Apples, Oranges And Journalism Revenue Print And Online

from the picking-it-apart dept

BullJustin points us to a Columbia Journalism Review article that tries to do some back of the envelope calculations on the difference in per user revenue both print and online. The end result, not at all surprisingly, is that a print reader is "worth" a lot more than an online reader. But, that's totally meaningless. It's a classic innovator's dilemma mistake. Concentrating on the small group of people who will pay me $1,000 and ignoring the massive group who will pay me $5 isn't very smart... especially when the first group is rapidly shrinking and the latter is growing (and that the "value" of each moves in the same direction as the user growth rate). Not to mention the fact that the cost of acquiring a user in both scenarios is entirely different.

But the bigger point is that it's not the users who are paying here, it's the advertisers. Breaking out the revenue on a per user basis is meaningless, because it's not the actual marginal value of the user. Getting one more print subscriber doesn't increase the ad revenue by the amount discussed unless they can actually sell more advertising.

Rather than looking at revenue per user, the real goal should be looking at maximizing revenue, period. And to do that you look at the overall trends of where revenue is growing and where it's shrinking -- not on the average revenue per user. Focusing on ARPU simply makes you ripe for disintermediation from someone who focuses on where the market is heading, rather than how to squeeze the most out of each user.


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  1.  
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    Doctor Strange, Aug 26th, 2009 @ 1:05am

    And to do that you look at the overall trends of where revenue is growing and where it's shrinking

    Wait, isn't it shrinking both in print advertising and online advertising?

     

    reply to this | link to this | view in thread ]

  2.  
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    Mike Masnick (profile), Aug 26th, 2009 @ 1:57am

    Re:

    Wait, isn't it shrinking both in print advertising and online advertising?

    Not in the research I've seen. The pace of growth in online has slowed, but it's still growing.

     

    reply to this | link to this | view in thread ]

  3.  
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    Anonymous Coward, Aug 26th, 2009 @ 5:17am

    "Concentrating on the small group of people who will pay me $1,000 and ignoring the massive group who will pay me $5 isn't very smart."

    Wait! Isn't this the basis of all that you push on the music business? Ignore the $10 CD buyer, give the music away for free, and concentrate on the higher pay concert ticket buyers, the people willing to overpay for t-shirts, etc?

    Doesn't the entire CwF depend entirely on the highest paying "fans" massively overpaying in order to support the freeloaders (which might have been low dollar fans before)?

     

    reply to this | link to this | view in thread ]

  4.  
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    Hephaestus (profile), Aug 26th, 2009 @ 7:02am

    Re: Re:

    Actually there was a drop in online advertising

    Online adverising has dropped in Q1 2009

     

    reply to this | link to this | view in thread ]

  5.  
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    Anonymous Coward, Aug 26th, 2009 @ 8:37am

    Re:

    You're showing your ignorance again.

    The current music industry ignores that $5 crowd. Name any given artist and their latest album, and there are millions of people who have never heard the work, simply because they have absolutely no reason to buy it and listen to it. And among all of those people, there are thousands that would buy your product (assuming there is some appeal...RtB).

    The whole idea behind the CwF business model is to spread your music as widely as possible, at minimum expense to yourself, so you can get a hold of as many customers as possible.

    It's the same model as basic advertising, really. Not everyone wants your product, but if your ad gets seen by enough people, even a small percentage of viewers turned to buyers is a lot of return.

     

    reply to this | link to this | view in thread ]

  6.  
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    Doctor Strange, Aug 26th, 2009 @ 9:56am

    Does it really matter if the revenues from advertising for the entire advertising industry might be going up? A company certainly isn't interested in how much 10 million other people can make in the aggregate, they are interested in how much they can make. The question, then, is per-capita advertising dollars online. Are those going up or down?

     

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  7.  
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    Chargone (profile), Aug 26th, 2009 @ 10:20am

    ya know, I've been trying to make a similar point about various things on many occasions, though not exactly the same one...

    just because something is more efficient doesn't mean it's better, if you can afford the costs [all of them in every sense, or near enough] of the less efficient method and it produces better results. especially if the more efficient method destroys the very point in the exercise.

    in this case it's not just efficiency, so much as, i dunno, immediate and obvious income with no extra work?

    anyway, the point is, i get it, and it overlaps significantly with a view I've held for quite a while. which is pretty impressive when you realise my entire experience with businesses consists of an accounting course in high school... well, in any formal or concentrated manner, anyway.

    well, it impresses me that i got it right, at least :D

    ok, this is a fairly insignificant and disorganized point. let's just say i recognized a familiar angle and call it done :D

     

    reply to this | link to this | view in thread ]

  8.  
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    Ajax4Hire (profile), Aug 26th, 2009 @ 2:51pm

    Missing the point...

    Do you want $1 for 10,000 print readers
    -OR-
    Do you want $0.01 for 1,000,000 online readers.

    The issue is do you want to be a
    Big Fish, little pond ($1 for 10,000) -or-
    Little Fish, big pond ($0.01 for 1,000,000).

    You want to grow, so you want to be a little fish in a big pond. You want to grow into a bigger fish. More readers, greater "circulation", better chance at not just surviving but thriving.

    You can either ride the wave of the future or be rolled under by it but you cannot stop it.

     

    reply to this | link to this | view in thread ]

  9.  
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    Ed C., Aug 26th, 2009 @ 9:28pm

    Inflated figures

    There are a number of glaring holes in the article. First, is that it only uses subscribers rather than readers, which excludes those who buy at the newsstand. While that seems like it would tilt the scales further in the favor of print, because newsstand prices are higher, the report also uses gross rather than net profits. Sure it gives print nicer figures, but it also ignores the fact that print cost FAR more than a website. Also, to account for all of the papers printed that weren't bought, he would have to average the printing cost of ALL the issues (paper, ink, machine maintenance, etc.) over the total number of readers. Here, the inclusion of newsstand sales becomes a liability.

    So, the NET profit of the TOTAL readership is the only meaningful comparison. The article wouldn't include those figures because they would be far less faltering--and possibly embarrassing.

     

    reply to this | link to this | view in thread ]


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