Ten Years After | Digital Deliverance

We’re now in the tenth year of publishing periodicals via the Internet. Most major newspapers and magazines have been doing so for at least sixth years. But, despite all that time, they are still ‘searching for the business model’ for profitably publishing via the Internet.

Although many major newspaper publishing corporations (NYT, Tribune, etc.) have announced that their online operations are finally profitable, few such announcements stand up to examination by Generally Accepted Accounting Practices (GAAP). Remove classified advertising ‘upsells’ from the print operations; remove online revenues that don’t originate on the Internet (an example: NYTD’s Lexis-Nexis revenues); remove other types of non-Internet revenues or funds transfers (for examples; and there are no real profits, despite six to ten years of operations.

Although most newspaper Web sites’ 1990s era business plans were for profitability by selling display (i.e., banner) ads, the major source of those sites’ online revenues nowadays is from classified advertising (73% of overall revenues, according to a recent Borrell Associates survey of 246 US newspaper Web sites. Moreover, almost half of that — 36% of overall revenues — is simply internal accounting transfers from print and hence not directly from those Internet operations). According to Veronis Shuhler Stevenson, online advertising (specifically, banner ads) grew at a 105% annual compound rate during 1996 through 2001, declining only 12% to $7.3 billion during the current recession. Why have newspaper Web sites’ business plans since 1996 failed to tap that relatively large (Veronis pegs it as equal to 11% of the newspaper print adverting) market?

Although a few consumer publications have achieved modest success at charging for online access, none (but with one exception) has been able to convert more than 2% of its free site’s users into paying subscribers. (The exception is WSJ.com, which signed up only 60,000 paying subscribers in its first year and has taken seven more years to signup 686,000). FT.com, Ireland.com (Irish Times of Dublin), South China Morning Post, and others haven’t been able to signup more than 2% of users.

Six to ten years into this era of Internet publishing, newspaper sites are read by less people less often than the newsprint editions. The average newspaper Web site’s average visitor visits only 2 to 5 times per month, spends less time than a half an hour per month, and reads less than 20 Web pages there per month. These figures stalled at those levels five years ago and haven’t improved. These figures also are five times less than that for even the average purchaser of newsprint editions at newsstands and a magnitude less than the average newsprint edition subscriber.

As printed newspaper and magazine circulations and readerships continue to decline, the Web editions of those publications continue to be no less dependent upon revenue stipends and content from those declining print operations as the Web editions were half a decade ago. Online editions can’t succeed print editions if online editions are dependent upon print edition content and revenues for livelihood.

By any objective measurements — revenues, profitability, ROI, readership & usage, achievement of revenue goals during the five fastest growing years in US economic history (nonetheless during the subsequent recessional), revenues per circulation, revenues per unique visitor, revenues per pageview, revenues per page published, etc. — online publication of periodicals has been a failure. The Internet may have been the fastest growing media in world history, but at least the communications media of printing, radio, and television, (and transportation media of railroads, automobiles, airlines, etc.) were able to achieve sustainable business models and profitability within six to ten years.

So, what should the online periodical industry do? Should it just continue apace in hope of finding ‘the business model’? Or is a radical reformulation of online periodical publishing needed? And who (either inside or outside the periodical publishing industry) do you think knows the answers? We’re working on a report and would like to talk to them.