Payback time

Payback time

As internet news reaches its 10th anniversary in New Zealand and web advertisements are surging, publishers are embarking on different, sometimes bold, new products to stem financial haemmorrhages from their online strategies. There may be object lessons in there for you.

Early in August 1995, New Zealand's first newspaper went online. With the click of a mouse, the then Prime Minister Jim Bolger launched InfoTech Weekly into cyberspace. Bolger declared the launch "a bold move", noting that while New Zealand was geographically isolated for exporting primary products, such isolation vanished for knowledge-based industries.

While the demise of newspapers had long been predicted, the PM told the Telecom Users Association Conference in Auckland, "Until someone finds a way to wrap fish and chips with electronic bits and bytes, then papers will stay with us, operating alongside powerful communications vehicles such as the internet."

Ten years later, Bolger's comments still ring true. Today's newspaper might still be tomorrow's fish and chip wrappings, but paper-based publishing remains strong, with many legacy operators publishing online as well.

Online news includes sites as varied as the New Zealand Herald, publisher IDG's IT-based titles, the many Fairfax titles (many published under the 'Stuff' banner), plus business titles like the National Business Review and The Independent.

However, over the past 10 years, it has been a bumpy journey and only now does the internet revolution seem to live up to its promise.

The National Business Review was one of the country's leading online media pioneers, joining the e-commerce boom in 1996 with the "NBR Business Centre Online".

"It was a visionary, world-class website that offered pretty much everything you'd get today from a place like MarketWatch (on America's CBS which has links to stock prices, analysts reports and breaking news). It had its own reporters and published the entire NBR every Friday," recalls NBR online webmaster and editor Francis Till.

Some services and content were subscription based, which challenged the then Kiwi view that, "If it's on the web then it should be free." But the NBR was not chasing this market. It believed its business readers would make the switch to online as the services offered were faster and more convenient than the print-based title.

However, as the NZ internet industry e-zine Aardvark noted in November 1996, the NBR site was more than just web pages stored on a server, but a labour-intensive operation with constantly updated information. Users sometimes faced database errors and people did not then accept banner ads like they do today. Nonetheless, despite minor teething troubles, the NBR site had defined online content in New Zealand and set a benchmark for others.

Sadly, Till continues, the site was "too far ahead of the cure" and NBR online was pulled in June 1999, and reportedly $3 million were lost in the venture.

"While it might have made it in an urban America or even the Australian market, New Zealand was still struggling with the basic idea of online content," Till notes.

A year later, the NBR decided to have another go, with a simple site that could be run by journalists using everyday tools. It had to cost nothing to build and even less to run.

Initially, the site drew heavily from the print edition, but now the NBR website has almost all unique content. The rationale for this was online sites need regular feeds of instant news, and putting the paper-based content online cannibalises magazine sales.

The NBR website has just been revamped. It now has job ads and produces some 40 to 50 stories a week, mostly of the 'facts only' sort. The print edition contains several times that volume of stories, all with bylines, and most heavy on analysis, Till continues. "We have also started looking at types of content that are possible only because of the online platform - like blogs and 'citizen journalism' features."

Till, who joined the company in 2000, says online journalism's big problem is micro-payments. "We don't know how to sell a story for a buck," so the website is then used for branding and to fill in the gaps between publishing dates.

The website takes advertising, which funds the site, and the NBR also publishes two newsletters. Services are free, but that may be reviewed, along with the newsletter offerings. "There is room for both but the NBR is a print newspaper and the brand comes from that. The website is secondary in everyway to print, but keeps us present in the mind of print readers, many of whom are online news consumers from multiple sources. Our print readership is highly defined. Our online readership is much broader," Till concludes.

The Fairfax experience

Fairfax New Zealand did not necessarily turn to the internet to make money, but rather played "catch up" to its media rivals, when it launched its flagship Stuff site in 2000, explains Fiona Reid, general manager of Fairfax Interactive.

While the then INL (which later became Fairfax) was criticised for being late off the mark, Reid claims the company benefited from a 'last mover advantage', by learning from the mixed fortunes of opponents and being able to find a unique point of difference in the marketplace - using INL's huge national news resources.

Nonetheless, the first couple of years were "extremely challenging" and tough business decisions had to be made like laying off a third of the Stuff team.

But, since then, Reid says the online business has "gone from strength to strength" and after four years as a standalone site, is profitable, a far cry away from the $3.5 million loss posted in its first year.

"The changing fortunes coupled with the greater clarity around the importance of the internet, also encouraged INL to explore how it could provide quality online vehicles to complement and more importantly protect its core classified pillars or recruitment and property," Reid continues.

Thus, JobStuff and Property Stuff were launched, which Fairfax believes opens up such advertising to a new audience - the younger, less conservative and tech-savvy readers.

Last year, Fairfax launched Adstuff, a web-to-print booking system, allowing advertisers to book ads into publications at any time of the day. Online subscription to its magazines and newspapers, plus the purchase of photos, is also possible.

Stuff also features its own online ads, which are important money spinners themselves, as the site's readership increases from an initial 120,000 users to around a million today.

"Immediacy is the key differential between the internet and what newspapers and magazines can offer. Our readers rely on Stuff to supply the latest and greatest news as it happens. Aside from this, the internet provides a convenient gateway to access information on anything and everything, past and present, all from the touch of a keystroke," Reid explains.

However, such online content may soon come at a price as Fairfax Interactive believes it is not a case of "if" but "when" it will introduce a subscription-based model to its sites.

"A subscription-based model will allow us to identify who our customers are and segment current subscribers from non-subscribers. In doing so, Fairfax will be able to implement customer loyalty programs that reward our existing newspaper subscribers by extending additional value to their current investment. Who know, it may even turn non-paying readers into fully fledged paying ones," she says.

Reid says the media world faces a huge shift in the "balance of power" to consumers, who demand instant news. Thus, for Fairfax New Zealand to succeed, the company must accept it is no longer a newspaper company, but a news media organisation delivering content through different outlets. Such a shift may be working with Reid adding Fairfax News Zealand's "overall domestic readership has increased by 5 per cent over the last four years".

Australia appears to have gone further down the online path. Fairfax Australia, parent company of MIS, believes that rather than the internet harming the printed page, the web is hitting radio instead as a provider of instant news. The publisher uses the internet to drive subscriptions to its newspapers. As office workers use the net for breaking news, they are reminded of its newspaper brands, so they buy the paper the next morning for better analysis and comment.

Mike Game, chief operating officer for Fairfax Digital Media in Australia, says there are three key messages. "Technical innovation directly impacts on our business advantages. We need to change the way that we tell stories, and technology innovation is the foundation of this. Which in turn helps us build new and important revenue for the business," he says.

Further to websites based on its established titles like the Sydney Morning Herald or The Age (Melbourne), Fairfax Australia has also delivered sites based around classified advertising, including (real estate), (motoring) and (jobs).

Fairfax Australia says it has no plans to charge for online access to the Herald and Age websites, believing this will diminish its online audience to the detriment of its brands and advertisers.

Indeed, it was to boost the Fairfax brand that led the company to dump the 'F2' label for its online activities last year, after it lost $100 million since 2000. F2 was renamed Fairfax Digital and websites were revamped.

However, charges exist for 'premium content" such as archives, crosswords and mobile news sites. Indeed, some 4 per cent of company revenue comes from the sale of digital content to consumers.

When revamping websites, Game says business drivers include creating opportunities for revenue growth, maintaining and increasing the company's competitive position and ensuring investments are tightly managed against budget.

Consequently, his IT executives face two main challenges. As the business evolves, this places new demands on the company's IT infrastructure. For example to give dynamic access for the search of restaurant reviews by price, cuisine or location, Fairfax Digital had to rethink its architecture and introduce new search engine technologies and redesign the server and network infrastructure.

Another hurdle is getting a clear set of objectives and requirements for an initiative from business stakeholders (e.g. product manager), or else projects waste valuable resources in not meeting business needs. Thus, robust processes are needed for constant due diligence to maximise investment ROI, he says.

However, Fairfax Australia claims an affluent readership and amid a rapidly growing market for online advertisers, which means its sites are enjoying annual revenue increases of 50 per cent or more.

Citing a report prepared by the PricewaterhouseCoopers in August, Fairfax points out the Australian advertising market is expected to grow 5.8 per cent this year to A$9.9 billion. Over the next few years, annual 4.4 per cent annual growth is predicted until 2009.

In the same report, the share given to newspapers is expected to decline from 40 per cent to 36 per cent, market share lost to the net, which will double its share from 4 per cent to 8 per cent by 2009.

After enjoying 64 per cent growth in 2004, the online advertising market is expected to grow 27 per cent in 2005, with 20.5 per cent compounded annual growth until 2009.

A new business model

Such healthy conditions are driving new innovation at the Australian Financial Review (AFR), for example. In the first half of 2006, Fairfax will launch AFR Desktop - a new online service which is understood to involve access to detailed financial information and research as well as provide links to online share traders.

At present, the AFR restricts access to its website. AFR subscribers gain free access to its website, with non-subscribers paying for online material.

AFR publisher Michael Gill says AFR Desktop will involve a new business model, not a publication, but rather an 'application model'.

"It is not a website. It will be highly customisable. Generally, the idea is to enable a very high degree of flexibility and personalisation," he says.

Gill says he has never seen an adequate website model for the AFR so the "application model" will deliver "an investable model".

"We have not encountered any major technological barriers at this stage. The challenges appear to be in building a product in line with some strong expressions of customer preferences," he says.

Print remains premium

Telecommunications Review is taking a different approach in growing its print and online models. The title has a related daily static PDF newsletter called The Line, to bring in extra subscription revenue and cover breaking news, which will eventually move to an online model.

Publisher Matt Freeman believes there is room for both print and online journalism, saying he expects print to remain the premium product, worthy of paying for. "Where online media offers real time, dynamic, endless content including audio and video delivery, print media offers an end-to-end read, high resolution full-colour, and a more relaxing, indulgent read," he says.

However, Freeman claims business models around online media in New Zealand don't work yet because the large players subsidise their web versions with their own legacy print outfits, which tells small players to stay away.

"Why would you pay for the New Zealand Herald in print?" he adds.

"All the good stories are online, real time! It's a pity the New Zealand Herald's print advertisers haven't woken up to this fact yet and either demanded cheaper rates or complementary space on its online version."

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