Friday 28 October 2016

The Guardian's €200m loss is a wake-up call for media

Published 07/08/2016 | 02:30

The Guardian newspaper anouced huge losses
The Guardian newspaper anouced huge losses

Ten days ago, the world's second-biggest news website announced crushing financial losses. Most rival publishers looked on grimly as the Guardian revealed a €204m loss.

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Lest anyone forget, this is the leading online newspaper of our times. It recorded 167m 'unique' visitors to its website in June. It has invested heavily in journalism, winning a Pulitzer Prize in 2014 for its coverage of the Edward Snowden whistleblower revelations.

But it is crashing and burning when it comes to online ads.

If the Guardian can't make money out of ad-supported publishing 'at scale', who can?

The British publisher's figures are sobering for anyone chasing 'traffic'. Its accounts show that revenue from online advertising actually fell by 3pc at a time when its online audience grew by over 30pc.

So neither Brexit nor Kardashian-based listicles could make the newspaper money online.

The Guardian's dilemma is one facing most traditional media companies trying to survive in a digital age. News generally isn't profitable at present. It is engulfed as a commoditised item, increasingly read in some Facebook feed or Snapchat story rather than in a publisher-controlled ad ecosystem.

As such, it acts more as an additional revenue bump for Facebook and Google - where news is shared or searched for - rather than for any media outlet that actually reports it online.

If you're wondering how Facebook has pulled this off, just look at its own newly reported accounts. While the media industry grapples with falling online ads rates, Facebook's ad prices actually rose by 9pc in the last year. Taken with an extra 100m people on the network (to 1.7bn now), that ad price rise contributed to a 59pc revenue rise in the past 12 months. And that means Facebook is making 15pc more per user (€3.43) than it did this time last year.

"Advertiser demand was particularly strong in quarter two across a broad range of verticals and advertiser objectives," said Facebook's chief financial officer, Dave Wehner.

What's more, everyone expects this to keep going. Analysts predict at least 35pc growth in Facebook's ad revenue in the next year.

So if ads aren't the answer, is there another way for media companies to look to the future sustainably?

The most notable examples of those succeeding are those who have developed niches for themselves.

Recode is a tech website that was spun off from the Wall Street Journal.

"We do a combination of stuff," said co-founder Kara Swisher in a Q&A session with New York Magazine last month. "We got some profitability on the website when we were at the Wall Street Journal and then the events just mint money for us. Commerce has been really great to us. Advertising is clearly problematic."

Recode's specialist conferences are something to behold. Charging over €1,000 per ticket, stage interviewees include A-list executives such as Tesla founder Elon Musk, Amazon chief executive Jeff Bezos, Bill Gates, Sheryl Sandberg and more.

Part of the appeal is that both Swisher herself and co-founder Walt Mossberg - both hugely respected journalists in their fields - lead the events and interview the speakers.

Commercially, these conferences work because of the promise of a focus and non-generic programming approach.

This attempt at depth over breadth is what many new media ventures are trying.

"The biggest mistake that is being made by the news business is relying on advertising and circulation," said Mark Little, former RTE news anchor and now head of Twitter in Ireland. "Those were the things that sustained you in the past. But the underlying business model for news has been splintered."

Instead, he says, micropayments, niche media services and more brand-sponsored content are likely to prove effective as sustainable commercial endeavours.

"I'm seeing much smarter companies looking at the concept of going after niches," he says. "That includes the growth in verticals from sport to gaming. I think it will involve taking something like micropayments, or newsletters in strong vertical sections that might carry with them some advertising. The companies that will survive are the ones that have within their own organisations small innovation units."

Ultimately, people are willing to pay for things. I pay €10 per month for an email newsletter written by a technology journalist-turned-analyst. Millions of people happily pay €10 per month for Spotify and €10 for Netflix.

But online ads increasingly seem like a very shaky basis for the future of sustainable media.

Last week, the US technology journalist Joshua Topolsky raised €5m for a new online publication called The Outline to focus on business, politics and culture.

"I really want to move away from the impressions-based way of judging success," he said.

"You get trapped into chasing just a little more audience and you never change your product. You get locked in. We are not interested in a horse race. This has to be a real brand. We want to focus on the best way to tell a story."

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