We are currently in a phase of seeing in blockchain, the ledger technology that underpins cryptocurrencies like Bitcoin, the solution to problems in nearly every industry. There is something alluring about a technology that is so easy to set up, does not require a leader or central controller, and which can store anything permanently. But would it work for media?

First off, it’s worth talking about what blockchain is – and isn’t. Blockchain is the name we have given the underlying database system created by Satoshi Nakamoto, the so-far unidentified maker of bitcoin. Nakamoto needed to solve a couple of problems if he (or she) was to create a digital currency that was unhackable. He first needed to get around the problem of copying: when it’s easy to copy something digital, a digital currency needs to not only be impossible to duplicate, but also everyone needs to be able to see that it cannot be duplicated. The other problem he wanted to get around is to make sure the process of recording and validating transactions was not dominated by one person, either relying on some central authority, or that someone could take over the system and manipulate transactions.

These problems were neatly solved by the blockchain. Embedded in software, copies of the ledger of transactions would be stored on multiple computers — basically anyone who wanted to join in. All subsequent transactions would be added to the ledger in sequential order, connecting each block cryptographically, so any attempt at tampering with the record would be discarded. The task of recording those transactions would be done by miners — people who had a copy of the blockchain on their computer, and used their computer’s resources to run through permutations until they found a particular sequence of digits. The first to do so would have the right to add a block to the chain, and earn bitcoin. This created an incentive for people to participate in storing copies of the blockchain, and to record the transactions.

So what has all this got to do with journalism? Well, the blockchain has lots of parts to it that appeal. Together they offer what some believe would be a different way of connecting the components of the media economy — those who produce content, those who consume it, those who publish it and those who currently finance it through advertising.

To understand this, it’s better to take each part of blockchain’s appeal one by one.

Micro-transactions

Micropayments — basically defined as pay per article — have long been the holy grail of digital media, as an adjunct to rather than a replacement for subscription and advertising. The idea is compelling because it means that people who care enough about a single piece of content could pay for it; no need for a subscription, no need to whip out a credit card, no need to think too hard about whether the content is worth it.

The reality is that micropayments will only work when the transaction costs are reduced to near zero. This hasn’t happened because we’re still using credit cards, or a variation thereof (PayPal, Apple Pay), where costs remain high. The alternative is to store value elsewhere — in a wallet, say — which is then transferred in the form of micropayments. But it is still one or two many steps for most users. Wallets are only appealing to users when there are obvious benefits or no alternative. Think ride sharing, or bike sharing. If I can only unlock a bike by uploading credit to their account, then I’ll do it, but I won’t be happy, because that money is all locked with them. And in a recent case, the money might disappear entirely if the company closes down suddenly. Expect wallets to get a bad rap from here on in.

So how could blockchain help? The first, and perhaps only, proven use case of blockchain is Bitcoin. The Bitcoin blockchain network has been running for nearly 10 years, and has an uptime of 99.992364787%. (Really.) So it’s a proven payments system. Unfortunately, it’s also hugely expensive: to move bitcoin from one address to another (in other words, to make a transaction) is still costly — often more than the value of the transaction itself. This is because the miners — the people running the computers that are adding blocks to the blockchain — need an incentive beyond earning bitcoin from the correct ‘guessing’ of the mathematical puzzle. So those making a transaction add a ‘tip’ to the transaction request to bump it up the queue. All this is hugely inefficient and often means transactions can take hours to be recorded. This is fine if you are moving large amounts, or if you just see bitcoin as a valuable commodity, but this is not what Bitcoin and blockchain were designed for. The idea is that it would make it possible for people to transact simply, securely, and without anyone creaming anything off the top (or blocking the transaction.)

Now we’re getting closer. If cryptocurrencies can overcome some of their limitations — high transaction costs associated with adding blocks to the chain, poor usability and security issues — then they definitely offer a way forward. You’d still have to convert from fiat into a currency or token, but that might be feasible if the transaction costs can be lower than real-world transactions. This will probably happen first on Bitcoin Cash, which is what is called a ‘hard fork’ from the original Bitcoin (now called Bitcoin Core.) Bitcoin Cash adherents talk about reclaiming Bitcoin from the Core people by focusing on increasing the transaction volume; Bitcoin Cash supports about 100 transactions per second. Compare that to Bitcoin Core’s 7.

One example of a media company exploiting this is Yours.org. The site, according to its founder Ryan Charles, is a platform designed to reward content creators. After trying several other cryptocurrencies unsuccessfully, they turned to Bitcoin Cash allowing users to charge for content if they wished, using Bitcoin cash. One user, Rivers and Mountains, charges about $5 for the full article after a short précis. His articles (about Bitcoin Cash, mostly) earn him up to $900 each. (Yours charges 10 cents to post content and takes 5% of purchases.)

As the founder of Yours, Ryan Charles, puts it: “With Bitcoin Cash we have actual low fees and the payments are actually irreversible. This is kind of amazing. This didn’t used to exist. This is actually the fantasy of micropayments that people have talked about since the 1990s. We actually have it for real starting last August.”

Tokenisation

Yours.org is somewhat unusual in that no extra tokens are involved. You buy Bitcoin Cash and you use that to pay for content. And that may end up being the most popular way of doing things. But most other platforms in this space use their own tokens — basically a version of bitcoin on its own blockchain, like a separate currency. Remember, a blockchain is like any database, it can pretty much store whatever you want on it. Bitcoin, a digital currency, was the original use case which inspired (and required) blockchain. But anything could be stored there, usually in token form.

Steemit, for example, is a social media platform that rewards users with its own token — Steem — which can be converted into dollars on an exchange. And, like Yours, not only are content creators rewarded but anyone clicking on like buttons, adding or voting on comments. All this, the argument goes, helps to oil the ecosystem and promote better content. (Steemit is doing very well, although you might think of it as more of a social platform than a media one. Steem’s market capitalisation — if you add all the tokens together and sell them at the present price — is more than $400 million at the time of writing. It has about half a million accounts.)

Having tokens opens up new ways to move value around the system. Brave, for example, is essentially a browser like Safari, Firefox or Chrome, that among other features builds into it a way for users to reward publishers. It works like this: download Brave, buy some Brave Attention Tokens with a cryptocurrency like bitcoin, and then decide how much you’re going to pay your favourite websites each month. So long as you use the Brave browser to visit those websites, this will be calculated and distributed automatically.

This is probably too many steps for most people, but it’s a start. Brave, like a lot of blockchain-based startups, raised money through something called an Initial Coin Offering, or ICO. An ICO is a bit like an IPO, in that those who are enthusiastic about the business buy into it by buying the tokens. Owners of those tokens can then use them in some way tied to the service. But as I explain below, this is not quite as simple, or legal, as it sounds.

In theory though, the idea is simple enough: those holding tokens can reward other people on the same platform — Brave, for example — for activity that benefits them. The token is a currency, but with benefits. The obvious one is paying for articles but they could also be used, for example, to reward contributors to an article (crowd-sourcing): So the author could ask for data for an article, and disperse tokens matching the size of each contribution.

The potential of tokens is that could unleash all sorts of new micro-transactions, effectively monetising content and content-related activity that so far has not been monetised. For example, existing content — think all the stories lying in archives, photos, videos, lying in archives that can’t be readily monetised because it would be too administratively cumbersome. Each item could be indexed to the blockchain and each user charged via a smart contract (more on them below.) Tokens promise a way to increase the overall value of content and access to content created by other readers. So, for example, you could charge users to comment on certain stories, effectively filtering out (some of the) time-wasters and trolls, and thereby increasing the value of the content produced by commenters by raising the bar. Similarly, you could charge for access to that content, creating a sort of club of readers. These costs would be small, but might act as enough of a barrier to flippant and time-wasting content.

Fighting censorship

Another appeal of blockchain technology is its distributed, decentralised nature. The blockchain — the ledger of transactions, but also potentially the database of the content itself — is not held anywhere centrally, so no one person or institution, in theory, can close it down or change that content. (Nor, in theory, can they monitor it because, while the transactions themselves may be visible to all, who or what exactly was transacted may not be. The Bitcoin blockchain, for example, can be explored in detail, but all you can see are amounts of bitcoin, bitcoin addresses (where the bitcoin travelled from and to) and the date and time of the transaction. Deeper study might reveal patterns, especially when an address is linked to an individual. But it’s detective work, and still more art than science.)

The blockchain — the ledger backbone — can therefore not be easily destroyed, disrupted, hacked or altered. That means it is more likely to survive some government’s, or individual’s, attempt to stop information from finding its way out. But it also means that the information stored on it has credibility: it’s much more likely not to have been tampered with, and because it has timestamps and other data attached, can be relied upon as an accurate record of what happened.

So several outfits are exploring opportunities the blockchain offers to reduce the potential for censorship. Publiq, for example, offer their distributed storage infrastructure to store all content — think of a peer to peer network like Napster, where users who host the content would be rewarded with Publiq’s tokens. A hash — a short unique code — of each piece of content on Publiq’s P2P network would be stored in Publiq’s blockchain, so any corruption of the data, intentional or otherwise, would be noticed straight away. So no-one can alter or remove the existing content — think censors or fake news hackers — but the content can be amended. So authors could for example add notes or corrections to the original content. Publiq’s Gagik Yeghiazarian tells me this has already happened, when one content provider was able to add amended transcripts to a story that some readers rightly claimed was incorrect. The correction was added to the original content, leaving it annotated but intact. With even mainstream news organisations over-writing or ‘fixing’ content without properly flagging it to readers, this feature is welcome.

Funding

The obvious way to reward journalism — the creators of content — via the blockchain is to remove the obstacles preventing people from paying for content that has been created — the micropayments model described above. That’s great for people who can create content on spec — in the hope that someone is going to reward them for it, either through tips or through a paywall.

Then there’s the funding of proactive journalism: the crowdsourced model, where enough people believe the story or content will be worth consuming that they’re ready to pay for it in advance. Similarly, the blockchain can help, not only with micropayments but with an immutable record of who paid what for what, and what that entitles them to.

But what about bigger content that require deeper funding — an investigative podcast series, say, or a documentary? Companies like Qravity are looking to break down the various tasks of a project, which are then farmed out to team members. Instead of being paid for their contribution they’re given tokens, which give them a stake in the ownership of the project proportionate to the number of tokens they hold. They’re therefore transparently tied to the project and can share in its success.

Content licensing

And then there’s monetising that content once it has been created. Or finding a way to monetise one’s archive. Take AllRites, a media company based in Singapore which handles licensing of content on behalf of major TV and video players in the region. They’re creating a platform that would move this marketplace onto the blockchain, in theory simplifying the licensing of that content, while also opening up B2C licensing — where you or I could buy streaming rights to movies, tv shows or documentaries by the hour, say — as well as a content funding platform. Initially, content would be represented on the blockchain via a unique identifier, but ultimately, their CEO Riaz Mehta hopes, technology will allow the content in its entirety to be stored on a blockchain, simplifying the process.

So why? What’s the point of this? There are several advantages, Mehta says. First off, an ICO allows them to raise money that venture capitalists would never provide because they wouldn’t see the longer term, and they’re only just starting to get blockchain. “For them,” Rias told me, this is the frontier land and they’re very cautious about what they put into it.”

But more significantly, they believe that not only will it make for a more efficient marketplace, but that content locked up in the long tail of providers could be more readily found and monetised. By registering the content on AllRites’ blockchain even niche providers or content creators themselves would be able to prove their rights, advertise their wares and sell to a much larger market.

There are other efforts in this area. Po.et is a shared ledger recording ownership and metadata for digital assets. Qravity is both a studio and a distributor of content created by decentralised teams. Both aim to build platforms that level the playing field for content makers. In other words, disintermediating the middle parts that conspire against smaller producers of content.

Smart contracts

A key part of the appeal of blockchain is the idea that embedded into it could be more than just tokens of value. You could store the content itself, theoretically, or you could store applications — code that actually does something. These are, or could be, smart contracts — a piece of code that, in its simplest form, kicks off an action, or sequence of actions, based on some input. So, on a certain date, ownership of a token could change hands. So imagine I have loaned a video to you, the record of which is stored on the blockchain. When that loan expires, ownership (and control) of that video returns to me. Part of the smart contract could delete it from your device, say, or require you to extend the loan, releasing tokens to me in payment. These smart contracts would effectively unleash a lot of the potential for what is otherwise just another database. Qravity, for example, plans to use smart contracts to determine how many tokens to distribute to each member of a team based on their contribution, in the example described above.

Warnings

ICOs

There are concerns however. Quite a few of these blockchain companies are launching, or have launched, initial coin offerings, or ICOs, to raise funds. These have proved very lucrative for some startups, but their appeal is beginning to fade. Regulator anxiety is forcing every ICO to move away from calling their tokens securities, for one thing — so while they are still raising money from the sale of tokens, those tokens do not represent a stake in the underlying company. Instead the tokens will be used to buy services or products. And there’s the issue of incentive: if companies do raise money through ICOs, how can they be held to account over how that money is used?

The first problem with ICOs and the subsequent blizzard of tokens is: why? Why can’t people just buy those services with their own currency? The argument is usually two-fold: the tokens allow money to be transferred without constraints of borders/currencies, and secondly, that it allows more value to be transferred than was available previously. Brave moves tokens (value) between the three main pillars of media — the users, the publishers and advertisers. So users, for example, can earn money directly from advertisers by giving their consent to view ads. Similarly, they can reward content producers on a proportional basis depending on how much of their content they viewed during a month.

But I think the bigger worry is that these systems are too complicated for the end user. I tied myself in knots trying to chart the various transactions that would take place within Brave’s ecosystem. And that was one of the simpler ones. These complicated arrangements may work in B2B, but the diagrams that accompany nearly all these models highlight the same problem: For the solution to work it must be invisible or intuitive to the end user. He or she must not have to juggle multiple tokens, or perform elaborate calculations in her head, or have to require lots of separate apps, accounts or wallets. And they don’t want to see lots of real money locked up in tokens. I can’t help coming away from reading some of these white papers (the conventional way these days to explain how these blockchains and tokens might work) and feeling there might well be a simpler way of doing things.

Blockchain is often mentioned in the same breath as the invention of the internet. That could be true. I would say that for it to be successful it must be closer in analogy to the invention of the World Wide Web — when Sir Tim Berners-Lee came up with a simple layer of links embedded in a familiar text-and-graphic interface which unlocked the potential of the plain vanilla and impenetrable internet. Until the blockchain is able to offer that, talk of its disruptive power in media is premature.

Of course, I might be wrong. Efforts like Civil hope to build a whole ecosystem — a platform encompassing many of the features I’ve described — and are already building a portfolio of news organisations. They describe it as a Netflix strategy — instead of waiting for someone else to aim big, they’re doing it themselves. And Yours Inc’s Charles points to his company’s buy button, seamlessly woven into any webpage, that would allow anyone with Bitcoin Cash to pay a user for his content, in the same way we click on the Facebook like button now. So there is traction, of sorts.

Platforms and standards

Most of the startups I spoke to are keen to point out that they’re not pursuing blockchain technology blindly, and ignoring other technologies — like artificial intelligence, for example. Inkrypt’s co-founder and CEO Muhammad Ali Chaudhary, for example, says: “It is important to realize that blockchain ledgering is just one piece, albeit a very necessary one, of the technical solution being provided by Inkrypt. We are implementing blockchain technology in a particular way for a specific use case and at the end of the day we are a media tech company, as opposed to a ‘blockchain’ company.”

For sure, there will come a time when these companies decide it’s better not to even use the word blockchain to describe what they’re doing. And I think we’ll see some quietly disappear when they realise that journalism is for most people both a passion and a job, and that it might be hard to build a critical mass of journalists and content creators willing to be guinea pigs for untried and untested business models.

What I think needs to happen in the longer term is that independent media, organisations, or funders should work on building standards and platforms that allow all these tokenised initiatives to cooperate. We are some way from a world where people will be comfortable with handling lots of different tokens, and it feels like a reverse if we push users in that direction. Better would be to encourage interchangeability — say an exchanges where you can easily buy and transfer your tokens. Or, where one token rules all. In that sense, companies like Yours.org may have a head start — building APIs, or application programming interfaces, software that allows services to talk to each other — for other content makers to plug into the Yours.org platform.

Ultimately though, I am optimistic that out of all these spaghetti-like flowcharts might emerge a model for media to find a better way of rewarding great content, keeping advertisers happy, and tapping into loyal audiences. I just don’t think we’re quite there yet.

Guide #2 – Launching a paywall: What you and your team need to know, by Tomáš Bella.

Please download and share the guide. We would love to hear from you – send any comments or suggestions to us at mas@mdif.org.

[pdf-embedder url=”https://www.kbridge.org/wp-content/uploads/2017/12/Guide-2-Launching-a-paywall-by-Tomas-Bella.pdf” title=”Guide #2 – Launching a paywall: What you and your team need to know by Tomas Bella”]
About author: Tomáš Bella is co-founder and web director of an independent Slovak daily newspaper: Denník N (dennikn.sk), which also develops open-source software for publishers REMP (remp2020). Previously, he was Editor-in-Chief of the largest provider of Slovak web journalism, sme.sk, and co-founder and first director of Piano, now the world’s largest company offering publishers paywall software.

The two charts above may seem contradictory. Yes, global online ad expenditure has multiplied tenfold since 2004. Yes, digital spend will surpass the printed press worldwide (in many countries, it already has) in 2015. But despite this impressive turnaround, the newspaper industry still gets most of its rapidly diminishing advertising revenues from print, not from digital. Indeed, many traditional news brands have reached huge audiences online but just a tiny amount of the global digital ad revenue cake. Why is that? Just a lack of vision, or is it an unfinished digital transformation?

The advertising paradox

The slow transformation to digital has indeed played a role for many traditional media, but unfortunately it is not the main factor behind this paradox. The most important cause is competition and this cannot be fixed. Media have moved from a world where ad revenues were shared among a very small bunch of papers, TV and radio stations in each country to a world of limitless competitors, from the huge new arrivals like Google or Facebook to the myriad bloggers. It’s almost a perfect market, awash with inventory, that is now getting even more ‘perfect’ with the development of programmatic buying, where machines (not fallible or emotional humans) match supply and demand in real time.

The laws of economics are ruthless. With an increase in competition/supply comes, inevitably, a decline in prices: so digital advertising has always suffered and will always suffer downward pricing pressure. This is why news outlets all over the world are searching with renewed passion for complementary revenue lines. And the main focus is now on ‘user generated revenues’, either traditional revenues based on editorial content or revenues based on new services.

Revisiting ‘editorial revenues’

Only five years ago, almost every news outlet in the world was banking on an open-web-pure-advertising-revenue model. But the global economic downturn and the low prices of digital advertising described above convinced many of the dangers of ‘single crop farming’ in digital. Only two international business brands – the Wall Street Journal and the Financial Times- were previously pursuing a subscription-based model, based on the exclusivity of their contents and the predominance of companies among their customers: WSJ as early as 1997 and the Financial Times 10 years later. But it was only in 2011 that a major general news property, the New York Times, dared to put its contents behind a paywall.

Three years later, the NYT has grown to 760.000 digital subscribers, an impressive number that has encouraged many to follow suit, even if The NYT’s journalism and singularity are difficult to match. Just in the US, there are already 450 national, regional and local news outlets (out of 1,380) that have introduced a digital subscription model according to the Pew Research Center. Are the models all the same?

No. Indeed, the discussion around ‘paid content’ and its presumed nemesis the ‘open web’ became so heated (creating two quasi-religious factions), that no one wants to talk about ‘paywalls’ any more. The forbidden word, as in Harry Potter’s ‘Voldemort’, is now replaced by ‘membership’, ‘club’, or anything else without ‘pay’ in it. And in most cases the offer does go beyond a pure payment for contents, offering users access to extra services, apps or discounts, and – of course – a special engagement with their favorite news brand. In any case, all offers include one or many of the following features:

• Hard paywall

It’s the oldest and usually simplest mechanism tried by publishers online. Users can only visit the homepage for free (sometimes also the sections’ homepages and/or ‘soft’ contents like photo-galleries), while most of the content online is reserved for subscribers. This was the system used by the Wall Street Journal in 1997 (now, fine-tuned) and by some general news big brands around the world at the turn of the 21^st Century, like El País in Spain in 2002. But most of them reverted to open websites after a disastrous drop in audience and very limited digital subscriptions. Surprisingly, Rupert Murdoch announced and put in place a hard paywall at The Times of UK as late as 2010. Last year, The Times and The Sunday Times totaled 130,000 digital subscribers, with a massive fall in online traffic (also affecting the paper’s audience) of more than 60% and a similar drop in digital advertising revenues.

• Soft paywall/Metered paywall

Introduced in 2007 by the Financial Times and popularized by The New York Times in 2011, this scheme tries to ‘square the circle’ of subscriptions and advertising revenues. The idea is to design a paywall that is porous enough to allow a very big number of free visits (and, therefore, a large enough digital advertising inventory), but not too much so as to discourage subscriptions.  The logic behind the system is the fact that loyal and very active readers are more willing to pay than casual users – though the latter massively outnumber the former. So the system relies on a ‘meter’ counting the number of times that a user visits the site and, from a set number of visits per month, the paywall pops up asking the user to log in or subscribe.

The Financial Times launched its paywall with a limit of 10 visits per month, excluding the homepage that is always open. Four years later, The New York Times took a much more cautious approach, because it had a much larger audience and advertising revenues to loose, and because the ‘exclusivity’ of a general news outlet is always more questionable than that of a financial one. So, the Times opened the limit to 20 free visits per month, excluding homepages and photogalleries which are always open. And to allow the virality of the internet to continue its magic (the main ‘collateral damage’ of paywalls), the NYT decided to keep access open to any visit coming from search engines and social networks.

All in all, this metered paywall only reduced the number of online visits by 5% and page views by 10% when it was launched. And to the surprise of many who thought this was too open an approach,  the number of digital subscriptions grew to the current 760,000. In the meantime, the NYT has reduced the number of free visits per month to 10 but, on the other hand, has completely opened access to video, whose ads are especially lucrative, and to some areas of content outside the US, where the rate of loyal users is lower. Indeed, the key to ‘metered paywalls’ is precisely this: they give publishers the ability to tweak the system on-the-go, depending on usage results and the need for inventories.

Ever since the NYT launch, hundreds of news outlets worldwide have introduced a metered paywall, including titles as different as The Telegraph in the UK, Folha de Sao Paulo in Brazil, The Onion in the US and El Mundo in Spain. Most are very recent developments, so we do not have meaningful numbers yet, but it will be interesting to see whether they are able to reach similar conversion rates to such an iconic brand as the NYT and whether they also manage to keep advertising revenues almost untouched.

• Freemium model

Freemium models are almost as old as the basic paywall. Their logic is straightforward: you cannot charge users for the same contents you were offering for free just before. So the basis is to keep the existing web open, while creating separate contents and/or products only for subscribers; i.e. a Free area + a Premium area. Indeed, this is a very typical model for software or mobile apps, which provide a basic service free of charge and a paid premium for accessing advanced features.

Many media outlets, old and new, have tried this model, including the New York Times previous ‘Select’ offer, Le Monde, Slate (very recently) and even the champions of the open web, The Guardian, with its premium tablet and mobile apps only for subscribers. But many ditched this approach after trying it out because it didn’t trigger a large number of subscribers (most users are fine with the free part) and because it usually involves an extra effort/cost from the newsroom or the publisher to create additional content/services for the premium area.

• Membership

Membership usually brings a set of advantages to the subscriber in addition to the editorial contents of the publication – such as free or discounted prices for conferences, exhibitions, theatre and concerts; or special events with the newsroom, etc.) to make him/her feel like they are a member of a ‘club’. As noted above, most paid offers from publishers – be they paywalls, freemium models or some other form – are also marketed as memberships. The emotional and ideological link with the news brand is indeed one of the – if not the only – most important factors for readers entering a paying scheme. Importantly, the New York Times realized recently that users respond better to a marketing campaign focused on the survival of the quality journalism they represent, than to other campaigns focused on the many features and advantages of their offer.

New media properties also use this emotional link with their readers/users as a key to their survival. New brands all over the world are being launched thanks to crowd-funding campaigns among their potential readers: people willing to pay to enjoy the type of journalism the brand promised. And many of them are inviting these readers to become subscribers or ‘members’ as a way to avoid a heavy reliance on advertisers – especially dangerous for small companies – and to support independent journalism. As the new Dutch kid on the block, ‘De Correspondent’ (famous for raising more than 1 million Euro of crowd-funding in eight days) put it: “De Correspondent is a commercial, for-profit enterprise, but our business model focuses on selling content to readers, rather than selling readers to advertisers”.

Beyond publishing

‘Diversification’ is the magic word for many media groups searching desperately for new sources of revenue in addition to advertising and to the – always challenging – paid content. The logic behind this model is: if I have a trusted brand and X hundred thousand – or even million – users visiting my website every day, I may be able to offer them other services or products endorsed by my brand. This way, publishers can leverage their own media power to build new businesses more or less connected to the editorial, instead of always relinquishing this to advertisers.

Given the difficulties of moving from the publishers’ trade to the service providers’ or retailers’ one, media groups are typically partnering with specialists or even buying their way into these new businesses. The two most widespread diversifications are online services and e-commerce.

• Services

Many publishers worldwide have been offering ‘collateral’ online services to their readers for more than a decade. Indeed, some of these services – such as classifieds – were a regular and very lucrative offer on print papers, and it was a natural transition to exploit them online too. The main difference between media players has been the size of their stake in this market, and their speed to approach it. While some news outlets have been particularly slow and cautious to enter the online business (for fear of harming their declining print product), others have been fast and assertive. In markets where supply of these services is mature, the late entrants are struggling to earn decent incomes from their affiliations with big players, but those who got in early are earning very significant revenues from their own fully-fledged operations. In some cases, much more than their revenues from the editorial business.

The Nordic champion Schibsted and the German group Axel Springer have been the most bullish in this diversification, and not surprisingly they are also the two European players with strongest digital revenues. Schibsted began as early as 1999 to position itself very aggressively in the online classifieds business in Norway, then bought start-ups in Sweden, France and Spain that are now blockbusters in their respective markets. Today they are shopping for a second round of personal finance services websites all over Europe to replicate the feat.

Springer initiated its diversification a little bit later, 2005, buying startups also in classifieds, affiliate marketing, price-comparison and women’s communities. In 2012, the German group was already earning more revenue from its digital operations than its print publications (that includes the 3 million daily copies of Bild!). A little bit further behind, the Guardian Media Group also relies on its dating and jobs classifieds online services for more than half of its digital revenues, and has recently sold part of the family silver – its 50.1% stake in Autotrader – for more than £600 million to finance its money-losing editorial operations. Last year, Autotrader made £252m in revenues and £32m in pre-tax profits.

• E-commerce

“Retailers have been very good at being publishers for a long time, it’s time for publishers to be good retailers,” the commercial director of the Daily Mail Group, Marcus Rich, said last year. DMG consumer media division is undoubtedly pushing e-commerce as a key strategy for the Daily Mail brand extension; they already make £5 million in direct cruise sales alone. Pure players like Gawker Media are also keen to run this race and, according to its founder Denton Memo, will make around 10% of their digital revenues from E-comm this year. Even media power houses like the Italian RCS-Corriere della Sera are swiftly moving from taking their first steps in e-commerce (selling ‘extended editorial content’ such as books or movies) to the second step (partnering with retailers around editorial topics such as travel or beauty) and even third steps (integrating pure e-commerce offers in the editorial content), according to RCS’s CDO, Alceo Rapagna.

But most publishers are still in the early infancy of an e-commerce strategy, even if they consider it important.  According to a Forrester Consulting survey of 106 media companies in December 2012, more than 70% thought that having an online store was important, and about the same number said that having a separate deals site was important too. Indeed these two options were ranked third and fourth for driving audience and revenue only after an ‘Advanced website functionality’ and ‘More online advertisers’. But 30% of them added that they didn’t have the budget for adding real e-commerce. Are we in Year One of e-comm for publishers, just as 2000 was for services?

In April, more than 20 representatives of Latin American and Spanish online journalism organisations gathered in Austin, USA, for the Iberoamerican Colloquium on Digital Media. The principal question on the table was: what is the path to sustainability?

As if finding the answer isn’t hard enough, the meeting revealed that some online news organizations have a very different understanding of what “sustainability’” means than others.

Many – such as La Nation from Argentina and O Estado from Brazil—  are part of larger legacy news organizations.

With most of their overheads and much of their content production covered by the parent company, relatively few ads cover many of the remaining costs. Additionally, a strong online presence serves as a way to promote the print brand.

But there is also a new generation of start-ups without financial backing from a parent company, outlets inspired by the same motivations that have fueled organizations like US national investigative reporting group ProPublica and the Texas Tribune – namely, a passion for investigative reporting, frustration with the limitations of the existing news media, and excitement over the new possibilities of digital platforms.

The participants in Austin demonstrated an impressive range of content, with strong offerings in human rights reporting, such as La Silla Vacia in Colombia, as well as scientific research such as Spain’s Materia and the arts, such as Argentina’s Revista Anfibia.

Many of the start-ups were fruits of a bold initiative by the Open Society Foundations (OSF) over a decade ago. OSF funded a number of young journalists around the world to create digital alternatives to the traditional news media in their countries, and several have made a mark. Plaza Publica in Guatemala and El Faro in El Salvador have added a range of perspectives that outlets in their societies previously lacked. During the recent controversial trial of former Guatemalan dictator Efrain Rios Montt, Plaza Publica ran a detailed  interview with U.S. investigative journalist Allan Nairn, an eye-witness to war crimes committed in the Rios Montt era.  El Faro has run hard-hitting articles on Salvadoran gangs and drug trafficking.

Over their first decade, Plaza Publica, El Faro, and their counterparts concentrated on building out their reporting capacity and constructing their digital platforms, in the belief that philanthropy would provide their core funding. But now the ground is shifting. With grants for independent media becoming harder to find, the message is clear: philanthropic support may not go away entirely, but it’s an excellent time to seek new sources of revenue. The search for business models is on.

An informal survey of Austin’s field of journalism start-ups (many of them leaders in their markets) confirmed that none cover their operating costs without external sources of support. In the early days, strong hope was placed in digital advertising, but now there is no suggestion that digital advertising alone could support a serious journalism site. Digital advertising pays a minute fraction of print rates, and it is continuing to favour non-journalism web and mobile platforms. Furthermore,  advertisers are often scared off by the investigative content the Latin American initiatives were founded to report.

Many of the digital start-ups get around the limitations of international grants though accessing  other forms of direct and indirect support. Plaza Publica is based at the Universidad Rafael Landivar, a Jesuit institution, which covers most of its overheads. Revista Anfibia has a similar arrangement with the Universidad de San Martin, a state institution in Argentina. Chilean site Ciper was launched with the support of the national media conglomerate Copesa. The shared experiences of the group suggested that if a start-up wishes to launch as and remain a news-only operation, it may have to seek supplements to philanthropic support and partnerships with local institutions.

All of these, of course, may come with strings attached.  But the broader discussion in the news industry is coming to the conclusion that the era of news as a “commodity” business is waning. The old models of charging for content, through paywalls plus advertising, appears to be working for some institutions, but these tend to serve affluent audiences who will pay a premium for content and offer an attractive demographic for luxury brands. This approach has little to do with the mission or the audiences of the Latin American start-ups.

The services model for sustainability

So what’s the alternative to the “commodity” model?  There is mounting evidence that independent online news will be evolving into a service industry, to market digital skills and training and to help to organize communities. The Austin group reported that they were involved in a range of experiments to develop new revenue streams, many of them promising.  With the help of Kevin Davis from Investigative News Network, these approaches were categorized as:

• direct, which markets online content in various ways;
• indirect, which generates revenue through advertising and philanthropic support;  and
• ancillary, which produces income through training, events, merchandising, and services.

So far, it appears that no single approach can be identified as a magic solution; once again, it appears to be a question of an evolving mix, heavily influenced by local factors such as political environment, market conditions and competition.

The new marketplace will press online platforms to find their audiences, listen to their needs and attend to them as a community.  With luck, they may find that they can support their news production through fine-tuning an array of services in combination with (or in place of) advertising.

In Chile, Mi Voz has benefited from the creation of study centres to teach digital skills, while Brazil’s Observatorio da Imprensa has implemented journalism training programs.

Mexican start-up seeks revenue in the ‘mix’

Only one organisation in Austin was described as a free-standing digital organisation, and – not coincidentally – it was the only one that expects to turn a profit in the foreseeable future.  This was Mexico’s Animal Politico.

Notably, Animal Politico was launched in 2009 as a for-profit, digital-first project, starting life as a Twitter news service; founder Daniel Eilemberg that he explored the possibility of  philanthropic support, but abandoned the idea. The project has since expanded into a website and an array of services, including marketing digital advertising expertise and events.

It does not purport to be a “pure” news site; Animal Politico includes entertainment as well as hard news, and has experimented with many forms of audience engagement. It has emphasised social media since the start, and engages its youthful demographic through talk shows on popular rock stations in Mexico City. It has kept its overheads low and built a growing advertising base by engaging a young urban audience. Animal Politico was early to experiment with mobile platforms and Facebook ads, and, as of June 2013, has 476,000 Facebook “likes”. Animal Politico now receives over a million unique visits a month and expects to go into the black within a year.

Animal Politico has benefited from the restrained nature of its competition in the Mexican media market, in which corruption, government controls and gang violence have stifled traditional reporting. But it has also been shaped by the unrelenting pressure of the market to adjust “the mix”. For those who question the advantages to entering the field as a “digital-first”, market-driven project, Animal Politico is providing a compelling test of the theory.

Defying the print media crisis in many parts of the world, Latin American newspapers and magazines continue to enjoy rising circulation and advertising revenue due to growing middle classes and economies left largely unscathed by the financial crisis.

However, internet use is growing rapidly in Latin America, and traditional media groups are exploring digital paid content strategies to try to protect and consolidate their dominant position, especially in the face of competition from new digital-only news organisations.

For instance, the Brazilian newspaper Folha continues to enjoy sustained growth in print circulation while also developing a dominant market position online, and it has become the poster child for paywalls in Latin America with the launch of a metered paywall strategy in January 2012.

While metered paywalls, in which users are able to access a certain number of articles before having to pay, are one of the most popular strategies globally, it is just one approach in use in Latin America, a reflection of the diversity in media markets across the region.

Latin American media experiment with different models

Until 2011, digital paid content strategies were the exception not the rule for news websites around the world. In the US and in Western Europe, paid content strategies have been driven by a drop in print advertising and the inability of news organisations to make up for that fall with digital advertising. News groups had to diversify their sources of revenue. The major shift in the industry came after the New York Times rolled out its metered paid content strategy in 2011, signing up 668,000 digital subscribers, according to its most recent quarterly report. Since then, more than 300 newspapers in the US and newspaper groups in the UK and Germany have implemented paid content strategies, and many have followed the lead of the New York Times and rolled out metered paywalls.

This success has given important legitimacy to paid content strategies globally. But for Latin American news groups, the economic imperative to develop paid content strategies is less, as performance in their print business remains strong. As in other regions, digital media market conditions vary widely in Central and South America, and there is no one-size-fits-all paid content model.

In our last look at paid content strategies, we highlighted the wide range of models in use as news organisations move beyond the binary debate of paid versus free and experiment with a wide mix of models. To recap, the major approaches include:

• Hard paywall with no access to digital content to non-paying customers.
• Free online but paid on mobile.
• Hybrid paid and free networks.
• Freemium strategy where general content is free but specialist or premium content requires payment or subscription.
• Long-form magazine or investigative journalism is repackaged and sold on ebooks or tablets.
• All access bundles in which subscribers pay a single price for access in print and digital platforms.
• Metered paywall in which a certain number of pieces of content are free but payment is required above the limit.

Of these strategies, all-access bundles, metered paywalls or a combination of both are proving to be the most popular and the most successful, and often, all-access bundling is part of a metered paywall strategy.

Market conditions help guide the choice of the most appropriate paid content strategy, and with the diversity of markets across Latin America, media companies have implemented a number of different approaches.

All access bundle and metered paywall – Folha (Sao Paulo, Brazil) – Folha was the first newspaper to implement a metered paywall in Brazil in January, 2012. They initially charged only for their tablet and mobile phone apps, but in in June of that same year they included their website.

Folha gained 45,000 new digital subscribers during their first year. Since then, many other newspapers have either followed suit or are studying how to implement a similar strategy.

When Folha launched their paywall, the rules were that each visitor would have 20 free articles per month while the homepage, cultural schedule and a site for children remained free. After reaching the 20 article limit, readers would have to register some information, then they would have an additional 20 articles before they had to pay.

In March 2013, the limit was lowered by half to 10 free and an additional 10 after registering. The ability to change the number of free articles is seen as a strength by proponents of the metered strategy. Unlike the New York Times model, which does not count pages accessed via links from social media towards the monthly limit, Folha does not make this distinction.

Folha offers two types of subscription:

• Those that subscribe to the print edition and have access to the digital products.
• A digital subscription that enables access to the content on any of the platforms.

According to Roberto Dias, Digital Content Director, Folha’s website has 21 million unique visitors per month, with over 270 million pageviews. “Today, every article by Folha is read by a lot more people than 30 years ago. What we really need to do is to look for sustainable models for the journalistic production process, which is expensive.  I think every newspaper is going to find their own; we are looking for ours as well.”

Hard paywall – Reforma (Mexico) – Since 2002, the Grupo Reforma have had a paywall on their websites and charged online subscribers 20% less than a paper subscription.

This was a means of protecting the print business, according to Jorge Meléndez, vice president of new media in an interview with the Knight Center.

After nine years, Reforma has 50,000 online subscribers and its daily circulation reaches 300,000. Currently, they have 5,555 new users per year. However, when they started the paywall, traffic shrunk by 30% and it took one whole year for it to return to its original level.

They currently offer a digital-only subscription that is good for up to four devices and a paper subscription that includes access for up to six devices. Offering bundles that encourage readers to continue to receive the newspaper is common, especially because print advertising still commands a dramatic premium over digital ads.

Digital kiosks – This model, similar to Apple’s Newsstand,  is particularly prominent in Spain, where Orbyt, Vocento and Kiosko y Más are some of the market leaders. In most cases, these kiosks provide access to a PDF version of the publication (similar to the one in print) and people can buy one or more publication from the kiosk at a price that is on average 50% of cover price.

In Latin America, kiosks are a fairly new concept, though one that is being developed.  One of the first to operate in the region is a Colombian kiosk for magazines called Pasalapagina.com; they offer access to 30 Colombian magazines for a monthly subscription fee.  According to a market survey, the amount people are willing to pay at the kiosk in Latin America is about 50% of cover price.

Platform specific strategies in Colombian media –  Semana, a political magazine, is the only Colombian media outlet ever to charge for the content they offer to tablet users.  Initially, the magazine launched a free app that reached over 110,000 users. They then introduced a fee charging for the digital subscription.

El Tiempo and El Colombiano, two of the leading dailies, are also working on paywall projects that they hope to implement in 2014.  Currently, these newspapers have free access to their digital editions and rely on online advertising for revenue.  However, they also offer a product called e-paper (an electronic version of the newspaper) for a discounted price.

In March 2012, El Colombiano, located in Medellin, implemented in its tablet edition a ‘freemium’ model which, after registering, allows the user to download the newspaper in its PDF version and have access to other publications such as smaller neighborhood newspapers and magazines. During the first month they attracted 7,000 users.

Markets in transition

When developing a paid content strategy, publishers and media executives will need to consider the specific conditions in their market to determine whether a paid approach is appropriate and, if so, which strategy to choose.

Determining the market opportunity is key, and it is important to consider the unique market conditions in your country, both in terms of digital consumer adoption and digital market development.

The vast differences across Latin America help explain the wide range of paid content models being used. The overall level of internet penetration is currently at 42 percent in Latin America, but that only tells half of the story. Internet use varies widely, ranging from 66 percent in Argentina and 58 percent in Chile to 16 percent in Honduras and Guatemala, and 14 percent in Nicaragua.

Paid content systems involve costs in terms of development and infrastructure, and if internet penetration is too low, it might be difficult to generate meaningful revenue. There is also the issue that many Latin American consumers are not yet comfortable with sharing credit information online. However, it’s important to note the rapidly changing market. The online population of Latin America grew faster than any other global region in 2011, rising 16 percent to 129 m visitors in December 2011, according to The 2012 Latin America Digital Future in Focus report by comScore.

While Latin American internet users might be fewer in number than in some other regions, the intensity of their use to some extent counterbalances this. As in other parts of the world, social networking is driving much of the growth in internet use. Moreover, Latin America is home to five of the most engaged social networking markets worldwide.

As internet use continues to grow in the region, the digital market opportunity both in terms of paid content and ad-supported strategies will increase for news organisations, but so too will new digital competition.

Mobile segmentation strategies in which users pay for the convenience of accessing content on mobile devices such as smartphones and tablets, while being able to read it for free on laptop and desktop computers, face challenges in Latin America. Tablet use is lower and growth has been slower due to pricing, limiting the immediate opportunity to use tablets as part of a platform segmentation strategy. According to market research company GFK, it is estimated that in Chile there will be 400,000 tablets by the end of 2013, for about a 2 percent market penetration.  In Colombia, 7.4% of the population owns a tablet, but tablets rank first when it comes to desired possessions. In the poll, 20 percent of Colombians indicated they wished to have one, according to an IPSOS-Napoleón Franco poll.

Of course, mobile phone use is high and smartphone use is growing. It is important to remember there are great differences between countries in the region, so fragmentation will be key. In Brazil, there are 27 m smartphone users, and in Mexico there are 23 m smartphone owners. Mobile phone penetration is 55 percent across the region and much higher in individual countries, such as Colombia with 95 percent penetration.

Other challenges exist including limited bandwidth and the broad prepaid user base. In countries such as Guatemala, 94 percent of mobile phone accounts are prepaid, and even in  Brazil, 80 percent of subscribers use prepaid accounts, according to the GSMA, a mobile phone trade group. Prepaid subscribers tend to be more price sensitive

All of these factors need to be considered when building a paid content strategy around mobile phones.

Facing the challenge from digital content start-ups

The diverse market conditions make the challenge facing the industry a complex one.  On one hand, there are the opportunities presented by the increase of the potential audience both for the print edition and its digital counterparts. On the other, there is the risk of squandering them by cannibalizing their own print product. A premature move towards full digitalization at this time may sentence healthy print editions to an untimely death, but failing to develop digital products and revenue streams may cede future digital opportunities to new competitors.

The Colombian experience in this regard is interesting: fast-growing all-digital outlets such as La Silla Vacía and Kién & Ké are gaining ground on their traditional media counterparts, particularly in the younger demographic.

Most current strategies focus on differentiating the various digital products – online, on tablets and on smartphones – in order to serve the needs of the audience, while keeping an eye on the fierce competition from other digital-only media outlets. These digital competitors are probably betting on a faster rate of decline for the traditional model, especially as Latin America moves closer towards its development goals.

Audience measurement key to strategic choices

Many experts agree that traditional print products in Latin America still have a bright future ahead of them. In order to navigate the complex set of strategic choices across the markets of the region, newspapers and magazines have developed or need to develop tracking features to better understand their users and the ways they are consuming information.

For example, a newspaper might be interested in knowing their audience breakdown based on users in cities versus smaller towns, or what percentage of readers are coming from abroad.  Not all users are the same and not all of them are willing to pay the same; similarly, advertisers might favour a certain category of users or a certain pattern of online behaviour.

The next step for traditional media in Latin America is to figure out what kind of digital strategy is best suited for their particular publication. Technology will provide many of the tools to make this assessment and come up with creative ways to court the audience and develop digital products with a range of revenue streams.

The amount of information available and the level of depth of niche-specific content are also important factors when considering a paid content strategy.  For instance, sports content in Latin America is a type for which users have been more willing to pay; on the other hand, music and entertainment news content is rarely purchased.

In the end, innovation and creativity are a must when it comes to designing the models that will govern the region’s paid content strategies.  The question is, in the interim, while traditional newspapers still enjoy healthy circulation and advertising revenues, will they invest in integrating newsrooms and developing radically different models to stay ahead of the digital game, or will their current success lock them in a potentially obsolete way of doing business?

For most news organisations, the response to the mobile revolution will be one of distribution, but Cory Bergman, the General Manager of mobile-first news service Breaking News, says that the mobile revolution is about more than distribution. Distributing your content to mobile audiences is a challenge easily met, but media are only starting to grapple with the business challenges. Writing for the Poynter Institute, Bergman said:

The mobile revolution isn’t about design and distribution as much as it is about revenue disruption. … Both Craigslist and Google created new business models enabled by the technology and scale of the Internet. In the same way, mobile is enabling new business models and use cases. Just like the mid- to late 1990s, we’re at the leading edge of the ensuing disruption.

He believes that mobile payments and geolocation, the ability of phones to customise advertising and content based on a user’s location, could disrupt local advertising. “For local media organizations, that has the potential to destroy your business,” he adds.

This disruption is not far off, he says, and he points to the moment where mobile internet use will surpass desktop. If anything, the developing world is ahead of the developed world in this respect. As we’ve pointed out several times here at Knowledge Bridge, for many internet users in Africa, the Middle East and South Asia, mobile internet access is people’s sole way of accessing the internet. In many countries, mobile will dominate, rather than the desktop internet.

This isn’t just about differences in distribution channels. Just as importantly, there are dramatic differences between the business of the mobile and desktop internet. As Bergman says:

There’s a huge gap in advertising yield between desktop and mobile experiences: $3.50 versus $0.75 in average CPMs, according to Kleiner Perkins’ Mary Meeker. Mobile is growing so quickly, the explosion in available inventory is depressing advertising rates.  Ad agencies typically lag demand, which means this gap won’t be bridged anytime soon.

Bergman’s worry is that news organisations’ response to the mobile web will be similar to that of the desktop web: that with such low advertising margins, it would be too easy to focus the business on the desktop web, even though this would ignore a growing segment of the audience.

However, as the news industry is realising with the desktop web, simply applying advertising and revenue models from traditional media to digital media isn’t proving to be successful. The same holds true for mobile media, and the strategies that worked for monetising desktop audiences will not be the same strategies required to monetise mobile audiences. It will take creative thinking both in terms of content and commercial teams to come up with appropriate and successful strategies for mobile.

To develop these successful strategies, Bergman suggests that news organisations consider how the mobile experience differs from the desktop internet. “Mobile is not merely another form factor, but an entirely new ecosystem that rewards utility,” he said. News organisations need to consider how to tap into the high level of social media use on mobile, the opportunities of location both for targeted advertising and targeted content and also the increasing use of mobile payments as potential ways to build this utility and the commercial activity needed to support their mobile efforts.

The main digital challenge facing many news organisations isn’t attracting an audience but monetizing that audience. With dropping digital advertising rates due to an excess of digital advertising returns, and a host of new competitors for digital advertising revenue, reaching digital profitability can seem like an uphill battle.

To compete effectively, news organisations need to improve their use of data and engage with other digital advertising innovations, says  Rodney Mayers, the chief revenue officer of data and analytics company Proximic.

“Advertisers know more about your audience than publishers do,” Mayers told the independent publishers Association of Alternative Newsmedia digital conference in the United States. Publishers need to respond with their own data to earn better returns on their ads.

Use the data tools that advertisers use

The advertising industry is becoming increasingly sophisticated in their use of data to assist buying decisions. Proximic provides page level analytics to media buyers allowing them to understand more about potential ad positions, including content category, potential impact for brand advertisers and overall page quality. All of this is done in real-time, which Mayers says means less than 5 milliseconds. They work with such major companies as eBay, WPP’s GroupM and AdMeld, which was acquired by Google in 2011.

In an interview with Knowledge Bridge, Mayers challenged publishers to use these data tools to get to know their audience better. Editors and publishers used to rely on their gut instincts to deliver stories that their audience wanted to read and an audience that advertisers wanted to reach. He said:

Back in the day, that was the what the editors knew. They had a feel for their audiences. You couldn’t put it into data, but they had a feel for their audiences. That helped shape the voice of the paper. It helped attract the audience, and then the audience was able to be sold.

But where once gut feeling was enough, Mayers says there’s now an opportunity for publishers to exploit the data revolution and refine their understanding of their audiences. Data allows publishers and editors to test the “feel for their audiences” against measurable outcomes to drive more traffic and more engagement with their journalism. Higher audience numbers, higher engagement and better audience data can help publishers make the case for higher ad rates than the industry average.

For advertisers, Mayers said: “…if they have high confidence that they are reaching their target audience with the message they want in an environment that allows that message to be communicated, they don’t mind paying a premium for that. They really don’t.”

However, Mayers was frank in discussing the differences in the way that journalists and advertisers define premium content and, therefore, premium ad rates.

“The journalistic side (of the media business) says, ‘I did good work. This is journalistically sound. This is excellent. We are the major newspaper, and we are worth $35 (CPM),'” Mayers said. To put that in context, an analysis by comScore in late 2011 found that the average CPM for newspaper websites was not $35 but $6.99.

However, it’s clear that the premium probably isn’t $35 CPM. Mayers said:

Gone are the days of ‘I declare my CPMs and you just pay it’ because as with the competition of news and information, broadly speaking, you have a general competition for attention. If you prove, in your case, as a publisher, that you have won or are competitive in the attention game, that your folks disproportionately spend more time with you versus someone else, that supports a higher CPM. Just declaring, I am who I am and I’m worth it. That doesn’t work out here.

With the glut of digital ad inventory, media buyers are turning to data to improve the effectiveness of the ad buys for their clients. Proximic is just one of a number of companies that have launched to feed this need for data and analysis in the media, advertising and marketing industries. comScore provides audience data, while bluekai and Lotome provide data management platforms and other data services for marketers, publishers, ad agencies and data providers.

Mayers recommends that publishers consider using these data services to help improve their advertising returns.

The tools that are available to advertisers, publishers need to take them and flip them around and say, “…How do I use it to better describe my audiences so that I can sell that to my advertisers?”

For instance, he said that advertisers practice “impression weighting” on a site to determine which pages are getting more traffic and attention. Publishers need to use the same technique to sell those pages at a slight premium “because that is where the audience is”, Mayers said.

However, local publishers also have an advantage over most big advertisers. The advertisers might have national data, but local news organisations often have much more granular local data, including offline data that can help them pitch to advertisers. He said:

You have to be the expert (on your market). (Advertisers) will have big national numbers and distributed trends and beautiful graphs, but at the end of the day, you have to say that I know more about this because I did 14 events in the last 13 days. I have connections with the X,Y,Z (name the local organisation) and I’ve been in this market for the last 25 years.

Offline market data is hugely important even in the digital age, Mayers said:

Why? Because no one else is going to bring them that. No cookie in the world is going to describe that. That is where you get the premium side of the buy. Audience analytics. Knowing your audience better than anyone else will set you apart.

Do you have a product worth selling?

To win advertisers and get premium rates, publishers also need to be prepared to demonstrate how engaged their audience is with their content. Advertisers want to know not just how many people came to your site, but also that they stayed on your site long enough to engage with your content and their ads. Advertisers also realise that, just like journalists, they are in a battle for attention and they don’t want to be on a page where they are one of eight ads. They want to be on a page where they are one of three ads, or possibly just the only ad, Mayers said.

While he urged publishers to adopt data and analytics to improve their commercial performance, he also said that data tools are important in improving editorial performance. He said, “Publishers need to embrace that side of what they do right down to how many people read this article. Was this article important?”

If an article attracts zero readers, you don’t have anything to sell to advertisers. He added bluntly, “if your audience doesn’t think this is a product that they want to spend time with, nothing is going to help your CPMs.”

That is not something that most journalists and editors will want to hear, but if you know which stories no one reads online, that can help you allocate editorial resources, which are for many newsrooms becoming increasingly scarce. That doesn’t mean that you have to stop covering those stories, but it should make you rethink, at the very least, how you cover those stories.

Mayers’ advice for journalists, editors and publishers can appear direct, possibly even blunt, but all journalists want to have an impact and reach the widest audience possible. Data and analytics insights from companies such as Mayers’ could help your journalism compete for your audience’s precious time and attention, and to help you compete for revenue to support your journalism.

The use of social media isn’t just in urban areas, participants in MDLF’s Media Forum 2012 in Jakarta were told.

Riza Primadi: In rural Indonesia people call smartphone "Facebook Phones." Gather where signal is stongest and use Facebook. #MDLF2012

— Harlan Mandel (@HarlanMandel) December 2, 2012

It’s estimated that 20 percent of Indonesians over the age of 14 now access the internet – some 30 m people, according to The Jakarta Post – and 70 percent of those 30 m people access Facebook each month.

Internet access and use is still concentrated in urban areas, but with second-hand smartphones and mobile internet access now reaching even remote areas of Indonesia,  the whole country is starting to go digital. One third of those who access the internet do so over their mobile phones. The revolution is not only digital but also mobile.

The revolution in digital media in Indonesia is not just about using Facebook. In a 2012 Nielsen report (PDF), Indonesia was ranked second in the world in a mobile video usage index.

Media companies there know they need to adapt to catch this digital wave, according to Bambang Harymurti, the CEO of Indonesia’s Tempo Media. However, just like catching a wave in surfing, riding the digital wave is all about the timing – too early or too late and media companies will miss it, he said.

Part of the challenge is technological. “You know the price of this technology is decreasing while its capacity is increasing,” he said. If you buy too early, you will have paid too much for technology that will quickly be out of date but, of course, if you are too late, you can also find yourself in trouble, he added. “You have to be just at the right time.”

To get the timing right, Harymurti said that media leaders need to take into account not only the digital usage of their audiences but also the extent to which advertisers have embraced digital.

“If you are a media leader, you need to cater both to your viewer or your reader and your advertisers,” he said.

What makes the timing even more challenging is that media audiences, readers or viewers, “are much more advanced” in using digital media than advertisers, he said.

The ratings agency Nielsen found a huge shift in media consumption in China, India and Indonesia. “This emerging group of consumers are young, they have grown up as a digital generation, and most have bypassed traditional technologies such as fixed-line telephones and desktop computers,” the Nielsen report found.

The report also found that while digital media use is rising rapidly across the region, digital advertising lags behind the global average of 14 percent share of total ad spend. In Indonesia, free-to-air television advertising dominates ad spending with digital trailing far behind television, newspapers and magazines.

Media leaders must find a way to bridge this gap between consumers shifting to digital and advertisers still focused on non-digital media.

Harymurti said that if media companies race out ahead with their audience, they might leave their advertisers behind, which means that they won’t have the revenue necessary to sustain their business. “That can kill you,” he said, highlighting the dilemma by adding, but “if you are too late, the viewer might leave you.”

In terms of advertisers, media companies should not simply wait for them to catch up with digital audiences. In Indonesia, like many markets, media companies have to educate advertisers about the opportunities that digital media provides, Harymurti said. “We have to be willing to invest a little bit to educate our advertisers.”

‘Unlearn your old model’

Timing isn’t the only challenge in the transition to digital. Harymurti also said:

The digital, which is going to be your future, is a different landscape. You have to have the ability to unlearn your model. This is sometimes the most difficult part. You don’t want to just put on digital the print format.

It’s a change in culture, often built on the workflow of previous media. Sometimes, to be able to change the culture, you will need new people with new skills, he said.

For instance, writing and producing a newspaper or a magazine has its own rhythm, a rhythm that might not be appropriate to the continuous demands of digital media. “To adapt to this, you have to destroy this old habit and build a new one,” he said, adding: “This is not easy, people do not like to be dragged out of their comfort zone.”

Meeting the mobile challenge

The challenge of digital is not static either. Initially, digital only meant producing content for a web browser, of which there are only a handful. However, with one third of Indonesians accessing the internet using a mobile phone, this also adds complexity to this shift to digital. Publishers need not only to adapt their content for smaller screens of mobile and smartphones, but they also must take into account the dizzying number of different handsets. Technology can help adapt your content, Harymurti said.

“What you read on one page in a magazine and what you read on one small screen is different. You have to find new ways to keep people reading more from one screen to another instead of one page to another or one column to another.”

Young people use their mobile phones primarily to talk to their friends on Facebook, but as they grow older they will want media, he says. To start that habit though, “we have to catch them on Facebook, catch them on Twitter, and hopefully get them to our site,” he said.

There is no textbook on how to do this so you have to try new things and see what works, he says, and what works today, may not work tomorrow.

“Technology changes. We have to be a very changeable management,” he said.

Monetising mobile audiences

While audiences are increasingly moving to mobile, consuming more content both on smartphones and tablets, just as they did with the desktop internet, advertisers have lagged behind audiences in shifting to digital.

French digital media strategist Frédéric Fillouxwrote this week:

Mobile audiences are large and growing. Great. But their monetization is mostly a disaster.

The situation will improve he added, but a number of things will have to happen. He’s optimistic that the situation will improve, but advertisers will have to take advantage of the unique features of mobile, including geolocation and the ability to scan bar codes to really unlock mobile’s revenue potential.

In Indonesia, the major shift has been Apple, iTunes and its content-selling service Newsstand. Even with Apple’s cut, about 50 percent he said, the revenue from a digital edition of their magazine or newspaper is still higher than it was in print. “We doubled our margin,” he said. They have also had success in selling a PDF version of their print content.

At the moment, older readers are more willing to pay for digital than younger audiences, he said. While they build their digital audiences, they are using this time to continue educating advertisers. By combining their print and digital circulation, they can make the case that advertisers can reach a larger audience than print alone.

For media leaders looking to start the digital transition, he said that they should seek investors who will help them build their capacity. “The digital world gives us a golden opportunity to reach more people in a much cheaper and faster way and, of course, that is our dream as journalists to reach as many people as possible.”

Mobile

Report: 40 percent of mobile ad clicks are fraud or accidents

Uh oh – we’ve covered the challenges facing news organisations and social networks looking to monetise their growing mobile audiences, and now a report from TradeMob says that of the people who do click on mobile ads, 40 percent of those clicks were either fraud or accidents. It’s one of the reasons that mobile advertising is lagging behind online ads.

Android winning the battle against Apple’s iOS in Southeast Asia

Ericsson ConsumerLab looks at which mobile OS is winning the smartphone wars in Southeast Asia. Not surprisingly, the huge number of Android devices is outpacing Apple’s iPhone. Apple has a strong position in Singapore, Australia and Vietnam. However, Android trounces Apple in New Zealand and Malaysia. Nokia’s Symbian still has a pretty strong presence in Malaysia, Indonesia and Vietnam.

Alvin Yap Talks about Monetizing the Feature Phone Industry [INTERVIEW]

The CEO of the mobile gaming company TMG talks about how they are earning revenue not just from smartphone owners but also those who own more basic feature phones. He offers great insight into making money using premium content on basic phones in countries like Indonesia. The interview has some great lessons on earning money from mobile not just in southeast Asia but in markets around the world.

Social media

Hootsuite Now Available in Indonesian (Bahasa)

Hootsuite is one of many social media dashboards applications that allow you to manage your social media presence across many services and accounts. Like many of these dashboard tools, it not only works on your desktop computer but also has apps for the iPhone and iPad and also for devices running Android and for Blackberry smartphones.

While Hootsuite operates in a crowded market, it is one of the best social media dashboards available, especially seeing as a number of similar tools have either lost their edge, such as Tweetdeck, which has really floundered since its purchase by Twitter. Here at the Knowledge Bridge, we use Hootsuite to share our favourite links and let you know when we publish some on Twitter, LinkedIn and our Facebook fan page. Hootsuite has free and premium options. The premium options allow you to add more accounts and provide you with more metrics on how your content is being shared. It allows you access to different languages, including the recently announced Bahasa to help journalists in Indonesia keep up with their social media mad audiences.

Digital Advertising and Television

Report from US figures show that Online advertising could surpass TV by 2017

New innovations, such as mobile advertising and increased use of online video, contribute significantly to the sharp growth of online advertising. The proliferation of online radio services, including Pandora and Spotify, will also bolster online sales at the expense of terrestrial radio.

Billy Hulkower, senior analyst for technology and media at Mintel, says:

Print media has lost the most to online media in terms of ad purchases, but the demographic element of people who are not DVRing their commercials and skipping them has tended for years to be lower-income and older households. If you’re advertising a luxury product, it already hasn’t made sense for a long time to have a large TV budget.

He sees two reasons why advertisers haven’t made the move from TV to online. Check out the interview to find out what those two reasons are.

Newspaper groups look to video for new revenue opportunities.  

NYTimes.com gets a revamped video player

Video is likely to play a pivotal part in the New York Times’ transition from a traditional print-based business into a modern, multi-platform publication. The NYT’s bigger focus on video gears up to position itself as a broader media content provider. With the new video product, viewers can thoroughly engage with videos, explore vast archives and perhaps discover content they were not expecting to find. Audience engagement is a new focus of modern journalism. Yet over the course of the half of 2012, digital advertising revenue still only accounts for a quarter of that print advertising revenue. The New York Times parent group saw revenues of $2.3 billion in 2011. Whether the video archives and channels will increase its online publication’s subscription is still open to questions.

Wall Street Journal rolls out video network powered by smartphone

The Journal’s online video effort until now focused on WSJ Live’s TV-news-style video segments with anchors and on-screen graphics. WorldStream complements that with simple, short video reports. Raju Narisetti, WSJ Digital Network’s Managing Editor said the thinking behind WorldStream is that audiences crave multimedia and have an appetite for instantaneous “raw” video, not just highly produced TV-like formats. And advertisers “are willing to pay premiums” to reach that audience via video ads.

Spanish newspaper expert Juan Señor was recently interviewed by The Economist’s Intelligent Life magazine about the free versus paid battle, which is often read in the West through the prism of Rupert Murdoch’s Times of London, which was put behind a paywall in 2010 but is still losing money, and Alan Rusbridger’s Guardian, which remains free on the web but is haemorrhaging money. Señor criticised both Murdoch and Rusbridger:

There are Talibans on each side and that’s what is hurting the industry. Both extremes are wrong because they do not make money – The Times with its paywall and The Guardian being free. The truth is somewhere in the middle.

Up until recently, we had very few news groups exploring that middle, and the primary example, the Financial Times, many in the newspaper industry felt was a unique case because the FT deals in time-sensitive business information, not to mention the fact that the subscription price is often written-off by business people as an expense. With the New York Times following the FT in setting up a metered paywall last year, we now have more examples. A metered paywall allows casual readers to read a number of stories a month before being asked to pay. A metered paywall, as opposed to the fortress paywall around the Times of London, doesn’t cut off a site from the open web, from search engines and social sharing. Proponents of metered paywalls say that the strategy allows sites to continue to attract large enough audiences to make them attractive to advertisers while also asking loyal readers to pay for access to a wider range of the publication’s digital content.

Analyst Ken Doctor looked at some of these new, more sophisticated paid content models in his most recent Newsonomics post. The New York Times has recently struck a deal with the tablet content app Flipboard. Flipboard takes websites and re-formats them in a visually stunning style, and users can add sections to the Flipboard app that highlight content their friends are sharing on Twitter and Facebook. The New York Times struck a deal with Flipboard to allow paid subscribers to sign in and see Times’ content “via the Flipboard experience”, Doctor said.

Meanwhile, the Wall Street Journal launched another strategy, allowing users to pay either 99 cents US a month for 15-20 articles using the Flipboard competitor Pulse in a package call the WSJ Water Cooler, or US $3.99  for either tech or political packages or some 30 articles a day.

As Doctor says:

The deals seemed out of the blue, but both represent a maturation in digital circulation thinking. We’re moving beyond Paywalls 1.0, to a more nuanced world of digital circulation. … These strategies are a logical extension of digital circulation. It’s a recognition that the relationship between a publisher and a reader, while paramount, can be fulfilled on sites or apps other than a publisher’s.

Furthermore, these deals show that in 2012, the only metric that really matters is money. We can talk about unique users, returns versus new visitors, time on site or the number of followers on Facebook or Twitter, but at the end of the day, you have to capture some value, some money, from those digital audiences.

Dmitry Shevelenko, head of monetization for Pulse, also nails it when he says:

Both [ad and circulation] revenue models are critical to the future sustainability of news, but both are in desperate need of innovation and simplification.

It’s not “free” versus “paid”, but rather a mix of advertising, circulation and other revenue models that deliver a number of revenue streams to sustain your journalism. We’ll be looking at different revenue models in the July edition of the Digital Briefing and how to get the mix right.