It’s been nearly a year and a half since I did a blog post here, but expect a few going forward as I work on some interesting projects related to the rapidly changing world of news content distribution.
Design for manufacturability is an engineering concept where you take into consideration the cost of the manufacturing process when you design the product. If you don’t do this you may have to redesign your product when you realize the original design is too costly to produce and make a profit.
I think that is where Patch went wrong, because sometimes it’s not easy to redesign. It may be impossible if your runway isn’t long enough.
Like Steve Buttry, I never closely studied Patch but am intimately familiar with the kind of traffic a local news site gets. It becomes easy to see why business was a challenge for Patch if their whole business model was display ads. (Was it? Correct me if I’m wrong.) I think it’s safe to say it was the biggest part of their business plan.
News sites in Patch sized communities only do a few million pageviews a month. The CPM for display ads is on a decline and I’m going to suggest Patch was undercutting some of the local newspaper sites. We all know the remnant ads bring in less, usually way less.
Practice with your own numbers by dividing x million pageviews by 1000 (cpm units). Multiply that by 2 or 3 ( the number of ads on a page). Multiply that by what you think the average CPM is (I bet it’s lower than you think). Is that the monthly revenue?
That might be enough for a scrappy team that is really killing it locally to get by. And those types of numbers are enough for small teams with global audiences. But it likely isn’t enough to also fuel the millions that the central office at AOL needed to develop the Patch product.
I think that’s where Patch was losing. AOL is used to big, big numbers. It’s hard for them to think small, on what it takes to be profitable on a local level, while maintaining a lean central office.
That is the one advantage that the former newspaper companies have. They’ve been doing that for a long time. But . . .
And it’s a big but (that doesn’t sound right).
The former newspaper companies still live in a world where cost is way too high for pageviews alone to support. Part of this is transitional legacy costs and part is a culture of using big commercial third party tools when we need to get scrappy, wear many hats and use freely available tools like our scrappy upstart competitors do. “Get scrappy” is the way to win in local.
More and more you’ll see folks at news sites that combine skills of journalists, developers and marketers. You see that at some of the small, successful local news startups that are staying afloat. This will be the norm in the future.
Also, and perhaps even more importantly, invest in other revenue generating ideas, software and companies that are not based on pageviews because with the accelerated growth of inventory across the web comes a decline in CPMs. This includes letting internal ideas blossom into their own products, the way Google and Amazon offer internally used products like their cloud to the public. If you find it useful internally, others will likely pay you to use it.
Display ads alone will not do it.
Patch didn’t make it because it was not properly designed to scale. It wasn’t designed for manufacturability (DFM). ; )
But I think a few things need to be pointed out. These points don’t make the old-shcool management right, but helps us understand why they are reluctant to change (at times).
First, is what I’ve characterized as a Vichy regime of Publishers that must account for their P&L.
The fall of the print model has a been a sloooowwww process. Many Publishers were and still are able to do nothing (or very little), trimming here and there every few years, reducing the workforce through attrition, while still maintaining a frail and declining (but certain) profit.
All companies vary, but we know the industry has taken a huge hit, and we also know that many are still in business. And this has been going on for many, many years.
In many of these cases, especially when a Publisher has an eye on retirement that is less than 10 years out, the safe bet is to try to keep the ship afloat by bailing. The holes in the hull can’t be fixed and who knows whether those lifeboats work well in these stormy seas. Let’s just wait it out.
In these cases, the Publishers don’t want to fight for a free future, just survive. That’s why I characterize it as the Vichy style of newspaper management. It isn’t noble. It lacks guts. But it is still safe at the moment. It won’t last much longer, of course.
The second take is the Publisher that cares about their workers, and uses that as a shield against taking too much risk. When you are in a startup, everyone knows there is a decent likelihood of failure. It’s accepted. Sure, all workers in the newspaper industry know their jobs may be on thin ice at any moment, but the mentality is different, and these managers feel an obligation to save as many jobs as possible — unless it cuts into the owner’s investment. : )
And remember that many of these jobs are still tied to print revenue. So while moving forward is the only way to a sustainable future, it will certainly have a negative impact on some of the current workforce.
While more noble than the previous example, this style is also certain doom.
The next approach is something we are starting to see a lot more of, thankfully. That’s making a clear statement of strategy that no matter what the consequences, we are a digital company. There is going to be a lot of pain in the short term, but we need to put digital first. And of course, that is how John Paton coined that term (disclosure, I work for Digital First Media).
And to do so, we also need to invest in new strategies. And some of them need to be free of the existing structures if they stand a chance.
At Digital First Media, we have Digital First Ventures where we invest and cultivate new ideas. The company is also great about letting internal ideas blossom, some of which may become standalone entities.
But getting back to the topic of Ezra Klein and Anna’s point. There are also different shades of setting these companies free, as she puts it. And different ways of launching them.
I think every company will need to do this type of thing at one level or another, but I also feel there is danger, if done incorrectly. But the danger is in company morale. It’s not whether I think it’s a good idea. (I do, but with less of an initial investment than was asked for)
If the venture fails, other journalists will be sore that that money was squandered. Also, it sets a precedence on what a blogger is worth based on the kind of audience they can attract, when in fact there is more to a successful business than just that. We need to drop this page-view thing, but that’s another post.
That said, I’m usually all for transparency so I don’t have a good answer here.
We certainly need to take risks like this. They certainly cost money. The key players know they are worth a lot. It’s not going to change back to the old ways.
So, I guess Anna is right in her use of the term free. We do need to set it all free. In fact, we have no real choice.
But maybe we shouldn’t go around waving eight figures into the air. Seven would have been fine. It was good enough for Reggie. ; )
I’m late to this party, but lots of cool ideas are being summoned by Dave Winer in response to his “Forward motion with RSS” post.
There are two things I think RSS already has that aren’t being utilized (enough).
One is RSSCloud, a way to get notified immediately if a feed has changed. I worked with Dave on getting some of my code to work with that feature of the spec a few years back. Need to dust it off because I’m pretty confident its day will come. In some ways it has, but it’s more of a plumbing aspect of app creation. I want to see it used for distributed real-time blogs. Like a distributed Twitter. Still some work before we get there.
The second thing is actually not RSS, but OPML. But it has huge implications for RSS feed lists, Reading Lists or Subscription Lists.
The idea (not mine) is that a feed reader can subscribe to an OPML list of feeds that is curated or generated somewhere else on the web, and the reader will dynamically adjust the subscriptions when the remote OPML file changes.
Coming from the news business, I’m pretty sure that news organizations don’t realize how valuable this feature would be for them and their users. And even better, those news organizations, like mine, have the reach to jumpstart this without help from Silicon Valley.
But today I actually put my money where my mouth is and created something I hope might be useful. Using the Google Feed API, I created a feed search which offers a link to the OPML of the results so that feed readers and other apps that support this feature will have a nearly unlimited supply of OPML subscription lists to play with.
I test it out with Dave’s Fargo outliner and it worked! (After some work to get my OPML cleaned and serving correctly)
If you’d like to test it, here is how.
1. Go to http://brisk.ly and perform a search for some news you might be interested in
2. On the search results page click on the OPML link
3. Copy the URL
4. Inside Fargo (go there for instructions about that), go to File->Open by URL and paste the URL you just copied in
5. You should see the feeds from the search results show up. If the results ever change the page should be updated automatically
Well, that was fun. But that’s really only the tip of the iceberg. I’m sure you can think of lots of cooler things that can be done with remote OPML subscription lists.
Please let me know if you do.
Way back in 2007, Doc Searls turned me on to this quote:
Currently, the predominant business model for commercial search engines is advertising. The goals of the advertising business model do not always correspond to providing quality search to users. — The Anatomy of a Large-Scale Hypertextual Web Search Engine, Sergey Brin and Lawrence Page.
I revisit it every few years and think about Google. It was ironic then and only gets better.