Newspaper economics: online and offline #foj

This isn’t so surprising: the fact of the matter is that newspapers have never made much money from news. They’ve made money from the special interest sections on topics such as Automotive, Travel, Home & Garden, Food & Drink, and so on. These sections attract contextually targeted advertising, which is much more effective than non-targeted advertising. After all, someone reading the Automotive section is likely to be more interested in cars than the average consumer, so advertisers will pay a premium to reach those consumers.

Traditionally, the ad revenue from these special sections has been used to cross-subsidize the core news production. Nowadays internet users go directly to websites like Edmunds, Orbitz, Epicurious, and Amazon to look for products and services in specialized areas. Not surprisingly, advertisers follow those eyeballs, which makes the traditional cross-subsidization model that newspapers have used far more difficult.

As the newspapers lose their revenue streams, they are having trouble subsidizing the news operation. The disintermediation of Craigslist killing classified revenue wasn’t highlighted, and should have been.

Google’s economist gives too short mention to the societal value of news, IMHO, and similarly recommends to “burn the ships” ( Andreessen http://techcrunch.com/2010/03/06/andreessen-media-burn-boats/) and kill the print version to save costs. Varian’s main suggestion is to experiment, experiment, experiment, and that is just good business sense. The best businesses are diversified, trying new revenue models is key to staying alive.