The Second Disruption of News
2 Apr, 2015
If there’s one thing that people love to blame news publishers for, and that news publishers can’t help getting defensive about, it is that the industry globally and almost without exception, missed the migration of classified revenue from print to digital.
That miss compromised the viability of print publishing, which then led to interminable rounds of cost-cutting and strategic compromises, a mad pursuit for digital advertising dollars, and today to the eventual jettisoning of news publishing businesses from major media conglomerates as they separate “GoodCo” from “BadCo”.
Most publishers have come to grips with that situation, and are now focussed on bringing their print business to a soft landing. The problem however is that even as they grapple with this effort, they are about to step off the ledge once more — their business is getting disrupted all over again.
This time the shift isn’t from print to digital. It’s from desktop to mobile. But ironically, the reasons for this migration are strikingly similar to the ones that led to the initial disruption of classified revenue. It always starts with consumers’ reading habits. Just as print readership has declined steadily (and is continuing to), we are also now starting to see more and more people moving towards mobile devices for news consumption. Desktop replaced print mostly because the news was more up-to-date. That’s also why mobile is replacing desktop — notifications mean that news is now instantaneous. Rather than waiting till your lunch break to check your favourite news site, your phone now informs you the instant a big story breaks. And in the near future, your watch will do this for you too.
On the heels of reader migration is the flow of revenue. On desktops the publishers got in early and were able to establish a beachhead. In Australia for example, the top 5 publishers accounted for the majority of online display advertising even just 5 years ago. But on mobile publishers are already well behind the likes of Google and Facebook. These companies have products that are perfectly adapted for mobile consumption, and with their dominance of mobile usage comes the domination of mobile advertising. Estimates from the US suggest that total mobile display advertising share excluding big platforms like Google and Facebook is a mere 25%.
And then there are the inherent challenges of the platform itself. Just as column-centimetre prices were obliterated by desktop MRECS (medium-rectangle ads) so too are “homepage-takeovers” blown out of the water by targeted / retargeted / cost-per-click campaigns enabled by the big networks on mobile devices. When you also consider that mobile screens are smaller, the pages per user are fewer, and that the attention span is shorter, it is small wonder that mobile advertising offers at best 10–20% of the revenue per user that desktop advertising can.
So. Will publishers see this second tsunami for what it is, and learn from their previous experience to increase their chances of survival? Well, there is reason to hope that they will. This hope lies principally in the fact that more than half the industry has introduced paywalls and online subscription revenue in the last 3 years. While the limitations and the challenges of paywalls are many, the fact that publishers have at long last pursued a second revenue stream — and one that can be adapted well to mobile devices — is profoundly promising.
It is well understood that on mobile devices there is a higher willingness-to-pay. There is also lower friction in purchasing (because of the payment mechanisms built in by Apple and Google). And products (i.e., apps) are more differentiated than desktop news sites are. All of which suggests that mobile consumer revenue could well be the next frontier of digital revenue growth for publishers.
But there is also hesitation, and that hesitation could be deadly. Most publishers today are trapped between their advertising and their consumer revenue plays. The first would have them favour popular content, and try to hold on to the desktop audience and advertising revenue that is now under siege from new players like Buzzfeed. The second would have them favour more newsworthy, high-brow content that costs more to produce, attracts fewer eyeballs, but is exactly the sort of content that readers are likely to want to pay for.
Will publishers remain trapped in this dilemma and unable to cope with the second disruption of their business? Or will they find a way to adapt and emerge as successful, viable, profitable mobile news publishing businesses? Time will tell. But one publisher at least has made an impressive foray into the future. The Economist Espresso app is an outstanding example of mobile innovation, and at $3 per month, presents a compelling vision of what a truly great paid mobile news service can look like. And so far 600,000 people agree.