Evolution or revolution? How big media is trying to fix journalism’s broken financial model

John Lloyd was a veritable Santa Claus of optimism when addressing journalism students at City University today. “The financial model of journalism is broken, probably forever,” boomed the former New Statesman editor as the sky darkened above the future careers of everyone present. Media Bastard’s hands trembled as he tweeted this grim news to the world.

Lloyd’s point was that the advertising-based revenue model for journalism is broken. He’s right, it is. The US alone, for example, saw a 17.5% drop in publishers’ ad-revenue for 2009. That is far from to say, however, that it’s gone forever.

The problem is that most big-media organisations are panicking. They’re losing money quicker than Paul Gascoigne on a bender and being told from all quarters that their model is irreparable. “Abandon ship,” appears to be the message, “you’ll be gone in five years and we’ll all be reading specialist blogs.”

Eager to adapt to the digital revolution (though in many cases years off-the-pace), they frantically search for new financial models. Pay walls? Clubs? Arms dealing? Nobody as yet can say with any confidence what kind of model will sustain the big boys, but it strikes Media Bastard that the smartest of them are evolving judiciously, not trying to force a revolution.

Consider this: the primary cost in print journalism is the print and distribution process itself. This vast cost has historically been supported by advertising. Naturally, advertising has thus accounted for huge swathes of media companies’ income. With digital, it’s a different ball-game. The cost of producing and distributing the product online is a fraction of the print cost. Digital advertising revenues are, admittedly, proportionately smaller, but if the predicted increase in internet ad-spending is anything to go by, this won’t be the case forever.

If online advertising becomes a sustainable business model for the bigger media enterprises then the dilemma is simple: how do they attract the biggest shares of the advertising pie to their website? There are four approaches to this. One is the Guardian method of creating a numerically-dominant brand. 37 million unique users and an outright SEO war with competitors like the Telegraph have made its reader-base, at face value at least, very attractive.

The other approach is Telegraph Media Group’s (TMG) branded content, channel-based, ‘three C’ style announced by TMG digital editor Ed Roussel last week. Their focus will no longer be on pulling in legions of worthless page-flickers, but on capturing dedicated fans and then selling them stuff (a strategy that has worked well for The Telegraph in print). Branded content, however, raises uncomfortable questions about the dark arts of advertorial that Media Bastard will attempt to address next week.

The third approach is old Rupert’s favoured paywalls, and they continue to incite swathes of debate and comment in establishments far more reputable than the Media Bastard’s dive-blog.

The fourth model, however, isn’t given so much air time by the media commentators, and this is surprising. Matt Kelly, digital content director at Trinity Mirror, announced last year that he was going to swim against the tide and reject SEO and the “headlong rush to accumulate users”, in favour of targeting humans, not search engines. The theory is simple. Create content that appeals to a smaller but far more dedicated bunch of readers, thus getting them to return to the site often and for extended periods of time. Then take all that lovely analytics data to advertisers and show them valuable users who convert into sales and not legions of worthless CPM.

In addition, Trinity Mirror have split up their best “value-adding” content (3am and their football coverage) into separate sites, meaning that it isn’t diluted between lots of users who are flicking from section to section with no intention of clicking on anything, still less buying something. Crucially, this also allows advertisers target far more succinctly to a more specialised market. The idea is to give readers quality journalism and then watch them return in their droves to the tablet screen as they once did to the news-stand.

The Mirror approach is high-risk, but it isn’t a risky as a paywall. They can’t compete with The Guardian or the Telegraph for sheer weight of numbers, but they’ve been clever in attempting to bring their dedicated readership online and make them valuable to advertisers. If NI’s paywalls do, as some predict, send legions of digital users to their free competitors, then the Mirror of all brands stands to benefit handsomely as digital readers desert the Sun.

The reason Kelly’s strategy is less than popular is because it’s evolution when revolution is all the rage. He’s taking old-world thinking and applying it to new technology. In the current climate, many would describe this as lunacy. Though not WSJ Europe Editor Ian McIntosh, apparently.

In reality, we will probably see several models enjoy some degree of success as the recession eases into growth. The Guardian will likely be able to monetise its global appeal, The Telegraph will benefit from some shrewd marketing, and Trinity Mirror will offer a compact content solution at the tabloid end. Where that leaves News International titles, assuming the great wall is indeed constructed, isn’t known. Still, as Media Bastard has said before, you never can tell with old Rupert, and it would be a fool who writes him off just yet.