Why Is Going Digital So Hard for Newspapers — and Why Is It the Same Everywhere?

In 2016, every newspaper had a go at going digital. The results have all been discouraging.

The one thing never in short supply is bad news about newspapers.

NewspaperDeathWatch.com, a site that keeps a record of newspapers that have folded, has logged hundreds of closures since it began in 2007. But the site also records the rebirth of news outlets — the fresh news about digital transformation.

Almost no important newspaper got through 2016 without trying to go digital. Regrettably, the bad news — readers lost, advertisers lost, papers shut, staff laid off, office buildings sold — shows no sign of stopping. More regrettably still, people don't seem to care about these troubles that keep the press awake at night.

The anxiety leaks out anyway. You need only look at how newspapers tug back and forth with social platforms like Facebook, which has become just about the most conspicuous newspaper story of the past while. Newspapers accuse the platforms of policing the truth of news too loosely and dodging questions of values, and still cannot stop working with them.

As for advertising revenue, the gap between them and these tech companies is not a small one. It is enormous.

QDaily plans to lay out the situation facing newspapers and other traditional media in two reports. This one asks why traditional media, newspapers above all, have had such a hard time going digital, all over the world.

The other — about the closures and rebirths of several important Chinese newspapers founded around 2000 — will come later.

At the start of the year and again at the end of it, Britain's The Independent, founded in 1986, and America's New York Observer, founded in 1987, each announced it would stop printing and publish only in digital form. In 1987, the best year the American newspaper business ever had, the combined daily circulation of all paid dailies reached 62.82 million, a fifth of the country's population. Two years ago the figure had fallen below 41 million.

The fall continues, and it is happening everywhere in the world.

As demand for newspapers and other printed matter drops, Finland's paper industry, which accounts for 2% of the country's GDP, is expected to shrink by 4% to 5% in 2016. Copenhagen's Paper Island (Paperland) is now best known for its street-food stalls. London's stationery and newspaper manufacturers' association predicts that by 2020 global demand for paper will fall by 32.5%.

Journalism graduates now have a hard time finding any newspaper job at all. By 2015 the editorial workforce at American newspapers had shrunk to 30,000, from about 50,000 around 2006. The Wall Street Journal, one of the three biggest papers in the country by circulation, started a buyout program in October, offering staff a lump sum to end their employment early. Gannett, which owns USA Today, cut 380 jobs this year, and Time Inc., the parent of Time magazine, said it would shrink its headcount early next year.

Reuters said in November that it would cut 2,000 jobs worldwide, 4% of its staff. Those cuts hit only the people who sell information technology and financial services to businesses, not journalists, but the reason behind both kinds of layoff is the same: hold costs down and limit the damage from falling operating profit.

The main reason is that newspapers spend more than they earn, and they can hardly bear it any longer. In the first three quarters of this year, print advertising revenue kept falling at The New York Times Company, Time Inc., Tronc (owner of the Los Angeles Times and the Chicago Herald) and News Corp (owner of The Wall Street Journal), and every one of those groups was running at a loss.

Advertising revenue was once the sturdiest money a newspaper had.

That model matured in the second half of the 19th century, replacing an older one in which papers lived mainly on paid subscriptions. The shift had many causes — urbanization, the industrial revolution, rising wages and the appetite for reading that came with them — and it carried newspapers out of a small elite readership into the mainstream. After 1900, companies and brands looking for growth and market scale found in newspapers a short cut to influence. After the Second World War, the spread of television drew off some newspaper advertisers, but the blow the industry took then was plainly nothing like the one it is taking now.

Figures from an American trade group show that the decline began in 2002. By 2014 the American newspaper industry's total annual revenue had shrunk from $67 billion in 2000 to $16.4 billion (adjusted for inflation), and it fell another 8% in 2015. That is below the level of 1950, when advertising revenue reached $20 billion.

Wall Street Journal editor-in-chief Gerard Baker summed up the present in a sentence: “The newspaper business has been changing violently these past few years... and none of our competitors has been spared the new challenges either.”

The Advertisers Who Got Away

News Corp CEO Robert Thomson thinks the bad advertising climate is universal. “The entire advertising market is in dire straits,” he said at an analyst conference.

But Thomson may have overlooked, deliberately or not, the other half of the world. In a year when newspapers and traditional media as a whole were in “dire straits,” the ad-funded “tech companies” on America's West Coast were doing fine.

By the estimate of Jason Kint, CEO of the online publishers' group Digital Content Next, Google's ad revenue rose 22% year on year in the first half of this year and supplied 60% of the ad market's growth, while Facebook's rose 67% and supplied 43% of it. Together that was just enough to cover a roughly 3% decline in advertising across every other medium.

Put yourself in an advertiser's position and the shift is easy to understand. Advertisers have grasped, to varying degrees, that technology has changed the way people get information, and that has changed how they hand out their budgets.

In the United States, the average time a person spends reading newspapers each day fell from 25 minutes in 2010 to 15 minutes in 2015. Between 2011 and 2015, the average time Americans spent each day on digital media (social media and video included) rose from 214 minutes to 328 minutes. The research firm eMarketer expects that by 2018 Americans will for the first time spend more time on digital media than on traditional media — newspapers, magazines, radio and television.

That newspapers are losing their vitality is now common knowledge, and it recently pushed the former Newspaper Association of America to rename itself the News Media Alliance. The alliance's CEO, David Chavern, told The New York Times that the word “newspaper” has stopped meaning anything to many of its member organizations, because most of their readers have already moved to the internet.

The trouble is that newspapers and other traditional media have never been keener on digital than in the past few years. And the problem is still not solved.

Some of them started early. The New York Times, besides its official news app, launched NYT Now in 2014 for younger readers, pushing short digests to them morning and evening. It also launched the cooking app NYT Cooking, and The Scoop, which offered local information about New York. Not all of it worked: a few months ago the Times shut NYT Now down after it failed to attract enough subscribers.

Others tried something more thorough. Atlantic Media, the parent of The Atlantic, set up a new, entirely digital news brand, Quartz, in 2012. Quartz uses charts heavily in its reporting and threw out the section categories of traditional news sites, laying out its pages instead around “editor's picks,” “popular” and “obsessions.” 40% of its readers are outside the United States. Early this year Quartz also launched a bot-like interactive news app that lets readers take in the news they care about in the form of a conversation.

Publishers are making this change because of the future digital advertising promises — a future that, on the surface at least, is hard to turn down.

Figures from the Interactive Advertising Bureau: in the first half of 2016, American digital ad revenue rose 19% year on year to $32.7 billion. Mobile ad revenue rose 89% to $15.5 billion, 47% of the digital total. Within mobile, video advertising grew 178%. eMarketer forecasts that by 2017 digital advertising's share of all American ad spending will have risen from 17.1% in 2010 to 37%, while newspapers' share falls further, from 14.8% to 6.5%.

But going digital guarantees nothing. A report from the Pew Research Center shows that in 2015, even as the digital ad market grew as a whole, traditional media's digital ad revenue not only failed to grow but fell 2%.

Outlets born on the internet are not doing much better. Earlier this year The Financial Times revealed that BuzzFeed's 2015 revenue was only $170 million, 32% short of its target, and BuzzFeed was said to have cut its 2016 profit goal as a result.

As noted, most of the growth still ended up in Facebook's and Google's pockets. Much of today's argument about the future of digital advertising turns on “which of the two better represents the future” — traditional media does not seem to come into it at all.

We analyzed this at length in our “What Changed Advertising” series: the scattering of audience attention has changed the path an ad travels. Advertisers can no longer reach “most consumers” by buying space in a few “high-traffic outlets,” as they once could. Facebook and Google, with their enormous traffic, now play the part of “premium media.” Facebook especially, which sells itself on “precision marketing,” holds huge appeal for advertisers because of its more than 1.8 billion monthly active users and the data it keeps on them.

In the age of traditional media, advertisers bought mainly against demographic data: region, age, sex, occupation. On Facebook, a user's location, the pages they have visited and the product keywords they have searched all become part of the “data” that decides which ads they see. By watching how users behave on social media and what words they post, Facebook can even work out that you have just moved house, and serve you an ad for paint or home goods during the hours you spend most on the site.

Advertisers who want results went into social media's arms under these conditions. In the same first three quarters of this year that traditional media groups spent losing money, Facebook's ad revenue rose about 60% year on year, to $18.256 billion.

The Biggest News Is on Facebook

Traditional media is losing advertisers, and it is losing readers' attention too.

That is why the most visible problem for the press over the past year or two has been the tug of war between traditional media and social platforms like Facebook and Twitter. In China the same story plays out on WeChat and Weibo; we will come to that in the next article.

The internet freed the flow of information and flattened power, and that broke the “authority” and “exclusivity” the press had built up through experience and special access. Traditional media once had agenda-setting entirely to itself: it drew the public's attention to an issue by playing a news event up in the layout, or by covering a subject again and again. Now an algorithm decides which news you will see on Facebook.

Whatever they feel about it, almost no mainstream outlet can refuse to work with Facebook. Vivian Schiller, an executive who has worked at NBC, The New York Times and Twitter, said the press cannot ignore Facebook because its influence is simply too large.

Facebook's influence soon showed up in the press in another way. In 2015, 14% to 16% of the traffic to The New York Times website came from Facebook, double the year before. The research firm parse.ly, after watching more than 40 news sites, found that social media sent them 40% of their traffic.

The press has come to depend on Facebook for traffic to some degree — which is why every outlet has hired social media editors and urged reporters to share articles on social platforms, even though they rarely admit it in public.

In public and in private, most outlets can never stop questioning Facebook. That was clearest after the American election result took the press by surprise: they all pointed at Facebook's loose policing of fake news (last Thursday Facebook announced a flagging feature that lets any user report fake news when they spot it) and at the severe “filter bubble” of social media, arguing that distorted information was an important reason the result came as such a “surprise.” They also kept asking how these platforms, which play down or even refuse human editing, deal with questions of values.

But what really worries them may be something else.

“Facebook is selling the media a future in which, as long as they use its newest news products to distribute content, innovate and immerse Facebook's users, their future will be bright,” Wired wrote. “The only problem is that this future isn't real. It is a false hope — or, to put it worse, a threat.”

What that means is that although Facebook has brought the media traffic and attention, it has not brought a long-term, healthy way to make money. Put another way, Facebook has promised the media a future that does not exist.

Nor is this the future of “everyone makes the news” that Twitter once called for. “Even though only a relatively small share of adults use Twitter, the platform lets people speak like journalists in a way no other channel can,” a study from Indiana University points out.

Facebook plainly does not mean to wreck anything. It means to share in what traditional media has spent years building, by making a few adjustments to the distribution platform.

In 2014 Facebook launched Instant Articles and invited The New York Times, NBC News and BuzzFeed, among others, to be its first users. Under the system a publisher uploads and publishes content directly, Facebook's algorithm pushes it into users' feeds, and readers get the whole article without ever leaving the Facebook app. Facebook gives its media partners 70% of the ad revenue.

Outsiders have no way of knowing how much those publishers were paid. The trouble now is that the system's ambition is dangerous for them: Facebook wants to keep readers inside its own world. On the face of it a publisher takes 70% of the revenue, but the arrangement also makes readers less likely to click through to the publisher's own site, which cuts the money it can make on its own ground. And publishers plainly have to hire people to run and maintain the new platform. Think of WeChat official accounts; the situation is much the same.

Quartz, for one, refused to join Instant Articles. The chairman of the news site's parent company gave a fairly oblique explanation: making money from Instant Articles depends on scale, and that does not fit the way Quartz produces its work.

Facebook may soon learn new ways to win the press over. A job posting it put up recently says it is looking for a “head of global news partnerships” with “more than 20 years of experience in journalism and deep understanding and standing across every corner of the industry,” who will be “Facebook's voice to the public” and “a piece of Facebook's news ecosystem”. The Guardian read this as Facebook trying to “ease its relationship with the media”; Mashable called it an effort to “clean up its (bad) image on the news front.”

Facebook has always insisted it is a technology company and not a media company, but plenty of facts point to its ambition to become the latter. Besides opening up Instant Articles, it has invited a crowd of publishers to make exclusive content for its live channel, Facebook Live.

Can Technology Really Help Journalism?

The New York Times put seven people on a Facebook Live team. During this year's American election the paper also ran full live commentary on Facebook. BuzzFeed and Tastemade signed contracts with Facebook worth $3.1 million and $1 million to make video programs for Facebook Live.

Both sides may be pushing the partnership along, on the strength of an optimistic view held inside the industry and out: good content has value in any era, and traditional media still knows more about making it.

There is also a view that technology may really be able to help journalism rather than lead it astray. Simply moving content from paper to screen will not change a publisher's fate.

A classic example is “Snow Fall,” The New York Times's multimedia interactive project from 2012, which won its reporter, John Branch, the 2013 Pulitzer Prize for feature writing. A long piece in six parts, it blended text, photographs, audio, video and interactive maps to reconstruct an avalanche that year in Washington state, and is considered a model of “immersive,” “experience-based reporting”.

But people have also come to see that reporting like “Snow Fall” is the product of high costs in time, labor and technology. In a sense, Facebook Live hands publishers part of that technology and lowers what they must spend building it themselves; from that angle it can only help the making of news.

Facebook does plan to put more into live video. Chris Cox, Facebook's chief product officer, said at WSJDLive in October that by 2021, 70% of Facebook's mobile traffic will go to video, which means the company needs deals with more content makers. Whether that works out depends largely on how willing publishers are — that is, on whether they can make long-term, healthy money from it.

The Washington Post's video editor, Micah Gelman, is a little wary of it. He said: “At the end of the day, we still have to make decisions according to Facebook's model... We're unlikely to stop doing this; what we can do is adjust our scale to get the economics we need.”

Finding a new way to make money is urgent. In going digital and social, publishers have not given up their original advertising model. But the old display-ad slot is being replaced by native advertising.

Native advertising is treated as the future — the market is expected to reach $8.8 billion in 2018, nearly six times its 2012 size, and to account for 74% of digital ad spending by 2021 (including native ads in social media feeds).

For publishers who are good at telling stories, that may actually be a piece of luck. The New York Times's T Brand Studio is the classic success. Since it was founded in 2013 the unit has made native ads for more than 70 brands in all, blending text, photography, video, audio and data journalism. This year it is expected to supply 20% to 30% of the paper's digital ad revenue. Measured against the paper's 2015 digital advertising, that share works out to roughly $39 million to $59 million.

Then again, a joint survey by the content marketing agency Contently, the City University of New York (CUNY) and the global market research firm Radius found that native advertising does not work as well as hoped: 44% of people could not tell who the advertiser behind a native ad was, and 77% could not reliably tell a native ad from a news story. That may shake advertisers' confidence in it.

On the whole, though, with so many new players moving into the media business, publishers apparently can no longer attend only to their traditional main job of producing news.

Media groups have tried to buy their way into new services, acquiring technology companies and digital marketing firms: Gannett bought the digital marketing provider ReachLocal, and Time Inc. bought Bizrate Insights, a consumer research company that calls itself “data-driven.”

Nobody is sure whether the new businesses will do any good. So far, at least, nothing has shown.

Other ventures into other people's trades look less likely to win over the old readers. Britain's Daily Mail this year opened a home-goods e-commerce site carrying 80,000 product lines. It used to be good at peddling lurid gossip. But selling actual goods? Shrewd shoppers are not the same crowd as gawkers.

Cover image from Pixabay