Newspapers Look to Digital

From DM News:

Newspapers look to digital as print faces challenges

Dianna Dilworth, Lauren Bell

After struggling with a loss of ad dollars in print, the Seattle Post-Intelligencer (P-I) ran its final print edition last week. The 146-year old paper will remain alive as a Web-only publication, making advertising for the publication exclusively digital.

The P-I is not alone. Newspapers and magazines across the country are looking to build digital revenue sources as less money is being spent in print advertising.

“I think digital publishing's absolutely the trend,” said Robert Grimshaw, publisher and managing director of FT.com, the Web site for the Financial Times. “Everything ultimately follows the consumer, and everybody is going online, so publishers have to comfortable with operating in a different environment.”

“Yes, there are closures and bankruptcies, but newspapers are not going away. Like all industries, the product life cycle changes and right now things are changing and going more digital,” added Mike Petrak, VP of sales for MediaNews Group, a group that publishes 54 newspapers nationwide including The Oakland Tribune and The Denver Post.

In fact, digital news audiences are growing. According to the Magazine Publishers of America, the number of unique visitors to consumer magazine Web sites for the first quarter of 2008 averaged around 70.7 million unique users per month, a new record. In fact, online readership is rising at twice the rate of the general Internet audience.

Larger markets, in particular, are seeing digital publishing take off, but the challenge is converting that digital audience to revenue, notes Jerry Lyles, SVP of publisher relations for Publishing Group of America (PGA). Currently, online ads are valued far below print ads, and publishers are struggling to make their old, ad-supported revenue models work online.

“Advertisers understand that that is the direction that everything is headed,” Lyles said. “The challenge comes more from the newspaper side, and trying to monetize the online version in a way that's similar to how they are able to monetize print. The papers have to get the correct pricing for those ads, the proper staffs to actually go out and sell them, and the last thing they want is to have their current print sales team selling digital.”

As the digital format continues to grow and gain audience, Lyles expects advertisers to become more accepting of paying similar rates for digital as for print ads.

“Online offers an enormous number of options not available in print and allows advertisers to pick put a very fine segment of the audience and target them precisely,” Grimshaw added. “It's an amazing benefit, and of course there's an awful lot of tracking technology that allows you to get great insight into the value of the money you've spent. As advertisers start to understand what it can do for them, online advertising is an attractive proposition.”

Until online ad revenues catch up with online publishing, there are plenty of other ways to make money on a digital platform — without having to relearn the entire business.

“Conceptually, digital is not that dramatically different than print,” explained Sean O'Neal, chief revenue officer, Datran Media. “A publisher's Web site functions like a newsstand and an e-mail newsletter functions like a subscription, where the content is being pushed by the publisher. There is a lot of opportunity to monetize this e-mail content, which is highly targeted.”

For MediaNews Group, which works with Datran Media's e-mail and inbox ad inventory services, it is about focusing on the content and knowing who its target audience is in each marketplace. After doing this, they can push targeted content to a specific audience via e-mail and mobile.

“We are a content distribution company, and e-mail helps us to provide great service and maximize the relationship [while helping us] monetize the content,” added Petrak.

MediaNews Group has been using digital to focus on its niche audiences such as lifestyle groups and specific communities. It is segmenting e-mails to reach special interests groups and, by adding more niche newsletters, it adds more ad inventory targeted to a specific audience. For example, Denver has many pet owners and dog lovers, so it has created a newsletter that targets this audience.

“In print, inserts drove a lot of subscriptions. In digital, people can get the same benefits from insert media by signing up for these lifestyle oriented newsletters that give them offers,” said Petrak.

New York magazine also is working with Datran and using e-mail to help monetize its publication online. It also has found success in e-mail newsletters with editorial content and advertising e-mails that send consumers offers from their advertisers. In fact, 10% of NY Magazine's digital revenue comes from e-mail. For the lifestyle magazine, it is all about building out its offerings in various channels.

“Like every media business, 2009 has been a tough year, but it doesn't change our belief that print is still a viable medium,” said Michael Silberman, general manager, NYMag.com. “And at the same time, digital is important. We have built a real digital media business, as opposed to just having a Web presence.”

The Financial Times, too, has built a robust digital media business. Some of this business comes from online offerings, but, unlike many of its peers, the paper also charges a substantial fee for online subscriptions.

“I think papers need to look at subscriptions,” said Grimshaw. “It's very tough to make money just from advertising, not least because it's highly cyclical but also because the Internet is so intensely competitive. There's not much to differentiate one publisher's ad proposition from another, and that's part of the reason why ad networks have been so successful.”

The publishing world is not broken into print v. online, but, rather, into a multiplatform world. Publishers should be prepared to serve content on mobile phones and e-readers as well. The Financial Times, for example, is developing an e-reader with Plastic Logic, set for release in early 2010, and it made its newspaper available on the Kindle last year. The paper has also revamped its mobile and is working on an iPhone app.

New York Magazine is also experimenting in mobile and plans to expand that over the next year. Mobile has become a hot topic for newspapers and magazines. Cox Newspapers, CBS News, The Street.com, Boston.com, The Onion and Gawker Media all recently have created mobile WAP sites. Mobile ad network Quattro Wireless is helping to sell inventory for these media properties.

“As many papers focus their efforts on online publishing, mobile is a great way to extend that content and generate more traffic and ad revenue,” said Lars Albright, VP of business development at Quattro Wireless. “We see solid interest from advertisers in the news space as the demographic is often highly attractive to a brand advertiser.”

Albright said that both national papers and smaller more regional papers have been using mobile to help grow their audience.