Giving away news for free is not sustainable when the advertising return is minimal

THE DEMISE of online news aggregator NewsWhip shows it’s not just print media that is struggling in the digital age.

NewsWhip.ie went live last November but site owner Paul Quigley says NewsWhip is focusing its pennies and energies on a new project to be launched in September with new business partner Andrew Mullany of eazydeals.ie

“The new site will be a very different creature,” Quigley says. “Rather than offering news stories chosen and created by us, we want to change how people find their news online by directing them to stories via links.”

The fate of NewsWhip proves that giving away news free is not sustainable when the advertising return is minimal.

“If you have a sufficiently large audience or have a distinct niche that is global, it can be financially viable to give away news for free, as the website Huffington Post has proved,” Quigley adds.

“But the scale of Huffpo is unique. It’s very difficult for online publishers because online advertising is very underpriced. Hopefully we have learnt more about the market by working on it and can try to change direction based on what we have learnt.”

A new report from Columbia University’s school of journalism on the state of digital journalism notes: “The economic reality is that digital audiences often far outnumber those for broadcast or print news media but online ad revenue is still only a fraction of what’s earned in ‘old world’ news media.

“One reason is the difficulty sites have keeping readers’ attention. The most loyal users typically make up a small part of the audience but look at the most pages per visit. Some news organisations are retooling their approach to derive more revenue from those users.

“Without having to make the steep investment that used to be required to launch a media business, low-cost local or topical sites have found it easier to build audiences. Legacy news producers face a trickier challenge: to cut costs and boost online revenue while trying to protect traditional advertising sources.”

Broadly speaking, the Columbia diagnosis is that the media companies that successfully make the transition to the digital world are developing new businesses and twists on old ones.

These include selling marketing services to advertisers and broadening their sales beyond their own sites.

The academics argue that media companies should redefine the relationship between audience and advertising.

They have spent a great deal of time and resources building masses of lightly engaged readers, and the industry has turned online ads into low-value “direct response” advertising similar to junk mail.

Bill Grueskin, one of the report authors, believes that publishers can build economic success by creating high-value less- commoditised content designed for digital media. “News and marketing companies should develop alternatives to the impression-based pricing system,” argues Grueskin. “Small publishers have been successful selling ads by the week or month rather than by volume.

“Many large advertisers and ad agencies will insist on paying by the impression but news organisations need to build upon their current pricing schemes by combining digital ads more effectively with broadcast or print, social-media outreach and other methods.”

Examples of the pressures facing media companies is illustrated by McClatchy Co, the third-largest publishing firm in the US, which saw the number of unique visitors to its websites grow by 17 per cent in 2010. However, digital revenue only grew by 2 per cent.

Meanwhile, the New York Timeshas more than 30 million online readers and weekday circulation of 900,000 copies. Yet the print edition still accounts for more than 80 per cent of revenue.

Jeff Cohen, editor of the Houston Chronicle, says: "What am I today? I'm an aggregator of eyeballs. We're doing around 79 million page views a month, almost a billion in a year." Despite this, the Chronicle's news staff has halved in the last five years.

Columbia Journalism School predicts a world of more and smaller news organisations, the most successful of which will leverage their staffs and audience by using aggregation and partnerships with audiences to provide content of genuine value.

It warns: “Any news site that adopts a pay scheme now should have very limited expectations for its success, at least on the web. In the case of a print publication, requiring digital readers to pay may help to slow circulation losses, but that is hardly a long- term solution.

“A pay plan merged with an ambitious strategy to improve users’ experience on mobile platforms has a much better chance to succeed.”