The Business of Journalism Research Paper

Newsrooms became electrified in New York and Washington, where a third plane had hit the Pentagon. Within minutes, one-sentence headlines from the event had stopped business across the United States, and soon the world. Journalists saw the biggest story of their careers unfolding. Editors ripped apart print publications to make space. Broadcast trucks raced to the scene. No expense would be spared.

The Wall Street Journal, headquartered in a suddenly uninhabitable building next to the ground zero site, moved its newsroom and staff to facilities in New Jersey, where it produced its national edition for the next 11 months. The New York Times added extra pages to its news section for 4 months and in weeks to come would devote two additional pages to individual Portraits of Grief profiles of the more than 1,800 who had died in the attack. New York’s tabloids streamed reporters to the scene. Anchors of the three big TV networks as well as cable channels stayed on air 24 hours a day with uninterrupted coverage. No one was buying ads.

In the world of journalism economics, a great news event, from terrorism, war, an earthquake, or a global pandemic, means that there is no budget constraint. The press spends what it has to to provide coverage, and the public expects it to do just that. In the United States and many other countries, press rights are constitutionally guaranteed because it’s believed that the free flow of important information is vital to having an informed public. In return for this privilege, journalists are expected to spare nothing to get that news reported and distributed.

If you pay an annual subscription fee of $88 for your home-town newspaper, $828 for The New York Times national edition, or $99 for a specialized newspaper such as the Financial Times or The Wall Street Journal, you might think that you are paying for a good share of this coverage. But in the world of newspaper economics, your subscription might at best cover the cost of delivery to your home or office. If you read magazines and newspapers online, you get nearly all coverage free. Radio and TV news is mostly free, too, except for cable and satellite fees. These include the cost of news gathering, but in much larger part the fees cover the cost of entertainment programs. The government-supported press, such as the British Broadcasting Corporation of the United Kingdom and America’s Public Broadcasting System, is funded by viewers, donors, and taxpayers. The BBC gets revenue from a tax on each TV set in the United Kingdom. In the United States, the Public Broadcasting System solicits donations from listeners and viewers with campaign drives and gets corporate sponsors to contribute in return for mentioning their names and often products.

What all this means is that with some government-supported exceptions, in the United States and most other nations, it is advertisers who really cover the costs of news. According to Veronis, Suhler, and Stevenson’s annual survey of U.S. communication spending, ad spending in all media in 2007 was about $880 billion (www.vss.com/ news/index.asp?d_News_ID=166, accessed December 30, 2008). Of that, $62 billion went to newspapers, $25 billion to magazines, $49 billion to broadcast TV, $132 to cable and satellite TV, $21 billion to radio, and $81 million to alternative media, mainly online sites and digital distributors using mobile phones and portable devices. That total, about the size of the GNP of Saudi Arabia, was about onethird of all U.S. media spending in 2007.

Advertisers have very specific criteria. They want to reach the audience of the publications, broadcast stations, and online sites where their ads have the most impact. Who are the readers and viewers? What are the demographics? How do you reach the fickle 18-to-35 youth market? Corporations, their ad agencies, researchers, and creative teams spend thousands of hours plotting the right way to spend the ad marketing budget. Media advertising in the United States is nearly a $1 trillion business; globally it is worth about $2.2 trillion. There are about 10,000 paid and free newspapers, 12,500 magazines, 12,500 commercial radio stations, and 3,500 TV stations in the United States to choose from. Internationally, it’s newspapers 60,000, magazines 22,000, radio 44,000, and TV 21,500. Nearly all these media in many languages and cultures are competing to get a share of someone’s ad budget, or ad pie as the industry calls it.

Advertisers aren’t especially interested in being associated with what is called hard news—wars, scandals, terrorism, elections, airplane crashes, and natural disasters, the news that most drives journalists. They’d much rather be around media that makes you feel good enough to want to buy their products and services. So business news sites, from newspaper sections to specialized investing magazines to online services, seek to attract mutual funds, retirement specialists, stock trading services, and investment advice advertisers. Women’s magazines such as Glamour seek to attract health, fashion, and cosmetic advertisers. Lifestyle publications and home magazines such as House Beautiful, called shelter books in the trade, attract appliance and furniture makers, interior design firms and national real estate chains; travel publications attract luxury resort, cruise, and eco travel specialists, and so on. The NewYork Times, which carries about 35% hard news over a weekly cycle, also produces ad-rich softer news sections on travel, culture, fashion, health, and real estate. As Executive Editor Bill Keller told his public editor about the Times’s soft news sections, “We put out a daily newspaper plus about 15 weekly magazines.” The sections, Keller noted, “exist in large part to generate advertising revenue.”

What about countries with heavy state control of the press, such as Russia and China? Doesn’t the government pay the bills there? Yes, but to a much lesser extent than you might think. Russia’s leaders indirectly control most broadcast networks through state-owned companies and can subsidize the kind of news they want with government funds. But when viewers know the news is state controlled, they look to independent alternatives. Small newspapers, magazines, and online sites in Russia struggling to fill the information gap depend on advertisers for support. In China, where all media is required to be government affiliated, there is a push to make the nation’s newspapers and broadcast stations pay most of their own way even while their editorial operations are under state control. Newspapers in China now must try to cover 80% of their operating costs with ads, and that percentage will likely grow larger as the government cuts back on subsidies.

For Western journalists, there are libel and professional constraints on news gathering and writing but usually not government-mandated controls. For decades, the free nature of Western publications meant that most news organizations did not want their journalists to be concerned with the business side of journalism. There were good reasons for this. Reporters worried about advertising pressures or concerned about proposing costly but worthy big story ideas might hesitate in doing their jobs. A so-called Church and State wall was erected to keep journalists pursuing the story no matter where it led them. In practical terms, even then, most journalists knew that a story that took on a big advertiser might be handled with extra care. But unless they personally were shareholders in the media company, they usually didn’t pay much attention to the finances of their employer.

Not so today. With newsrooms everywhere under extreme cost pressures and the media fragmenting into thousands of online sites and blogs, reporters and editors are critically involved with the financial health of their employer. Newsroom job cuts across the board have been unprecedented. In just 1 week in June 2008, some 900 editorial jobs were eliminated in U.S. newspapers. Knowing how the business of journalism works has become everyone’s job.

The biggest threat to the established press everywhere, whether in the United States, Europe, or China, is not the government but digital media. The erosion of revenues from traditional media, often called mainstream media, or MSM, by digital competitors has been accelerating for 10 years and shows no sign of stopping. Online revenue is growing an average 30% a year. While many newspapers, magazines, and broadcasters have developed large and effective online news sites, the revenue they can generate by selling ads on these sites is still a fraction of what they need to maintain news staffs and run their parent companies.

In the digital world, nearly all information is free and the start-up costs are miniscule compared with the fixed costs of editorial, printing, and circulation for a large print news organization or for those broadcasting news over a national TV or radio network. Sending camera crews with producers to cover a large news event such as 9/11 or the Iraq War costs millions; the broadcast licenses and transmission over the airwaves is also a million-dollar expenditure each day.

Then, there are the daily business expenses of running a network, a cable company, or a large, independent TV or radio station. These include administrative expenses for top management and real estate; production, printing and distribution costs; and business-side marketing to sell ads and increase circulation.

How this seismic shift is taking place and the degree to which online journalism replaces print and broadcast media is an evolving story. It has sharply divided analysts and opinion makers. In one camp are those who believe that the age of large print publications and large broadcast companies is over. Marc Andreessen, the founder of the search engine Netscape, told a conference of media owners on July 9, 2008, “If you have old media, you should sell. If you own newspapers, sell. If you own TV stations, sell.” In the pro-print camp, people such as Rupert Murdoch, the chairman of News Corp., one of the world’s largest owners of newspapers, said in a March 2006 speech, “I believe that traditional newspapers have many years of life left but equally I think in the future that newsprint and ink will be just one of many channels to our readers.”

To see how this landscape develops, let’s look at the pillars of the news media today, starting with newspapers.

Newspapers

Newspapers, from local publications, such as the Stamford (CT) Advocate, to the large national newspapers, such as USA TODAY, rely on advertising for 80% or more of their revenue. Large full-page or partial-page ads, called display ads, account for about 85% of the ad revenue. Classified advertising amounts to 15%. In recent years, both have been losing ground to competitors such as direct mail and marketing service companies, as well as digital sites. Advertising sales can be local, such as a home-town auto dealer, to regional, a large department story, to national, such as Wal-Mart. Local advertisers today offer the strongest support for many smaller newspapers because there are no good alternatives that target their buyers. But if online media becomes more locally focused, it could also take a share of local newspaper revenue as it has of national revenue.

A large daily newspaper such as the Los Angeles Times until recently funded a newsroom of close to 1,000 reporters and editors. An unofficial estimate of its annual editorial cost for news, features, sports, culture, living, real estate, and other sections most readers desire might be about $100 million a year. If that was 25% of its total cost, another $300 million would go to printing, daily distribution, ad sales, and general overhead expenses. In good years, the newspaper would aim to generate a 20% beforetax return for its shareholders. So in the old days, when ad revenues softened cyclically because of a weaker economy, a large daily would ride through the downturn with at most marginal cuts. But because today’s change is viewed as structural, the paper is permanently reducing staff and costs. The Times, for example, started 2008 with 970 editorial employees. In July, it cut 250 of its editorial staff, bringing it down to 720. A decade ago, in its golden years, the paper had 1,300 editorial staffers. The July cut of 15% matched what the paper said was a 15% decline in revenues in the first 3 months of 2008. Increasingly, as revenue falls to what management believes is a permanent lower level, cuts that match revenue declines are likely.

Magazines

Magazines face a more varied future than newspapers even though both depend primarily on print advertising. There are about 10,000 magazines in the United States catering to nearly every taste and interest, from salt water fly fishing to needlepoint. Of that number, about 2,000 are prominent, and of that number, about 40 are large, above 1 million in circulation. Because a magazine often has a closer relationship to the reader than a newspaper, it has what the industry calls “shelf life.” A newspaper is discarded the next day or sooner; a magazine can have value long after it is printed. It can also offer targeted features and columns to the reader and present sections with a visual flourish so compelling that many magazines are desired by subscribers first for their photos and design. National Geographic, for example, has an almost permanent shelf life. Copies of old issues sell for more than new ones because the magazine is considered a collector’s item. Many home and fashion magazines have loyal subscribers who renew annually. The cost of renewal from $12 for House Beautiful to $15 for Vanity Fair is a fraction of the delivery cost, not to mention paper and production. In these cases, the magazine is using very inexpensive subscription pricing to maintain a large subscriber base while producing very attractive editorial, both to satisfy advertisers. This formula has so far kept many glossy magazines relatively healthy.

The publications closer to the news are the ones hurting the most. Newsweeklies such as Time, Newsweek, and U.S. News and World Report and business magazines such as BusinessWeek, Fortune, and Forbes have seen a significant decline in their pages in recent years as online news outpaces their ability to deliver value-added or original stories against digital competition.

Most magazines like to keep a ratio of ad pages to editorial pages in the range of 60% ads, 40% editorial, or at worst, 50% to 50%. Because of seasonal variation, that ratio can drop to 30% of ads or less in some months, with the expectation that it will come back in other periods. The first quarter of the year is usually a weak one for many larger magazines because it follows a surge of advertising spending during the holiday season. Mid to late summer is also a doldrums period because of vacations. That is why revenue-producing ad pages are so carefully watched for the fall run, the last time to make up weak performance.

This is the period when big glossy magazines such as Vogue and Vanity Fair carry a few hundred extra pages. Vogue, for example, ran 725 pages in its September 2007 edition. Reflecting a softer U.S. economy, its 2008 September issue carried 674 pages but still weighed nearly 5 pounds.

Two widely followed sources for the strength of ad pages and magazine circulation are the Publishers Information Bureau (PIB) and Media Industry Newsletter (MIN), a trade publication that tracks the industry with a weekly box score. In recent years, the MIN box scores have become of prime interest to journalists following the health of their publications. In mid-July 2008, for example, MIN scores showed leading U.S. magazines such as Time off 27% in pages from the year earlier, Newsweek off 23%, and U.S. News and World Report off 28%. BusinessWeek reported pages 17% lower than the year before, and its competitor Forbes was lower by 18%. But The Economist was up 5%, and its competitor Fortune was up 2%.

Like newspapers, magazines have limited options when rising costs meet dwindling ad revenues. Because magazine managements believe that the decline is a permanent condition, most of their choices involve cost cutting. They can cut business and editorial employees, discount from posted ad rates on their rate card, reduce the number of pages they carry, and reduce their circulation. The last is especially important because magazines usually guarantee advertisers a minimum number of readers per issue, called their rate base. If a publication goes below the rate base, it must pay back advertisers either with free extra pages or with financial payments. The number of subscribers compared with the cost of an ad is a critical consideration here because the advertiser is buying readers. The cost of an ad page is measured per 1,000 readers, called a CPM. The CPM is a critical competitive index. If the cost is higher than the competition’s, the publication must argue that the demographic quality of its subscribers is higher. Among the three leading U.S. business magazines, for example, BusinessWeek claims senior management readers; Forbes, high-level investors; and Fortune, chief executive and board members. In contrast, The Wall Street Journal, which is the leading place for business print ads, claims an overall high net worth of $2.5 million per household.

A decade ago, the rate card reflected the real cost of a page. But, like suggested retail car prices, today, it is a benchmark for discounting. Advertisers and analysts thus treat ad sales numbers produced by rating services as guidelines rather than actual revenue figures. A box score from MIN that says a publication that sold 2,300 ad pages at $65,000 a page each earned revenues of $138 million for the year reflects only the nominal price requested. In reality, discounts off the rate card might be from 20% to 40% or more for some big advertisers. If costs can’t be controlled, the publication could be losing money when it might appear to be growing. Analysts and advertisers thus look at the actual number of pages sold and make their own back-of-the envelope calculation of what the publication is earning. Looking at the actual pages sold from year to year also gives them a more realistic view of the publication’s condition.

Magazines have a few other levers to use for sales and cost control. Because they have a longer shelf life than a newspaper, they multiply their number of subscriptions by a “pass-along” factor to arrive at a readership rate. Independent research companies such as Halls and MRI sample readership and report pass-along scores. Thus, a magazine with a subscription base of 1 million may in fact claim almost 5 million readers based on a pass-along rate of 5 readers to each subscriber. While the number is an estimate based on a sample of impressions from readers, the industry and most advertisers accept it as a measurement standard.

Magazines can also try to trim weight, since most are mailed to subscribers. They can do this by trading heavier paper for lighter paper, called “reducing stock.” They may also trim the magazine page size. In August 2008, Rolling Stone editor Jann Wenner said, “All you’re getting is nostalgia,” in announcing that his 1.4-million-circulation rock biweekly would reduce to a smaller newsstand size from the distinctive larger format it has had since its founding.

Television

Television and radio like print are mainly ad-supported businesses, but their revenue comes from commercials or “spots” that are sold in 30-second or shorter time periods. TV ads are sold against programming, and the more the viewers the more a station or network can charge for airtime. Each spring, the industry rolls out its schedule for all programming, news, and entertainment and asks advertisers to place orders for the season in what is called the “upfront market.” This means that networks get paid up front. But they really don’t own that revenue because like the magazine industry they must guarantee a minimum number of viewers. If a show falls short on viewership, they have to repeat the ad on free airtime until the required number of viewers has seen the commercial. Because they are giving up finite airtime to cover “make good” airtime, the practice can create a perverse effect where there is less time available for spot buyers. This means that advertisers seeking immediate spots, called “scatter advertising,” can see rates go up in price even through there is an overall declining market. As the Project for Excellence in Journalism points out in its 2008 report, advertisers buying in advance in the upfront market are really reserving time, not actually paying for all of it. So a strong spring buying season in media headlines may end up down if advertisers trigger cancellation clauses or demand “make goods.”

Extravagant opportunities are the exception. Both the 2008 American Super Bowl, where a 30-second spot for a football game sold for $2.4 million, and China’s 2008 Olympics, where NBC sold more than $1 billion in advertising, had a waiting list of sponsors. A local TV station might accept $2,000 for a spot if its cost of programming is low. TV shows are based on longer-term programming that can come from a network or outside production company. Nightline, a U.S. news show by Ted Koppel that ran for years on the ABC network, is now produced by Koppel himself and sold as a syndicated news program to local stations. Many entertainment shows are financed and sold by independent producers and then licensed for international revenue.

Audiences are measured by rating services. The leading providers in the United States are Nielsen, for national and local, and Arbitron, for local listings. Both use a small sample of total viewers to arrive at their local and national market ratings. Nielsen works with a universe of households based on sampling techniques accepted by the industry. In their book This Business of Television, Howard J. Blumenthal and Oliver G. Goodenough observe that while print publications sell to advertisers against their subscription and total readership numbers, broadcasters must convince advertisers that so many thousands of people “are actually watching a commercial message at a given time.” For a regional TV station, a sample of 300 households or less may be enough to satisfy advertisers that a million or more viewers are watching the show at the time the commercial appears. For a national ranking of 90 million households, the sample may be only a few thousand viewers, they point out.

Both Nielsen and Arbitron rely on the cooperation of sample households to keep track of their viewing habits. Because viewers can easily click away, mute, or use prerecording boxes such as Tivo to escape the ad, Nielsen, a few years ago, introduced the electronic PeopleMeter for national rankings. This is a device attached to the TV set that records what channel is on and for how long. More sophisticated devices now also allow ratings companies to monitor actual viewing remotely so that household information arrives in real time to produce the overnight ratings that are being developed. Neilsen offers a real-time measurement tool called C3, which attaches to all viewing devices from TV to DVR, video game box, or set-top box and feeds live-viewing information, including what commercials are being watched in real time, into a data bank. New set-top boxes and viewer cards for digital TVs will also provide instant feedback and monitor how long a viewer stays with an ad and where the ad is placed in the programming.

High-profile events where ad time gets bid up don’t yet require this precision. Five days into the 2008 Beijing Olympics, for example, NBC Universal could claim that viewership was up 15% based on the current rating system. But that aside, more precise measurement of audiences and the need to raise ad revenue is a global trend, even in countries with tight government control of networks. Whether it’s an ad dollar, ruble, rupee, or yuan, broadcast TV is increasingly required to fund itself by selling airtime, along with various kinds of taxes, subscription fees, or direct government support to supplement ad revenue. Running against the grain, Britain’s BBC remains one of the few successful noncommercial experiments. The BBC is not allowed to show any commercials in the United Kingdom, although it can get licensing revenue from selling shows abroad to commercial stations. Households in the United Kingdom pay a tax for owning a TV of about $270 annually, which covers any number of sets in a house. Although the BBC competes against three commercial channels, its two main channels are watched by some 90% of Britons each week and have a 27% share of total viewing, even though viewers also have access to some 200 commercial channels on satellite networks. With live sports programming, the BBC usually has a much higher proportion of viewers for a match than commercial channels, a fact that analysts say shows that viewers want the game uninterrupted. In the largest emerging markets, TV viewing is free, but channels are limited, and editorial content is under especially tight state control. China’s national network, CCTV, for example, a government monopoly with 600 million viewers, is likely to generate $60 million in Olympic revenue along with 30% growth in 2008, according to Martin Sorrell, the CEO of WPP, a major ad buyer in China. Russia has 20 major channels; India, a very competitive media market, has hundreds.

Radio

Radio also earns most of its revenue from advertising, with the remainder from fees and licensing, and broadcasters face the same cost pressures as all traditional media. But while radio stations have seen flat revenue growth, they must have invested more airtime in news— 40 minutes a day from 37. According to the Radio and Television News Directors Association annual survey, the news increase has been primarily in major markets with an audience of 1 million or more, targeted to morning commute “drive” times. The economics of radio news is much simpler than for TV. An average newsroom can function with no more than four full-time and part-time employees, and regional news generated by one newsroom often gets used by several stations. The consolidation of stations under one corporate parent also cuts costs by homogenizing the news. Clear Channel, a U.S. radio consolidator, owns more than 1,300 stations.

Radio has a greater measurement problem than print or TV because it can’t tell with precision who is listening at any one time. There are about 14,000 licensed broadcast stations in the United States, and advertisers spent a total of $21.7 billion on radio spots in 2008. But as the Project for Excellence in Journalism points out in its State of the Media 2008 report, “The strongest growth story in the radio universe is the Internet.” Although still small, ad spending for radio on the Web grew some 15%, from $1.3 billion to $1.5 billion. If radio could produce a more accurate listener measurement, it might be better able to sell advertisers on airway ads as it can with Internet advertising. One experiment by Arbitron, which rates radio listening, is to have sample listeners carry around a portable transmitter that would send listening data to the rating agency in real time. While this has been withdrawn for now, other experiments to improve metrics this way may be forthcoming.

Online and Digital

It’s clear that the future of journalism globally will be about how traditional media sort out revenues and audience in competition and aligned with the digital world. If publicly traded media companies lose investor confidence, they won’t have the capital to remake themselves. Financial health, not size, is the criterion that measures their business. No matter how large a traditional media company looks, from CBS News to The New York Times, investors and advertisers have made a decision to bet much more heavily on digital than print and broadcast, and unless that trend abates, the value of traditional media of all kinds is at risk. As the media writers JayYarrow and Jon Fine asked in a recent column, “How can The New York Times be worth so little?”—noting that the paper itself, even with its online site, the Paris-based International Herald Tribune and a radio station, seems to be worth just $750 million.

So who are the dominant players in digital journalism? Many are traditional media. Nearly all newspapers, magazines, and broadcasters have online news sites. The Wall Street Journal, The Washington Post, The New York Times, CBS, NBC, and ABC support large online staffs who produce original stories well beyond what the parent enterprise offers in print and broadcast each day.

But the biggest providers of news globally are increasingly not news companies at all. The giants in the field, Google, Yahoo, and Microsoft’s MSN, call themselves aggregators rather than news sites, even though they are among the most heavily visited for news. As aggregators, they collect and distribute news and any other kind of information that they find useful. They have made the word content a substitute for what used to be called news, information, entertainment, classified advertising, and just about anything else that a print reader or broadcast listener might have found in a newspaper or on TV. The most watched provider of content is Google.

For journalists, Google epitomizes all that is both admired and feared about digital media. Journalists use Google constantly for their story searches and may also have their private e-mail accounts with Gmail. But at the same time, they know that Google’s power to attract advertising in competition with their employers’ media companies means that their own financial position weakens.

What is Google? When Google announces earnings each quarter, the financial press and Wall Street often call it the world’s largest media company. That’s because on any day, you can find a large share of the world’s stories and broadcasts on Google for free. For example, Google News is a channel of constantly changing selections from the world’s newspapers and broadcasters. YouTube, owned by Google, puts up clips from broadcasters as well as individuals that often beat the networks on spot news coverage anywhere in the world. This means that Google, an enterprise that started out as a pure search engine in 1996, is also a powerful distributor and facilitator of news.

If you are one of the world’s most important places to check each day for news, are you not a media company? Google says no. Instead it calls itself a distributor of global content. “Our mission is to organize the world’s information and make it universally accessible and useful” is Google’s mission statement.

Jon Friedman, the media columnist for Market Watch, owned by Dow Jones, the parent of The Wall Street Journal, agrees. “Google doesn’t create content which informs and entertains people as media companies do. Instead, Google compiles facts and delivers information as well as news clips to its panting audience,” he says.

If Google does not produce original news or create content, is it then a news distributor, as Friedman says? Many people think so. This means that the company that is one of the world’s largest deliverers of media gets nearly all its content without cost. The U.S. broadcast and newspaper industry spends close to $70 billion a year to gather hard and soft news. Google gets nearly all that material free.

Google earns its income from ads on its site paid for by order of placement and from keywords that direct a user to an advertiser on another site. But unlike a newspaper, magazine, or broadcaster, it gets paid by the number of users who click on an ad. In Google’s financial statements, it reports income by the number of “aggregate paid clicks.” On an annual basis, the number of paid clicks, meaning visitors to the Google site, has been increasing by 30% a year. In 2008 Google’s total revenues were $21.7 billion, up from $16.5 billion the year before. Against those revenues, Google’s main costs were compensation for 20,000 employees to the amount of $8.6 billion; research of $2.8 billion; and sales, marketing, and general administrative expenses; bringing total costs to $15.1 billion. That allowed Google, before deducting for some investment losses and taxes, to earn $5.8 billion. By comparison, The New York Times lost $57 million in 2008.

Like all online sites, Google’s attraction for an advertiser is the precise measurement and cost it offers from “hits.” Each time a user uses the search engine, highlighted links that are prepaid by an advertiser show up in descending order on the search results. In a right-hand column separate from the search, there are also “sponsored links,” similar to the kind of ads you might see on a traditional media online site.

Suppose you wanted to develop a low-cost shipping service. You might buy 100 keywords from Google ranging from Low Cost to Cheap Shipping. The keywords are sold at an auction, so the most popular are the most costly. If you monitor your list, you can see instantly which ones work for you and cut out the ones that don’t. If Low Cost Boxes is $1 a click but generates strong traffic to your site, the cost per click becomes worth it. If words costing 20 cents a click are cheap but don’t draw users, you discard them. The Google model with variations is why the number of “eyeballs,” meaning people visiting the site, is so critical. Google draws millions of search users a day. Users click a link, and if the link generates an inquiry or a sale, Google can measure that and report it back instantly to you. Traditional media cannot offer that precision.

According to Technorati, an online tracking service, there are some 100 million online sites worldwide. Some, such as Yahoo, spend some income on personal finance stories that they generate on their own. Many others use writers attached to their sites who may write for the print and broadcast companies that own them. When the stories that are used are new for the site, they are there to attract viewers. When they are stories taken from the print publication, or “repurposed,” readers and viewers are getting older content but viewing it online.

A second way in which print revenues have been transferred to online services is through digital classified sites. The community-based San Francisco free online listing service called craigslist now has replicated its online listing model in many major U.S. cities. Craigslist has severely eroded classified advertising in newspapers, taking an estimated $65 million of the classified market in San Francisco alone. According to InternetWeek, classified advertising in all forms is a $30 billion business in the United States; about half of this still remains with daily newspapers but faces increasing competition from online services.

Craigslist and other online shopping services continue to take a share from print publications. In the employment category, online jobs boards such as CareerBuilder, Monster, and HotJobs have been growing at a 30% to 50% rate a year and account for about 20% of the classified job ad market, which is a $1 billion-a-year business for newspapers.

In shopping, increasingly direct buying as well as key research for big ticket items such as autos, furniture, appliances, and vacations takes place primarily on an online site. Think of Edmunds.com for car buyers and Orbitz for travel. Amazon, once a bookseller, is now a digital department store for much of the world’s consumer goods, with revenues of $14 billion in 2007.

Then there are blogs. Most blogs do not make money, and most have low readership. According to Technorati, there are 56 million blogs worldwide growing at a rate of 22% annually. The blogosphere is mostly an avocation, but the number of blogs hosted by specialist contributors means that blogs get a following on key events. Blogs can affect the future of traditional media in two key ways. They can swarm with expert opinion to challenge or drive the editorial views of large news organizations. They also draw eyeballs away from print- and broadcast-affiliated online sites, thus reducing the traffic needed to produce a high volume of “clicks” for advertising revenue.

Here is a huge debate about whether bloggers are journalists at all. But for the bloggers themselves, the debate is beside the point. As independent and usually unpaid commentators and reporters, bloggers have been vital to the information food chain, and their influence is felt on many public issues. Bloggers challenged the authenticity of a letter that was aired on the CBS Evening News that presumed to show that U.S. President George W. Bush did not participate in Alabama National Guard exercises as Bush said he did. Bloggers argued that the letter was a fake because the typeface used did not exist on electric typewriters available on the date that was printed on the letterhead. The CBS anchor Dan Rather, who initially defended the letter as authentic, retired from the network soon after.

If blogs can successfully challenge the top editorial views of traditional media, what effect do they have on large media revenues? It is too early to say what share of the media market blogs will command. As some blogs mature and become more like established online sites, they will be competitors for ad spending and become attractive takeover targets. Two leading U.S. news and opinion blogs, The Drudge Report and the Huffington Post, have low news costs and high visibility. Writers contribute to the Huffington Post mostly for free. The Drudge Report is run by one editor, Matt Drudge, who aggregates stories on his site. Thousands of other bloggers are seeking to follow these models and earn revenue through consortiums that sponsor and sell their content.

Conclusion

What this overview of the business of journalism shows is that the media world continues to fragment without a clear view of who will pay for quality news ahead. Online Web sites attached to traditional media companies are seriously committed to developing high-quality online journalism. They are also experiencing sold rates of growth that match growth among independent online sites. But their ability to monetize their editorial in a way that offsets or supports the losses they have from traditional advertising does not show signs of reversing. Over a longer time, this suggests a shrinking role for print and broadcast media since newsrooms will not be able to support their staffs even after repetitive cuts. This does not mean that the traditional media are going away altogether but that their effort may be focused on much more local coverage, with softer and high-profile online features that drive traffic to the Web site. Some traditional media executives see the day when their online business will become their dominant revenue source, big enough to sustain a healthy online news staff and generate enough revenue to also support a smaller print and broadcast stepchild. This uncertain future is already creating divisions in newsrooms.

Print and broadcast newsrooms now post on their Web sites their most viewed and most e-mailed stories of the day. This creates sudden acclaim for popular writers but for reporters who are on serious but not always exciting beats, the practice is discouraging and threatening.

The good news is that the job demand for journalists with multimedia skills is increasing. Even with a downturn in the 2007 U.S. economy, a survey from the University of Georgia found that 63% of journalism graduates from 80 U.S. universities landed jobs within 8 months with an average starting salary of $30,000, indicating no decline from the year earlier.

There is also a debate about what the number of editorial jobs means in the world of digital journalism. “Saving journalism isn’t about saving jobs” maintains Jeff Jarvis of Buzz Machine, who argues on his influential blog that future media investment should be in growing jobs outside newsrooms and training journalists to report and write to professional standards. Practices such as “twittering”— sending short instant messages—are now used by some traditional media to take files from “citizen reporters” at news sites, such as a bridge collapse, and turn them into constantly updated stories in a running narrative of the event. Entrepreneurs and journalists able to build stories out of these kinds of free editorial feeds are now trying to find ways to monetize their work, such as selling stories to mobile phone users and perhaps eventually selling their creations to large media companies. But unless and until there is a drift toward consolidation, it appears that the universe of new media will continue expanding into multiple digital pieces offering easy entry but limited structure and training for beginning reporters.

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