The inspiration for NewsCloud’s News Challenge entry, Connection: Platform for an Audience Member Economy, now a finalist, struck in the spring of 2009 at an intimate dinner gathering of technology executives invited to brainstorm on the business challenges faced by a large national newspaper, which I was asked not to name. I and another executive highlighted the scope of opportunities provided by building technology to leverage the data the company already knew about its subscribers. Yet, I could tell as we spoke that this concept was a bit beyond the technical and conceptual grasp of our hosts. The idea stuck in my head until I decided to enter it in the 2010-2011 News Challenge.
There’s still a huge disconnect today between the way most news organizations try to generate revenue and what their readers want. Splash and interstitial ads, video pre-roll, pop-overs and pop-unders are some of the most annoying Internet revenue models yet publishers seem to be accelerating their use. Yet, it’s fairly clear at this point that revenue from online advertising isn’t sufficient to sustain quality journalism. The combined ignorance to the reader’s experience and lack of innovation in the online journalism business model is disappointing.
Only recently are we starting to see some experimental efforts at subscription paywalls. While we’re supportive of these efforts, paywalls, by nature, reduce the number of readers informed and engaged by your content.
We believe that the core value news organizations have is the monopoly of audience eyeballs that visit their sites on a regular basis for great content. This monopoly generally stems from legacy distribution of newspapers in major markets. This is a huge competitive advantage and yet there are few tools helping newspapers strategically leverage this advantage.
The Knight News Challenge provided four different categories for innovation: Mobile, Authenticity, Sustainability and Community. Our entry targets sustainability of journalism at newspapers by surgically focusing on building a platform for expanding sources of revenue that leverage this core asset.
Partnership with The Seattle Times
Our idea was good enough to excite the good folks at The Seattle Times, Seattle’s 115 year old daily print newspaper with Sunday circulation of 1,248,500 adults. If we’re fortunate to win the News Challenge, we’ll work closely with The Times business team (partnership pdf) to build an open source system that reflects the requirements of a large daily news organization and helps us learn what works and what doesn’t.
We will work closely with their team to plan, develop, deploy and evolve our project features. Ultimately, our primary work product will be an open source platform that other news organizations can adopt for themselves.
What We Will Build
Our idea is unique in that we’re trying to move publishers away from a banner advertising model towards a platform that helps them provide a useful service to their audience. Readers don’t need to be bombarded by ads when they read the news but they probably could use a little help finding the best products, services and deals.
We’re constructing a new online economy by providing a platform for an online marketplace between news organizations, businesses and their audience. This hasn't been done before.
News organizations already know a lot about their audience. They routinely promote aggregate demographic data to their advertisers. We’re simply taking this to the next level. We’re using the benefit of online tracking, opt-in data collection and Facebook Connect to help news organizations provide a useful service to readers while earning money from businesses that want to reach them.
The project actually consists of four different websites: 1) Website for readers to manage their participation in the system, purchase subscriptions and individual coupons and browse the affiliate store and book and movie clubs. 2) A mobile website for readers with smartphones to access these features on the go. 3) Website for businesses to browse aggregated demographics and potential offers and to purchase and manage coupon placement or engagement contracts within the system. 4) Backend administrative website for the media company to create and manage offers, coupons, payments, monitor statistics, track revenue, and manage communication and support with members and businesses.
We’ll also provide the following components, each a building block in the overall platform:
The most unique part of the system enables the new online marketplace economy between businesses and readers. It's essentially an offer creation and pricing system for the media company to proactively match businesses to specific groups of audience members that have opted in. The media company can price these contacts based on their perceived market value. Offers will be managed and sent via email through the system, linking businesses to readers. The system will fully manage and track payments and redemptions giving the media company full control and ownership of these transactions and relationships.
For example, the system will allow media companies to sell the right of car dealers to send unique offers to readers who have opted in and shared that are in the market for a new car. It will allow pet food delivery companies to contact readers that have opted in and shared that they own dogs or cats. Or, diaper and childcare services to reach parents, electronics retailers to reach HDTV shoppers, etc. The potential connections are endless.
Second, we’ll provide an online coupon system available via subscription. This is similar to print coupon books, which are purchased annually. Subscribers will be able to regularly browse and use an online coupon guide from participating businesses. We’ll provide components for managing the coupons including purchase, payment, authentication and redemption.
Third, the coupon management components we build for the above listed features will allow us to provide a deals system similar to Groupon, Living Social and a variety of third party services which are now working with newspapers. However, the media companies will be able to offer these directly to businesses without having to share a transaction cost with the service provider.
Fourth, we’ll provide a product of the month club so media companies can enroll readers in a book of the month, movie of the week or video game club and earn affiliate fees from purchased product. It's closely related to this next component...
Fifth, we’ll extend the existing NewsCloud resource directory to provide a store catalog and affiliate management system. This allows media companies to easily earn affiliate fees for products they wish to refer readers to. NewsCloud already includes API level integration with Amazon’s Product API.
Finally, we’ll also work on solutions for integrating our open source platform registration with legacy systems of The Seattle Times website and other media adopters.
How can we do all this in two years? The open source NewsCloud platform provides an outstanding starting point for this project because of its sophisticated Ruby on Rails architecture and numerous ready to use features such as: registration, profiling, Facebook Connect and Twitter integration for registration and viral sharing, background scheduling, notifications and email delivery, Compass and SASS integration for managing design resources, internationalization support (i18n), widgets, resource directory which can be extended into some of our key target features such as deals and the store and an Amazon AWS machine image for affordable, robust hosting.
If we’re successful, we will have created an entirely new suite of approaches to revenue generation for news organizations, approaches that offer higher margins than display advertising and the added benefit of happier, more loyal readers. More importantly, our solution will be freely available via open source for any news organization to adopt and use.
We’ll be providing further updates to the foundation later next week, which we will also publish to our blog. Follow @newscloud on Twitter for updates.
Have a question? Post it here in the comments or email jeff at newscloud dot com.