After the online meltdown
Now that we’ve hit bottom, where do we go from here?
This column appeared March 25, 2002, in the Online Journalism Review to kick off its new The Future of News section. Here’s the version on the OJR site.
By J.D. Lasica
Now that the online news industry has survived the cyberspace swoon and woken up to the Mother of All Hangovers, what’s next?
Opinion leaders in the online news business say they’re cautiously upbeat about the industry’s long-term prospects. While no one is saying that Web publishers have found the path to the promised land, many say the pervasive doom and gloom of 2001 — marked by cutbacks, closures and contortions — is being replaced by a sense that the worst is over.
“I think we’ve turned the corner,” says David D. Hiller, president of Tribune Interactive. “We actually grew through the nuclear winter. Our operating losses were cut by more than half, our revenues were up, and we’re looking for further growth this year.”
More realistic business expectations and improvements to the online news product add up to “a lot healthier” landscape today, says Scott B. Meyer, general manager of The New York Times on the Web.
“People are starting to figure out their business models, and they’re finding a way to do more with less,” he says. “Everyone’s learning that capital is not free and that profits are more important than eyeballs. It’s too early to declare that the industry is out of the woods yet, but it’s way too early to declare its demise.”
Other observers are less sanguine about the fortunes of news and content in cyberspace. They suggest that media companies need to mine revenue sources besides the ad dollars that have traditionally supported traditional media.
“The down ad market underscores the need for media companies to get off their duff and develop new revenue streams,” says Forrester Research principal analyst Lisa Allen. “Old habits die hard. The limited successes we’ve seen online with subscriptions or premium content models is a testament to the fact that most media companies are still acting out their traditional roles as manufacturers when they need to start acting more like retailers.”
Allen, a former journalist and author of a report due out in late March on how media companies can entice consumers to pay for content, says, “Don’t try to sell snow to the Eskimos. You need to identify an unmet consumer need and then build an enhanced product in a way that makes consumers want to dip into their wallets. You can’t just put out the repurposed dreck of a commodity product.”
Both optimists and critics seem to agree on this much: Over the near term, we’ll remain in a restive period of churn and flux until the industry transitions to a more stable financial footing. Until that happens, the waters will remain choppy.
For troops on the front lines, that presents a challenge — but also an opportunity to experiment, innovate and think outside the box.
Steve Rossi, ink-stained president of Knight Ridder Newspapers, says that media companies need to do more than port their print products to the Web; they need to explore new ways to take advantage of their news-gathering resources and deliver news and information with the uniqueness that the online medium demands. “We need to think of ourselves as media people, not newspaper people,” he told the E&P Interactive Newspapers conference last month.
Six trends for online news
If the long-term goal has come into sharper relief, the question facing media organizations remains: How do we get from here to there?
Let us count the ways. Here are six trends rippling through the online news industry right now:
(1) Back to basics. As news sites buckle down with smaller staffs and leaner budgets, they’re focusing resources on getting the biggest bang for their buck: identifying users’ needs and meeting them by delivering breaking news updates, local news and information, useful guides and tools, and often leaving some of the flashier stuff, like high-bandwidth, high-resource multimedia, for another day. As Michael O’Donnell, chief executive of Salon Media Group, told the Wall Street Journal earlier this month, “We tried everything, but what we found was that people are more willing to pay for plain old good content and do not want bells and whistles.”
(2) Modulated experimentation. Throw everything against the wall and see what sticks? That little party game is over. But 2002 will see news sites continue to introduce creative new revenue streams, such as nytimes.com‘s use of Surround Sessions and sfgate’s Personal Shopper. Others, like Salon and Variety, are experimenting with walling off their premium content, with mixed success. Online news staffs, too, will continue to find creative ways to stretch the boundaries of online storytelling, and small news sites such as Topeka’s CJOnline will help blaze the innovation trail.
(3) Rise of digital news networks. In the past few months, newspaper and broadcast chains — notably Tribune, Knight Ridder, CanWest in Canada and Belo — have all adopted a unified theory of online publishing, moving to single publishing platforms to share news and publish ads across nationwide networks.
(4) Convergence and consolidation. Even as media companies distribute content and ads across networks, they’re looking to sister operations or partners to bring users a richer experience. Multimedia newsrooms are now operating in Tampa, Orlando, Fort Lauderdale, Oklahoma City and San Diego, among others, with more on the way. Media companies are broadening their offerings but packaging them under a single central brand. RealCities ditched its JustGo entertainment guide franchise and repositioned it as the entertainment channel of its city sites. Look for a further consolidation that brings stand-alone new media ventures back into the bosom of the mother ship. (See “The city guide reconsidered” in an upcoming edition of OJR.)
(5) Darwin’s revenge. The past year has seen a ruthless thinning out of independent content sites. Inside.com, the much-hyped entertainment news site, went down in flames after it signed up fewer than 2,000 paying subscribers. (Primedia scooped up the remains and converted it into a lackluster portal for its other media properties.) Three other content sites couldn’t stand on their own and were sold: ThirdAge, the site for baby boomers, was bought by the genealogy company MyFamily.com. BabyCenter, the parenting site with an editorial staff of 10, was bought by Johnson & Johnson from the bankrupt eToys. The medical news site HealthScout was acquired by MDchoice.com.
The blood-letting appears nearly over, with CNET, Salon (35,000 paid subscribers), TheStreet.com (77,000 paid subscribers) and iVillage still carrying the torch of independents and sites like CBS MarketWatch, MSNBC and ABCNEWS.com still clipping along. “The online media that remain have the opportunity to contribute far more greatly than some of the traditional outlets in terms of audience reach and accountability,” says Michael Zimbalist, executive director of the Online Publishers Association, a new media trade organization. “Now that the dust has settled, we’re hopeful these startups will mature and grow into real media companies.”
(6) The future is now. We can already glimpse the outlines of the wired landscape a few years out. Watch the young kids — they’re the ones who are already shaping our future. Cell phones with instant messaging will be ubiquitous. File-swapping services will endure. Wireless digital palm devices will summon up news, information and cool new services. Telematics, offering asynchronous news reports and real-time traffic updates to commuters, will move from the drawing boards to behind the steering wheel. Consumers will demand more interactivity from all media. (More on wireless, interactivity and telematics in future installments of this series.)
While media companies shouldn’t jump headlong into these nascent ventures, they need to be ready to spring when the time is ripe. Many of these new technologies are already here in embryonic form, a sort of Version 0.5. Paul Saffo, director of the Institute for the Future, likes to quote author William Gibson, who wrote: “The future is already here. It’s just not evenly distributed yet.”
Regaining a sense of balance and renewed purpose
The challenges facing the online news industry today strike me as more psychological than technological. Half my friends are out of work, and the other half are nervous about the future. Who can blame us for being jittery, after the triple-whammy perfect storm of dot-com collapses, economic recession and Sept. 11?
But if the waters are finally calming and our long season of discontent appears to be nearing an end, don’t look for a return to the party days of the late ’90s, when media companies joined in the madcap pursuit of audience mindshare and ingested dot-com ad dollars as if snorting coke through rolled-up hundred-dollar bills.
“Up until a year or so ago, we were strung out on this speculative bubble,” Robert S. Cauthorn, vice president of digital media for the San Francisco Chronicle, told the Interactive Newspapers conference. “It was like a spigot of drug money. It went away — and we replaced it last year from a new source: traditional retailers.”
That may be the most startling development of the past year: the first sustained blossoms of profitability in the digital news garden.
New York Times Digital has posted profits of $790,000 and $1.4 million in the past two quarters. The new media unit of the Sacramento Bee? Profitable, in the 20 percent range. The online unit of latimes.com? In the black.
Other companies appear on the verge of going black. The Chronicle’s SFGate recorded record revenues last year and was on the verge of sustained profits until the Sept. 11 terrorist attacks; it expects to achieve month-to-month profitability this year. Tribune Interactive says it will be profitable across all its units by the end of 2002. So does Knight Ridder Digital.
But not everyone is convinced. Vin Crosbie, head of the new-media consultancy Digital Deliverance, was one of the 250 attendees at last month’s Interactive Newspapers conference in San Jose (attendance was down sharply from 1,200 two years ago in New Orleans). He sees the Web as the second wave of online publishing, which will soon be overwhelmed by a third wave: the wireless revolution. The news from the think tanks is similarly stark, with predictions of declining margins for media companies in every sector and a rapidly shrinking window of opportunity to capture a decent share of the lucrative Net audience.
All in all, not exacting a rousing verse of The Love Song of J. Alfred Prufrock.
Meeting the challenges of a digital future
The challenges facing the industry remain formidable. I’m sympathetic to the online news veteran — the assistant managing editor of a major online newspaper — who came up to me after a panel on wireless services at the E&P conference. He shook his head, saying, “I found it extremely depressing. Lots of talk about media alliances with banks, but almost no mention of news.”
That’s an understandable sentiment. But we’ve got to wrap our minds around the realization that news and storytelling on their own may never pay their own way online, just as they rarely pay the freight in the offline world. (You think newspapers run comics, fajita recipes and horoscopes because they ‘re newsworthy?)
It’s up to the online news brain trust — both the business side and editorial — to begin devising new, compelling, must-have products and services to woo wired consumers and fulfill advertisers’ needs.
Having said that, online journalists in the trenches can get too bogged down agonizing about monetizing traffic or converting surfers into shoppers. Count me on the side of the optimists who think the long-term economics of the business will work itself out.
Amid all the clamor and clatter about viable business models, there remains this simple, unalterable fact: Users want us, need us, depend on us. And we need to focus on improving the journalism that appears on news sites.
Bruce Koon, the new president of the Online News Association and executive news editor for Knight Ridder Digital, sees a certain return to basics reverberating throughout the industry.
“It’s a difficult message to deliver right now as newspapers and TV are going through tough economic sledding, but basically I see a return to the fundamentals, to the themes we’ve been talking about for years: putting up content quickly, serving different markets, adding the right mix of multimedia, finding business imperatives attached to your news operation, and figuring out how to generate more original reporting and editing online,” he says.
“That’s not real sexy in terms of trends, but it’s not about sexiness or the Great Next Big Thing anymore. It’s about what it’s always been about: How do we publish information in a totally different medium and time set and serve our audience best?”
Adds Tribune Interactive’s Hiller: “We all need to do a better job of getting news up on the Web throughout the day as events break. We need to be working toward a Web site behavior rather than the print model if we’re to play to the strengths of the medium. We need to get people to come to our sites several times a day instead of several times a month, and we need to do a better job of telling them what we’ve got — and how it’s different from picking up the print product — in order to get them here.”
The future of news is a digital one. Print will be around for a long, long time, and the events of Sept. 11 showed us that TV continues to cover breaking news best. But the weeks since Sept. 11 spotlighted the strengths of the online medium. The Net did a better job of providing context, background and alternative points of view. It connected users across continents and comforted people in their communities.
The past few years have been a wild ride. But the recent downswing, in a perverse way, has made new media stronger and more focused.
Some of my favorite Web sites have disappeared — Feed Magazine and The Industry Standard, to name two. But many more are still around and looking to gain serious traction by year’s end. New forms of journalism, like weblogs and collaborative news sites, continue to grow and evolve. And the slimmer, trimmer staffs at mainstream news sites have rededicated themselves to engaging the user and providing a first-class news experience.
News — in all its varied forms — has never been more vital to our lives.