March 15, 2010

Lee Rainie talks with Media Life about the economics of online news

Q. What was the most interesting thing you discovered in compiling this report?

LR: The material I sent you is part of a much larger analysis of the State of the News Media that was done by the Pew Research Center’s Project for Excellence in Journalism (PEJ). There are a tremendous number of new insights in that comprehensive analysis of the whole news sector, but let me concentrate on four parts of the internet-related work that are especially striking and new.

The first is new survey results that we collected with PEJ that show their attitudes towards pay walls, online advertising, and subscription offerings. To walk you through the numbers: 71% of internet users get news online. Of that group, just 35% say they have a favorite news website. Of that group that has a favorite site, only 5% say they pay for news content now and only 19% say they would be willing to pay if that favorite site started charging for access to its content. That means that only 7% of all internet users express any willingness or behavior to pay for news. That reluctance poses huge challenges to news sites that want to erect a pay wall and add subscription fees for access to their online offerings.

The second compelling thing in the online chapter to the larger report is some new analysis PEJ has conducted of Nielsen Netratings data of the top 200 news sites in the United States. Of the top roughly 200 news sites, legacy media are heavily represented, accounting for 67%. Another 13% are aggregators, such as Google News, primarily of legacy content, while 14% are online-only sites that produce original content. The average visit to an online news site is three minutes and four seconds long, but a visit to the New York Times website averages more than a minute longer than a visit to an aggregator site. And contrary to what some might expect about consumers engaging more closely with their favorite topics, people spend about half as much time per month on niche news sites as they do on those focused on general interest news.

The third thing is a new analysis of community websites that tries to determine if those citizen-inspired sites are perhaps filling in gaps in local coverage that emerge as local news organizations struggle in these difficult financial times. A study of community journalism found that the best sites can vary widely in their values and norms — even among those run by former journalists. Highly regarded sites produce more new content than community sites overall, but they are still limited in capacity. Only 43% of the sites were likely to produce a new piece of lead content each day. Fewer than a third of these select sites allowed citizens to post news or feature stories, information about community events or photographs. Just 2% allowed videos to be uploaded.

Finally, the content analysis in the report looks at the wide differences in tone and topic between the traditional news media and those who produce social media such as blogs, posts on social networking sites, and Twitter. This is the first-ever comparative analysis of the major news topics that matter in each domain and the variances between them are really striking.

Q. What is the most important thing media buyers and planners can take from it?

LR: The overall report spells out very clear how much the media world is fracturing and how much financial distress it is suffering. In the internet space, our polling data suggests that news consumers are not particularly eager or willing to click on ads. Some 79% of those online news consumers say they have never or only rarely clicked on an online ad. There is a section of the online chapter that talks about the rise of social media as a force in disseminating news and as a set of tools that allow people to participate in news. One implication of this is that media buyers and planners would be wise to consider social networking as a major pathway for people to learn about, discuss, and engage with news.

Q. Why is there so much uncertainty about how to measure and monetize audiences for online news?

LR: This report is careful to say that there is controversy over the accuracy and meaning of measurements of online news engagement. News organizations often say they have very different traffic figures from the ones that are provided by the web-tracking organizations. The other difficulty in this relatively new marketplace is that the distribution and application mechanisms for engaging news are changing rapidly. Many news organizations allow their content to be shared in places other than their websites. There are syndication and affiliation agreements that put news content in all kinds of places online that may or may not be considered “news” channels. So the measurement problems are compounded in the age of distributed publishing.

On the monetization side, the digital environment allows the supply of news to proliferate and that means there are more and more sites chasing ad dollars. The basic laws of economics say that when the supply of something increases more than the demand increases, the price will go down. There is also a strong undertone in our data that people feel that news is a commodity. When we asked people who have a favorite website if they would pay for access to the site if it erected a pay wall, 82% said they would not return to the site and would go elsewhere for their news. And those are the people who like that website enough to call it a favorite. The vast majority of online news consumers think that news is omnipresent from a wealth of sources, so they don’t feel they have to pay for something that is abundant and available from lots of places.

Q. Why were citizen news sites less affected by the economic downturn and what sort of future is there for them in terms of reader growth and editorial potential? How are they perceived by online news consumers?

LR: One of the findings in the analysis of the citizen sites was the motives of their creators. Most of them did not create the sites to make money and that means the downturn has not posed that much of a challenge to them. We don’t have data in this report about how those sites are perceived by consumers, but there are other studies that show news consumers like the idea that those sites are there, but don’t necessarily depend on those sites to give them the news they feel is critically important. There is a general hunger among news consumers for more local news, but the new study in this report shows that citizen sites are not always regularly updated and are not yet at the stage of being frequent providers of breaking local news.

Q. Why has blogging decreased in frequency? Do you see this trend continuing?

LR: We don’t know for sure, but there is some evidence that the activity formerly known as blogging is now being done on social networking sites in people’s wall-posting habits and their messaging activities. So, it might be the case that personal journaling and even personal news-posting habits are simply switching to a new platform. This is something we are going to explore some more in the future.

Q. How will search affect the way people get their news online in the future — what changes is it forcing the online news industry to consider?

LR: There are several elements of current searching that are important to online news. The first that comes through in the analysis of Nielsen Netratings data is that lots of traffic to news sites is referred by search engines. The online news industry is in the middle of a huge debate about its relationship to search engines and aggregators and it is clear that several experiments that are now or will soon occur will determine whether search engines are revenue enhancers or revenue detractors from news sites. Does an organization allow Google to crawl and index their site or not? That’s a huge unsettled question in some segments of the industry. The second is that the major search engines have for years provided news alerts that allow people to learn about new mentions of subjects that matter to them through emails. My sense is that the “alert” process will become even more compelling and important as more and more people connect to the internet wirelessly. We already see that “on the go” news consumers.

Q. Based on your research, how can news sites effectively monetize themselves? Will they have to turn to a combination of advertising, subscriptions or partnerships?

LR: At the Pew Research Center, we do not make recommendations along these lines because we are non-partisan and have no advocacy agenda. There is other research cited in the PEJ report that talks about all the business models you mention and there is an interesting argument that hybrids or multi-brids of those models might be the way of the future – in other words, news organizations will use several strategies and not just pick a single “business model.” Some places are already looking at another model, what writer Chris Anderson calls “freemium” – that is, offering some content for free and then charging for more in-depth or personalized material.

Q. Demographically speaking, who are internet news readers? How do they differ from the average American?

LR: Here’s the table we have in the report on this:

 Online news user demos


Link: The thorny challenges of online news at MediaLifeMagazine.com 

Read the full “State of the News Media” report at  http://www.stateofthemedia.org/2010/