This morning’s NYT features a dissection of what Brad Stone and Miguel Helft label “the International Paradox”: Social networking and user-generated content sites are finding that huge swaths of their users and traffic are in the developing world – in countries that their current advertisers aren’t all that interested in, and in which they currently aren’t selling much new advertising either”:
Visitors ≠ Revenue. Hmmm.
This intractable contradiction has become a serious drag on the bottom lines of photo-sharing sites, social networks and video distributors like YouTube. It is also threatening the fervent idealism of Internet entrepreneurs, who hoped to unite the world in a single online village but are increasingly finding that the economics of that vision just do not work.
I’m not so sure that either “international” or “paradox” is the right way to define this particular state of affairs. In fact, I can think of “fervent idealists” in any number of media spaces who have been running up against this problem for decades, with highly unsatisfying results.
Let’s root around in Wikipedia for a minute:
- Look magazine’s issue of October 19, 1971, had a circulation of 6.5 million. Oh, yes, that was the last issue. Shrinking ad revenue as national dollars shifted to TV, combined with a mail-centric distribution model focused on low-cost subscriptions, got a lot of the blame.
- Life magazine’s issue of Dec. 8, 1972, had a circulation guarantee of 5.5 million (reduced earlier in the year from 7 million to reduce costs). Yup, the last weekly issue. Going monthly was supposed to overcome the problems that had killed Look a year earlier, but not for the long term.
- In 1990, beginning a trend that would sweep America over the next two decades, the Des Moines Register substantially trimmed statewide distribution of its main edition to reduce costs. With the revenue model for most American newspapers dependent upon retail and classified advertising dollars, circulating almost any major metro paper to readers too far away to shop locally was just a losing proposition.
In the 1970′s and 1980′s, the early mornings of my own driving vacations around the Midwest often revolved around figuring out where I could go to buy a Tribune; when I was in Hilmar, California, I could drive to the local market and find the San Francisco and San Jose papers in an honor box. I’m still interested today when I am out of town, but the publishers aren’t interested in moving their dead trees quite that far. We’ve compromised; I bought a Kindle, way better for my purposes than browsing through nearly anybody’s Web site.
None of this rear-view-mirror stuff is meant to be whining, by the way. My point is more that, for a long time, media companies have proven that they can assemble large and/or far-flung audiences for their brands of news, entertainment, advertising, and other information. But, for nearly as long, they have needed (or chosen) to subsidize their assembly of audience by selling them to end users below cost, relying on the advertising revenue stream to cure all ills.
Now, of course, thanks to its circulation pricing model and marketing partnership, I can get a New York Times almost anywhere there is a Starbucks (although that seems to be changing a little, too. I’ve begun to find out-of-the-way hamlets where the local Starbucks carries only the Sunday paper. Sound familiar?). The point being that sooner or later, fervent idealism begins to sputter in the face of supply, demand, cost, value, and a laundry list of other market forces. Back to today’s piece:
There may be 1.6 billion people in the world with Internet access, but fewer than half of them have incomes high enough to interest major advertisers…
Facebook is in a particularly difficult predicament. Seventy percent of its 200 million members live outside the United States…the company faces the expensive prospect of storing 850 million photos and eight million videos uploaded to the site each month.
So how do idealistic entrepreneurs, idealistic journalists, idealistic purveyors of ideas get to serve and perpetuate their ideals? Can they collaborate with idealistic technologists to create less expensive ways of serving these widely dispersed audiences, or package them in ways that do interest advertisers? Or can they create models in which the value their users/readers attach to their content actually start to meet the cost of having it provided?
It’s clearly dicey to solve equations that contain more than one unknown. There are at least five variables in this particular one: cost, brand, value, convenience, and importance (I put relevance into that last bucket, as well as timeliness and personalization; probably there needs to be an equation just for that). Getting all five on the left half of the equation so that, to the right of the equals sign, there is a positive number of dollars is not the challenge of the age. It’s the challenge, period…whether your audience is growing or shrinking, whether your ambitions are grandiose or just grand. It would do society some good to solve this for everyone.
Volunteers?
