CJR, June 1997

I didn’t see the movie Jerry Maguire, but God knows I’ve heard “Show me the money!” enough to drive me nuts.

As is Hollywood’s wont, that catchy little phrase was thrust with so much velocity into the mass media that it instantly became a cultural spore, propagating itself into countless headlines and stand-up routines. Its ubiquity almost lulled us into believing we actually knew the story without ever having seen the movie. In fact, “Show me the money!” — in a dual role as rallying cry and cultural spore — is an appropriate starting point for assessing the wretched state of financial affairs for news organizations online.

First, and at long last, it appears that many people with financial responsibility for online news operations on the World Wide Web are weary of hemorrhaging cash. After far too many years of talk about revenue and nary a peep about profit, they would very much like for someone, anyone, to show them the money.

Second, the questions that one would assume are most critical to news organizations online — i.e., “Where is the money?” and “How long will we have to wait to see it?” — should have been answered long before now. If anyone had ever bothered to really demand some old-fashioned financial accountability, today’s state of affairs would likely be less dismal.

And third, the idea that news organizations had no choice but to make a transition to the web in the first place was very much the result of a virulent spore that infected the entire media industry, causing everyone therein to believe they could survive only if they invested mightily in an online presence. Like those of us who only heard about Jerry Maguire, they knew a lot less about the story than they thought.

The progenitor of this particular spore was the awesome hype machine of the technology industry, which back in the early 1990s started issuing press releases about how newspapers and television were on the brink of being replaced by new, interactive services delivered over the global Internet.

These new services, not incidentally, were based on products that it just so happened that technology vendors were selling. News folks, some of whom continue to brag to this day about their computer illiteracy, didn’t have enough knowledge or courage to challenge the industry’s assertions. Unable to fight the virus, they believed what they were told.

In Silicon Valley, the conscious creation of this environment of fear, uncertainty and doubt is a marketing tactic that actually has a name. It’s called the FUD Factor, and in its thrall news organizations began racing to get online before it was “too late.”

In the seven-plus years that I’ve been writing about technology and media, I never once met an editor or a publisher who asked, “Too late for what?” Instead, because no one would admit he or she was being driven by FUD, media companies scrambled to come up with some kind of business rationale for their online efforts.
Some said that their “investments” would yield fruit when the market catches up to their vision (a subset of this group have now decided that market will never happen). Others — companies like Time Warner, for example — started out thinking online was a business, but in light of no profits have since shifted perspective. In fact, Time Inc. c.e.o. CK Don Logan may have been the first media executive to publicly note that the emperor had no clothes when, a couple of years ago, he called Time’s online efforts a “black hole” for money.

Time, and others with enough cash to stay the course, now choose to see their online efforts as an opportunity to experiment, testing new media concepts on real customers (which is what everybody, including them, should have done in the first place).

But none of these rationales, then or now, was based on a realistic economic model. That’s because there isn’t one. And there won’t be until at least these three nasty and very tightly coupled problems are attended to:
One: News has become a commodity, like laundry soap or videocassettes. It is ubiquitous and cheap, if not free, to millions of people every day. But unlike soap or tapes it is incredibly expensive to produce and the cost of producing it does not go down as a function of volume. This was an impossible situation even before the Web.

Enter online and the situation gets worse. The easy money many organizations thought they could make by simply digitizing and slapping up onto the Web the stories already filed for today’s newspapers or news broadcasts on the Web never even came close to materializing.

Two: Advertising support, which provides much or all of the funding for news organizations’ traditional offerings, is unreliable at best as a revenue source for online news.

Because online news is a commodity and customers don’t pay real money for it, once an organization takes its product and its revenue model online, it becomes vulnerable to a phalanx of new competitors. Geography no longer matters. News providers are no longer competing only with each other, but also with content aggregators like America Online and the Microsoft Network and Netscape and Yahoo, all of which court advertisers as aggressively as any publication or television network in history.

What’s even more worrisome is what has already started happening to classified and local advertising dollars because of online technology. Smaller and independent papers, which now survive on local news and advertising because global and national news is a commodity, are seeing companies like the omnivorous Microsoft Corporation fire up its Sidewalk local listings service.

The problems with online advertising are not limited to revenues. The Web was not designed as a commercial medium, but as a way to distribute and connect information to communities of interest; thus any line drawn between advertising and editorial is unnatural by definition.

For example, most news stories online link to other websites; you can jump from site to site with the click of a mouse. Linking is integral to the medium, and readers should and do expect it. But was the link to Company X’s website paid for or not? Today there’s no way of knowing. In fact, there has already been a furor or two over paid links, unidentified as such, on popular non-news sites. If and when online news publishers are tempted to sell commercial links inside news stories, we will already be way down the slippery slope of credibility.

At some point, a sentient being may be inspired to ask, “If the online news business is so ridiculous, why are we doing it!?” Given the absence of reason outlined so far, the only apparent response is: “Because everyone else is.” Which leads to the final point, one which my mother used on me, to great effect, in grade school:

Three: “If everyone else jumped off the bridge, would you do it, too?” So far, no one has demonstrated there is any great customer benefit Q besides immediacy Q to online news. And unless you’re a sports nut or a stock investor or an information junkie in some area or another, immediacy doesn’t have much real value except as a marketing tactic.

And the much-vaunted “community” aspect of having an online news organization Q chat and bulletin boards about stories Q is hardly worth the effort. Online communities are extremely valuable where people share specialized interests; that’s why sites such as Parent Soup, a place where parents can find resources and electronic discussion about parenting, are so popular.

But for a news organization? I don’t think so. Sure, every once in a while something interesting comes out of them. But for the most part, people who participate seem to have a bit of trouble socializing. Often enough, if the messages aren’t banal, they’re offensive.

Still, everybody’s trying to do whatever’s possible, from chat to photos and audio and video and Java and games and contests Q dangling any carrot they can to get visitors.

They’re all being very stoic about hanging in there because they don’t want to be seen as past their prime.
This is a bad reason to spend millions of dollars. Instead, online news organizations ought to be taking a giant step back and asking themselves, “How can we be of service? What is the value proposition for our customers? What can we give them online that they can’t get any other way — that they will thank us, and pay us, for?”
Maybe the answer is, “Nothing.” Seriously, it’s possible. But it is also possible for news organizations to set aside everything they think they know and look at the landscape with fresh eyes.

So, news is a commodity? Then maybe it’s time to think about how to create and sell high-value information to a subset of one’s existing customers. Everything on the Web has to be free? Then detour the Web. Think about how to use the cost advantages of digital distribution without it.

After all, it’s not like there are any rules. It is entirely acceptable to make something up and if it doesn’t work, try something else. As says Nick Donatiello, president of the consumer research firm Odessey L.P., “It is much less important to be first than to be right.”

Creative problem solving, not business as usual, is the only thing that will allow the news business to wrest control of its destiny from the forces of FUD, which got it into this mess in the first place. It won’t be as easy as digitizing a newspaper page or video footage and pretending that’s the future, but I suspect it will be a bit more fruitful.

Denise Caruso is a technology analyst, presently on leave from The New York Times, where she writes the “Digital Commerce” column. She is a visiting lecturer on interactive media at Stanford University, and a visiting scholar at Interval Research, a technology think-tank in Palo Alto, California.