Forget “value-added journalism” — Think, disruptive innovation

The new buzz phrase for entrepreneurial journalism (itself a buzz phrase) is "value-added journalism."

We see it expounded upon in this post by Kevin Anderson. Kevin is a really smart guy who has said nice things about me, but I’m going to disagree with the business proposition of "value-added journalism."

Let me introduce two other terms first:

  • Disruptive innovation — which is innovation that attacks a competitor or competitive landscape by offering a product that is just good enough to find a market, to get a job done for consumers, and is under valued by the competition.  Here’s a video of Clayton Christensen explaining that in terms of the invention of the steam engine and how initially, ship builders didn’t value it, until it was too late.
  • Sustaining innovation is the kind of change brought to a product or service by incumbent companies.  When newspapers started putting classifieds online and charging an up sell fee, that didn’t change the marketplace or fill an unmet need, but added a new level of service for existing customers.  

The idea of "value-add" is fundamentally a "sustaining innovation" mindset.

We see that mind set in this quote, which Kevin provides, from Alan Kohler:

It doesn’t matter whether it’s free or online, to survive it must do more than just report what readers can find out for themselves but don’t have the time.

He says, according to Kevin, that journalism must “explain what events mean, not just report them”.

Actually, there’s a great market, as I’ve found, for reporting events.

In a market where we compete directly with a local newspaper that maybe (being generous) has 7,000 subscribers*, we routinely get 5,000 local readers a day (and well more than 6,000 on a big news day) to our web site.  That’s pretty good, I think, for a three-year-old pull technology to achieve competing against an incumbent 100-year-old push technology.**

We’ve found 90 local advertisers who believe enough in what we’re doing to provide us with sustainable revenue and a chance to continue growing and we’re looking forward to a good and growing 2011.

But I don’t think there is anything "value-added" about what we do.

We’re serving a market that wasn’t served before, and that market is the one that asked the perpetually unanswered question in most markets, "What’s going on in my community right now?"

We don’t always answer it perfectly — we miss stuff some times, we’re late sometimes — but we answer it "good enough" when compared by consumers to the alternatives.

It’s true that some of our success can be attributed to "community engagement," which in Kevin’s post is identified as "value added," and that might be, but what I’ve really found is there is an audience for "get me news of my local community quick and make it easy for me to find what is new since my last visit to your site."

There isn’t a lot of demand to explain it to them.

Our mindset is fundamentally a disruptive innovation approach to news.

While there is a place even in our model for bigger packages, lengthier stories, time-consuming investigations, more in-depth features, it is not foundational to what we do.  It’s important to surprise and delight readers with unexpected quality (or what I hope is quality), but it is not a fundamental business strategy, not now, not on the web.

Journalists who want to go into "entrepreneurial journalism" set themselves up for failure if they’re thinking about "value-added."  To achieve the kind of value-add people like Alan Kohler promote means to add expense, or it means taking time away from doing what I call "quick-hit journalism" — post fast and post often about what’s available now.

The web is fundamentally a disruptive technology. It’s made publishing dirt cheap.  One of the key ingredients that AOL’s Patch has right when it comes to online news publishing is that the expense ratio vs. print is about 4 percent.

To get going with a successful online news start up, all you really need is a scanner, a camera and a copy of Word Press (though, I’d recommend Drupal).  I guarantee you, you will be able to build an audience and build a business.  Start telling people everything you can about what’s going on in their community right now, from why the fire truck just screamed down their street to what’s happening at the American Legion’s chicken BBQ, and you will grow an audience and be able to turn it into cash in your pocket. I promise.

* The competition has a circ, last I heard of 10,500 over three counties. The Batavian covers only one of those three counties, so we bound our competitive market in terms of that one county.

** If you’re not familiar with the terms of "push" vs. "pull," push means, essentially, delivery, where "pull" means the audience has to take the initiative to come to you.

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 operations — making too much money to put at risk, but not enough to make a difference in the current model. is a warning shot for all newspaper publishers

In writing about NewzJunky the other day, I think I buried the lede.

It’s only deep into the post that I get to the point that has trounced, both in audience and volume of advertising (I have no idea what the actual revenue is) the local newspaper site.

That’s no small feat. I don’t know of any comparable event in online media.

I’m not sure that point has sunk in for many people.

If any readers know about another local newspaper getting beat by a direct local competitor, I would like to know about it.

As Jack Lail points out in the comments to the previous post, this is more than a pay-vs.-free story. It’s much more than that.

  • It demonstrates what a one-man operation, or small-staff in a small market, can do. A small staff is more nimble and usually comprised of people with an ownership stake in the venture (talk about motivation!).
  • It shows that you don’t need a big news staff to win the local market online. Many journalists take too much comfort in the notion that, “we have a big staff, so we have an advantage.” Have you seen the news about layoffs recently — a big staff in the future is by no means guaranteed. The other side, of course, is that a small, nimble, hard working staff can beat a bigger, more institutional, bureaucratic staff.
  • It shows that traditional local advertisers will defect to viable local online competitors, and it shows there is a greater hunger for local advertisers to reach a local audience than many local sales staffs can admit. I’ve heard from many small publishers who say, “Our advertisers are not yet interested in online.” Bunk.
  • It shows that users will flock to a site where they can make their own local news contributions, and they value the contributions of other users.
  • It challenges traditional notions about design and usability — what matters is content, both in width (not necessarily depth, which is not the competitive advantage many editors assume it is) and frequency.
  • There are a lot of people in our communities who hate our guts — read some of the comments on the previous post … they will sound strangely familiar to people who have been in the business a while. Give those people an under-dog outlet to rally around, and they might just become the instigators of an inflection point.
  • It demonstrates perfectly how disruption works — delivering a product that is just good enough to take customers away from incumbent players, and that disruption can come in many forms.

While in the vs. race, the newspaper’s former pay wall may have been a huge help to NewzJunky winning the race (for now — the race, of course, is not over), but publishers should not take too much comfort in the fact that they offer their content for free. There is an element of the NewzJunky story that demonstrates that any is susceptible to disruptive competition.

On the other hand — this is just one event. Currently, I’m reading Fooled by Randomness. The lesson of that book is just about any outcome in inevitable. Warren Buffet, the guy who gets all of his trades right, is inevitable, given the millions of traders who have tried, and it is probably inevitable that at least one local start-up will beat an incumbent media leader.

Still, I’m not sure newspapers can afford to take too much comfort in the vagaries of randomness.

This is a much bigger story than just a couple of blog posts. Is the sort of thing the trade press should examine more fully. Let’s see if they do.

UPDATE: I stumbled across Quantcast months and months ago, and then lost the link and couldn’t remember the name of the site … thanks to a friend, I just found it again. Relevance here, some confirming evidence that is indeed trouncing  Again, NewzJunky’s audience is twice the size of the Daily Times. Amazing.

It doesn’t look like San Diego’s free classified strategy worked

I have yet to hear of a newspaper improving its revenue or audience growth by offering free classified ads.

The San Diego Union-Tribune tried it int 2005.

Now the U-T is further trimming staff.

“Not since the merger of the Union and Tribune over 15 years ago have we faced such wrenching changes,” he (CEO Gene Bell) wrote. “At the same time, never in our history have we faced revenue losses as dramatic as those of the last 12 months.”

Observation: The U-T offered free classifieds  and that did not stem the tide of revenue loses.

I’m not trying to draw a direct connection, just saying … it didn’t help.

The only time I’ve ever heard of an MSM newspaper offering free classifieds and using it to win market share was in Arkansas when Walter Hussman took the Democrat from second-tier player into only game in town.

There might be a very scary lesson about the inability of a market leader’s inability to use disruptive strategy to beat other disruptive players.

What worked for Hussman to beat a bigger paper, may not work for a market leader like the leading metro in town to beat Craigslist and other free-classified sites.

If that’s true, then sustaining innovations (which most newspapers have been pursuing in the recruitment ad space for a decade) may be the only way to go.

Just thinking out loud.

Video taxonomy new term: Video Illustration

I’m reading an interesting book right now called Glut: Mastering Information Through the Ages.

How we label and categorize things is important to how we understand our environment.

Nearly a year ago, Andy Dickinson did a post labeling three types of newspaper video: Disruptive, channel and multimedia. At the time, I suggested “attached video” was a better label than “disruptive,” being that disruption is a strategy not a category.

That post influenced a slide in my internal video training presentation. My three categories of video have been: Attached, story, and webcast.

Attached is that short video meant to embed on a story page. Story video is the full story, no text needed, and webcast is that sort of thing that usually has an anchor/host and covers more than one topic.

A couple of weeks ago, Victor DeRubeis left a comment on a post highlighting a couple of GateHouse Media videos.

Nice raw video, yes. But where’s the journalism? Where’s the editing? Where’s the context?

And somewhere, though I can’t find the comment now, somebody said of one of our videos that it was nothing more than a moving photo illustration.

That’s the comment that stuck in my head. It’s a V8-moment! The proper term is not “attached video.” It is a “video illustration.”

To me, these comments intended to be criticism are actually high praise. This is exactly what we’re after with quick-production, point-and-shoot video.

Story video may have its time and place, but unlike some, I don’t believe that is the sum and whole of what online video can or should be.

The point of quick-production, reporter-shot video should be to illustrate in a way that words alone cannot. Raw is good. Heavy editing is a waste of time. Context is a distraction. The point is not to capture the whole story. It is to illustrate a story.

That’s not to say that we’re doing all that well at that goal yet, but it’s still a style of newspaper video I believe in passionately. I believe we will learn. I believe we will get better. I’ve seen enough glimpses of how well this can work to believe that as quality and understanding (reporters developing the appropriate sense of when and how to use this type of video), it will prove a very useful tool both journalisticly and strategically.

UPDATE: Andy Dickinson does a nice job of responding to this post.  He clarifys, expands and explains what I’m trying to explain.