Web vs. Print: Online Successes at One Newspaper Raise More Questions Than They Answer

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The newsroom at washingtonpost.com, the website of The Washington Post, is not so different from that of a print newspaper, with one notable exception:  At a time when newsrooms across the country have empty desks from recent buyouts and layoffs, staff numbers here are expanding to fill every available nook and cranny. Washingtonpost.com, part of the publicly held Washington Post Company, is a success story in an industry where the divide between vibrant online ventures and shrinking print products is increasingly sharp.


Although analysts have been studying this conjoined twin-like pairing — where one twin is thriving and the other is declining, but they both depend on each other for survival — there doesn’t seem to be any consensus yet on a number of key questions: Can online revenues replace print revenues? Does an unlimited “news hole” leave consumers drowning in content? Can a website whose main audience is national still dominate a local market?


Donald Graham, chairman and CEO of the company, admits his own uncertainty. “I don’t know what the newspaper business is going to be like 20 years from now,” he told Wall Street analysts at the December 2006 UBS Warburg Media Week conference.


Nearly all the “minuses” Graham reported at the conference and in the company’s year-end statement came from the print-based Post, which, last year, lost 3% of its paid readers, 4% of its ad revenue and 14% of its classified recruitment revenues; both ad revenue measures fell almost twice as steeply in the fourth quarter, indicating more losses are on the way. “2006 has been a poor year for every newspaper I know of,” he said. (Luckily for its shareholders, however, the company has diversified with lucrative education and cable television properties that offset losses in the publishing sphere.)


Graham touted good news from Washingtonpost.Newsweek Interactive (WPNI), a subsidiary of the Washington Post Company, where revenues grew by 28% and unique online visitors rose by 11%, according to Graham’s presentation and the year-end statement. Although washingtonpost.com is by far the largest operation in the subsidiary, WPNI also runs the websites Newsweek.com, Slate and Budget Travel Online.


The Tail Wagging the Dog


Given this fast-paced growth, can’t online operations like washingtonpost.com eventually support papers like the Post?


Not anytime soon, judging from analysis in the “State of the Media 2007″ report, released this month by the Project for Excellence in Journalism, part of the Washington, D.C.-based Pew Research Center. Based on the fact that most online operations generate a fraction of the revenues of their twin print editions, the report’s authors write, “it seems reasonable to expect that the industry is a decade or more away from seeing online business contributing half of [all] revenue.”


“The shift from print to digital is gradual, and that cuts both ways,” says Wharton marketing professor Peter Fader, who analyzes behavioral data to forecast customer choices. Because print operations are still the dominant players, many companies have been slow to divert resources online.


At the moment, washingtonpost.com, whose newsroom is in Arlington, Va., is an enthusiastic tail on a very large dog. The online operation currently generates 14.5% of total ad revenue, according to the 2006 annual shareholders report. While this figure is nearly twice the national average, Graham is sober in looking ahead. “If a shareholder in this company should want to know what our newspaper and website will be earning five or 10 years from now, I simply have no way to tell you,” he said during his Media Week presentation.


The print-based Washington Post also generates the lion’s share of content at its Washington, D.C. office, which has 625 reporters, editors and photographers compared to washingtonpost.com’s 85.


That said, washingtonpost.com does far more than repackage stories from the print edition; it has won an avalanche of awards for original reporting and multimedia storytelling. Last year, video journalists at washingtonpost.com won two Emmys. The website also pulled in two major national awards for best overall large-circulation news site and earned some of the highest marks for any news site from the “State of the Media 2007″ report.


A quick visit to washigntonpost.com can lead to hours of clicking. Viewers can read all the articles from the print edition, of course, but that’s just a start. You can chat online with reporters, watch award-winning documentaries or see the cherry blossoms bloom with time-elapsed photography. Wondering whether Jesus is the Son of God? Go to “On Faith,” a popular multi-contributor blog where high-profile panelists ponder theological questions. Foreign policy junkies can find a similar venue at “PostGlobal,” and true procrastinators will like the vapidly addictive “On Being,” where complete strangers talk with warmth and enthusiasm about random topics like why they are annoyed by crowded elevators.   


“Free Is Good Enough”


Though washingtonpost.com offers everything in the newspaper plus lots more, its content is different in another important way: It’s all free.


According to Caroline Little, CEO and publisher of Washingtonpost.Newsweek Interactive, that’s been a key strategic decision since the Washington Post Company created the WPNI subsidiary in 1993. “We have continued to have an unpaid model. That has kept unhampered our ability to drive traffic to the site,” says Little.


Stephen Gray, managing director of the innovation-oriented Newspaper Next project at the Reston, Va.-based American Press Institute, suggests that washingtonpost.com has made the right choice. “The paid model doesn’t work when there are substitute sources [that are free],” says Gray, although The Wall Street Journal currently charges for all its content, and The New York Times requires payment for access to its archives, columnists and certain other content. “Are you offering something people can’t get elsewhere? A lot of local newspapers believe they do. But The Washington Post has enough competitors, both locally and nationally, that it’s hard to make that case. For a lot of users, free is good enough.”


Some would disagree, however, arguing that news organizations are undercutting their own business model by giving away content for free. “Every study shows that price doesn’t matter as much as people say it does. People go for quality, selection, convenience, service — those things matter a whole lot,” says Fader. Offering completely free content “is a mistake for The Washington Post and a mistake for the whole industry.”


Fader urges news websites to gradually introduce subscription models, as ESPN.com has recently done. “You need to find ways to bump the price up over time, in invisible or painless ways,” he says, pointing to television — where local broadcast is free, but cable or satellite service is not — as an example of how expectations can evolve.


Other observers, however, say reader revenue is not as important as advertising revenue. “Traditionally, most newspapers were breaking even on distribution and making their money from advertising,” says Joel Waldfogel, Wharton professor of business and public policy, who studies media economics. While digital distribution of news “is, in most ways, just a great opportunity, there has been a lack of clarity about how much advertisers are willing to pay for online viewers.” The “State of the Media 2007″ report quoted a Deutsche Bank analyst’s estimate that an online reader is worth 10% to 15% of what a print reader is worth to a newspaper, because online ad rates are lower. “The best model has not yet emerged,” says Waldfogel.


PBS’s recent Frontline series, “News War,” mentioned another option: What if news aggregators Google or Yahoo paid organizations like washingtonpost.com for access to content, much as they subscribe to the Associated Press and other wire services? That would only happen, says Little of WPNI, if a number of newspapers joined together. “We have been approached on that issue, and we have been a part of those conversations, but we’ll wait and see. We have a pretty robust national business that continues to grow, so it doesn’t necessarily make sense for us to join consortia where we share revenue.”


Pulled in Multiple Directions


Because readership and advertising are so intimately linked, washingtonpost.com’s growing national success has prompted a new version of an old question: How do you keep local and national audiences satisfied simultaneously? “They’ve got a dilemma,” says Andrew Nachison, co-founder of iFOCOS, a Reston, Va.-based media think tank. “Their online audience is mostly national, but The Washington Post is a highly local brand, and they’ve still got readers interested in tar spills on the Beltway.” Although washingtonpost.com won’t disclose how many registered users the site has, it notes that unique users total eight million a month.


Local users make up 10% of unique visitors to the site, but that small number accounts for 30% to 35% of page views, according to Jim Brady, executive editor of washingtonpost.com. “The local audience is very loyal,” he says. The problem with washingtonpost.com, adds Miles Groves, an economist, long-time media analyst and president of the Washington D.C.-based media consulting firm MG Strategic Research, “is that the core product [the newspaper] does not match the footprint of the digital product.”


If the digital newspaper continues to grow while the print paper continues to decline, then the Washington Post Company will be forfeiting the lucrative local market, says Groves, who argued in a recent industry newsletter that many large-market metro papers — with the exclusion of The Wall Street Journal, The New York Times and USA Today — have failed to make necessary innovations and now face almost certain decline. In metro markets, newspapers have faced particularly intense competition from news and information services available on the web because areas like Washington, D.C., “had early and easy access to fast-pipe broadband connectivity,says Groves. “Without broadband density, there wouldn’t be a Craigslist.”


Craigslist, with its free and highly trafficked classified listings, is not the only competitor The Washington Post and washingtonpost.com have to worry about. “They are going to see the relentless emergence of new forms of media that might not even be built or positioned as competition, but which have the potential to siphon off their audience,” says Nachison, speculating, for example, that a consortium of Washington, D.C., think tanks could create an attractive analysis and opinion service that rivals The Post‘s political coverage.


The online user market segments in yet another way, further complicating the picture. “Our local audience is significantly younger. We get a lot of older readers who nibble here and there, but they are not built-in readers,” says Brady, adding that washingtonpost.com tailors content towards these young, local users. “We have more tech coverage — like a blog on cyber security — and when it comes to local arts and entertainment, we focus on bars and clubs, rather than, say, classical music.” Washingtonpost.com has eight “Going Out Gurus,” some fresh out of college, who blog and chat with readers about where to buy a cheap tuxedo, watch the Final Four or have a fun girls’ night out.


Gray, of the American Press Institute, says washigntonpost.com is asking the right question: “What jobs do our readers and non-readers need to get done?” For a lot of young people, says Gray, the answer is, “I’m looking for cool things to do when I get off work or school. Turns out there’s an entertainment job to be done that spills over to music, community and even social networking.”


According to Brady, washingtonpost.com is set to roll out a social networking function later this spring, which will allow readers to set up their own pages and, eventually, upload their own audio and video, perhaps around themes like the Redskins or the annual cherry blossoms. “We are dipping our toes in [user generated content], but we’re trying to do it carefully. It’s a subject of great controversy because there are people who believe it’s the future, and others who think it’s way overblown. I’d probably put myself somewhere in the middle right now,” says Brady, adding he’s “thrilled” by the recent launch of Assignment Zero, a project of Wired magazine and NewAssignment.net, a media blog, to have professional journalists assign and edit content created by volunteer amateur reporters. This “pro-am” collaboration attempts to answer the question: Can average citizens produce real journalism?If the project goes well, says Brady, washingtonpost.com might work with one of its founders, New York University journalism professor Jay Rosen, on a “crowd sourcing” project.


But the move towards Web 2.0-style content seems to fly in the face of another imperative for newspapers and their websites: to distinguish themselves as “authoritative” in a world drowning in “generic content,” notes Kevin Werbach, a Wharton professor of legal studies and business ethics who studies emergent Internet technologies. “The great newspapers can remain important and vital, simply because in a radically fragmented world, there is still value in the few channels that remain broadbased and have a distinct identity,” Werbach notes. “I don’t need the Washington Post any more to give me the weather, sports scores or even the basic news of the day, but I could still use its perspective on what’s happening in Iraq, or how the Presidential campaign is going.”


Even without lots of user-generated content, washingtonpost.com already has overdose-levels of text, audio and video. At the bottom of a current multimedia package called “Exploring Antarctica,” for example, users can follow 16 related links, including one that reads “More News from Antarctica.” Last year’s award-winning series, “Being a Black Man,” offers online visitors a choice of 19 text articles, four related features, eight audio and video links, and 19 transcripts of online chats. Also running now is the 25-chapter serial, “Citizen K Street,” about the D.C. lobbying world, begging the question: Is there such a thing as too much online content?


Strategy in Uncertain Times


Yet all the speculation about the future of print vs. digital media doesn’t detract from the Washington Post Company’s successful online strategy, observers say, particularly when compared with that of the Los Angeles Times, another large-market newspaper with national ambitions. In January this year, editor James O’Shea admitted that latimes.com was “woefully behind” the competition as he announced strategic changes.


“What the [Washington Post] company did right was invest heavily in the web in the mid-1990s and [remain] willing to accept significant losses for some time to keep at it,” says Brady. “There was a strong feeling in the senior leadership, specifically with Don Graham, that this is going to be big, and we have to be prepared. [His thinking was] if we are going to lose readers 10 years down the road, then we ought to lose them to ourselves, rather than another website.”


If that was the right strategy for the 1990s, what is the right strategy now, particularly when so many questions remain unanswered? “In unknown economic circumstances, our aim is to manage as aggressively as we can,” said Graham in his Media Week presentation. WPNI’s Little echoes that sentiment: “It is a very uncertain time, but you follow your successes, learn from mistakes and you move forward. It is important to listen, and find out what’s going on in the industry, and hear about best practices from peers, but it’s also important to stick to your knitting.”


Will such grit and determination be enough to see such long-running newspapers through troubled times? Says Wharton’s Waldfogel: “At the end of the day, newspapers are good at creating information that is valuable. Right now, they are not so good at selling their product. It seems they would be best situated to take advantage of new opportunities. But don’t count on them.” The best strategy, he says, is doing something the Washington Post Company seems to have made a priority: “Experiment, experiment, experiment until something works.”

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