For the last week or so, I’ve had this post of Matt’s flagged in my RSS reader, waiting for a response. In it, he castigates the advertising market for failing to competently embrace the web. Today the conversation continues: Ezra responds to Clay Shirky, and says that, contrary to what Shirky implies, the newspaper’s death became inevitable the instant digital technology was invented. Matt responds, noting, among other things, that newspaper brands will survive (which seems right — if Nuprin can do it, so can the New York Times), and that the papers’ failure to hang on to their classifieds business was a major mistake. I think that brings us up to date (whew!).
I’m with Ezra on this one, and apologize for the amount of overlap that this post will likely have with his own. But I think Matt is seriously understating the crisis facing the advertising industry. Narrowly, there’s the question of Craigslist. It’s a weird one, in that its creators have quite obviously avoided implementing features that would maximize revenue, or even just reported user satisfaction. They could have a slick-looking site, and a huge staff, and a big office in the Mission with polished concrete floors and free snacks in the break room. But they’ve decided not to, and that’s their genius: they realized that classifieds were going to be a race to the bottom, so they decided to get to the bottom first. This is a crucial realization — one that a lot of people involved in similar races just can’t accept.
I don’t think Matt’s right that this could have been stopped, but it probably could have been slowed. Competing on the basis of having fewer features rarely works, and it probably wouldn’t have for Craigslist, either, had the newspapers rolled out competent online options quickly. CL was allowed to build marketshare in an unusual and, in hindsight, inexcusable way. Also, we haven’t collectively reached that proverbial bottom, making CL’s success seem that much stranger. But we’ll get there; if the papers had responded quickly, we just would’ve gotten there at a more languid pace.
But classifieds aren’t the only doomed form of advertising. I think there are reasons to doubt advertising’s viability in a broader sense, too. More of it will inevitably have to be done online as people continue to spend more of their time on the net, but so far that hasn’t been working out very well. For one thing, there are technological ways to avoid online advertising. For another, although various form factors have been tried, the online medium still hasn’t been figured out how to capture viewers’ attention in the way that print and broadcast have — personally, I think the media may simply be innately immune to commoditization, thanks to the aforementioned ability of computers to avoid displaying unwanted information. Third, and probably most troublingly for the industry, online advertisers seem to have made a serious mistake when they offered concrete metrics to their customers. This action was perfectly understandable — the web makes it simple to collect objective data, and it’s easy to see why an advertising client might find the prospect of better stats alluring. The problem is that doing this reveals that advertising just doesn’t work very well.
In retrospect, it should be obvious: to whatever extent the advertising industry is capable of shaping the public’s sense of how to gauge value, naturally they will apply that talent to their own products first. The other advertising media smartly developed captive metrics agencies like Nielsen and Arbitron. But online advertising charlatanism is still in its infancy, and continues to be dominated by primitively objective concepts like “page views”, “click throughs” and “purchases”.
Right now the practitioners of online advertising have not yet succeeded in artificially inflating the perceived value of their product in the way that advertisers working in other media have. Perhaps this will change. I think it might not. It’s easy to forget how quickly advertising has evolved, and how quickly the public has evolved along with it. Although I admit that it’s probably an overly antagonistic framing, I tend to think of the relationship between the public and advertising as being analogous to the one that exists between humans and bacterial pathogens. In both cases the pace of evolution is staggering, but I’m left optimistic that humanity will come out on top.
For one thing, we’re awfully plucky. For another, there are fewer constraints on us. As viewers of advertising, we’re subject to various hindrances that seem to be biologically determined — among others, we’re susceptible to the concept of brands, and we’re keen to see sexy dames, and plenty of em (so to speak). But we’re free to come up with whatever compensatory intellectual constructs we need to help us maintain our senses of iconoclasm and connoisseurship, and our ability to maximize the value we receive for our money. Advertisers face many more restrictions: time, space, cost, reproducibility, risk aversion, various regulations, and, last but by no means least, the simple necessity of crafting messages that are both interesting and at least somewhat coherent from a commercial perspective.
I admit it: I’ve always been an advertising millenarianist. But I still feel a bit bad for them. None of this is to say that advertising will ever go away, but as the pool of novel advertising techniques shrinks and purchasers become more aware of its limited utility, the industry will naturally contract. And that brings us back to newspapers.
Ezra lays it out pretty well; let me do the same with a tedious half-analogy. Once upon a time the cost of distributing information was high. Then technology improved, and if you were able to make a big up-front investment, economies of scale allowed you to drastically lower the cost of getting data out. If you sold information-distribution services at a price in between the old one and your own, newly-discovered cost, you could make a lot of money. Firms flourished, and added premium features to differentiate themselves from their competitors, just like those little sticks of gum that come with baseball cards. The paid information distribution business continued to be lucrative — to get more lucrative, even! — to the point where the quality of the gum could be drastically upgraded. Sometimes even non-gum ingredients were bought up and converted into gum (it just seemed like the most efficient way to distribute them, frankly — look how much gum people were buying!).
But technology kept getting better, and that up-front investment kept getting smaller, and although by now everyone had pretty well fooled themselves into thinking it was the high-quality gum that moved units, that wasn’t actually the case. In fact, a lot of that gum was downright revolting1.
These days distributing information costs very little, and there’s no minimum order. And people still chew gum, but not nearly so much of it. Hopefully the quality of gum available to them is better than it was, but I think the jury’s still out on that one.
ALSO: I hadn’t read Tim’s post before I wrote this, but he makes a number of excellent points. One thing that’s maybe worth adding: when he says “…the only way to avoid this grim fate is to spin off an independent subsidiary that can pursue new markets without worrying about fat profit margins or cannibalization of existing product lines… Iâm not aware of any high-profile newspaper firms that attempted this”, I think the Washington Post may be a counterexample — the Post and their online operations are entirely distinct, and separated by a river. Typically they’re castigated for this decision, and to be fair I’m not sure to what extent the decision (which is now being undone) was made with Christensen’s principles in mind versus more immediate concerns (there wasn’t any more space in their downtown building). Either way, I don’t think WaPo.com was sufficiently independent to really embody Christensen’s model (as I understand it based on Tim’s account — I haven’t read the man’s work), but it’s the closest noteworthy example I’m aware of. Doubtless there were other, truly-independent ventures backed by major news organizations, which are now lost to memory thanks to “making money on the internet” being a very tough proposition in general.
1 Bazooka Joe Scarborough (discarded gag for alternate metaphor: Kristol Pepsi)
Could you maybe elaborate on your claim that “It’s easy to forget how quickly advertising has evolved…“, because I just don’t see it. TV ads today are pretty similar to TV ads 50 years ago, and print ads look a lot like they did 100 years ago. The technology has improved, but the fundamentals seem pretty similar. Aside from a few horrible attempts at viral advertising in recent years and college bowl sponsorship, what’s really changed?
I think that the only asset any newspaper has that will not be directly diminished by digital technology is their reputation for quality journalism. Organizations like the NY Times have spent decade upon decade building public trust in their reporting, giving them a huge head start over upstart digital rivals.
The sad part is that the budget for reporting is the first thing that is being cut as newspapers face economic hardship. So I guess soon they will be nothing but empty shells, printing factories that just distribute whatever “news” comes from the AP wire.
Actually, we seem pretty close to that point right now…