Learning from our past

One of the greatest strengths traditional media companies bring to digital marketing is hidden in plain sight and all-too-often overlooked in our frenzy to develop new online solutions.

Over the past 150 years, newspapers have developed robust systems for making sure that we are delivering what we sell. We have systems to ensure that ads get built and proofed and approved, systems to ensure that, when necessary, ads are paid for before they’re placed, systems to ensure that every ad gets billed, systems to ensure that every ad billed gets placed. When we screw up, we have systems to ensure that credits or credit ads are applied, and we track all of our errors to learn from them.

Ten or 15 years ago, the systems were all paper-based, with tickets and proofs and all of the other forms we needed shuffled through wire baskets as the ads went through the mill and into print. Now the systems are mostly electronic, but lots of newspapers still measure and tally the ads in each day’s paper.

The systems are sometimes cumbersome, and they’re never foolproof, but they’ve been critical to our success. They have been the foundation of customer satisfaction and internal accountability. They are what gave us confidence we would deliver exactly what we sold.

But when we started dabbling in digital advertising, we ignored all of that. We hacked our ad-entry systems to book digital ads, sometimes making it virtually impossible to run a manifest that would tell us what should be running on any given day. We shoehorned digital ad production into our existing workflows, relying on e-mail chains to keep track of their status. We used whatever ad-delivery systems we could cobble together, without much thought to how we would be able to delivery against ads ordered. And if something went wrong, if we over- or under-delivered on impressions, we dealt with it on the fly, tossing a few thousand more impressions onto the order to jam the ad into rotation.

For banner ads, most of us cleaned up our processes after the early Wild West days. They’re not that dissimilar from print ads, after all.

But now, as papers dive into “digital marketing services” by whatever buzzwords they’re called – reputation management, SEO, social media marketing and the like – we’re doing it all over again, forgetting to build the checks and balances that keep us on track.

Keeping it simple, there are three key outcomes you want, whatever you’re selling:

  • An efficient, effective workflow. You need to build systems that ensure you can track work performance and quality. That’s trickier when you’re dealing with what are essentially consulting services than when you’re dealing with relatively tangible ads. You may need to deploy time-tracking systems as well as quality-control systems.
  • Delivery confirmation. You need to be able to replicate the kind of delivery certainty you got from matching up sales manifests against the measured paper. You never want to be in the position of having promised SEO-optimized marketplace listings only to find out the customer has nothing but a name and an address posted.
  • Verifiable adjustments. Until all of us are replaced by robots, we’ll make mistakes. You need a system to approve adjustments, make-goods and corrections and ensure they’re delivered.

Recent readings for a strategic retreat

A group of managers at The Frederick News-Post will be shutting off mobile phones and retreating to a farm outside of town next week to kick off a strategic planning process. Gary Greene will be leading us. To get the mental wheels turning, I Tumblr’d a bunch of recently bookmarked stories on the industry. Here they are: http://geordiewilson.tumblr.com/.

Against the tide

Scores of papers have eliminated their Monday or Saturday editions; a hardy few have gone further and cut themselves back to publishing just three or four days a week. The Times-Picayune of New Orleans is the latest high-profile example of a daily paper downsizing itself to a some-daily paper.

Meanwhile, here in Frederick at The Frederick News-Post, we’re heading in the opposite direction: We brought our Monday edition back from the grave in February.

Are we nuts?

Only time will tell. But five months into this experiment the results are promising. Readers are grateful, and advertisers remain supportive.

Going into the project, we had five main goals:

  • Increase reader satisfaction: The lack of a Monday edition was a huge and continuing source of complaints from our readers. Whatever the media gurus say about the inevitability of a future where dailies aren’t daily, our readers haven’t read the memo. They made it very clear they want their local paper delivered every day. We had seen about a 15 percent decline in subscribers after cutting out Monday in 2009; our hope was to at least stem the decline.
  • Seize the opportunity to rethink the daily newspaper: As it had shrunk over recent years, our newsroom had lost much of its design expertise. We wanted to use the reinvention of a Monday paper as an opportunity to talk about design and improve our overall graphical sensibility. We also thought long and hard about the kinds of information readers need to start their week, and we developed a range of new story forms to present that information.
  • Shore up our business and sports coverage: The lack of a Monday edition is a real liability in the football and NASCAR seasons. We also saw the start of the workweek as an opportunity to burnish our local business report.
  • Change the narrative: The Frederick News-Post had been through almost four years of cutbacks and layoffs, mirroring the national decline, and the perception of the paper in the community and even in the building was that it was struggling. We saw an opportunity to make a bold statement about promise and opportunity, one that would affirm subscribers, advertisers and employees in their continued support.
  • Make money: Suspending Monday’s paper saved us hundreds of thousands of dollars in the short term. But it contributed to an erosion in our subscriber base, it cut the profitability of our third-party delivery business and it made raising home-delivery rates problematic.

I laid before the newsroom the following proposal: Design an entirely new Monday edition, with a business and sports focus and an emphasis on “agenda-setting” news for the week ahead. Make it a tabloid format, as opposed to the full broadsheet format we use the rest of the week, but keep the feel of a daily newspaper, with as much of the daily furniture (comics, editorials, letter, classifieds, advice columns, etc.) as we can. Here’s what emerged:

Along the way, we stumbled onto a new strategy for ad sales, which has emerged as the key to the business success we’ve had. I’d like to say we designed it intentionally, but really it was the result of a cascade of other decisions:

  • First, the tabloid format. We chose a tabloid format to underscore the newness of the paper, to force new thinking on design and information and also, I confess, to trick the eye. It was hard to imagine a Monday ad stack that would justify more than about 20 pages broadsheet, which we thought would underwhelm our readers. But a 40-page or even a 36-page tabloid feels richer.
  • Next, fixed ad sizes and positions. We decided to fix ad sizes and positions to simplify production, to make it easier for readers to navigate this new and unfamiliar paper and to give advertisers certainty over where their ads would show up.
  • Finally, the columns. We wanted a five-column design to give the Monday edition a newsy feel. But this left us with ad sizes that wouldn’t translate to other days of the week.

Given ads that couldn’t readily be extended to or from other days of the week, we made lemonade. We decided to sell Monday-only contracts on specific ad spots for 13, 26 or 52 weeks. This fundamentally changed the sale dynamics. It introduced scarcity and urgency, and it helped us minimize switch advertising.

The upshot so far: We’ve had tremendous success on the first four goals. Reader response has been overwhelmingly positive, even to the radically new format, and even from long-term (older) readers. The paper looks great, the new elements have been well-received and we’ve maintained a strong focus on business and sports. It’s hard to gauge how much the narrative of decline has been changed to one of growth or at least stability, but to the extent that advertiser support is an indicator we appear to have made gains.

On the final and critical goal of making money, it’s still too early to say, although most indications are that bringing back Monday has helped. Ad sales have far exceeded expectations, and we’ve held on to the early advertisers. In our most recent edition, for example, we have just one house ad in the 20 spots we designed into the paper.

On the other hand, single-copy sales of the Monday paper have been lower than we had hoped and our trend with subscribers has been somewhat mixed. Our stops have been flat, but our starts have been weak. Because we  increased rates shortly after introducing the Monday edition, though, it’s hard to tease out the impact of Monday. On balance, I’d say it has helped us to retain subscribers, but that’s a hunch.

All in all, we’re pleased. Bringing back Monday appears to be helping us financially, readers are happier and it has strengthened our position in the marketplace after several difficult years.

That’s not to say it would make sense for other papers. We had some unusual factors that helped to make it feasible for us. We have a substantial commercial printing business, with two other dailies on the press on Sunday nights, so we already had the press crews here. We also deliver a number of dailies in our market; bringing our Monday back actually helped reduce some complications there (and service complaints). And we had shifted some Monday content to an extra Sunday section, so we already were using about a third of the newsprint we run for Monday.

So it may not work for everyone. If there are takeaways for other papers, they might include the following:

  • If you need to reduce costs, consider a tabloid format. You don’t save on distribution, but you can save newsprint and it forces you to rethink what you’re delivering. Our readers love it.
  • The ad sales model — fixed positions sold on contract — has been surprisingly effective; we’re trying to figure out other ways we can employ it.
  • And the editorial kicker: Don’t underestimate the value of the daily readership habit. Three years after we suspended Monday, it was by far our largest reader complaint and a consistent obstacle in sales.

Some readings:

 

Failure of imagination

So this is what passes for innovation in the newspaper industry? Taking the Times-Picayune, with its passionate daily print readership, from seven days to three is the best idea we’ve got?

Surely we could do better.

Those who style themselves realists point to the fact that newspapers like the Times-Picayune lose money most days of the week they print. The money’s in the fat days like Sunday; Monday’s a loser. Tally it up, and the decision is clear: Cut Monday. And why stop there? Why not cut Tuesday, cut Thursday and cut Saturday? Job done; here’s your new, “more robust” New Orleans Times-Picayune, as the management memo styled it.

What that ruthless logic overlooks, though, is the value of the readership habit. Generations of newspaper readers have grown accustomed to reading their paper every morning or afternoon. That daily habit forms a powerful bond between readers and their paper, and you disrupt it at your peril.

We certainly learned that in Frederick. Three years after cutting out our Monday publication, the lack of a Monday paper was far and away our top reader complaint.

The simple math of the hard realists also overlooks the basic reality that many businesses lose money some times of the day, some days of the week and even many months of the year. Outside of a few key buying periods, especially Christmas, many stores don’t cover operating costs every day of the year, or even every day of the week. Restaurants may scrape by early in the week to make their money as the weekend approaches. Yet these businesses stay open even during lean hours and lean days. After all, a customer who finds a business shuttered on Tuesday may go elsewhere on Friday, too.

The hope in New Orleans is that even if readers go elsewhere for news four days a week, they’ll still come back to the Times-Picayune on the other three. Maybe so. Maybe their readers are more flexible than ours were, or maybe there are fewer alternatives for them to choose from.

But what’s profoundly discouraging is that publishers in New Orleans, Michigan and elsewhere have embraced such radical surgery before attempting other therapies.

Would a tabloid format lower production costs enough to support at least weekday publication? What about differential pricing, for advertisers and for subscribers? Where are the radically re-conceived newspapers that try to meet readers where they are today? Why no experiments with targeted-interest papers, or cafeteria-model papers? Why not a three-day core news product with up-sells for a Business Monday edition, an Entertainment Friday edition, and so on?

Maybe none of these ideas would be enough to save a paper like the Times-Picayune. I only wish someone was trying. Otherwise, if the Internet and the economy don’t kill newspapers, we might just do it ourselves first.

Related readings:

First results from NYT paywall

Amid more gloomy news about newspaper advertising, this nugget on the experience of the NYT paywall to date:

100,000 subscribers signed up.

What I really want to know is how many signed up for the print as well. (Since it’s actually cheaper to get the Sunday with online access included than it is to buy online by itself.)

Personally, I’m ready to renew my Sunday subscription, but I’m waiting to see how tight their net is. To date, using incognito mode seems to allow me unlimited access.

—–

And about that gloomy news. What was most interesting to me was that the ad revenue pattern seems to have flipped, with the NYT regional papers faring significantly worse than the NYT itself and even the Boston Globe group. That upends recent conventional wisdom that local papers will fare better over the next couple of years. It will be interesting to see if this is an NYT phenomenon or an isolated blip.

 

So you want to taxonomize?

In theory, taxonomies beat categories hands down for organizing content.

The main advantages are flexibility and precision.

With taxonomic tagging, you describe content on an atomic level, very precisely, and then you build queries get lists of the stories (or photos or whatever) that you want.

And because a true taxonomy maintains a parent-child relationship between entities on the taxonomy tree, you can go up or down the taxonomy tree to build general or specific queries.

So how does this build flexibility?

First of all, categories change. All of a sudden you may wake up and realize you really need to have a section devoted to the business of sports. If you’ve been taxonomizing well, that’s no problem — you’ve probably got a bunch of stuff that already has both business and sports tags. Now you just pull them together in a query, attach the query to a page or a block, and away you go.

But if you’ve been a category-based site, and you never had that particular “sports business” category before, then nobody has ever categorized anything helpful. So you’ve got to search through the database and manually recategorize the stuff you want.

Taxonomies also give you much greater precision, because you’re not just categorizing something as “sports,” you’re tagging it “sports>basketball” and you’re also tagging it for professional, college or high school, and you might even be tagging it as a tournament game. Want that Final Four page? No problem.

Even if you don’t go around adding new sections or content lists all that often, the inherent precision of taxonomies can help you get much tighter lists of related articles.

That’s the theory, anyway. In reality, there are lots of challenges to making taxonomies work for your site, from uncooperative content management systems to basic human limitations.

More on those challenges later, but for now check out the IPTC’s NewsCode taxomony, which is a pretty good starting point if you’re going to use or develop a taxonomy for your site. Also, this (somewhat outdated) history of the IPTC’s work in this area from controlledvocabulary.com is helpful. It’s focused on image tagging, but it gives a good overview of the evolution of the IPTC standards work. And the Dublin Core metadata initiative has some pretty clear explanations of what all this is about.

 

Tools for online journalists

I’ve started a page of useful tools & sites for online journalists. It’s a work in progress, and still a bit of a grab-bag list, but you’re sure to find something interesting there. Over the next few days & weeks I’ll dig deeper into my bookmarks and try to annotate, illustrate and organize it. Suggestions welcome!

The Wedge Strategy

It’s painfully apparent that digital revenue cannot yet support substantive professional journalism for smaller daily newspapers. I don’t know that it ever will, either. Fortunately, it does not necessarily follow that community newspapers are doomed.

If the goal is to find a near-term replacement for all the revenue necessary to support a newsroom and newspaper operation something like the papers we know today, the logical response is either to proceed on blind faith or give up in despair. But that’s the wrong goal. Think instead in terms of what I call the Wedge Strategy.

In simplistic terms, the Wedge Strategy frames the goal more modestly (and achievably) than trying to replace all the print dollars. With a Wedge Strategy, the goal is to fill the profit gap created by declining core revenue and increasing expenses.

You can expect long-term deterioration of core newspaper revenue. The rate and shape of that decline is anyone’s guess, but the fact of digital transformation cannot be denied. Meanwhile, there is inexorable upward pressure on expenses. The two lines move in opposite directions, and simple extrapolation quickly produces losses.

A Wedge Strategy assumes the key to survival is not necessarily to toss out the entire print newspaper business model in a desperate grab for digital dimes. Rather, the key is to work hard on bending both of those core newspaper trend lines, for revenue and expenses, while at the same time developing new revenue sources, especially online revenue, that fill the wedge.

Implicit in the Wedge Strategy is a belief that the physical daily newspaper is a unique, valuable and durable medium. It offers a level of engagement that’s hard to replicate online, it’s convenient and efficient for many uses, it’s cheap, it’s an old-school push technology that rewards curiosity and leverages hundreds of years of information design evolution to serve readers.

A print paper may not be everyone’s preference, and it is not likely to dominate even smaller markets in the future, but my assumption is that it will continue to adapt and will retain a valuable niche, perhaps serving educated, affluent, engaged members of the community. It may publish fewer days, it may shrink and change focus, but it will remain a significant factor.

As an illustration of what a Wedge Strategy might look like, I modeled a typical small daily newspaper with a nice, even $10 million in current revenue from its core operations. That might correspond to a paper with 20,000 circulation.

With $10 million in core operations, I assumed circulation revenue of $3 million, display revenue at $3.5 million (50 percent of ad revenue), classified revenue at $2.1 million or 30 percent of ad revenue and preprints at $1.4 million. Your mileage may vary, but those are within the bounds of industry experience.

I assumed this paper has not been terribly aggressive or successful at getting online revenue, so I put that at $250,000, with another $250,000 in “other publications.” Those I call the growth revenue opportunities.

I put expenses at $9 million, which gives this paper an operating margin of a bit under 15 percent. That’s pretty low by historical standards, but it’s certainly not crazy for this stage of the recession.

Now come the real critical assumptions. The value of a simple model like this is not that it might actually predict the future. I don’t know anyone that smart. Rather, it can help you identify what you need to do to succeed over time given certain reasonable assumptions. Then you have a goal, and you can begin to evaluate how likely you are to make that goal. And then you can start playing with better or worse scenarios.

My approach with this model is basically to solve for the wedge — to figure out what you need to raise is growth revenue to maintain a reasonable rate of return from operations.

My starting assumptions are the following:

  • Display revenue will increase modestly over the next few years with recovery, then it will flat-line for a few years, then it will start to decline at 5 percent annually. After 10 years, it will have dropped about 6 percent.
  • Classified advertising will just keep going down at 5 percent a year, dropping 40 percent over 10 years. (A straight-line is unlikely, but it makes modeling simpler, and, really, who knows?)
  • Preprint revenue will drop by 1.5 percent over the next four years and by 5 percent thereafter, leading to a 31 percent drop over 10 years.
  • Circulation revenue will drop a steady 1.5 percent, the assumption being that some online subscription revenue will offset slightly larger print declines.
  • One the expense side, I grossed everything up and assumed increases of 0.75 percent every year. That’s pretty tight cost control, but that’s our new reality.

Here’s what it looks like graphically:

With no growth, the paper dips below 10 percent operating margin in Year 5, and by Year 10 it’s losing more than $1 million a year.

So what’s the wedge?

To hit a 10 percent margin in Year 10, you need to maintain an average growth rate in online revenue and other publications of 18.2 percent. To hold a 15 percent margin, you need to grow at 20.8 percent.

In practical terms, a steady growth rate of 20.8 percent over 10 years is, of course, highly unlikely. But in absolute dollar terms, the numbers are somewhat less daunting, in part because this mythical paper is starting from a low base. That kind of growth rate gets this paper to online and other publication revenue of $1.65 million (each) after 10 years. That’s a bit less than 15 percent of total revenue.

That’s a stretch, to be sure. But it’s a tangible challenge that presents at least a possibility of success, a possibility that becomes more and more attainable the more you can do to hold those other numbers in line. Sure beats despair.

Here’s that future:

A good read from 1995

Thanks to Steve Yelvington for unearthing a prescient piece by Philip Meyer.

In AJR, back in 1995, Meyer predicted much of the disruption now shaking the news industry. Reading it today is fascinating, both for what he hit and what he missed.

First, a quibble.

Meyer talks about newspapers as high-turnover operations, similar to supermarkets, and suggests that high-turnover businesses should typically expect lower margins — unless they have a fortified (monopolistic) market position. So newspapers, he said, should get used to single-digit margins, say 6 or 7 percent instead of the 20 or 30 percent once common. And he suggests that new owners would be happy to step in to operate newspapers returning 6 or 7 percent.

I’m not so sure. I think turnover is less determinative than operational leverage, capital requirements and profit variability. Unlike supermarkets, newspapers have high operational leverage, with substantially fixed costs in production and distribution. They also have to make huge, lumpy capital investments in everything from presses to front-end systems. And, Gannett’s profit smoothng aside, profits can be highly variable. Even if circulation revenue is fairly stable, or at least predictable, advertising revenue swings with the fortunes of advertisers, and newsprint costs can quickly eat profits from the other side as the newsprint companies gain pricing power.

(A tangent: I’d love to see a chart comparing the profitability of newspapers and newsprint manufacturers over time. I’ll bet it looks a lot like the famous charts of the wolf and moose populations on Isle Royale.)

For newspapers, all of those factors mean risk, and with risk comes the need for higher margins to compensate. Ten percent is probably a more realistic minimum return to run a newspaper comfortably.

But that quibble aside, Meyer was right on the mark on so many points that his article still makes great reading:

He did a great job of explaining the trap imposed on current owners by high valuations, with his golden goose analogy. It’s the difference between a good business and a good investment.

He laid out the existential choice publishers faced, and largely failed, between squeezing their geese or accepting lower margins and investing in the future. (Of course, in fairness, it’s never been very clear exactly where one should be investing for the future.)

He emphasizes the importance of the virtuous circle, where dominance in an information marketplace leads to greater dominance. (I also find it helpful to think about this dynamic in terms of network externalities and lock-in, phenomena explored by Brian Arthur and many others.)

And he identifies trust as the key to maintaining dominance in an information marketplace, which is a great insight.

Unfortunately, I don’t think he or anyone else could foresee how effectively new, Internet-based businesses would slice up the newspaper business model and take over revenue streams like classifieds.

And it’s hard today to echo his confidence in trust as the critical monopoly-building asset. As we navigate a world of blogs and social media and channel proliferation, trust seems like a much more contested asset, and one that people are doing more to define on their own terms.

When more is less

Writing about Patch last week got me thinking again about one of the perennial challenges that online sales managers face: Finding the right balance between simplicity and complexity in designing your sales plan.

When I was publisher of the Monitor, we worked with an outside sales consultant on a couple of occasions. Before bringing him in the first time, we had spent more than a year trying to build up the online sales expertise of our print salesreps. We held regular sessions on everything from what CPM means to innovative uses of rich-media advertising. We recast and streamlined our online rate structure, and we built in lots of flexibility to meet what we thought would be the key needs of our advertisers.

And we got basically nowhere.

Enter Mike Blinder. He came in, spent a couple of hours talking with us about what we were doing, pulled a simple sales package out his kit, sent a sales consultant to work the market with our salesreps, and in one week we sold more online advertising than we had the previous year.

There are many components to putting together a successful sales drive. But, for us, one of the most important lessons learned from working with Blinder was that simplicity sells. Limit choices, strip out the complexity, reduce the pitch to the core value proposition.

Any toddler parent knows this. Offer a three-year-old whatever he or she wants from the the cereal aisle, and you’ll be there forever. Or at least until you lose patience and leave with a screaming child. Give the kid a choice between Cheerios and Wheaties, though, and you’re done in a flash.

Psychologists and behavioral economists working on decision theory have explored the paradox that having more choices can lead to a worse decisions – or the failure to make any decision. (See the academic work of Sheena Iyengar or the popular work of Barry Schwartz.) And smart advertising sales managers always have tried to make complex print offerings understandable.

But for some reason when it comes to online advertising we have to learn this lesson over and over again. Maybe it’s the pace of change, maybe it’s the inherent complexity of the underlying technologies. Whatever the reason, we seem inexorably pulled into the whirlpool of choices and complexities whenever we try to go to market with online advertising opportunities.

At the Monitor, all of our efforts to be responsive and flexible just led to confused salesreps and unresponsive customers. (At least they didn’t tantrum.) But when we presented advertisers with a tightly designed package for only one ad size and a set number of impressions, they bit. We had moved the discussion away from CPMs and sizes and all the other details of online campaign design to a simple choice: Is this advertising opportunity going to work for you?

In Patch’s regionalized structure, with one or two dozen salesreps serving clusters of a dozen or so sites, I see an chance for them to finesse at least some of the problems of complexity.

First, they can do away with all of the complications that come from trying to combine print and online. That’s a huge benefit.

Also, their salesreps will be able to specialize. That makes it easier for the reps to hone their pitch, and it keeps sales calls focused on one or two opportunities. And, of course, with AOL corporate support they can tap a tier of national advertisers that would be beyond the reach of most small, standalone sites.

For the rest of us, who don’t necessarily have a national sales team or even regional clusters that would support specialized sales teams, it still may be possible to develop a layered sales strategy that provides some of the benefits of specialization.

Some approaches:

  • Pick a set of core ad services, like online display ads and maybe a business blog or PR wire service, whittle each down to the simplest possible proposition, and drive those as the foundation.
  • Introduce scarcity and focus with “limited time” offers and sales efforts. These can be simple refinements of the core ad services.
  • Use self-service portals, outside specialists and blitzes strategically to sell other ad services. For example, you might turn to an outside team to hit the market for a business directory and then handle residual interest through a self-service window. Or you might gear your team up for a one- or twice-a-year blitz.

And now, I think, I can leave aside my minor obsession with Patch…