November 10, 2007
Adopting New Rules of Consumer Engagement
By Jeffrey F. Rayport
 The travails of newspaper publishers across the country have been a long time coming. It wasn’t just the onslaught of competing media formats that have driven long-term secular declines in newspaper readership and eroding household penetration. It wasn’t just the acceleration of news cycles from daily to real time with the advent of online news that has made newspapers far less relevant in a wired world. It wasn’t even the unbundling of the newspaper as a product and business model, with online “category killers” like Monster and Match hollowing out classified verticals and niche publications like city magazines going after display or ROP ad dollars, which put a stain on just about every newspaper’s basic economics.
While every one of these factors has contributed to newspapers’ decline, something more fundamental is going on. The rules of consumer engagement – how every kind of media engages consumers – have changed. The new rules don’t favor newspapers as they currently do business. If newspapers have a future, they must adapt to these new rules, or die.
Here are the principles we believe successful newspapers will live by in the future:
Verticals win, horizontals lose
What reshaped the retail sector over the last two decades is happening to newspapers by dint of an onslaught of alternative media. Broad general-merchandise retailers such as department stores (horizontal retail propositions) have given way to niche-focused retailers such as “category killers” (vertical propositions). Metro newspapers, like general merchants, are collections of horizontally arrayed content. Successful Web sites generally focus ruthlessly along vertical lines. The best of them use every “lightweight” software tool, application, and service to augment and redefine what content means, overwhelming users with usefulness that goes far beyond reporting the “news.” Think TMZ.com as compared with People.com for keeping us with celebrity news; or TheKnot.com as compared with Brides.com for help planning a wedding. The best sites stake out a vertical and own it.
Newspapers traditionally skim the surface of dozens of verticals and own none of them. That means that newspapers can surely continue to deliver the horizontal proposition, but that’s not where future growth or profits will be. Publishers must pick their vertical “microcosms” – those content domains where they can “kill the category” (such as Silicon Valley for San Jose Mercury News, horse racing for Charlottesville Observer, auto industry for Detroit Free Press) and overwhelm their angles of advantage.
Communities win, readerships lose
The fastest growing sites online today are social networking platforms. Whether it’s Cyworld in Korea or Bebo in the UK, or MySpace and Facebook in the United States, nothing is fueling growth in consumer usage of online media more than peer-to-peer connectivity. But those are just the mass-market community platforms. There are niche-focused online sites organized around location (Yelp or SFGate), interest (TripAdvisor or Concierge.com), identity (Military.com or PlanetOut), and condition (TheKnot.com or BabyCenter). Even Facebook is less of a horizontal community than it is horizontal infrastructure supporting thousands of vertically focused communities based on locations such as college, university, and high schools.
Major metro and small town newspapers alike have tight ties to their local communities, but to win in this new world they must identify their relevant communities and activate them. It’s what Lawrence-Journal World did with its online property, LJWorld.com, by serving up not only news from the print product online but also by embracing reader-generated content, aggregating local third-party content, and integrating a wide variety of community tools and applications to connect users with users. LJWorld.com did not establish a “readership”; it forged among its users a vibrant community of local residents – from Little League parents coordinating pick-ups after games to business people buying and selling local services.
Presence wins, sites lose
Most newspaper publishers focus efforts on their “site” when many winners on the Web now exploit an online “presence.” Consider the case of YouTube. When it was acquired by Google in 2006 for $1.65 billion, many observers asked why YouTube, just one of a reported 172 video playing sites on the Web at the time, had commanded the outsize price. One answer: YouTube could claim over 100 million video views every 24 hours. But that only begged the question: How did YouTube achieve such traffic. YouTube was not actually a site in the strictest sense, but a constellation – a firmament composed of hundreds of thousands of third-party websites running YouTube video players. Upon acquisition, 60 percent of video views occurred not on YouTube but on third-party sites. That’s presence.
In online publishing, newspapers would be wise to take note of the vertical fashion and style player Glam.com, which runs a network of hundreds of Web sites, some owned outright by Glam, some merely affiliated with Glam. Whether it’s making content and tools portable as players or widgets, or “working the Web” by merchandizing content for Digg.com or search engine optimization, newspapers must extend their reach and engage users beyond their own name-brand sites. Today, a standardized, one-size-fits-all point of presence doesn’t pack much punch, especially as ad networks and search become vertically specialized and walk away with increasing shares of online ad dollars.
Form factors win, broadsheets lose
In industry sectors as widely divergent as consumer electronics, automotive, and consumer packaged goods, design matters. Herman Miller, of Aeron chair fame, calls it ergonomics. Apple calls it aesthetics. Toyota’s Lexus calls it form factor. Call it what you will, most publishers tinker with their broadsheet or online interface with a makeover once every few years. But that’s nothing compared to the attention Sony lavishes on optimizing its product design, or, for that matter, that Procter & Gamble invests in enhancing the convenience and appeal of its product packaging. In the news and information market, design for usability is the next frontier. Magazine publishers like Condé Nast and Hachette have led the way appealing to younger readers with familiar titles in new and more engaging trim sizes (digest editions), while newspaper publishers from Fleet Street to Michigan Ave. have made their papers more ergonomically friendly by offering them in new trim sizes (tabloid editions). As newspapers become constellations not only with multiple points of presence online but also multiple platforms – such as print, online, and mobile – optimizing content for each “device” is part and parcel, as information providers, of meeting their users’ needs.
Systems win, silos lose
As newspapers become “programmers” of content for multiple media, coordination across platforms becomes critical. Think American Idol: Spawned by European sensation Pop Idol a few years ago, American Idol has become the most valuable television franchise in history. It is, of course, much more than a TV show. It has become a social and commercial phenomenon by coordinating activities across four relevant media platforms: broadcast, where the contest takes place; mobile, where viewers can vote for contestants; online, where users connect with one another and access additional information on the competition; and offline, where the experience continues in live concert venues and other promotional events. The power of the strategy goes beyond robust offerings on each platform; it lies in coordination and integration across platforms. By contrast, many papers run sites that compete with their broadsheets, and most ignore mobile and offline altogether. It’s time for newspaper publishers to mandate a “unified field theory” – that is, to operate across platforms, including all of the relevant ones, in ways that create one experience of their brands instead of many.
Put these strategies together and publishers could take away a roadmap for the future of newspapers. There’s no doubt that information, not just news, is a growth business, even if newspaper publishing is not. But newspapers must find ways to align themselves with drivers of growth in a market they already know. Of course, there are good reasons not to embrace the opportunity. One is loss of control over what’s “news,” by enabling users to contribute content, unleashing peer-to-peer social dynamics, and aggregating third-party content to meet users’ needs. Another is loss of control over distribution, by adopting, in effect, a “studio model” of programming, creating content for other people’s media and platforms, and ultimately divesting ownership of production. But the greatest challenge is likely a conceptual one. What’s winning on the Web today is innovation that fundamentally changes the definition of content. Like it or not, content is becoming something very different than anything ever generated in a newspaper newsroom. That this sea change is occurring is no longer a matter of debate. What is open to question is whether the nation’s newspapers will resist this epic change, or choose to embrace and capitalize upon it.
Jeffrey Rayport is founder and chairman of Marketspace LLC, a strategic advisory practice that works with leading companies to radically reinvent how they interact with and relate to customers. Mr. Rayport, a former faculty member at Harvard Business School, focuses his consulting work on opportunities for businesses to drive growth by transforming their customer-engagement strategies, particularly in information-intensive industries.
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