Knowledge Bridge

//Kevin Anderson /June 26 / 2013

News organisations in smaller markets must develop multiple digital revenue streams

Most news organisations have found great difficulty in charting a path to sustainability relying solely on digital advertising. The only sites that have successfully done this are ones that are able to attract huge audiences.

This is all the more challenging in smaller, less digitally developed markets. To achieve sustainable digital growth, news organisations – particularly in these smaller markets – will have to creatively develop a range of revenue streams to start generating financial returns from their digital efforts.

BRICS driving digital development

One of the challenges for the digital transition for news organisations is that it is happening at different rates in different countries and can even vary widely within countries. Digital media and digital markets in the urban centres of major emerging economies may look very similar to North America and Western Europe, but in the early stages of the digital transition, digital opportunities look much different.

As Orlando Alvarez, Creative Director in Publicidad Comercial Lowe El Salvador, points out in another Knowledge Bridge article, in the smaller markets of Latin America where digital is not well developed, advertising agencies struggle to make digital campaigns pay as budgets are smaller and dedicated digital budgets are usually non-existent. This is what news organisations experience in smaller markets around the world.

Alvarez highlighted how the major economies in Latin America – Mexico, Argentina and Brazil – are driving digital growth in the region, and he highlighted how the digital market is very different in smaller economies.

The same could be said in Africa, where major economies such as South Africa, Kenya and Nigeria have digital market dynamics completely different to most other countries in sub-Saharan Africa. A lot of international coverage of African digital development focuses on Kenya and South Africa. As a report into the contribution of the internet to the South African economy said, South Africa is thought to have the largest internet economy in Africa. But even in South Africa, the report found that internet advertising was fourth out of five categories in terms of contribution to the South African economy. Digital advertising only accounted for 1.5 bn Rand compared to 29.2 bn Rand for internet access.

In Asia, the massive economies of China and India flatter the digital advertising growth figures. In Russia, while internet growth is booming across regions, it still lags well behind St Petersburg and Moscow.

Creative solutions for sustainability

This requires news organisations in smaller, less digitally developed markets to think creatively about how they identify digital opportunities and how they grow their business to support those efforts.

Keep costs low – One simple answer to this conundrum is simply to keep costs low. One of the reasons why digital media is so disruptive is that distribution costs are so much lower than other media such as print. As we highlighted in our recent Digital Briefing looking at content-management systems, it’s always a good idea to focus on lightweight, flexible and low-cost solutions.

Develop niche products – As Alvarez said, most digital-only media outlets have survived by focusing on “very defined target audiences”. Niche products, whether digital or print, have a place in most markets, regardless of their stage of digital development and disruption.

As Michael Chalhoub, the founder of Gulf Sports Media said at the recent World Newspaper Congress, “Print is not dead, neither in our market nor in the world, it is just being redefined: there is a huge demand for niche products.” Sports, entertainment and lifestyle sites or special publications can be very popular not only with audiences but also advertisers.

Develop digital ‘tools’ – In developing markets with publicly available data, Knight International Journalism Fellow Justin Arenstein recommends that news organisations think beyond stories and develop digital tools. While this might sound counterintuitive because most people assume that the costs would be too high to support in a developing digital market, Arenstein highlighted the StarHealth tool created by The Star in Kenya. The searchable database allows readers to see if a doctor has been convicted of malpractice. The project cost less than $500 and took one developer four days to build with the assistance of two journalists.

Arenstein told editors at the World Editors Forum, “These are tools that people start to use beyond news. They also make people come back to these sites, and this eventually helps to generate revenues.”

Develop digital services and other revenue streams – As we discussed at the MDIF Media Forum last December, one area where many MDIF clients and other news organisations around the world are finding success in building revenue streams is by offering a range of new services. These might be digital marketing, community management or website and app development. As Alvarez said, 95 percent of digital advertising revenue in the smaller markets of Latin America comes from work around community management and website and app design.

The benefit of offering such services for news organisations is that they can develop their digital capacity while offsetting costs by selling it more widely, domestically or even as it grows, internationally.

Events can also be another way to build revenue to support digital efforts if sufficient sponsorship can be attracted. MDIF client Malaysiakini hosts digital marketing events, some meant to educate and attract advertisers and other larger events to earn revenue from ticket sales and sponsorship.

Article by Kevin Anderson