Tuesday, February 2, 2010

Why Ads on the iPad & Other Tablets Won't Make a Difference

Karsten Lemm, a San Francisco-based freelance writer who works mainly for the German newsmagazine Stern, makes a convincing case that my earlier post on the iPad gave short shrift to the advantages of tablet reading. As he puts it: "The Kindle is hardly a great device for displaying magazine content, and Amazon's conditions have been less than favorable to publishers. That's likely to change with increasing competition. The iPad, future Google Android tablets, and e-readers like Skiff and Plastic Logic Que give publishers at least a chance to offer a new kind of reading experience that people will be willing to pay for."

I hope Karsten is right, but I have strong doubts. The free genie is out of the bottle, and it will be extremely hard--if not impossible--to get people to pay for what they already get for free. Even an old print guy like myself has to make a confession: Far too often I'll peruse the contents of a magazine at a newsstand. If there's a story I'm keenly interested in reading, I'll pass on buying the magazine and simply go to the website. I've done this for The Atlantic, Rolling Stone, The New Yorker, Vanity Fair, Esquire, and Sports Illustrated, to name a few. There has to be three of four stories I badly wanted to read in a magazine before I'll pay for it on the newsstand.

Others suggested that tablet reading will allow advertisers to reach consumers in new and different ways, creating greater revenue for content providers. The basic problem with this argument is that few advertisers have used websites to smartly do multi-media ads, even though the ability to do so has been there for years. Even if advertisers take greater advantage of the digital space on an interactive e-book reader, it still won't offset the loss of print advertising. So the essential problem confronting old media doesn't substantially change. It's costs are badly out of sync with current revenue.

Yes, it's true that production and distribution costs account for a high percentage of the cost structure bringing down traditional media. Ad Age recently quoted Google's Hal Varian who says that typically 53% of a newspaper's budget goes to printing for distribution--costs eliminated through digital distribution--compared with 35% on the "core" functions of news gathering, editorial and administration. But what he many not know is that in many instances, costs are so out of control in traditional media companies that if every editorial employee were eliminated, they would still bleed red.

As Kathy Gill (aka kegill) smartly points out in a response to my blog post, there are significant cost savings associated with digital distribution. Kathy reminds us of an ugly truth many in journalism prefer to ignore: that readers have never really fully paid for content, anyway. "For newspapers," she writes, "we subscribers have never paid for the content of the paper with our wallets, we paid for it with our collective eyes. We paid for the convenience of having the paper delivered to our door, whether or not that fee actually covered distribution costs." 

Today, we've trained a generation of readers not to pay for anything. With the exception of The Wall Street Journal, ESPN, Barron's and a few other niche sites, no one has cracked the code on the paid formula. Even The New York Times, which has the highest quality content on a consistent basis, hasn't figured out how to get money for its very valuable journalism. So there's little reason to think that the emergence of the iPad and a lot of competitive products will alter this reality.

I'm not trying to view this glass as half empty, as Chris Herot suggests, but I'm not very optimistic here from a financial point of view. I am, however, enthusiastic about the reading experience on a tablet based on my experience using the iPhone. It's a great and convenient way to access quality journalism and participate in community around that journalism. I suspect the iPad and its rivals will really ratchet up digital reading.


  1. John-
    No device makes the difference- the database does.
    There are only a few companies that have the trust and knowledge of their customers well enough to generate revenue from it:
    Amazon, Apple, Netflix, OKcupid (yep a free dating site) and Google.
    It's knowing who is looking at the screen- that generates the ability to monetize- not what they are looking at.
    These companies can serve up the advertisers what they desire- relevant consumers for their campaigns- if the middle men will share the revenue stream depends on how long the content providers keep dishing it out for nothing.

  2. David, very good point. In the old media world, we called it lead generation. Those ads led to significantly higher revenue and largely exist in the trades--not general media. Digital tracking make it far more likely for ads to result in higher revenues for smart publishers, though only Google has figured out how to really make money from this so far.

  3. John, since you were on the inside, why were media companies slow to adjust? I guess that in Time Inc.'s case they did the deal (or got taken along via TWX) that they thought would position them for the future with AOL. But even forward-thinking pubs like Fast Company were "talking" about the future while operating a business along legacy structures. And to be fair I think pub execs did feel that they were adapting and changing -- but as is usually the case the amount of change was never as big as the situation required.

    Anyway, thanks for the post. For the brave new world of publishing/journalism this post summed up the new maxims prett well [uh hhmmmm can't paste into comment, perhaps some anti-spam feature]

  4. Peter, not to pick up a cliche here as a response, but it's damn true: Change is hard. All of us were stuck in the plodding routines of day-to-day operations. We enjoyed the prestige of print, the influence of it, and how it commanded the bulk of the resources. Performance reviews emphasized your contributions to print, not digital. This is still true in media circles. Virtually all the attention remains directed to a dying medium. Far too much energy and money is spent on print when everyone agrees the future is digital. I don't expect this to change because the industry hasn't suffered enough to get it. To paraphrase one of my favorite authors and thinkers, John Gardner, the publishing industry has built its own prison and its editors serve as their own jailkeepers.

  5. Love the quote. Totally true. Hope you don't mind if I tweet that and link back here. Time Inc. is a highly metrics-based publishing enterprise (i.e. well suited temperamentally to pick up on digital and leverage the metrics). I can understand that they were nervous about taking the eye off their profitable print franchises. What I didn't understand was that they didn't fund more pure-play digital tools around key categories like food or home. The focus was more on digital replication of existing brands vs. building digital franchises for the future. Sports Illustrated had it right when they bought, incorporated and nurtured the high school sports site fannation. It perfectly extended the brand and served the niche in a more relevant way than the main brand ever could on it's own. But that model wasn't been used as much for People, Real Simple etc. When I left in 2000 to go to a dotcom it was total culture shock -- bright people working crazy hours embracing technology in all aspects (cell phone and laptop mandatory, web-based request systems, VoIP phone, a copy of Jacbo Nielsen's Web Usability guide for every new employee).

  6. John,
    A candidate for the deanship at the Nebraska J School believes mobile-device journalism is the future. And he's hot to put our school in the forefront. I'd be curious to know whether you agree.
    If you have some time, check out the details on Gary Kebbel's view in the "Bright Shiny Thing" post at www.joyousjoes.blogspot.com

  7. John, I agree with some of what you say, but I believe the trouble with media's adapting to a new digital world is that everyone wants to lump the entire industry into one strategy. You mention the few successful paid content sites. They are all niche or enthusiast resources, which is why people are willing to pay. Although the NYTimes could make a paid site work, they will have a harder time since they are more geared toward general news.

    The web era has allowed consumers to be much more focused. Fortunately, the analytics have followed suit. Media companies need to embrace this and take on a strategy that fits their audience and mission. People will pay for content, but it has to be better and more trusted than the competitors.

  8. Hi, John:

    It was great meeting you when you and Charles visited MSN from BusinessWeek. I only now found out about the career change. Shows how much I pay attention to the machinations of the media industry outside of Redmond.

    Best wishes in Marin County with your next venture. One of my freelancers from the SF area just clued me in.


  9. Hi John,

    My name is Erik Hansen and I work with Tom Peters. We'd like to send you a copy of his latest book, "The Little BIG Things: 163 Ways to Pursue Excellence." Would you be willing to send along your address? Email: erikhansen@tompeters.com

    Thanks, and best of luck in your new venture.


    Erik Hansen

  10. HI, John (trying again - if there are two, please delete one!).

    Belated thanks for the shout-out. I'm trying to finish our UW Twitter book and I'm not paying as much attention to the outside world as I should.

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