Four reasons why some news organizations can’t make money online

It has been well documented that online media is eating away at print and broadcast media revenue.

This decline in print and broadcast media has been going on for years, and newspapers, magazines and TV stations have been working hard to make headway online. But no matter what these companies do, their profits from online advertising (although growing) haven’t been able to make up for the loss of print/broadcast revenue.

This is not a content problem. Publications like The New York Times, The Washington Post and The Wall Street Journal have award-winning content and excel at producing it in a multitude of Web-friendly formats. Nor is this an audience issue. According to Compete.com, the NYTimes.com, Washingtonpost.com, WSJ.com, CNN.com and NBC.com all have monthly visitors numbers in the millions and have increased their traffic from anywhere from 21.5 per cent to 149.2 per cent in the past year. (See chart.) Rather, these companies are suffering from the limitations of their business models.

In Canada, news consumers still favour traditional channels over new media.

There are four primary things that print companies and TV networks are doing wrong:

1. Focusing on print and broadcast revenue models and trying to make those models work online. Instead of plotting out Internet-focused business models that work with the characteristics and qualities of online audiences, print and TV outlets are taking their offline models and trying to make them work online. For example, Hulu, an online video site that shows clips and full episodes of TV shows and movies that was founded by NBC Universal and News Corp., is a well-executed and popular site.

Hulu, however, still makes money based on advertising interrupting the middle of a show.

Hulu is just transferring commercials to the Web instead of branching out and trying different video revenue models.

2. Ignoring the open and free nature of the Web. Print and broadcast business models are predicated on creating the best content and branding it.

This involves both developing media personalities that have authority or star-power, or by using the most rigid editorial standards to produce quality content.

These practices have resulted in the creation of content that these companies have fought rigorously to protect, copyright and keep private. Online, however, many of the most successful Web 2.0 companies boast a business model where content is open and free and everyone can use it, mash it around, and combine it in new ways. YouTube, for example, allows anyone to become a content creator, distributor or aggregator.

3. Overlooking the opportunity to dominate in local markets. While there are a number of ventures that are trying to figure out how to tackle local markets, no one has yet emerged as the dominant local leader. Traditionally, hometown newspapers and TV stations are the best at serving the local markets.

Because these outlets have their fingers on the pulse of their communities and have ties to the local advertisers, there is a huge opportunity for print and broadcast media outlets to capitalize on serving the underserved local markets online.

But they currently are not capitalizing on that opportunity.

4. Having a “build-our-own” mentality.

This is something that plagues not only print and TV media companies but many companies.

Instead of utilizing the excellent tools that are available online — often for free — companies decide to undertake technology initiatives to build their own online tools.

These projects are usually costly, time-consuming and totally unnecessary.

There are very few legitimate reasons, for example, for a company to build its own blogging platform when there are a multitude of white-label tools that work just as well as any blog tool that could be built proprietarily.

This causes profit to be lost to overhead and technology costs, and frequently results in inferior products. (Hat tip to Eric Lundquist for the core of this idea.)

Until the print and broadcast outlets get these basic business-model issues sorted out, no amount of quality content or dedicated audience is going to solve their online problems.

Melissa Chang is the founder of Pure Incubation, an Internet incubator based in the Boston area. She blogs at 16thletter.com.

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