Facebook currently has over 500,000,000 users, yes that’s 500 million! An almost unbelievable statistic, coupled with the fact that most users are active it is an Internet behemoth and will almost certainly be a very profitable machine.

Twitter has fewer active users but their figures are also very impressive with a user base of around 200 million.

Both of these platforms outshine even online newspapers for breaking news and events to family and friends, so much so that online newspapers are actually becoming slightly less relevant than they were just a few years ago. You only have to take the recent Osama Bin Laden death to know that most of us get a lot of our news directly from our online networks on both of these platforms.

Creativity Vacuum

Where I think Twitter and Facebook fail is in their business models. The current thinking (or lack thereof) is that build up users and then start displaying advertising from 3rd parties amongst the content on various pages.

Google was the first large Internet player to do this successfully and have reaped billions and billions of dollars in advertising revenue on this model and will continue to do so. Why this is successful is very simple, users search for information and Google displays as close to relevant information back to the user as their algorithms allow.

Newspapers do the same thing, they attract visitors to their websites and then display advertising amongst and over (annoying their users) content and generate most of their online revenue from doing so.

This model is a problem for Twitter and Facebook and Online Newspapers because users do not use or behave the same way on these sites as they do on Google and other search and retrieve related entities. We use Twitter and Facebook to inform others on what we are thinking, what we are doing and where we are going, we gather news from Online Newspapers to share ones that interest us to our networks or to keep ourselves up to date. In short we generally have conversations on Facebook and Twitter and we use newspapers to gather information on the days events.

What is needed from these entities is a creativity revolution, one that value adds the offerings to those of us that want to become power users.

Online Newspapers

I am going to use the Sydney Morning Herald and The Age Newspapers as these are clearly the best newspapers in Australia. Each day I visit both of these websites to read up on news and events and each day I try to avoid any annoying ads across these sites.

What if I became a member of either of these websites? I really get nothing in return, making the added value proposition worthless. However what if the hierarchy thought a little differently about their business model.

What if for say $100 per annum, I could get an enhanced mobile version for both my smartphone and my Android or iPad tablet? What if my membership included the ability to sell my unwanted sofa quickly and easily? What if I could sell my car, engage a real estate agent, advertise open positions at my company? What if all of this was included in one simple interface and for one simple price? I don’t know about you, but I would pay this money without a second thought. Why? Because I trust the company, I know they have the biggest user base and I know I have one place to go to do all of these if and when I choose!

Facebook

If you read the above with interest, could you imagine if Facebook did the same? This would send shivers up the spine of any newspaper across the globe, simply because newspapers have lost control of their users and have been slow to innovate. Facebook could very easily do the same thing and to be honest, I think they would win this battle. Facebook currently has the dumbest advertising platform of all of these entities combined.

As an example if you ever had the miserable pleasure of adding some of your favourite movies, books or music to your profile you will immediately notice your Facebook wall being filled up with junk advertising from related advertisers. They must have been up all night thinking about that one – pathetic!

Facebook is so bad with their business model that it only serves to annoy their base and this is a true crime in the online world and may someday open themselves up to competitors. It also will cost them billions in the long term as users will simply change their behavior.

Facebook should also offer an enhanced version one with stronger privacy cooler profiles and a tranche of new offerings including the above, classifieds, cars, jobs and houses. I should also want to store with the options to share HD Videos, HD Photography and enhanced mobile versions all for a simple annual fee.

Twitter

Twitter worries me, it is no longer a must-be destination for the average Joe consumer or small business. It is slowing down dramatically and may only useful in the future for disseminating news and events. Sure it is still relevant but it maybe just a niche player in a few years.

For the power user it still offers some great insights and I do get great information, but more so from a select group of people I follow.

Summary

In summary I think the advertising model is flawed across Online Newspapers, Facebook and Twitter and needs some real creativity. I am convinced the model of the future for sites that have massive user bases is enhanced offerings all paid for with one simple annual fee.

Sadly however, the people that have run these industries from the top always seem to be clueless as to what the future holds. I will read with interest the changes new Fairfax Chairman, Roger Corbett makes in his first 3 months in charge or if he just takes a ‘steady as she goes’ approach. In my opinion he has to immediately show he has got something to offer and he has to get creative .

In the first of a two part series I am going to take a look at The Print Newspaper both here in Australia and also in The USA where I am currently located. In Australia we have two major real estate newspapers, The Sydney Morning Herald and The Age these are both controlled by Fairfax.

The second part of this series to be released this time next week will focus on the future of online newspapers.

The Boardroom

We have a management problem, boardrooms are filled with people that have a good record of running traditional companies or companies that have made the digital transition easily. However, the majority of boardrooms today are filled with people that are not qualified to understand the digital age and the behavior of their own market in this digital age.

In the beginning it was much easier to launch a jobs, cars or houses website if you had an established classifieds newspaper to get it off the ground. Realestate.com.au was not saved by investment from News Ltd (although it helped) , it was the aggressive push through their newspapers and property guides from News Ltd (and a slack competitor) that established its success.

Today it is nearly impossibly to run a newspaper if you do not have strong jobs, cars and houses website in each of the key markets. Newspapers can no longer survive without the online world!

For an established newspaper to change, it has to start at the top. If the stories of Roger Corbett are true, then he must change his attitude or he will be remembered as the Chairman who sank Fairfax. The man has had great success in the past and I cannot see how at his age and with his bank account, he could not want more, than to make the changes needed in his own headspace to make this work.

You cannot be successful if you think that the newspaper market will get back to normal levels once the economy picks up; or if your only other idea is to wait for other Internet companies to succeed and then purchase them at inflated prices; or if you invest more in marketing and less in your journalistic talent; or think more tabloid news stories will appeal to the masses!

You have to understand that what is broken cannot be fixed in the same ways you have attempted to fix them in the past.

Yesterdays News

I love newspapers, I read them every single day. Actually, let me clarify, I read the news everyday, but I rarely buy newspapers.

The reason I do not buy newspapers is fairly simple, and is summed up in the following statement.

When was the last time a real news story broke in a newspaper, before it broke online?

You, like me cannot think of one recent event. If you are using an RSS reader (like me) and get your news delivered this way, you probably hear about the news before anyone in a newspaper newsroom hears about it. Even better Twitter (and the right accompanying application) will get it to you quicker.

Yesterdays News

Let us look at the first issue, news. The first time I really thought it was over for newspapers was when Saddam Hussein’s rein ended. I remember reading the headlines outside a newsagent in Hobart, Tasmania almost 24 hours after it happened, as if it just happened! Remember that statue coming down? This is the papers biggest problem, it cannot scoop news, so it tries to make up news.

Michael Jackson dies and for 2 weeks we have a different headline each day, each one trying to out do the previous. This is not news, it isn’t even interesting, you don’t create news – you find it – and you cannot find it unless you grow your journalists and give them the freedom and time to search for it.

The Classifieds

Once upon a time we read a newspaper to look for a job, a house, a car, a garage sale or a classified. You purchased the Trading Post to look for a bargain and you may have even looked at advertising for a coupon to take to Coles or Woollies.

Classifieds will never return, they will continue to shrink and someone will have to do the maths one day on whether it is worthwhile to run the wretched things in print.

Classifieds are now almost exclusively online, so there must be a conduit between the print version which should be about stories and statistics, to the online which should be the classifieds and even more statistics.

Subscriptions

The price of a daily newspaper is dirt cheap, yet fewer people are willing to pay for it. In Australia, I purchased Wired and Fast Company magazines each month. I loved these magazines, but air freighted and at $16 an issue it was ridiculous, but I still paid for it. Since I arrived in the USA and have an address here, I have subscribed to both magazines at a total cost of $19.80 for 24 issues!

Surely these companies lose money? I think you have already guessed why they do it. Their thinking is that they make the purchase so cheap that it makes common sense to just subscribe – even for the casual buyer, the losses on delivery are minimal and are offset by the increase in advertising revenues. Lifting your guaranteed monthly subscriptions, lifts your total guaranteed readership and impresses potential advertisers.

This is exactly what newspapers need to do. They can keep their newsstand price the same, but run promotions for $9.95 per annum where you can get the newspaper delivered to your door 7 days a week, 365 days a year. Anything more than $19.95 per annum is not an impulse buy and therefore will not work.

There are many ways you can offset this price, increases in advertisers, bundling other companies leaflets, flyers etc.

The Rockstar Journalists

We only have to look at the current stocks of young journalists to know just how sad a situation we are in. Gone are the days of journalists dedicating months to a story and cracking a scandal, the majority are now relegated to press releases or are so tied up covering so many stories, that they have no time to actual do any real beat reporting. Many journalists now have too many job titles and business cards that it is laughable.

Examples

• Political Correspondent James Worthy
• Youth with James ‘JimmyW’ Worthy
• Yachting Expert James Worthy
• Lawn Bowls with James Worthy
• Ask James
• Religious Affairs with Brother James

We are about to enter a new era of the rockstar journalist. These are the same journalists that we read today, but newspapers will be making them into rockstars. Even though the first stage will be shallow, I believe that the newspapers across the globe will need to get back to breeding stars, beat journalists and real local content.

Sure, we have some good journalists in the political arena, an almost endless supply of financial experts, plenty of celebrity style journalists and some that provide us with a running commentary on social issues from both sides such as Peter Fitzsimons and Miranda Devine, both of whom are excellent writers, but are more social commentators than true investigative journalists.

I am talking about beat journalists, a breed who follow a lead for months/years, who give us real gritty local and national impact stories and every now and then crack a conspiracy – journalists that know it is a mortal sin to end any scandal with the word ‘gate’.

A newspaper should provoke a discussion in the workplace and around the nations dinner tables and only beat journalism can do that!

Newspapers are facing slow death and I think only the true beat journalist can save them. Michael Moore has some interesting comments on the death of newspapers. It comes in at 21 minute mark if you want to jump straight to it.

Design

Jacek Utko, is a newspaper designer, he has had some great success in lifting circulation. Newspapers are boring and they need a re-design, it will not make all the difference, but it is all part of the new solution. You can also read an interview with Jacek here.

Watch this February 2009 Ted Talk by Jacek.

Distribution

I currently live in Boston, where you have the Boston Globe and the Boston Herald, each one of these companies have their own set of delivery trucks. The cost of delivering newspapers does not have to be so high. Come together, open your network up to other local newspapers and periodicals, where you actually make money from the distribution.

Do Newspapers still matter?

I love newspapers, I think they can still survive, they will never thrive like before, that is because the classifieds ‘rivers of gold’ (jobs, cars, houses) are lost forever to the web, but they have a real relevance to a cities identity. It will be a sad day if this is lost and the blame for this will lie squarely with the owners of these media groups – who still seem to think that it is their right to control the media and not simply a time limited privilege!

Summary

It is a tough sell. I cannot see many newspapers surviving if the boardrooms just think that everything will be fine once the economy picks up. Everything from the people to design, subscriptions, distribution must change.

Next week in part two, I will talk about the future of online newspapers and provide soe great examples of what we can expect in the next generation.