Newspapers & Profitable Digital News Delivery

e-Book Newspapers & Development of Profitable Digital News Delivery Products in the new media landscape Onur Kabadayi M. Sc., Integrated Marketing Communications Northwestern University March 2006 This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike2.5 License. To view a copy of this license, visit http://creativecommons.org/licenses/by-nc-sa/2.5/ or send a letter to Creative Commons, 543 Howard Street, 5th Floor, San Francisco, California, 94105, USA.

Newspapers and the Development of Profitable Digital News Delivery Products in the New Media Landscape About the Author After an undergraduate education in Management, Onur obtained his master’s degree from Northwestern University’s Integrated Marketing Communications program in December 2005. There he took classes from both Medill School of Journalism and Kellogg School of Management, specializing on online and direct marketing. This background has awarded himwith some invaluable skills in Customer Relationship Management, Branding, and Multivariate data analysis. Perhaps because he used to work for a publishing company, Onur seems to be particularlyinterested in applications of these skills in the new media field. He recently completedhis summer residency at RC2 Corporation, working on a CRM strategy design project, where he primarily addressed the better utilization means of Internet and Call Centers forachieving increased customer lifetime value. Special Thanks The basic research idea underlying this e-book originates from Rich Gordon, the chair of new media program at Northwestern’s Medill School of Journalism. He also contributed many ideas and provided feedback during the initial phases of my research. Tom Collinger, the director of Direct, Database and E-commerce Marketing sequence of Integrated Marketing Communications (IMC) program, also contributed great ideas, and provided his invaluable feedback. Ed Malthouse, who teaches Statistics and Data Analysis at IMC, offered his help in regards to complex data analysis conducted for gaining insights on “new media consumers”. Joseph Fan, from the IMC Class of ’05, who conducted some research on a similar topic, contributed some key insights. Although this e-book tries building on previously published works of many great scholars and practitioners, the following ones have a greater influence on the outcome (in alphabetical surname order): Bobby Calder, Joey Ka-Ching Chan, Vin Crosbie, Matthew Gentzkow, Umair Haque, Clive Humby, Louis Leung, Matt McAlister, Ed Malthouse, and Don Schultz. I hope the way that I build on and/or present their ideas is accurate. To all these and more, I offer my deepest appreciation. page 1 of 60

Newspapers and the Development of Profitable Digital News Delivery Products in the New Media Landscape Contents Page # • Introduction and Executive Summary 3 • Part – 1: Exploring the factors that facilitate substitution from print 8 newspapers to online news sources o P1-A Technology 8 o P1-B Younger generations 9 o P1-C Strategy implications 11 o Part -1 Summary 14 • Part – 2: Maximization of online revenues in a multi-channel setting 15 o Section -1: Advertiser related revenue maximization issues 18 P1-S1-A Fundamentals of multi-channel newspaper 18 advertising P1-S1-B Exploring factors that affect advertising 21 effectiveness • 1 - Ad perceptiveness 21 • 2 - Media experiences 24 • 3 - Database marketing 26 o Part - 2 / Section - 1 Summary 29 o Section - 2: Audience related revenue maximization issues 31 P1-S2-A Technological and societal trends on media 31 • 1 - Micro-differentiated media platforms 32 • 2 - Mashups and aggregators 32 • 3 - Reconstructors and connected consumption 33 • 4 - Implications on news industry 34 • 5 - Peer production 35 • 6 - A pressure towards greater transparency 37 • 7 - Snowball effect 38 • 8 - Further implications on news industry 38 P1-S2-B Analysis of online content pricing strategies 40 • 1 – Pros / fee based partial subscription models 41 • 2 – Cons / fee based partial subscription models 41 • 3 – Weighting pros and cons / fee based partial 42 subscription models • 4 – Implications of the Analysis 43 o Part -2 / Section - 2 Summary 44 • Part – 3: Consumer insights to aid superior news media design 47 o P3-A Insights from experiential engagement framework in 47 regards to online news consumption behavior o P3-B Strategy implications for newspaper websites 50 o P3-C Insights from VALS and experiential engagements 53 frameworks in regards to total news consumption behavior o P3-D Strategy implications for newspaper multi-channel 57 strategies o Part – 3 Summary 59 page 2 of 60

Introduction and Executive Summary 1A Introduction The purpose of this e-book is to identify and address major issues in regard to the development of profitable digital news delivery products and mechanisms for newspapers. However, major issues pertaining print channel are also addressed, where online revenue maximization issues seem to have multi-channel aspects with potentially significant impacts on revenues. The discussion of profit maximization considerations are structured into two sections: Advertiser related issues, and audience related issues. Although they are closely interrelated, the focus of advertiser issues discussion is optimizing the moment of ad exposure of audiences, and also driving superior integrated campaign results on them. On the other hand, the focus of audience issues discussion is exploring new frontiers in driving value from the news media audiences, in addition to analyzing potential online content pricing strategies, which will be done in the context of the discussed new media dynamics and economics. All these discussions are built on many societal and technological trends, and insights regarding the changing behavior of news media audiences, which are gathered from a wide variety of sources in addition to the conducted primary research. Additional consumer insights to aid the future superior designs of news media platforms, products and features are introduced in the final part of the e-book. Overall, the dynamics of the new media landscape and the resulting economics points that the existence of newspaper companies are under a serious threat, and preserving the status quo could be very costly. The new, winner vision entails a transformation towards being truly multi-channel “news companies”; built on more efficient economics; driven by the insights regarding the total news consumption behavior of the media audience. This new vision focuses on building two key competencies: Internal production and distribution of news; external facilitation and organization of open access value creation. These efforts will result in news delivery products that are experience-rich, multi-channel, versatile, integrated; and also a brand loyal audience. These will also enable the execution of highly effective advertising campaigns that are Integrated, Data- Driven, Multi-platform, targeting micro / local audiences with multiple touch points in a tailored way for the for the niche and diverse advertiser audience. Newspapers & page 3 of 60 Development of Profitable Digital News Delivery Products in the New Media Landscape

1B Executive summary The existence of newspaper companies under a serious threat… Media landscape is undergoing a substantial change, threatening the very existence of newspaper companies. The rate of population wide substitution from print to online news media is increasing. Also, competition is intensifying and boundaries are blurring amongst various media channels. Overall media supply is exploding, and a greater portion of the supply becoming available to the consumer. Buying attention / audience acquisition costs are likely to increase significantly in the near future. Furthermore, the current cultural and technological trends are not only putting traditional news media companies who rigidly forbid open-access value creation at a great economic disadvantage, but also create a major pressure towards transparency, challenging hierarchical and undemocratic editorial processes. In the midst of these changes, most of the digital news delivery investments of newspapers had failed as a result of lacking the strategic intent –not paying attention to key issues of multi- channel optimization–, and relating to papers as primary products and the Internet as the adopted child. Consequently print and online products began to be managed and strategized in a totally siloed manner that in turn not only created an inconsistent and disintegrated customer experience, but also prevented emerging business opportunities to be assessed and leveraged more effectively. Building a vision on the total consumption behavior and the new media landscape: Experience- rich, multi-channel, versatile, integrated products and a brand loyal audience… It must be noted that people do not just use media – they experience it. Also, overall media experience is not a unidimensional continuum. There are many multidimensional experiences associated with media use. Better driving / strengthening many of these separate experiences will potentially increase both the media consumption of the audiences, and the advertising effectiveness of the news products. Younger generations (aged 18-35) have higher expectations from online news products. The 5 common elements of experiences that specifically "turn them on" have been identified as: Personalization; Interaction; A sense of belongingness / involvement / community; A sense of accomplishment / self-improvement; and Credibility. Most of today’s newspaper websites are unable to drive these diverse set of experiences as they don’t leverage the rich set of tools and opportunities provided by the online medium. As a result, audiences -specifically younger ones- prefer other websites which also feature news content, but do a better job in terms of driving these experiences. Thus, newspapers must invest aggressively into the development and promotion of profitable digital news delivery mechanisms. On the other hand, these efforts are likely to fail as well, without an in-depth understanding of the “total” news consumption behavior and needs of the audiences, younger segments in particular. Considering the economical impacts of the discussed media trends, newspapers must relate to their audiences’ news consumption needs holistically and leverage their brands on multiple platforms. This is a plausible strategy, as consumers' brand conceptualization is independent from delivery channel. A transformation is needed from being a “newspaper company” to a “news company”. This will involve maintaining a mix of products and services that will capture the maximum “share of news consumption” of the target audiences, so that so that the effects of attention and/or time scarcity will be somewhat compensated. Newspapers & page 4 of 60 Development of Profitable Digital News Delivery Products in the New Media Landscape

However, the implications of the VALS and experiential engagement frameworks presented suggest that achieving this end can be somewhat complex, because the factors that determine someone's total mix of consumed news products seem to be many. One's lifestyle and psychographics (i.e. one’s resourcefulness and primary motivation in life) determine utilities driven by the various features and the design of a news product / platform. News product / platform features discussed in this text include interactivity, multimedia, convenience, required level of involvement, and indepthness. The resulting taste of news consumption has a great role on determining the mix of news products / platforms consumed in a complementary sense. Also, consumption of various news products (may be in different platforms) create a taste for each other (i.e. print magazines create a taste for online, and online a taste for print). These findings suggest that the news media products must be highly versatile, yet integrated. The versatile and integrated products idea involves news delivered in multiple platforms and multiple formats, which can complement each other synergistically based on personal preferences and tastes. In order to capture more of the share of news consumption these customizations of news products should go even beyond presenting the audience with relevant news, because the relevancy of the news does not ensure the relevancy of the format, and many other variables of preference. Many design improvements are required to accommodate wide range of audience preferences – not only in the Internet platform which impose fewer restrictions on product designs, but also in the print platform. Furthermore, the increasing cost of customer acquisition presents a good case for designing effective loyalty programs in order to retain the most valuable segments of the media audience. In this context, customer insights obtained through database marketing may be utilized to design a loyalty scheme that both rewards the high valued audience segments with relevant perks, and the newspaper itself by altering the news “prosumption” behavior of the audience in the desired direction. Two key competencies: Internal production and distribution of news; external facilitation and organization of open access value creation… The new media audience both consume and produce media ("media prosumers") collectively and connectedly over the internet (i.e. peer production, connected consumption) with an increasing marginal utility on each additional prosumer (network effects). These gave birth to new media forms such as "micro-differentiated media platforms" and "mashups". As a result, the economics of media has changed which caused the simple equation that used to hold sometime ago to become highly inefficient: Buying audience attention for the in-house produced content and selling it to the advertisers. Within the context of new media economics, developing and improving the competence of “core” news production and distribution presents a relatively bigger competitive advantage compared to that of other media, since the barriers of entry are higher for "news media" production compared to other (i.e. entertainment) media production. Furthermore, well publicized and branded opinion pieces play a key role in differentiation of the products, simultaneously driving brand equity for the newspaper. Considering the economic advantages of "peer production" models, newspapers websites must experiment with “peer production" in regards to content categories that stay out of the core "news" description, while further developing their core competence of news production and distribution. Furthermore, newspapers should open up their online goods, experiment with "connected consumption models" encouraging social interaction on websites, and giving readers Newspapers & page 5 of 60 Development of Profitable Digital News Delivery Products in the New Media Landscape

access to means of production for complementary goods. These steps will also function as experimentation with more transparent, democratic editorial structures. These recommendations will also drive and strengthen the identified experiences that “turn on” the younger generations, which will potentially improve website usage and ad effectiveness of this segment. In the era of “open access value creation”, cooperation with external influential and popular bloggers and columnists, whose comments on opinion pieces play a key role in generating buzz and triggering external value creation, is essential. Thus, providing incentives for them in terms of advertising and/or subscription revenue sharing programs will have positive financial benefits as a result of driven complementary value and popularity. Strategic Newspaper Advertising tailored for the needs of niche and diverse advertiser audience: Integrated, Data-Driven, Multi-platform campaigns that target micro / local audiences with multiple touch points… The "news companies" which capture the maximum “share of news consumption” of their target audiences with versatile and integrated multi-platform news media products are a quite unique advertising media. Serving to micro / local audiences who frequently seek both content and advertising delivered in print and online platforms creates significant opportunities from the integrated marketing perspective. There is a potential a potential to host consistent yet complementary multi-touch point marketing campaigns that are data-driven. However, this requires careful strategic execution and planning. Leveraging the powerful position of newspapers at the top of the food chain in terms of local news and information content, by coupling it with the capabilities of the online environment is a key pursuit for newspapers to drive advertising revenues. On the other hand, getting a satisfactory share from increasing online advertising demand requires them to pioneer innovations serving the specific needs of their niche advertisers – small to medium sized local businesses, and regular people who use classifieds. All these require a strategic cooperation with innovative and experienced online marketing agencies / consultancies. Also, there is a need to educate advertisers about the unique potential of strategic newspaper advertising. Newspapers must also become a highly effective advertising media compared to the competition in order to grab a considerable share from shifting media budgets. There are three critical factors which affect the advertising effectiveness. These are ad perceptiveness of the content delivery platform, nature and intensity of experiences with the specific media, and proper utilization of database marketing methods. The differences in ad perceptiveness of different content delivery platforms require properly addressing the characteristics, limitations and capabilities of each platform. Print advertisements are more effective in driving brand awareness and recognition. Also, print medium is more suitable to drive sales to products offered in bricks and mortar stores. Online advertisements are more suitable to drive traffic to online websites and stores. Since newspaper websites lack the tangible experience of holding a print newspaper, which impairs the ad perceptiveness, they must utilize innovative ways to deliver advertising. Interactive online advertising, which increases the engagement of the audience to the advertising, is an example for this. It must be noted that there is a potential to use print and digital platforms in a complementary manner in integrated marketing campaigns. Newspapers & page 6 of 60 Development of Profitable Digital News Delivery Products in the New Media Landscape

It is important to realize the relationship between media experiences and advertising effectiveness. Improving / strengthening many of the multidimensional media experiences will also improve the advertising effectiveness of the media. The utilization of advanced database marketing practices has a potential to significantly improve advertising effectiveness of multi-channel advertising campaigns. Thus, newspaper websites must require their visitors to register in exchange for a number of benefits. Especially for regular website visitors, behavioral data-mining following registration will reveal a great deal of customer insights. Along with self reported information, and VALS / PRIZM input, these customer insights enable targeting the right customer with the right message / offer, at the right time in both print and online platforms. Contextual targeting can be used as a supplementary mechanism to improve the results of campaigns on the online platforms as well. The true power of strategic newspaper advertising will be revealed when both print and online mediums utilize these superior targeting mechanisms, and they can deliver an individual multiple customized ad copies at different platforms, each achieving different goals. Targeting based on trigger events is another powerful mechanism. Database marketing will also fuel the design of key business strategies with potentially more powerful results than its applications in advertising. Loyalty programs and multi channel optimization issues are potential areas to benefit from revealed customer insights. Experiments with new fee-based subscription models… For most newspapers, fee-based “total” subscription models do not seem economical in the era of “open access value creation”, especially without extraordinary circumstances that make content highly differentiated. On the other hand, there is potential for fee based “partial” subscription models (i.e. New York Times’ – TimesSelect) to have positive net financial benefits, mainly because they decrease the substitutability of print and (free versions of) online products. However, the results are likely to vary amongst different newspaper companies. Existence of circumstances that differentiate the content to be restricted provides a stronger case for pursuing such strategies. Such circumstances that have been discussed here include, having a powerful brand equity, having a perceived monopoly, and having well-know and recognized bloggers / columnists. If these circumstances exist, until the industry reaches a consensus, conducting a detailed market research followed by a test implementation seems to be the only way to reach an accurate decision on pursuing such strategies. This decision should involve weighing the estimated negative revenue impact of resulting limited value addition / popularity and decreased traffic; and the estimated positive revenue impact of people who either subscribe to the online edition, or continued buying the paper as a result of restricted online access. Moreover, increasing the utility driven from the additional online features that are provided to the subscribers may increase the net financial impact of the partial fee based subscription models. It must be noted that once the access for opinion pieces is restricted, the complementary value created for the opinion pieces by the audience becomes limited. Unless special mechanisms are designed, the micro content will not enjoy as powerful acceleration of value and popularity as non-access restricted ones. Two examples for such special mechanisms can be providing free subscriptions for the influential bloggers who may comment on the opinion piece, and making some of bolder the opinion pieces unrestricted for a certain period of time. Newspapers & page 7 of 60 Development of Profitable Digital News Delivery Products in the New Media Landscape

PART – 1: Exploring the factors that facilitate substitution from print newspapers to online news sources Newspaper readership behavior has been going under a slow but a determined change since the last few decades. The fact that Baby boomers read newspapers roughly one-third less than their parents, and the Gen Xers read newspapers another one third less than Baby Boomers 1 is a good indicator of this change, and shows that this change is not a positive one from the perspective of traditional newspaper companies. The effect of popularization of Internet and the introduction of online newspaper websites on the decline of newspaper readership has been subject of much speculation and debate. Recently, many researchers tried to address if Internet news is a substitute whose continuing growth may curtail or even eliminate the market for traditional newspapers, or if it need not crowd out print consumption and could even complement it 2 . Although some researcher’s findings are contrary, many have concluded that, overall, online news is a substitute for print. However, a statement that almost all researchers will agree would be that the magnitude of the substitution today does not appear to threaten the survival of newspapers. Although it should be safe to assume that such threat does not exist today based on these researches, there potentially are some foreseeable factors which might change the magnitude of this substitution, and consequently threat the very existence of newspaper companies. Two of these factors will be explored in detail: Technologies that increase the utility of online news media; and younger generations who have negative attitudes of newspapers. P1-A Exploring the print to online news media substitution: Technology Today, the popularization of laptop computers, internet enabled phones, and PDA’s combined with the increasing penetration of wireless Internet access points are already making online news consumption much easier and convenient. It should be noted that, many of these technologies, even the Internet itself has not reached to their full potential yet. Adoption of online media usage and the forming of online media consumption habits are still underway, as people are still experiencing a learning curve and habit formation in regard to technologies which make online news delivery possible. A support for this comes from two highly recognized research resources, Forrester and eMarketer. Forrester Group, which focuses on technology and its effects on businesses, concludes that web veterans are more likely to cut back on reading print newspapers than people with less Internet experience 3 . On the other hand, a forecast from eMarketer, a key resource for online marketing related market research, suggests that the number of broadband households will grow at a compounded annual rate of 19.4, which brings the broadband penetration from 23.1 in 2003, to 56.3 in 2008. Since households with broadband spend much more time on the internet compared to households without broadband 4 , a significant increase will be observed in the numbers of "Web Veterans", which in turn will negatively affect print newspaper readership based on Forrester’s research. 1 Brown, M. (2005), ‘Abandoning the News’, Carnegie Reporter - Vol. 3 No. 2 2 Waal E., Schonbach K., Lauf E. (2004), ‘Online Newspapers: Substitute for print?’, 6th World Media Economics Conference; Gentzkow, M. (2005), ‘Valuing New Goods in a Model with Complementarity: Online Newspapers’, University of Chicago Website; Rathmann T. A. (2002), ‘Supplement or substitution? The relationship between reading the local print newspaper and the use of its online version’ (2002), Communications - Vol. 27; Dutta-Bergman M. J. (2004), ‘Complementarity in Consumption of News types across Traditional and News Media’, Journal of Broadcasting and Electronic Media - March 2005. 3 Kelley, C.M., DeMoulin, G. The Web cannibalizes media. Technical Report, The Forrester Group, May 2002. 4 http://www.clickz.com/stats/sectors/broadband/article.php/3463191 Newspapers & page 8 of 60 Development of Profitable Digital News Delivery Products in the New Media Landscape

Apart from the technologies that already are on the market today, there is a significant likelihood that further dramatic technological advancements are yet to come, which would also positively impact the utility, thus the consumption of online news media. This is what many people involved in technology industry suggest, including the famous business man Bill Gates 5 . Indeed, what they suggest does not seem to be a fantasy, as Philips Electronics had recently demonstrated 6 an e- paper that can be rolled up into a cylinder the size of a pen, and announced plans to begin manufacturing 1 million of these in 2006. P1-B Exploring the print to online news media substitution: Younger generations Apart from the advancement of news delivery related technologies, the other factor which will potentially increase the magnitude of substitution between print and online news media is the younger generations who have negative attitudes of newspapers, and their consequently slipping newspaper readership rates. Some researchers which have been cited for their works regarding the substitution of online and print media have suggested that online newspapers seem to harm the use of print newspapers especially among the young 7 . Perhaps, total migration to the online versions of newspapers is a less significant source of concern for newspaper companies than the migration to other online news media is. However, according to a recent article published on Carnegie Reporter 8 , things are not promising in this front as well. Based on a survey performed to 18-to-34 year olds carried out by Frank N. Magid Associates in May 2004, Carnegie Reporter indicates that measured by daily use, Internet portals (such as yahoo.com and msn.com) is the most frequently used news source for this segment of population, newspapers ranking fourth after local TV and network or cable TV websites. Carnegie reporter also indicates that 18 to 34 year olds intend to continue to increase their use of the Internet as a primary news source in the coming years, and that it is a medium embraced in meaningful ways. The very bad news for the newspapers is that they have no clear strengths over the other forms of media as perceived by this segment, which could be summarized by the following table: 5 During a speech that he gave on October 2005, Bill Gates expresses that personal opinion that within 10 years of time, we'll all be connected to the internet all the time, carrying paper-thin devices that will allow us to access entertainment, education and information - and they will render newspapers and magazines obsolete 6 Betty Halford, ‘Philips advances flexible displays’, Chemical & Engineering News – February 2004, http://pubs.acs.org/cen/topstory/8205/8205notw7.html 7 Waal E., Schonbach K., Lauf E. (2004), ‘Online Newspapers: Substitute for print?’, 6th World Media Economics Conference 8 Brown, M. (2005), ‘Abandoning the News’, Carnegie Reporter - Vol. 3 No. 2 Newspapers & page 9 of 60 Development of Profitable Digital News Delivery Products in the New Media Landscape

Table 1A – Images of News Sources based on category Now it should be highlighted that human behavior is driven by previously formed beliefs / attitudes, and habits. A research conducted in 1985 by Philip Meyer, a journalism professor at the University of North Carolina at Chapel Hill, discovered that the newspaper reading habits that people develop in their 20s stick with them as they age 9 . Further research by the Newspaper Advertising Bureau, the National Opinion Research Center and the research firm of Clark, Martire & Bartolomeo confirmed this. Then, looking from the perspective of traditional newspaper companies, this could be one obvious reason why substitution to online news sources seems to be a less significant problem considering older segments of the population, who have previously formed newspaper readership habits, and mostly positive attitudes towards newspapers. However, the case is completely different for younger generations. Recently, it has been suggested that these people read less newspaper, consume more online news media every other day; have mostly negative attitudes towards newspapers, and positive towards online news media. As they grow, it is very likely that the magnitude of the population-wide print to online media substitution will become bigger. Indeed, inability to understand the news consumption behavior and needs of younger generations is not a new problem for newspaper companies. The following chart is a good illustration that this problem is evident for decades. It is also a good illustration that newspaper reading habits stick as people get older, and finally the survival of newspaper companies is under a serious threat. Table -1B: Behavior of Age Cohorts Read Newspaper “Every day” 10 9 Newspaper Association of America Website, http://www.naa.org/artpage.cfm?AID=1593&SID=1020 10 John Bartolomeo, Presentation to International Newspaper Marketing Association, May 2002 Newspapers & page 10 of 60 Development of Profitable Digital News Delivery Products in the New Media Landscape

In order to sum up the analysis in regard to substitution from print to online news media, now it can be concluded that although the magnitude of the substitution between print newspaper readership and online news consumption does not appear to threaten the survival of newspapers today, the magnitude of substitution is bigger for the younger segments of the population, and there are many foreseeable factors which will potentially cause an acceleration in the rate of population-wide substitution every other day. Thus, the survival of newspaper companies is indeed under a serious threat. P1-C Exploring the print to online news media substitution: Strategy implications There are two implications of this conclusion. The first is that newspaper companies must spend serious efforts in order to truly understand the changing news consumption behavior and needs of their audiences, paying specific attention to the younger segments of the population. Obviously, these people are different than the older generations, and an in-depth understanding of these differences might be the key to attract and engage them into newspapers. Thus, this e-book will later try to shed further light on this understanding by compiling the insights gathered through various researches, and discussing their implications during Part – III: Consumer Insights to aid superior news media design. The second implication of this conclusion is that, the drive for newspaper companies to become much more engaged in digital news delivery systems and truly multi-channel oriented is getting stronger every day. However, it is important to realize that this issue remains highly controversial among newspaper company executives, and many have serious concerns in regard to the further development of online offerings. For instance, one most commonly heard such concern is that online editions significantly cannibalize print revenues. Indeed, most of these concerns are well grounded and attributable to the overall challenge of multi-channel optimization, and many industry specific circumstances. This e-book will soon try to address these challenges, and the key multi-channel strategy design issues for newspapers. However, such concerns also suggest a need to reinforce the logic in regard to what makes aggressive digital new delivery strategies a high priority. Two key factors that have already been addressed are: the increasing rate of population-wide substitution from print to online media; and younger audience’s negative attitudes towards print, positive attitudes towards online media. Now, some additional factors will be discussed. It has been recently noted that advancements in news delivery related technologies are making online news consumption much easier and convenient. Another key impact of such technologies on the media industry is that they cause the boundaries between different media channels blur fast. Today, a newspaper or an Internet portal can compete with radio stations without any significant investment using podcasts, which are in a sense “on-demand” radio programs. Likewise, a newspaper or an Internet portal can also compete with TV channels using video blogs and featured on demand video archives. A computer is not necessary to access these on-demand videos anymore, as TIVO has recently started making them available for regular TV’s 11 . Moreover, media establishments of online origin have recently illustrated that they are not bound to innovative technologies for further competing with traditional media companies: WikiNews 12 have started offering a print edition. Although it is only available to people with printer access for now, future plans are underway to start offering a weekly or daily published edition. 11 http://publications.mediapost.com/index.cfm?fuseaction=Articles.showArticleHomePage&art_aid=38863 12 http://en.wikinews.org/wiki/Wikinews:Print_edition Newspapers & page 11 of 60 Development of Profitable Digital News Delivery Products in the New Media Landscape

So the boundaries are really blurring between various media channels, and media establishments are increasingly crossing their traditional territories and operating in each others traditional domains. Thus, direct competition is intensifying between newspapers, radios, TV stations, and online news portals for getting an increased share from both the audience time available for media consumption, and the advertiser budgets. As a result, the ability to successfully respond to competition from all fronts became a key factor on the chances of survival of media companies, especially for the ones with a “print” origin. Leaving the technology and competitive landscape aside, it is now time to take the consumers perspective, and ask if it make sense for consumers to see their favorite news media brands on a variety of other news products and channels. How might a consumer react to see the “Wikipedia” brand on a print newspaper, or the “New York Times” brand on a podcast? To answer these questions, the concept of integrated marketing, which contends that there is a need to view the consumer as a whole 13 , can be visited. From an integrated marketing standpoint, a consumer is not just a person who buys the product that we are concerned, at a point in time. Taking a more multidimensional view of the consumer will lead to a better understanding which will reveal larger marketing opportunities. When this multidimensional view of “newspaper readers” is taken accordingly, they would now be seen as “news consumers”, because for them a TV / Radio news program, an online news portal or a newspaper all serve to pretty much the same need – “obtaining information about what is happening out there”. Then, it will be realized that news consumers conceptualize a news media product as an “idea”, which marketers call a “brand”, based on their experience with the news media product (as this is the case for interaction between any consumer and product). For instance, driven by their experiences with various New York Times products, news consumers conceptualize “The New York Times” as an idea that entails high-quality, authentic, trustworthy news and journalism. Thus, news consumers’ brand conceptualization is independent of the delivery channel and based on their total experience. Then, it can be suggested that once the New York Times Company “owns” the high-quality, authentic, trustworthy news and journalism “idea”, it can leverage this in any media delivery channel that target certain news consumers. Whether it is a website, TV channel, podcast or newspaper, once a news product tagged with “The New York Times”, news consumers will associate it with the high-quality, authentic, trustworthy news and journalism. Note that consistent experiences across different media channels will reinforce the idea, and will increase the brand equity. Indeed, this is what New York Times Company is trying to achieve today. Janet Robinson, the CEO of the company states “Our vision for The New York Times over the next 10 years is to transform ourselves from a product-oriented organization into one that focuses on our core competency of providing quality journalism through a variety of channels” 14 . NYTimes.com has 15 million unique users, and the company continues to explore digital delivery systems. Moreover, March 2003 saw the debut of the Discovery Times channel, a joint venture TV channel from the New York Times Company and Discovery Communications. Also during late 2005 company started offering a variety of podcasts 15 . 13 Calder B. J., Malthouse E. C. (2003), ‘What is Integrated Marketing’, Kellogg on Integrated Marketing. 14 Mark Tungate (2004), Book “Media Monoliths – How great media brands thrive and survive”, page 111 15 http://news.com.com/Audible+to+offer+New+York+Times+podcasts+via+RSS/2100-1026_3-5760988.html Newspapers & page 12 of 60 Development of Profitable Digital News Delivery Products in the New Media Landscape

Summing up the discussion, it can be concluded that aggressive development of digital news delivery products and a commitment for having a true multi-channel orientation should be a top priority for newspaper companies today: Table - 1C: Factors that call for newspapers to become truly multi-channel oriented 1. The increasing rate of population-wide substitution from print to online media 2. The younger audience’s negative attitudes towards print, positive attitudes towards online media 3. The fast blurring boundaries and increasing direct competition amongst various media channels. 4. The independence of consumers brand conceptualization from delivery channel, which enables newspapers to leverage their brands on multiple platforms. This e-book recommends the media brands / products to be built around consumer needs and preferences rather than the delivery channels. Thus, the call for the newspaper companies to become truly multi-channel oriented implies abandoning the traditional logic that relates the “paper” as the primary product, and the website as the adopted child. Perhaps, it is time for newspaper companies to relate themselves as “news companies”. Of course, the ability to deliver news in print is their unique advantage compared to the competition. But the label news – “paper” obviously limits their perceived abilities for responding to competition. The consumer need of “obtaining information about what is happening out there” will never vanish, since it is an essence of the human nature. Perhaps having the preference of satisfying this need through a print publication will also never completely vanish, but it is becoming less popular with the emergence of other news delivery channels. In such circumstances, a company which sees itself as a “newspaper company” will be bound to the paper for revenue generation, and probably spend millions to alter consumer preferences, and make them buy the paper again. Inevitably, such companies will financially suffer, and become extinct at a future point in time. On the other hand, a “news company” will explore new mechanisms of revenue generation that emerge from the new news delivery channels. Also, it will closely watch the changing news consumption behavior, needs and preferences of their audiences. They will finally reorganize and leverage all the current assets of their business and gather new assets if necessary, in order to maintain a mix of products and services that will capture the maximum “share of news consumption” of their audiences. A “news company” is the one that realizes, one of its key assets is having a strong, differentiated brand concept that revolves around the basic need of “obtaining information about what is happening out there”, and leverages this brand on multiple channels. Thus, one of the highest priorities of a news company with a print origin today should be aggressively developing and promoting effective digital news delivery methods. These might involve Internet news portals with enriched capabilities, podcasts, video Blogs and on-demand video archives, or mobile news services for PDA’s and cell phones. Carnegie reporter highlights many of these recommendations with the following wording: “It is time for print industry investments in Internet to match the online audience size and the extraordinary magnitude of the migration to digital news delivery. While making investments is imperative, the news industry needs to do so while simultaneously inventing new, creative business approaches. Few news organizations think methodically and creatively about product development, and resources allocated to studying and inventing new news products are generally miniscule.” 16 Contrary to “newspaper companies”, “news companies” with a print media origin will never become extinct. As they innovate, their brands will get stronger, loyalty of their audience will grow across all platforms, and as a result, they will also grow and prosper. Which one of these 16 Brown, M. (2005), ‘Abandoning the News’, Carnegie Reporter - Vol. 3 No. 2 Newspapers & page 13 of 60 Development of Profitable Digital News Delivery Products in the New Media Landscape

groups will your newspaper belong? The bets are open, however if the signs of transformation are not already there, good luck alone might not prevent the inevitable. PART – 1 Summary: Exploring the factors that facilitate substitution between print newspapers and online news sources The following factors cause the rate of population-wide substitution from print to online news media to accelerate, threatening the very existence of newspaper companies: o The advancement of news delivery related technologies o Younger generations’ negative attitudes towards newspapers / positive attitudes toward online media; and consequently slipping readership rates of this segment Boundaries are blurring fast and direct competition is intensifying amongst various media channels. Newspaper companies must spend serious efforts to gather an in-depth understanding of the “total” news consumption behavior and needs of their audiences, paying specific attention for the younger segments of the population. Based on this understanding, they must relate to their audiences’ news consumption needs holistically, regardless of the delivery channel. The traditional logic that relates to papers as primary products and other delivery channels as adopted children has to be abandoned. A transformation is needed from being a “newspaper company” to a “news company”. This will involve reorganizing and leveraging all current assets of the business and gather new assets if necessary, in order to maintain a mix of products and services that will capture the maximum “share of news consumption” of the target audiences. Newspapers must invest aggressively into the development and promotion of profitable digital news delivery mechanisms. Newspapers & page 14 of 60 Development of Profitable Digital News Delivery Products in the New Media Landscape

PART – 2: Maximization of online revenues in a multi-channel setting The newspaper business had become a multi-channel one as many newspapers started offering content in their websites during mid 90’s, when Internet was enjoying the very early days of its popularity. Such a timely start to digital news delivery should be seen as a very promising action since this could both be a great response to the new forms of competition that emerge in these mediums, and also a potentially effective remedy for the declining readership in younger audiences who are very tech-savvy. However, it must be noted that becoming a multi-channel business brings many complex issues on the table that must be urgently addressed. First of all, integration of marketing communication efforts, organizational structures, business processes, and business technologies is an important imperative. Consideration of these issues ensure that the business will be managed and strategized in an integrated and non-siloed manner, that in turn not only facilitates the consistency and complementariness of the customer experience, but also enables business opportunities to be assessed and leveraged more effectively. Moreover, leveraging each channels unique abilities and advantages while properly offsetting the limitations of each is another key issue. Since many decisions which seem to impact one channel may indeed have significant interdependence with others, other multi-channel issues which require serious consideration include but are not limited to the following: decisions regarding pricing strategies for different channels, whether and/or how to cross-promote different channels, and which products / services should be offered on different channels. Especially after the emergence of the online environment as a major channel, many businesses spent much effort in order to figure out their way in the midst of all these issues. Numerous cases illustrating this could be revealed if one looks at the evolution of methodologies employed by the retailing industry that mainly uses brick-and-mortar stores, catalogues, and also Internet to approach their customers. The multi-channel optimization efforts of retail industry had paid off, since recent studies indicate multi-channel customers show a significantly higher value and frequency of purchase than single channel customers 17 . In the case of newspaper industry, however, it can be alleged that decision makers initially approached the task of multi-channel optimization with only common sense and spontaneity rather than with business rationale. Apart from making poor planned and excessive investments on technologies that achieve just a little more than copying the print content to the websites, it is hard to say that newspapers had put much thought into digital news delivery and the multi- channel issues that emerge. In a speech at the Online News Association annual conference last year, Tribune Company President Jack Fuller said his company alone has so far spent $600 million on online editions 18 . The fact that most of these investments had failed is undeniable. Although many businesses had significantly revolutionized the way they serve to their customers using the Internet medium during last 10 years, newspaper companies seem to be more or less at the same point that they started in regard to online news delivery. For instance, despite the fact that younger audiences increasingly substitute their newspaper readership with online methods of news delivery, newspaper websites failed to attract them, just like their print counterparts. A Belden Associates 17 Ashish Jandial, Patrick Ogawa, Preetha Sekharan (2005), ‘Multi-Channel Retailing goes Mainstream’, Infosys Technologies Whitepaper – July 2005, http://www.infosys.com/amr-cp/multi-channel-retailing-pov.pdf 18 Vin Crosbie (2004), “What newspapers and their websites must do to survive”, USC Annenberg – Online Journalism Review Newspapers & page 15 of 60 Development of Profitable Digital News Delivery Products in the New Media Landscape

study of 8,000 online newspaper readers in five markets during 2002 found that only 9 percent of online newspaper readers are aged 18 to 24, and only 25 percent are aged 25 to 34 19 . One shouldn’t get surprised that this figure is remarkably similar to newsprint edition readerships, since the online newspaper content is also remarkably similar to the print edition: almost nothing has been done in regard leveraging unique opportunities provided by the online environment to create a superior news consumption experience for the younger people. Neiman Reports, published by the Neiman Foundation of Journalism at Harvard University, makes the following notes on the issue “The problem with online newspapers is this: They are just like offline newspapers. That means they are not particularly interactive, they are barely customizable to individual preferences, they contain mostly outdated information, and they are hardly relevant to most readers daily lives” 20 . Lacking the strategic intent – not paying attention to key issues of multi-channel optimization was one of the fundamental errors of newspaper companies that paved the way for failures. Closely tied with this one – relating to papers as primary products and the Internet as the adopted child – was the other fundamental error, as highlighted in the previous part. Perhaps, most of these problems could be attributable to the various concerns of the newspaper company executives in regard to the idea of digital news delivery itself. Indeed, most of these concerns are well grounded, however, rather than addressing these issues and concerns in business strategies many reacted with fear and hesitation. Consequently, print and online products began to be managed and strategized in a totally siloed manner that in turn not only created an inconsistent and disintegrated customer experience, but also prevented emerging business opportunities to be assessed and leveraged more effectively. That being said, this part aims to achieve two goals simultaneously. First, it aims to identify and address major issues in regard to the development of profitable digital news delivery products and mechanisms. This also entails identifying common concerns of newspaper executives in regard to digital news delivery, and discussing potential strategies that will serve as a remedy for these concerns. Second, in order not to take another failing siloed approach, it also aims to identify and address major issues pertaining print channel where online revenue maximization issues seems to have multi-channel aspects with potentially significant impacts on revenues. In order to give a broad overview of the coming discussion, the following model illustrates online media exposure and revenue generation: 19 Vin Crosbie (2004), “What newspapers and their websites must do to survive”, USC Annenberg – Online Journalism Review 20 Carlson, D. (2005), ‘The news Media’s 30-Year Hibernation’, Neiman Reports – Fall 2005 Newspapers & page 16 of 60 Development of Profitable Digital News Delivery Products in the New Media Landscape

Figure 2A – Online media exposure and revenue generation As visualized on Illustration 2A, the business models of media companies are quite simple. Their content attracts audiences, which attracts advertisers. In the case of newspapers a great portion of revenues – about 85% – come from advertising which also includes classifieds, and the rest comes directly from the readers through subscriptions and sales in newsstands. Similarly, the discussion in this part - “maximization of online revenues in a multi-channel setting” will also be structured into two sections: first section will address the issues on advertiser revenues, and the following will address the issues on audience revenues. It must be noted that the discussion of advertiser revenues will inevitably involve a great deal of audience related issues as well, since advertisers are attracted to the marketing opportunities to audiences in the first place. However, the focus here will be optimizing the moment of ad exposure of audiences, and also driving superior integrated campaign results on them in order to maximize advertising revenues. The discussion on the audience side will initially involve discussion of a series of technological and social trends on media, and the means they change the economics and other dynamics of the industry. Although this discussion will lead to a diverse set of implications and recommendations, an overarching theme will point for a need to explore new frontiers in driving value from the news media audiences, rather than just earning advertising or subscription revenues from them. The section will be concluded with an analysis of potential online content pricing strategies, which may then be done in a healthier context of the introduced new media dynamics and economics. Newspapers & page 17 of 60 Development of Profitable Digital News Delivery Products in the New Media Landscape

Part – 2 / Section - 1: Advertiser related online revenue maximization issues in a multi-channel setting P2-S1-A Advertiser related issues: Fundamentals of multi-channel newspaper advertising The strongest theme of integrated marketing has been the contention that marketing should be more targeted. Rather than focusing on large numbers of people with common offerings, marketing should target fewer people with more customized offerings. Another valuable theme is that there is a need to view the consumer as a whole. So consumer is not just a person who buys the product of our interest. It follows that taking a more multidimensional view of the consumer may lead to larger opportunities than the one-time sale or even repeat purchase of a single product. Once such a multidimensional view is taken, the choices of related products, general preferences, and areas of interest will be revealed, usually through the utilization of database marketing. Thus, taking a holistic view of the consumer not only facilitates cross selling, but also enables integrated marketers to get relevant to their finely tuned consumer segments in terms of marketing communications 21 . Consistent yet complementary multi-touch point campaigns are important weapons in integrated marketers’ arsenal. From an integrated marketing standpoint, multi-channel newspapers can be an advertising medium full of opportunities. Most newspapers serve to micro / local audiences, so they are naturally targeted. Moreover, average newspaper reader frequently seeks content and advertising – multiple times a week, sometimes a day – through both print and digital platforms, so it is possible to execute multi-touch point campaigns over these platforms. This frequent interaction, especially on a digital platform, enables collection of extensive information about the reader, so that marketers can both further target their advertising, and also tailor communications based on the collected information. Stated more simply, the uniqueness of the newspapers creates significant marketing opportunities However, this requires careful strategic execution and planning – as it will be discussed throughout this section. Just as the medium is quite unique, so its advertisers and their needs are. Most newspaper advertisers are small to medium sized local businesses, and regular people who use classifieds. These advertisers lack most of the resources that their huge corporate counterparts have to design highly effective campaigns. Many are unaware of the factors regarding advertising effectiveness, and potential benefits of multi-touch point and data-driven integrated marketing campaigns. Perhaps because of the nature of their most advertisers, one of the most common concerns of newspaper executives regarding a stronger multi-channel orientation is that there is not adequate advertiser demand in the online environment to generate adequate revenues – compared to print. Is it reasonable to contend that digital news delivery platforms may not generate adequate revenues for newspapers? And if so what are the means to boost those revenues? In order to address these, a series of statistics will be visited, from more general ad spend figures to specific newspaper specific ad spend figures. Although Internet adspend was consisting of only 7.14% of all adspending in US as of Q1 2005 22 , it’s recently enjoying even more significant growth than the years before the dot-com bust. The growth in Q1 2005 represents the highest reported quarterly growth in nine consecutive 21 Calder B. J., Malthouse E. C. (2003), ‘What is Integrated Marketing’, Kellogg on Integrated Marketing. 22 North America Media Industry Report (July 2005), Mergent Industry Reports Newspapers & page 18 of 60 Development of Profitable Digital News Delivery Products in the New Media Landscape

growth quarters. Forrester Research reports that 84% of marketers and advertisers plan to increase their online ad spending during 2006. Furthermore, Forrester believes that total online advertising spending for 2005 is likely to hit $14.7 billion, and by 2010 is expected to reach $26 billion. Mergent Industry reports indicate that “this is a significant development because it potentially will draw advertising funds away from other media types, especially radio and print media and changes the advertising budget landscape”. However, one could contend that this increase in online adspend may not be reflected to the online newspaper websites. Although based on a recent estimate from the Newspaper Association of America (NAA), online newspaper adspend continued double-digit growth in the second quarter of the year 2005, increasing 28.6 percent from the same period a year ago and reaching $500.7 million 23 , the question should be whether this growth is satisfactory enough. In an economy where Newspapers get roughly the quarter of all ad-spending, it is perhaps not satisfactory to capture about 10% of all ad-spending on the Internet, a medium which is becoming increasingly popular. Or should newspaper companies be even more than satisfied from this result? In the end, local advertising and classifieds are the lifeblood of newspapers, and although overall Internet advertising is experiencing a sharp growth, this might not be the case for online local advertising and classifieds for newspapers based on the advertiser specific conditions that have been raised. Indeed, online environment present challenges to both local advertisers, and the newspapers themselves which further impair advertising demand and revenues. One primary reason for this is that major online advertising networks such as Google and Overture does not provide both parties with many capabilities that they are accustomed to: a. Newspapers that contract with Google or Overture to have ads driven their way give up ownership of the relationship with the advertiser. Furthermore, they have almost no control on the ads displayed on their website. b. Advertisers that use Google or Overture have very limited control regarding which website and what type of news story their ads will be run. They also have limited control on their daily budget. The list can be prolonged. However, there are recent developments in regard to creation of a better landscape for local advertisers and newspapers in the online medium. Recently, Quigo Technologies Inc. had launched a new advertising network specifically targeted at local advertisers and newspapers 24 . They addressed many issues that give trouble to both sides. Initial results are very promising. Quigo attracted about 130 newspapers to use its technology, and thousands of local advertisers. Participant newspapers have reported increased growth in local ad revenue, and indicated that they expect much significant long-term payoff. The other good news is that, competition, namely Google and Overture is inevitably forced to catch-up, adding some of the Quigo’s features to their technologies. What about classifieds, how are they working out online? Although there are many challenges for newspapers in capturing the online classified revenue -such as Monster Inc. and Craigslist-, CareerBuilder which is a joint venture from Tribune, Gannett, and Knight-Ridder has been “a home run as far as the publishing industry goes” 25 says James C. Goss, who is a Vice President and Senior Investment Analyst at Barrington Research associates, Inc. He adds “They offer 23 MarketingVox – Online Marketing News Website (August 2005) http://www.marketingvox.com/archives/2005/08/23/online_newspaper_adspend_jumps_34_percent_in_1h05/ 24 Tony Kontzer, ‘Newspapers compete harder for online ads’ Information Week (August 15 – August 22, 2005) 25 Analyst Interview: Newspapers, Broadcasting & Entertainment, The Wall Street Transcript (August 22, 2005) Newspapers & page 19 of 60 Development of Profitable Digital News Delivery Products in the New Media Landscape

people an opportunity to look both in print and online classifieds, and I think that is well received by both the job seeker and employer. That is very powerful.” The implications of this discussion regarding the adequateness of online advertising revenues are quite clear. As advertisers shift their funds away from traditional media, newspaper companies must spend a great deal of effort to capture their own share. First, newspapers must realize the unique needs and concerns of their niche and diverse set of advertisers. To effectively address these needs and concerns, they must work much closely with online advertising networks / agencies and consultancies. Buying equity stake in establishments such as Quigo Technologies, and perhaps launching their own, which will serve better to both newspaper and advertisers specific needs must be an imperative. Soon, it will be further discussed what such establishments may achieve for newspapers and their advertisers. Second, newspapers must work hard to inform their advertisers about strategic multi-channel newspaper advertising – which potentially can be highly effective: consistent yet complementary, finely targeted, multi-touch point, data-driven – thus completely in line with the integrated marketing phenomenon. Third, they must leverage their powerful position at the top of the food chain in terms of local news and information content, by coupling it with the capabilities provided by the online environment, just as in the case of CareerBuilder. Another most common concern of newspaper executives regarding a stronger multi-channel orientation could be that online advertising rates might not be as good as the print advertising rates. It is reasonable to address such concern at this point, since doing so will reveal that being flexible enough to meet the specific needs of their niche and diverse advertiser audience might not be good enough to grab a considerable share from online advertising revenues. It has been already concluded that overall Internet advertising demand is experiencing a sharp growth; however increased demand does not always mean increased prices. It is then appropriate to take a look at how online advertising rates are performing lately. Figure 2B – CPM (Cost per thousand Impressions) Rate increase during 2003 Indeed, online advertising rates are on the rise as well as the demand, as illustrated by this graph. The increase has even got sharper since 2004, and this trend is expected to continue according to eMarketer. However, it should be noted that online advertising rates had skyrocketed pre dot-com bust era as well, followed by a sharp plummeting. Why did those rates collapsed? Despite the great accuracy of the targeting, and because of the greater measurability of the advertising effectiveness, advertisers discovered that most of their ad dollars were wasted. Based on this, one could suggest that market equilibrium prices especially in terms of CPM (Cost per thousand Newspapers & page 20 of 60 Development of Profitable Digital News Delivery Products in the New Media Landscape

impressions) and even in terms of CPC (Cost per click) can be misleading, since various market circumstances may cause these two pricing schemes to be determined independent from the effectiveness of advertising. Further it can be suggested that the greater measurability of online advertising not only creates a premium over mostly unaccountable advertising fees for the traditional media sources, but it also puts the advertising medium at pressure to innovate and be more effective. P2-S1-B Advertiser related issues: Exploring the factors that affect advertising effectiveness This recent discussion highlights the particular importance of advertising effectiveness for the digital media. Apart from being flexible enough to meet the specific needs of their niche and diverse advertiser audience, and informing them about the strategic multi-channel newspaper advertising, newspapers must become a more effective advertising media compared to the competition, in order to grab a considerable share from online advertising revenues. Thus the factors of advertising effectiveness will now be explored in order to reveal the means of improvement. The focus here will be the moment of ad exposure. As it can be observed from the Illustration 2A, the ad exposure is somewhat complicated moment which entails the interaction of the audience both with the content and the advertisement. This e-book focuses on three critical factors which affect the outcome of the ad exposure. The first of these is ad perceptiveness, which is specifically affected by the medium specific factors. The other is the nature and intensity of experiences with the specific media, in this case a newspaper website. The last one is the proper utilization of database marketing methods for accurately targeting the right audience with the right message, in line with the campaign goals. Ad effectiveness - 1: Ad perceptiveness Although not much research exists regarding ad perceptiveness in print versus online environments, a very recent work published on Psychology & Marketing Journal 26 tries to addresses this issue. Research concludes that “Print outperforms screen on (brand name) recall, but not on (brand name) recognition. The results suggest that print information is easier to retrieve but also that screen information is available in memory.” However, researchers add, “For marketing goals, which require consumers to remember information off-line at a decision point or purchase point, print should outperform screen. Where being able to retrieve information from memory matters less, such as in on-line shopping, screen and print seem equally suitable”. Stated more plainly, different types of advertisements are suitable to different mediums. This finding has an important implication both for the advertiser, and the newspapers: To obtain the desired results from campaigns, goals and the outlined characteristics of the medium should be evaluated carefully. Print advertisements are more effective in driving brand awareness and recognition. Perhaps, online advertisements can serve to the same end; however they will require more engagement from the audience in order to drive similar results. Also, it can be stated that print medium is more suitable to drive sales to products offered in bricks and mortar stores. If possible, online medium should be used to drive traffic to online websites and stores of retailers, rather than just displaying the product and/or driving sales through a brick and mortar store. 26 Jones, M. Y., Pentecost R., Requena (2005), “Memory for advertising and Information Content: Comparing the Printed page to the computer screen”, Psychology & Marketing, Vol. 22 - 8 Newspapers & page 21 of 60 Development of Profitable Digital News Delivery Products in the New Media Landscape

It has previously been hinted that the power of newspapers lie in their ability to design integrated marketing campaigns utilizing both print and online mediums. When newspapers realize, and educate their advertisers in regard to “ad that suits medium” phenomenon they can execute even more powerful integrated campaigns. For instance, print edition can be used to raise brand awareness, and online edition can be used to drive sales through the online stores, complementing each other. This is one of the unique advantages of utilizing successful multi-channel strategies for newspapers. Further, if “ad that suits medium” phenomenon is well understood, the ad effectiveness of the online medium will increase, thus the advertising rates and revenues. One driver of online environment’s decreased ad perceptiveness could be attributed to another common concern of newspaper company executives regarding this medium: Less desirable readership behavior. Meaning, online readers are less engaged with the content and the ads, and they read less content / spend less time reading. If true, this will both decrease the perceptiveness and the effectiveness of online advertising. This concern is partially supported looking at three different researches by Nielsen //Netratings, ComScore Media Metrix, and Readership Institute of the Media Management Center at Northwestern University 27 . Nielsen and ComScore both conclude that average newspaper Website user in the United States visits only two to six times per month, spending less than 35 minutes on the website each month. By comparison, based on a 2002 survey Readership Institute reports that, an average newspaper reader reads the paper 14.7 times per month, spending average of 28.2 minutes per day with the paper. However it should be noted that Nielsen and ComScore’s findings are based on data collected without a proper research design, and there are limitations to drive further conclusions. For instance, whether online edition reader uses the website in addition to newspaper (for updates only) or without reading the newspaper (as a sole source of news) will make a great difference on the reported results. Although academic research addressing readership behavior concerns is very limited, a recently paper published on New Media & Society Journal tackles this issue with a work published about a year ago 28 . Although limitations for this research exist as well, it at least entails a proper research design. The results here are somewhat surprising, contradicting shared beliefs and the findings of ComScore and Nielsen. Researchers find “Reader attention to the news stories varies, depending on the newspaper and news category (between print and online mediums)”. They add, “No consistent reading pattern is evident and the print version readers do not read more than the online version readers. News Consumption seems to be more dependent on the news category, reader gender and interest in a particular topic than on whether the news appears in print or online”. They add, “On the basis of cued and free recall questions, no consistent pattern differentiates readers of the print newspapers from the online versions.” And conclude that “evidence has not been found that online readers consume and retain news differently from readers of the print versions examined in this study”. Although it is hard to reach a conclusion in regard to desirability of the readership behavior in the online medium based on these contradictory findings, perhaps it would be reasonable to hypothesize that results will vary based on the ways which content and advertising is presented in the online medium. It is well a known fact that that website design and navigation plays a major role on shopping behavior of e-tail consumers, retailers to spend serious efforts to optimize the website design, considering the limitations of the online environment. As the intangibility of the online medium is a problem for retailers (i.e. considering navigation and the product display 27 Vin Crosbie (2004), “What newspapers and their websites must do to survive”, USC Annenberg – Online Journalism Review 28 D’Haenens L., Jankowski N., Heuvelman A. (2004), “News in online and print newspapers: Differences in reader consumption and recall”, New Media & Society, Vol. 6- 3 Newspapers & page 22 of 60 Development of Profitable Digital News Delivery Products in the New Media Landscape

purposes), it also is a problem for newspapers. Holding a tangible print newspaper – an experience inexistent on newspaper websites – creates an increased interaction with the product and the reader, and enhances the engagement of the reader to both content and the ads. Furthermore, the means to navigate content in print versus online are obviously different. These differences and limitation of the online environment is what lies beneath on the decreased ad perceptiveness, and the less desirable readership behavior. Thus, newspapers have to come up with innovative ways to deliver their content and advertising, and optimize their websites which will enrich the engagement of their audiences in the online medium. The ways which this could be achieved will be addressed during part 3 in detail – consumer insights to aid superior news media design. However, the following example could illustrate the ways which engagement could be improved specifically for online advertising: Figure 2C – Interactive and more “engaging” online advertising This illustration shows an online advertisement example which is featured within the news content. The brand that is being advertised is IBM business consulting – which is represented by the purple boxing gloves worn by the businessman. First, the attention of the reader is attracted by the businessman figure that is not totally steady i.e. breathing, blinking eyes. Then, reader is invited to interact with advertising – punching the sandbags and wiping them away, which represents the information silos in an organization. Featuring such interactive advertising not only makes the reader more engaged with it, but it also achieves to do a good job in terms of simulating the advertiser brand experience and achieving brand positioning. It has been earlier suggested that online advertising might not be as effective as print advertising for establishing brand awareness. Perhaps, if such ad delivery mechanisms are utilized, it is possible to match, even exceed the results obtained in the print medium. Note that such interactive capabilities do not exist in most other advertising media. One can contend that online advertising is still in its infancy stages. Many innovations, such as the one illustrated above, are yet to come as the industry matures. What might be the other innovative ways to serve more effective online advertising that deals with the limitations of the medium; considering the campaign goals of, for instance, a medium sized / local sporting goods store, and the integrated marketing capabilities of newspapers? What about classifieds – how they might be served more effectively along with the online newspaper content? In order to get effective solutions tailored to such complex issues, newspaper companies must engage in strategic cooperation with agencies and consultancies that have extensive know-how on multi- channel marketing solutions, as earlier pointed. To better illustrate this recommendation, retail industry may be visited, since some dominant retailers such as the Tesco of UK and Kroger of US have already engaged in such a strategic Newspapers & page 23 of 60 Development of Profitable Digital News Delivery Products in the New Media Landscape

cooperation. In 1995, Tesco asked Dunnhumby, a UK based relationship marketing consultancy, to help it with improving its marketing effectiveness. Dunnhumby first helped Tesco to launch a highly regarded and successful loyalty program, which led to the acquisition of its majority stake by Tesco. Later on, Dunnhumby also helped Tesco to discover that retailers can as well be a highly effective advertising media, perhaps even more effective than newspapers or TV, for their niche advertisers – predominantly consumer packaged goods companies. Clive Humby, one of the founders of Dunnhumby notes “Tesco can now define the parts of a mass audience and provide channels to reach each part – the mailings, the Clubcard coupons, the magazine, and the permission-based e-mail, even coupons at till” 29 . Dunnhumby has recently also started working with Kroger and many other retailers worldwide, to help them achieve their relationship marketing goals, and to design more effective integrated marketing campaigns for their advertisers. All the motivations are there for newspaper companies as well, to form such partnerships with online agencies / consultancies that deal with the specifics of their businesses leading to major innovations. Ad effectiveness - 2: Media experiences The second critical factor which affects the outcome of the ad exposure is the nature and intensity of experiences with the specific newspaper website. The term experience captures the idea of what people think and feel when they read the content and interact with the website. As it can be observed from the Illustration 2A, people interact with both the content and the advertisement as they experience a particular media. Media experience of the audience is also affected by other elements of the newspaper website, for instance the means and effectiveness of navigation mechanisms, interactive and multimedia elements, and many others. Traditionally, media companies and traditional media research focus on quantitative measures of usage, such as exposure. In the traditional sense, basically the higher exposure or the reach of the news media, the higher advertising rates they can charge. However, it should be noted that a distinction lies between exposure to media, or “eyeballs”, and qualitative reactions to media: Being exposed to media does not equate to how a person thinks and feels about media. The primary reason to this is because people do not just use media, they experience it – there is a subjective, qualitative side to their usage. An obvious example for this could be involvement: Two people could each read a newspaper on three occasions for about 15 min each time. Person A might be engaged in what she is reading, and even be trying to remember the material. Yet Person B might be reading merely to pass time with no thought of wanting to remember anything. The two peoples’ usage is the same, but their experiences are very different. Also, note that the overall media experience is not a unidimensional continuum, and there are many multidimensional experiences associated with media use. For instance, in addition to being more engaged in content, person A can feel that the content is very valuable and presents a good opportunity for self-improvement. She might also think that the content provides her with new ideas to bring up during conversations with friends. At this point, the question relevant to current online advertising discussion is, whether different experiences and the intensity of these experiences have a significant relationship with the advertising effectiveness. Thus, a methodology called “Experiential Engagement” will now be discussed. It has been developed by two scholars, Bobby Calder and Ed Malthouse of Northwestern University’s Media Management Center. By observing people’s experiences through their own reports of their thoughts and feelings about media, and further quantitative research methodologies employed, Experiential Engagement identifies people’s distinct 29 Humby C., Hunt T., Phillips T., 2003, “Scoring Points – How Tesco is winning customer Loyalty, Kogan Page Limited, page 261. Newspapers & page 24 of 60 Development of Profitable Digital News Delivery Products in the New Media Landscape

qualitative experiences with a particular media, the relationship between these experiences and the usage levels of that media, and also the relationship between these experiences and the advertising effectiveness – which is now the focus of this e-book. “Experiential Engagement” have previously been applied to magazines (Malthouse, Calder and Eddy 2003; 2005 in review) newspapers (Calder and Malthouse 2004), and online content web sites (Calder and Malthouse 2005) in order to shed further light on these issues. Work underway at the Media Management Center at Northwestern University is applying it to television. As for the online content websites, these scholars have identified 22 distinct experiences. After performing analysis to reveal how these experiences relate to usage level, they conclude all but 3 of these experiences are clearly implicated in the level of usage of any specific website. Stated specifically, the stronger these experiences are, the stronger the site usage level will be. This e- book will further explore this methodology, the experiences identified, and the implications in more detail during Part-3: Consumer insights to aid superior news media design. However, our specific focus in this section is advertising effectiveness, thus it is now time to discuss the findings and implications of this methodology in regard to this issue. In a recent paper “The Effects of Media Context Experiences on Advertising Effectiveness” (Malthouse, Calder 2005), researchers had sought the links between magazine experiences and advertising effectiveness. Here they conclude “This research confirms that involvement with magazines constitutes a rich set of multidimensional experiences. It identifies specific experiences and develops reliable scales for quantifying the extent to which a magazine provides each experience. It demonstrates that the way a person experiences a magazine can affect the way the person reacts to advertising in the magazine”. For example, when a magazine makes people feel as if “reading the stories makes them smarter” –this is one of the identified magazine experiences–, the readers are likely to have more positive reactions to the advertising in the magazine. Therefore, other things being equal, an advertisement in a magazine with stories “that makes people feel smarter” is worth more to the advertiser than the same ad in a magazine without this characteristic experience. In their paper on the online content website experiences where 22 such experiences had been identified, researchers suggest, “We have provided evidence in previous studies of magazines and newspapers that experiences such as these affect advertising. Thus the same online ad may perform better on one site than another because that site provides a better context for the ad in terms of experiences. While this research did not test for advertising effects, there is every reason given the experience results to expect that they exist. Should this hypothesis prove correct, it would open the door to a new qualitative currency for evaluating online sites and, interestingly, to the possibility that online ads could be created to take advantage of the strongest experiences that a site provides”. So what are the conclusions that can be drawn from these findings? Researchers state “The implication obviously is that an online content website should try to improve these experiences”. As it will be covered in Part-3, some of these experiences might remain questionable regarding how they can be improved, however the ways of improvement are mostly obvious for many of them. If newspapers achieve to improve the identified experiences on their websites, the effect will not only be increased usage levels of their websites, but also increased advertising effectiveness. The advertisers will achieve more successful results through their campaigns, thus both advertiser demand and advertising rates will go up. Also, as the experiential engagement framework is further developed and recognized, and as more convenient means of evaluating a content website’s performance in regard to experiences that are highly correlated with the ad Newspapers & page 25 of 60 Development of Profitable Digital News Delivery Products in the New Media Landscape

effectiveness are developed, advertisers will have the ability to design their campaigns with the websites that are proven to deliver best results. The “eyeball” criteria will be replaced by the “experience” criteria, and the advertising rates of websites with less desirable experiences will suffer where ones with more desirable experiences will go up. All these conclusions are a strong call for newspapers to further develop and sophisticate their online digital offerings. As it will be covered later in this e-book, these 22 experiences that have been identified are truly multi-dimensional, and audiences are seeking very diverse experiences during their news consumption behavior. Most of today’s newspapers websites are unable to drive these diverse set of experiences as they are only copying their print content to their online websites, without leveraging the rich set of tools and opportunities provided by the online medium. Consequently, audiences prefer other online websites which also feature news content, but do a better job in terms of driving these experiences. Newspapers may only develop profitable digital news platforms by driving strong and sophisticated website experiences. Thus, Part-3 aims to provide guidance for these efforts based on research findings. Ad effectiveness - 3: Database marketing Perhaps as the masters of database marketing, retailers may provide some useful insights on the frontiers of this discipline. Retailers capture customer data from a wide variety of sources. For the multi-channel ones, a widely used source is their websites where they can track the actual shopping behavior, items that are viewed but not bought, and the way that customer navigates. The other predominant source is the loyalty programs and cards which can pair unique customers with the bought products in the retail environment. Self reported demographic information, and also psychographic and geo-demographic customer segmentation schemes such as VALS and PRIZM are other means which can add further level of detail about a certain customer; however these aggregate measures are usually seen less valuable than the individual behavioral data. There could be multiple ways that this data could be utilized by retailers. First, it could be used to fuel the relationship marketing activities. This could be individually tailored marketing communications, such as sending more relevant e-mails and direct mail pieces along with relevant offers, i.e. coupons for items that customer will be interested, which will reinforce more profitable shopping behavior. Another example of relationship marketing activities employed by retailers could be presenting product offerings that are relevant to individual customers on the websites using methods like collaborative filtering, which was pioneered by Amazon. Second, these data could be used to fuel business strategies, whose effect might even be more powerful than that of relationship marketing. An example for this could be optimizing pricing strategies and product / service offerings on multiple channels by utilizing various data-mining techniques. The cooperation between dunnhumby, and predominant retailers such as Tesco and Kroger have been earlier visited, their efforts had made retailers a highly effective advertising medium for consumer packaged good companies have been highlighted. Apart from exploring new fronts in multi-channel ad delivery capabilities, the true innovation of dunnhumby and its retailer partners is leveraging data captured from multiple platforms – predominantly loyalty programs – to utilize powerful database marketing practices. Keith Mills, the founder of Air Miles expresses his admiration of the practices employed by dunnhumby and Tesco with the following words: “The thing that set Tesco apart was the depth of its data analysis. The big step forward wasn’t to launch a card with a magnetic stripe on it; it was understanding the value of information it provided. There were a lot of high profile (loyalty) schemes in the 1990s that were nothing more than Newspapers & page 26 of 60 Development of Profitable Digital News Delivery Products in the New Media Landscape

deferred discount cards” 30 . Following figure is a great illustration of the success of database marketing methods utilized by Tesco, where retailer starts gaining considerable market share after its partnership with dunnhumby. Figure 2D – UK Grocery Retailers Market Share Tesco and dunnhumby used the data, and their powerful data analysis capabilities for fueling both relationship marketing activities, and business strategies. But they also utilized these for improving the effectiveness of the advertising campaigns that they run for their CPG clients in multiple platforms, i.e. coupons, various Tesco magazines, e-mails. Resulting capabilities enabled not only targeting the right customer with the right message / offer at the right time utilizing multiple platforms; but they also enabled creating powerful tracking mechanisms to establish the accountability of performed campaigns. Clive Humby, one of the founders of dunnhumby says “Because these media are based on customer intelligence on an individual basis, Tesco can connect the exposure a brand buys in its media to the subsequent sales impact: it can confidently connect cause and effect”. This is another insight regarding how retailers are becoming highly regarded advertising media on their own. After all these innovations, their advertisers are very willing to pay premiums over the rates of other advertising media – such as newspapers. What might be the matches of such innovations for the newspaper industry? How newspapers can make their advertisers pay such premiums compared to other media, utilizing database marketing? In order to answer this question, first the current targeting mechanisms employed by the newspaper industry must be visited. As for the print medium, there are some primitive but expensive ways to target a certain audience. This usually involves distributing inserts to specific geographic locations based on geo- demographic data. There are very rare cases that more than geo-demographic data, which is usually not related as a valuable source compared to behavioral, is utilized for targeting purposes in print medium. As for the online medium, it is hard to say that there is a widely employed method to match the advertising and an individual customer / or a customer segment. Rather, advertising and the content is matched using rather primitive contextual advertising technologies developed by online 30 Humby C., Hunt T., Phillips T., 2003, “Scoring Points – How Tesco is winning customer Loyalty, Kogan Page Limited, page 95. Newspapers & page 27 of 60 Development of Profitable Digital News Delivery Products in the New Media Landscape

advertising networks, which serves advertising related to the displayed content. Contextual targeting technologies may utilize geo-demographic information as well; however this is a rare case and the results are usually inaccurate. Overall, inconsistent practices employed in these print and online medium alone is an indicator that newspaper industry has a long way to go in order to get in line with the changing marketing phenomenon. It is not possible to execute complementary multi-touch point campaigns and target precisely defined customer segments, in a case where geo-demographic is used in the print channel, yet contextual targeting used in the online. Moreover, neither contextual nor geo- demographic methods are effective means of targeting; and in circumstances that enable more effective mechanisms they are mere waste of resources available for facilitating higher advertising effectiveness. Contextual advertising can be an acceptable method for a content website which gets limited amount of return visits from its audience, or for a website which lacks the ability to ask for a registration from its visitors. However, newspaper websites can, and usually do ask from its visitors to register in exchange for a number of benefits. Especially for regular website visitors, data-mining following registration will reveal a great deal of customer insights, such as the general areas of interest, and the performance of various categories of advertising on an individual reader, or a reader segment. Along with self reported information, and segmentation schemes such as VALS / PRIZM, these customer insights can significantly improve the effectiveness of online advertising by allowing to target the right customer with the right message / offer, at the right time. Note that contextual targeting can be used as a supplementary mechanism to improve the results of campaigns as well, depending on the advertisers needs. It is also possible to utilize these customer insights for better targeting in the print medium as well. Sharply decreasing digital printing costs make it very realistic to deliver individually customized inserts along with the newspapers. In the near future, it might be even possible to alter on page copy to reflect the information in the database, yielding an acceptable marketing ROI to the advertiser at the same time. The true power of strategic newspaper advertising will be revealed when both these mediums utilize these superior targeting mechanisms, and they can deliver a single reader multiple and customized ad copies with different goals, i.e. two copies on the print version and e-newsletters to facilitate brand awareness, and then another copy on the website to drive sales through online store, all featuring a relevant tone of communication / messages based on the behavioral profile in the database. Once the newspaper industry gains the ability to target their readers individually based on various triggered events (i.e. someone reads a restaurant review, which triggers a campaign for a restaurant in the same neighborhood), or a specific reader segment based on the advertiser needs; and once they can strategically design integrated multi-touch campaigns which deliver customized communication pieces at multiple platforms, then the industry would be in line with the changing marketing phenomenon. Once again, this could only be possible by a close cooperation with innovative and experienced online marketing agencies, and consultancies which can tailor solutions for the needs of the newspapers, and their niche advertisers, such as in the case of retailers and dunnhumby. However, until then, newspapers are bound to become an outdated advertising medium, facing the risk of extinction. Also, mastering database marketing practices and effectively utilizing captured customer data have other potential benefits that could create even more powerful results than in the area of advertising effectiveness. Revealed customer insights may fuel the design of most major business strategies. Relationship marketing strategy is one example, where highly effective loyalty programs can be designed in order to retain most valuable segments of the news media audience. Newspapers & page 28 of 60 Development of Profitable Digital News Delivery Products in the New Media Landscape

Data driven approaches also have the potential to provide solid guidance for the key multi- channel optimization issues that were raised at the beginning of this part – “decisions regarding pricing strategies for different channels, whether and/or how to cross-promote different channels, and which products / services should be offered on different channels”. Part - 2 / Section - 1 Summary: Maximization of online revenues in a multi channel setting / Advertiser related issues On “digital news platform designs and emerging multi-channel considerations”… The newspaper business had become multi-channel since mid 90’s. However, apart from making poor planned and excessive investments on technologies that achieve just a little more than copying the print content to the websites, it is hard to say that newspapers had put much thought into digital news delivery and the multi-channel issues that emerge. Newspaper executives have many concerns in regard to the idea of digital news delivery. Although, these concerns are well grounded, many react with fear and hesitation rather than addressing them in business strategies. Thus, lacking the strategic intent –not paying attention to key issues of multi-channel optimization–, and relating to papers as primary products and the Internet as the adopted child were two fundamental errors that paved the way for failures. Consequently, print and online products began to be managed and strategized in a totally siloed manner that in turn not only created an inconsistent and disintegrated customer experience, but also prevented emerging business opportunities to be assessed and leveraged more effectively. Most of the digital news delivery investments had failed: Despite the fact that younger audiences increasingly substitute their newspaper readership with online methods of news delivery, newspaper websites failed to attract them, just like their print counterparts. This part aims to achieve two goals simultaneously. First, it aims to identify and address major issues in regard to the development of profitable digital news delivery products and mechanisms. Second, it also aims address major issues pertaining print channel where the discussion in the context of online revenue maximization seem to involve multi-channel considerations with potentially significant revenue impacts. On “advertiser related revenue maximization issues” … Newspapers are a quite unique advertising media: Most of them serve to micro / local audiences who frequently seek both content and advertising delivered in print and online platforms. This uniqueness creates significant marketing opportunities from the integrated marketing perspective – there is a potential a potential to host consistent yet complementary multi-touch point marketing campaigns that are data-driven. However, this requires careful strategic execution and planning. Just as the medium is quite unique, so its advertisers and their needs are. Most newspaper advertisers are small to medium sized local businesses, and regular people who use classifieds. Considering that online advertising is still in its infancy stages, there are many innovations yet to come which will benefit these niche and diverse set of advertisers as industry matures. Although online advertising is experiencing a steady sharp growth, newspaper websites might not be able to get a satisfactory share from this growth unless they meet the specific needs of their advertisers, and pioneer these innovations. This can be possible by a strategic cooperation with innovative and experienced online marketing agencies / consultancies. Also, educating their niche advertisers about the unique potential of strategic newspaper advertising is very critical. Many are unaware of the benefits of multi-touch and data-driven integrated marketing campaigns. This is also true for the factors regarding advertising effectiveness. Leveraging their powerful position at the top of the food chain in terms of local news and information content, by coupling it with the capabilities of the online environment is another key strategy that will both benefit advertisers and audiences, just as in the case of careerbuilder.com The discovery of advertisers that the effectiveness of online medium is not as they expected Newspapers & page 29 of 60 Development of Profitable Digital News Delivery Products in the New Media Landscape

led to the sharp plummeting of the online advertising rates during the dot-com bust. This has proven the importance of the advertising effectiveness phenomenon. Thus, apart from being flexible enough to meet the specific needs of their niche and diverse advertiser audiences, newspapers must also become a more effective advertising media compared to the competition in order to grab a considerable share from shifting media budgets. There are three critical factors which affect the advertising effectiveness. These are ad perceptiveness of the content delivery platform, nature and intensity of experiences with the specific media, and proper utilization of database marketing methods. 1. The differences in ad perceptiveness of different content delivery platforms require properly addressing the characteristics, limitations and capabilities of each platform: o Different types of advertisements are suitable to different platforms. Print advertisements are more effective in driving brand awareness and recognition. Also, print medium is more suitable to drive sales to products offered in bricks and mortar stores. Online advertisements are more suitable to drive traffic to online websites and stores. There is a potential to use this platforms in a complementary manner in integrated marketing campaigns. o Lacking the tangible experience of holding a print newspaper which impairs the ad perceptiveness, newspaper websites must utilize innovative ways to deliver advertising. Interactive online advertising, which increases the engagement of the audience to the advertising, is an example for this. 2. It is important to realize the relationship between media experiences and advertising effectiveness: o People do not just use media – they experience it. Also, overall media experience is not a unidimensional continuum. There are many multidimensional experiences associated with media use. For most of these experiences, the stronger they are the stronger site usage and advertising effectiveness will be. o Most of today’s newspaper are unable to drive these diverse set of experiences as they are only copying their print content to their online websites, without leveraging the rich set of tools and opportunities provided by the online medium. Consequently, audiences prefer other websites which also feature news content, but do a better job in terms of driving these experiences. Also, advertising effectiveness is impaired. Thus, newspapers must further develop and sophisticate their online websites in a way that drives strong and sophisticated experiences 3. The utilization of advanced database marketing practices has a potential to significantly improve advertising effectiveness of multi-channel advertising campaigns: o Newspaper websites must require the visitors to register in exchange for a number of benefits. Especially for regular website visitors, behavioral data-mining following registration will reveal a great deal of customer insights. Along with self reported information, and VALS / PRIZM input, these customer insights enable targeting the right customer with the right message / offer, at the right time in both print and online platforms. Contextual targeting can be used as a supplementary mechanism to improve the results of campaigns on the online platforms as well. The true power of strategic newspaper advertising will be revealed when both print and online mediums utilize these superior targeting mechanisms, and they can deliver an individual multiple customized ad copies at different platforms, each achieving different goals. Targeting based on trigger events is another powerful mechanism. o Database marketing will also fuel the design of key business strategies with potentially more powerful results than its applications in advertising. Loyalty programs and multi channel optimization issues are potential areas to benefit from revealed customer insights. Newspapers & page 30 of 60 Development of Profitable Digital News Delivery Products in the New Media Landscape

Part - 2 / Section - 2: Audience related online revenue maximization issues in a multi-channel setting P2-S2-A Audience related issues: Technological and societal trends on media During the previous section, advertising effectiveness has been the boldest talking point based on its major role on maximization of revenues obtained from the key lifeblood of the industry. Framed this way, one could expect that online content pricing strategies to be the key talking point of this section, based on its obvious relationship with revenue maximization. However, once considered, the implications of drastic changes undergoing in the media landscape make issues related with the maximization of online audience revenues much broader than they initially seem. During the discussion in Part-I where these drastic changes were initially discussed, two key factors underlying have been introduced: Technology, and younger generations with very different media / news consumption behaviors. A further discussion of the very same two factors throughout this section will reveal new insights that are closely related to the issue of revenue maximization. This take on technology will reveal the ways that it transforms media production, consumption, and delivery in the ways totally unthinkable couple of years ago. Also, this take on younger generations will reveal that they are so different from their predecessors that we may not even relate to them as media “consumers” anymore: As they consume new forms of media utilizing these new technologies, they simultaneously produce and create significant economic value for media products – thus, the correct term to relate them would be media “prosumers” (combining the words producers and consumers). The “prosumers” phenomenon is perhaps the key implication of drastic changes undergoing in the media landscape, making the issues that underlie maximization of online audience revenues much broader. The emergence of this phenomenon – “media prosumers”, along with all other implications of the changing media landscape hints us that, the economics of media has changed as well. As it will be discussed throughout this section, within the context of new media dynamics the simple equation that used to hold sometime ago – buying audience attention for the in-house produced content and selling it to the advertisers – is becoming highly inefficient. Thus, the discussion of “audience related multi-channel strategy design issues” will first involve a discussion of a series of technological and social trends on media, and the means that they change the economics of the industry. Although this discussion will lead to a diverse set of implications and recommendations, an overarching theme will point for a need to explore the new frontiers in driving value from the news media audiences, rather than just earning advertising or subscription revenues from them. The section will be concluded with an analysis of potential online content pricing strategies, which may then be done in a healthier context of the introduced new media dynamics and economics. Then it is now time to introduce 3 key phenomena, which are mostly technology related, and are at the core of all the analysis that is to follow: 1- Media distribution becoming much less costly & easy, as a result of emergence and popularization of internet. 2- Media production becoming much less costly & easy, as a result of advancements in computing and software related technologies. 3- New formats and markup languages such as XML / RSS allowed the delivery of syndicated micro-chunks of content. Content delivered in the form of micro-chunks led to Newspapers & page 31 of 60 Development of Profitable Digital News Delivery Products in the New Media Landscape

the emergence of "Media Plasticity" 31 phenomenon – atomized media that can be cut, split, filtered, remixed, and aggregated. Technological and societal trends on media - 1: Micro-Differentiated media platforms These 3 phenomena combined led to the emergence of micro-differentiated media platforms such as Blogs, Vlogs, podcasts which cheaply produce and distribute high-quality micro-differentiated content. Content produced in these micro media platforms mostly involve people sharing their personal or professional experiences, views, or making reviews, providing tips (might be in DIY or how-to format). However, as the micro-differentiated name implies, their content usually have a focus on several of the following popular categories: Politics, travel, technology / computing, business, entertainment / nightlife, foods / drinks, sex, gossip, fashion / design. Also, some of them are purely personal involving building micro-differentiated media content based on one’s own experiences and memories intimately. Indeed this is quite popular, and has been coined as the “Life-caching” trend by the famous consumer trends website trendwatching.com 32 Although initially micro media platforms were produced by amateur people, recently some small commercial players entered into the space, which engaged in building micro media platforms with more profit driven desires - such as Weblogs Inc (http://www.weblogsinc.com), which today manages more than 70 blogs. Note that content produced by micro media platforms are not only textual. Today there are many micro media platforms, which also cheaply produce and distribute short movies or video clips. MobuzzTv (http://www.mobuzztv.com) is a recent example of a commercial player which has started competing in the micro-differentiated media platforms sphere, producing much of its content in the video format. Technological and societal trends on media - 2: Mashups and aggregators The afore mentioned phenomena, along with the Micro-media platforms featuring plastic media led to the emergence and popularization of mashups, websites or web applications that combines content from more than one source 33 . Aggregators or news aggregators, from a broader perspective, are the earliest and simplest form of Mashups. They are a type of software or website that retrieves syndicated web content supplied in the form of RSS and other XML feeds which are published by weblogs, podcasts, vlogs, and other media websites. These mashups, along with their more sophisticated counterparts, played a great role on emergence of viral forms of online marketing. Mashups, a phenomenon very central to media plasticity, enabled the content of micro media platforms to operate without any significant marketing expense. As a single piece of content get aggregated and mashed up by more popular aggregators and mashers, they become big hits almost overnight. This accelerating popularization 31 Haque U., 2005, “The New Economics of Media”, http://www.bubblegeneration.com/resources/mediaeconomics.ppt 32 http://www.trendwatching.com/trends/LIFE_CACHING.htm 33 McAlister M, 2005, “Arm Yourself for the Future: Opportunities and Threats for Your Web Business”, http://www.mattmcalister.com/ Newspapers & page 32 of 60 Development of Profitable Digital News Delivery Products in the New Media Landscape

and value addition phenomenon has been framed as micro-media “snowballs” 34 which will be explored later in detail. Technological and societal trends on media - 3: Reconstructors and connected consumption In one sense, reconstructors are more sophisticated forms of mashups. They "deconstruct" micro- media from many sources, alter, remix and filter micro chunks to reconstruct casts of personal media. They unbundle micro-chunks from micro media, for instance, blog entries from individual blogs, or tracks from playlists, and rebundle information about microchunks and distribution. An example for this is Last.fm, which unbundles tracks from albums and playlists to reconstruct new playlists. Its collaborative filter predicts what people will like, so that they will easily discover music that matches to their taste from unlimited number of indie and small record labels, along with more popular and mainstream ones. Connected consumption phenomenon can be considered as the enabler of many reconstructors, from the perspective that this is what makes collaborative filtering itself possible. Collaborative filters and technologies fueled by connected consumption leads to the discovery of high-quality media suitable to one’s taste. The logic is that, as people consume micromedia, they reveal or contribute private information which is valuable to everyone when aggregated and made public. During connected consumption which occurs on various micro-media platforms and mashups, consumers explicitly share their expectations, preferences and satisfaction about massive amounts of micromedia contents. They also share and create complementary goods which implicitly reveal expectations, preferences, and satisfaction during this process 35 . This is a great illustration of network effects, a phenomenon where marginal utility increases in number of connected consumers. In "unconnected consumption" attention allocation is inefficient because non-transparent information sharing creates an information distortion. In a world of disconnected consumption, local newspapers publish book / movie or music reviews, best seller lists. Radios broadcast top 40 charts. However, information on these mechanisms is easily gamed. For instance, Top 40 charts gamed by radio payola, or bestseller lists are gamed by publishers buying own books. As a result, true aggregate preferences are never revealed. Connected consumption, on the other hand, achieves an efficient allocation of attention by the transparent information sharing mechanisms it employs 36 . De-centralized trading of cheap information reveals most valued goods, so that people discover all types of media that are of higher quality and to their interest: Music, movies, news, or whatsoever. A great example for a website that specifically banks on connected consumption is del.icio.us (http://del.icio.us), a social bookmarking service where people can store and share their web bookmarks. Everything posted to del.icio.us can be made publicly viewable; it was not originally intended to be a tool for storing private bookmark collections. Del.icio.us uses a non-hierarchical keyword categorization system where users can “tag” each of their bookmarks with a number of freely chosen keywords 37 , which is a collaborative but unsophisticated way in which information is being categorized. Users can search certain tags to find a website to their interest, and can also see how many users bookmarked the websites displayed on search results screen, along with their tags, which leads to an easy discovery of relevant and popular websites. 34, 35, 36 Haque U., 2005, “The New Economics of Media”, http://www.bubblegeneration.com/resources/mediaeconomics.ppt 37 http://en.wikipedia.org/wiki/Del.icio.us Newspapers & page 33 of 60 Development of Profitable Digital News Delivery Products in the New Media Landscape

Technological and societal trends on media - 4: Implications on news industry One bold outcome of these phenomena, micro-media platforms, and mashups is the explosion of the overall media supply. However, when the effects of reconstructors and connected consumption are considered, it will be obvious that the explosion of supply is not only the major impact of these trends on media: Much more media is becoming accessible to the consumer as well. For instance, as for the music industry, there already used to be massive amounts of productions available (well before the emergence of most these trends) from many independent and small scaled production companies - totaling into a massive supply. However, as a result of the disadvantages of the disconnected consumption, search costs used to be immense for the consumer and most of this supply was actually not available to the consumer. Today reconstructors like Last.fm unleashes the actual potential of this supply slashing the search costs, multiplying the effect of the media supply explosion. After the discussion of these emerging trends in the general media space, it is now time to turn the attention back to newspapers and news media. The first critical question to be posed is whether the news media supply is exploding along with others as well. The most popular categories of content produced on micro-media platforms have earlier been mentioned. It must now be noted that "news" was not one of them, evidently because production of news media is a quite more complex than, for instance, the production of entertainment media is today. The reasons for this lie in the following capabilities of most news media producers, which most micro-differentiated media platforms naturally lack, or are not as effective: • Editorial support, putting news into context - providing general perspective framing the background of the news. Providing relevant facts, stats, and historical events, photography. Surrounding a story with other relevant ones. • Establishing trust, as a result of the brand equity, reporters and journalists with proper education, training, and experience – which includes the journalists' code of conduct. • Going to Darfur or Iraq, or attending military press conferences. These and other capabilities of newspapers which most micro-media platforms lack constitute relatively higher barriers to effectively produce "news media" compared to other types of media. This means that, for instance, entertainment magazines should feel more threatened from the emergence of micro-platforms than newspapers do. However, this doesn't mean that newspapers won't be threatened by the explosion of media supply at all. Given that the total amount of media one can consume is somewhat limited, exploding media supply means, attention is becoming scarcer every other day - for any type of media. Even though news media supply might not be exploding, attention and time available for news media will be relatively scarcer as well. This also means "buying audience attention” will be much more expensive for the media industry, including newspapers. Or stated more simply, audience acquisition costs are expected to increase. There are 3 clear implications of all this analysis: 1. Developing and improving the competence of “core” news media production and distribution presents a relatively bigger competitive advantage compared to that of other media. Thus, allocation of corporate resources on other types of content production assets seems Newspapers & page 34 of 60 Development of Profitable Digital News Delivery Products in the New Media Landscape

uneconomical, since explosion of media supply will limit their returns. This implication will be revisited after certain other media trends are discussed. 2. An overarching theme of this paper addresses that a newspaper company has to abandon its paper-centric business orientation, and transform itself into a “news company” that is multi- channel oriented, aiming to capture maximum share of news consumption of its target audience. One factor underlying this recommendation is the accelerating rate of substitution of print newspapers with online news sources – as expressed in Part-I, and another factor is the increased advertising effectiveness if campaigns are executed in an integrated sense over multiple-channels – as expressed in the previous section. The discussed media trends, and their boldest implication – attention scarcity, present another case justifying this point. In the era of attention scarcity, news companies simply have to maximize the loyalty of their target audience. Maximizing loyalty means, but is not limited to, capturing maximum share of news consumption of the targeted audience. This serves as a remedy partially compensating for the attention and/or time available for media consumption which are becoming increasingly scarce. This means news has to be delivered to the targeted audience in the way that they want, in the platform they prefer, in a highly customized and versatile manner. Also, another key issue from the perspective of increasing loyalty is increasing the involvement of audiences with news media. Consumer insights which might shed further light on the means to improve the audience loyalty will be offered in the final part of this e-book. 3. The increasing cost of buying audience attention, or stated differently, the increasing cost of customer acquisition presents a good case for designing effective loyalty programs in order to retain the most valuable segments of the media audience. These loyalty programs will also address a common concern of newspaper executives regarding the migration of audiences to digital news delivery platforms: Higher defection propensity – the fact that competition is just one click away. During the Part – 2 / Section – 1 where advertising effectiveness has been discussed, it has been highlighted that effective utilization database marketing practices will not only increase the advertising effectiveness, but also fuel the design of key business strategies, including loyalty marketing strategies. Indeed, the customer insights obtained through database marketing may be utilized to design a loyalty scheme that both rewards the high valued audience segments with relevant perks, and the newspaper itself by altering the news “prosumption” behavior of the audience in the desired direction. These rewards should create increasing barriers towards switching in a way that’s hard to be imitated by the competition. Technological and societal trends on media - 5: Peer production One should not conclude that newspapers are mostly invulnerable to emerging forms of online competition based on the fact that entry barriers exist for micro-platforms to directly compete with traditional news media companies, before another important media trend, or rather a more general phenomenon is visited: peer production. Commons-based peer production is a term coined by professor Yochai Benkler to describe a new model of economic production, different from both markets and firms, in which the creative energy of large numbers of people is coordinated (usually with the aid of the internet) into large, meaningful projects, largely without traditional hierarchical organization or financial Newspapers & page 35 of 60 Development of Profitable Digital News Delivery Products in the New Media Landscape

compensation. 38 Peer production means, well organized masses may collectively threat any traditional media company - including newspapers. Perhaps the adverse effects of this phenomenon do not only apply to traditional media industries but many others; however a lengthy discussion of this obviously stays out of the scope of this e-book. An example for current peer-produced media establishments which have already started competing with the traditional ones is Wikinews (http://www.wikinews.org). Another good candidate is a recently announced project initiated by Craig Newmark, who is the owner of the craigslist (http://www.craigslist.org) 39 . Both these projects aim to allow anyone to report news on a wide variety of subjects, collectively competing with traditional news companies. Wikinews has been launched by WikiMedia foundation in December 2004 in both English and German. Soon editions in Dutch, French, Spanish, Swedish, Bulgarian, Polish, Portuguese, Romanian, Ukrainian, Italian, Serbian, Japanese, Russian, and Hebrew (in that chronological order) were set up. Its mission, as stated on the main page, is to "create a diverse environment where citizen journalists can independently report the news on a wide variety of current events". While Wikinews focuses on text articles, members are expanding the philosophy into other media. These projects include Audio Wikinews, which delivers Ogg Vorbis audio files, and Wikinews Print edition, which is a daily edition meant to be printed. 40 Illustrations 2C & D – Number of Wikinews Reports & Wikinews Articles over time 41 Note that the parent company of the newly announced peer produced news project, Craigslist - a Web site of classified ads and community notices which serves to many urban areas, had already cost newspapers tens of million dollars in advertising revenues in San Francisco Bay area alone 42 . Very recently, founder Craig Newmark told Associated Press editors and writers in a bureau visit, his newest fascination is community journalism. MSNBC notes that "Newmark hopes to develop a pool of "talented amateurs" who could investigate scandals, cover politics and promote the most important and credible stories. Articles would be published on Internet sites ranging from Craigslist to individual Web logs, or blogs." 43 There is a high likelihood that peer produced news media such as Wikinews, and "Craigsnews" can give newspapers and other news media significant headaches. The very basic reason for this 38 http://en.wikipedia.org/wiki/Peer_production 39 http://www.msnbc.msn.com/id/7762587/ 40 http://en.wikipedia.org/wiki/Wikinews 41 http://commons.wikimedia.org/wiki/Image:Wikinews_Reporters.png 42 http://money.cnn.com/2004/12/28/technology/craigslist/ 43 http://www.msnbc.msn.com/id/7762587/ Newspapers & page 36 of 60 Development of Profitable Digital News Delivery Products in the New Media Landscape

is that they enjoy virtually free production of content. Compared to newspapers which allocate a considerable amount of their resources to reporting, and other production related costs, peer- produced media will operate much more efficiently from an economic standpoint. If the central bodies such as WikiMedia Foundation achieves to efficiently allocate key central support resources for the use of their independent / amateur reporters and well organize them, peer produced news media will be able to compete with newspapers in every sense, and will be able to achieve everything that are initially listed as what micromedia platforms aren't capable of in order to properly compete with newspapers. The debate will continue on the front of code of journalists' conduct, and whether the reporting can be done properly without a proper education and training. However, as the debate goes on, the popularity of these sites will continue to soar, and for sure, governing bodies will arm themselves and their independent / amateur reporters with the tools to ensure that published articles will be of greater accuracy, and that their reporters will obey to the rules of conduct. Technological and societal trends on media - 6: A pressure towards greater transparency From the way that Wikinews dictates its mission statement and Craig Newmark states what Craigsnews will try to achieve, it seems that a differentiation ground for these peer produced news media operatives will be that they are unlike "corporate media" which allegedly defines it agenda based on complex politics - corporation - media relationships. On this issue, Richard Sambrook from BBC notes the following 44 : "There, of course, are problems associated with what many see as a dysfunctional relationship between British politicians and the press. They live side by side in what is known as the "Westminster bubble", mutually dependant, but eyeing each other with deep-rooted distrust. Many believe that distrust contaminates the public discussion of policy and legislation, and prevents people getting the information they need to make informed decisions about their lives". He continues, "The information revolution is in its earliest stages. But it has the potential to alter the dynamics of public debate, and the interaction between politics, media and the public, beyond recognition. The news business has been based on a model of limited information gathered by select organizations with resources to do so, and then distributed in ways controlled by the media or the regulators. That world has gone. We now have unlimited information available - it has been commoditized and democratized. Thanks to the internet, the role of media gatekeeper has gone. Information has broken free and top-down control is slipping inexorably away." Finally he concludes, "News organizations do not own the news any more. They can validate information, analyze it, explain it, and they can help the public find what they need to know. But they no longer control or decide what the public know. It is a major restructuring of the relationship between public and media. But it will affect politics and policy as well. The pressure for transparency is raising new political issues which we have not had to confront before." So emerging media trends such as peer production pressurize traditional media not only from an economical sense, but also create a major pressure towards transparency, challenging hierarchical and undemocratic editorial processes. If traditional media resists changing, a public backlash against non-transparent editorial procedures could be something that future brings. A great example for an online media establishment which leverages more democratic and non- hierarchical editorial systems is digg (http://www.digg.com), a website with emphasis on technology news. News stories and websites are submitted by users, and then promoted to the 44 http://news.bbc.co.uk/2/hi/technology/4630890.stm Newspapers & page 37 of 60 Development of Profitable Digital News Delivery Products in the New Media Landscape

front page through a user-based ranking system. Readers can view all of the stories that have been submitted by fellow users in the "digg all" section of the site. Once a story has received enough "diggs", roughly 25 or more within a certain time period, it appears on digg's front page. Articles usually are short summaries of stories on other websites with links to the stories, and provisions for readers to comment on the story. As of December, 2005, there are over 100,000 registered digg users 45 . Note that digg also leverages peer production, facilitating efficient allocation of attention to media content. Technological and societal trends on media - 7: Snowball effect There is a need to further emphasize a key impact of media plasticity combined with connected consumption: These also enable media consumers to add significant value to the content (which led to the “prosumers” term). As people engage in connected consumption of plastic media on micro-media platforms and mashups, they also complement the value of the core content by commenting, adding tags, links, playlists, and other means. As earlier noted, these actions add value by both implicit and explicit sharing of expectations, preferences and satisfaction which is valuable to everyone when aggregated, made public, and / or processed. In the end they slash search costs, and facilitate an efficient allocation of attention to the massive amounts of media content. Media plasticity combined with connected consumption both enables further value addition, and also further popularization of the micro-chunks of content as they are consumed. Potentially, the more popular a micro content becomes, the more sources will aggregate, syndicate, and mash it up, where even more people will add value along this process. This process of accelerating popularity that is accompanied with accelerating value addition is coined by Umair Haque, a highly recognized new media strategist and a popular blogger (http://www.bubblegeneration.com) as the "snowball" effect 46 . The emergence of snowballs simply means that most of today's traditional news media world which rigidly forbids open-access value creation by utilizing copyrights, not using syndication technologies such as RSS, and not allowing audiences to comment, is at a great economic disadvantage. The value of their properties will be limited, and they will either live with significantly less popularity or significantly higher marketing expenditures. Technological and societal trends on media - 8: Further Implications on News Industry During the introduction of the section it has been noted that the trends that are to be discussed drastically change the economics of media. The discussion indeed showed that, the equation that used to hold sometime ago –simply buying audience attention for the in-house produced content and selling it to the advertisers– is becoming highly inefficient in the new media dynamics. Within the context of this new media landscape preserving the status quo could be very costly for the news media industry – perhaps a matter of survival. Although some might involve a highly radical change, much easier said than done, the following recommendations can be seen as very elementary steps to be taken in order not to be dominated by the new players of the industry: 1. Open up your online goods, give readers access to means of production for complementary goods a. Enabling comments are the simplest example for this 45 http://en.wikipedia.org/wiki/Digg 46 Haque U., 2005, “The New Economics of Media”, http://www.bubblegeneration.com/resources/mediaeconomics.ppt Newspapers & page 38 of 60 Development of Profitable Digital News Delivery Products in the New Media Landscape

b. Syndicate your content via RSS and XML feeds. Yet, brand your syndicated content, and feature advertising on it for obvious reasons. c. While jumpstarting with your mashups, also encourage others to create their mashups, and feature them on your website. Washington-post is the pioneer newspaper in this front. Their mashup center could be visited for a better illustration: http://blogs.washingtonpost.com/post_remix/ 2. Experiment with connected consumption, and encourage social interaction on your websites. Give readers access to preference and expectation information about your goods. a. Markup your content with tags and other micro-formats b. Imitating similar basic functionality of digg or del.icio.us a-like structures (tagging, digging, lists of popular items and such) that are exclusive to your online readers can be a basic example for this. Apart from experimentation with connected consumption, this will also be an experimentation with more transparent, democratic editorial structures. c. Also, experiment with news reconstructors built on collaborative filtering, that leverage connected consumption, and present the audience with the news that is relevant for them. Simply, most of your audience might not have the time to spend on finding what’s relevant in the era of attention scarcity. There are many online media establishments that already have functional news reconstructors, such as GoogleNews 47 . 3. Experiment with peer production. It has earlier been pointed (trends on media – 4: Implications…) “Developing and improving the competence of “core” news media production and distribution presents a relatively bigger competitive advantage compared to that of other media. Thus, allocation of corporate resources on other types of content production assets seems uneconomical, since explosion of media supply will limit their returns.” This point along with the discussed economic benefits of peer production provide a good case for an experimentation with “peer produced content” in categories that stay out of the core "news" description, for instance, all sorts of reviews, cooking / traveling tips. The competence that is to be developed in regard to “peer production” is well facilitation, support and organization of external value creation. The Denver Post and Rocky Mountain News are the pioneer newspapers in this front, which jointly set up 42 community sites under the umbrella of Yourhub.com which features “locally” peer produced content. Also, WKRN-TV, the ABC affiliate in Nashville is another established media operation which experiments with peer production on Nashvilleistalking.com, a website that aggregates the posts from 400 local bloggers 48 . 47 http://blog.outer-court.com/archive/2006-01-21-n38.html 48 http://www.businessweek.com/print/magazine/content/06_08/b3972099.htm Newspapers & page 39 of 60 Development of Profitable Digital News Delivery Products in the New Media Landscape

P2-S2-B Audience related issues: Analysis of online content pricing strategies Since an understanding of new media trends, economics, and their implications on news media has been established, now a healthy and through discussion of potential online content pricing strategies can be made. This discussion will involve an analysis of the strategies of two news media giants, Wall Street Journal, and New York Times, addressing the effects of these strategies and underlying circumstances. Wall-Street Journal is one of the very few newspapers that restrict access to all its online content by requiring a fee based subscription. Even print subscribers have to pay additional subscription fees for accessing Wall Street Journal Online: Enjoying “critical” news updates during the business day costs $50 annually for the paper subscribers. The question that follows is, what might be the factors that make such a pricing strategy sustainable on the internet, where massive amounts of information is available at the expense of a couple search queries and mouse clicks? The first factor is the very strong brand equity and high national brand awareness of Wall Street Journal. Most people relate Wall Street Journal as the “must read” newspaper for business professionals. This idea, which is perhaps the strongest element of the Wall Street Journal “brand idea”, brings a perceived monopoly to Wall Street Journal in its category, which is also leveraged on the Internet, the universe of free information, to some extent. The other factor that makes this strategy sustainable is that Wall Street Journal is owned by Dow Jones & Company, which had recently acquired marketwatch.com 49 , a free site serving more or less the same target audience. Acquisition of marketwatch.com simply makes it easier for Dow Jones & Company to sustain the fee based subscription strategy for the WSJ online. However on the other hand, this move can be a mere indication that even Dow Jones & Company, the owner of the mighty Wall Street Journal brand, is realizing that there are more effective ways to leverage their corporate assets & content using other revenue models than fee based subscription. The concluding remark of this analysis is that, without circumstances that make the content highly differentiated, such as very powerful brand equity and a perceived monopoly (or a true monopoly, which is not quite likely to exist in the news media industry), restricting the access to whole content with a fee based subscription model is not a plausible strategy. Even having very strong brand equity might not make such a strategy plausible, such as in the case of New York Times. During early 2005, New York Times has adopted a new online content pricing strategy. This strategy involves restricting the access for only the "premium content" of the website with a fee based subscription, however the access for the regular daily news items stays unrestricted. Premium content includes most of the opinion pieces: Columnists and bloggers. Premium content also includes Times archives – older news items; advanced search capabilities which enable browsing these archives dating back to 1981 efficiently; and finally some other advanced functions such personalized e-mail news alerts. New York Times’ fee based partial subscription model remains controversial amongst many media strategists 50 . Yet on the other hand, it seems to be a more plausible strategy compared to total subscription models such as the one adopted by Wall Street Journal. Does TimesSelect make an economic sense for New York Times? Also, can similar partial subscription models make sense for other players in the news industry? These questions can be answered by a detailed analysis of the pros and cons of such partial subscription strategies within the context of new media dynamics that have been recently discussed. 49 http://www.dowjones.com/Pressroom/PressReleases/Other/US/2004/1114_US_DowJones_7276.htm 50 Fine J, ‘New York Times decides opinion pieces on web will be pay per view’, Advertising Age (May 2005) Newspapers & page 40 of 60 Development of Profitable Digital News Delivery Products in the New Media Landscape

Online content pricing strategies - 1: Pros – fee based partial subscription models • Incremental revenues: The most obvious benefit of this strategy is that it creates a new stream of income from online readers who will choose to subscribe. • Decreased substitutability of print and (free versions of) online products: The underlying logic is as follows: If loyal print readers who buy the print edition are inclined to substitute their print consumption with online edition, they may not be able read their favorite columnists without a paid TimesSelect subscription. These people may always find regular news items for free on NYTimes.com, or any other news website, however being New York Times loyalists it’s quite likely that they will either continue buying the paper, or subscribe to TimesSelect in order to access to their favorite opinion pieces. This phenomenon indicates to the importance of opinion pieces as a differentiator to the news products. Especially in the online world where the regular news items are heavily commoditized, the influential columnists and bloggers are true value adders to the news products and brands. Thus, heavily branding and promoting the columnists and bloggers make much economic sense. Some media strategists, contending that information will always try to be free on the Internet, object to the fact that charging for opinion pieces decreases the substitutability of print and online products. According to them, the "premium" content, although illegally, will usually be published by other websites. However the validity of this argument requires an assumption that loyal New York Times readers will opt to seek this content elsewhere, incurring considerable search costs. This is quite unlikely for most readers. Online content pricing strategies - 2: Cons – fee based partial subscription models • Limited value creation and popularity: Once the access for opinion pieces is restricted, the complementary value created for the opinion pieces by the audience becomes limited. The effects on viral mechanisms that enable the popularization of the micro content also become limited. These effects combined mean that access restricted opinion micro content will not enjoy as powerful "snowball" effects (accelerating value and popularity) as non-access restricted ones. However even in the case where the access is restricted, mechanisms for triggering snowball effects may still be designed. Let's give an explicit example about how snowball effect works for an opinion micro content, and then discuss how such mechanisms may be designed for access restricted opinion pieces. Popular columnist X writes an article, and this is published on his blog / micro-media platform. Subsequently, it is syndicated by his RSS feed, which is delivered to the feed subscribers. Reading the article through his/her aggregator, another influential / blogger Y, quotes this article, and shares his views on this opinion piece. This time, popular blogger Y's feed is aggregated by its own subscribers. In the mean time, significant traffic is diverted to columnists X's weblog, and readers create complementary value by adding comments. They also bookmark the article through del.icio.us along with tags and comments, and they "digg" and comment on the article at digg.com, causing it to appear on the front page of this popular website (further complementary value is added, and popularity has soared by now). Finally, the article starts to gain significant visibility on popular reconstructors / mashups, for instance Technorati. Consequently, a huge a micro-media "snowball" is formed. Now, when the access to opinion piece is restricted by a fee based subscription requirement as in the case of New York Times, non-subscribers can’t access to both the blog itself or the RSS feed. The influential / popular blogger Y of the mentioned example, whom may seen as Newspapers & page 41 of 60 Development of Profitable Digital News Delivery Products in the New Media Landscape

the trigger of all this process, may as well not be a subscriber, and so most of the potential complementary value adders. As a result, very few people comments and tags the article, and it also gets decreased visibility on mashups and reconstructors like digg and del.icio.us, and Technorati. Then, a simple step designated to enable the triggering of the snowball creation process may involve keeping track of the most influential bloggers who may comment on the opinion piece, and providing free subscriptions for them. In this case, the resulting snowball still wouldn't be as powerful as the unrestricted access case, yet it could still drive significant value and popularity. Another mechanism to employ could be simply making some of the opinion pieces unrestricted for a certain period of time. Bold opinion pieces which are expected to create a big buzz / controversy are good candidates for this since their snowballs are likely to be relatively large. The result will be increased brand equity, and potential additional subscribers for TimesSelect. • Decreased advertising revenues: As a result of restricting access to opinion pieces, and limited snowball effects, advertising revenues that are driven by this content will obviously be negatively impacted. Online content pricing strategies - 3: Weighing pros and cons – fee based partial subscription models In order to conclude whether partial online subscription models make economic sense, one should weigh the negative revenue impact of this relatively less powerful snowball effect and resulting decreased traffic; and the positive revenue impact of people who either subscribed to the Times Select, or continued buying the paper as a result of restricted online access. It must be noted that the utility driven by the additional features of the TimesSelect program, such as customized e- mail alerts and advanced search features, potentially plays a key role impacting direct revenues from TimesSelect. Weighing these factors is trickier than it seems. New York Times can easily keep track of direct TimesSelect subscription revenues. Yet the projection of the number of people who opted to pay print subscription fees as the result of restricted online content access is not that straightforward (i.e. people who wouldn’t subscribe to print edition if the premium online content was not access restricted). On the other side, the lost advertising revenues, and the lost value from the resulting less powerful snowball effects must be calculated. Which is even trickier is the estimation of the effects of another potential factor, changes in brand equity. Obviously, powerful snowballs create positive brand equity for New York Times. How much of the brand equity is lost by as a result of the restricted access? Unfortunately, complexity of underlying factors, and unavailability of extensive data makes it impossible to conclude that the partial subscription model makes economic sense for New York Times. However, this is also true for concluding the contrary. One can contend that even NYT may not be aware of the answer yet, since the strategy has been adopted very recently. Although it would be a naïve course of action, one who assumes that NYT employs sound business decision making mechanisms may reach a conclusion on this issue by observing whether this pricing strategy is sustained for long or not. Newspapers & page 42 of 60 Development of Profitable Digital News Delivery Products in the New Media Landscape

Online content pricing strategies - 4: Implications of the analysis Although there is no clear conclusion in regards to the overall financial effects of fee-based partial subscription models, there are some key implications of the analysis performed that is applicable for all newspaper industry: • Fee based total subscription models, or stated differently restricting the access to whole content by requiring subscription fees, as in the case of Wall Street Journal, are not plausible online content pricing strategies for most newspapers. • Regardless of the pursued online content pricing strategy, opinion pieces are key properties of the online editions. Engaging in significant promotion and branding activities for the columnists and bloggers contribute to the differentiation of the online editions, simultaneously driving brand equity for the newspaper brand. An illustration of this can be seen from the New York Times homepage, where highly visible banners introduce columnists of New York Times along with some of the benefits of the TimesSelect program: Illustrations 2C & D – Banners from New York Times Online which promote columnists • Also regardless of the pursued online content pricing strategy, cooperation with influential and popular bloggers is essential. As their comments on opinion pieces play a key role in triggering the formation of micro-media snowballs, providing incentives for them in terms of advertising and/or subscription revenue sharing programs will have positive financial benefits as a result of driven complementary value and popularity. • There is potential for fee based partial subscription models to have positive net financial benefits. However, it is likely that results will vary amongst newspaper companies. Based on the analysis of New York Times’ and Wall Street Journal’s online pricing strategies, it can be suggested that existence of circumstances that differentiate the content to be restricted provides a stronger case for pursuing such strategies. Such circumstances that have been discussed here include, having a powerful brand equity, having a perceived monopoly, and having well-know and recognized bloggers / columnists. If these circumstances exist, until the industry reaches a consensus, conducting a detailed market research followed by a test implementation seems to be the only way to reach an accurate conclusion. Apart from the nature of the content, and the brand equity of the newspaper, increasing the utility driven from the additional online features that are provided to the subscribers may increase the net financial impact of the partial fee based subscription models. These capabilities also play a differentiating role for news products. Advanced search features and e-mail alerts that are offered by TimesSelect can be some basic examples for them. Newspapers & page 43 of 60 Development of Profitable Digital News Delivery Products in the New Media Landscape

It is possible to design more advanced capabilities that drive higher utility for paid subscribers. An earlier recommended feature for online news products – effective news reconstructors that presents relevant news to subscribers using collaborative filtering – seems to be a good candidate in this respect. Part - 2 / Section – 2 Summary: Maximization of online revenues in a multi channel setting / Audience related issues Today, as the "new" media audience consumes new forms of digital media, they simultaneously produce and create significant economic value for media products – thus, the correct term to relate them would be media “prosumers” (combining the words producers and consumers). “Prosumers” phenomenon is what makes the issues that underlie maximization of online audience revenues much broader. The emergence of “media prosumers” hints us that, the economics of media has changed as well. Within the context of new media dynamics, the simple equation that used to hold sometime ago – buying audience attention for the in-house produced content and selling it to the advertisers – is becoming highly inefficient. Thus, the discussion of “audience related multi-channel strategy design issues” first involves a discussion of a series of technological and social trends on media, and the means that they change the economics of the industry. Although this discussion leads to a diverse set of implications and recommendations, an overarching theme points for a need to explore the new frontiers in driving value from the news media audiences, rather than just earning advertising or subscription revenues from them. On “media related technological & societal trends”… 1. Media production and distribution is getting much cheaper and easier. Furthermore, content is now being delivered in the form of micro-chunks: Atomized media that can be cut, split, filtered, remixed, and aggregated. 2. These led to the emergence of micro-differentiated media platforms such as Blogs, Vlogs, podcasts which cheaply produce and distribute high-quality micro-differentiated content. Content produced in these micro media platforms mostly involve people sharing their personal or professional experiences, views, or making reviews, providing tips (i.e. in "D.I.Y." or “How-to" format). 3. Micro-media platforms featuring plastic media made mashups more popular - the websites or web applications that combines content from more than one source. 4. In one sense, reconstructors are more sophisticated forms of mashups. They "deconstruct" micro-media from many sources, alter, remix and filter micro chunks to reconstruct casts of personal media. 5. Connected consumption phenomenon is the enabler of many reconstructors, facilitating the efficient allocation of attention to media by the transparent information sharing mechanisms. During connected consumption consumers explicitly share their expectations, preferences and satisfaction about massive amounts of micromedia contents. They also share / create complementary goods which implicitly reveal these. 6. Potentially, the more popular a micro content becomes, the more sources will aggregate, syndicate, and mashup it, where even more people will add value along this process. This process of accelerating popularity that is accompanied with accelerating value addition known as the "snowball" effect. 7. With peer production, well organized masses may collectively threat newspapers. WikiNews is a peer produced news project that is already competing with traditional news media. Soon it will have editions in 16 different languages on digital and print platforms in multiple formats (i.e. text, audio). Compared to newspapers which allocate a considerable amount of their resources to reporting, and other production related costs, peer-produced media will potentially operate more efficiently from an economic standpoint. If the central bodies such as WikiMedia Foundation achieve to efficiently allocate key support resources for the use of their independent / amateur reporters and well organize them, peer produced news media can dominate newspapers in every sense - unlike micro-media platforms which may never become Newspapers & page 44 of 60 Development of Profitable Digital News Delivery Products in the New Media Landscape

effective news media establishments. 8. Emerging media trends such as peer production pressurize traditional media not only from an economic sense, but also create a major pressure towards transparency, challenging hierarchical and undemocratic editorial processes. If traditional media resists changing, a public backlash against non-transparent editorial procedures could be something that future brings. “The Implications on the news industry”… Overall media supply is exploding. However, considering the effects of reconstructors and connected consumption, there is another major implication: The greater portion of the overall media supply is becoming actually available to the consumer. Since total amount of media one can consume is somewhat limited, attention and time available for news media consumption will get relatively scarcer. This also means "buying audience attention” will be more expensive for the media industry, including newspapers. Moreover, audience acquisition costs are likely to increase significantly in the near future. In the era of attention scarcity, news companies simply have to maximize the loyalty of their target audience: o Maximizing loyalty means, but is not limited to, capturing maximum share of news consumption of the target audience, so that the effects of attention and/or time scarcity will be somewhat compensated. This requires news to be delivered to the targeted audience in the way that they want, in the platform they prefer, in a highly customized and versatile manner. Also, another key issue from the perspective of increasing loyalty is increasing the involvement of audiences with news media. Consumer insights which might shed further light on the means to improve the audience loyalty will be offered in the next part. o Furthermore, the increasing cost of customer acquisition presents a good case for designing effective loyalty programs in order to retain the most valuable segments of the media audience. These loyalty programs will also address a common concern of newspaper executives regarding the migration of audiences to digital news delivery platforms: Higher defection propensity – the fact that competition is just one click away. In this context, customer insights obtained through database marketing may be utilized to design a loyalty scheme that both rewards the high valued audience segments with relevant perks, and the newspaper itself by altering the news “prosumption” behavior of the audience in the desired direction. Today, the barriers of entry are higher for "news media" production compared to other (i.e. entertainment) media production. From this perspective, entertainment magazines should feel more threatened from the emergence of micro-platforms than newspapers should. Thus, developing and improving the competence of “core” news media production and distribution presents a relatively bigger competitive advantage compared to that of other media: The return on resources allocated on other types of content will be limited by the exploding media supply. This point along with the discussed economic benefits of peer production provide a good case for an experimentation with “peer produced content” in categories that stay out of the core "news" description, for instance, all sorts of reviews, cooking / traveling tips. In the era of “snowballs”, traditional news media companies which rigidly forbid open- access value creation by utilizing copyrights, not using syndication technologies such as RSS, and not allowing audiences to comment, are at a great economic disadvantage. Thus, newspapers should open up their online goods, giving readers access to means of production for complementary goods. Enabling comments, content syndication via RSS and XML feeds are some basic examples for this. Also, encouraging others to create their mashups on the newspaper content is another good example. Furthermore, experiments with connected consumption should be an imperative while encouraging social interaction on websites. For instance, this may involve giving readers access to preference and expectation information about content, marking up content with tags and other micro-formats. It may as well involve imitating similar basic functionality of digg or del.icio.us a-like structures (tagging, digging, lists of popular items and such) that are exclusive to paper's online readers. Apart from experimentation with connected consumption and peer production, these will also function as experimentation with more transparent, democratic editorial structures. The competence that is to be developed in regard to these Newspapers & page 45 of 60 Development of Profitable Digital News Delivery Products in the New Media Landscape

strategies is well facilitation, support and organization external open access value creation. On “Online Content Pricing Strategies”… Wall-Street Journal is one of the very few newspapers that restrict access to all its online content by requiring a fee based subscription. This pricing strategy owes it sustainability to the Wall Street Journals’ very strong brand equity and high national brand awareness. Furthermore, the “must read newspaper for business professionals" component of the “brand idea” brings a perceived monopoly to Wall Street Journal in its category, which makes the strategy even more plausible. However, since many news media companies are not in similar circumstances that make their content highly differentiated, restricting the access to whole content with a fee based subscription model is not a plausible strategy for them. During early 2005, New York Times has adopted a new online content pricing strategy. This strategy involves restricting the access for only the "premium content" of the website with a fee based subscription, however the access for the regular daily news items stays unrestricted. Premium content includes most of the opinion pieces; Times archives – older news items; advanced search capabilities; and finally some other advanced functions such personalized e- mail news alerts. Once the access for opinion pieces is restricted, the complementary value created for the opinion pieces by the audience becomes limited. As a result, micro content will not enjoy as powerful "snowball" effects (accelerating value and popularity) as non-access restricted ones. However even in the case where the access is restricted, mechanisms for triggering snowball effects may still be designed. Two examples in this regard can be providing free subscriptions for the most influential bloggers who may comment on the opinion piece, and making some of bolder the opinion pieces unrestricted for a certain period of time. Does TimesSelect make an economic sense for New York Times? In order to conclude that, one should weigh the negative revenue impact of resulting relatively less powerful snowball effect and decreased traffic; and the positive revenue impact of people who either subscribed to the Times Select, or continued buying the paper as a result of restricted online access. It must be noted that the utility driven by the additional features of the TimesSelect program, such as customized e-mail alerts and advanced search features, also have a close relationship with the direct revenues from TimesSelect. Unfortunately, complexity of underlying factors, and unavailability of extensive data makes it impossible to conclude that the partial subscription model makes economic sense for New York Times. However, this is also true for concluding the contrary. “The Implications on the news industry”… Opinion pieces are key properties of the online editions. Engaging in significant promotion and branding activities for the columnists and bloggers contribute to the differentiation of the online editions, simultaneously driving brand equity for the newspaper. Cooperation with influential and popular bloggers is essential. As their comments on opinion pieces play a key role in triggering the formation of micro-media snowballs, providing incentives for them in terms of advertising and/or subscription revenue sharing programs will have positive financial benefits as a result of driven complementary value and popularity. There is potential for fee based partial subscription models to have positive net financial benefits. However, it is likely that results will vary amongst newspaper companies. Existence of circumstances that differentiate the content to be restricted provides a stronger case for pursuing such strategies. Such circumstances that have been discussed here include, having a powerful brand equity, having a perceived monopoly, and having well-know and recognized bloggers / columnists. If these circumstances exist, until the industry reaches a consensus, conducting a detailed market research followed by a test implementation seems to be the only way to reach an accurate conclusion. Moreover, increasing the utility driven from the additional online features that are provided to the subscribers may increase the net financial impact of the partial fee based subscription models. These capabilities also play a differentiating role for news products. Advanced search features and e-mail alerts that are offered by TimesSelect can be some basic examples for them. It is possible to design more advanced capabilities that drive higher utility for paid subscribers. Effective news reconstructors that presents relevant news to subscribers using collaborative filtering seems to be a good candidate in this respect. Newspapers & page 46 of 60 Development of Profitable Digital News Delivery Products in the New Media Landscape

PART – 3: Consumer Insights to aid superior news media design As concluded on part-I, gathering an in depth understanding of the audience’s "total" news consumption behavior should be a major issue on the agenda of any newspaper company today. However, it seems that there are few resources which may help them in achieving this end. Carnegie Reporter highlights this issue with the words - “Even at universities and think tanks, research on these critical topics is limited” 51 . Thus, in an effort to provide a remedy for this resource scarcity, some recent major academic work on the issue will now be visited, discussed and further built on. P3-A Insights from experiential engagement framework in regards to online news consumption behavior One of these recent major academic efforts had led to the emergence of experiential engagement framework, a powerful media analysis tool that has been introduced earlier during our discussion of advertising effectiveness. An overarching theme of this discussion addressed the multidimensional nature of audience experiences with media products. Basically, one’s total media experience is composed of many distinct or separate experiences. In this context, it has been concluded that better driving / strengthening many of these separate experiences will potentially increase both the media consumption of the audiences, and the advertising effectiveness of the news product. Nonetheless, introduction of these experiences and an in-depth discussion of their implications have not been made yet. This will now be done here in the context of recommendations that have been presented throughout the e-book. However, right before that, the methodology underlying the experiential engagement framework will be explored as it will enhance readers’ ability to assess the implications and recommendations that are to be presented. As earlier discussed, the experiential engagement approach has been mostly developed by two researchers, Bobby Calder and Ed Malthouse of Northwestern University’s Media Management Center. According to them, observing people’s experiences through their own reports of their thoughts and feelings about media is a great way to capture the “qualitative” reactions to media. In the simplest sense, the idea of experiential engagement is identifying, measuring and understanding people’s reactions to the media using experiences as a tool. The methodology involves 3 steps: 1. Qualitative interviews on people’s experiences and reactions to the media which yield a set of survey questions that may or may not indicate a variety of experience constructs. Experiences are conceptualized as constructs because a specific experience usually has multiple indicators (i.e. survey questions or expression style). 2. An analysis of the responses to the survey (via exploratory factor analysis) in order to locate separate experience constructs, followed by examining the reliability to refine the measurement of each construct in terms of its best survey question indicators. 3. Experience constructs are then related to the variables of interest such as usage, and advertising effectiveness. In regard to their most recent research focusing on the online content websites, researchers state “our purpose here is to examine online content web sites using the Experiential Engagement 51 Brown, M. (2005), ‘Abandoning the News’, Carnegie Reporter - Vol. 3 No. 2 Newspapers & page 47 of 60 Development of Profitable Digital News Delivery Products in the New Media Landscape

approach. In addition, we will also consider the issue of cross-media impact. To what extent does usage of print media impact online media?” 52 As noted earlier, researchers identify 22 separate experience constructs with online content websites. After performing analysis to reveal how these experiences relate to site usage level, researchers conclude that all but 3 of these experiences are clearly implicated in the level of people’s use of any specific site. In order to measure site usage, they use a variable called ‘SUM’ (Site Usage Measure). This is a summary figure of two variables closely related with the intensity of site usage: Amount of time spent on the site and number of distinct sessions for weekday and weekend usage. Basically, the higher the SUM, the more someone uses a website. The summary chart which includes a list of the identified 22 experience constructs is provided below, along with estimated figures on the relationship between each experience and SUM. The β coefficient is estimated slope of the line that predicts SUM from the intensity of the respective experience. Basically, the bigger the β coefficient is for an experience, the more sensitive the SUM is for that specific experience. Table 3A – 22 Experience constructs and their respective β coefficients as a predictor of SUM 53 ??? For instance, one would probably describe the experience “Entertains and absorbs me” during a qualitative interview using some of the following sentences: “I look forward to visiting this site. I have fun while I’m there and don’t want to leave. It has a distinct personality and often surprises me. It’s a contrast to the mainstream media”. Then, the positive β coefficient of 0.64 for this experience indicates that, the more people use such statements when describing their reactions to a content website (or stated differently, the better a content website stimulates this experience), the higher likelihood that both the site usage, and the advertising effectiveness of the content website will improve. 52, 49 Calder B. J., Malthouse E. C. (2005), ‘Experiential Engagement with Online Content Web Sites and The Impact of Cross-Media Usage’ Newspapers & page 48 of 60 Development of Profitable Digital News Delivery Products in the New Media Landscape

As expressed earlier, a very obvious conclusion that can be drawn from this analysis is, as researchers’ state, “The implication obviously is that an online content website should try to improve these experiences”. However, they add “It remains, of course to design and test ways of improving the experience on the site”. Indeed, means of improvement may be somewhat obvious for some experiences, but not for all. For those experiences that the means of improvement remain questionable, performing further experiments with online news products followed by an assessment of the impact on the experience levels, site usage measures and advertising effectiveness is a good course. Further work is underway at Northwestern University’s Media Management Center to come up with further explicit recommendations for content websites in regard to the improvement of the revealed experiences. Media establishments those are willing to conduct their own tests and exploration to improve the performance of their news products may download detailed research papers on experiential engagement framework from Ed Malthouse’s homepage 54 . Also, some of these experiences will soon be assessed further in this e-book, in the context of some earlier discussions and recommendations, perhaps leading to a better understanding of the means of their improvement. During Part-I of this e-book, the risks posed by the changing news consumption of the younger generations have been clearly highlighted. Thus, it has been pointed that newspaper companies must pay specific attention for the younger segments of the population when gathering consumer insights. Thus, as a part of the efforts to prepare this e-book, experiential engagement framework is further utilized in order to shed further light on the online news consumption behavior of the younger generations specifically. First it was hypothesized that for some of the newspaper website experiences, β coefficient, which is the estimated slope of the line that predict SUM from the experience level, would be significantly different between young and old segments of the population. Stated more plainly, it was hypothesized that some experiences are enjoyed differently between young and old segments (i.e. the same level of an experience may lead to different site usage levels between young and old segments). "Younger segments" refers to 18 to 34 year olds, and "older segments" refer to 35 year olds and older, in the context of this analysis. Then, utilizing experiential engagement approach, first it will be analyzed if such differences actually exist and if so for which experiences they exist; which will be followed by a comparison of the β coefficients. Note that a difference of this analysis’ approach compared to the original application of the experiential engagement framework to the online content web sites is that, it only uses data from respondents who had taken the “newspaper websites” survey specifically 55 , so that findings would be more relevant for the newspaper industry. First, the analysis has revealed that such differences indeed exists, validating the hypothesis stated above. It turned out that these differences are more striking for the following experiences: 54 http://www.medill.northwestern.edu/faculty/malthouse/ 55 The original framework uses data from surveys on a diverse set of online content websites, which includes other categories than newspapers, i.e. News Portals (msn, yahoo), TV stations Newspapers & page 49 of 60 Development of Profitable Digital News Delivery Products in the New Media Landscape

Experience Constructs [In the order of the Young β Old β β coefficients for the younger segment] 1. Looks out for people like me .94 .59 2. Helps and improves me .81 .41 3. A credible, safe place .71 .43 4. Connects me with others .69 .42 5. Easy for me .67 .35 6. Makes me feel I belong .60 .31 7. Give me something to talk about .58 .37 8. Guides me to other media (β = .56) .56 .38 9. A way to fill my time (β = .48) .48 .30 Table 3B – Young versus old: Differences in β coefficients of experience constructs as a predictor of SUM For the remainder of 22 online content website experiences, the differences of β coefficients between younger and older segments are either not very striking, or statistically insignificant. Finally, it turned out that, as can be observed from the above table, for all the experiences identified as having significantly different β coefficients that predict SUM, the β coefficients of the younger segment of the population was bigger compared to that of the older segment. This basically means that younger segment is much sensitive to these 9 online experiences than older segments are, so the inability to drive these experiences is likely to cause a higher decrease in younger segment’s newspaper website usage (SUM) than it would for the older segment. Consequently, this means, if these experiences are well driven, the usage levels (SUM) of the younger segment will increase more than it increases for the older segment. It should be noted that the insensitivity of older segment in regards to these experiences should not be interpreted as they don’t care about them. Indeed, they do, however these experiences matter less for them than it does for the younger segment, as implied from the β coefficients listed above. The further details of the performed data analysis are available at the neoMarketing website. 56 P3-B Insights from experiential engagement framework in regards to online news consumption behavior: Strategy implications for newspaper websites The insights obtained from the experiential framework have number of implications that are to be considered in the future designs of online news media products: A. Younger generations with higher expectations from online news products Let’s recap some of the insights gathered through experiential engagement: 1. Media experiences are multi-dimensional. For most of the separate experience constructs that contribute to this multi-dimensionality, the stronger they are the stronger the site usage will be. 2. Younger generations are more sensitive to many of the 22 experience constructs that are related with the online newspaper website usage compared to their predecessors. Based on this, one could also say that they have higher expectations from online news products. In order to make a stronger point from these insights, a statement from Neiman reports, which also have been quoted earlier in this e-book will now be revisited: “The problem with online 56 http://www.neomarketing.tv/neomedia/news-ebook/analysis-details.doc Newspapers & page 50 of 60 Development of Profitable Digital News Delivery Products in the New Media Landscape

newspapers is this: They are just like offline newspapers. That means they are not particularly interactive, they are barely customizable to individual preferences, they contain mostly outdated information, and they are hardly relevant to most readers daily lives” 57 . So: 3. Most newspaper websites are mere copies of print editions. When combined together, these 3 points imply the reasons behind the problems of newspapers inability to attract younger generations to their online editions. Once most key experiences that “turn on” the younger generations are weak on newspaper websites, they simply prefer other websites which also feature news content, but do a better job in terms of driving these experiences. This makes better driving / improving the experiences that specifically turn on the younger generations an important imperative for the online editions. B. Technological and societal trends on media revisited in the context of experiences favored by younger generations During the earlier discussion on Part – 2 Section 2, three major technology driven trends have been introduced, such as the eroding barriers to media distribution, which led to the emergence of some other technological and societal trends that are drastically changing the media landscape and economics. Although an in-depth exploration of these trends and analysis of their implications have been made, this was more of a technology and economics oriented approach per se, rather than customer centric or insights driven. Now that experiential engagement approach has been explored in detail, these trends may now be approached and explained from the view point of customer, or stated more precisely – the media audience, since this methodology identifies clear relationships between the audience experiences and media usage levels. When this approach is taken, the experiences that lead to the emergence and popularization of new media products and features can be revealed, which will perhaps enhance the understanding of the means that both these experiences and trends can be leveraged in order to design of tomorrow’s superior news media products and features. Indeed if explored in detail, it will become apparent that many of the experience constructs that younger generations are more sensitive to, or that “turn them on”, are closely related with the technological and societal trends on media that have been discussed during Part 2 section 2: Table - 3C: Experiences that “turn on” younger generations, and that are at the core of the media revolution, as defined by the media audience • Makes me feel I belong: I find my values reflected here, and feel more a part of community. It makes me feel like a better citizen. Using this site makes a difference in my life. • Looks out for people like me: The site cares about people like me and conveys a sense of community. It makes everyday things interesting and simplifies the complex. • Easy for me: It's easy to find what you're looking for and the content is clear and straightforward. I enjoy that there is also serendipity. • Connects me with others: Getting input from others is a big reason why I like this site. Visitors are knowledgeable. I've gotten interested in causes I wouldn't have known about. • Guides me to other media: This site points me to other good sites and helps me enjoy media more. • A credible, safe place: I trust this site's information and its ability to provide what's important. I feel safe using the site and giving it information. It presents unbiased information. • Helps and improves me: This site helps me make good decisions and to improve myself. It provides a lot of "how-to information". I give others tips and advice from what I've learned. • Gives me something to talk about: I use things from this site in conversations with other people. 57 Carlson, D. (2005), ‘The news Media’s 30-Year Hibernation’, Neiman Reports – Fall 2005 Newspapers & page 51 of 60 Development of Profitable Digital News Delivery Products in the New Media Landscape

These experiences may be consolidated to 5 major elements / components, which are mostly observable on the discussed new media trends, such as micro-media platforms, reconstructors, peer production, and connected consumption: • Personalization • Interaction • A sense of belongingness / involvement / community • A sense of accomplishment / self-improvement accompanied by the discovery of the things (i.e. media, people, knowledge) which are “usable” (i.e. I use things from this site in conversations with other people) and relevant (i.e. using this site makes a difference in my life) • Credibility Micro-differentiated media platforms, such as blogs, vlogs, and podcasts have been identified as websites that cheaply produce and distribute high-quality micro-differentiated content. On the other hand, reconstructors have been identified as sophisticated forms of mashups, featuring micro-chunked content from various sources. Reconstructors first "deconstruct" micro-media from many sources, then alter, remix and filter micro chunks to reconstruct casts of personal media. For instance, with their narrowly focused content, most micro media platforms attract people with values and interests alike, which create a sense of belongingness and community, when interaction component driven through features such as comments is considered as well. Furthermore, when some of the statements that relate to these experiences are considered, such as “This site helps me make good decisions and to improve myself. I enjoy that there is also serendipity. It provides a lot of how-to information”, it must be to no one’s surprise that “content produced in these micro media platforms mostly involve people sharing their personal or professional experiences, views, or making reviews, providing tips (might be in DIY or how-to format)” – a quotation from part 2 section 2. On the other hand, reconstructors, such as Last.fm, create a great sense of personalization since they create micro-chunked casts of media that is highly relevant to the audiences. Furthermore, reconstructors lead to the discovery of new and interesting knowledge or media, which perhaps lead to the improvement and diversification of one’s tastes. A phenomenon closely related with reconstructors, connected consumption not only enables personalization and discovery of the usable and relevant things (by the efficient allocation of attention it facilitates), but also user interaction. Connected consumption also brings an additional layer of credibility to the media (i.e. Top 40 charts gamed by radio payola, or bestseller lists are gamed by publishers buying own books; versus transparent information sharing mechanisms employed by the platforms leveraging connected consumption). Finally, new media establishments that leverage peer production, such as Wikinews or WikiMedia also create a sense of belongingness / involvement / community and enable interaction amongst users. From the sense that it enables democratic and transparent editorial mechanisms, peer production also brings an additional layer of credibility to the media. These clear relationships between experiences that “turn on” the younger generations and the new media products / features offer a good explanation for popularization of blogs, and websites such as del.icio.us, Wikinews / Wikipedia, digg, Last.fm, which have been discussed during Part2 – Section 2. They also reinforce the recommendations of Part2 – Section 2A-VIII from a customer centric way. Furthermore, apart from these recommendations, the 5 major components of the discussed experiences that have been identified constitute a potential guide for coming up with Newspapers & page 52 of 60 Development of Profitable Digital News Delivery Products in the New Media Landscape

and evaluating other ideas on the design of tomorrow’s superior online news media products and features. P3-C Insights from VALS and Experiential Engagement frameworks in regards to total news consumption behavior During Part-2 section 1, means to improve advertising effectiveness were discussed taking a holistic, or a non-siloed approach in regards to print and online platforms. This approach made it apparent that taking multi-channel issues into account is essential when strategizing and managing online and print platforms, in order to make the execution of effective advertising campaigns that are integrated over platforms possible. Following a similar logic, the evaluation of various online content pricing strategies was also conducted in a “holistic” manner on Part-2 section 2. Meaning, the analysis considered the potential impacts of those strategies on print subscription revenues as well, which had quite an impact on the drawn conclusions. Thus, now that the customer insights from various recent major researches are being presented in an effort to guide the tomorrow’s superior designs of news products and features in this part (3), there is a clear need to present relevant multi-channel issues and insights. In this context, the experiential engagement framework, which has recently offered some key insights on the online news product design (3A, 3B), will soon be revisited which will offer some new insights on the potential impacts of online content website usage on the print product usage, and vice versa. However before that, a new research which offers insights on news consumption behavior from a multi-channel perspective will be introduced. It has been published on New Media & Society, and titled “Lifestyles, reliance on traditional news media and online news adoption” 58 . The research suggests that psychographics can be a powerful tool for gathering an in-depth understanding of the “total” news consumption behavior. Psychographics is an extension of demographics and is used to determine values and lifestyle characteristics that can be correlated into targeted marketing programs. The “Lifestyles, reliance on traditional news media and online news adoption” research specifically uses VALS segmentation, which is based on psychographics, a very popular approach supported by much research (e.g. Grunert et al., 1997; Leung, 1998; Pitts and Woodside, 1984). The mere phenomenon underlying psychographics is that people seek out new products as a means of establishing and communicating social differentiation and identity. The products that people buy and use are an indicator of their lifestyles. Kahle (1985: 231) points out that ‘rarely do consumers purchase anything exclusively for the functional aspect of the product’. Instead, they hope to attain other benefits from the purchase. For example, few people purchase a car solely for transportation. Furthermore, Levy (1963) demonstrated that the total assortment of goods and services used by consumers is a mirror image of lifestyles. Thus, knowing something about lifestyles and their relationship to consumption objects for social identity would help to predict product use. Sourced from this outlined rationale, the basic idea of VALS is that, consumers buy products in part to reflect their values and enact their lifestyle. VALS proponents have argued convincingly that values directly influence interests, time–use activities and roles, which in turn influence consumer behavior (Carmen, 1978). It must be noted that many researchers had previously examined links between lifestyles, personal values and media usage (Backer and Connor, 1981; Donohew et al., 1987), and confirmed the 58 Chan J. K., Leung L. (2005), ‘Lifestyles, reliance on traditional news media and online news adoption’, New Media & Society, Vol. 7 - 3 Newspapers & page 53 of 60 Development of Profitable Digital News Delivery Products in the New Media Landscape

usefulness of these variables in explaining one's media usage behavior, which presents a good case for an application of the VALS methodology in a context where media is the product. VALS segments the population based on two dimensions of variables. “Lifestyles, reliance on traditional news media and online news adoption” research reveals some significant links amongst these variables and total news consumption behavior. Thus, first these variables of VALS methodology will be explored, which will be followed by the findings of the research in regards to their relationship with news consumption behavior. First dimension of VALS is the primary motivation of the individual, and it determines what in particular about the self or the world is the meaningful core that governs his or her activities. Consumers are inspired by one of three primary motivations: ideals, achievement, and self- expression 59 : • Ideals: Consumers who are primarily motivated by ideals are guided by knowledge and principles. • Achievement: Consumers who are primarily motivated by achievement look for products and services that demonstrate success to their peers. They possess a strong need for approval by others, and are concerned about the opinions. • Self expression: Consumers who are primarily motivated by self-expression desire social or physical activity, variety, and risk. Second dimension of VALS is the resourcefulness of an individual. Energy, self-confidence, intellectualism, novelty seeking, innovativeness, impulsiveness, leadership, and vanity play a critical role. These personality traits in conjunction with key demographics determine an individual's resources. Different levels of resources enhance or constrain a person's expression of his or her primary motivation. VALS segments feature four different levels of resourcefulness. The research seeks some notable links between these set of lifestyle / psychographics based variables and the following characteristics of news consumption which are dependant on both the nature of the content and news platform, and the design of the news product: Table - 3D: News consumption characteristics based on the nature and design of the content and platform* • Interactivity - refers to the interaction between the news consumer and content producers, or other news consumers. • Multimedia – refers to audiovisual characteristics of the news content • Convenience – refers to the ease of news consumption, which is mostly related with the nature of the platform, i.e. the ability to easily retrieve relevant additional information on the Internet • Required level of involvement – refers to the involvement required by nature of the news content during consumption, i.e. Radio requires engagement at only audial level, whereas Internet usually requires active participation in order to consume the news • Indepthness – refers to the detail level / comprehensiveness of the content most commonly offered by the news source * As inferred from the methodology and findings of the quoted research 59 SRI Consulting Website - http://www.sric-bi.com/VALS/types.shtml Newspapers & page 54 of 60 Development of Profitable Digital News Delivery Products in the New Media Landscape

So the basic contention is that one’s primary motivation and resourcefulness impact the level of utility driven by these characteristics of the product: • Interactivity: Interactivity as an attribute of online news consumption seems to drive a higher utility for the VALS segments who are either motivated by achievement (i.e. strivers), or self-expression (i.e. makers). Since people who are primarily motivated by ideals mostly purchase products for their functional purposes, it makes sense for the utility driven by the “interactivity” feature to be lower for them compared to other two segments. Research also concludes that the more someone listens to radio for entertainment and information (a news platform which doesn’t enable much interaction), the more they would use Internet for news (where the platform enables extensive interaction). This suggests that various news products function in a complementary sense to form a mix of consumption, based on the utilities of various features that are different across platforms and/or products. • Multimedia: Multimedia as an attribute of news consumed online seems to drive a higher utility for the VALS segments who are motivated by the ideals (i.e. makers). This makes sense from the perspective that they are unimpressed by material possessions other than those with a practical or functional purpose. Thus multimedia features drive a high level of utility for them, most probably from the perspective of their functional purpose. • Convenience: It seems that utility driven by the convenience imposed by the news product / platform mostly depends on the resourcefulness of the individual. Here are the findings based on the resourcefulness of the individual: • Highly resourceful: Experiencers are an example of a highly resourceful VALS segments. These people are looking into excitement and variety, and tend to use internet as a news source more often compared to other platforms, because they would not rely simply on traditional sources for news. They enjoy the convenience offered by the Internet, which presents information from different sources through hyperlinking and other means. Internet’s convenience also embodies easy access, frequent updates, and searchable features. Convenience is one of the key factors to their online news consumption. Not surprisingly, in terms of coverage they also like to read both local and international news online. • Lowly resourceful: In contrary, survivors who are very lowly resourceful individuals who live narrowly focused lives, who seldom read news with international coverage. This is primarily because international events don’t interest them much, since they have very limited resources to relate these events to their own lives. Newspapers & page 55 of 60 Development of Profitable Digital News Delivery Products in the New Media Landscape

• Required level of involvement Although no clear links with any psychographic variable is found, it still is a notable finding that when someone listens to radio news, and also refers to radio as the news source that he/she mostly relies on, then he/she is less likely to use the online news. Internet obviously requires the highest level of involvement, since the audience has to be more intentional and focused in receiving new information, for example the need for following a series of links in order to reach desired content. On the contrary, radio allows listener to be more passive in consuming the content. So for someone who relates radio as the primary news source (this can be interpreted as this platform has most enjoyed features for him / her –including low level of involvement required–), perhaps the high level of involvement required by the online news platform act as a barrier to news consumption. It seems that differences in news consumption tastes may also causes radio and internet news not to be included in the mix of news products consumed complementarily, contrary to the example discussed in interactivity • Level of indepthness Although no clear links with any psychographic variable is found, another notable finding is that when online newsreaders regularly seek news information on TV, they also tend to be frequent users of specific local and international news online. This could be due to the fact that television news is known for its brief and shallow nature rather than news with depth and analysis, such as printed newspaper or online news. Moreover, news online usually provides hyperlinks to related stories if one wishes to learn more. This is in line with the notion of the media activation effect, which motivates audiences to seek more of the same from another medium (Rosengren and Windahl, 1989). This is another example where utilities of various features seem to cause different products to be consumed complementarily, similarly to the example given during the discussion of interactivity All these findings constitute a sound case for hypothesizing two things. First is that one’s taste of news consumption is, at least partly driven by his/her lifestyles / psychographic variables. This can be stated differently as, the utilities of the various features of news products and platforms depend on one’s lifestyles / psychographic variables. The second is that, there is an obvious relationship between one’s taste of news consumption and the mix of news products / platforms consumed in a complementary sense. Based on these findings, VALS researchers conclude that “Customized news services are required to satisfy the different needs of newsreaders with diverse lifestyle orientations”. Experiential engagement framework will now be revisited, this time offering further insights regarding the consumption of news products / platforms in a complementary sense. The application of this framework titled ‘Experiential Engagement with Online Content Web Sites and The Impact of Cross-Media Usage’, also addresses the following questions: • How use of an online content website is affected by use of print magazines in general? • How use of a print magazine is affected by use of online content websites in general? Although this part of the research specifically focuses on magazine readership, most likely the conclusions drawn regarding magazine readership behavior are also applicable for the news consumption behavior as well in a broad sense (as most magazines offer news content as well). Research concludes “Heavy users of print are different from other online users. It is not that print usage correlates with online usage. It is that online usage is even more affected by online experiences for heavy print users. Print use makes people more responsive to their experiences Newspapers & page 56 of 60 Development of Profitable Digital News Delivery Products in the New Media Landscape

online. Conversely, online usage makes people more responsive to their print experiences. One creates a taste for the other”. They also state “That print magazines create a taste for online, and online a taste for print, raises obvious possibilities for cross selling and cross-promotion. There is a built in potential for synergy”. The interpretation of these findings is as follows: 1. Heavy users of print have higher print experiences 2. This makes them more responsive to online experiences 3. The pattern of results suggests that this may be especially true for online experiences that are qualitatively different from print experiences (i.e. online only experiences – connects me with others) Although limitations for making further inferences from these findings possibly do exist, these findings are in line with the recent contention that “various news products function in a complementary sense to form a mix of consumption, based on the utilities of various features that are different across platforms and/or products”. The prior example involved someone consuming internet news along with radio news as a result of enjoying the interactivity. This finding suggests that, similarly, someone who enjoys interactivity may complement his print magazine readership with online news. It also adds another important insight that, heavy consumption of one product / platform may create a taste for other products / platforms as well, so an additional variable shown to impact taste of consumption apart from lifestyles / psychographics. P3-D Insights from VALS and Experiential Engagement frame works in regards to total news consumption behavior: Strategy implications for Newspaper Multi-Channel Strategies Let’s recap the insights offered in this discussion: • One’s taste of news consumption, or stated differently – the utilities of the news products and platform features, is partially driven by his/her lifestyles / psychographic variables (i.e. resourcefulness and primary motivation). • These features are partially posed by the nature of the news product / platform, but also are related with the product design. • There is a relationship between one’s taste of news consumption and the mix of news products / platforms consumed in a complementary sense. Taking a more broad perspective to these findings, they may suggest: o Some psychographic segments would seek news sources that are very in-depth, and that provide convenience access to many other news sources. For others, these features may not drive increased utility, and potentially even decrease the overall utility of the news product. o Some segments would be willing to have no involvement in the way that the news is delivered for them, even if they’re using the Internet platform. On the other hand, other segments might be totally enjoying the empowerment provided by the Internet in regard to what news they are consuming. o For some, the more Interaction with others they can have in an online news platform, the better. Others might not care this as much. o For some, the more Multimedia features they’re presented with in an online news platform, the better. Others might not care as much. • Also, consumption of various news products (may be in different platforms) create a taste for each other (i.e. print magazines create a taste for online, and online a taste for print) o Someone who is a heavy print reader, valuing interactivity, may complement his/her print news consumption with Internet, since this experience does not exist Newspapers & page 57 of 60 Development of Profitable Digital News Delivery Products in the New Media Landscape

in print platform. Consequently, he/she is likely to be more sensitive for the online experiences that are inexistent in print platform. o Someone who is a heavy radio listener, thus who likes or got used to news consumption with a low level of involvement, may not complement his/her consumption with online news. • VALS researchers conclude that “Customized news services are required to satisfy the different needs of newsreaders with diverse lifestyle orientations”. On the other hand, experiential engagement researchers conclude that (the phenomenon that news products create tastes for each other) “raises obvious possibilities for cross selling and cross- promotion. There is a built in potential for synergy”. • Then, there are two overarching themes offered here in regard to the future designs of news products. One is the requirement to be customized and flexible; and the other is the requirement to work synergistically, in an integrated way. Now let's re-visit some of the earlier recommendations presented in this paper, and re-frame them based on these findings. During Part-I, a new vision has been presented for newspaper companies that are willing to survive and prosper in the new media landscape. Based on many factors (Table 1-C) discussed, perhaps strongest case being an accelerating rate of population-wide substitution from print to online media, this vision entailed a transformation from being a “newspaper company” to a “news company”. Further, it has been highlighted establishing this vision initially requires newspaper companies to engage in aggressive insights driven investments in order to develop and promote profitable digital news delivery mechanisms. Later on many media related trends have been discussed, which introduced the idea of exploding overall media supply, resulting in an attention scarcity for media establishments, including newspapers. This reinforced the "news company" vision, implying that the effects of this attention scarcity could only be overcame by capturing maximum share of news consumption of the audiences, regardless of the delivery platform. Thus, the following recommendation has been made: "deliver the news in the way that your audience wants, in the platform they prefer". The implications of the VALS and experiential frameworks presented in this chapter suggest that "delivering news in the way that your audience wants, in the platform they prefer" can be somewhat complex. It seems that although people utilize different news delivery channels in a complementary sense (i.e. a radio news consumer who enjoys interaction, may complement this consumption with internet news which is more interactive), their channel preferences and usage patterns are highly differential based on their lifestyle orientations and other product preferences (i.e. another radio news consumer, who does not enjoy interaction in media may not complement this consumption with Internet news). In summary, the factors which determine the total mix of consumed news products seem to be many. Apart from the ones mentioned in this text, situation specific factors (i.e. you may not read newspaper while driving) are another obvious factor. Today's industry view on "customized" news usually entails providing people with relevant news content that they will indeed be interested. Showing GoogleNews' recommended news feature as an example, it has been recommended that “newspaper websites have to experiment with building similar reconstructors built on collaborative filtering technologies”. However, these recent insights suggest that, in order to capture more of the share of news consumption these customizations of news products should go beyond presenting the audience with relevant news. This is especially true for the internet, which has less rigid boundaries, imposing fewer Newspapers & page 58 of 60 Development of Profitable Digital News Delivery Products in the New Media Landscape

restrictions on product designs. The relevancy of the news does not ensure the relevancy of the format, and many other variables of preference. For instance, some of the audience might simply prefer video or audio rather than text, and others might be looking into places that provide them with higher interaction, or higher level of involvement - which will be readily available on another news source. Obviously, there are many things to do in regards to further customizations of these products. Why not offer multiple designs that can accommodate wide range of audience preferences? Thus, the new media landscape requires the products of news companies to be highly versatile, yet integrated. The versatile and integrated products idea involves news delivered in multiple platforms and multiple formats, which can easily complement each other based on personal preferences and tastes. Assuming that not everyone is well aware of their customization preferences and tastes, these versatile and integrated products should be smart as well, predicting the best design and the mix of products to be offered. The flagship product of almost all newspaper companies today, the papers themselves, stays totally out of the vision of "news companies with versatile and integrated products" today. It is for sure that, also considering the situation specific factors, “news delivered on paper” will be a part of the news consumption mix of many. However, the paper products of tomorrow's news companies will be highly customizable in terms of content, which will also be highly integrated with many other products that constitute a mix, complementing each other and capturing the maximum share of news consumption of the target audiences. On the other hand, most of the websites, the “adopted children”, also are totally out of this vision. They are barely customizable, few go beyond copying print content, and totally disintegrated with the print products. Part - 3 Summary: Consumer Insights to aid superior news media design On “online news consumption behavior”… Basically, one’s total media experience is composed of many distinct or separate experiences that make the overall media experience multidimensional. In regards to online content websites, experiential engagement framework identifies 22 separate experience constructs. Better driving / strengthening many of these separate experiences will potentially increase both the media consumption of the audiences, and the advertising effectiveness of the news product. As a part of the efforts to prepare this e-book, experiential engagement framework is further utilized in order to shed further light on the online news consumption behavior of the younger generations specifically. This analysis validated the hypothesis that some of the identified content website experiences are enjoyed differently between young and old segments (i.e. the same level of an experience may lead to different site usage levels between young and old segments). 9 such experiences have been identified, and it turned that younger segment is more sensitive to all these 9 experiences from the perspective of site usage levels compared to their predecessors. Based on this finding, one can say that younger generations have higher expectations from online news products. These 9 experiences may be consolidated to 5 major elements / components: Personalization; Interaction; A sense of belongingness / involvement / community; A sense of accomplishment / self-improvement accompanied by the discovery of the things (i.e. media, people, knowledge) which are “usable” (i.e. I use things from this site in conversations with other people) and relevant (i.e. using this site makes a difference in my life); and finally Credibility. The inability to drive these experiences is likely to cause a higher decrease in younger segment’s newspaper website usage (SUM) than it would for the older segment, whereas strengthening them is likely to cause a higher increase in younger segment’s SUM than it would for the older segment. Consequently, newspaper websites are unable to attract younger generations as mere copies of print editions, failing to drive most experiences that “turn on” Newspapers & page 59 of 60 Development of Profitable Digital News Delivery Products in the New Media Landscape

the younger generations. On the other hand, many of these elements that “turn on” the younger generations are observable in new media trends and products that have been discussed earlier, such as micro-media platforms, reconstructors, peer production, connected consumption, offering a good explanation for the popularization of these products and technologies. These insights not only reinforce the recommendations of Part2 – Section 2A-VIII from a customer centric way, but also are potential guides for coming up with and evaluating other ideas on the design of tomorrow’s superior online news media products and features On “total news consumption behavior”… This e-book’s vision for the future of newspaper companies entails an urgent transformation towards becoming a “news company”. Many of the trends that have negative implications for the industry could only be overcame by capturing maximum share of news consumption of the audiences, regardless of the delivery platform. However, the implications of the VALS and experiential engagement frameworks presented in this part suggest that this can be somewhat complex, because the factors that determine the total mix of consumed news products seem to be many: o One’s taste of news consumption, or stated differently – the utilities of the news product and platform features, is partially driven by his/her lifestyles / psychographic variables (i.e. resourcefulness and primary motivation). These features are both posed by the nature of the news product / platform, and also related with the product design. Such news platform features discussed in this text include interactivity, multimedia, convenience, required level of involvement, and indepthness. o The resulting taste of news consumption has a great role on determining the mix of news products / platforms consumed in a complementary sense. Also, consumption of various news products (may be in different platforms) create a taste for each other (i.e. print magazines create a taste for online, and online a taste for print) In order to capture more of the share of news consumption these customizations of news products should go beyond presenting the audience with relevant news, because the relevancy of the news does not ensure the relevancy of the format, and many other variables of preference. Many design improvements are required to accommodate wide range of audience preferences - not only regarding the Internet platform which impose fewer restrictions on product designs, but also for print platform. The new media landscape requires the products of news companies to be highly versatile, yet integrated. The versatile and integrated products idea involves news delivered in multiple platforms and multiple formats, which can complement each other synergistically based on personal preferences and tastes. Assuming that not everyone is well aware of their customization preferences and tastes, these versatile and integrated products should be smart as well, predicting the best design and the mix of products to be offered. It is for sure that, also considering the situation specific factors, “news delivered on paper” will be a part of the news consumption mix of many. However, the paper products of tomorrow's news companies will be highly customizable in terms of content, which will also be highly integrated with many other products that constitute a mix, complementing each other and capturing the maximum share of news consumption of the target audiences. The flagship product of almost all newspaper companies today, the papers themselves, stays totally out of the vision of "news companies with versatile and integrated products". On the other hand, most of the websites, their “adopted children”, also are totally out of this vision. They are barely customizable, few go beyond copying print content, and totally disintegrated with the print products. Newspapers & page 60 of 60 Development of Profitable Digital News Delivery Products in the New Media Landscape

Newspapers & Profitable Digital News Delivery

by Onur Kabadayı on Nov 09, 2010

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Newspapers & Profitable Digital News Delivery Document Transcript

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