This morning, I had a “someone is wrong on the Internet” moment. The someone was Clay Christensen, David Skok and James Allworth who wrote a long piece for the Nieman Foundation for Journalism at Harvard entitled “Mastering the art of disruptive innovation in journalism.” The report is about the woes facing the newspaper industry and what they have to do to get back in the game. But the narrative makes the classic mistake of searching for keys under a lamppost because that is where the light is. That is, it fails to start with the causes of disruption and so, I think, makes an error in focussing on second order issues. Put simply, I contend, as I have done many times before, that what was disrupted for the newspapers was not journalism but advertising.
Anyhow, the report starts actually in the right place:
The problem is a profound one: A study in March by the Pew Research Center’s Project for Excellence in Journalism showed that newspapers have been, on average, losing print advertising dollars at seven times the rate they have been growing digital ad revenue.
Yes, the reason newspapers are in trouble is that the advertising didn’t follow the consumers online. But from there the assumption is that those advertising revenues are gone and they aren’t coming back. They don’t ask where they went and why and so cannot properly analyse this industry. Instead, taking that as an assumption, they conclude that the disruption was elsewhere.
With history as our guide, it shouldn’t be a surprise when new entrants like The Huffington Post and BuzzFeed, which began life as news aggregators, begin their march up the value network. They may have started by collecting cute pictures of cats but they are now expanding into politics, transforming from aggregators into generators of original content, and even, in the case of The Huffington Post, winning a Pulitzer Prize for its reporting.
They are classic disruptors.
Well, to me, they are classic entrants. The Internet has allowed lower cost journalism to capture attention. But were these guys the cause of the loss in advertising revenue? It seems hard to believe. It wasn’t just new entrant readership that moved online, it was all readership. Again, if an industry is being disrupted, surely we have to ask what disrupted their revenues? And the likely culprit is the move of readers online per se rather than what some organisations did to take advantage of that.
Now once you have decided to ignore the lost revenue from advertising and treat that as gone, you have to look elsewhere to find opportunities. The new entrants went for a model of not having to rely as much on revenue to cover costs. They went down the quality chain to a good degree (albiet with some exceptions) but, most importantly, they offered a platform for people to perform journalistic style activities — or at least provide content that competed for the attention of readers of traditional journalism — and then relied on the fact that those people had other reasons to be putting effort into writing. I’m doing that right now. You’ll see later that I have a book to sell but, in actuality, I just had a beef with this study and want to get it all off my chest. That someone might want to read this is a bonus.
I will give the Nieman authors their due: if you want to ignore advertising and think about how else to make money as a media business, their discussion covers all the options in a pretty accessible way. I don’t have anything to disagree with there. I just think it is second-order and, therefore, possibly missing bigger opportunities and changes.
Now on to my point: advertising was disrupted. How do we know this? Advertising revenues went away. They didn’t go to HuffPo, they went seemingly into the ether. The first order question is why? Lots of answers are postulated and I don’t want to go into all of them now. The leading one is psychology. Apparently, online ads or digital ads just don’t work. That is the thesis. Except that no researcher has found this in a lab environment and no theory explains the mechanism. Some people say that mobile advertising is what is harder but I should remind everyone that newspapers are a mobile device and they seem to do just fine.
My leading candidate is that the market for advertising was disrupted and hasn’t re-organised itself from the shock. The disruption came because readers, instead of hanging around for 30 minutes with a newspaper or on just one website, pick and choose across 20 instead. That means that neither news outlets or advertisers know what ads readers have likely seen. When a reader stays with a newspaper, it is a good guess that they have seen an ad on page 2 when they get to page 20 so there is no need (unless you want a follow-up) to repeat the dose. But when the reader started on CNN and ended up in the NYT, what are you supposed to do? It takes some actual research to show but the impact of this alone is enough to destroy ad revenues by killing the efficiency of the advertising market. Oh and by the way, it is an application and extension of the matching market theory that won a Nobel prize this week (it is about matching advertisers to consumers).
This leads to a natural conclusion: before we start re-organising the newsroom perhaps we need to re-organise the advertising salesroom and, in particular, the platforms for advertising. In my book, Information Wants to be Shared, I spend much time going through some options for this. So I won’t traverse that again here. But as it is a disruption, there is a need for experimentation. The problem is so many in the media have, for reasons I cannot understand, decided to focus on journalism rather than advertising. The report writers are not alone. Clay Shirky’s classic post makes the same error. Why? I suspect that it is because journalists actually have a lot of sway in the organisational decisions of newspapers and as Shirky has long taught us “institutions always move to defend the problem for which they are the solution.” Indeed, the Nieman report took that to heart and literally defined the problem that journalists were the solution to! I think it just happens to be the wrong problem to focus on. They are their own writers’ examples of the Innovator’s Dilemma.