Through Steve Boriss’ blog, The Future of News, I read Terry Heaton’s post on the real business of media companies – advertising. After discussing the missed opportunities of railroads due to their failure to recognize their true business, he suggests the same is true of media executives who think of themselves as being in the newspaper, radio, TV, or even the information business. The reality, though, is different:
Media makes its money through advertising, and this is the only disruption that matters for traditional media companies, for new forms of media aren’t taking readers, listeners or viewers away, they’re taking advertising away, and this should be the principal focus at the top of all media companies, especially local media companies. Amazingly, it is not.
With consumers expecting information to be free, the focus on advertisers must grow. Without an audience, there can be no advertising, of course, so serving the audience remains of critical importance, but media companies must now begin to think more than ever about how to attract advertisers. As Heaton points out, the online competition here are the Internet pure plays like Google and Yelp, not the usual local competitors. He then goes on to suggest two courses of action, both of which I’ve also advocated.
The first is to create a “a horizontal local ad network, one that serves all websites within the market…” The pureplays are already doing this and, once again, local media companies find themselves playing catch-up.
The second is to “combine resources to create a single local information portal and to compete within that instead of standing alone on the Web…” This idea goes somewhat beyond what I’ve supported since it involves local media joining forces to create this portal. I think it would be a great improvement, although perhaps only a first step, for the local newspaper to think of itself as a portal, linking to the best content on other local sites. With an advertising network in place, however, this is much closer to Heaton’s idea.
Thinking about the future of media companies, Steve Boriss believes that, “Journalistsâ€™ independence from advertisers will be seen as a luxury from an age when traditional outlets had more power over advertisers than they ever will again.”