Monday, October 29, 2012

New York Times–a look at their business model

Many of you know that I work with media owners as a consultant to help them navigate their way around the new mobile and social environment. As such, I like to keep up to date with key insights and information which is why I enjoy reading the Monday Note. Today’s Monday Note article about the New York Times was particularly pertinent and reiterated to me a few key points.

  • Advertising revenues are dropping. It’s a case of ever-diminishing returns – whether that’s print or digital. For the NY Times, ad revenues are down –9% across the board, print is down –11% and digital ad revenue is down by –2.2% (for the second quarter in a row).
  • Costs are not decreasing. Increased people costs coupled with increased cost of printing
  • Circulation is up - hurrah – by 7% on last year. This is mainly due to the rise in digital subscribers – double hurrah! This sounds like good news, doesn’t it? Well, unfortunately not. Circulation figures do not offset the the loss in advertising revenues. Jim Follo, CFO, says on their business model ‘When advertising revenue goes down, 90% of the decrease translates into a margin loss, but circulation revenue gains generate additional costs’. Oh dear.

I don’t know if at some point those figures change and the circulation model does eventually offset the advertising losses. The article suggests that the paywall strategy is a work in progress and that growth abroad, particularly in China, may yield results.

I wonder if we’re not being brave enough in our thinking. I wonder if it’s time to reinvent advertising altogether. Mobile advertising is huge and growing. Yes, we know that, but since there is limited screen real estate. That means there’s a limit to how many ads can be served and the old metrics just don’t wash and actually, the formats and metrics feel a bit tired. And I have seen nothing around measuring the serendipity of advertising – i.e. the ad that wasn’t targeted for you but was relevant in that moment as you needed to buy someone a gift or had a very specific, unexpected need that wouldn’t fit your big data profile.

Equally, I’m hearing anecdotally, that young people are tuning ads out and actively ignoring them. This begs the question of how are they going to find out about new brands (for the young in the UK are hugely brand savvy), new trends, new music, new whatever if they’re limited to their social streams? And what does that mean for marketing in general? Does advertising still work anyway? And in a perfect world, what would advertising and marketing look like in say, 2030? We are lucky to be living in an age that can invent its own future. So why isn’t advertising being reinvented?

Will it be down to context, location and big data? AR, QR, rich media formats, is that enough? Can you even remember an advert you saw in the last day, week, month? Will discovery of new stuff be reliant on a few key trendsetters in our circles being given ‘perks’ and freebies via the likes of PeerIndex, Klout and its ilk and then they talk about those things in their social stream (admittedly early days for these services but you can see where they’re going)? Are innovations like kiip, qriously and LoopMe enough? If we are questioning the future of newspapers and media in general, shouldn’t we also be questioning the future of advertising too?

References and resources:

The Monday Note: The New York Times Shifting Model

LoopMe Launch

Mobile Marketing Magazine Issue 11. Off Deck (last page): Helen Keegan calls for mobile advertising to reinvent itself

Newspaper Extinction Timeline (PDF). This shows the death of newspapers in their current format by country. It’s a sobering infographic

Newspaper Death Watch blog