Week 7: Who is Using and Paying for What?

This week’s readings made me feel ADHD. 

I really applied myself to the readings, starting earlier in the week than usual, and doing ancillary research.  Because I had chosen this topic for my first case study, I needed to really understand and make connections. And I needed to find something interesting to use for my case study.  Initially, that seemed nearly impossible.  After delving deeper into the readings; however, I’m completely fascinated and passionate about the economics of digital media.

My initial point of interest was in the possibility that print news wasn’t dead.  I liked the idea, maybe it was the nostalgia associated with it.  I remember my grandmother sending my copies of our local paper, the Cameron County Echo, while I was stationed in Japan.  We never had news with a global impact, not did the Echo report on it.  But we had the best local interest stories.  I remembered being mocked by my fellow sailors over my favorite headline ever, “Stumpy’s Ice Cream Cart Demolished.”  That news, a crushing blow to a country girl who cherished that cart, was fodder for endless jokes and required lots of explaining.  Who was Stumpy?  Why was he called Stumpy?  Why an ice cream cart and not a truck?  How was it demolished?  Why did its destruction warrant front page coverage?  Even my urban friends were fascinated by this story.  

This is print news at its best to me.  And while online hometown stories might be more timely and accessible, I can’t cut them out and pin them to my cork board or put them in my scrapbook alongside postcards and magazine clippings.  After reading more about the future of print news, I actually realized that I had an opinion about their (potential) demise, where I previously had none.  Motivated in my newfound interest in print newspaper sustainability, I launched into my research.

“The Ramen Noodle Theory of Online News” was fascinating.  I was encouraged and intrigued with much of Professor Chyi had to say about the longevity of print media.  I was so encouraged and intrigued, in fact, that I highlighted topics to research further.  The first was Professor Clayton Christensen’s “Disruptive Innovation Theory.”  Here’s the graph:

Based on this theory, newspapers were led to believe that they should invest heavily in their online content.  After all, technology was becoming more and more accessible to the reading population.  Online news was clearly - based on this theory - going to outpace print news.  But an article by Steve Denning at forbes.com argues against this theory.   Citing a 2015 MIT Sloan School of Business study, he contends that the key to relevance in the digital space isn’t predicting and combatting competitors; the key lies in management and innovation.

Most managers, when faced with a disruptive innovation, simply give up.  2/5 of all managers in these types of situations simply “choose to die,” according to the Sloan study.  And, as the study further states, they were absolutely right in doing so.  They never stood a chance, in essence.  The Sloan scholars justify this harsh statement with the knowledge that, unless the companies in question were already capable of innovating to match the disruptive innovation, they SHOULD just give up.  Innovation under those circumstances was resource prohibitive.    

But with less than 5% of U.S. companies willing or able to innovate, according to the Sloan study findings, what options are businesses given?  They provide a solution less “heart-wrenching” than death:  outward thinking.  Denning proposes that company presidents should "stop running the company with defensive, inwardly-focused, hierarchical bureaucracy and commit to continuous customer-focused innovation.”  In other words, healthcare providers should focus on their patients; camera companies should focus on the quality of their photos; newspapers should focus on news.  But these industries (and many others) are so focused on revenue and CEO retirement packages that they have forgotten the essence of the product or service that catalyzed their businesses in the first place.  Re-committing themselves to their roots could very well prove to be their saviors.

If this theory holds true, newspapers will win the news delivery competition with a combination of innovation and dedication to their craft. While most major print sources have attempted to innovate with online sites and apps, they find themselves stymied by the lack of ad revenue.  It DOES take money to operate a site and pay reporters and send the news to press.  So paid ads on their online sites seem not only logical, but necessary.  But that’s not working so well.

Advertisers aren’t willing to pay for online ads as much as for print ads.  Print ads had come to be viewed by readers as necessary, but minor distractions.  Online ads are vastly different than the subtle suggestions represented by the 2” x 4” rectangle paid for by Sears on page 5 of the paper.  Online ads are glaring. And obtrusive. And annoying. And immune to any sort of privacy-while-web-surfing etiquette.  And therein lies the REAL problem facing newspapers and their advertisers: ad blockers.  

Michael Rosenwald of The Washington Post reported in Fall 2015 that nearly 198 million people globally use ad blocking software, which, when the article was published, was up 41% from 2014 numbers.  That percentage is even higher in the U.S., with almost 50% of our internet users employing ad blocking techniques.  Adobe, committed to aiding those businesses who are losing money to ad blocking, says that $21.8 billion in global ad revenue will be blocked this year.  They suggest that users are “inadvertently putting their favorite websites out of business."

Well, I hate online ads.  Passionately.  After reading about the most prominent and effective ad blockers, available at Adblockplus.org, I immediately installed it on my laptop.  Oddly, I had an article from Forbes.com  on my screen prior to the installation.  When I went  back  to access the article, the following appeared on my screen:  

CONTINUE TO SITE 

QUOTE OFTHE DAY

“Pushing the limit isn’t always the way to succeed.”

Jimmie Johnson

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Ha! Nice try Forbes!  There’s no way I’m having you whitelisted OR turning off my adblocker.  Maybe you’ll go out of business.  

PageFair, a Dublin-based anti-adblock startup that provides publishers with technology that measures and defeats adblockers, is equally passionate about ad revenue.  They have been working with prominent online sites to find ways around adblockers.  On October 31, 2015, The Economist’s online site - happily employing the services of PageFair - came under attack of a malware virus, seemingly planted by adblocker advocates.  Economist online readers on Halloween night (and readers of over 500 additional online sites) pick up this virus.  Ultimately, people want the right to block ads, some so much so that they’ll go to great lengths to ensure that ability.