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Sunday, May 1, 2016

Part One: Selling news is not like selling pickles

Selling news is not like selling pickles. People want pickles. This is not to say that people don't want news. They do, they just don't want to pay for it. Never have.

Two-bits worth of pickles costs two-bits. Fair enough. But two-bits worth of news costs maybe a nickel. Why? News is subsidized by advertising. In a traditional newspaper the editorial content and the advertising copy exist in a symbiotic relationship. Despite their great differences, journalism and advertising live side by side on the pages of a newspaper in a mutually beneficial relationship.

Today that relationship is under stress. The parasite, the advertising, has found a new host: the Internet. Here, think Alphabet and Alphabet's biggest division, Google. According to Reuters:

"Alphabet Inc easily beat Wall Street's quarterly profit forecasts on Monday, helped by strong mobile advertising sales . . . Google's advertising revenue increased nearly 17 percent to $19.08 billion, while the number of ads, or paid clicks, rose 31 percent . . . Advertisers pay Google only if someone clicks on their ad." (These are the fourth quarter results ending Dec. 31, 2016.)

Clearly there is money to made on the Internet from advertising. But I could have told you that. When I took a buyout from The London Free Press I tried to start a blog at the paper as an experiment. The editorial department was not at all interested in my experiment. Although I was promised a blog, they dragged their feet, I looked elsewhere.

Soon I had a blog supported by Blogger, the blogging platform owned by Google. I decided to run AdSense. One ad appears beside my posts and another ad runs immediately after. If a reader clicks on an ad, AdSense and I split the payment. AdSense claims the lion's share. I find this only fair as Google charges me nothing to post my thoughts.

I haven't earned a lot from my blog, but I have earned a little and more importantly I have gained a little window into how money can be made online. When I left the paper, I had asked to have a blog with the paper but there was a stumbling block: I wanted to be paid. I didn't want a lot but I was offered nothing. There was no money to be made on the Internet, I was told.

A few months ago, after the monthly breakfast of retired local media types, I picked up the entire restaurant tab plus tip. I found it strangely satisfying to be able to pay for dozens of breakfasts with money earned from posting information to the Net.

I was a little surprised that after more than seven years in retirement, the media line about the Internet had changed very little. The spin from the media still seems to be that there is no money to be made online. I don't believe even one panelist admitted that decades ago newspaper management took their collective eye off the ball or should I say dot and fumbled the future. How to fix that colossal  failure of imagination is the question demanding to be answered.

And the answer will not be found in treating newspapers like pickle factories. The American food giant Smuckers bought the Southwestern Ontario pickle producer, Bick's, once located in Dunnville, Ontario. I say once located in Dunnville as Smuckers closed the plant and merged the business with its Stateside operation. Smuckers chopped lots of jobs and saved a lot of money. Nothing is left of Bick's but the name. Economies of scale made it all profitable.

In the media world giants also rule. Canada's newspapers have been bought, closed, moved and merged. Reporters, editors, and oodles of support staff, even advertising staff, have lost their jobs. In many Canadian communities nothing is left of the local paper, a paper that may have been a going concern for more than a century. In many cases even the name of the local paper is but a memory.

But, unlike the big pickle maker the media giants have discovered economies of scale did not make it profitable.

End of Part One.

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