What is it with tech bigwigs dispensing a mix of obvious and poorly thought out advice to newspapers?
Google's chief economist and the founder of the world's first popular Web browser both argued this past week that newspapers need to more quickly move online (shock!), but neither address the key thing holding publications back: the ad revenue disparity.
Netscape founder Marc Andreesen on Friday told TechCrunch his longstanding recommendation that newspapers and magazines "should shut down their print editions and embrace the Web wholeheartedly." Google's Hal Varian made a similar argument in a Tuesday blog post. "The best thing that newspapers can do now is experiment, experiment, experiment," he wrote:
There are huge cost savings associated with online news. Roughly 50% of the cost of producing a physical newspaper is in printing and distribution, with only about 15% of total costs being editorial. Newspapers could save a lot of money if the primary access to news was via the internet.
Print is expensive and dying, online is the future. So what's holding papers back? Maybe it has something to do with, oh I don't know, money?
On his Reflections Of A Newsosaur blog, Alan D. Mutter points out exactly why Andreesen (and implicitly Varian) is wrong. In 2008, interactive advertising accounted for about 8 percent of industry ad sales, he writes. Even accounting for a $10 billion decline this year, he still estimates print revenues will be over $30 billion.
It doesn't take a certifiable Silicon Valley genius to see that no business can walk away from some 90% of its revenue base without imploding. Andreessen should know this better than most, because he watched Netscape, the pioneering browser company he helped launch, go from supernova to black hole in a few short years.
Ignoring the Web is obviously suicide, but there is a reason publications are taking their time.
One of the biggest success stories in recent years is Politico, which was founded in 2007, and is expected to at least break even this year. How were they able to do it? With a print product. In his August 2009 Vanity Fair profile, Michael Wolff writes that Politico's Internet cachet "has enabled a tabloid-size print version of Politico (also called Politico) to thrive and more than double the company's revenues."
Google's Varian points out why this is. On an average day, we spend about 70 seconds reading news online and 25 minutes reading it offline, he wrote. "Not surprisingly, advertisers are willing to pay more for their share of readers' attention during that 25 minutes of offline reading than during the 70 seconds of online reading."
And, ultimately, he does make an interesting point, albeit indirectly. Replace that 25 minutes offline with an equivalent time on a tablet, and publications can reap the benefits of high-value ads while also saving on printing and distribution. Now that's an argument that makes sense.
[For another take on Google's prescription for Web newspapers, read Derek Thompson's 3 Big Problems for Online Advertisers]
This article available online at: