Tag Archives: KrugmanParadox

Alan Mutter Jumps The Shark – Getting Over Newspapers

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This post is in response to Why newspapers can’t stop the presses from Newsosaur by Alan Mutter.  It is a series and at the time of this writing he was on installment 3.  Please help me explain why he thinks newspapers should focus on newspapers because I can’t make any sense of this.

Because newspapers on average derive approximately 90% of their sales from print advertising, the only ink-on-paper newspapers that can afford to attempt digital-only publishing are the ones that are irreversibly losing money. -Alan Mutter

So we have newspaper companies that are irreversibly losing money.  These companies have discovered that in the internet paradigm, their value proposition is valueless or near valueless. Continue reading →

Hyperlocal Disaster – East Iowa Herald Closes After One Year

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You can’t get more “hyperlocal” than a newspaper serving a population of 1000. This is the purest attempt at Hyperlocal that I’ve ever read about, a very small operation covering a very small population. It has been said before that hyperlocal fails because the advertising cannot support it. So what happened in this situation? Something new and unexpected? Nope, from publisher Mitch Traphagen, “It literally came to an end, the ad revenues,”.

The East Iowa Herald Closes After One Year -from AP/ Chicago Tribune.

It should be pretty obvious by now that advertising revenues cannot support general interest news operations by now. The Krugman Paradox and Publisher’s Dilemma spell this out pretty clearly.

What about donations? What about Spot.us? Barring a generous grant or donation, this model will also fail. Spot.us might be a nice niche alternative for the San Francisco Bay area, but I don’t see the model working for small-town USA. There just isn’t enough disposable income floating around for the model to work. Continue reading →

LATimes.com Economically Sustainable? I don’t think so

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1. LA Times editor Russ Stanton at USC: “Stanton said the Times’ Web site revenue now exceeds its editorial payroll costs.”

2. Jeff Jarvis then writes, Can The LA Times Turn Off Its Presses?

3. Which is republished by The Huffington Post as, Jeff Jarvis: LA Times: Turn Off Your Presses

My M.A. Thesis which was just completed two weeks ago goes into great detail how general interest newspaper websites are not now, and will never be capable of generating economically sustainable revenue.  There is a huge difference between covering payroll expenses and achieving Economic Sustainability; Having a mechanism in place for generating, or gaining access to, the economic resources necessary to keeping the business operating on an ongoing basis. Continue reading →

2004 Newspaper predictions way off, well maybe not that far

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Excerpt from State of the News Media 2005

By the Project for Excellence in Journalism

In December 2004, a mock documentary about the future of news began making the rounds of the nation’s journalists and Web professionals.

The video, produced by two aspiring newsmen fresh from college, envisioned a nightmare scenario – by the year 2014, technology would effectively destroy traditional journalism.

In 2008, Google, the search engine company, would merge with Amazon.com, the giant online retailer, and in 2010 the new “Googlezon” would create a system edited entirely by computers that would strip individual facts and sentences from all content sources to create stories tailored to the tastes of each person.

A year later, The New York Times would sue Googlezon for copyright infringement and lose before the Supreme Court.

Will the New York Times be around in 2011?  If they are not around, who will protect us from Googlezon?  And who were these two “visionaries”?  I demand answers.

Newspaper National Network NNN “wantedness” spells trouble

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While researching information from my Thesis I ran across this unsettling bit of data from the Newspaper National Network website. It appears on the homepage in the green sidebar.

“Ad wantedness” is highest in newspapers. In fact, one recent study, reported that 90% of consumers prefer newspapers with ads to newspapers without ads. Newspapers are the primary source for shopping information for most product categories, with 52% of people seeing ads as “valuable” when planning their shopping. -Jason E. Klein President and CEO Newspaper National Network, LP

The statement is aimed at marketing people and is meant to sell them on the benefits of advertising in a newspaper.  I thought maybe I misread it but sure enough, holy cow!  This is extremely troubling news for newspapers.  When I read that first sentence I interpret it as, “only 10% of newspaper readers purchase the paper purely for it’s content -consumers prefer newspapers with ads to newspapers without ads”.

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Internet Advertising Revenues in Q3 ’08 Increase – Except Newspapers

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The Krugman Paradox in practice

11% Increase from Q3 ’07, Up Slightly from Q2 ’08 Despite U.S. Economic Woes
NEW YORK, NY (November 20, 2008) — The Interactive Advertising Bureau (IAB) and PricewaterhouseCoopers LLP (PwC) today announced that Internet advertising revenues reached almost $5.9 billion for the third quarter of 2008, representing an 11 percent increase over the same period in 2007. While double-digit annual growth continues, the quarter-to-quarter curve remains relatively flat compared to recent past performance. The Q3 2008 figures, published in the IAB Internet Advertising Revenue Report, are 2 percent higher than the Q2 2008 results. Set against strong economic headwinds in the U.S. economy, Q3 ’08’s $5.9 billion represents nonetheless the second-highest quarter results ever. For the first nine months of 2008, revenues totaled $17.3 billion, up from $15.2 billion in the same period a year ago and surpassing the record set in the first nine months of 2007 by nearly 14 percent. -from IAB

From NAA/ Clickz:

Print and online newspaper advertising revenue plunged 18.11 percent in the third quarter of this year — the worst decline by far in the nearly four decades the Newspaper Association of America (NAA) has been tracking quarterly performance. After its first ever reported drop in online ad revenue in Q2 2008, the industry drifted another few notches in Q3. According to the Newspaper Association of America, online paper sites brought in $749.8 million in Q3, a drop of 3 percent from a year before.

From NAA/ E&P:

The number of unique visitors to newspaper Web sites hit another record high in Q3, up 15.7% to 68.3 million compared to the same period a year ago.

The fundamental problem of newspapers on the internet – The Krugman Paradox

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Updated: December 9, 2008


I introduce you to the fundamental problem of newspapers on the internet – The Krugman Paradox - named by me after watching PetMeds.com ads appear next to Paul Krugman for three days after it was announced he won a Nobel Prize. I couldn’t believe there wasn’t a better way to monetize his presence on NYTimes.com. Further investigation revealed that the Krugman problem was not unique. Here goes, I want feedback.

Definition:
The Krugman Paradox is a phenomenon referring to newspapers’ websites and the site’s inability to produce economically sustainable advertising revenue, despite their highest audience reach in the history of their industry. The paradox indicates that newspapers must increase the effectiveness of their online advertising if this is to be their main revenue stream.

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