NewspapersandOnlineC ompetition

Slide1: 

Newspapers and the Challenge of Online Competition 600 Executive Drive • Princeton • NJ • 08540 • (609) 921-7200 • Fax (609) 921-2112 www.kelseygroup.com

First, the Bad News: 

First, the Bad News U.S. print subscriber numbers peaked in 1987; declining since (NAA); “3rd party sales” obscure actual rate of decline Newspapers “first choice” media of only 3.2% of 18 to 34 year olds vs. Internet at 45.6% (OPA, 9/04) 8 to 18 year olds: 34% read a newspaper on a “typical day” (Kaiser Family Foundation, 3/05) Internet as local shopping resource grew from 60% to 70%; newspapers declined from 73% to 70% overall. Use grew only among those without Internet (TKG, 3/05) 2004 circulation scandals (Chicago Sun-Times, Dallas Morning News, Newsday) reflect pressure

More . . . : 

More . . . U.S. print classified revenues estimated to hit US$17 billion in 2005 (NAA), but main categories under increasing threat/influence from Internet: Jobs, Cars, Real Estate Online siphoning revenues: e.g., Craigslist = lost revenues of $50 million annually in the SF Bay Area (Classified Intelligence) Pay for performance and free online models (CL, LiveDeal, Zixxo) put pressure on traditional, print-classified pricing eBay has more listings than all daily U.S. newspapers combined (Morgan Stanley 10/04) Internet threatens to overtake print as primary news source (WP, OPA, Pew)

Why? In a Word: Broadband: 

Why? In a Word: Broadband U.S. home BB access now at 57% of Internet users (TKG, 3/05) Home BB users: 38% said Internet was their major political news source vs. 36% for newspapers. Home + work BB users: 51% Internet vs. 33% newspapers (Pew, 3/05) BB users the most desirable consumers: Better educated (49% are college graduates) Higher family incomes (38% earn more than $75K per year) Most “Internet savvy” (65% using Web at least six years)

Some Good News: Online Strength: 

Some Good News: Online Strength Major online editions experiencing “double-digit” growth (Merrill Lynch, 12/04); online growing as a percentage of overall revenues (Borrell, 8/04) Online news audiences growing, including youth (Journalism.org Annual Report, 2005) CareerBuilder is jobs category leader: 21m unique users in 1/05 (comScore); 23 month consecutive lead Newspaper acquisitions of high profile online brands: NYTimes-About.com; WSJ-MarketWatch; WashPost-Slate

Many Threats to (Online) Newspapers: 

Many Threats to (Online) Newspapers

Threats: Advertising and Readership : 

Threats: Advertising and Readership News aggregators (e.g., Yahoo, Google, Topix, Findory, RSS readers) will “commoditize” news. Yahoo News top site (comScore/Nielsen, 1/05) Proliferating alternatives to newspaper ads: verticals, free sites, CL, eBay; online alternatives for national/large advertisers (e.g., PPC/contextual) Poor site design and functionality that fails to surface content and/or showcase advertisers Blogs/social networking may ultimately siphon readers General search and local search (Google, Yahoo, AOL, MSN, Jeeves and improving directory sites)

Popularity of Search: 

Popularity of Search Search ranks second only to email as online activity¹ 84% of U.S. online population have used search¹ 64% of online buyers: search engines are the “main way” they find things online² 80% of online buyers: search a “good” or “excellent” way to find products or services² Shaping user expectations of other online experiences Paid search revenues in 2004: $4b approx 1. Pew Internet & American Life; various sources (8/04) 2. Kelsey Group-BizRate.com Online Buyers Survey (3/04)

Local Search: A Growing Category : 

Source: TKG-BizRate (9/04) N=3,887 online consumers Local Search: A Growing Category

Category Usage Comparisons: 

Category Usage Comparisons Source: TKG-BizRate (9/04) N=3,887 online consumers

Consumer Usage Critical: 

Consumer Usage Critical Online newspapers sites must maintain and grow online user base—advertisers follow the eyeballs Leverage newspaper assets: exclusive content, trusted brands, online-offline presence. (sales force on advertiser side) Redefine/redesign the product to “surface” more content and create simpler/richer user experience News is just one (critical) component of an effective local site (local news not yet a commodity) Either redesign or create new brands/sites (e.g., SacBee vs. Sacramento.com)

Local Destination Feature Set: 

Local Destination Feature Set Uncluttered, intuitive design with keyword search-driven navigation (browsing okay). Consider toolbars (w/RSS) Integrate classifieds, directory listings, local product search in a single results set with relevant editorial content (e.g., travel advice, home repair ‘how-tos’, restaurant reviews) Add local web search to integrate related web content (e.g., merchant websites) for more depth Dynamic mapping (e.g., Google Maps, Yahoo Maps, Mapfusion) Community (ratings/referrals, discussion/blog platform) Enhanced functionality (e.g., job/product alerts/price comparisons/personalization) Don’t make me register unless the benefits are very very clear!

Sacramento.com: ‘Local Portal’: 

Sacramento.com: ‘Local Portal’

Star Tribune: Integrated Local Shopping: 

Star Tribune: Integrated Local Shopping

New Brands, Mixed Blessing: 

New Brands, Mixed Blessing Sites become traffic aggregators and/or distribution system for local advertisers. May be effective, but creates loyalty to national/alternative site rather than local newspaper site(s). Dilutes newspaper brand.

On the Other Hand . . .: 

On the Other Hand . . . Many individual paper sites may not have the resources, culture, brand, etc. to ultimately be competitive online Potential strategic option: build general newspaper portal/megabrand as an entry point for local online editions: Like YellowPages.com (SBC/BellSouth) in directory space Classified Ventures is a model (but don’t create vertical after separate vertical) Partner with directory publishers in individual markets (ala SacBee and SureWest YP) to create comprehensive local content portal (but you can essentially buy the YP database)

Richer, More ‘Integrated’ Experience Key to Success: 

Richer, More ‘Integrated’ Experience Key to Success Users ultimately don’t want overly “verticalized” experience. They want a primary resource for local information, news, shopping (trusted/complete) Bring all relevant results/content/ads together in a single display or w/in a single click Leverage exclusive local content assets to brand and reinforce rich user experience Legacy/culture issues may require new sites/brands to execute Outsource all technology development to third parties