I had planned on writing this post early this month. But Sunday evening I got into an exchange on Twitter about the controversy with the Times and Bret Stephens and many people canceling their subscriptions over his hiring. That prompted me to discuss some broader questions about the future of digital news journalism and advertising. It gives me a launching off point to discuss the broader issue. As I explained in that exchange, I have no dog in the Times fight. People should make their choices and – this is all I’ll say – whenever possible judge publications in their totality and over time. The leeway to make some mistakes is one thing that keeps a publication vital. But I want to talk in more depth about the issue of journalism and subscriptions, both in terms of the journalism industry generally and specifically how it affects TPM.
If there’s one thing I know a decent amount about it’s digital news journalism and specifically the range of publishing, business and editorial factors that go into doing it. TPM has been in constant publication for almost 17 years. In that period there have been perhaps three to five different ‘eras’ of publication in which the methods of finding news and paying for it have altered, often dramatically.
For twenty years, the key fact of the digital publishing world has been the over-supply of publications – that is to say, too many publications for the funding base of advertising which virtually all have been based on. The reasons for this are fairly straightforward. The cost of entry into digital publishing is very low. In the era of print, the cost of entry was a major factor keeping the number of publications limited. The other big factor was geographical monopolies. Much of what we now look back on as the heyday of copiously funded journalism was the product of a several decades long period in which most cities were dominated by one or two newspapers. That meant those papers could command monopoly advertising rates. People talk a lot about how the death of classifieds killed the newspaper industry. But it’s all part of a single story. Newspapers had a monopoly on most forms of commercial speech particular geographic areas. That allowed them to charge consistent and profitable rates for that product. The mix of low costs of entry and geographical ubiquity changed all of that.
Those structural changes defined the age of digital journalism, what I see as in many ways a golden age of journalism. After all, TPM wouldn’t exist without it. When I started TPM, not only did I not have any money to invest in it, I barely had enough to pay my rent or feed myself. The costs of entry were that low and the timing was right.
But while those changes created the ‘let a hundred flowers bloom’ of digital journalism, they also defined it’s structural contradictions. It is why advertising rates keep going down for publishers and why the ads you see keep getting more intrusive and annoying. It’s all part of the same reality: a buyers market for digital ad space. Again, too many publishers depending on too few ad dollars, with the over-supply of publications created by the low costs of entry and the inability to create and sustain monopolies.
That’s been the reality all along – at least if all along goes back to the late 90s. But something big has happened in the last handful of years. Last December Jason Kint, head of the one of the digital media trade groups, published an analysis of IAB’s (another trade group) numbers showing that 99% of the growth of the digital ad market over the previous two years had gone to two companies: Google and Facebook.
Think about that for a second. Basically all of the growth in advertising, the supposed revenue source for publishing, has gone to just two companies which in the broad sense do not actually ‘publish’ anything, at least not in the sense of creating new information – writing, imagery, fiction, non-fiction, etc. They are both, broadly speaking, networks with the market power created by path dependence.
This gets at a big, big issue we talked about yesterday and which I want to discuss a lot more in the coming weeks and months: monopoly, a huge issue affecting the entire economy, driving wealth and income inequality, sapping economic dynamism and more. For now though, let’s set that aside and view this fact simply through the prism of the publishing industry.
A couple weeks ago Adrienne LaFrance published an article in The Atlantic arguing that the demise of Yahoo was a harbinger of the death knell of the ad-supported digital publishing industry. I think she got the story right but used the wrong example. Yahoo! (I’m tossing them a bone for old time’s sake by using the exclamation point) has been dying for years – long before the trends I’m discussing really came to the fore. But the engrossment of most of the ad revenue by two big monopolies will spell the end of a lot of ad supported websites. LaFrance states the case rather apocalyptically …
Print newspapers will continue to fold, but Yahoo’s demise is a signal that web-native companies are next. If you run a business that relies on digital-advertising revenue for an outsized portion of your funding, you need to find new streams of revenue. Now. It may already be too late.
Scary, if you’re a publisher.
I frequently talk to people who are looking to start publications or invest in them or in various ways want to think through the business of publishing. For a couple years I’ve been telling people I would not invest my money in any project that relied exclusively on ads and/or scale as its business model.
Now, here’s the good news, at least as far as TPM is concerned. We are not surprised by this. Indeed, we’ve been planning for these changes for more than four years. As recently as 2014, membership fees made up 6% of our total revenues. That percentage rose to 16% in 2015 and hit 27% in 2016. My goal is for it to hit 50% in 2017. That is a very ambitious goal. But I think we can meet it. We now have just under 20,000 subscribers and we are going to shoot for having 30,000 by the end of the calendar year.
I obviously did not anticipate that 2017 would be the first year of the Trump presidency. But I was looking at it as a key turning point year for TPM as an organization for the reasons I’ve explained above. We see 2017 as an inflection point for the organization. But the two developments have had a way of coinciding, catalyzing each other. We’ve been working behind the scenes to hire a new team of investigative reporters, as I’ve mentioned. I hope to announce the first hires this month.
This is all a big deal for us, for all the reasons I’ve mentioned. Speaking just for myself, having the site significantly funded by subscriptions is an inherently more stable business. That’s nice because it makes my life less stressful and I get to focus more on writing and new things we can do with the site, the editorial part of the site. But the real difference is one that I’ve only really fully understood in the last six months or more. That is, that the having the bulk of our revenue driven by subscribers makes the focus of our business activity more focused on subscribers, which is to say on readers. That makes the whole enterprise more coherent. Or perhaps it’s better to say, the things we focused on to make the editorial product better can be in many cases the same things we do to keep the company financially healthy.
In practice, this will mean more focus on original and investigative reporting, more features just for subscribers and a shift in the resources we devote to our subscription program relative to advertising. Now, to be clear: the goal is 50%. That still leaves the other 50% of our revenue base. That will come from advertising. So it’s not like we’re getting out of the ad business. But our dependence on it will shift.
As I said, early 21st century publishing economics is one thing I know a lot about because I’ve been thinking about pretty constantly for going on twenty years and I’ve had to have my eyes open for the trends. This is the way to keep TPM vital and frankly make it better than its ever been. I’m frankly excited as I’ve been in years about all the things we have planned. There’s a reason why most publications, historically, have placed the bulk of their reliance on subscriptions. It makes economic sense. And it makes editorial sense because it creates the kind of dependence and coherence I referred to above. The publications who have a body of readers who truly value it, rather than just being one of many drive-by places on the web, will survive and find they’ll thrive in new ways.
If you enjoy reading TPM, find it valuable, want it to thrive, please consider subscribing. You can click right here to sign up. This is an experiment, like every big step in the site’s existence has been. We need you to be a part of it. If you’re already a subscriber, thank you. Look forward to getting more from your subscription, a better read, more reporting you won’t see anywhere else and more new features that are just for you as subscribers.
Over the coming weeks I’m going to be posting more both about the issue of monopoly, which is simply a policy issue I’m deeply interested in, and more details about where we see the news publishing industry evolving and how we plan to thrive within it. We’ll also be talking our annual sign up drive which kicks off next month. Of course, if all goes according to what I hope, I plan to writing about news and politics and history a lot more too. That’s what this makes possible.