Russel Yeo: Media’s digital dream turns to smoke. Open access failure.

The online dream, where did it all go wrong for publishers? Why has it taken so long for advertisers to follow? In this insightful piece, online guru Russel Yeo takes a look at the challenges faced by those in the digital space. The transition was expected to be a smooth one but the two revenue models contradict one another. While the newspaper world made money from both sides (subscriptions and classifieds), online struggled to find a steady form of income, because generally everything it does is free. Media planners have also taken a while to jump at digital, generally sticking to more traditional mediums. And while there are some success stories there are also those that are haemorrhaging, as the Guardian knows too well, losing $120 million last year. Yeo also looks at consolidation in the media space, which may see titles like the Cape Times and M&G become national exhibits. This piece was first published at – Stuart Lowman

By Russel Yeo*

There once was a dream. As the reading public moved, inevitably, from getting their news on dead trees to the internet, vast amounts of money would follow. Fortunes awaited the brave.

The logic was simple enough. As eyes moved to the internet, advertisers would be forced to follow. The costs of producing the news would be less, as each journalist became their own typesetter. Most importantly, there would be low distribution costs, across the globe. Each additional reader would add negligible cost.


To see how deluded this all was, you need only follow the fortunes of the poor Guardian. Despite a massive commitment to the dream, they managed to lose $120 million in the last year. At that rate of loss, they will be out of business within 5 years.

I once had a dog in this fight. Back in the Palaeolithic year of 2002, we calculated that online advertising in South Africa, against all conventional wisdom, was at the correct level, given the time and attention paid to it.  We had all assumed that media planners were shying away from the unknown, and time and salesmanship would grow the pot.

The old newspaper guys said all along that the dream was smoke. Journalism is hard, costly, and dependent on the income from subscriptions, cover sales and classified ads. Brand ads were cream.

At the same time we were working with the Guardian’s excellent online team, and it became clear that they were going all-in on digital. The Guardian is not a normal newspaper business. It is protected from the real world by the Scott Trust, dating from the 1930’s. And yet the team was already privately despondent about the financial outlook.

So how did it all go so wrong?

Firstly, newspapers were always, as the saying goes, buttering the bread on both sides. If you charge for both a classified listing, and sell the right to read it, you are vulnerable. The Junkmail style publications had already begun to attack this: free to list, pay to read. Then Craigslist and others offered free in both directions. Print Classified were dead.

Secondly, everyone overestimated the importance of old-style journalism. Most hacks see themselves as warriors, speaking truth to power. The fact that the establishment press missed the biggest scandals of the age, Enron, WMD lies, the global housing bubble, does not distract them. This is why the dream of open-access journalism appeals so strongly to them, if not to their financial managers. As we now know, sometimes people just want to look at cute cats.

Thirdly, the money did not follow newspaper-style journalism. The biggest online winner has been search, once regarded as unplayable. Google’s parent company, Alphabet, briefly became the most valuable company on earth. The Huffington Post found that they could get writers to contribute for free, paid in the new currency of “exposure”. Facebook has a billion uses every month.

It may be time to wake from the open-access dream.

So what happens now?

It’s not all doom out there. The New York Times (with a metered-paywall) has grown to 1m digital subscribers, and is profitable. But the old grey lady is a truly global brand, and reflects the world’s most important city.

Mail Online’s ad revenue is growing fast, as print advertising in the Daily Mail falls. But it is the biggest online news destination.

Wags would conclude that the open-access model can only succeed with crap journalism at vast scale. Quality needs to carry a price.

Niches are likely to survive. The value of a rich reader on an elite financial site, reading insightful journalism, is very high.

Smaller players will need to erect some kind of paywall, as the Sunday Times and the Mail and Guardian have locally. I remember their horror when it was suggested a dozen year ago. Some will survive just to keep quality journalism alive like the Daily Maverick.

And what should we expect on the rust-belt of newspaper publishing?

As sales and advertising decline, expect ethics and quality to be defenestrated, as desperation drives a hunt for new markets. I offer the M&G and the Cape Times as exhibits. These wild moves will increase, and they will fail.

Consolidation is always likely as cash runs out. Perhaps a few quality papers, paywalled online, and one trashy tabloid will survive.

Political money will continue to prop up a few partisan rags. The public will look away. The tide will eventually go out, and then we will see who is swimming naked.

It’s gonna be fun.

  • Russel Yeo has worked in the advertising and media business, and was the founding chairman of the Online Publishing Association, now IAB South Africa. Follow him on twitter @RusselYeo
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