Everyone is talking about the imminent end of the newspaper industry and the prominent rise of social media (social networking, social bookmarking, etc.), but in reality, both publication sites and social media platforms face the same dilemma: getting people to pay for content they are used to getting for free.
A lot of the burden has recently been placed on Twitter’s back to find a successful revenue model for a social media platform (that is, other than getting bought by Google, Yahoo, Microsoft, News Corporation, or eBay), but previous media darlings YouTube, Delicious, Facebook, MySpace, and StumbleUpon still face the issue of finding a sustainable cash flow – the urgency being relinquished solely by the large pocketbooks of the buyers.
Why then are social media platforms seen as the future and newspapers as relics of the past?
Is it because social media relies largely on user generated content, an abundant, inexpensive resource, while newspapers rely on expensive wire reports, beat reporters, and investigative journalists?
A quick check of Digg shows over 77,000 submitted entries from the nytimes.com. Delicious has over 188,000. Backtweets.com cuts off at 500 links, but the 500th link was from 1 day ago (i.e. people tweet about articles on nytimes.com over 500 times per day).
Clearly, social media platforms owe much of their success to publication sites (newspaper, blog, or otherwise). And while social media platforms may be better at manipulating available content, they are no better at making money.
Facebook is considering an IPO to raise money, largely to offset high bandwidth costs while the company looks for the right recipe to turn a profit. YouTube is burning through cash. Twitter is rumored to be considering selling to Google. MySpace turned to Citi Bank.
All have created successful brands, but not one has established consistent profit margins (although LinkedIn has found some success by offering a paid service). For the most part, social media platforms, like newspapers, are merely treading water until the money runs out.
Hopefully, Facebook is not waiting on Twitter to learn how to generate revenue or vice versa, and hopefully, the newspapers recognize that they should be a part of this discussion. Likely, the solution is going to take more than one body at the table.
Sadly, I have seen more innovative solutions from bloggers bloviating than from any social media platform or large publisher.
In my opinion, Google has already unlocked the model: cater advertising to the individual and the individual’s intent. Newspapers and social media platforms now need to take the next step and adapt the model to their respective services.
What if the New York Times gave a free subscription to every user who registered his address and filled out personal preferences online? The registration would link a user’s physical address with an account on nytimes.com.
The New York Times would now be armed with a slew of new readers, preferences of those readers, and data on how those users behave online (including which ads they clicked on) to attract advertisers.
In turn for users signing up on nytimes.com, the New York Times should not only provide a free newspaper but should also serve less ads online and incorporate less inserts in their daily paper. This can be accomplished by providing advertisers with better targeting (including targeting by specific section, article, and keywords within articles on nytimes.com) and more information on the demographics of its customers.
In this scenario, a company like StubHub could advertise New York Yankees tickets to men 34-55, earning over $60k in New York City, in the Sports Section, and on articles featuring A-Rod in both the print and online version of the New York Times.
There is a ton of logistics involved to turn this concept – or countless others like it (e.g. Mark Cuban’s concept of sports leagues subsidizing beat writers) – into reality, but it needs to start happening soon. Investors are beginning to hold back, and social media platforms and newspapers alike need to begin making changes while they still have the money to implement them.
Thoughts on how social media platforms and newspapers can generate revenue in the new economy?