We need to recalculate ROI for mainstream Web initiatives

We’ve just been through a round of quarterly reports from media companies that show revenues up — and in some cases dramatically — for the “web side” of business. While this is encouraging, these announcements are always accompanied by two other thoughts. One, traditional advertising is down or not growing as it used to, and two, that web revenues aren’t sufficient to make up the difference.

I’d like to propose that this may not be the best way to look at what’s happening, because it makes a couple of assumptions that may not be true. One, that the web is just another line on the organizational chart, the revenues of which make up a part of the overall whole, and two, that saving (or prolonging the death of) the traditional product is the best use of that revenue. These assumptions further blur an already obscure future, and I think it’s time we looked at it differently.

Firstly, I think we need to fairly and accurately calculate the cost of the web business and compare web revenues against that cost in order to determine the long-term viability of either business. The problem with not doing this is that we bring the expense of producing the traditional product into the new marketplace and vice versa, and that blinds us to what’s really taking place. The web isn’t another line on the organizational chart; it’s a separate business that should have its own chart. There is, of course, a symbiotic relationship between the new and the old, but that can (and should) be calculated without blending both into one.

Secondly, is “making up the difference” the purpose of our web initiatives? The web didn’t come along to serve the best interests of our hierarchical world. It’s a new ball game, played with different rules and in a different arena. If traditional media is to survive, it must do so on its own merits. Otherwise, the spreadsheet will tell an artificial story.

It’s important to think this way, because the web market thinks this way. The barriers to entry into the web’s media world are next-to-nothing compared with traditional media. This is producing a disruption that must be dealt with on its own terms, something we can’t do if we’re trying to make it appear as an extension of the status quo. Eyeballs are eyeballs and time is time, and the guy selling advertising with little expense is ultimately going to be more viable than the guy selling advertising with great expense.

I realize this is contrary to the concepts of branding and mass media, and that doesn’t make me popular with the mainstream. I happen to believe that you don’t have to give up the standards and quality you believe in by giving up the original distribution model for which they were created. It costs a TON of money to print and deliver a daily newspaper. Same with broadcasting a signal areawide. Are these models viable anymore? We’ll never know by mixing the old with the new.

“It takes a lot of money to do ‘good’ journalism,” is an argument we hear. The problem is we don’t know what that means or how much is “a lot.” Like media itself is unbundling, we need to be able to unbundle our accounting. Otherwise, generalizations will rule and, as I’ve warned before, outsiders will come into our communities and further disrupt (or take over) the local news franchise, because their expenses are far less than ours.

And for broadcasters, I keep coming back to the idea that the broadcast spectrum allotted to us has far more value than our signals can possibly generate in an increasingly fragmented and unbundled media world. This is going to be even more the case when digital TV becomes the standard downstream. What is the real value today of the channel number when more than 8 in 10 TV households get the station via satellite or cable? If that bandwidth is “ours,” perhaps we ought to be talking with the government about how we can use it more profitably.

As Corante president Stowe Boyd so brilliantly says, “Don’t look to an aging member of the mainstream media to look in the crystal ball and foretell a revolution.” Yet, this is exactly what we must be doing.

Comments

  1. Terry- I might extend that argument. The Web should not only be a separate business, it should also be measured by how it is performing against the broader Internet marketplace. Most TV stations only look across the street. They should be evaluating the sites against newspapers and Google, etc. Local TV sites still garner less than 2% of local online advertising – pretty poor.

  2. Good point, Ian. Thanks.

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