I wrote this on Digital Publishing for CNBC-TV18
About five years ago, if you had asked anyone in the media to look into the crystal ball and predict the future of news, the answer would have been simple. Digital media companies such as Vice, Buzzfeed, Mic, Huff Post, would have been named as those who would lead the upsurge of digital news, while the traditional players – New York Times, Washington Post and the rest would have been slated to be victims of the power of the internet to upend more conventional business models. Yet, five years later what you see is that the traditional players have folded the power of digital into their core business operations and building businesses around the core journalism premise of subscription, while the upstart digital challengers are throwing in the towel, because they cannot make ends meet. What does this portend for the future of news on digital, not just in the west, but in India too?
At the core of the problem facing digital companies – not just digital news companies – is the issue of revenue, or the lack of it. They are not making as much money as they are spending. And, while that could be a problem that faces any new company that starts up, there is at least some revenue light at the end of the tunnel. With digital publishers, as with most digital companies, the issue is slightly different. They have spent all their time and effort on acquiring customers who would consume their wares, without figuring out if the customer is even willing to pay for the wares. This lack of revenue is tied into the way digital publishers earn revenue in a digital world, what is called CPC or cost per click – every time the reader of news clicked on an ad, the publisher would get paid. That model did not work, primarily because most internet users use adblockers, and seldom get to see the ad. It is estimated that in the core American market, almost 80% of all internet users use at least one ad blocker. If you don’t get to see the ad, you are not likely to click on it, and the publisher does not get paid.
The second major problem is the role of the internet behemoth Facebook. Many publishers invested money in their operations, hoping that the giant social networking site would be able to drive some of its members towards their operations. Facebook had promised smaller, newer publishers the pot of gold at the end of the rainbow, if they signed on, and promised that Facebook publishing was the brand the new shiny toy, which would over come the economies of scale, and brand reputation, built up by older traditional publishers, and make the newcomers into internet giants. However, as Facebook got hit with the fake news scam – fake publishers putting out fake news , via Facebook, to attract eyeballs and make revenue – it tweaked its algorithms. That hurt digital publishers using Facebook as a key source of traffic and many began shutting down.
The third problem is that of greed. Seduced by the promise of both local and global audiences who would flock to digital properties, consume content and ads, business plans began banking on gazllions of internet users who will consume their content. It was believed that corporates would pay money to advertise to reach the gazllions of users. Not only that, they spent huge sums of money to create more content in many more areas, rather than spend money on consolidating and retaining the audience and converting them to subscribers. There was more interest in creating valuation for the digital property, than creating value using the digital property. Also the promise of great valuation, and great ad revenues got a plethora of new publishing sites to set up shop on the internet, chasing the same audiences, and a slice of the same advertising pie – leading to lower revenues all around. And, anything that Is a bubble is going to burst, and it did.
So, is the tryst with digital publishing over? The answer is no. But the discipline that real world businesses have to follow – namely making a profit sooner rather than later – will now apply to digital publishing as well. Those companies that have said ‘we do only one set of things, and we do it well, and people will pay us to consume the quality of our content’ – are most likely going to survive. Those who say ‘we are all things to all people, and advertisers will pay us to reach customers, because customers won’t pay’ are likely to die. A business model cannot just rely on giving away content to build a business. Sooner or later, you have to ask customers to pay – and the question arises is the content compelling enough, and useful enough for the customer to subscribe.
The Market is brutal. It penalises waste and inefficiency. And, that is what the latest round of mini implosions in the digital publishing world have shown us. A business model for publishing has to be built on highly probable revenue streams, not the distant probability of a consumer clicking on a random advertisement that is served, based on which the publisher gets paid. Those who manage to adapt to this will survive, the rest will be swept away by the market.