Digital news companies are facing a perfect storm that observers say will leave those unprepared in its wake. In fact, numerous reports indicate industry consolidation has begun and is expected to continue.
Just last week, Poynter detailed how corporate investment and digital consolidation in the newspaper business is creating “news deserts” in local markets. At the same time, The Wall Street Journal reported that global newspaper print advertising this year is expected to see its worst decline since the recession, meaning big changes to both print and digital news products.
To ready themselves, old media and digital natives alike are undergoing reorganizations aimed at becoming more agile and responsive to today’s digital consumers. (See our This Week in Publishing posts for news updates.)
But who will survive the shakeout isn’t clear. According to a Contently report, all signs point to the Big 5—Google, Facebook, Microsoft, Twitter, and Yahoo/Verizon—becoming more dominant in terms of ad share: In 2015, they together accounted for 65% of total digital ad revenues. And increasingly, that domination is narrowing to the Big 2—Google and Facebook—which grabbed $2 billion of the new $2.7 billion (74%) in digital advertising revenue. Eye-opening numbers for sure.
So where does that leave digital news organizations? Here’s a look at the top factors driving today’s big shifts and how media companies are responding to them.
Social Media Platforms
Within the past few years, news publishers have found themselves in the uncomfortable position of having to increasingly rely on social media platforms (namely Facebook) to reach their readers, a majority of whom now get their news directly from their social feeds rather than publishers’ websites. And with the introduction of direct-to-social distribution options like Facebook Instant Articles and Snapchat Discover, platforms are gaining even more control over not only news audiences but advertising revenue, as the latest figures show.
Despite that, some media companies—including The Huffington Post, Mic, and The Washington Post—remain all in on Instant Articles and similar offerings, taking the position that multiplatform distribution is what the current market demands.
Others are wary. The Wall Street Journal, for example, offers only a limited number of stories on Instant Articles and is holding back on any deals to produce video for Facebook Live. The Journal “has put a stake in the ground about maintaining full control over the data around the relationship with its audience,” noted media executive Vivian Schiller in a Bloomberg post.
Check out “Keeping Up With Evolving Content Platforms” for more insight on today’s platform ecosystem.
Ad Revenue
While digital ad revenue in general has failed to make up for print losses and drive profit, The Washington Post is among the few bright spots, recently reporting that it’s numbers are now hitting the “nine-figure” range. It also announced a 275% jump in native advertising, an avenue many of today’s top news providers are taking.
Slate, for one, reported that nearly half of its revenue now comes from custom ads. Another leader in native is The New York Times, which recently expanded its T Brand native advertising unit into a full-fledged agency that offers a range of marketing products and services. T Brand campaigns are expected to add 20% to 30% to the Times’ digital ad revenue this year, according to a Digiday report.
Video has also become a key component of content and business strategies across digital media (see “The Video Boom: Meeting the Challenges of Scale, Cost, and Monetization“). BuzzFeed, for example, recently announced it will be central to its newly reorganized news and entertainment operations.
And across the board we’re seeing news media companies exploring new revenue streams including global initiatives (see “The New Realities of Global Media“) and lucrative international licensing deals.
Ad Blocking
Growing use of ad blocking technologies continues to be a major roadblock for news providers, with the number of U.S. users turning ad blocking on expected to jump from nearly 70 million this year (more than a quarter of Internet users) to more than 86 million in 2017, eMarketer research shows. And, as we highlighted in one of our recent Media Metrics posts, that growth is expected to cost U.S. media owners $12 billion by 2020.
To combat the trend, media organizations are employing various tactics, including content blocking, subscriptions, paywalls, and use of ad block vendors, according to Sourcepoint research. Tech publisher IDG is finding success with a “tough love” approach: It began blocking access to content with messaging explaining that it depends on advertising to produce quality content, which resulted in some 38% of ad blocker users whitelisting its sites.
Mobile
If anything is for sure, the future of digital news media is all about mobile. Mobile already outpaces desktop traffic to news websites, according to Pew, and that trend is expected to accelerate. As Quartz’s recent The Next Billion conference highlighted, the world’s next billion users to go online for the first time will do so largely via mobile, opening up vast opportunities for digital media organizations that align their reporting and delivery strategies to the way mobile users consume content.
To speed mobile load times, some media companies are turning to offerings like Google Accelerated Mobile Pages and Facebook Instant Articles, with varying success. And last week, publishers reported big traffic gains from the Apple News mobile app, though they’re still waiting for better tracking and monetization options.
News organizations are also shifting away from print-focused news cycles toward digital-first approaches that better serve mobile audiences. Under WSJ’s recent newsroom reorg, for example, more content will be digital only, stories will be shorter, and high-impact features will be published earlier in the day, when readership is highest.
These and other influences promise continued change in the digital news business, meaning it’s anyone’s guess as to what the long-term outcomes will be. Industry observers agree on one thing, though: Media companies that embrace innovation and transformation are likely to fare much better than those that don’t.
Check out our October Book Picks to learn more about the evolving world of digital media.
CEO Margot Knorr Mancini’s monthly blog on content strategy shares valuable insights and observations from her experiences in the publishing industry.
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Posted by: Margot Knorr Mancini
