Opinion: How to profitably publish financial news online for free

By Bernard Hickey

Earlier today NBR publisher Barry Colman announced he was going to charge a discounted NZ$89 for a six month subscription to see about 20% of the news and commentary at NBR's website.

He argued it was only a matter of time before the business model of free news online collapsed and media generally was at a 'tipping point in The Great New Journalism Adventure.'

I agree that we are at or near a tipping point for a great new journalism adventure and I'm having a ball embarking on that adventure.

But I think Barry has tipped the wrong way and I'd like to suggest another better and more profitable way.

Firstly, it's worth looking closely at what Barry said to his email subscribers announcing the change. In the spirit of the underlying ethos of blogging I encourage you to click on the link to the announcement, where he is getting a pounding from his own readers (congrats to Barry by the way for leaving comments open and I admire what he has done up until today with NBR.co.nz).

Here's how the tirade started.

As you know, there has been endless discussion for a number of years about the crazy model adopted by newspapers in most parts of the free world in which they pay the enormous costs of running professional newsrooms only to give their content away free "“ while at the same time slashing newsroom numbers to save money as circulation and advertising revenues fall.

Barry is right about the endless discussion among print publishers and how it's bubbled up again in recent months.

They are all under intense pressure from those falling circulation and advertising revenues, particularly in the United States where most newspapers have very fat cost structures and have faced hot competition online for longer.

But I didn't think Barry faced the same immediate pressures, given the NBR dominates the weekly business newspaper market and New Zealand's economy has fared better than the US or Europe. 

He has form in this area, however. My understanding is that he has tried to invest online and build a profitable audience in 1999, but failed.

His second attempt in the last year had, I thought, done very well, but it seems to have failed to meet his expectations. Hence the palpable anger in this comment.

And to add to the madness it has been the aggregators that have profited the most from the supply of that free news copy. Worse still the model has spawned a huge band of amateur, untrained, unqualified bloggers who have swarmed over the internet pouring out columns of unsubstantiated "facts" and hysterical opinion. Most of these "citizen journalists" don't have access to decision makers and are infamous for their biased and inaccurate reporting on almost any subject under the sun (while invariably criticising professional news coverage whose original material they depend on to base their diatribes).

Just turn it off

It's not clear what he's referring to when he talks about aggregators.

If he's talking about search engines like Google or google/news then he has a simple solution. He can very easily turn them off. Google, helpfully, has a few tips.

For more than a decade, search engines have routinely checked for permissions before fetching pages from a web site. Millions of webmasters around the world, including news publishers, use a technical standard known as the Robots Exclusion Protocol (REP) to tell search engines whether or not their sites, or even just a particular web page, can be crawled. Webmasters who do not wish their sites to be indexed can and do use the following two lines to deny permission: User-agent: * Disallow: / If a webmaster wants to stop us from crawling a specific page, he or she can do so by adding '<meta name="googlebot" content="noindex">' to the page. In short, if you don't want to show up in Google search results, it doesn't require more than one or two lines of code. And REP isn't specific to Google; all major search engines honor its commands.

Go on Barry. Do it.

You'll lose at least a quarter of your traffic overnight, but it will stop google 'profiting from all that free copy' (I doubt it does by the way,)

The other point worth noting in Barry's comments about 'hysterical, untrained, unqualified bloggers and citizen journalists' is that he has a couple of the best bloggers in New Zealand on his payroll -- David Farrar and Chris Keall.

They are probably better connected, more hard working, more relevant, more useful and set the news agenda more often than any of his regular journalists, or any other for that matter.

David Farrar's Kiwiblog is the gold standard for blogs in New Zealand because he works so damn hard.

He also is very well connected, scoops the mainstream media almost daily and actively works to foster a community.

He's already posted on this issue and beat me to the punch.

David single-handedly set the agenda for the public upwelling of opposition to the Electoral Finance Act last year, which Barry also opposed with vigour.

Barry likes him so much he invited him to write a column on NBR.co.nz. Go figure, as the Americans say.

Chris Keall has done a fantastic job at the NBR covering tech and telecom stories since starting this year. I only hope his stuff remains in front of the paywall. It is today. That's brilliant.

Many bloggers are not journalists, but often they have more expertise and better contacts in their particular field than most journalists.

The good ones often write better as well.

I point to Lance Wiggs' blog as an example of a non-journalist writing excellent business analysis independently of a mainstream publication. As a former McKinsey consultant and advisor to Sam Morgan TradeMe, he has the insight and experience no business journalist here would ever have. (Disclosure: I worked with Lance at Fairfax.)

Blogging is an intensely democratic area. The better the content, the bigger the audience. That may be why Kiwiblog has an audience and traffic that is not much smaller than NBR's.

Then Barry goes on to say the model for free news online is going to break.

It is only a matter of time before the model collapses. The alternative is newsrooms decimated to the point of processing public relations handouts or unedited government propaganda from their fully staffed team of spin doctors.

Barry is right that his traditional model of print journalism is collapsing, albeit slowly in New Zealand. The idea that somehow a print publisher could make a smooth transition from advertising-and-subscription-funded journalism in print to advertising-funded journalism online is a pipedream.

His model of a hybrid print-online publication is also collapsing, but more on that later.

Cut costs 80%

Barry has two basic problems. Firstly, he has a cost structure problem.

His costs are too high and there's nothing shameful in that because all print publishers have high costs.

He has to support contracts with a printing press firm, an ad sales and marketing team, a fancy office in the CBD, editors, sub editors, journalists, software licenses, promotional advertising and the sponsorship for the Opera.

Secondly, he has a revenue problem. Advertising online earns about 10% of the equivalent advertising in print when you compare demographics and page impressions in a like for like way.

I reckon the online CPM rate (cost per thousand page impressions) for a financial news site in New Zealand is about NZ$50, while I suspect the similar CPM rate in a glossy print publication like Barrry's would be over NZ$500. Either online isn't earning enough or print is overcharging. I suspect the latter.

That means Barry has to cut his production costs by at least 80% to break-even in an online only world, let alone make a profit.

Barry then makes the mistake of assuming his only method of cost reduction is firing journalists in the following comment.

Our move to Subscriber Only Content has been driven by our belief that laying off journalists as a cost-cutting tactic is a route to oblivion for newspapers. I know there have been previous attempts by New Zealand publishers to charge for their news and these have failed and left them so far scared to attempt new initiatives.

The only productive assets he should have in an online world are journalists and commentators. Their output is the only thing that will earn money.

That means slashing printing, marketing, accomodation and other overheads to as near to zero as possible. He has to think the unthinkable and turn off the presses.

He is probably nowhere near having to do that for another decade or so, but it will come. I also wonder how much profit he could sacrifice before sacking journalists.

NBR does not equal WSJ or FT

Barry also makes the mistake of assuming others have successfully erected pay walls and he can too.

Overseas the Wall Street Journal and The Australian Financial Review have successfully instigated subscriber paid policies for premium content and legendary publisher Rupert Murdoch has promised the days of the internet's "free lunch" news service from his newspapers is about to end.

There's a couple of problems with that assumption.

The Wall St Journal can charge for its premium content because it is the biggest financial news brand in the world covering the world's biggest economy and the world's biggest markets. And even then I bet it doesn't cover its costs, if it had to buy its journalism on an open market from the Wall St Journal newspaper. It is still being subsidised.

The Australian Financial Review's site is a debacle that earns nothing. Fairfax has essentially ceded the financial news space to Murdoch's The Australian and a startup called businessspectator.com.au.

The FT has been more successful with its tiered pricing strategy, but it too has struggled over more than a decade. I have seen that from the inside.

NBR plans to charge an annual fee (before discounts) of NZ$298 per year. The Wall St Journal charges US$129 (NZ$205) per year for its exclusive news. The FT.com charges US$182 (NZ$288) per year for its standard subscription level. I actually pay for both subscriptions because it's my job to know what's happening at a very  high level overseas. Would I pay for those if I was a regular reader or investor? Probably not.

I'm actually reviewing whether I can get away without paying for them at all. I'm finding lately that the key (and free) financial blogs are more useful. We'll see.

I'm certainly not going to pay more for the NBR than I do for the WSJ and FT. Sorry Barry, but you're not as good.

There's a cultural problem

I've worked inside big media companies trying to re-educate and change news cultures from the inside to be more online friendly. Eventually you end up hitting a brick wall of legacy costs and legacy revenues. 

Behind that is a cultural legacy of running a news monopoly to maximise free cash flow.

That means maximising revenue with high advertising to news ratios, mutliple advertising inserts and steadily rising subscription and cover prices.

That means minimising outgoings by cutting journalism costs because there's no need to provide better content when you think you have no competition in your monopoly area.

Over the 1980s and 1990s New Zealand's newspapers rationalised themselves into a carefully segregated set of geographies and niches. Often they were built around the logistics and economics of a big printing plant and a news gathering process that is wedded to an increasingly early nightly deadline.

The high start up costs of building a printing plant (at least NZ$50 million) essentially walled off these monopolies so they could comfortably churn out the cash for APN (Tony O'Reilly), News Corporation and then Fairfax.

That cash churn was so comfortable it convinced the shareholders to leverage up and suck up even more cash in the form of debt. That decision is really hurting them now.

I have no idea if Barry has this debt problem. I doubt it, given he sold the Property Press empire for a big whack a few years back.

As head of Digital for Fairfax and Head of Business News for Fairfax from 2006 to 2008, I tried very hard to integrate the online and print news organisations for business coverage. I failed because I was over-ruled by the editors of the respective Fairfax newspapers. They can't see how the two medias can work together.

They still don't for both major newspaper chains. The only way to move forward is to literally destroy these print-based cost structures and start again.

I'm convinced the unthinkable (turning off the presses) is now the only way forward in the long run. That's partly why I'm doing what I'm doing now. I'm part of the creative destruction process.

And here's how it can be done

In January 2008 I left Fairfax and joined David Chaston here at www.interest.co.nz to see if we could build an interest rates comparison and news service that made us money.

I really had no idea how it could be done.

I was sceptical and nervous, given the struggles I'd been part of at Reuters, the FT Group, Telecom and Fairfax at making money online from free news. I helped in a small way to build a 20 million pound online publishing system at Reuters called News2Web that as far as I know has never been used.

Even the FT never made real money online without a big subsidy from the print operation. Ditto for Fairfax. Telecom had no real desire or ability to make money from online media through XtraMSN. It still doesn't with YahooXtra.

So how have we done it?

Here's our own 10 commandments for making money by 'giving away' news online.

1. Keep your costs brutally low

Given the essential problem of earning only 10% of the revenue from the same audience you have to keep your costs brutally low. We use the free open source software Wordpress to publish. We never pay for advertising, even google adwords. We use free multi-media publishing platforms whenever we can, including Youtube, scribd, slideshare and twitter.

We simply embed the code for these platforms in Wordpress. Our videos are made with gear costing no more than NZ$3,000 in total. We take budget flights to Wellington for Reserve Bank press conferences and the budget. We hold our meetings with customers and partners in cafes. We drink instant coffee. We celebrate saving money. We hate spending money with a passion.

2. Treat Google as god

We worship and fear Google in equal measure. It is the major source of traffic to our site and to most sites. We obsess about our Pagerank and how to raise it.

We work like dogs to get sensible links into our site from highly ranked sites elsewhere. Almost the first question we ask before anything we do is: how can we boost our Google juice.

Just like any decent deity, Google can take life and give it. Often Google's giving and the taking of life appears not to have any logic. It is the mystery of the faith, but we never lose the faith. If I could get my hands on the Google's Pagerank algorithm I would be the richest man in the world. Come to think of it, the two men (Larry Page and Sergey Brin) who dreamed it up are the 26th richest men in the world (US$12 billion each).

This algorithm is the font of everything online. Does Barry know that? Apparently not if he's even thinking of turning it off. Just a quick illustration of how endemic Google is. TradeMe and Trade Me are two of the top 10 Google search terms in New Zealand because people apparently don't know the TradeMe URL. I suspect a good chunk of people would go to NBR do it by typing NBR into Google and then clicking on the link at the top of the search rankings.

3. Worship your community, which is the holy spirit

I stumbled on this after adopting Wordpress as our content management system because it cost nothing. Our community is everything. I love eliciting comment and insight from our readers. Often they know a lot more than us about a subject and can say it much better. They tip us off to stuff all the time. I am forever asking for help and getting it. I always read all our comments and regularly go in to respond to comments. It's worth the time and is a lot of fun. It improves the quality of the articles immeasurably.

I spend a lot of time dreaming up polls and finding ways to trigger a debate. It's so much better than writing just a plain article.

4. Share the link love and ye shall receive

The bloggers' ethos is all about link love. Whenever you source a document or another media report you must hyperlink to it. This is not just to be polite, although that is part of the ethos. This is all about driving traffic to each others' sites and being open and transparent.

It's also all about worshipping in front of the Pagerank algorithm. It means we source what we have whenever we can and it allows our readers to check our facts and then debate them with us.

5. Donate the news and sell the data

This is at the core of how we make a profit. We collect an awful lot of data about interest rates, the housing market, the economy, financial markets and commodity prices. We display these in charts and tables for free and use them in free news and commentary on our website. A major source of traffic to our site is to our rates comparison pages (mortgages, term deposits under one year, term deposits over one year, and credit cards) and that's where many advertisers want to be for obvious reasons.

We then collect and store the data for these pages and sell that in various concentrated forms and formats to banks, regulators and other media. We mine these data sets constantly for story ideas and new ways to profit from them.

Some might say this an impossible business model for others. It's obviously more difficult outside the financial realm, but not as hard as you might think. Just imagine if journalists collected data on their areas of interest, including courts, fires, crime, entertainment, council issues and general business issues? If it was properly structured and maintained it would become very valuable to lots of people, particularly when mashed up with maps and other data. Real estate agents, businesses, councils and all sorts of people would pay for it or that data would generate much higher CPM rates from advertisers.

Just imagine if you could look at a map studded with data and reports on crime, school quality, community events, sports reports, economic reports and anything else linked to that region or town or street? Or perhaps sliced and diced another way? There's money in that sort of targeted usefulness. Check out Dominic Adrian Holovaty's ideas on making money from data here and his everyblock.com site.

He also spoke recently at Webstock in New Zealand and Julie Starr has a great summary of what he's about with a video.

6. Be generous, open and tolerant

Open up comments on all stories and allow unmoderated comments from all. Moderate after publication and only ban or block comments when they are clearly defamatory or abusive. This is a big issue for big media. They can't let go of their perfect publication and are paranoid about legal action or upsetting anyone.

There are no legal precedents yet, but I've seen a legal opinion saying moderation after comment is just as effective in protecting the publisher as moderation before the comment. Having a journalist approve or moderate every comment before publication is too expensive and blocks the flow of debate. It is the reason the NZHerald blogs have so few comments despite being very heavily read. Commenters want instant gratification from instant publication and the joy of being part of an active debate. Invite dissent and debate. Give credit to other sites and competitors. It's the internet. That's how it works.

7. Spread the gospel through all media

Many old media journalists shun or block appearances or publication on other media. This protectiveness is a product of the old monopoly culture. If you have the news and there is no other way of getting it because the paper can't be printed or distributed in your geography or niche then it makes no sense to publish your content in another media.

The problem online is that news and comment is very easy to find through google, very cheap to produce and endemic. You have to rely on your content being better than anyone elses and finding other ways to make money from your content or the brand you've built around that content. Geographic news monopolies don't work any more.

I appear regularly on television (TV3, TVNZ, Prime andTVNZ7), radio (Radio Live, NewstalkZB and Radio New Zealand National) and in print (Herald on Sunday). Some of this is paid for and some of it is free. I even blog on NZHerald.co.nz (Don't tell anyone but it has a very high Pagerank...).

All of this multi-media odd jobbing helps spread our brand and our content to a wider group of people. This means people think of interest.co.nz when they think about anything to do with interest rates, house prices and the economy. They will come to us eventually, even if it's after hearing about us elsewhere.

8. Open your source and be happy

Open source everything. It's much cheaper and it's the 'internet way'. Never pay a licence fee for anything. Again, this is partly about keeping your costs brutally low, but it's also about being more engaged, more community-minded and 'bloggy'.

Open up your articles to challenge by linking to every document our raw source. Invite comment and correct openly and immediately when it's clear you're wrong.

9. Be the best and link to the rest

The temptation when you're in the Old Media is to believe that you have to have everything. You believe that you are the only source of news for your reader and therefore you have to be the 'journal of record' and 'cover the waterfront'. This is all part of the monopoly news culture.

There's no point trying to do this in an Internet era. Choices are a google search away and there is always someone else who has covered a public event. If we don't have it first, we simply link to the website that has it. If we can't find a fresh angle or a way to explain it better to our audience, then we simply don't cover it or we link to someone else.

We know we're not the only website people look at. Being best for us means being first, fast, accurate, useful and incisive. If we aren't at least one or two of those things, we don't waste our time (and our readers' time) doing the story.

10. Focus on a lucrative niche and nail it

We are focusing on those 2 million New Zealanders who have term deposits, mortgages, credit cards and car loans. They make decisions on about NZ$170 billion of mortgages and NZ$90 billion of term deposits every 6 to 18 months. They want accurate and useful information to help them decide whether to fix or to float, how long to fix for, and which bank or non bank they want to use. There are at least 10 very large and profitable companies advertising to these New Zealanders. We aim to help them reach that audience.

Over the coming years they will need to market to their customers directly online and much of that will happen through rates comparisons sites. We have the biggest and best in New Zealand at the moment. Our advertisers are happy to pay to reach those customers online at the moment they are making decisions about those NZ$260 billion of assets and liabilities. That's where we make money from advertising. It is a niche market, but a growing and profitable one.

All we need is 0.01% of the NZ$260 billion being rolled over every 18 months to be spent on online marketing and some of that NZ$26 million will trickle to us. If it's 0.1% then we could be talking some real money.

People in New Zealand forget online in New Zealand is big business.

Trade Me makes at least NZ$1.5 million profit a week. Air New Zealand sells more than NZ$1 billion of tickets a year through its websites.

Trying to be all things to all people is a waste of time online. There are too many choices and too much excellent stuff. You simply have to be the very best in your chosen niche.

Barry might argue that the NBR is the best business news publication in New Zealand. That may be true for the niche of a weekly business newspaper, but that's not automatic online. There is hot competition from NZHerald/business, Stuff/businessday, ourselves and scoop/business.

We were chuffed earlier this year when interest.co.nz won the Qantas award for Best Business News website HT to Lance Wiggs for this chart below, which we're proud of.

So why do I care what the NBR does?

Perhaps I should just shut up and let Barry make a big mistake. Fair enough.

But I am keen to share any ideas I have about making money from free news online.

I welcome any more ideas in the comments below.

I believe Barry cares a lot about finding a way to make quality business journalism sustainable. I think he's an old journo at heart and is trying to make a living for himself and a bunch of other journos at the same time. I wish him all the best.

I just think he's going about it the wrong way.

Cue free ad PS: Here's a presentation on this topic I gave to a Massey University Chancellor's Lecture Series at Albany on July 29.