Robert Niles is one of the sharpest commentators about digital journalism and the business of journalism. So his tweet last night caught my eye:
Deal with it – There is no new revenue model for journalism.
He linked to his latest post at OJR: The Online Journalism Review. He makes a lot of excellent points, as I would expect, and I will review some of them later. But I believe he is wrong on his central point:
There are three ways – and only three ways – that publishers can make money from their content:
1. Direct purchases, such as subscriptions, copy sales and tickets
3. Donations, including direct contributions and grant funding
Robert laments that people in this business are wasting time and energy in a “doomed quest to look for their revenue model Holy Grail.”
I couldn’t disagree more. Other businesses (Amazon and eBay, to name two) are thriving online by selling products directly to consumers. If a news organization developed an easy, efficient way of selling products and services directly online for business customers in its community (or businesses from elsewhere wanting to reach its community), I think it would develop a digital marketplace for its community that would bring new revenue for the media organization and a fundamentally new revenue model.
Perhaps Robert includes this in advertising (though he did not mention direct transactions in his three-paragraph discussion of advertising). This model does rely on the media organization’s ability to build an audience and sell access to the audience, which Robert correctly identified as the essence of advertising. But advertising is an expense line in the budget of a business customer. The business has to decide that the potential return is worth the investment. And, unless coupons are involved, the business has difficulty measuring the return (Did business boom that week because of the ad or because of nice weather or the new sign you built? Or would business have been even worse in a bad week without the ad, and how much better was it because of the ad?). But a business model built on conducting direct transactions for business customers brings them measurable revenue. The media organization doesn’t send the business customer an invoice. We send a check (after subtracting our fee). Yes, the contact point may be an advertisement, but that’s a new revenue model.
Robert also might have thought he covered this aspect in direct purchases. He did mention tickets, one of the items a news organization could sell for business customers, in the three ways, in the “direct purchases” category above. But the six paragraphs elaborating on that point focused entirely on direct purchases of the media company’s content. That is thoroughly different from creating a digital marketplace for businesses in the community.
If a media business has pursued the digital-marketplace revenue approach (part of my Complete Community Connection model) to any serious degree, I am not aware of it. Robert should not lump it in with direct purchases of the news content or with advertising and should not dismiss it as a fictional Holy Grail. It is a possibility we have not fully explored and need to.
Robert is fully aware of the C3 revenue approach, by the way. He invited me to write about it for OJR last year. I am not sure whether he has dismissed the transaction focus of C3 as impractical or whether he sees it rolling in with advertising and direct purchases of content. I will be writing Robert to ask his response to this (it’s about 7 a.m. on the West Coast and I don’t want to wait to post, since his original piece will be generating discussion already today. It’s already been retweeted more than 25 times).
I think we may have other revenue sources as well. I explained in three posts about my mobile-first strategy that I see great opportunity in helping local businesses connect with mobile customers in ways that go beyond advertising. Some of these ways might be mobile versions of conducting direct transactions, as I’ve described above. But we might generate significant new revenue by developing and promoting mobile applications for business customers.
And I don’t think those are the only revenue sources. I encourage others to continue the search for new revenue models to support journalism.
That said, I still recommend reading Robert’s post. Even though we disagree on this, he makes some excellent points:
- “Allow me to suggest that much of what has passed for advertising has been, in fact, donation funding.” He is absolutely right about this. Advertising had (and still has) benefit for the business that buys an ad, but part of the historic advertising relationship that newspapers (and local broadcasters) used to have with local businesses was that they supported each other out of a sense of shared commitment to a healthy local business community: You buy your tools at my hardware store and I’ll advertise in your paper. Robert insightfully notes that as media consolidated and as national chains came to dominate the retail sector, “the personal relationships that news publishers used to have with advertisers have been severed.”
- Robert correctly notes the folly of looking for salvation by charging for digital content: “No one is going to be able to craft a paid content model that elicits significant payment from more than a handful of readers for commodity news.”
- Robert calls for greater effort and investment in “cultivating and studying innovation in news gathering and production.” We agree about that. He says funding for research on business models should be diverted into that quest. I say they need to proceed together.