News for Nothing: Life on the Web

Michael Hedges December 17, 2008

A question posed by an ftm reader is simple enough. What real world examples are out there of financially sustainable news websites? Opportunity abounds on the internet domains. Cold hard cash is harder to find.

A zillion news websites are out there waiting for inquiring eyeballs, many updated within the last two years. With all that creativity and effort finding a few financial winners shouldn’t be too difficult. We’d rather learn from winners than losers, right?

Fortunately or not, the three dominant and traditional business models apply equally to the Web and every other media platform. There’s money from advertising, subscription and sustaining sponsors. Sometimes these revenue sources are mixed, sometimes not. New models have not been invented for the Web. To be financially sustainable, somehow the content must evoke a transaction.

If I had five centimes for every time somebody explained their business model with “and we’ll get money from advertising” I’d be writing this from a tropical island. Yes indeed, advertisers have been in love with the Web. More are spending more on the Web each year. Most are spending a lot more on television, with newspapers or billboards.

If fact, news websites are a lot like newspapers – free newspapers. People like their news hot, relevant and free…or nearly free. People pay for information - or other content – they deem necessary. It’s not good enough for news websites to be interesting: they must be necessary.

The winners, web-wise, among general interest news websites aren’t news websites at all. They’re aggregators and they get zillions of visits, hits, page views, whatever. They make money from advertising because, even at fractions of centimes per click-through, zillions of visits will yield a bit of cash. The general rule of the click-through thumb says it takes 1.5 million visits per month to yield sufficient cash to live. The biggest of the news aggregators are profitable because there is no cost but technology. Oh, and everybody expects that click-through rate to fall.

Other winners on the Web are the lightly specialized news sites. Indeed, it’s the specialization that gets closer to advertisers Holy Grail: targeting.  During the tediously long US presidential campaign The Huffington Post – offering political news bent center-left – beat pure aggregator Drudge Report in Web traffic and made a bit of money. Several left leaning political news and comment sites are served by ad aggregators offering a higher click-through rate because the targeting is more in line with ad buyers’ needs.

Social networking sites’ short, short history with advertising offers another essential piece of the money puzzle. These sites are page view magnets, gazillions. Procter and Gamble experimented recently with Facebook, figuring all those eyeballs must be worth something. The one campaign they’ll talk about featured a sign-up link to a special promotion. Only 14,000 played, and one-third of those dropped out. Research on users of social networking sites shows they ignore the ads, regardless the premium.

The next set of news website winners simply charge, subscription-style, for the good stuff. The biggest winners tend to be from the publishing world because they have the good stuff. The best examples in the big league are the websites of the Economist, the Financial Times and the Wall Street Journal. Sure, they ‘show a little leg’ but the easy payment page is there when you work your way up.

Mr. Murdoch – the Elder – famously announced on acquiring the WSJ that the ‘pay-wall’ would fall. The accountants turned him around. It must have been an interesting meeting.

Business-to-business websites, those offering specialty news, apply the same principle. The good stuff is available to subscribers. Anybody can pay, but pay they must. And, yes, B2B sites are often filled with ads targeting the specialty.

The remaining set of news website winners are those sustained by a host. The BBC News, CNN and ESPN websites are brand marketing devices for their parents…so far. Of course, the Web platform offers users an attractive alternative to the linear television program model but eyeballs to the TV matters. 

There is no ‘magic bullet’ to making money with news websites. Indeed, those looking for it are most likely to miss it or get it right between the eyes. A sustainable business model considers the costs involved in providing sufficiently relevant or important information to a customer motivated to pay. It matters not whether that customer is an advertiser, sponsor or the end user.

The lesson from free newspapers applies. News, unless it directly affects that most fundamental level of Maslow’s Pyramid, is discretionary.  People pick up the free sheet, surf the Web, turn on the TV or radio often hoping for some bit of information or news but interest is fleeting. Raising fleeting interest to ‘must know’ is the key to making money with news websites…or any news platform.

Eva Aberg from Stockholm posed the question. Join the discussion with the ftm LinkedIn Group here