Using Free to Sell Paid

March 30, 2009

The NewsThere is a misconception in the world of journalism that news has only one definition — one set of rules and guidelines — and that the demand for news, therefore, is limited to what those rules and guidelines can produce. Moreover, there exists an ancillary misconception that the output of a news organization must always be monetized. In the world of Media 1.0, these beliefs are connected. In the Media 2.0 world, however, neither is correct, and the combination places a major structural barrier in the path of reinvention.

For media companies, this is fatal, because the "all eggs in one basket" approach — where every feature, event or investigation is a "story" with ads attached — leaves us helpless in the face of disruptive influences to the model that supports this practice — mass marketing. We can be excused for this approach to the news, for that's what we know and have practiced for at least the past century.

The Information SuperhighwayBut for a minute, let's leave the comfortable confines of this nest and venture out into the seemingly chaotic void of the Internet Superhighway. But wait! We can't do that, because there is no highway, only the illusion of one. There is no void. There are no roads, no maps, no dwellings, no trips, no visits, no point-A or point-B. There are only databases and documents with sophisticated code that come alive when your browser tells them to do so, right there in front of you.

This simple reality is the most important piece of knowledge we need to move forward, because nobody comes to our stage in the World Wide Web. We go to them, individually. As such, it's a world of direct marketing. The Web doesn't exist for you, absent your browser, and that browser window of yours is unique. This is the great disruptor and yet the great hope for all of us, especially the people formerly known as the advertisers.

In the news business, revenue is derived from our stage, either through ticket prices or dancing advertisements. We can and probably always will make this kind of money from browser windows, too, but that will never take the place of money from the stage, because the browser window is too precise. The stage allows for a degree of opaqueness. Value is determined, not by the individuals present, but the audience as a whole, and that puts us in a command position. We call this "reach," and it's what we know well. Online, however, advertisers don't need our reach, so our branded stages don't have the same value proposition, and this shoots a big hole in the "all eggs in one basket" formula for news.

Browser windowTo fully understand business strategy for news organizations involving the Web, we must go back to that single browser window, whether portable or not, and consider what we know from existing research. The top two reasons people use the Web for news are for breaking news and the weather, and yet we use the Web as a "platform" for our "all eggs in one basket" approach. That which we produce for the stage is that which we produce for the Web, because our ability to do business is tied to the content we create. This thinking must be exorcised from our minds, if we are to find a place in the world of Media 2.0.

If people use the "news web" primarily for breaking news and the weather, we ought to be able to meet those demands and, in so doing, drive traffic to our stage. So the value of online news to the news organization is almost entirely marketing, and in chasing revenue the old-fashioned way online, we're actually helping to devalue our stage. Pause here, and think about that for a minute.

Chris AndersonChris Anderson, the Wired editor who authored the "Long Tail" theory of web economics, has a new book coming out this summer on the economics of free, called "Free. The future of a radical price." Free is not a business model, but it is a smart strategy, according to Anderson. Google, for example, doesn't charge people to search. That's "free," and they make their money — lots of it — by putting ads on everything in those free search results. In an email, Anderson told me that "free is the best form of marketing."

That's true for software (freemium), books (my book will be free in digital form), music (recording music is marketing for the concerts), games, etc. Indeed, wired.com is in some sense free marketing for Wired Magazine (like most of our titles, the website's business function is in part to sell subs).

From an advance copy of Anderson's book:

(Information wants to be free) is misunderstood because it is only half-remembered. Brand's (Stewart Brand, creator of the Whole Earth Catalog and regarded as the author of the phrase) other half—"information wants to be expensive, because it's so valuable"—is ignored, perhaps because it seems both paradoxical and tautological. Perhaps a better way to understand it is this:

Commodity information (everybody gets the same version) wants to be free. Customized information (you get something unique and meaningful to you) wants to be expensive.

But even that's not quite right. After all, what is a Google search if not a unique and customized sort of the Web, tailored just for you to be a meaningful response to your query? So let's try again:

Abundant information wants to be free. Scarce information wants to be expensive.

In this case, we're using the marginal cost construction of "abundant" and "scarce:" Information that can be replicated and distributed at low marginal cost wants to be free; information with high marginal costs wants to be expensive."

The concept of "free" shoots a big hole in the "all eggs in one basket" paradigm for news, because it suggests a new role in the dissemination of news content — a vehicle to move people to other, more monetizeable forms of media, including advertising. But Anderson is not speaking of the "tease" strategy employed by contemporary media online. "Free" as a tease is not really free, so we're talking about a new form of free information.

So let's assume that a free form of news is strategically smart to use as a marketing tool for forms of news delivered from our monetiziable stages. This frees our minds to think differently about that browser window, for rather than seeking to build our service around revenue, we can now build a service that is largely promotional, and we can target that service to individuals, based on behavior or preselected interests. This also means we don't care where or how this service is consumed, because its value proposition to us is not as a direct revenue-generator. We can freely unbundle (as in RSS 2.0, full feeds) this kind of content, because its purpose is other than the "all eggs in one basket" approach.

This also helps us overcome the speed versus depth argument for news. A service that meets the breaking news and weather needs of consumers needs to be delivered in many fast and short bursts. It's easy to consume that way, and it works across many platforms. The "all eggs in one basket" approach doesn't permit us to do this, because we want everybody to experience the depth of our work. However, it is foolish to assume that an appetite for speed equals no appetite for depth, and driving people to that depth is the central, strategic mission of the continuous news model.

Media companies may think they already practice this with RSS, but using RSS to drive people to brand-extension content with advertising is a lame and irritating substitute for a bonafide continuous news model. It insults the user, when the user is who we are trying to attract. RSS wasn't created to tease; it was created as a way for people to pull content that they want to their browsers. We can do better than teasing, and we need to, because our legacy platforms are where the real money is. By assuming that our future was in shifting our "all eggs in one basket" model to the Web, we have participated in the dismantling of those legacy platforms, rather than using the Web to strategically build them up.

This is because we believe in our legacy platforms, but we don't believe in the Web.

TMZ logoAccording to February Nielsen numbers, the syndicated program "TMZ" is the #2 entertainment news program season-to-date in syndication among Adults 18-49, Women 18-49 and Adults 25-54, and #1 among Adults 18-34. This achievement is remarkable for two reasons: one, the program launched in the fall of 2007, and, two, it is the fruit of the entertainment website TMZ.com. The website promotes the TV show, and it does it throughout the day and in the right column content of the site. The important thing to understand here is that the site was built to communicate a continuous stream of "news" to its users, and while it is profitable on its own, the real moneymaker is the TV show.

From a TMZ press release:

Since its launch in November 2005, TMZ.com a joint venture between Telepictures Productions and AOL has become the Internet's number one entertainment news destination. TMZ.com is consistently credited with breaking stories dominating the entertainment news landscape and is one of the most cited entertainment news sources in the world.

The point is that, by using the Web as it was created to be used, a concept that began three and a half years ago now produces one of the top syndicated programs in television. How exactly did this happen?

The Web is marvelous marketing tool, and those who view it as such do a remarkable job of spreading themselves and their products around. But they begin with that single browser and create a rich experience for the eyeballs that are viewing it, while at the same time exploiting how the back end works to build their own (free) brands. Media companies do it backwards. We begin with our "all eggs in one basket" formats and try to use the Web as just another distribution channel. The Web can do that, but it is also so very much more.

Twitter, for example, is an outstanding marketing tool for media companies, because is uses the free model to accomplish four things. One, it's a brand-extension marketing play, and it we wish to stay relevant in the world of news and information, we'll need these kinds of marketing options. Two, it can move people to stories on the Web that are attached to ads. Twitter is a growing inbound reference to media company websites, assuming the company plays in the Twitter sandbox in the first place. Three, in cases of very big stories — or certain highly attractive franchises — it can drive traffic to our television audience. Four, it's our entryway into the online discussion that is news. Twitter isn't just a distribution platform; it's also a listening post.

While many media company people can understand this about Twitter, they seem unable to see it relating to their entire web strategy, and choose instead to use, for example, their TV station to "drive traffic to the Web." That's an archaic model, albeit one that was important to the third-party ad networks that used to host those websites. Thankfully, media companies are beginning to wake up to the reality that they'll never develop the concepts and revenues they need, if their software is driven by a third-party ad network. The model of driving traffic to a station's website has been a net liability to local media, for all it does is devalue our core business.

Instead, we need to see the wisdom of using the Web to drive traffic to our legacy platforms, and if we could just BEGIN with that assumption, we'd do things a whole lot differently online. The starting point for all of it is that browser.

So here are five tactical recommendations that any local media company can do to almost immediately.

  • Create a news product for the Web that doesn't involve repurposing content from the "all eggs in one basket" paradigm. Think differently. If you had no TV station or no newspaper, what would you do to meet the online news and information needs of the community? We think that's some form of a Monday-Friday, 8 a.m. to 5 p.m. continuous news stream, and it doesn't take tons of resources to accomplish this.

  • This product should be unbundled for place-based distribution, including mobile, RSS, widgets, SMS subscriptions, or any other method of pushing this free product to those who are interested. We don't care how or where it's consumed, because its principal purpose is marketing.

  • Build from that product back towards the TV station or newspaper. Use its marvelous marketing opportunities to set and maintain the information agenda throughout the day, and in the process, steer people to various platforms you have for making money from your content, whether online or off.

  • Get out of the mindset that everything you do has to carry with it a balance sheet. This has been the great failure of the Newspaper Next project, because it considers the needs of the media company over the needs of the people formerly known as the audience. As I have been saying for years, we don't have a revenue problem as much as we do an audience problem, and absent efforts to fix that, we'll never solve the revenue issues. Free is the strategy we must be prepared to embrace, but that doesn't mean giving away that for which we get paid.

  • Use your clout and your sales feet-on-the-street to enable commerce for businesses in your community by connecting them with those browsers who pull you to them. This is not "advertising," in the traditional sense; it's using advertising as content in stand-alone revenue plays to help people connect with businesses. And here's where your legacy platform can help you.

The Web may appear chaotic to the logical mind, but it's actually a highly sophisticated, organized, and living machine. To thrive in tomorrow's multimedia world, we need to start paying less attention to our stage and more attention to how the life form functions. If a car dealer, for example, can use the Web to sell cars, why can't we use the Web to sell ourselves? To the dealer, the automobile hasn't changed and neither has the demand, only the mechanism by which he or she reveals inventory to consumers. The news is still the news and the demand is still there, but we're stuck in the past in terms of how we move our own inventory.