Funding the future

Thought provoking and interesting piece from Ethan Zuckerman on future funding for journalism.  He points out that advertising has always been massively overpriced in print, and now that vendors can get good stats on how effective their ads are, they’re not willing to shell out quite so much anymore.  He quotes an ex-ad exec called Joshua Jeffryes:

When I worked in Advertising the ineffectiveness of advertising was hardly a secret. But customers couldn’t measure the effectiveness of ads. So they paid and continue to pay ridiculous prices for them.

Online ads, on the other hand, are measurable. They work just as well, if not better, than print, television, etc., the difference is that for the first time ad customers know exactly how ineffective they are.

The first point being something I suppose we all knew intuitively but, like our intuitions about the irrationality of the banking system, didn’t allow into conscious awareness (the somebody knows what’s going on, surely, impulse).  The second point being a thing journalists and publishers are going to have to worry about.  Says Zuckerman:

If I’m right and print advertising costs are fundamentally irrational, then it’s possible that the way we’ve built media in the United States can’t survive a transition to a more rational market.

That goes not just for the US, but for Europe too.  While we do have trusts (Irish Times, Guardian), they depend on this putatively irrational system of advertising for their existence, and licence fee funded broadcasting networks (BBC, RTE) only ever came about because of limited bandwidth in the early days: ie, it’s as far from a funding model for the internet as it’s possible to get.

He goes on:

What if the idea that commercial enterprises should carry out the public interest function of journalism is built on a fundamentally broken model? What if advertising worked pretty well as a way of subsidizing public interest journalism only so long as advertisers didn’t understand the effectiveness of their ads? Putting aside all the other reasons why commercial journalism may be flawed – the tendency of newspapers and television channels to seek readers by publishing “edutainment” rather than investigation, the worry that papers will hesitate to publish stories that might embarrass advertisers – what if ad supported journalism is only viable in a world where we radically overvalue the worth of ads?

Is the answer more, cheaper ads?  Or is it a return to the old old model of foundation/proprietor funded journalism?  Bloggers and smaller concerns will be able to fund their small operations with their small advertising revenue, but growth will only be achievable when someone who’s made their money in something else comes along and doles out cash.  The Knight Foundation are already doing this in the US.

Justifications for ‘free’ newspapers funded by advertising were created after the model came about: without a controlling proprietor, with proprietary interests, newspapers were more objective, balanced; free.  Always a nonsense, of course, advertisers were always just as controlling of what a newspaper could report, and how, as the Rothermeres of old.  It was just a more subtle form of control.

Going back to the smaller revenues achievable through online advertising: is this the end of the world?  Philip Meyer, in his book The Vanishing Newspaper, gives traditional profit margins of 30% for newspapers, compared with 6% for other industries.  Even without funding from a foundation or a proprietor it seems entirely plausible that online publications can operate at a profit.  Just a smaller one.  If anyone out there can do the sums, I’d be delighted to hear from them.