FAQ: Cheap readers and the future of local news

Every so often a journalism student sends me questions for an assignment. I publish the answers here in the FAQ series. The latest set comes from a student in Australia writing for Upstart magazine at La Trobe University, and focuses on the local press. 

1. Is the reader not worth as much on the internet?

Readers have always been worth different amounts in different contexts. It’s not that the reader is ‘not worth as much on the internet’, but that most readers on most websites are worth less.

The reason is partly the same as it’s been for 100 years of advertising: supply and demand. If supply goes up, prices go down (unless demand also goes up by the same amount).

20 years ago, if you wanted to advertise to hundreds of thousands of readers, there weren’t that many places you could do that, so those places could charge you more.

With more and more publishers out there competing for advertising, however, that drives prices down, because they are each trying to undercut the competition.

But there’s another big factor as well: costs. The cost of publishing has dropped dramatically: if you don’t need a printing press and distribution vans, or even a city centre office, then you don’t need to make as much money to turn a profit. That means that publishers can still make a profit even if they sell advertising for much less than a print newspaper might have once done (although that doesn’t mean that they do!).

Combine a reduction in costs with an increase in competition and supply, and you have two big factors driving the price of advertising down online.

What this adds up to is not that ‘the reader’ is worth less, but that ‘advertising’ is worth less, because companies can sell it for less and still make a profit.

2. It won’t work to export the traditional business model to the internet. Could you explain what the new business model should be?

There isn’t one business model which is going to replace the old one. It’s taken a while for the industry to get to grips with that, but that’s now approaching a consensus. Most publishers now have a range of revenue streams: not just advertising and subscriptions but also events, merchandise, training and education, consultancy, affiliate sales, webinars, membership schemes, crowdfunding and others I either can’t remember or don’t know about.

The emphasis differs depending on the market that a publisher operates in: merchandise revenue streams tend to be used more in the magazine industry (although here’s a news website doing it); training and webinars in the B2B sector. Some publishers are acquiring companies in related areas such as marketing.

Advertising itself is also being reinvented to find ways that publishers can charge more for it. Native advertising is one example (which has problems). Creating video to sell advertising on is another. New ways of measuring advertising’s impact are also being looked at: for example publishers can argue that readers who are more ‘engaged’ with a story or a publisher are more likely to buy the products advertised there.

There are also ways of reducing costs or making advertising more efficient, such as programmatic ad buying.

3. Can local news as we know it work online or is hyperlocal journalism the future?

Local news can work online. It has been historically enormously profitable, and you have to remember that local newspaper groups took on enormous debts based on those profits (for example to buy other papers), and debt repayments have been a large part of the costs that they have struggled to meet over the past decade.

Like any successful business, survival comes down to having higher revenue than costs. Local news publishers have tried to do that by getting rid of expensive city centre property, reducing pages and editions, and, mainly, getting rid of staff. In some cases they have got rid of the print edition and gone entirely online. As long as the cost of doing so is lower than the revenue they get, it can work online – and does.

Hyperlocal journalism has a part in that future, in my opinion. That sector has a much more mixed range of business models than traditional publishers: some are advertising-driven but most either make money from related activities like training and consultancy, or are voluntary acts of civic participation.

It’s also important to look at the role the BBC is increasingly playing in supporting both types of local journalism, recently announcing that it would be supporting local and hyperlocal publishers through sharing video, paying for court/council reporters and setting up a unit to supply data stories, all of which of course reduces costs further.

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2 thoughts on “FAQ: Cheap readers and the future of local news

  1. Bhavya Sharma

    Online journalism has really great advantages . As we know reading online news is more comfortable than reading a newspaper. For example, i usually read cumbriacrack.com which provide all local news from Cumbria and i am very comfortable reading it. Reading Newspapers is old stuff now.

    Reply

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