Jury Still Out on New Media's Money-making Power

Kitty Ho - Editorial Board member, The Journalist
Alex Koo - Executive Committee member, HKJA

[Jan 2011 - The Journalist]  The first regular newspaper, Daily Courant, began to be published in London in 1702. Three centuries later, the era of newspaper is seemingly coming to an end, thanks to the rapid development of the Internet. Facing challenges ahead, media developed online platforms to disseminate news. For instance, the Next media group has invested a handsome amount of money to seize the opportunities that new media provide. This includes action news, vdonext etc. Although the Next Media Group enjoys a profit amounting of HK$76 million, a loss of HK$31 million was recorded by the online business, according to the interim report of the company.

Recently, Ming Pao also attempted to charge readers for online news. Mr. Leung Heung Nam, News Manager of Ming Pao, said that a pilot scheme to charge readers for reading a few sections online had been going on for a few months. But revenue from online news remained more or less the same. He believed that readers have yet to get used to it.

All news outlets in Hong Kong provide internet news, and most of them are free.
Mr. Leung rejected the claim that charging for online news would reduce the impact of news as readers cannot share the news online. He quoted the example of a report about a member of the Executive Council, Mr. Lau Wong Fat, who allegedly failed to report a series of property deals under the conflict of interest rules. He said that it had aroused a lot of discussion in society as it should be.

Online Ad Revenue Needs Exploration

Nevertheless, the market for online advertising and marketing has yet to be exploited. Mr. Leung said that revenue generated from online advertising was a mere 5% of traditional advertising. It took time for people to adapt to new market trends, he added.

But the reality may be more complex. Although both new and traditional mass media makes revenues through advertising, their ways of doing so are not the same. Though traditional mass media like Ming Pao and Apple Daily have developed their own platforms online, their way of attracting advertising is the same as selling a newspaper: pay for the content, then readers are forced to read the advertisements.

However, this is not the current trend. Google, the search engine giant, has become a household name partly because of its brand new mentality to making money through advertising. Google excelled as a search engine because of its unique formula in ranking search results after users have provided the search keywords. Despite the wonderful service they provide, the founders of Google decided not to charge its users for its content. Instead, they look for ways to sell the information provided by their users for profit.

“Adwords” has been providing a stable income for Google, accounting for 30-40% of total profit. For instance, when users key in “flower” as their search keyword, advertisements of florists will be generated. Such pairing of searching and advertisements enables advertisers to reach their potential customers more easily.

Google runs another ad serving application called AdSense. Website owners can enroll in this program to enable text, image, and video advertisements on their websites for free. These advertisements are administered by Google and generate revenue on either a per-click or per-impression basis. This is a win-win situation where website owners can earn revenue at no cost, while advertisers get more exposure.

Similarly, Facebook, an online social network platform, attracts 500 million active users by providing free services before they found out how to sell the information of their users for profit. Although opening a Facebook account is free, it requires users to provide personal information. More importantly, from Facebook activities they can learn about the habits, hobbies, interests etc of 500 million users. This is very helpful in targeting specific customers for advertisements.

Traditional mass media going online may consider paying special attention to matching advertisements and customers. However, online news is easily disseminated. Readers may not have to go to the website of the media organization to read the content. In this way the traffic of the news website is reduced. Facing this problem, media organizations may consider limiting “copy and paste” or developing programs that require users to share the whole page layout instead of an article so as to boost website traffic.

Charge or Not to Charge

Apart from advertising, another major way of making money is charging users for newspapers’ online content. The feasibility of this proposal is still very controversial. We have two major newspapers in the UK adopting entirely different approaches.

The Times is among the pioneers of putting all its online content behind a paywall since mid-2010. After 3 months trial, The Times announced that online users came to about 200,000. It had lost less than 90% of its online readers. Traffic was reduced from 21 million to 2.7 million per month. Times' Editor James Harding said that the decrease was smaller than expected. Supporters of paywall argue that subscribers are more valuable to advertisers than readers who access online content for free, because they tend to be more engaged and publishers know more about them through registration. A steep decline in audience need not be financially detrimental.

This trial was closely monitored by the whole industry. Most media observers regard these figures as inflated. Among the 200,000 subscribers, half of them are subscribers of the “real newspaper” who get their online account for free. Their level of engagement is in doubt. Worse, the remaining half includes all those who have engaged in any sort of transactions during the period. News International, the mother company of The Times, admitted that many of those included in this figure are “single copy or pay-as-you-go customers” or those on one week or one day trial. These readers may not renew their subscription as soon as The Times cease to offer these concessions.

There is no verdict on The Times’ paywall, although most observers remain skeptical about its success.

In contrast, The Guardian has adopted an entirely different strategy. In an open lecture, Alan Rusbridger, the Editor of The Guardian, said that newspapers should embrace the openness of the Internet and the Internet has opened up many possibilities for journalism, if not business models. He said: “If you universally make people pay for your content it follows that you are no longer open to the rest of the world, except at a cost. That might be the right direction in business terms, while simultaneously reducing access and influence in editorial terms”. As a result, the website of The Guardian remains free of charge. Online readers don’t even have to register or provide any information.

Amid the global financial crisis, The Guardian earned 25 million pounds from digital advertising. More interestingly, the influence and readership of the Guardian has been considerably enhanced. In 2009, its daily circulation was around 300 000 copies. In December 2009, its website traffic was more than 37 million. Readers from the UK, the U.S. and the rest of the world take up around a third of the total. It is ranked among the top three English newspaper websites in the world in terms of traffic.

Engaging the Readers

The secret of The Guardian's website success may lie in its interactivity. The Guardian has operated its own bookstore (which is connected to its book reviews), job hunting and social network functions. It realized that many journalists find it hard to accept that they are no longer the ones in the know or with special access. Digital skeptics may say though social media is interesting, journalists are about authority. Rusbridger reckons that the position that journalists are uniquely knowledgeable and insightful is a hard one to sustain, as we look at how social media and blogosphere give you extraordinarily rich and deep content on specialized subjects fast and deep. Crowd-sourcing is an acknowledgement of the fact that readers know more than journalists do. The Guardian’s environmental site has joined up with a network of environment sites and bloggers and they give the newspaper diversity and range that the newspaper can’t achieve alone. The Guardian, as a result, is benefited by higher website traffic as well. Similar open platform has been developed for technology section too.

Alan Rusbridger stressed that designing a news website did not merely mean news going on the web by putting the entire newspaper online. Instead, it should be news of the web. This echoes what Dr. Mario Garcia, media consultant, said in his recent visit to Hong Kong. He said that senior personnel in media organizations have to understand the characteristic of each platform and emphasized the importance of layering for reporting. News alerts on smartphones have to be as precise as one sentence. They do not have to be complete but instant updates are allowed. Online news on websites is a continuity of news alerts that should incorporate videos and photos. News report in newspapers, given their 24-hour lag, must contain unique angles and in-depth analysis. He contends that tablet pcs will be the future of journalism and its potential is untapped. For instance, The Guardian has launched an iPad app called Eyewitness which makes good use of the high resolution screen, in association with a camera brand. It regularly uploads some very outstanding news photos, supplemented by professional tips from photographers.

Currently people mainly receive news from the websites of Hong Kong media in an inert context. In fact, the authority vs involvement situation should be resolved. News websites should encourage readers and journalists to interact: readers can make their own judgements, create their own content; articulate their own views; learn from peers as much as from traditional sources of authority, challenge journalists, or even do shopping in news websites. The feasibility of each of those should, of course, be further studied in detail. But the conclusion is apparent: if we are satisfied with the old way of thinking and attempt to extend it to the new media, we will be sleep walking into oblivion.