Friday, July 15, 2011

The new fox in the hen house: using 'Digital First' as yet another excuse to cut costs at media companies

The fox has been let into the hen house and it is going to be pretty hard to get him out. The gurus of digital are coming into newspaper and magazine companies because there is money to be made, for them, but not necessarily for publishers.

That's a pretty damning statement above, isn't it? And one you wouldn't necessarily expect from a New Media website. But the sad fact remains that most efforts to go "digital first" revolve around schemes to cut costs, typically found in veteran newsrooms and editorial staffs, not in new ideas about how to drive revenue in digital products. That is why most new advisory boards are made up of "digital" people who have backgrounds not on the revenue side of things but on the editorial side.

The ideas – aggregation, "digital first", hyperlocal – are all well and good, but none really get at the issue that advertising is leaving the display pages at newspapers and magazines, shifting to search and other digital formats. Most newspaper companies that claim to be moving to digital first strategies, remain behind when it comes to creating original, unique digital mobile, tablet and web products. Instead, the shift is concentrated on how content is handled, and most importantly, who handles – mostly younger, less well paid writers and editors.

If content truly is the differentiator, then the media industry's inability to visualize a future for the creators of that content surely must be a sign of failure. Instead, content simply is reduced down to ones and zeros – all content being equal in the eyes of the media executives.

Meanwhile, having few new ideas concerning sales, sales staffs and structure, the new digital gurus are left to depend on ad networks and other third party solutions.

Few modern publishing executives are heard talking about going on sales calls with their ad staffs, better to sit in their offices talking to their advisors – who themselves have never gone on a sales call. In the trenches, the sales teams will tell you that it is impossible to sell multi-thousand dollar ad solutions to local businesses, and that the digital offerings of newspapers, in particular, are often far too complicated and do not produce the results they are looking for.

The problem of lost local advertising is not a new one for newspapers, and it did not arise because of the Internet – it predates the Internet by over a decade. As newspaper circulation levels and costs rose, ad rates rose with them. And as ad rates rose, retail (and to a less degree classified) sales teams began to see the number of prospects for display advertising decrease.

In the early eighties the biggest competitor for local advertising became companies like Advo, who could offer targeted advertising based on zip code to local merchants, often at a fraction of the cost of the metro newspaper, and often the local paper, as well. The sales process was complicated for the rep who needed to calculate CPMs, look at the distribution information, and pass along a quote to the customer. But from the advertisers perspective the rep handled the hard work while they simply approved the budget. Better still, negotiations tied price to distribution, rather than the rate card rate.

Newspapers struggled to compete as marriage mail grew. Newspapers, such as the one I worked at in the late eighties, added combination insert and mail programs to compete. But the process was difficult as reps had to learn a new way to sell, and often had to settle for a lower price point.

Auto and real estate shoppers came into many market simply because publishers feared that advertisers, looking for a cheaper buy, would stop buying their full run ad sections if they created speciality products. So new competitors filled the void, happy to take ads from customers who used to depend on their metro newspaper to drive traffic into their showrooms, or to their open houses.

(Some of these competitors have moved smoothly into new digital formats, or, as in the case of web competitors such as Zillow, moved smoothly into mobile and tablets – as seen above.)

Newspapers, and to a certain degree magazines, continue to get squeezed by the new media alternatives. But rather than choosing to compete in the new media marketplace, publishers have punted, choosing to adjust their cost structures rather than create new competitive ad products.

So when I hear "digital first" I cringe. As someone who has advocated web publishing, then mobile and tablet publishing, you might think my first instinct would be to applaud. But I know that some of the advocates for "digital first" are simply selling their wares. It is, in the end, the reason why most announcements of "digital first" initiatives are eventually followed by layoff announcements.