A Modest Proposal For The [Xxxxxx] Newspaper

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A memo outlining a business and technical model for a newspaper...

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A Modest Proposal For The [Xxxxxx] Newspaper

  1. 1. A Modest Proposal for the [XXXXXXXX] Newspaper on the Web Background I don’t know any internals about the business of the [XXXXXXXX]. But as someone who tracks the media industry, it’s safe to presume that the same forces that are corroding other print media businesses are also hitting the Weekly. The forces look like: lower circulation as audiences move to the Web, meaning lower ad rates for print; an audience shifting to the Web where ad rates are spectacularly lower and where core functions of the paper (choosing nightlife, choosing restaurants, choosing films) are exposed to well-funded category killer sites like Yelp, Citysearch, and Fandango. The [XXXXX] – like other newspapers – can either decide to defend its existing territory and fight to slow the erosion or move into the new territories opened by changes in technology, advertising and revenue markets, or audience and consumer behavior. The ideas contained here just popped into my head as I was working on something else over the weekend; I thought I’d share them with you. Newspaper Web Strategy 1.0 > 2.0 First-generation newspaper websites essentially replicated the print edition online, with the key differences of persistence (articles go into an archive) and some level of interactivity (comments on articles). As newspapers advanced, they began to include raw background information, source notes, etc. to offer a more complete exposition of what went into articles. The efforts have gone into expanding the value within the core url that represents the newspaper’s online footprint. Theorists like Jeff Jarvis (author of ‘What Would Google Do?’, blogger at www.buzzmachine.com, professor at SUNY’s graduate school of journalism) have begun to suggest that the newspaper of the future will be online – but that it won’t necessarily be contained on one site. Jonathan Swift wrote: "So nat'ralists observe, a flea 1 © Charmed Particles, Inc 2009
  2. 2. Hath smaller fleas that on him prey, And these have smaller fleas that bite 'em, And so proceed ad infinitum." Imagine instead an ecology of sites centered on the core [XXXXX].com site; each is a site on a more- specialized topic than the one above it and more general than the ones below it (LA politics, then below it a series of sites including a site on the doings in CD5; Dining, then below it a series of sites including a site on Dim Sum) feeds traffic and content upward, receives traffic downward, and provides ad, sponsorship, and transactional inventory. A core set of the blogs would be funded and owned by the [XXXXXXXX], and each would also work to create a lower level of 3rd party blogs on related topics, and provide a conveyor belt of content and traffic upward – as well as traffic and ad revenue downward. It would look like this: This is a conceptual diagram of the Glam.com network of sites – as compared to a major competitor. Here’s VentureBeat talking about Glam in early 2007: We finally “get” Glam, the network of Web sites for women’s fashion and lifestyle. Last month, VentureBeat was incredulous when venture capitalists invested in the company at a value of $150 million. Glam is just another new media company, dependent on ads. How could an upstart team of 40 employees produce that sort of value? The company has just demonstrated why. It is the fast growing of the country’s top 500 web sites, according to Comscore Media Metrix numbers just published — and shared with VentureBeat by chief executive Samir Arora (pictured here) during an interview Monday. 2 © Charmed Particles, Inc 2009
  3. 3. Glam enters 2007 with impressive momentum: Hip social networking company, Facebook, was No. 1 fastest-growing site in 2006 — until December — when Glam doubled its uniques in a single month and blew past Facebook at the last minute. Glam now has more than 8 million U.S. unique visitors per month. Glam overtakes Disney’s women network and CondeNast’s network, jumping to second largest women’s web property, behind only iVillage. (See data below.) Glam has more than 16 million global visitors, Arora says. The recommendation is to duplicate that model editorially as a regional network of location-and-topic centered sites, with authority and core traffic driven from the [XXXXXXXX] newspaper and core site. Economically, this allows the [XXXXXXXX] to reinvent itself from a single web property to a regional ad network; additional transactional revenue sources (ticket sales, restaurant reservations) ought to be readily attainable as well. [XXXXX].com as a ‘Network’ of sites. Part 1 – content (we’ll talk revenue in a moment) Taking Jarvis’ ideas and the Glam model applying them to the [XXXXX], we might initially get a constellation of 41 sites (this is a conceptual suggestion, not a plan): • [XXXXX].com at the center; • CouncilDistrict1 – 15 [XXXXX]. A blog for each council district with a blogger brought in to birddog each LA City Councilmember • Supervisorial District 1 – 5 [XXXXX]. A blog for each County Supervisorial district • 10 blogs on aspects of culture. High Culture, Pop Culture, Dining, Housing, Outdoors, Relationships, Music, Film, Theater, etc. • 10 hyperlocal neighborhood blogs. Hollywood, West LA, Beach Cities, etc. Each of these blogs might draw content from the relevant political blogs, as well as the cultural blogs Each of the sites offers content to other [XXXXX] sites and promotes other [XXXXX] sites – the CD12 blog has space to promote cultural events in the West Valley; and the best – most interesting – content is rolled up until it gets to the core [XXXXXXXX] site and if particularly interesting, to the print edition. Each of the site authors it encouraged to curate other relevant sites and offer them an advertising, content, and traffic deal in which content may flow upward, links will send traffic both ways, and the [XXXXXXXX] ad sales force will place ads – at a higher rate than Google or TribalFusion – on these outside sites. 3 © Charmed Particles, Inc 2009
  4. 4. Why do this? Because it will move the [XXXXX] from a difficult to defend position at a legacy reviewer (film, theater, food) with a narrow news hole to being the pre-eminent hyperlocal news company in the region; it’s a scalable model anywhere the [XXXXX] chain has a paper. And it will – itself – make money. [XXXXX].com as a ‘Network’ of sites. Part 2 – the economics Here’s what it looks like: HighCultureWeekly .com Story Li nk s Story Ad s Story Storie ries S to LA Weekly.com s Link ks Story WestSideWeekly.com Lin Stories Story Story Ad Story Story Ad LATheaterWeekly.com Stories 3rd Party Blog Links Story Stories Story Story Story Story Ad Ad Links Story Story es s Link Stori CD5Weekly.com Story Stories Story 3rd Party Blog Ad Story Story Links Story Ad Story The hard reality is that bloggers – even good bloggers – are inexpensive (I say this with great sadness as a blogger). It is likely that the [XXXXX] could bring on 40 writer/editor/bloggers for about $500/month, with a promise to raise them to $1 – 1.5K/month plus some share of ad revenue if the model works and if their particular site takes off. In addition, you’d agree to pay them your usual rate for articles that were moved up to the main site or the paper. 4 © Charmed Particles, Inc 2009
  5. 5. So assume outside personnel costs at startup of $20K/mo or $240K/year, plus someone to coordinate/manage all this at $50K/year (burdened) for a total of $290K in staff costs at startup. Operating costs would be a webmaster to manage ad placement and noncopy content changes – another $50K burdened – and a few thousand a month in ongoing technical costs (higher once traffic takes off). So in total, we’d be looking at an ‘at risk’ operating cost of $345K/year ($28.4K/mo) plus a significant low six-figure capital expenditure to implement this. There might be resources that could be pulled from other operations to cover some of this, but I’m assuming not. How much traffic/advertising would you have to generate to cover these costs? CPM ads are dying as we move to CPC or CPA, but CPM rates can serve as a good ‘proof test’ to look at traffic needed to cover costs. Pageviews/site Aggregate /day /month Monthly Ad views Monthly Revenue Sites Ads/Page CPM 40 5 $ 1.00 $ 2.50 $ 5.00 15,000,00 2,500 75,000 3,000,000 0 $ 15,000 $ 37,500 $ 75,000 30,000,00 5,000 150,000 6,000,000 0 $ 30,000 $ 75,000 $ 150,000 45,000,00 7,500 225,000 9,000,000 0 $ 45,000 $ 112,500 $ 225,000 60,000,00 10,000 300,000 12,000,000 0 $ 60,000 $ 150,000 $ 300,000 75,000,00 12,500 375,000 15,000,000 0 $ 75,000 $ 187,500 $ 375,000 So at a $1.00 CPM, you’d need 5,000 pageviews/day. As a comparison, the Mayor Sam blog – with no outside traffic driver – gets 6,000 unique visits/day (per Compete.com) which should translate into 7,500 – 9,000 pageviews/day. At a $1.00 CPM, if your sites could – on average – match Mayor Sam, you’d earn $45,000/month, on costs below $30,000/month for a profit of $15,000/month (not including the cost of the six-figure capex for setting this system up). If you could drive the effective CPM’s up – and note that Federated Media shows $15 – 20 CPM’s for targeted web properties – the revenue potentials are obviously significantly higher. And with a larger inventory base, the ability to invest in or partner with targeted ad providers and raise ad revenue further is significant. 5 © Charmed Particles, Inc 2009
  6. 6. Adding transactional revenue should be an immediate step. The current state of revenue-generation on sites is transactional, rather than ad-driven. Sites that review things also sell them (typically as an Amazon or other major merchant affiliate); review sites could sell tickets through links to Fandango or Ticketmaster or make restaurant reservations through links to Open Table. Conclusion This is obviously nothing like a complete plan. But it ought to be enough to define a possible future for the [XXXXXXXX] that would not only be a good business decision – one that will generate revenues and profits that justify the investments and risks – but a good journalistic one. [XXXXXXX] has stories that need to be covered, and the current economic state of print and mainstream television and radio journalism don’t support the coverage that’s needed to do that job. New models must emerge – and the hope is that steps like these can define a path to those new models. So here’s my present to you guys. Or to quote: “There it is. Take it.” Marc Danziger Charmed Particles, Inc. www.charmedparticles.com marcd@charmedparticles.com 6 © Charmed Particles, Inc 2009

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