Weekly notes 09/25-10/02

Current online media landscape and trends

Since the inception of the online media business models used by news Web sites, the business landscape hasn’t changed much, except advertising becoming the main revenue source. Advertising is the dominate source of revenue to online news sites (Brown, 2003; Greer, 2004).

Furthermore, advertising is growing to be more sophisticated, interactive and targeted to extend the value proposition on the B2B side, as clients are looking for more innovative ways to showcase their products.

In 2006, advertisers are looking for more hi-tech and innovative ads: from simple banners to rich media like Flash, animations and interactive ads.

Studies show that 89 percent of news Web sites contain advertising (Greer, 2004), and 75 percent of revenue to newspaper Web sites comes from classified advertising (more than double the 36 percent for hardcopy editions) (Brown, 2003; Newspaper Association of America, 2006). A typical news homepage has five ads that take up about 10 percent of the front page (Greer and Mensing, 2004).

By 2004, online ad spending was at $145 per U.S. household with Internet access compared to $674 per newspaper home (Robertson, 2005-2006). After the dotcom crash in 2000, ad revenues dropped but traditional brand advertisers became the biggest spenders (Bruner, 2005; Greer, 2004).

By 2005, online advertising raised to almost $13 billion, which is almost 5 percent of total media spending (Foege, 2006). In 2003, it was only 2.5 percent.

Along with the revenue numbers, online traffic metrics is one of the measures of success. CNN.com gets over 22 million average monthly unique users (in 2005; Nielsen ratings). This amount of “eyeballs” is definitely attractive to any advertiser and translates well into revenue numbers for CNN.com.

Paid content is becoming increasingly important in CNN.com’s revenue stream, as the company is being able to offer unique and exclusive content wrapped in premium packages like Pipeline. The Wall Street Journal’s online edition follows the same model, offering unique business-related content.

Most news content providers and aggregators, however, may not be able to extend the same value proposition of a unique product. Their revenue seems to be mostly based on “bounty” and licensing fees, or revenue share models. When there’s no unique value proposition, there will be consumer resistance to subscription-based revenue models.

CNN.com as a continuous breaking news operator delivering the freshest content 24/7/365 has a unique advantage of having close to 4,000 journalists in all parts of the world, including the company’s 42 worldwide bureaus and more than 1,000 affiliates.

What makes the product even more valuable to consumers is the fact that most reporting is done by locals: be it in the U.S. or in Somalia. With the exception of a mega stars like Anderson Cooper going to Afghanistan on reporting trips, the majority of breaking news is handled by local correspondents that have knowledge of local history, customs, background of events and can offer a unique insight into a news development.

And the faster the broadband grows, the more “eyeballs” will CNN.com get: both at work and at home. Currently, the model seems to be serving users at work more than users at home, as many employers supply the broadband needed for watching premium products like Pipeline. But home use seems to be growing as well. As of March 2006, Internet penetration reached 73 percent of all American adults – 90 percent have broadband access at work and 42 percent at home (Horrigan, 2006b).

To further extend its product value, CNN.com captures its audience with mobile technologies. When there’s no Internet and no breaking news e-mail alerts, the text messaging technology SMS works to the company’s advantage in its “CNNtoGo” product line.