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Future of online, Part One: How did we get here?

Business Maverick

Business Maverick, Media

Future of online, Part One: How did we get here?

The global news media finds itself in a precarious position these days, and it isn't at all clear whether we will find a way to survive while still resembling the industry we're used to. But just how did we arrive at such a dangerous point in our existence?

Being a news-media executive in today’s world is not typically good for one’s mental health. The old world of print is heading towards Hades. Pundits’ time-frames of when those publications will reach the River Styx vary, but they all agree that it is inevitable. The very same pundits also agree that online news will completely take over, probably soon.

The problem, of course, is that the dying print publications are still making up an overwhelmingly large part of any big media company’s revenues, and profits (where applicable). Winner-designate, the online media, is still junior in every way and its revenue model is woefully inadequate. And with most of the estimates seeing the demise of the majority of print publications within five to 10 years, media houses are scrambling to come up with a workable online model.

Ask any executive at any big media house about what would happen to their corporation if their print publications closed tomorrow and their online offerings emerge as the bread-winners? Without exception, they will tell you it would mean curtains for the company. Make no mistake, with print fading at an ever-quickening pace, they are running out of time. There’s no more screamingly urgent task for media thinkers today.

How did we manage to get ourselves into such a tight spot? Were we all asleep for the last 15 or more years as the world changed? Yes. Yes we were.

The initial mistake was made in the early nineties. The following could be a summary of a meeting that could have happened in any publishing house in the world. Dramatis personae: the CEO, the publisher, the editor, the advertising sales head, and the CFO.

CEO: What’s with this new Enternet thingamajig that my friend Alex says we have to invest in? Who’s looking at that for us?

Editor: It’s some ex military project. Jane in the newsroom is doing us a piece; says it will keep working after a nuclear war, but it’s mostly students talking to one another about how fast their computers are.

Publisher: All the guys over at Media Corporation and Uspers say its a new medium for information. Maybe we should look into it.

CEO: Wait, you’re saying it’s a new medium? Like when TV first came along? Like that?

Publisher: It is bit like TV. All the information comes on the screen, which is like a TV. But it’s just words. Pictures take too long.

CEO: How about ads? Can you put ads in those words?

Publisher: Sure, I guess. Lots of ads have words.

CEO: Editor! I want us on this Enterweb thing right away! We’re not going to be the only company that missed the boat!

Editor [changes colour between red and white a couple of times, flexes hands, develops twitch under one eye]: Sure, I’ll get right on that. I’ll just assign Bob and Charlie and Dave to work on it. Oh, wait, you made me fire them last week. We can use Ester and Fiona. No, wait a second, they left because they haven’t received a pay increase in four years. How about…

CEO: Let me ask you two questions. One, do you imagine this to be a democracy? And two, would you like to continue receiving your paycheque?

Publisher: Look, Editor, we know resources are somewhat strained. But we’re just doing some exploratory work here, right? Get somebody to work with the IT department on this, just one writer.

Editor [grudgingly]: I guess I can spare Zach. He’s 18, so he understands computers. He’ll probably take a pay cut if we pull him off the sewage and sanitation beat to do this.

Which put juniors, with little understanding of news, in charge of the editorial side. Everything else consisted of the (then technically non-trivial) task of updating the website, and the executives were in awe of the complexity. So, as a rule, they handed the reins of their media company’s online presence to … the IT department.

And for many years, not too many people saw any problem with that. In fact, there is a problem, a gigantic one. Consider a print magazine as analogy. Let’s say it is now the mid-eighties and you have money to spend. What you really want to do is launch a magazine. Who will you hire to conceptualise and design your magazine, create the team of journalists, designers, sales people? Would you hire a publisher-editor team to do it for you? Or would you rather hire a machine-minder, the person who will ultimately print your magazine? Unless you were into some seriously experimental publishing, you’d go with the former, naturally. Well, the people who made the decisions about the news-media Internet presence in the nineties did exactly the opposite.

Because IT departments had interests, preferences and likes of their own, the distribution channel itself became more important than the message transmitted. News websites became more about cute technology than the meaning of the message. Remember, there was a lot of either scared or disinterested people in decision-making positions those days, so anyone with a firm opinion and some jargon to back it up held sway.

As the first news websites started appearing, they presented themselves as the de facto standards to which others coming in their wake should adhere. And what wonderful standards they were: beauty was unimportant in the world that generally despised even HTML email. A major new thing, a clickable ad that leads directly to advertiser’s website where the purchase can be made instantly, was soon introduced, raising prospects of online Eldorado. But then, some cleverhead realised that if the entire purpose of the ad is a click-trough, the ad doesn’t have to be big. Actually, it could be quite small. Tiny. That, of course, excited the money people, a lot. If the ad didn’t have to be big, then how about putting 10 or so small clickable ads on the web page? How about, say, 40 ads? No problem, technology would easily solve that. The future looked bright.

By then, all the major wire agencies were online, providing a new website with an uninterrupted stream of “content” that could almost automatically be turned into the pages of the site, at minimal costs. So the future looked even brighter. Who wouldn’t love a publication that costs virtually nothing to produce and has unlimited ad space with a unique new value offering?

It must have felt very good to be the media executive right about then. Except, it didn’t work.

Running wire stories that everybody else could also run turned most of websites into a commodity, necessitating the sales strategy of offering cheaper eyeballs than the competition could offer, with ever-shrinking revenues being the natural result. And by insisting on offering small, clickable ads, the newly-minted online gurus forgot the overwhelming majority of advertisers who do not advertise to make an immediate sale, but for their brand to be perpetuated. (Do you really think Louis Vuitton expected you to click on a miniature ad and buy a R25,000 bag on their site?) And by placing between 10 and 40 ads on any given page, they effectively turned adverts into classifieds. (Again, which self-respecting brand would choose classifieds over advertising?)

The final nail in online advertising came in the shape of the tactics of advertising sales people. For a long time, print publications were making a genuine killing on advertising. The sales people then came out with an extra sweetener that would make the advertisers feel good about buying the print space: they would, for every print page ad sold, throw in hundreds of thousands of “impressions” for free, thereby driving the perception of online advertising value to … well, to zero. And as placing all those little ads on the web-page was of mind-boggling complexity, an entire new crop of companies was introduced, ones that were serving the ads from their powerful servers. Their services were not exactly cheap either.

Suddenly, the promise of news websites’ athletic performance collapsed. Some companies were still making money from online news websites, especially the distributing agencies, like Google-owned DoubleClick, but not the publishers themselves.

Many years passed and nothing was done, mostly because print publications were still making a mint and the executives remained only superficially committed to any kind of e-future. A distant e-future, in their minds. The talk was still about more technology being a solution to everything. More imaginative ways to perform interrupt advertising. Citizen journalism to save the costs of paid-for journalists or even wires. And, of course, paywalls. (We will dedicate an entire future piece to the paywalls).

Then the 2008 collapse of the world economy happened. The crisis shrunk advertising budgets and suddenly almighty print became clearly vulnerable. The warning lights within media companies started strobing. The very survival of news media was at stake. It still is.

The media companies spent 15 or more years fiddling, criminally abdicating their responsibility for their own future to their IT and marketing departments and assorted “media analysts and consultants”. It is about time they take their futures into their own hands.

Next: The Future of online, Part Two – Needed: a fundamental re-think.

By Branko Brkic

Photo by MiiiSH.


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