The Newspaper Original Sin: Keeping online units tethered to the mother ship

Alan Mutter started it. He said the newspapers "Original Sin" was not charging for online content from the beginning.

He was wrong, of course — many newspapers tried and failed at paid content online in the early days, and even the ones who stuck with it never generated enough revenue to make up for their declines in advertising revenue.

But Mutter’s "Original Sin" meme started a trend toward "Original Sin" guess work about just where and when newspapers went wrong with their online strategies.

Steve Buttry hits on one possible answer with his "Original Sin" post. His answer: The bundling of online ads with print ads.  Bundling devalued online ads and taught advertisers online could be viewed as an add-on, just something extra.

There’s merit to the assertion, but it misses why newspapers bundled ads in the first place.

Simply put, they couldn’t sell online advertising in the early days.

In most cases, publishers relied on their existing print sales staffs. 

That seemed logical, I suppose, but in an era when selling print advertising was more like order taking and less like selling, why would a fat-and-happy print sales rep go out and actually SELL a low-margin online banner?  That was too much like work.

Steve makes the point that bundling taught advertisers to see online as nothing but an add-on, but the flip side is that back in the day, local advertisers barely even knew online existed, let alone how it might benefit their businesses.

Publishers who needed to justify the salaries of their online staffs needed to ensure online operations contributed to the bottom line. The only way to do that was through bundling.

And bundling was easy. Advertisers who might not get online, at least understood that online audiences were growing agreed it made sense to put their ads online with an established local brand  at a low cost. Advertisers simply didn’t object to bundled pricing.

Besides bundling, publishers also tried hiring online-only sales reps. The problem, however, is they were rarely really online-only. They weren’t allowed to sell against the print reps, and had to consult with print reps on mutual clients, were encouraged to go out with print reps on "four-legged calls" and easily fell into thinking the only clients worth calling on where the ones already buying newspaper advertising.

Throughout the history of newspapers online, there has simply been a lot of thinking that there isn’t much different between the Web and print.

It’s understandable. The Web, especially in the early days, is a text-dominated medium. The natural response is to think editors could simply move print stories into pixels and be done with it. From the very beginning we called this "shovelware" and "the daily dump," but the practice has persisted.

If publishers thought the Web was no different for content, how could they possibly be expected to see online sales were different, too?

And this leads to my theory of the "Original Sin."

The Original Sin was? Failure to create separate business units for online.

And I’ll plead guilty to a share of this sin.

As director of new media in Ventura and VP of interactive in Bakersfield, I certainly had some grasp that online wasn’t print. I did push such innovations (at least for the time) as comments on stories, video, web-first publishing, locally focused home pages, user profiles/social networking. But looking back, I see now that I still had a lot of newspaper-think in my outlook.

In both Ventura and Bakersfield, I saw it as my job to figure out how to make enough money online to pay for the newsrooms as constructed at the time.

That seemed impossible without being tethered to the mother ship, mooching of established customers and existing sales, and hoping some day, some how, we could convert that bundled revenue into pure online revenue.

It wasn’t until late 2007 that a switch tripped in my head and I realized I needed to flip the expense/revenue picture upside down. Instead of thinking about how to generate more cash, I needed to figure out how to create a news operation that could exist profitably based on a reasonable expectation for local online revenue.

In a market where the newspaper newsroom might cost $10 million, I knew how to make $1 million online, or even $2 million, but I didn’t know — and still don’t — how to make $10 million.

So if I can make a million online, why do I need operate a $10 million newsroom, especially given the greater efficiencies of online publishing?

It was that realization that lead to planning The Batavian (not that The Batavian will ever make anything close to $1 million, just illustrating with round numbers).

Here’s what a separate online business unit would look like:

  • Minimally staffed on both the sales and content side.
  • Both staffs would operate in a building far away from the newspaper office.
  • No newspaper content would feed the web site, and the online staff wouldn’t consult or work with the newspaper staff on stories. There would be a total wall of separation.
  • There would also be a total wall of separation between sales staffs.
  • The separate business unit would be competitive with the newspaper, not complimentary.

It’s a little surprising to me that after all my study of Clayton Christensen and other thinkers on disruptive innovation  that I didn’t see more clearly sooner the imperative of a separate operation, but it is what we should have been doing.

The thing about this approach is that by starting small, starting with the lowest cost possible, in the disruptive innovation model, you have your best chance to grow a $10,000 business into a $10 million business.  In a disruptive world — which online is by its very nature — if you start out with a $10 million expectation you’re only going to end up making the kind of mistakes that eventually lead to failure.  By starting smaller, you can adjust more quickly to a turbulent environment.

So, if the "Original Sin" had’n’t been committed, if newspapers had created more totally separate business units, would newspapers be "saved" today?

I don’t know.

The strategy could have hastened their demise, but I think you can also make the case that by letting newspapers be newspapers, and keeping online far away, you would have had fewer readers dropping subscriptions in favor of free online content. Maybe. Maybe the online competitor would have been seen  by readers as just another media outlet, not a replacement for the newspaper.

It might not have saved newspapers, but it would have been the right thing to do, because it would have led to greater innovation. It also would have helped publishers retain a foothold in communities they served should the newspaper ever fail.

And it may not be too late for this approach, but newspapers are pretty hemmed in now with their existing newspaper.com operations — making too much money to put at risk, but not enough to make a difference in the current model.

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  • lectroidmarc

    Howard,

    Man you nailed the history so well. I think back to those days and realize that we haven’t really learned anything.

    Another side effect of combining the online and print sales was that it spawned a latent cynicism about the online product internal to the newspaper operations themselves.  When confronted with publicly stated facts like "the online operation is profitable" I’ve had more than a few non-online managers scoff and point out that it was only through "upsold" revenue "stolen" from classified or display advertising that the online operation was viable at all.  Obviously this made for a unique environment to operate in.

    But why do you suggest a completely walled off business unit?  I see the print side as a huge news resource, just not the ONLY resource as it’s been treated to date.

    What if back in the day the print side, with it’s $10 million newsroom, was just another partner providing news content to the online side?  The print operation could continue to produce a print product and the online staffers could produce an online product, but the online side could leverage at will — if they desired for that particular story — the work of the print side.  (By "leverage" I mean getting access to the stories when they were done, not through some quasi-workable "nightly dump", and using them to bolster uniquely online content.)

    It seems like now, with 20/20 hindsight that would have been a much more flexible model.

  • Howard Owens

    By commingling print content with the online operation, you give the newsroom some power over the web operations.  They don’t want their content used in certain ways, or they want it published at certain times, etc.  

    Newspapers were slow to embrace blogs not because the online side of the operations didn’t get it, but because the newsroom side hated blogs so much.  

    Without a complete and total break, you can’t take away the print editor’s ability to influence what happens with the online side.  The online side is now free to experiment more, at least within the limitations of their budget, and if they’re truly innovative people in the online business, they’ll be creative in working around budgetary constraints.

    I’ve also come to believe that the style of reporting and writing as practiced on the print side is not the best approach for online. 

  • vkern

    Howard, I’ve been on furcation so I am just now reading htis: You NAILED it! This is one solid analysis…….and like the other commenter said, paints a historical picture we tend to overlook……