News Corp’s acquisition of the Skiff e-reader platform has been widely reported in the last few hours. It’s a completely sensible move from an organisation which understands that it has to control every part of the news chain if it is to extract as much value as possible from content, advertising, and user data.

Of course we’ve been here before with MySpace – a distribution network, database, and content platform that Murdoch acquired to howls of derision – then applause, when an enormous advertising deal was brokered with Google – and derision once more as MySpace failed to meet targets stipulated by that deal.

Skiff, however, is a rather different proposition. Interestingly, News Corp have bought the software but not the device it was supposed to run on. That may be because it was already developing one.

I’m not sure whether it is a wise move to compete with the technical expertise and experience of Amazon and Apple – but you can bet that, commercially, News Corp has a very strong hand.

One point to note is that Apple’s business model is primarily based on selling devices; Amazon’s is mainly about selling things; but News Corp is mainly about selling the intangibles of advertising and content. That may give them cause to discount their technology heavily as a mass-market offering to tie people in, and acquire customer data.

News Corp is a network, not just a series of holdings. And the latest acquisitions suggest they’re not going to let someone else control their market without a fight. The question is: how soon will they put the gloves on? And how hard, and long, can they fight?

Free does not mean that content has no value, but when the very sustenance of the entity producing that content is in danger, the concept of “free” begins to edge closer to devaluing content.

But even if content online has been free for so long, if it is captured back and tightly shut under a pay wall, does it become more valuable as a result? Or would news organizations have to earn that money if and when they finally achieve that pay wall?

As has been pointed out several times before, and on this blog as well, pay walls have been tried, tested and have, in effect, mostly failed. But many of the experiments that have involved paid content have erected pay walls around generic content or opinion that would perhaps be available elsewhere for free.

Moving toward specialized content

It is a pretty reasonable assessment that the more reasons a news Web site gives its readers to spend time on a site, perhaps by offering in-depth, contextual and narrative journalism, the higher the chances are that they will linger on the page longer, and even buy products through targeted advertising. And for better or for worse, this idea that the most engaged readers of a Web site will not only be willing to pay for content but also click through and purchase products advertised on the side of it is catching on.

As Steve Myers writes in Poynter:

“…pay structures create narrower, more specialized audiences and offer more opportunities for higher-yield, behaviorally-targeted advertising, which changes depending on users’ online habits.”

He explains that as paid sites start to attract more focused readers who recognize and identify a brand and content, it would also make it easier for news organizations to use targeted advertisements.

Free and paid content can co-exist

What worries me, however, is that news organizations are looking at options as either-or propositions. Getting your users to pay for content does not mean you can do away with Google, like Rupert Murdoch seems to believe.

There’s no denying that random visitors that are led to a site through search engines account for a large enough percentage of revenue to be ignored, as Paul pointed out in a previous post. In fact, it’s been roughly estimated that stumbling from search engines can make a news site about 50c a day per person, way less than subscriptions can, but it is still close to a hundred million a year, considering the average newspaper gets about a million visitors per month through Google searches alone. For the actual math, I direct you to the excellent Ryan Chittum at CJR.

Hence, blocking Google might not be the answer, but it is also important to note that the Wall Street Journal does have over a million readers subscribing to its content monthly, and since these users prove to be valuable to advertisers, specialist content could well be the answer for other newspapers as well.

There have been complaints all around that for an industry on the brink of collapse, news organizations are less than savvy in the area of market research, and aren’t doing much at all to help determine the monetary value of the content they offer and the kinds of products they should be providing in order to make money.

Instead, what many news organizations have resorted to over the years, is the “massification” of news in order to appeal to the broadest conceivable audience, a process that merely erodes the quality of journalism, without offering solutions for revenue generation, since such audiences do not have a brand identity that advertisers can appeal to.

As Slate editor David Plotz points out, the more media companies and editors begin to focus on the numbers, the faster they will shift from their pursuit of a “mass audience” and begin to produce more exclusive, in-depth content. Along that line of reasoning, Steven Brill’s Journalism Online plans to charge only the most frequent users who seek very specific content while allowing cursory surfers to avail of most topical news for free.

Following the lead of financial publications

Successful pay models, such as the Economist’s premium content, and the Financial Times’ paywalls are, after all, based on loyal readers returning to a site frequently on account of the exclusive content it provides. Financial publications, of course, are in a league of their own when it comes to paywalls, because of their high value, well-differentiated content and affluent consumers.

But as WSJ.com’s Alan Murray explained in an interview with the Nieman Journalism Lab, most news organizations should be able to tap into the idea that loyal readers will pay for exclusive information, as long as they steer clear of charging for the most popular content, which has the potential to yield maximum traffic and hence, revenue.

Whether it is due to declining ad revenues and falling readerships or the recession, newspapers in the US from the Minneapolis Post to the Arizona Republic, are adopting the idea of pursuing these “loyal readers” to sell their content. Others, like the Tribune company, are merely seeking them to target advertising.

Very early this year, Andrew Currah, a fellow at the Reuters Institute for the Study of Journalism, called on news organizations to not give up their core editorial values in the quest for clickstream data, not simply because such lack of focus would be detrimental to journalism, but because it would not prove to be beneficial to revenue generation in the long run.

“The basic logic of a webcentric strategy is to maximise the size of the audience around the news, for as long as possible. But a rush to generate clicks may in fact erode the distinctiveness of the brand and its connection to a specific audience,” Currah wrote.

Regardless of what they’re seeking – direct payment for content or indirect revenue through clickthrough advertising -  specialized, in-depth content to retain that brand and connection has got to be good for journalism.

These questions were submitted to me in advance of the next AOP meeting, on ‘Microlocal Media’, and have been published on the AOP site. As usual, I’m republishing here as part of my FAQ series.

Q. How can publishers compete with zero-cost base community developed and run sites?

They can’t – and they shouldn’t. When it comes to the web, the value lies in the network, not in the content. Look at the biggest web success story: Google. Google’s value – contrary to the opinion of AP or Rupert Murdoch or the PCC – is not in its content. It is in its connections; its links; its network. You don’t go to Google to read; you go there to find. The same is true of so many things on the internet. One of the problems for publishers is that people use the web as a communications channel first, as a tool second, and as a destination after that. The successful operations understand the other two uses and work on those by forging partnerships, and linking, linking, linking.

So publishers should be working with those community sites for long-term mutual benefit – and I emphasise ‘mutual’: publication in your print edition ‘Photos of the Week’ does not really constitute a long-term strategy here.

Q. Are publishers wise to be investing in microlocal at this time?

Yes. The regional approaches of print products were based on print distribution logistics. Take those away and you have no reason to replicate that ‘patch’ online. Readers are going to go to a website based on their postcode rather than plough through pages of content on the chance they’ll find something relevant.

Q. What kind of local sites are likely to succeed and who do you think will ultimately emerge as owners of this space?

The sites that have been most successful so far are those that focus on relationships as much as content, and who have an open and transparent approach to production. Sites that challenge power while inviting collaboration.

Q. How do you think the landscape is likely to develop going forward?

I’ve said this before at the C&binet event, so I’ll quote from that: I see 2 main paths of development, and both have one thing in common: the future is networked.

On the one side I see the national-grassroots-data path – I’ll call it the Networked Model for simplicity’s sake. As increasing numbers of local newspapers close or stunt their operations, hyperlocal blogs will spring up to address the gap. At the same time national news organisations enter the local market and partner with these and data-based operations. The most likely figures in this scenario are The Guardian, hyperlocal blogs and the likes of MySociety and OpenlyLocal. It’s a patchwork solution that is likely to leave gaps in coverage.

On the other side is the Local News Consortia proposed by Ofcom. Established operators like PA, ITN and regional newspaper publishers will partner up to gain access to a pot of public money and efficiencies that they cannot achieve without ending up in front of the Competition Commission. This will require some public service commitments such as covering councils and courts, and universal coverage – but fundamentally this will be Business As Usual.

Q. What do you see as the main threats to publisher success?

The biggest threat is in continuing to focus on maximising the efficiencies of existing assets rather than using the efficiencies that the internet offers. The internet makes it incredibly efficient to collaborate, to distribute, and to link, but publishers’ moves online so far have neglected all three of those opportunities, focusing instead on content, content, content.

Content, for most people, is a means to an end: typically conversation or action. Established publishers face enormous threats from other online operations make that connection easy through collaboration, distribution and linking.

Q. What tactics do you think publishers should be adopting to leverage their strengths?

Focus on adapting ad sales departments for the internet age and the measurability and interactivity that that offers. Don’t just sell internet ads – sell the internet to advertisers; because if you don’t, a competitor will.

Be as transparent as possible about everything that they do, linking to sources of information and publishing them in their unedited form if they’re not already online. This creates material for others to work with, leading to more stories, and more people clicking back to the material, not to mention the goodwill that can help drive more leads and more sales.

Like in the music or art fields, we, the Spanish-speaking people, allways look to the Anglo-American world to see what the new trends and innovation about digital journalism are (and laugh when Rupert Murdoch opens his mouth).

But now we can show our own example of a news site that tried to survive in this ecosystem and… died. But it’s all about trial and error!

I’m talking about Soitu.es, which closed its highly-regarded doors after 22 months of life. Of course, its demise had a strong impact in the blogosphere, its increasing traffic more than 10% in the last month.

This Spain-based news site was born in the wrong way, trying to show off with an enormous and fancy newsroom of almost 40 people, in times when the bet must be low-cost. The correct path is to start with a smaller staff and try to grow when the cash starts flowing in. Instead, Soitu.es made an alliance with the BBVA bank, that soon came to an end when they didn’t see the profitability, taking the whole project down with them. Its Director, Gumersindo Lafuente, blamed the financial crisis – as expected – after he spent money on their own CMS and ad server instead of using the great open source options available.

With this experience in mind, David De Ugarte came up with a few key points to make your news site a sure failure:

• Over-budget your project: There is nothing quite like having great amounts of money from the beginning to install in your team the habits that will make you fail, while the expectations of your investors remain high.
• Abandon your own speech about reality: Comment uncritically on all the fashionable stuff. Cut no ice. Don’t believe in anything and stand for anything and with a bit of luck they won’t remember anything you published.
• Don’t allow users to identify with you: people used to buy El País newspaper – or any newspaper, for that matter – as a militant action or a way of life. If you want to fail you can’t allow something like that to happen. Don’t let them associate you with something in particular and don’t make yourself specialist in anything.
• Have a “paper mindset”: pay columnists to write like they have been doing it all their lives without a single link for contextualization.
• Burn time and capital as fast as you can: organize conferences and invest while you can in nice headquarters with fancy furniture.