A memo outlining a business and technical model for a newspaper...

1. A Modest Proposal for the [XXXXXXXX] Newspaper on the Web
Background
I don’t know any internals about the business of the [XXXXXXXX]. But as someone who tracks the media
industry, it’s safe to presume that the same forces that are corroding other print media businesses are
also hitting the Weekly.
The forces look like: lower circulation as audiences move to the Web, meaning lower ad rates for print;
an audience shifting to the Web where ad rates are spectacularly lower and where core functions of the
paper (choosing nightlife, choosing restaurants, choosing films) are exposed to well-funded category
killer sites like Yelp, Citysearch, and Fandango.
The [XXXXX] – like other newspapers – can either decide to defend its existing territory and fight to slow
the erosion or move into the new territories opened by changes in technology, advertising and revenue
markets, or audience and consumer behavior.
The ideas contained here just popped into my head as I was working on something else over the
weekend; I thought I’d share them with you.
Newspaper Web Strategy 1.0 > 2.0
First-generation newspaper websites essentially replicated the print edition online, with the key
differences of persistence (articles go into an archive) and some level of interactivity (comments on
articles).
As newspapers advanced, they began to include raw background information, source notes, etc. to offer
a more complete exposition of what went into articles. The efforts have gone into expanding the value
within the core url that represents the newspaper’s online footprint.
Theorists like Jeff Jarvis (author of ‘What Would Google Do?’, blogger at www.buzzmachine.com,
professor at SUNY’s graduate school of journalism) have begun to suggest that the newspaper of the
future will be online – but that it won’t necessarily be contained on one site.
Jonathan Swift wrote:
"So nat'ralists observe, a flea
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2. Hath smaller fleas that on him prey,
And these have smaller fleas that bite 'em,
And so proceed ad infinitum."
Imagine instead an ecology of sites centered on the core [XXXXX].com site; each is a site on a more-
specialized topic than the one above it and more general than the ones below it (LA politics, then below
it a series of sites including a site on the doings in CD5; Dining, then below it a series of sites including a
site on Dim Sum) feeds traffic and content upward, receives traffic downward, and provides ad,
sponsorship, and transactional inventory. A core set of the blogs would be funded and owned by the
[XXXXXXXX], and each would also work to create a lower level of 3rd party blogs on related topics, and
provide a conveyor belt of content and traffic upward – as well as traffic and ad revenue downward.
It would look like this:
This is a conceptual diagram of the Glam.com network of sites – as compared to a major competitor.
Here’s VentureBeat talking about Glam in early 2007:
We finally “get” Glam, the network of Web sites for women’s fashion and lifestyle.
Last month, VentureBeat was incredulous when venture capitalists invested in the company at a value of
$150 million. Glam is just another new media company, dependent on ads. How could an upstart team of
40 employees produce that sort of value?
The company has just demonstrated why. It is the fast growing of the country’s top 500 web sites,
according to Comscore Media Metrix numbers just published — and shared with VentureBeat by chief
executive Samir Arora (pictured here) during an interview Monday.
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3. Glam enters 2007 with impressive momentum: Hip social networking company, Facebook, was No. 1
fastest-growing site in 2006 — until December — when Glam doubled its uniques in a single month and
blew past Facebook at the last minute. Glam now has more than 8 million U.S. unique visitors per month.
Glam overtakes Disney’s women network and CondeNast’s network, jumping to second largest women’s
web property, behind only iVillage. (See data below.) Glam has more than 16 million global visitors, Arora
says.
The recommendation is to duplicate that model editorially as a regional network of location-and-topic
centered sites, with authority and core traffic driven from the [XXXXXXXX] newspaper and core site.
Economically, this allows the [XXXXXXXX] to reinvent itself from a single web property to a regional ad
network; additional transactional revenue sources (ticket sales, restaurant reservations) ought to be
readily attainable as well.
[XXXXX].com as a ‘Network’ of sites. Part 1 – content (we’ll talk revenue in a moment)
Taking Jarvis’ ideas and the Glam model applying them to the [XXXXX], we might initially get a
constellation of 41 sites (this is a conceptual suggestion, not a plan):
• [XXXXX].com at the center;
• CouncilDistrict1 – 15 [XXXXX]. A blog for each council district with a blogger brought in to
birddog each LA City Councilmember
• Supervisorial District 1 – 5 [XXXXX]. A blog for each County Supervisorial district
• 10 blogs on aspects of culture. High Culture, Pop Culture, Dining, Housing, Outdoors,
Relationships, Music, Film, Theater, etc.
• 10 hyperlocal neighborhood blogs. Hollywood, West LA, Beach Cities, etc. Each of these blogs
might draw content from the relevant political blogs, as well as the cultural blogs
Each of the sites offers content to other [XXXXX] sites and promotes other [XXXXX] sites – the CD12 blog
has space to promote cultural events in the West Valley; and the best – most interesting – content is
rolled up until it gets to the core [XXXXXXXX] site and if particularly interesting, to the print edition.
Each of the site authors it encouraged to curate other relevant sites and offer them an advertising,
content, and traffic deal in which content may flow upward, links will send traffic both ways, and the
[XXXXXXXX] ad sales force will place ads – at a higher rate than Google or TribalFusion – on these
outside sites.
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4. Why do this? Because it will move the [XXXXX] from a difficult to defend position at a legacy reviewer
(film, theater, food) with a narrow news hole to being the pre-eminent hyperlocal news company in the
region; it’s a scalable model anywhere the [XXXXX] chain has a paper.
And it will – itself – make money.
[XXXXX].com as a ‘Network’ of sites. Part 2 – the economics
Here’s what it looks like:
HighCultureWeekly
.com
Story
Li nk s Story
Ad
s Story
Storie
ries
S to
LA Weekly.com
s
Link
ks
Story WestSideWeekly.com Lin
Stories
Story Story
Ad
Story Story Ad
LATheaterWeekly.com Stories 3rd Party Blog
Links Story Stories
Story Story
Story Story
Ad Ad
Links
Story Story
es
s
Link
Stori
CD5Weekly.com
Story Stories
Story 3rd Party Blog
Ad
Story
Story
Links Story
Ad
Story
The hard reality is that bloggers – even good bloggers – are inexpensive (I say this with great sadness as
a blogger). It is likely that the [XXXXX] could bring on 40 writer/editor/bloggers for about $500/month,
with a promise to raise them to $1 – 1.5K/month plus some share of ad revenue if the model works and
if their particular site takes off. In addition, you’d agree to pay them your usual rate for articles that
were moved up to the main site or the paper.
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5. So assume outside personnel costs at startup of $20K/mo or $240K/year, plus someone to
coordinate/manage all this at $50K/year (burdened) for a total of $290K in staff costs at startup.
Operating costs would be a webmaster to manage ad placement and noncopy content changes –
another $50K burdened – and a few thousand a month in ongoing technical costs (higher once traffic
takes off).
So in total, we’d be looking at an ‘at risk’ operating cost of $345K/year ($28.4K/mo) plus a significant
low six-figure capital expenditure to implement this. There might be resources that could be pulled from
other operations to cover some of this, but I’m assuming not.
How much traffic/advertising would you have to generate to cover these costs?
CPM ads are dying as we move to CPC or CPA, but CPM rates can serve as a good ‘proof test’ to look at
traffic needed to cover costs.
Pageviews/site Aggregate
/day /month Monthly Ad views Monthly Revenue
Sites Ads/Page CPM
40 5 $ 1.00 $ 2.50 $ 5.00
15,000,00
2,500 75,000 3,000,000 0 $ 15,000 $ 37,500 $ 75,000
30,000,00
5,000 150,000 6,000,000 0 $ 30,000 $ 75,000 $ 150,000
45,000,00
7,500 225,000 9,000,000 0 $ 45,000 $ 112,500 $ 225,000
60,000,00
10,000 300,000 12,000,000 0 $ 60,000 $ 150,000 $ 300,000
75,000,00
12,500 375,000 15,000,000 0 $ 75,000 $ 187,500 $ 375,000
So at a $1.00 CPM, you’d need 5,000 pageviews/day. As a comparison, the Mayor Sam blog – with no
outside traffic driver – gets 6,000 unique visits/day (per Compete.com) which should translate into 7,500
– 9,000 pageviews/day.
At a $1.00 CPM, if your sites could – on average – match Mayor Sam, you’d earn $45,000/month, on
costs below $30,000/month for a profit of $15,000/month (not including the cost of the six-figure capex
for setting this system up).
If you could drive the effective CPM’s up – and note that Federated Media shows $15 – 20 CPM’s for
targeted web properties – the revenue potentials are obviously significantly higher. And with a larger
inventory base, the ability to invest in or partner with targeted ad providers and raise ad revenue
further is significant.
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6. Adding transactional revenue should be an immediate step. The current state of revenue-generation on
sites is transactional, rather than ad-driven. Sites that review things also sell them (typically as an
Amazon or other major merchant affiliate); review sites could sell tickets through links to Fandango or
Ticketmaster or make restaurant reservations through links to Open Table.
Conclusion
This is obviously nothing like a complete plan. But it ought to be enough to define a possible future for
the [XXXXXXXX] that would not only be a good business decision – one that will generate revenues and
profits that justify the investments and risks – but a good journalistic one.
[XXXXXXX] has stories that need to be covered, and the current economic state of print and mainstream
television and radio journalism don’t support the coverage that’s needed to do that job. New models
must emerge – and the hope is that steps like these can define a path to those new models.
So here’s my present to you guys. Or to quote: “There it is. Take it.”
Marc Danziger
Charmed Particles, Inc.
www.charmedparticles.com
marcd@charmedparticles.com
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