| ||||||||||||
PRINT
COMMENT
SUBSCRIBE
RSSA story in the front of the business section of The New York Times this past Monday raised once again the issue of whether Craigslist was responsible for the troubles that the U.S. newspaper industry finds itself In today. While the Times' story didn't jump on that bandwagon -- and actually presented a pretty balanced view of Craig's true impact on newspapers' recent misfortunes -- just reading about the issue once again motivated me to address it in today's column.
Craig Newmark is not responsible for the fact that U.S. newspaper companies have seen significant declines in their classified ad revenues -- and therefore, their profit margins and their ability to support robust newsrooms and carry out their historical duties as the Fourth Estate. While many in the newspaper industry point to Craigslist to explain their problems, the issue is not that simple. In my view, Craig and his list may be emblematic of U.S/ newspapers' problems, but it is not a cause and effect relationship.
In the end, the problem for newspaper companies is that their businesses and business models are not well-designed for a world where the vast majority of consumers (their readers) and marketers (their advertisers) are connected to a robust, Internet Protocol (IP)- enabled communications network. IP and business model issues are the demons here, not Craig. Here are my reasons:
The Internet enables low-cost business models. Much of the power and defensibility of newspaper franchises has been built on the huge barriers to entry in production and distribution. Content makes newspapers valuable, but distribution is the core of their business models power. If you don't have access to hundreds of millions of capital, you can't even think about launching a decent-sized newspaper. If your market already has one, then you better be prepared to lose lots of money on it for years (USA Today reportedly went more than 13 years before turning a profit).
With ubiquitous IP networks and digital content, Web-based media has virtually no cost of content reproduction and distribution. This enables digital companies to deliver content and commercial services to consumers and advertisers at very low prices -- even free -- and still run quite profitable businesses.
Thus today, we see hundreds of millions or billions of print classified revenues being turned into tens of million of online revenue. We see both consumers and advertisers get better, more robust, offerings, better service and better results. Of course, those who used to make money on print ads find themselves taking empty bags to the bank at the end of the day. The future of media is about competing with business models in markets with very low or no marginal costs. Craig didn't create this factor; he just exploited it.
Analog media business models have problems. Many media companies built big businesses and big cost structures to consume the fat margins they were creating with their distribution powers to keep out competitors. (In some ways, this is not unlike what Google is doing today with all of its "cost center" businesses, such as Google News hanging on the back of the search business.) This worked great for the big media companies when the barriers to enter their markets were high. But those big, fixed cost structures have now become anchors around their necks, as low-cost competition is now eroding their core revenue and profit bases. To make matter worse, many of these companies have taken on enormous debt loads, mistaking secular declines for seasonal ones and betting that time would make it go away. These folks now are forced to spend too much of their time with lawyers and bankers, trying to avoid blowing debt covenants -- and not enough time trying to reshape their business operations.
Marketing is changing. For more than 40 years, and probably at least since Lester Wunderman pioneered modern direct marketing with his seed company mailings, marketers have been shifting commercial communication spend away from media intermediaries and more to "marketing directly." Many marketers have long favored moving money out of "above the line" spend to "below the line," but it was hard to justify it when the world of mass media was so easy. Not so today. Not only has fragmentation and clutter made media much less effective, but the Internet has made the ability to market directly to consumers much easier. And, most importantly, it has made it much more measurable. For decades, media companies fought against the use of true effectiveness measurements in the delivery of advertising for their clients. ROI was something that direct marketers did, not media companies. Now, with digital media giving marketers what they want in measurability, and delivering low-cost media to boot, the analog media companies are left particularly unprepared.
It's all about me. Consumers want services that focus on them. Likewise, marketers want services that focus on them. The dynamic and flexible nature of Web-based services and the fact that interactivity permits you to run every service like a customer service laboratory means that while many analog media products have changed little with customer needs, Web-based services are a direct reflection of explicit customer needs. Most analog media products are about publishers 'control and their views of what consumers and marketers want, not turning control over to the market participants themselves. Thus, not only do Web-based media services have cost and business model advantages -- but for many consumers and marketers, Web services are just plain better.
Does this mean that I expect legacy media companies in the newspaper, magazine and broadcast television businesses to go away, overwhelmed by Web-based disruptions? No. Certainly not all of them. Some will, for sure. Some are too far gone and some have so much debt and have lost so much of their talent that they will never be able to navigate their way out, even if they knew how to. However, many legacy media companies will make it. Many will focus back to serving the core value proposition that their consumer and marketers have depended on for decades. They will change -- becoming different, yes, but definitely better, companies. What do you think?
RSS FEEDS
mırc
From the recollections I have of the two or three conversations that you and I had pre-Tacoda, you were one of a handful of people that were trying to stop the trainwreck that has been happening, albeit in s l o w m o t i o n.
Recall what happened when the silver industry was eclipsed by gold, a hundred years ago. Entire fortunes were wiped out, seemingly overnight. Business rules were reset and life went on. So too are analog "command and control" business models being replaced by digital ones: some may call it "syndication," and others, "personalization": but we are seeing an explosion of systems that provide content managers with the tools they need to proliferate and profit across a wide band of digital channels.
At one point, newspapers had it good: no other form of mass media had such a portfolio of publishing services that were being consumed by such an assortment of audiences and advertisers. But there is that old adage about fools and history.
Years from now, I expect there to be a new "Bunker Hunt", who instead of seeking to corner the silver market, will attempt to consolidate the newspaper market under one roof. I hope I've cashed out by then.
I wouldn't be surprized if they are on the next "Going Green's" hit list. I just don't think it will be in those newspaper's headline when it happens.
When the newspapers finally wake up and realize that they have been sitting on the gold all along, and that there is an easy way to bypass the search engines, they will once again become the prominent Fourth Estate they once were.
They become so focus on down playing the Internet, because of the threat they perceived it be, instead of embracing it as an opportunity before anyone else did. Read their archives of market research they published in the late 90's.
The opportunities the Internet offered, was like taking a bucket out of the ocean, there was enough for everyone.
The newspapers became so busy trying to stop everyone else from using their buckets, they forgot to fill their own until is was too late.
If they had their hands on our patent, I could only imagine the number of law suits they would file for infringements in the local sectors.
There is still a lot of gold in thar hills, the question is, who has the bigger bucket?
We'll save the rest for another time. Dave, wish you would have been publisher.
Boo Hoo.......
What is further amazing is Craig Newmark has managed to exist without trying to gouge advertisers nor filling his site with a mass set of ads.
Last week I picked up the newspaper.....ooops adverpaper and on a full two pages found a column of news jammed in between an inordinate amount of ads...
News I mean adverpapers are now the new spammers....
Adapt to change or die off....
The same things are always said about companies like Wal-Mart. People say they put local stores out of business. Wal-Mart doesn't put anyone out of business. Consumers do.
We just completed finishing our basement. We had a bunch of stuff to get rid of and did it on Craigslist. It didn't even cross our minds to advertise in the paper.
Just a few years ago, it would have been a completely different story.
Most papers in USA are very biased in on direction or another and this often means that they have a more limited readership and circulation figures due to this. Craigslist does not espouse anything it is purely a site that allows everybody to sell or buy goods with minimal effort.
As an example I offer my home town newspaper in Wilmington NC, where I know that a number of people have canceled their subscriptions in protest at the totally biased reporting. This is, I believe, due mainly to the pressures of having only two major industries (building/realestate and Automobile sales), which make up the majority of the advertising income for the paper, and therefore must not be offended in the editorial pages.
Well just my thoughts, thank you for your article. John MacDonald