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What is Killing Newspapers? Online Media Business Model and Customer Intelligence

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Jun 3 2010

By now we are all familiar with the online media business model. It’s all about hits – well sort of. First, we have to remember that media companies have two groups of customers: 

  1. Those who consume their content.
  2. Those who purchase rights to advertise alongside their content.

When you purchase advertising in print newspapers, the rate card will often include demographics and circulation data.  This provides the marketer with information about who their ads are targeting.  This is far from perfect. The advertiser cannot select to target say, only affluent subscribers, or those looking to purchase a car.

Successful online media companies know thy customer and thus can sell the ad space to them at a premium. For example, let’s says you are a car company and you have a choice; you can purchase 1 million random display ads for $10,000 or $10/CPM or you can buy 150,000 ads to those subscribers ranked on their likelihood to purchase a car in the next 6 months for $2,250 or $15/CPM. You are saving 75% and are likely to get 80-90% of the total number of clicks you would have received if you had purchased the million ads.

It is definably a win for the advertiser, but how about the media company?  Well, they can sell those 850,000 ads that were not sold to the car company to a travel agency or an online retailer for the$10/CPM. Thus, the premium charged to the car company increases profitability.

So where did the newspapers go wrong? Most newspapers don’t know the consumer of their content. In a rush to keep people visiting their websites many newspapers did not require registration.  Thus, the only thing they may know about the person visiting their site is their IP address.  In contrast, successful online media companies will do the following:

1.       Require registration for some free content.

2.       Use email marketing to increase traffic.

3.       Profile its fan base on demographics, lifestyle, and interests.

4.       Sell premium ad space to these subscribers.

5.       Offer premium content to subscribers to increase revenue.

If newspapers are going to survive they will need to apply these customer intelligence principles to online content and then print technology will become more advanced to the print media, as well.

 

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Jun 4 2010

Bill Connolly said:

Very insightful post here, most people (including myself) haven't considered the advertising impact on the newspaper industry as online organizations are able to more effectively target and measure their impact on consumers.

Another important issue surrounding the declining newspaper industry is the introduction and exponential growth of the blogosphere. Nearly everyone can be a 'journalist' now which has seriously undermined the traditional definition of the word. I don't necessarily think that is a bad thing, but it certainly has provided consumers with a ton of new forums through which to receive their news.

Jun 4 2010

Bill Connolly said:

I should, for the sake of disclosure purposes, mention that I also work for CSG Systems.

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