Mobile and the news media's imploding business model

Pew research has a new survey showing that tablets and smart phones are now 27% of Americans' primary news source. The overwhelming share of this is phones, not tablets; and a reasonable view says this will rise to 50% in three years.

Makes sense: just as radio became one of the big purveyors of news because it was the medium that traveled with you, so should mobile.

But it is also a depressing development, portending, once again, the end of the world as we know it: the news business has been plunged into a crisis because web advertising dollars are a fraction of old media money. And mobile is now a fraction of web: the approximate conversion rate is $100 offline = $10 on the web = $1 in mobile.

In part, the reasons are purely mechanical: you can cram three or four ads on a web page, meaning an average web CPM (cost per thousand views) of $1.00 (if you're lucky) can become a rate-per-page per thousand (RPM) of $4.00 (versus $20-$40 CPMs in traditional media). Mobile CPMs are running at something closer to $0.25 – and we're only able to fit one ad on those miniature pages.

And to some extent, the problem defines the medium: who wants to pay for inattention and a cursory scrawl? (How much of mobile news is consumed by people behind the wheel, even?)

And yet, this resistance, or lack of interest, on the part of advertisers challenges the bedrock logic of marketing: follow your customers.

Brands and big agencies continue to announce their commitment to and excitement about the revolution at hand. They surely want to be seen as players and cool people. I don't know anybody in consumer marketing who isn't gaga about digital and mobile. But these are the same people and big brands who have doubled down on television, your dad's medium, making 2011 a golden TV advertising year.

Now, there's an optimistic and stubborn view that this must change, that agencies and brands can't hold on to the past for ever. Almost every digital executive and booster will, at this point in the conversation, outline his or her children's media consumption habits as anecdotal evidence in support of the coming digital ad boom. But, as it happens, the patterns seem to get only worse. According to a recent report by Kanter Media, broadcast TV was up was 7.7% in the fourth quarter of 2011 (up 2.4% for the year), while internet search advertising was down 6.4% (down 2.8% for the year); and internet display advertising was down 5.9% in the fourth quarter (and down 5.5% for the year). Mobile does not even get its own break-out category.

There is another bleak element here: a basic shift in how advertising is bought and sold. More and more digital space, both web and mobile, is moved through a real-time auction process: audiences (or demographic segments) are sold like soy beans. Curiously, for all other commodities, the auction process raises prices. In a virtually unlimited world of digital advertising space, it lowers them.

If the news business on the web is depressing, contributing to the existential angst that has gripped every established news organization, mobile turns the story apocalyptic: there is no foreseeable basis on which the news establishment can support itself. There is no way even a stripped-down, aggregation-based, unpaid citizen-journalist staffed newsroom can support itself in a mobile world.

Posted via email from Pete's posterous

No comments: