Developing an Online Newspaper Business Model: Long Distance Meets the Long Tail

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DEVELOPING AN ONLINE NEWSPAPER BUSINESS MODEL: LONG DISTANCE MEETS THE LONG TAIL

BY

GEORGE SYLVIE ASSOCIATE PROFESSOR SCHOOL OF JOURNALISM THE UNIVERSITY OF TEXAS AT AUSTIN

MARCH 24, 2008 AUSTIN, TEXAS

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ABSTRACT Developing an Online Newspaper Business Model: Long Distance Meets the Long Tail

This literature review cum strategic proposal connects two concepts – Chyi and Sylvie’s notion of long-distance online newspaper audiences and Anderson’s long-tail statistical Internet economic model – into an approach that holds strong potential for the local newspaper. The author analyzes the standard online newspaper input chain via the resource-based view (RBV) to suggest a new product that’s consumer-driven in terms of its value. The author argues that the resulting “global long tail” (aka GLT) product, however, must be combined with a two-pronged marketing strategy involving mobile media and local businesses to succeed. Finally, the author lists value chain, technological, and feedback risks that newspapers will have to overcome or rethink to adapt the strategy to current operations.

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Online newspaper strategy is an orphan in search of a home: Up until recently, consistent profits, market share, and sustainable growth have been scarce. Many companies are just now beginning to report an increase in online profitability. While most U.S. newspaper sites doubled their revenue, market share fell to 35.8 percent (from 44.1 percent in 2006) and the increase in revenue often came in lieu of print revenue: A Web ad cost 20 to 30 percent the cost of a counterpart print ad and a 1 percent drop in print revenue could not be made up by a 10 percent increase (Borrell 2007b; Stone, 2007a, 2007b). Average profit margins of online news sites approach roughly only half that of traditional media (Huang, 2007b). The mixed results in large part reflect the mixed approaches. Although American sites – with the exception of The Wall Street Journal – largely allow free access to content while charging for archives or special-interest material (Strupp, 2007), many British papers charge for some content (Herbert and Thurman, 2007). Doubt exists as to the worth of online readers (Snedeker, 2007) and online measurement methods draw debate as to effectiveness or worth (Hedges, 2007). No general, proven blueprint or business model for online news exists (Krüger et al., 2003) and, although papers have tried several approaches (Mensing and Rejfek, 2005), no new method has generated a rush of imitators. Although forecasts predict online ad growth will exceed that of newspaper ads (Van Duyn, 2007), no consensus exists among industry experts as to how to sustain acceptable levels (e.g., see, among others, Jones, 2007; Albers, 2007; Kubas and Kubas, 2007; Lemberg, 2007a; Lemberg, 2007b; Nesbitt and Lavine, 2004; Ernst, 2007; Cohen 2007; and Pfanner, 2007).

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Confusion may be the result. For example, newspapers such as The Washington Post are held in high regard, not only for their success and reputation, but because of – in the case of The Post’s online edition – a willingness to experiment (Anonymous, 2007). But Picard and Dal Zotto’s survey (2006) showed that while newspaper managers and owners saw unpredictability of developing markets as a key challenge, they did not (relative to other financial criteria) believe experimentation, positive action and imitating competitors as important in their investment decisions. But we can’t expect publishers to experiment blindly. There should be a successful business model that they can emulate or adapt to their own situations. But as suggested above and detailed later, no triumphant recipe or replicable formula exists. In developing such a model, this also will develop a strategic view that augments current schemes. Examples will show how newspapers can manipulate current value chains and create online products mining previously unforeseen and viable markets. These model cases also will...
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