(UPDATED) Why there is no ad-supported digital business model for journalism

The CJR has an ominous  piece about the “darkening” employment outlook for journalists at digital only publishers like Buzzfeed, Vice, Vox, and so on. It’s a disheartening corrective to the widely held, but pretty much entirely wrong view, that print is failing because it is run by dinosaurs who don’t know how to properly transition from a print to digital world. While print continues to melt (Rogers is preparing to massively shift its magazines to largely or exclusively digital publishing), there’s little indication digital is much in the way of a stable icefloe.

In fact, just the opposite. Mashable basically gave up on news this year, as Gigaom did the year before. Vice has laid off reporters. Buzzfeed recently shuttered its Ottawa bureau after a year or so.

What’s remarkable about the supposed digital behemoths, like BuzzFeed, is how tiny their revenues are. According to the CJR piece, BuzzFeed was expecting revenues of $240 million in 2015, and came in with $170 million. But surely even $170 million in revenues sounds like a lot? Hardly. For comparison that’s how much a newspaper about the size and circulation of the Ottawa Citizen was bringing in ten years ago. (Another comparison: Before it got into trouble and was sold, Gawker was pulling in $55 million a year in revenue, or about what a newspaper with a circulation of 50 to 60,000 would be making today).

To see how serious the problem is we can do a bit of napkin math:

At Postmedia, as a general guideline for the budgeting of digital initiatives, we were told to budget about $90 per person hour. That is, a given employee’s time, adding in salary, benefits, computers, phones, lighting, etc. costs about ninety bucks an hour. For ease of math, let’s make in an even hundred bucks an hour.

Say a reporter spends five hours reporting and writing a story, a photographer spends two hours on the shoot, and an editor takes an hour editing the piece and getting it prepped for the various digital platforms and then posted. That basic news story cost $800 to produce and publish.

The effective CPM for news on websites in Canada is between $5 and 8$ (a thousand impressions nets about five bucks). Make it ten bucks. Say there are three ads on the page, so you get 30 bucks for every thousand page views (which is pretty generous). To simply cover the costs of the story, you would need to get 26000 page views, at the minimum. And forget about making any profit.

I don’t know what sort of numbers they get at the Globe or Star or NYT or WSJ, but at a typical metro daily, that’s a lot of page views. You might get a story or two a day with those sorts of numbers, but the vast majority of news hits do a lot less than that.

I’m sure there are some places getting better numbers than this, but I think this math is, if anything, too generous. The upshot is really unpleasant: There is no generally workable business model for ad-supported local digital news.

This points to the general problem with digital journalism: it has a revenue problem. This might seem obvious, except that a number of well-known and well-paid consultants have made their reputations over the past decade telling desperate publishers that they have a journalism problem, and if they would just fix their newsrooms, the problem would be solved. (I’m going to write a lot more about this at some point. There are axes that need grinding).

But in the meantime, there are really only two ways of getting the numbers to work: One is to find a way to juice those CPMs — video is just the latest God that Failed on that front. The other is to find something that commands the sorts of premiums that print ads once did, which is why you are seeing everyone push into native content. For the uninitiated, this is advertorial that is designed to trick the reader while pretending that they aren’t designed to trick the reader.

The other lever to pull is to get relentless on the cost side. Outsource and downsize wherever possible. Then where it once took a reporter, a photographer, and an editor eight hours to get a piece online, give the reporter a phone with a camera, make them shoot and edit photo and video and post directly to the website.

You can maybe start to get the numbers into the same solar system, if not the right ballpark, doing this. At least when it comes to basic news hits, covering press conferences or minor accidents. But hink of what happens to the math if you need two days to do a story; or a week to research and write, and then two or three days to edit. The inexorable math that militates against investigative journalism, long form narrative writing, or anything more than a quick and dirty hit, starts to really bite.

It’s a serious problem, and I don’t think anyone has a great idea about what to do about it. The Public Policy Forum continues its work trying to make recommendations to the government, and I’ll be in Vancouver at the beginning of November on another panel trying to hash this out. But the clouds are gathering, not parting.

But here’s a video of two squirrels fighting:


(UPDATED) Why there is no ad-supported digital business model for journalism — 3 Comments

  1. What a depressing picture you paint. Funny, the promise of the interweb was that it was going to democratize everything. So far, not so much. We have fewer media owners and fewer retailers. I don’t even bother to look for some items in stores, I go direct to amazon, and somehow, this makes me feel uneasy.

    Is it some structural failure of digitized media or have we just not figured out how to use it yet or have we just been lucky these last 100-200 years or so?

    • Good questions. I think the old business model of print was a lucky confluence of monopoly power being used to support public goods, largely as a result of status competition between newspaper proprietors.

  2. Dear Andrew, thank you for the excellent squirrel video.

    How do you think this changing financial landscape for journalism interacts with the polarization in media and of people more broadly? Does it exacerbate it? Does it mitigate it? There is a a growing body of research showing that we are sinking ever deeper in our own content silos as we receive information inadvertently (say, facebook algorithms) or deliberately (say, me having an RSS feed to this blog) to confirm our existing biases. Here is one, for example from Pew Research: http://www.journalism.org/2014/10/21/political-polarization-media-habits/

    Does the “darkening” employment outlook change the incentive structure of journalists in any way beyond what you describe as the “inexorable math that militates against investigative journalism?” Because one could argue, perhaps, that a move away from “long form narrative writing, or anything more than a quick and dirty hit” could be just a reflection of changing demand for how information is presented – different consumer preferences, a response to excess information, or even shorter attention span.

    I’m very much looking forward to seen more of your work on this. It’s a fascinating topic.