Dennis D. McDonald ( consults from Alexandria Virginia. His services include writing & research, proposal development, and project management.

Mohr on the Newspaper Crisis and the Importance of "Network Effects"

paperboy.jpgBy Dennis D. McDonald

Tom Mohr in Winning Online - a Manifesto provides a sobering view of the challenges newspapers face in adjusting to a Web 2.0 world where online advertising revenue today still accounts for less than 6% of total annual newspaper advertising revenue -- and total advertising revenue is declining.

Mohr provides a quick rundown of the reasons why newspapers are performing so badly in the online world:

  • Lack of technology savvy and technical innovation
  • Focus on the local instead of building to take advantage of network effects
  • Lack of vertical integration and failure to establish valuable partnerships
  • Lack of common platforms
  • Failure of leadership

If you have been following the industry none of this is really new; doom and gloom abound in the newspaper industry. Dead trees just aren't as popular with young folks as they used to be.

What I like about Mohr's analysis is his understanding of network effects, the value of partnerships, and the need for leadership and innovation. 

One fundamental problem is that rapid increases in online newspaper advertising revenue (+20% per year is not unheard of) are starting from a much smaller base. In the short run these increases can't make up for the continued slide in regular advertising revenue. Something's got to give.

Can newspapers survive by simultaneously shedding staff and by consolidating their operations?

That's the question. Mohr strongly supports the concept of "platform standardization" to control costs and to maximize economies of scale. Reading his list of what constitutes platform standardization you realize that it's not just hardware and software he's talking about, he's also talking about the standardization of processes and the centralization -- and commoditization -- of business processes that at present are greatly decentralized.

Think, for example, about advertising rate cards and the multiple levels and types of discounts that local sales reps, resellers, and agencies are accustomed to negotiating around. What happens when pricing is standardized, pre-discounted, and includes standard options for local vs regional and paper only vs online only ad buys? Won't advertising buyers naturally gravitate towards standardized platforms for purchasing and running ads that provide greater coverage while simplifying the buying process?

Given corporate competitiveness and the massive costs involved in standardizing both technology and processes, none of this is going to happen overnight. But as has occurred in other industries, the urge to survive in such a challenging environment leads not only to corporate casualties and to unemployment, but to innovation and to growth in niche markets as well. So it may be with newspapers; some will die while others will morph and flourish.



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