I highly recommend checking out the work being done on the New Business Models for News Project. The project examines what a paper-less news organization might look like in a top 25 market (The project assumes that daily print newspapers are gone). The effort is designed to look at the type of organization that might replace the traditional newspaper.
Jeff Jarvis, heading up the project, sees an ecosystem rather than a single entity emerging. He cites the fact that numerous hyper-local bloggers currently generate $100-200K in annual revenue. The theory is that such bloggers (many with formal journalism training) will band together with other service providers to create a lower cost, highly distributed news organization.
These “New News” organizations might generate $20MM in revenue in a top 25 market (versus $400-800MM that a traditional newspaper generated). Margins would remain in the 30% range. The news staff might be approximately the same as a traditional organization. Obviously, overall staff would be dramatically less. (Too bad the newspapers completely missed the boat on classified ads – the most profitable part of a traditional daily.)
The revenue streams for New News are predicted to be far more diverse. The model predicts that 57% of revenue will come from advertising. The rest will come from a wide variety of sources (e.g., event hosting, ticket sales, B2B online marketplace, consulting local businesses regarding online marketing).
In terms of advertising itself, online display advertising will ultimately be displaced by newer forms of advertising that behave more like ecommerce (e.g., coupons, deals). “Online ads want to be transactional.”
The project team published a very detailed financial model (great work!!!). The model is in Google Docs and can be copied and modified. I took a look at the model from the perspective of Portland, Oregon. In my opinion, many of the assumptions are a bit off (especially as applied to the Portland market).
* Most obvious is the assumed market size of 5,000,000 people. Portland is substantially smaller.
* Additionally, the traffic ramp is far too aggressive. The hypothetical New News org reaches 73% of “mature” potential in three years.
* Most fundamentally, the model doesn’t take into account competition. It assumes a single winning New News organization.
* Furthermore, I would toss out most of the “alternative” revenue streams as too speculative in my modeling.
* On the expense side, the Portland organization would be SUBSTANTIALLY smaller.
I do feel that there is an opportunity in Portland, Oregon to join forces to create a very interesting (and profitable) New News organization. Perhaps the initial organization wouldn’t directly compete with the Oregonian. A coordinated network including blog/niche news sites like BlueOregon, BikePortland, SiliconFlorist and the like would be very interesting.
In terms of the advertising products, some work is necessary. Perhaps the best way to launch is to simply focus on “traditional” online display ads. However, it makes sense to quickly move to more performance based advertising approaches. Portland’s ForkFly is a good example – applied to the restaurant category.
In terms of quality of the journalism itself, Jarvis optimistically believes that quality might actually increase as blogger/journalists are able to focus more and dive into more detail. In terms of the Portland market, there are plenty of high quality local websites.
I’m convinced that there is an opportunity along these lines in Portland (although on a smaller scale).
Finally, here is a link to Jeff Jarvis being interviewed on On The Media. Well worth a listen.