Karen Rubin's Ramblings

It shouldn’t be news to anyone that the newspaper industry isn’t doing well. The cost of producing a newspaper far exceeds the cost it is sold for and the real money is earned in advertisements and classified listing services. As the internet hasHowevecont conti continued to grow and expand sites such as Craigslist.com have provided the same listing services for free and thus the money earning opportunities have dwindled for newspapers.

In addition, because the internet is based on the open sharing of information, newspapers have failed to bring their businesses online in a cost effective manner. Forcing customers to pay online subscriptions has failed and online advertising is continually decreasing in value. The industry has failed to keep up with the changing times and newspapers around the country are bleeding money and beginning to close.

All of this has sparked recent discussion and debate about a potential newspaper bailout which culminated in the Newspaper Revitalization Act which was introduced a couple of weeks ago by Senator Ben Cardin (D-Md).The Act, as described in Tech Crunch,

“allows newspapers to operate as nonprofits for educational purposes under the U.S. taxcode, and thus receive the same tax-benefits as a non-profit organization.Revenue from advertising and subscription would be tax exempt, and contributions to support news coverage or operations could be tax deductible.”

The Act is getting some heat for its restriction prohibiting newspapers from endorsing political candidates, but I think the bigger problem is that it would halt innovation in an industry that is desperately in need of it. Newspapers have been failing for the last 5 years and they haven’t quite figured out that they need to change something drastically in order to survive. A bailout from the government will only prolong their slow death and hinder true forward motion.

I don’t have the answer to how the newspaper industry can have all their problems solved, but I am sure if a couple more fail, people will start to get antsy and the brain-juice will start flowing. Scott Kirsner shared on HubSpot.tv, that he thinks newspapers need to reach out to the local businesses that have supported them in the past, to find out how the newspapers could better support them. It’s not a novel idea to ask your customers what you can do to give them better service, make them happier and then jack up the rates, but I don't think it's something the newspapers have tried yet.

Another idea might already be in the works between Google and the New York Times. Newspapers have fantastic data about what people are reading they just haven’t put that data to use to serve better targeted ads. If there is any company in the position to help them do so, and supply the infrastructure to do so, it’s Google.

Newspapers provide a valuable service to the country by keeping us all informed. I agree it would be tragic to see the industry bite the dust, however I also think it would also be tragic to miss this opportunity to embrace innovation and instead provide a crutch to a failing industry. 

*Photo Credit: Lakewentworth on Flickr 

Marketing Pilgrim shared with us last week that Forrester is predicting huge long term growth for social media spending in online advertising. They even shared this pretty graph (ok I added the commentary,) 

Social media is a really small portion of the pretty chart because social media is largely free. Sure there is the cost of execution, but you don't pay money to be on Linkedin or Facebook. What I found amazing are the predicted growths of display advertising (banner ads) and search marketing (PPC) of 17% and 15% respectively. 

As we have learned over at HubSpot, leads that you find through inbound marketing are cheaper than those you find through outbound marketing. While Mike tells me you can get really good deals on banner ads and such, I think the rest of the world will catch on to what a good deal inbound marketing is in the next couple years. 

 Once they do, I think they are going to stop spending so much money on search marketing and display advertising and start spending more on creating great content and pushing it out through social media.  I am no marketer and I don't know where content creation cost would fall under the online marketing budget segments, but I do think inbound techniques are going to prove to be significantly more effective than the old school outbound approaches and will change the spending landscape.

 Forrester and I will be sure to keep an eye on this for you!

There was a super interesting article in the New York Times yesterday about how internet users in developing countries are not profitable for advertising based websites. It was one of those stories that made me hit myself smack in the forehead and say, "Duh!" It makes so much sense and yet I had never thought of it before.

The gist is that companies like YouTube, MySpace, Facebook and hundreds of others, make money by showing ads on their sites. These sites have been working to grow internationally and by doing so have had to make investments in the infrastructure required to do so (more servers & bandwidth.) While their traffic around the world has indeed gone up, what has become apparent is that this doesn't translate into more advertising revenue.

As the article explained, "there may be 1.6 billion people in the world with Internet access, but fewer than half of them have incomes high enough to interest major advertisers." This means that while the internet companies are working to pull to world together online, they aren't making any money because the advertisers aren't interested in a significant portion of the world's population. Some of these sites have even stopped allowing access to their sites for people in developing nations.

While I am ever the capitalist and want these companies to make money and thrive, it bothers me that individuals in developing nations may have limited access because advertisers don't find them sexy. There seems to be something we haven't figured out about globalization if these companies cannot bring their services to those in less developed parts of the world. It also is one more argument for figuring out a way to monetize these sites that is not entirely based in advertising.

Image Credit: http://www.thestrategyweb.com

 Update: A new tool was released today that tracks the use of Facebook around the world. Check Facebook has some supercool displays of use around the globe which they update daily.