Ken Doctor’s Insider View on Publishing’s Hottest Topics

Insider magazine coverThis article was originally published in The Insider, PressReader’s leading edge magazine covering the latest industry trends and top insights about navigating through publishing in a digital world.


Anyone who’s anyone in the publishing industry knows Ken Doctor of Newsonomics – a highly respected media expert and analyst who focuses on the business of news.  I’m delighted I was able to connect with Ken during his busy travel schedule to capture his insights on the state of our industry, where opportunities can be found and the challenges lay ahead.

Welcome Ken. Let’s talk about some of the hot topics of 2015 and how you see them playing out in 2016…

Gayle:   I enjoyed reading your article on Newsonomics: The 10 questions into 2016… and was particularly curious on your views about the ad blocking so-called crisis we’re in.  Some publishers seem to be moving to native advertising to combat the problem. What are your thoughts on native?

Ken:   I look at it as basically commercial storytelling, but there is a lot of confusion. There are a lot of different words that describe it. The most au courant term these days is “branded content”, which is a fine term and basically means that it’s coming from a commercial brand, as opposed to a media brand whose first effort is to inform people. It is commercial speech. As long as commercial speech is well labeled and presented as such, I have no problem with it.

Let’s just look at the terms here. You have branded content which I think is the best term right now. You also have the term “native content”, which means is that it is advertising speech presented in a way that flows easily, sometimes seamlessly, within editorial, especially on a mobile phone.   A good example of native content is Quartz.

Quartz, a very good business news start up, was one of the early pioneers in native content.  As you read down the news flow on Quartz, it will say very clearly, “Sponsored Content”, but the typography doesn’t change much from the editorial.  The idea was that people were going to continue to read up and down the stream and that native content would not be intrusive in the way that ordinary ads have long been in newspapers or magazines or online.

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However, others have used native to obscure the fact that it is commercial speech. In terms of labeling, The New York Times has made the biggest public pronouncements about that, of how things are labeled and whether they have a border around them.  That is the critical question here — of not trying to deceive or confuse readers.

The other term is “content marketing”, which is just simply saying that advertisers or brands are using content, as opposed to price/item ads such as, “Come buy this car for $30,000 dollars.”

I think the controversy is pretty easy to dismiss, as long as publishers do the right thing and are very clear in labeling the presentation. The business importance of this is huge and growing. If you look at the majority of the digital ad world, it is increasingly programmatic, meaning driven by technology. 65% of all ads are programmatically driven. This is a field that is absolutely dominated by non-publishers. 71% of all the digital advertising in the US goes to ten top companies that create original content.

What branded content ads allow publishers to do, over the last two or three years, is to say, “We’re not going to try to compete with Google and Facebook in terms of targeting. They have better targeting than we’ll ever have.  In terms of beating Google and Facebook on price, what we’re going to do is be an agency. We’re going to work with the top brands. We’re going to help them create really good commercial storytelling that works for our audience, and we’re going to charge print-like rates to do that.”  That’s what we’ve seen out of The New York Times, the Journal, the FT, The Washington Post, Hearst, Time Inc. etc.

Finally, another big benefit of branded content is that ad blockers won’t work against it because of the nature of how it’s presented.  Branded content makes the competition with Google easier, it fetches high prices, and it avoids ad blockers; that’s why we’re going to see more and more of this.

A company like the New York Times will do about 20% of its digital ad business in branded content this year. Bloomberg, which I just met with today in fact, has about 30% of its business in branded content. This has become a big part of the business in just a couple of years.

Gayle:   You recently said in a radio interview that advertising was the greatest business challenge for publishers and that it has fallen into a death spiral.  Can you elaborate on that?

Ken:   In terms of print advertising, all it takes is statistical analysis. It’s been going down essentially seven or eight percent, and it will do that again this year. This will be about the fifth year in a row. There hasn’t been any growth in newspaper advertising overall, and clearly not in print, since 2007. That is the definition of a death spiral.

The hope ten years ago was, “Yeah, we see print advertising is going to go down. You can look at this line going down on this chart, but this line is going to go up.” But even though digital advertising itself is growing still at a 12% annual compounded rate in the US, news publishers are essentially flat. They’re just not getting any increase out of digital.

What that means overall is not that advertising goes away as a revenue source, and clearly branded content is ascending for the reasons that we just talked about, but that advertising for many news publishers becomes the secondary source, and reader revenue becomes the primary source.

Gayle:   Let’s talk about readers a little bit. You’ve been quoted as saying that publishers are producing poorer quality products these days, but charging their readers more. Loyal readers are still putting up with it, but at what point are they going to rebel and say it’s enough?

Ken:   It is happening. It’s happening every day. I think it’s how we ask the question. It’s like asking, “Will newspapers ever go away?” They are going away. They have gone away. They are shadows of what they were, and that’s not just the number of printed pages, but in the volume of stories, and especially knowledgeable stories in any community. That process is happening every day, and if you look at the volume numbers, the paid circulations of these newspapers are declining roughly at the rate of three to five percent a year, in terms of print paid circulation.

I like to use this analogy.  Tell me another industry that has a two-liter bottle of Coke that they sell for a dollar, and then they turn around and reduce it to one liter and double the price.  That is in a nutshell exactly what the daily newspaper industry has done.

The huge and sad irony of it is that publishers don’t have enough pride in their own product to say, “Look, we cut the product, and we made the product worse. Maybe we had to, but that’s what’s responsible for the loss.” It’s not digital, not young people and not the internet. It’s the fact that in print, and print would decline naturally because of digital reading habits, they have hastened their own decline. I’ve quoted off and on, Molly Ivins, who said ten year ago, “I don’t mind being in a dying industry, but it really pisses me off to be in one that’s committing suicide.”

It’s exactly true for most local publishers.  There’s a big distinction between local and national that we need to make. The internet has been very good for national media. If you’re a national media company, you’re really a global media company, by the nature of the internet and a billion English speakers around the world. The advantages of massive free distribution through the internet are great but you have to have a national focus. You can survive between national and global.

You look at the Times, the Journal, the Post, the FT, Bloomberg… these kinds of companies all have a substantial future and they’re figuring out the business. Local companies just keep getting smaller and smaller and less and less relevant in terms of their news products and advertising.

Gayle:   More and more, we see audiences wanting to participate in the news, and yet in 2015, there were a number of publishers who were killing commenting on their site, moving readers off to social to have their conversations, and taking their advertising money with them. What are your thoughts on that?

Ken:   I think you have to have a good and smart level of dialogue on your site and do what needs to be done to create that community, because it’s really a community.  There are basic tools for monitoring the community for outrageous behavior, but also for making it easy for people to find the better comments, or the smarter comments, the more relevant comments and the more timely comments.  Either you invest the resources to help create a capacity to do that, or it makes sense to abandon it.

In the old days you had letters to the editor and they were highly meaningful in a lot of papers, especially smaller papers, and you had community op-eds. The ability on the internet to do that ten times better is there, but it takes resources. It takes smarts and it a willingness to manage; relatively few companies have been willing to do that.  I think they have, in a sense, taken an easy way out, and said, “Well, everybody just uses Facebook.” They allow that as part of the much greater outsourcing of local news and information to Facebook.  I think it’s a symptom, not a big part of it, but it’s a symptom of the problem.

Gayle:   Speaking of Facebook, they had quite the announcement on their revenue in Q4, and in TechCrunch they suggested that maybe Instant Articles had something to do with it.  It just seems contrary to me that Facebook is making billions a quarter on advertising, and publishers that have all the content around which that advertising makes money are just handing it over to them for free. It almost seems like another type of suicide Molly Ivins mentioned.

Ken:   I think it doesn’t need to be, but I think with Facebook, with Apple, with Snapchat, and with Google in some different ways, this is not, and shouldn’t be considered an all or nothing proposition.

With Facebook Instant Articles, for instance, the program has hardly gotten started, and it has had very little impact on Facebook in terms of its traffic or its revenue, and also – and I’ve talked to publishers about that – very little impact with publishers so far. In fact, Facebook is just not prepared to be a really good partner, and hasn’t done a very good job providing some basic analytics of what kind of benefits there are to publishers of Instant Articles.

But if you look at the model and step back from it, you can say, “This isn’t Google 1998,” or, “This isn’t Google 2005. This is Apple and Facebook 2015/2016.” In this new model, we have seen a movement, which is a significant movement, where publishers can sell advertising, in theory, on Apple and on Facebook, adjoin their content and keep all the revenue themselves. That is manifestly different than what the situation was with Google.

Secondly, we heard it announced by Apple a couple days ago, that it’s going to authenticate those publishers that have paywalls. If you’re on The Wall Street Journal for instance, and you go to Facebook, come June or so, you’ll be able to read more of The Wall Street Journal, but only if you’re a paid customer.  So we’ve have seen movement in terms of Apple and Facebook. We’re going to see some movement in Google in some other ways. These are not all or nothing propositions.

The only one that is all-in is really The Washington Post, which has a wholly different strategy at this point, of ubiquity.  The other publishers I’m talking to I think are handling it right, where they’re testing, and not doing any great damage to their business to see what will happen.

Gayle:   Let’s talk more about monetization and paywalls.  The New York Times has obviously had some success, but what about the average publisher?

Ken:   In the newspaper world, the metered model has worked, but again, it’s not all or nothing; it’s worked in a limited way, with some very different experiences across the board. About half of US dailies have paywalls.

If you look at the top performer, The Boston Globe, it has 65,000 digital-only subscribers. That’s a good number. They have moved their pricing up from the equivalent of 57 cents a day to 99 cents a day. They’re getting 65,000 people to pay them $365 dollars a year now for digital-only access to The Globe. That is a significant achievement. Now, that’s the high end of it.

As we take that apart and try to understand that, a lot of people will say, “Well, 65,000, that’s nothing compared to The New York Times that has a million.” This is the essential disparity between the value of national media and the value of local media.

Local media companies have reduced and reduced their value proposition to their readers, and most of them have far fewer than 65,000 digital-only subscriptions. What most of the newspaper companies have done, is they’ve used the metered paywall to do something that’s very important, which is to say, “The newspaper content is not free. If you’re a subscriber in print, or if you’re digital-only, you now have access to it, if you want to read more than ten articles a month”. That is important. I think it was smart, and in fact for two or three years, that actually grew circulation revenue for them.

The problem with it is twofold. One, they haven’t invested in the product and in the digital experience overall. And two, they haven’t increased their value proposition.

Those that are doing less, basically have held on to their print-only subscribers, by charging them for digital access a little longer.  They have gained a few points in circulation revenue, but it’s not a winning strategy, and they’re looking for a new strategy at this point.

Gayle:   What other monetization strategies do you think have legs?

Ken:   The number one is in an area that we’ve seen little effort recently, but we may see more of, which is e-commerce, or you can call it services.

Take a look at a new app called Vurb for instance. This is an app that says, “Hey, you live in a local city, everybody lives somewhere, you’ve got all these apps, you’ve got Open Table for restaurants, and movietickets.com, and StubHub for buying tickets. Come to this one place, and you can find all your local apps, or your apps that access local information and local commerce.” Of course, this is a commerce play for them. They plan to take a percentage from those transactions.

Now, ironically, this is a company that is partially funded by Tencent, the Chinese e-commerce company. This is something that local media should have done a long time ago; it gives them a new opportunity to redefine “local”.  Local has always been for newspaper companies far more than just news; it’s always been about community and a place to find things. Now the mobile phone allows these companies to reinvent it, but newspaper companies have just shown so little imagination in doing that.  But I think that’s one opportunity that is big.

Another area is events – events in terms of being a convener in local issues and commercial fairs. It is another form, perhaps, of advertising or reader revenue and finding other sponsors who will come in on that.  But it is a live and in-person kind of connection where some companies are finding a good new revenue source.

Gayle:   We’ve been watching what you called “Billionaire Bingo” with Buffet, Bezos, and Henry buying newspaper properties over the past few years, and more recently with Nikkei buying Financial Times, casino mogul, Sheldon Adelson, acquiring Las Vegas Review-Journal and Alibaba Holdings taking ownership of South China Morning Post (SCMP).  Do you see this continuing during 2016, and any thoughts on who you think might be primed to be picked up?

Ken:   I think basically everything is for sale, which is a scary proposition. The thing about it – and I’ve written about it several times – is the low prices of these enterprises, number one; and number two, the fact that the old brotherhood of newspaper chains, where people kept the properties essentially in the family, has been broken up.

It is totally unpredictable who would buy a newspaper. I suggested when the Adelson purchase went down in Las Vegas that the Koch brothers could well re-appear. They were very interested in buying The Tribune company. They could well appear, and this is like pocket change for them. You could buy all of Tribune Publishing for $650 million. It’s unpredictable how many people are going to want to get into it, either for reasons of political influence, or ego. Or, in the case of John Henry, and Glen Taylor, really a combination of civic interest, and a belief that they can turn around these businesses long term.

It is unpredictable, I think, at this point. The most predictable part of this is, we’ve got two companies, Gatehouse and Gannett that are both fueled with funding that says, “If you can buy properties cheaply enough, where you can buy it essentially at a multiple of three to four times annual earnings, and then you bring your centralization mojo to these companies,” which is what they’re both doing, “and you can make your money out, you can make more profit in four years than you’re paying for the property,” that is the financial discipline they’re bringing to it.  So most companies are looking for more papers, and we’ve seen a number of individual, independent, family-owned papers succumb over the last few years.  A paper like The Columbus Dispatch, for instance, is a good example of that.

Gayle:   If you were a billionaire, would you buy a newspaper, and if so, which one?

Ken:   It would depend on how I wanted to spend my time. If you’re a multi-billionaire, it’s really less a question of money than it is of time, because these are tremendous turnaround projects; there is no template at this point to do it. That’s really the big question.

Gayle:   Going into 2016, if you were to give one piece of advice to the industry as a whole, going into this year, what would it be?

Ken:   I’ve been urging publishers to think about business intelligence, also called analytics, or data science.  It is becoming the center of every media business. You have to have knowledge of your customers and what they’re reading and want to read, and similarly of your advertisers and what they want and how well you’re performing.  Without that core of business intelligence, you’re flying blind at this point and by 2020 you won’t have any business left.

I urge people to venture into an area that many of them are scared of because they think about all these nerds that are data scientists.  They need to learn how the smarter publishing companies have, just in the last two or three years, harnessed data science to really have an understanding of their business.

The parallel here is that Google and Facebook and the others are all based on a lot of knowledge. They have all the data moving through there. Their ability to optimize their business processes and to do it quickly isn’t based on hunch, which is what has long been valued in the media world. What I tell publishers at every opportunity is that the new world is both hunch and munch, that the editorial intuition and the editorial judgment is as important as it ever has been, and this is what still distinguishes publishers from tech companies.  It’s the combination of munching of the data to actually get to a level of business intelligence that will help distinguish their businesses in the years ahead.

 

About Ken Doctor

Ken Doctor is an analyst with a ringside seat at the greatest story ever told about the global news media industry. Fully employing more than 35 years of experience across a wide range of media, he’s become a go-to speaker, press source and consultant for legacy and emerging press around the world, talking about emerging Newsonomics.

He writes regularly on the business of media change for Harvard’s Nieman Journalism Lab and for Capital New York. He also contributes to CNN Money and Politico. He is at work on his second book, following “Newsonomics: Twelve New Trends That Will Shape the News You Get,” which has been translated into Mandarin Chinese, Korean, Portuguese and Russian. All of his work can be found at his own Newsonomics.com website, newly mobile-optimized.