Tuesday, May 11, 2010

Retweet: Google and the newspaper

The June issue of The Atlantic features a long feature story, written by James Fallows, that talks about Google's genuine interest in working with newspapers to "save the news". Let me simply say that Fallows is one of our great writers, and even if he is coming to this subject a bit late -- the Hal Varian speeches which must have sparked the idea for this article occurred months ago, see this TNM post from January -- Fallows still does a fantastic job of piecing the story together and presenting it in a well-written and organized article. Here is a link to the entire piece: How to Save the News.
Fallows shows how Google has analyzed the decline of the newspaper and how they believe that the news, if not the newspaper, is essential to Google's success. Google is optimistic that the news business itself can survive this period of technological disruption. The article also recounts the decline of classified advertising, and how the newspaper, which has always profited from certain revenue streams, which supported things such as enterprise reporting, now finds itself getting hit from all sides.

I wanted to add a few thoughts about classified advertising, since it is a subject that is near and dear to me. As a former classified sales person with Hearst (L.A. Herald Examiner) and Classified Advertising Manager with several California newspapers, this is an area that has bothered me for some time. Fallows recounts how the rise of the Internet has allowed help-wanted, automotive and real estate ads to be stripped away.

Where I disagree with Fallows is that he lets newspaper executives and managers off the hook for the loss. Sure, one can not compete with free -- that is, Craig's List -- but why is it that newspapers now run four to eight page help-wanted sections on Sunday? and continue in vein to try and sustain classified ad revenue in the face of obstacles they surely know are too great to overcome?

The answer lies, as it often does, with a lack of understanding of the role of classified in the success of the newspaper, and the inability of newspaper executives to react to the loss of revenue.

What was the reaction? Didn't newspaper folk try and compete? Yes, the creation of such companies as Classified Ventures and the purchase and expansion of CareerBuilder were reactions by the newspaper industry. But were they really attempts to capture classified advertising, or were they simply attempts to save any sliver of revenue they could? I, obviously, would argue that the efforts put forth by the newspaper industry were a desperate attempt to save a few dollars, not honest attempts to save classifieds themselves.

The result has been further media fragmentation: classifieds are pulled away from the newspaper brands and now Craig's List is synonymous with classifieds. What publishers failed to understand was what could be gained by gathering free ads onto a web page -- traffic. The loss of classified has certainly cost the industry millions of dollars, but it is also losing it audience.

Today, newspapers are struggling to attract readers with such things as aggregated local news sections, mobile media apps, customization, etc. The interaction that classified advertising creates for a media outlet -- the two way communication between buyer and seller -- is lost to the Internet pure plays when newspapers insist on retaining that last dollar of profit. Now, increasingly, many newspapers continue to print small daily classified sections the way many printed daily stock market tables -- it remains part of the tradition.

Newspapers have always hated spinning out its sections and brands. While I was a classified manager I helped launch (along with my manager, Lee Beauregard) a weekly real estate tabloid in order to compete with the L.A. Times' massive Sunday section. Where we went wrong was to not spin it out completely and treat it like a separate product. A few years later the local real estate companies began publishing their own real estate products; and not long later the auto trader publications were doing the same.

Newspapers have been about resisting change and hanging onto the last dollar to be made. The industry will need companies like Google and Apple to push them into doing business differently.