SimonWaldman.net

A couple of weeks ago, John Duncan, wrote a piece on his blog which was then edited and used in PressGazette. To be honest, after a brief e-mail exchange with John, I was just going to let it lie but, they asked me if I’d like to reply - so I did; and that reply was published today. I had to chop a few bits out - as did they, and then John had a bit more to say , so I added a bit more, so this is an extended, annotated version.

Two weeks ago, my former colleague John Duncan, took what might politely be called a pop at newspaper owners’ investments on the web.

He pointed out that the Guardian’s world-conquering website still had less UK users on a daily basis than the paper had readers; that newspaper owners had been ‘conned by the numbers from their web departments’; and, in fact, the internet was not ‘a beast’ but ‘a poodle’.

“The people running newspapers believe that the future is online…This is bad news for newspaper people, because not only are the reader numbers not very exciting online, neither are the prospects for selling advertising…”

Now, I don’t have a problem with John’s maths about comparative UK readership of the Guardian and Guardian Unlimited. However, I do think it’s pretty irrelevant, and I have a huge problem with the conclusions he draws; with his assessment of the UK online market; and perhaps most of all, with his assertion that online teams have somehow been ‘conning’ unsuspecting boards into making investments.

Before I get going, let me introduce as my first witness, Bill Keller, executive editor of the New York Times, interviewed earlier this month.

“At present, the print edition of The (New York) Times supplies most of our revenue and profit. I don’t expect that to change in a hurry. We have a variety of levers we can adjust to keep the print newspaper healthy. We can add features that attract new advertising. We can reorganize for greater efficiency. (One major example: consolidating New York area printing into a single, modernized plant.) We can raise prices. We can trim costs. And so on.

But the Web audience is growing at a great clip, while print circulation is not. And online revenues are growing faster, too, albeit from a smaller base. If the trend continues, there’s little doubt that — “eventually” — online becomes the main business”

I don’t know Bill Keller. He may well be the sort of gullible chap who is easily conned by evil web types, but let’s just assume that he didn’t get where he is today by not having a clue about the future of his industry.

What he is describing is the process of evolution and transition that the entire newspaper industry is going through.

Right now, if you want to add up daily readers and revenues print wins by a long mile. But every piece of research tells the same story. People are spending less time with newspapers and more time online [’Young People and News‘ from Harvard is just the latest] . The trend is, of course, particularly pronounced in under 30 year olds.

What do we think things will look like in five years? What about in 10? And do you really think you can wait until then before you start to take digital seriously?

And taking it seriously, of course means investment.

But, investing in what? Well, frankly, as an industry it’s time to stop thinking like ‘newspaper people’ and stop thinking about investing in print versus investing in digital. It’s time to start talking about investing in things that will best equip us for the next decade and beyond.

That means investing in journalism, and in our brands. It means investing in engaging with our readers and users and making sure we understand them like never before. It means providing the very best service for our advertisers; and it means making sure that we have the best editorial, commercial, technical and production teams possible.

Sometimes that will mean investing in digital, sometimes in print, and more often than not - in both.

Does this mean everyone should be able to get what they want? Hell, no! An organisation where there aren’t compromises - often painful ones - either has too much money or too little amibition for its own good.

What about John’s assertion that we will have no luck selling advertising? Well, our year on year figures would prove the opposite. And so, apparently, would those from the rest of the industry. The Association of Online Publishers annual survey revealed that its members - who include pretty much all of the UK’s main media owners, print and broadcast - experienced an average of 63% growth in digital revenues last year. Ahead, as it happens of the online market as a whole.

And this market is, frankly, growing like mad. An average of the current forecasts for growth in the UK market indicates that digital spending in the UK is going to grow from a £2bn market to approximately £4bn over the next two years. In other words, there is likely to be some £2bn of new money coming online.

But, isn’t much of this going to search (ie Google)?. Well, even if 50% of it is, that still leaves £1bn of new money left for us to fight for. When you consider that £1bn is more than the entire UK consumer magazine ad market, and nearly twice the size of the entire UK radio market you would have to be a fool to turn your back on this market.

Of course, that money is not going to be handed to us on a plate. We will face competition from all quarters: from global portals to start-ups hoping to feast on slithers of our classified revenues. This is our new reality. It is our new competitive landscape. There is no shortage of people who want to eat our lunch; and this is precisely why our digital offerings need to be in the best possible shape if we want to stand any chance to succeed online.

John says that broadband is nearly at penetration and therefore UK online audiences are unlikely to grow. Well, yes, growth rates are slowing - hardly surprisingly seeing as we have had the fastest growing broadband penetration among the major economies for the last five years according to OECD figures.

But we are nowhere near saturation point yet. Last month PWC forecast that we will move from 50% of households having broadband connections this year to 80% by 2011. That is another 30% of UK households - and this will probably be the 30% most likely to trust brands they have a relationship within the real world.

At the same time - all the evidence shows that the longer people have a connection, the more time they spend doing things online. So internet usage in the UK is set to grow for many years yet.

So has this all been some sort of con? I can’t tell you how much I object to the idea that myself and others who have spent the last decade or more conceiving and delivering digital strategies within newspapers have somehow been deliberately misleading boards.

I also can’t tell you how silly it would seem to anyone taking a cool look at the trends around our industry that digital investment was somehow ‘a con’.

Don’t get me wrong. Print has many healthy decades ahead of it. And much of our editorial and commercial success will depend on having strong presences both in print and online. I wouldn’t be still working in a newspaper group if I didn’t believe that. But on the key metrics of circulation and ad revenue those decades will be about gentle, and sometimes not so gentle, decline.

The online world, meanwhile, offers smart media owners potential for growth - in reach, reputation and revenue. None of this will be easily achieved - but without it, we That’s not a con. It’s a fact. And it’s time to learn to deal with it.

John’s latest post looks at McClatchy’s latest figures and tells us in a rather understated fashion: 8% of revenue: 100% of innovation effort: Why print people need to get to grip with the shocking numbers at the heart of the online newspaper con.

After proving something that didn’t really need to be proved - that newspapers won’t be able to cover their current cost base on their digital revenues he concludes:

“All I’m saying is that it might be better for us to invest in real print innovation before we decide to get into the dog of a business that the internet is going to be for us. Print still has a lot of revenue, a good base from which to redevlop our products and fight back. That’s great news, because the path down which newspaper companies are being led right now just leads to layoffs and bankruptcy.”

It’s funny that after such a data-rich expose John’s solution is the remarkably wooly: ‘invest in real print innovation’.

What ‘real print innovation’, I wonder, is there that is going to so dramatically turn around newspaper’ fortunes, King Canute?

The last decade in the UK has seen no shortage of print innovation and marketing investment across the market. Collectively, we have launched free papers and new sections; we have changed formats; we have given away CDs, DVDs and wallcharts. That is a lot of smart ideas, and a lot of cash.

The same is true in most developed newspaper markets. And each year WAN produces a lovely report to prove it.

This effort gives us some blips and bubbles of growth. In some cases, what might have been a crashing decline has been made much more gradual though many of the tactics described above. The net result though is that everyone is having to run much harder just to stand still.

And, yes, there is growth globally in newspaper markets, as WAN loves to trumpet each year - but not in the UK; not in the US and not in Western Europe. And, this isn’t the result of a lack of innovation - to suggest as much is frankly an insult to those who work in newspapers. It is the result of a structural shift in consumer behaviour and advertising budgets.

This is like gravity. And you can’t defy gravity just by jumping a little higher and harder.

The fact is that 100% of the threat and 100% of the real, long term growth potential for all our businesses lies with digital. And yes, proportionally, our 10 year old businesses are a lot smaller than the 100+ year old ones. But we have to start somewhere.

More than this, though, the idea that somehow the web has had 100% of the industry’s innovation and investment is hat stand.

Those with any memory at all will recall that between between the dot com crash and the moment when Rupert Murdoch stood up and announced his conversion to all things digital - a period of some five years - most newspapers - in the UK and elsewhere - woefully underinvested in their online activity. Not simply in terms of cash, but critically in terms of senior management energy, effort and conviction.
It was the organisations that kept the digital flag flying through that period: ourselves, the BBC, the New York Times and the Washington Post to name but a few which are now accepted as the leaders in the field.

It was during that period, for example that we overtook the early market leader the Telegraph. Despite overhauling their entire business in the last 18 months they haven’t really got anywhere near us since [see their ABCe vs ours]. Why? Because getting things right digitally takes years, not months. And stop/start spending was never the way to do it.

This isn’t just true in the field of journalism. Our automotive classified business, Auto Trader, also took the web seriously from the start - and never gave up. As a result it increased in value during that period. It is one of the few print classified titles to have made a successful digital transition - the result of taking significant risk and sticking with it.

I can understand that the figures don’t add up for John. They are not pretty. But, given the dramatic change that is happening around us, it would be a miracle if they were. If only everything were as clear as he’d like it to be. By the time it is - I fear it will be too late.

Ourselves, the music industry, the film industry, and my old favourite Kodak - all of us are caught in a hinterland between a world that we know well, but which we have to accept is not going to be with us for much longer, and one which is inevitable, but still doesn’t make complete sense to us.

By all means let’s not throw away our past. But let’s not cling on to it so tightly that we also throw away our future.