paid for by every form of advertising available online, including editorial sponsorship, advertorials and affiliate links.  Importantly they have their own video production facilities and control their own video advertising, the most profitable type of online advertising, so they make the money and not Google (which would if they used YouTube).  Mashable was designed from scratch, with no legacy structure dragging them back, so it is as fit for the online social media world of today as it is possible for a news website to be.  And everything on the site is mobile friendly because they know that that’s how 60% of their visitors use the website. Yet, despite all these pluses, in 2016 Mashable made a loss of $10 million and the sale of the company for such a low price doesn’t bode well for their financial results in 2017. Up until now I always thought that a news website, properly adapted for the 21 st  Century, could be profitable.  Mashable proves that assumption to be totally wrong which means that legacy news brands that are relying on online riches are in for a very rough future.  Look at the chart above and you can see that in the last eleven years the U.K. newspaper business overall has had to cope with a near halving of its income.  Although revenue from digital advertising and digital subscriptions has grown, it is never going to make up for the loss of print subscriptions and print advertising for most newspapers.  And sadly, Mashable shows that even without vast investments in the atoms involved in buying printing machinery and plant, an online news operation is not a route to gold but one of huge potential losses. Looking at the chart above now, I think my client recommendations, made well over a decade ago, still hold.  I basically said they should be prepared to manage decline and make money in bits and pieces anywhere and anyhow they could.  It really is a question of adapt or die. The newspaper industry can never be as profitable or as large as it once was.  Online the real money will be made by Google as it directs the traffic and owns the software platform which runs the bulk of digital advertising.  As well as with Google, online newspaper advertising now has to be shared with Facebook, which leaves even less for companies that don’t own an advertising platform. U.K. newspaper groups haven’t been imaginative or bold enough in making money wherever they can.  I remember suggesting to one tabloid editor in 2004 that his newspaper could own football online if they gave their website some serious investment, with all the opportunities for live events and merchandising that that would eventually offer – but such ideas fell upon deaf ears.  He couldn’t see the extent of the tsunami that was about to hit his company.  But other people have been far more creative: In search of new opportunities presented by the Web, one Brazilian media group has become the largest wine distributor in Latin America.  How’s that for lateral thinking?  But despite what I have said so far, I would emphasise to all editors the importance of not giving up on those people who still enjoy reading their printed newspapers - and there are many, many of them.  Some of this group may well be a declining breed but all them are still willing to pay for the privilege of reading their papers, and they obviously find it acceptable to view printed advertising.  Such loyal readers should be treasured: they produce around four times the income that a digital subscriber generates for most newspaper businesses.  And in a world of bits and a fascination with all things digital, it’s intriguing to note that unfashionable atoms can still make more money. November 2017 
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