Social News: The Future of the Publication Industry
Much has been written, and surely much more has been discussed about how to “save newspapers.” Recommendations range from the recent (rehashed) push for pay per article to the innovative solutions posed by Mark Cuban (recruiting the NBA to provide a stipend for local sports writers) and others. But, few if any have addressed the issue from the perspective of the folks who will actually be supplying the newspaper’s revenue. Last Monday the Huffington Post did just that. By introducing Social News using Facebook Connect, the Huffington Post addressed both the needs of the reader and (potentially) the online marketer in one fell swoop.
Clearly, newspapers need to evolve. Too many journalists have been laid off, too many newspapers shut down, and too few people have retained their subscriptions not to recognize that the industry needs to change. Newspapers no longer can rely on a subscription based model. Customers simply do not want to pay for a daily paper, print or online, and efforts to generate revenue from online advertising have shown mixed results. At the current pace, The Oregonian could be gone before today’s infants reach the job market.
Newspapers need to follow the Huffington Post’s lead and establish a partnership with Facebook.
A consortium of newspapers should look to partner with Facebook and integrate a Facebook Connect login for online content. Newspapers such as the Washington Post have already implemented Facebook Connect to simplify the account signup process, but most newspapers are slow to embrace the social aspects of Facebook Connect (what’s new?). Facebook Connect would allow the newspapers to incorporate Facebook features (e.g. sharing stories on Facebook, finding friends, etc.), similar to what the Huffington Post is doing now.
However, the true potential of the Newspaper-Facebook partnership lies in the capability to build a large ad network. Google AdSense generates roughly $6.7 billion per year in revenue based on Google’s 2008 Annual Report. A potential Newspaper-Facebook network could be much bigger, and newspapers should get a large chunk of that pie.
A Facebook ad network also has a clear advantage over Google AdSense or other content ad networks: advertisers can accurately target specific demographics (age, gender, location, interests). For example, advertisers for Brandon Roy’s new shoe could target 12-18 year olds in Portland who like basketball. Google’s AdSense currently falls far short of this pinpoint accuracy (although the Google boys are trying with Google Profiles).
Newspapers have a distinct advantage in negotiating with Facebook – newspapers provide a ton of content. Newspapers release thousands of articles each day. More content means more views, and more views means more clicks. More clicks means more money. Furthermore, users generally disregard Facebook ads but not newspaper ads. Newsweek listed clickthrough rates (CTR) for Facebook ads at an abysmal 0.04% while Adtech estimates the average content network, which is largely made up of online publications, has a CTR of 0.19% – essentially a five-fold increase in clickthrough rate.
Combine the substantial increase in eyeballs with the uptick in clickthrough rates, and Facebook is as much inclined to this deal as are the newspapers. Facebook has yet to establish a viable revenue stream. Therefore, newspapers should be able to negotiate a higher percentage of ad revenue than current AdSense customers who get roughly 78%.
A Newspaper-Facebook partnership could generate billions of dollars for both parties, and the only newspaper that has taken advantage of Facebook Connect is a small, albeit growing, player in the industry. Where is the New York Times? Why is Rupert Murdoch in a rush to charge readers when he could magnify his newspapers’ reach and turn a hefty profit by incorporating a Facebook ad network (at the very least, figure out a way to integrate your own MySpace ad network)?
Why am I still surprised the established newspapers have their feet stuck in concrete and their heads buried in the sand?
This is the second in a series where Anvil focuses on the future of news. Please read last week’s article on What the Future Newspaper Will Look Like and join the discussion on Twitter by adding the #futureofnews hashtag to your update.