Link wrap: it’s all about business models

I’ve lost count of how many stories I’ve bookmarked lately about potential business models for news. It’s clearly occupying a lot of minds at the moment. Here are just a few links:

Chris Anderson wrote in The Wall Street Journal about The Economics of Giving it Away.

The standard business model for Web companies that don’t actually have a business model is advertising. A popular service will have lots of users, and a few ads on the side will pay the bills. Two problems have emerged with that model: the price of online ads and click-through rates. Facebook is an amazingly popular service, but it also an amazingly ineffective advertising platform. Even if you could figure out what the right ad to serve next to a high-school girl’s party pictures might be, she and her friends probably won’t click on it. No wonder Facebook applications get less than $1 per 1,000 views (compared to around $20 on big media Web sites).

Google has built an enviable economic engine on the back of its targeted text ads, but the sites on which they run rarely feel as flush. Running Google’s Adsense ads on the side of your blog, no matter how popular it may be, will not pay you even minimum wage for the time you spend writing it. On a good month it might cover your hosting fees. I speak from experience.

What about the oldest trick in the book: actually charging people for your goods and services? This is where the real innovation will flourish in a down economy. It’s now time for entrepreneurs to innovate, not just with new products, but new business models.

Take Tapulous, the creator of Tap Tap Revenge, a popular music game program for the iPhone. As in Guitar Hero or Rock Band, notes stream down the screen and you have to hit them on the beat. Millions of people have tried the free version, and a sizable fraction of them were ready and willing to pay when Tapulous offered paid versions built around specific bands, such as Weezer and Nine Inch Nails, along with add-on songs. (The Wall Street Journal is pursuing a strategy of blending free and paid content on its Web site.)

Because almost all conversations about news business models veer off into discussions about safeguarding democracy…

David Swensen and Michael Schmidt wrote in the New York Times about endowments as a business model for newspapers in News you can Endow.

Today, we are dangerously close to having a government without newspapers. American newspapers shoulder the burden of considerable indebtedness with little cash on hand, as their profit margins have diminished or disappeared. Readers turn increasingly to the Internet for information — even though the Internet has the potential to be, in the words of the chief executive of Google, Eric Schmidt, “a cesspool” of false information. If Jefferson was right that a well-informed citizenry is the foundation of our democracy, then newspapers must be saved.

Although the problems that the newspaper industry faces are well known, no one has offered a satisfactory solution. But there is an option that might not only save newspapers but also make them stronger: Turn them into nonprofit, endowed institutions — like colleges and universities. Endowments would enhance newspapers’ autonomy while shielding them from the economic forces that are now tearing them down.

Steve Coll wrote about in the New Yorker about Non-profit Newspapers.

In the foreseeable future, it seems, there will be two kinds of nonprofit newspapers—those which are deliberately so and those which are reluctantly so. Ever since I left the Washington Post, in 2005—after twenty years there that included a stint in management—and particularly since I joined the nonprofit world at the New America Foundation and started learning about the management and fund-raising issues at tax-exempt organizations, I have been mulling over this idea: that only by turning the Post into a nonprofit trust and raising a university-size endowment to support the newsroom could the paper retain the vitality it requires to serve as a successful watchdog over our constitutional system. Now David Swensen, the chief investment officer at Yale, and Michael Schmidt, a financial analyst, have come forward with a similar argument.

Their math is the same as that which got me started on this notion. When I left the Post’s newsroom, a few years ago, the total cost of its news-gathering operations—salaries, benefits, and cash—was in the neighborhood of $120 million. That was lean compared with the Times, which Swensen and Schmidt peg as a $200-million operation today. But it was more than enough to maintain a strong investigative-reporting staff of more than a dozen reporters, editors, and researchers, and to support richly detailed beat reporting across a range of local, national, and foreign-policy subjects. We had about thirty staff foreign correspondents in about twenty bureaus and additional contract writers abroad.

It has been very painful to watch papers like the Post offer buyouts to dozens of talented journalists at the height of their powers while shutting overseas bureaus and even entire sections of the paper.

After comments, Steve Coll followed up with More on Non-profit Newspapers:

An endowed newsroom should hire young journalists, innovate, and adapt to the changing media market while preserving the core values, ethics, and reporting sensibilities of the past. If that means letting lifestyle or business journalism go on the grounds that the commercial market is handling it well enough, then fine, as long as the audience doesn’t run away, too.

Still, the big papers have some unique properties, which will likely become extinct unless their newsrooms are protected with endowments. These include their audiences, their scale, their reporting, and the nature of the talent they develop over long careers.

The sad irony of the predicaments facing newspapers today is that their troubles are not a function of loss of audience. In fact, the total readership of the content of the New York Times and the Washington Post has grown more than fivefold since the emergence of the World Wide Web. My statistics are not up to date, but the Washington Post and New York Times Web sites combined have in excess of twenty-five million unique monthly users. Several million of these readers live overseas. The problem is that the business model that created the newsrooms that made this journalism so popular has been shattered at the same time. New readers are, per capita, less profitable than the old ones. That is hardly a reason to allow the destruction of the journalism that attracted them to these newsrooms in the first place.

Second, the sheer scale of legacy newsrooms creates strength—an independence of mind, an imperviousness to deep pockets and political pressure. At the height of the Washington Post’s powers, I was working as an investigative reporter in London and got into a dispute over my reporting with an exiled Russian, er, businessman. The Post’s lawyers never blinked. They shelled out in the range of a million bucks of cash and insurance to defend our reporting, sent private investigators to Russia to acquire files that proved our case, and handled the matter without ever breaking a sweat. The powerful institutions, whether private or public, that journalism should report on simply dwarf those smaller entities that will emerge in the coming era of self-publishing and philanthropic journalism. We need a few big dogs with enough money to choose principle even when it does not make economic sense.