theaustralian.com.au
Alan Kohler says journalism is far from dead but faces serious challenges in order to survive into the future.
Eureka Report was sold again this morning.
Three years and nine months after it was sold to News Corporation along withBusiness Spectator, the investment newsletter has a new home inside the listed financial services group chaired by Paul Clitheroe, AWI.
Meanwhile Business Spectator is in the process of being fully integrated into The Australian, ending its separate existence.
No regrets: we did well out of the sale in 2012, AWI is a well-run, ethical company and Business Spectator has been an important part of The Australian’s success in the business media category over the past few years, as intended.
But these events, along with last week’s announcement of more redundancies at Fairfax, inevitably prompt some reflections about the changes in the media landscape since we launched Eureka Report 10 years ago and Business Spectator eight years ago.
In 2005, social media was in its infancy. News Corporation bought MySpace, which was then bigger and more successful than the one-year old Facebook. In late 2007, when Business Spectator began, Microsoft bought 1.6 per cent of Facebook for a valuation of $US15 billion. It’s now worth $US318bn.
Programmatic trading of digital advertising did not exist at all then. Now, according to Stuart Simson, chairman of Switch Digital, it represents more than 50 per cent of all online advertising, on its way to 100 per cent.
This is where computers buy and sell online display ads on exchanges using sophisticated algorithms.
And increasingly it’s being done in real time — that is, in the 0.3 seconds it takes for an ad to be loaded on someone’s computer or smartphone, it is auctioned to the highest bidder, with the price determined by the value of the person who is about to view it.
The advent of programmatic ad exchanges is the fourth successive media convulsion within the digital revolution that began in the 1990s. The first was portals like Yahoo! and Alta Vista, then came pure search as Google carried all before it, then social media with Facebook and Twitter, followed by Instagram, Pinterest and a host of others and then programmatic ad exchanges, which really got going with the acquisition of the DoubleClick ad exchange by Google in 2008.
And even since we sold our business to News in 2012, the changes in media and advertising have continued to accelerate.
When Business Spectator started as a free site in 2007, the ads were sold in the time-honoured way for all media: partnerships and campaigns were signed with big advertisers, who got a guaranteed amount and style of ad inventory and who handed over a fat cheque directly to us, and any leftover inventory was sold as “remnant”.
We were averaging more than $50 per thousand page impressions (CPM) in those early days, which meant that if we could get 200,000 users to click on two or three stories a day we’d make a profit.
If an individual journalist could get about 8000 clicks per day, he or she could justify a salary of $100,000 from direct revenue against the stories.
The basic, no frills CPM rate for a digital ad is now $2 (per thousand page impressions) and big partnerships are almost dead. Even major national advertisers are moving to the ad exchanges for their campaigns.
At that rate a publisher needs 5 billion page impressions to make $10 million; a journalist needs 200,000 clicks per day to pay for a salary of $100,000. You might get that if you luck on a story about a kitten being rescued from a drain, or you’re the one assigned to the Brussels bombing, or your yarn gets picked up by Buzzfeed and goes global, but for everyday journalism in Australia, it’s simply impossible.
That’s fundamentally why newsrooms are shrinking. I wrote last week that the market will dictate the size of newsrooms — well, in fact it is actually becoming a market exactly like the stock exchange (which is also being taken over by programmatic trading, by the way) and advertising has become commoditised.
That’s why Business Spectator, The Australian and the Fairfax websites are all now behind paywalls: in the absence of enough advertising revenue to pay the costs of the business, consumers have to be asked to pay directly.
And now the fifth media revolution is upon us.
It’s all about data, and it goes hand-in-hand with real time trading of ads.
The more publishers and media agencies, including the ad exchanges, know about their individual readers — what they read, and more importantly what they buy — the more they can charge for the ads.
To some extent the publishers are a kick behind play because Facebook knows everything each one of its 1.6 billion active users, and Google knows a bit less about just about everyone in the world.
What’s more, Facebook and Google don’t have to pay for their content — it’s provided by users and/or everyone else.
Publishers are working hard to readjust their business models and keep up with these continuous convulsions and these new, enormously rich competitors and they’re trying, with some success, to get readers to pay them directly, but it’s tough.
For example, appendix 8 of Fairfax’s recent interim results presentation showed that digital display advertising revenue declined for the past two years and that digital subscriptions provided $18m, or only about 10 per cent of total digital revenue.
Journalism is far from dead, in fact people are reading more than ever, and a lot of that reading is still serious and long — not just kittens in drains.
But a new business model needs to emerge from the dust, and at its heart, as with all businesses, the consumers of the product will have to somehow pay enough for the producers — in this case the journalists — to service a mortgage and raise a family.
Otherwise the producers will have to do something else, and the product won’t exist.
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