Recently, a number of people have written about the decline of the newspaper industry that has occurred over the past decade. This great fall, sometimes referred to by others as “the original sin” has been debated at great lengths. Although a somewhat crowded arena, I too want to throw my two cents into the mix. While others discuss the limitations of print and their inability to change or still others lament over needlessly giving away all their content online, I would argue that the real fall happened much earlier. The real fall didn’t take place within the editorial side of the business, but rather within advertising.
First of all, let’s point out the obvious. The dawn of the internet age is at the heart of it all. On that point, i don’t believe you’ll find any disagreement. The internet presented a disruptive change to how readers consume information. However any disruption within the news side of the business was preluded far in advance by changes in another: classifieds.
Before things started to go south (i.e. before the internet caught on with the masses) things were going pretty good. Most newspapers were making money hand over fist, and most of that money came from classified listings. Sure, display advertising was also doing very well, but within newspapers, classifieds was a gravy train. The advent of computerized publishing systems brought about sophisticated and efficient systems to cost, schedule, book and print thousands of listings each day.
During this time, if you wanted to announce a birth, a graduation, a wedding, or a death, you did so through your local paper. Likewise if you wanted to see who’ve outlived (I’m convinced this is the sole reason my parents still subscribe) you would read those listings every day. Same goes for finding garage sales, used cars, open houses, a cat, or some used winter tires. People paid good money to place an ad (often waiting in a phone queue to do so) while others purchased your paper to find the information, which created demand. Newspapers were taking money out of both pockets, but primarily from the advertiser. In most cases, unless you had a printing press, you couldn’t compete.
It was at the height of this that I joined Southam. In fact, my first foray into “new media” was to create a fully functional website to allow people to browse and search the classified ads online. But, at that time, thankfully, newspapers didn’t see the internet as a threat. I say thankfully because if they had, they would have delayed placing their ads online at all and given way to an even faster decline. As far as classifieds are concerned, that first initiative was the first and last good decision they made.
(From this point on, I’m speaking primarily about my experience with Southam, but I know many of these same decisions were taken at many other papers as well.)
The first big mistake occurred shortly thereafter, and it was motivated entirely by greed. Someone decided in their infinite wisdom to create a surcharge for placing the ad online. It wasn’t much, but hey, if you have a virtual monopoly why not make a few extra bucks. A couple of models were tried, including the forced surcharge, but my favourite was the optional one. In many (if not most or all) classified departments, the ad takers work on commission in order to encourage operators to offer up-sells. This is where the real gravy is, or at least was. “Would you like to insert a photo ($$$$), or some bold ($$) or some dingbats ($$$) to make your ad stand out from the rest?” Usually, these up-sells are easy to explain. An up-sell to have your ad show up online, especially ten years ago to a primarily older audience who most likely (at the time) has no clue as to what this intertube thing you’re talking about is, is not.
If you’re an ad taker, working on commission, would you take 30 minutes to explain to poor Aunt Mildred what the internet was and why putting the ad there would be worth the $5 charge, or would you rather within that same 30 minutes book a few more $100 ads. It’s not rocket science.
I’m convinced that the originators of these plans actually did predict the correct outcome. Online ads dropped to just a portion of what was found in print, critical mass was lost to the point where many verticals became a joke, and in the end print became the only place to consume ALL of the listings. Internet problem adverted.
Except then came the competitors. Sites such as Craigslist and Monster saw an opportunity to compete in an area that just a few years earlier they couldn’t even dream about. But newspapers still had a chance. They still had a ton of information and could have not only competed, they could have wiped these competitors off the map. But they didn’t, because they were too focused on saving print. I, along with others, begged for the ability to have online-only ads. We tried to convince our colleagues that offering free online ads with online up-sells was the right business model. Why not compete with yourself and dictate the rules of the game? The newspapers however decided that not only would they not allow free online ads, they wouldn’t allow an online-only ad at any price. Let’s be clear about this, they decided that the only way you could place a classified ad with them is by going through print first. That my friends, was the final nail in the coffin.
Sure, some people managed to prevent print classified revenue from diving too quickly, and in doing so they likely met their targets and got their yearly bonuses. But they did so at the cost of the entire company.
Not only have we lost revenue, but more importantly we have lost the very business model that made newspapers profitable in the first place. We now have to find an entirely new business model that can sustain not only the digital side, but the print side as well. That’s no easy task. I don’t believe that pay-walls are that new model, but that’s the subject of my next post. Stay tuned!
This post is Part 1 of my series titled Turning the tide. An insider’s take on the future of newspapers.