The clickthrough’s tyrannical efficiency

In an interview this week with the Rocky Mountain News, the founder of the free classifieds site Craigslist, Craig Newmark, offered some free advice to struggling newspapers:

Q: How do you feel when you hear about the economic impact you’ve had on mainstream newspapers?

A: We have had an impact, but it’s been greatly exaggerated. For example, falling circulation is a much bigger effect.

Q: What would you do if you were running a major newspaper dependent on the support of classified ad revenue?

A: I’d be moving to the Web faster, hiring more investigative journalists, engaging the community and speaking truth to power.

Q: What do you mean by that?

A: When a politician is lying and you know they’re lying, say something about it.

Couldn’t be simpler, right?

Except for one thing: money.

Your circulation’s falling, your classified ad revenue is being eaten away by sites like Craigslist, and so you should “move to the web faster and hire more investigative journalists.” The problem is, those two bits of cheery advice are in direct conflict with each other. Moving to the web means moving to the web’s economic model for publishing, which increasingly is being built on targeted advertisements that generate revenue only when readers click on them. Making money in a pay-by-the-click world means publishing content that (1) attracts ads that pay a lot for clickthroughs and (2) attracts readers who are likely to click on those ads.

Investigative journalism is about as far from that kind of content as you could possibly get. What kind of advertisers are going to bid up the value of keywords related to, say, a story on a mayor who gives a big municipal construction contract to a political contributor? The answer: no kind of advertiser. And what kind of reader of such a story is going to be highly motivated to click on nearby ads. The answer: no kind of reader. Stories on graft just don’t ring the clickthrough cash register. Neither do stories on politics in general. Or on wars or famines or other sorts of nasty business. In fact, most hard journalism just ain’t particularly clickthrough-friendly. Often, it’s downright clickthrough-unfriendly.

Now, add in the fact that investigative journalism is really expensive for newspapers. You’ve got to assign talented reporters to a long-term reporting effort that may or may not even end in a story. And you’ve got to pay their salaries and benefits during that whole time. And their expenses. God forbid the story requires original reporting in some distant place like Africa.

On the other hand, if you could get some cheap freelancer to hack together a story on new developments in high-definition televisions, that could really be a bonanza. Manufacturers, retailers and programmers bid a lot for clickthroughs on HDTV-related ads. And the readers attracted to a story on developments in HDTV are likely to be considering some kind of purchase – and thus in the mood to click. Ka-ching, ka-ching.

So if you’re a beleaguered publisher, or a beleaguered publisher’s boss, and you’re losing money and Wall Street’s howling at your door and the private-equity guys are circling overhead, what do you do? Hire more investigative journalists? Or publish more articles about consumer electronics? (Hey, maybe you can even get your readers to contribute their own TV reviews for free!) That is, I’m afraid, what the business folks call a “no-brainer.”

Traditional newspapers sold bundles of content. Subscribers paid to get the bundle, and advertisers paid to have their ads in the bundle, where those readers would see them. In effect, investigative and other hard journalism was subsidized by the softer stuff – but you couldn’t really see the subsidization, so in a way it didn’t really exist. And, besides, the hard stuff contributed to the value of the overall bundle. That whole model has been slowly unraveling for some time, but the web tears it into tiny little pieces. Literally. The web unbundles the bundle – each story becomes a separate entity that lives or dies, economically, on its own. It’s naked in the marketplace, its commercial existence meticulously measured, click by click. Advertisers, for their part, pay not to be seen by a big group of readers, but to have their ads clicked on by individual readers. They’ll go where the clickthroughs are. Clickthroughs themselves are priced individually, depending on the content they’re associated with. As for readers, they’re not exactly trained or motivated to pay to read anything online. The economic incentives created by the web model are very different from those of the old print model – and it’s economic incentives that ultimately determine business decisions.

Sure, this is how markets should work, but let’s not kid ourselves: the precise nature of the correlation between efficient markets and good journalism remains to be seen, and so far the indicators are less than encouraging. The result may leave a lot of people disappointed – or out of work. To say that newspapers should “move to the web faster and hire more investigative journalists” is to engage in a happy and convenient fantasy. If Craig Newmark is really so gung-ho on talking truth to power, he may want to sit down and have a little chat with himself.

10 thoughts on “The clickthrough’s tyrannical efficiency

  1. vinnie mirchandani

    Disagree. At Gartner we found the more buy side focused we were, vendors did not much like it, but they respected the power (and dollar influence) that represented. It has gradually become far more vendor revenue centric and lost its edge. They do not want to offend the vendors. Us bloggers are taking over that role. On Wall Street buy side analysts have far more influence.

    Advertisers pay for readership. Readers expect vitality from our press and celebrate (or despise) Murrow, Woodstein – and pay for that too.

  2. Mike Drips

    Nick, if you are going to keep being intelligent and logical when you blog, would you please tone it down a little bit? It’s making the other five million of us bloggers look stupid. Also, could you please do more butt-kissing? I’ve noticed a serious lack of name dropping in your blogs. Finally could you start to mention who you send your emails to? I just read on Scripting News (run by Dave Winer or is it Whiner?) that Dave had sent a e-mail to Ray Ozzie (another useless person in the blogosphere). Big Whoop. He dropped a name, implied a relationship, and claimed to know how to send an email all in one small posting. Why don’t you do more of this to demonstrate your mastery of multi-tasking to us mere mortals?

    Please Nick, if not for us fellow bloggers, do it for the gipper.

  3. John D


    Isn’t advertising on most sites (big sites, that is) sold in both clickthrough Google-esque and package deals? Google ads would be useful on the more fluffy pieces like HDTV reviews and the like, while package deals to advertise on certain areas of the page throughout the site would be more akin to the bundles of traditional newspapers.

  4. John D

    Also, vinnie makes a good point: If you are popular (say, ten million page views a month popular), then it ultimately doesn’t matter what your content is, because someone will want to reach that many people. And, if you report news, and are that popular, you must be doing something right. No legitimate online news organization (which some would say doesn’t yet exist, but let’s hypothesize for a moment) could never survive by moving slowly over to fluff pieces, since readership would go down. If you’re popular, the advertisers come to you, not the other way around.

  5. Nick

    Mike: Thanks.

    Vinnie & John: Good points – assuming the “bundled newspaper” model survives the shift online. If the unbundled story turns out to be the primary unit of news consumption – and that does seem to be the way things are going, no? – then “selling impressions across a site” becomes a lot harder.

  6. John D


    I’m saying that the bundled or unbundled doesn’t matter, because popularity online brings advertising dollars. If millions of people read you, then you’re going to get people wanting to advertise in an official capacity. A lot of sites sell just based on visibility. I point you to the recent example of Rocketboom, who sold an ad package for $40,000 for a week of (IIRC) one-minute ads at the end of the show. And from an ATM company, of all people! They aren’t selling on clickthroughs, but impressions (the CPM rate). I think advertisers are slowly starting to see the value in CPM over just raw clickthroughs, as Rocketboom’s example no doubt shows.

    See here for analysis of Rocketboom’s advertising success.

  7. PJ Brunet

    Context-sensitive PPC isn’t the only way to make money. It’s hard, complex work that takes decades to master–newbs shouldn’t expect a free handout and overnight success.

    “In fact, most hard journalism just ain’t particularly clickthrough-friendly. Often, it’s downright clickthrough-unfriendly.”

    Maybe if you’re only doing page-centric analysis. Do you have numbers to back this up?

    “Literally. The web unbundles the bundle – each story becomes a separate entity that lives or dies, economically, on its own.”

    Don’t stories have an author with money to lose/gain?

  8. Yehuda

    >Making money in a pay-by-the-click world means publishing content that (1) attracts ads that pay a lot for clickthroughs and (2) attracts readers who are likely to click on those ads.

    Excellent point, Nicholas. Investigative journalism might be valuable for some few people but it is not a good business concept nowadays. When you go for maximizing ads revenue, most classical topics like politics, economy, etc. don’t pay.

    Craig goes with his concept for things people permanently need or use but it is NOT the same situation for “old” media and news publishers.

  9. Mohit Mahendra

    I agree that the revenue stream for some kinds of journalistic content may be drifting away, towards content that is more readily monetizable via PPC/clickthru advertising. But if there is value perceived by consumers/readers in the investigative sort of content, and blogs may very well be the preferred media vehicle for such content, a revenue model for such content publishers that works more efficiently than PPC should not be far away. How about subscription fee based RSS feeds? Or unbundle it further – micropayment for each story clickthru, with such payments tracked and aggregated by an RSS feed portal, and then distributed to content publishers by an intermediary like Technorati. I think ideas like those may just be waiting for a critical mass of content to emerge so that an RSS subscription market can grow out of it.

  10. Tom Foremski

    Nick, it’s what I call “you can’t get there from here” a lovely American expression.

    In this case, as you say, the econmics of the old cannot be supported by the economics of the new. It will be a while before we have the value-recovery mechanisms for quality content which means interesting times ahead :-)

    I’ve been writing about this since the summer “What happens if the old media dies before the new media learns to walk?” We will be going through a big deconstruction/reconstruction of the media sector as the economic model shifts to the new. It will be interesting to watch (and even better if you are in the game :-)

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