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The online sums don’t add up

12 February 2016

Popular but uncommercial: the Mail Online, the most visited newspaper website in the world

Popular but uncommercial: the Mail Online, the most visited newspaper website in the world

I HAVE been working on a radio programme about the economics of the news business, and it makes me want to rush around like Private Frazer in Dad’s Army. We’re all doomed.

I search in vain for a metaphor to describe the behaviour of my industry over the past 20 years. Lemmings over a cliff? An invasion of Russia? An army of lemmings marching on Moscow?

Heaven forfend that this should have any lessons for the Church of England, but this is a story of what happens when people cling to their own propaganda in the face of all the signals from the real world.

The story started about 20 years ago, when the first web browsers started to spread around the world. Right from the beginning, the first one aimed at a commercial market, Netscape Navigator, made provision for advertising. A special slot for “banner ads” was built into the pages it showed. And print companies saw this and salivated.

The commercial model of print publishing was perfectly simple then. Although everyone pretended that newspaper publishers were in the business of delivering news to readers, what they actually did was to deliver readers to advertisers. In the United States, newspapers, which were usually local monopolies, made anything from 80 to 100 per cent of their revenue from ads rather than subscriptions.

In this country, the figure was rather lower, but still between 65 and 75 per cent of newspaper revenue came from advertising. Older readers will remember The Guardian’s weekly print supplements, such as Education Guardian, which consisted almost entirely of classified job ads.

A friend of mine, who edited that supplement in the early 1990s, remembers issues of nearly 100 broadsheet pages, almost all pure profit. Other successful papers, such as The Sunday Times, operated on the same principles.

Anyone who grew up as a newspaper executive during that period knew that advertising would expand to surround content, and that it would always be profitable. Of course, most readers simply threw away the great bulk of all those papers unread. If you were not looking for a job, a car, a house, or anything else, you had no reason to look at ads for those things. But this was something it was in no one’s interest to acknowledge.

So the first commercial sites on the internet tried to mimic this. They surrounded their information with ads, just as people were doing on newspapers.

Technology meant that these ads were much harder to ignore. They flashed, they made noises, they squirmed on the side of the page, and some appeared before you could read, and when you clicked away afterwards. Users hated them, but had no way to show this, until Google came along. “Google’s mission was to make users appreciate advertising,” someone who worked there told me. It did this by showing very few ads, and those related to things that people were actually looking for.

It is all advertisers’ dream to show their wares only to people who might want to buy, and people who use a search engine are telling the advertisers exactly what they might want to buy. No newspapers could compete with that. The only other advertising sales company that has ever been able to compete with Google is Facebook, which has also made considerable efforts to ensure that users do not see too many ads, but which knows even more about what they are interested in.

But even Facebook, which has a billion users every day, does not make vast sums from each one. The average ad revenue from a European reader is about 80p a month. Americans are about three times as profitable at £2.50 per reader per month. But this is a figure that depends on there being hundreds of millions of readers, who can be very precisely targeted.

Compare this with the Mail Online, which is, by some measurements, the largest newspaper website in the world: more than 20 million people look at it every day. Yet it makes about 12p a month from each of them in advertising revenue. The Guardian, with fewer readers, makes less than 10p from each one.

Clearly, these businesses are unsustainable in the long run: the Mail Online employs about 450 people, and The Guardian 950 journalists, although it has just announced staff cuts of 20 per cent. Yet this is a business from which no one dares draw back. Without ever-growing audiences, the numbers add up even less.

One answer is to blur the distinction between editorial and advertising. Some of the online-only sites are really advertising agencies that do a little news-gathering on the side. But newspapers that have traded on their integrity cannot manage that. The other, and surely inevitable, answer is to start charging for online content. The challenge then is to produce something that readers find worth paying for.

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