Google To Newspapers: Experiment, Experiment, Experiment

Predictions

from the there's-money-to-be-made dept

The Google Public Policy Blog recently posted a summary of a speech by Chief Economist Hal Varian on newspaper economics. Alongside the we-are-not-your-enemy message that Google is hoping newspapers will someday listen to, it contains useful insights on the challenge of succeeding as an established print publication in the digital world. Varian suggests a few potential courses of action, but the real value of the piece is that it highlights the obstacles in a way that can be tackled by experienced insiders—especially marketers and salespeople, which newspapers employ in abundance but often fail to set free on experimental strategies.

One of the first things Varian establishes is the volume and value of online news readers, and then he looks at the difficulties of turning that value into revenue. The numbers may be discouraging for newspapers, but they could also become the basis of several important short- and long-term goals in an online strategy:

“Visitors to online newspaper sites don’t spend a lot of time there. The average amount of time looking at online news is about 70 seconds a day, while the average amount of time spent reading the physical newspaper is about 25 minutes a day. Not surprisingly, advertisers are willing to pay more for their share of readers’ attention during that 25 minutes of offline reading than during the 70 seconds of online reading. So even though online advertising has grown rapidly in the last five years, it appears that somewhat less than 5% of newspapers’ ad revenue comes from their internet editions, according to the most recent Newspaper Association of America data.

There’s a reason for the relatively short time readers spend on online news: a disproportionate amount of online news reading occurs during working hours. The good news is that newspapers can now reach readers at work, which was difficult prior to the internet. The bad news is that readers don’t have a lot of time to devote to news when they are supposed to be working. Online news reading is predominately a labor time activity while offline news reading is primarily a leisure time activity.”

Varian talks about the need to increase leisure involvement with online news, and in the full speech, he lists ways this might be done: leveraging new technologies like smartphones and tablets, developing more engaging formats for journalism (like Google Living Stories, which recently went open source), and creating multimedia experiences.

These are all important ideas, but to some extent, they miss an opportunity by focusing on ways to get people reading at home instead of work: namely, don’t at-work readers have value too?

For a long time, newspapers have used “business purchasing influence” as a prominent reader statistic in media kits. But we now live in a world where business purchasing influence is a much more distributed thing, hardly limited to managers and IT folk: employees at every level in every field make use of online services to expedite their work. Web services subvert the top-down model of corporate IT, allowing workers to seek out the tools that work best for them. These services usually have freemium models, with prices that suit small departmental budgets, and since there’s no software installation there’s no need to involve IT staff.

Think web lockers (plenty of companies still have laughably low email attachment limits). Think Flash-based presentation tools (graphics departments hate PowerPoint). These are bottom-up business services: a few employees get free accounts, a few more get on board, and before you know it a whole department is more than happy to pay a monthly fee for such a useful tool. These are the companies that want to reach people at work, during those 70 seconds they spend reading a news story while wondering how to transfer a 50-megabyte PDF.

There are some other excellent parts of Varian’s post, including a look at the goldmine vertical markets which have traditionally sustained newspapers: automotive, travel, home & garden and the like (he oddly fails to mention real estate, which is a biggie). These are the same verticals that sustain Google’s search advertising—the problem is that the end market is now specialty sites, not news publications. Though Varian doesn’t discuss the possibilities, this is an area where newspapers still have a chance: they should be leveraging their community respect while partnering with specialty purchase sites through advertising and affiliate programs, ensuring that they continue to be an important link in the chain. TechCrunch recently reported on a Forrester Research study that estimates that web-influenced offline sales in the U.S. (purchases where the consumer made their decision online then went to a retail store) are worth nearly a trillion dollars, and news websites should absolutely be a part of that.

It’s well worth reading Varian’s post in full, but in the end, his core piece of advice is what counts:

“In my view, the best thing that newspapers can do now is experiment, experiment, experiment. There are huge cost savings associated with online news. Roughly 50% of the cost of producing a physical newspaper is in printing and distribution, with only about 15% of total costs being editorial. Newspapers could save a lot of money if the primary access to news was via the internet.”

That really is the core of it. Newspapers must experiment with new ways to report the news, new ways to engage their readers and new ways to get advertisers on board, while embracing the fact that their readers are switching to a medium that costs them less. There are over 70-million Americans reading news online—if newspapers can’t turn those eyeballs into money, someone else will.

Filed Under: experiment, google, hal varian, newspapers
Companies: google