Floundering news start-ups need help

Although nearly $26 million was donated to 50 non-profit journalism start-ups in recent years, most are flubbing the mission-critical task of finding ways to financially sustain their efforts for the long term. 

The casual approach at most news start-ups to the serious business of identifying next-generation models for journalism has got to stop. More on that in a moment.  First, the background: 

The scale of spending on news start-ups was captured in an unprecedentedly thorough study released today by the Pew Research Center’s Project for Excellence in Journalism. 

In surveying 178 non-profit news ventures formed since 1978, Pew learned that 57 of them started with “a major seed grant,” according to Mark Jurkowitz, the associate director of the project, who kindly responded to my request for funding details not contained in the published report. 

While only 50 of news ventures receiving major seed grants reported the amount of their  backing to Pew, those groups collectively raised “just shy of $26 million,” said Jurkowitz in an email exchange. That makes for an average or more than $500,000 per organization. 

So far, so good. But here is the problem:

Although the intentions of both donors and recipients undoubtedly were noble, Pew found that many non-profit news organizations, including bootstrap operations not benefitting from significant seed funding, “face substantial challenges to their long-term financial well-being” because they “do not have the resources or expertise necessary for the business tasks needed to broaden the funding base.” 

While most of the 178 organizations surveyed by Pew said they brought in more money than they spent in 2011 (the most recent year studied), Pew noted that the bulk of funding for most organizations came from a single foundation or donor. “That funding source may not provide long-term sustainability,” said Pew, noting that only 28% of the organizations at the time of the report said their key donor had agreed to renew the initial grant “to any degree.”  

Of the organizations whose seed funding was renewed partially or not at all, only 28% “were able to make up the entire deficit from other sources,” said Pew.  

Despite the risk of depending on a single source for long-term viability, Pew found that nearly a third of the news start-ups spent less than 10% of their staff time on business development, while more than half said such activities occupied between 10% and 24% of their time.  By contrast, 85% of the ventures said editorial tasks consumed at least half of their time. 

In other words, most start-ups are concentrating on their journalistic missions without giving due regard to the equally vital task of building financially healthy organizations to sustain their efforts over the long term. 

This has been a consistent theme among most of the news start-ups that have emerged since the wheels started coming off the traditionally profitable newspaper and newsmagazine businesses in the middle of the last decade.

Inattention or ineptitude with respect to business matters killed off such high-profile efforts as the Chicago News Cooperative, which flamed out in 2012, and the Bay Citizen, which was euthanized last month in San Francisco. 

The Pew report is not the first to identify the want of business acumen at most journalism start-ups. 

In a 2010 study of 46 news ventures that collectively received $833,000 in funding, Jan Schaffer of the J-Lab at American University reported that nearly a third of the organizations had failed and that the balance were hanging by a thread because the founders were toiling for little or no pay.  “Community news sites are not a business yet,” she concluded.  

The weight of the available evidence over the years makes it clear that small, isolated groups of journalists – regardless of their passion and talents – are not going to spontaneously discover ways to fund the news business. 

If all the nation’s newspaper publishers have been unable to arrest a 50%-plus decline in advertising revenues since 2005, how can a handful of writers and editors be expected to do better? 

For all the millions of dollars that have flowed into starting news ventures, almost no serious research has been funded to identify the business models and best practices necessary to ensure the success of those investments. 

With each news start-up left to its own devices, many have failed. Without significant help, many of the remaining ventures will succumb, too. 

These wonderfully well-intentioned people need help. Before anyone backs another journalism start-up, let’s put some time and money into figuring out how to make sure they can succeed.  

What’s your digital strategy? First, get a grip.

More often than you would think, an editor or publisher will contact me to ask, “What should my digital strategy be?”  

The inquiry is alarming on a number of levels.  First, because it has taken nearly two decades after the commercial arrival of the Internet for many newspaper executives to seriously tackle the seminal existential question facing their businesses. Second, because this question already has been addressed actively for years by businessmen ranging from the brass at Walmart to the butt-crack plumber under your kitchen sink. Third, because the question presumes there is a simplistic, one-size-fits-all answer that, once revealed, will serve for all time.  

Here’s my Yoda-like response:

The answer is there is no single answer. There are many answers. It will take many questions to find the right answers for you. And the answers for today will be challenged over time by the new questions necessary to discover the answers for tomorrow.

The reason there is no single digital strategy is that every market is different and that each business possesses a unique array of strengths, weaknesses, opportunities and threats. We’ll come back to this in a moment.  

The reason there is no enduring digital strategy is that the marketplace is kinetic. The solutions that work successfully today almost certainly will be overtaken in the not-too-distant future by new technological and competitive disruptions that we cannot imagine today.  When the iPhone was introduced six years ago and the iPad arrived three years later, each created whole new ways of getting and giving information.  The next big iThing – whether from Apple, Google or a gaggle of ramen-gobbling geeks in a garage – is bound to change things all over again.   

Successful strategic innovation in this environment isn’t easy. It requires managers to undergo the out-of-body experience of realistically and unemotionally evaluating their businesses, even if they don’t especially like what they see. As demonstrated hour by hour in Silicon Valley, this requires tireless market reconnaissance, unflinching objective analysis, rigorous self-assessment, the disciple to challenge existing assumptions and the fortitude, if necessary, to sacrifice existing lines of business to invest in potentially better ones for the future. 

The reason American newspapers failed to adapt to the digital age is because editors and publishers didn’t want to change, fighting furiously, instead, to preserve traditional revenue streams and editorial prerogatives at a time their readers and advertisers were moving on. With advertising revenues less then half today of what they were seven years ago, one can only hope the industry is ready for something new. 

For those who are, here’s how to start thinking strategically: 

∷ Get a grip. Accept that your business will be affected by three enormous forces that you can neither escape nor control:  Changes in technology, changes in consumer expectations and changes in the ways companies spend their marketing dollars.  A good strategic plan will bend those forces to your advantage, tai chi-style. 

∷ Get real.  Before you can think about articulating a plan, take a realistic look at the internal strengths and weaknesses of your legacy business, as well as the external opportunities and threats that exist (or are likely to emerge) in the marketplace around you. This is called a SWOT analysis and it seldom fails to produce an abundance of appealing, appalling and ambiguous choices.

∷ Get set to self-destruct. As you sift through the strategic possibilities, seriously consider ideas that could cannibalize your existing business, because they may, in the fullness of time, turn out to be better than the business you are in. Back in 1995, the management of the Boston Globe nixed a modest investment that would have secured a big stake in a little start-up called Monster.Com.  As subsequently reported by the Globe, the managers felt a low-priced online job site would damage their highly profitable print recruitment business.  We all know the rest of that story. 

∷ Get creative. To select the most promising paths among the many potential choices revealed by the SWOT analysis, rank them in order of their promise and feasibility.  Test the assumptions underlying each idea, asking whether the critical factors necessary for success are realistically within your grasp. Remember that the quickest way to go wrong is to substitute your intuition for unbiased market research and bottoms-up financial analysis. 

∷ Get going. Armed with solid research, develop clear product specifications and a well-conceived marketing and sales plan.  Launch as soon as possible with a good-enough product to test the market’s response.  Gather customer feedback, analyze the results and refine the product, as necessary, in successive releases.  Feed good ideas and kill the bad ones. 

∷ Repeat. Disciplined planning and execution are ongoing, iterative and forever. So, as Yoda would say, “Started, let’s get.” 

© 2013 Editor & Publisher

How publishers can win at mobile commerce

In the never-ending quest by marketers to put the right offer in front of the right consumer at precisely the right time, inner space is becoming the next frontier for mobile commerce – and a major opportunity for newspaper publishers. 

Inner space is the precious geography inside a store, where marketers have their last, best chance to persuade consumers to buy what they are selling. Here’s why inner space is fast becoming the most valuable territory in the do-or-die world of mobile marketing:

With more than half of mobile users equipped with smartphones, a growing number of consumers are using their devices to decide on purchases as they move through stores, checking product features, consulting reviews and, of course, comparing prices.  In a recent survey, Localeze and 15 Miles, a pair of consulting companies, found that nearly a third of smartphone-packing shoppers use their phones at some point in the purchase process. 

Well aware of this behavior, retailers ranging from Safeway to Home Depot have developed smartphone apps and loyalty programs that meticulously track consumers in order to target specific offers to them. This dynamic process depends on what we’ll call the Three Ps:

∷ Profiling.  Combining volunteered, purchased and derived data, marketers are able to determine the age, gender, wealth, credit rating, education, marital status, address and other demographic information about individuals. When customers opt into brand-issued credit cards and/or join loyalty programs, the actionable data is even more granular and abundant. 

∷ Prospecting. Crunching the vast volumes of data they relentlessly compile, marketers are developing ever-more sophisticated data-mining techniques to slice and dice consumer groups into ever-narrower segments.  The segmentation information is used by brands to recruit future customers from among groups of people who happen to look like the customers they already have. 

∷ Personalizing.  Analyzing past and prospective purchases (the latter captured by monitoring real-time clicks), marketers can learn what folks are likely to buy, when they are likely to buy, how to best pitch to them and, in some cases, even the most compelling prices or packages to offer. In the same way airlines sell seats at different prices as flight time approaches, it won’t be long before brands dynamically customize coupons, pricing and other incentives to tweak demand while maximizing profitability. 

For all the digital derring-do invested at separating consumers from their money, the crucial step in closing any deal depends on putting the right offer in front of the consumer at the moment she is poised to buy. 

To date, reaching customers at the point of sale has been the weakest link in mobile marketing, because the global positioning services that can track you in the glorious desolation of Yellowstone Park can’t pinpoint your location when you are in a mall.  

To solve this problem, a growing number of retailers are installing systems that map the interiors of their stores – and every customer’s location within them. An iPhone app knows where you are – and will direct you anywhere you want to go – when you visit the flagship Macy’s in New York.  The same is true at every Walgreen’s, whose app not only encourages you fill out a shopping list but also routes you through the store, conveniently prompting you to buy salsa when you near the Doritos. 

The value of inner space was underscored when Apple recently bought a start-up company that can detect an individual’s movements in enclosed spaces. Meanwhile, Google has accumulated interior maps of more than 10,000 public locations around the world, including some or all of the stores operated by Best Buy, Bloomingdale’s, Home Depot, Ikea, Macy’s, Petsmart, Sears, Sports Authority, Toys R Us and Walmart. 

But, wait, there’s more: The latest-generation Android phones, among other things, detect barometric pressure, so they can tell if you are on the first or fourteenth floor of a building. Meantime, researchers are developing smartphone biosensors that can measure everything from your body temperature to your heart rate, theoretically making it possible for marketers someday to tell when you are literally hot for their products. 

Given the efficiency and generally higher purchase volume associated with mobile commerce, it is fair to assume that marketers will cut back on traditional print and banner advertising as they put ever more resources into building direct relationships with individual customers.  

While many of the big-box retailers have created their own apps, newspapers, working with a growing number of eager technology partners, can participate in the mobile commerce revolution by equipping independent businesses in their communities with optimized mobile sites, in-store mapping, mobile couponing and loyalty programs. 

If newspapers act now to invest in helping local merchants master the art and science of mobile commerce, they can generate significant new recurring revenue streams at the same time they build powerful customer loyalty for themselves. 

© 2013 Editor & Publisher

Print circ fell 42% at top papers since 2005

A series of changes in recent years in the way newspapers count their subscribers masks a deep, ongoing and troubling plunge that has cut print circulation by 41.6% at the nation’s biggest papers since 2005. 

Print matters because it still produces approximately three-quarters of the revenues at the typical newspaper, according to Jim Conaghan, the vice president of research at the Newspaper Association of America, an industry-funded trade group.  

Although most publishers say they are moving aggressively to diversify their revenues away from print by creating digital products and services, the typical newspaper depends on print advertising and circulation fees to not only fund the innovations they hope will secure the future of their franchises but also to stay afloat in the meantime.  

The foremost question facing publishers is whether the traditional print business will remain robust long enough to support a successful pivot to the digital delivery of news, information, advertising and other commercial services. But an analysis of the most recent circulation data shows that print circulation is shrinking at an alarming rate. Here are the details: 

While the Alliance for Audited Media reported Tuesday that combined print and digital circulation at newspapers in the last six months fell by 0.7% on weekdays, print-only circulation actually declined by 9.9% in the same period at the 25 largest papers in the country. The AAM is an industry-funded group formerly known as the Audit Bureau of Circulations.

The long-term circulation trend is sobering. The AAM archives show that weekday print circulation at the top 25 papers has plunged 41.6% since March, 2005, the year the industry achieved all-time high advertising sales of $49.4 billion. In a stunning reversal of fortune that has roiled the industry ever since, ad sales in 2006 commenced a seven-year slide that brought aggregate industry revenues to $22.3 billion by the end of 2012.   

As illustrated below, weekday print circulation in the last seven years has fallen by more than half at the Los Angeles Times, New York Daily News, New York Post, Arizona Republic, Houston Chronicle, Boston Globe, Dallas Morning News, Newark Star-Ledger, Orange Country Register, Atlanta Journal-Constitution and San Diego Union-Tribune.  Only one of the 25 papers on the list reported selling more print copies in 2013 than in 2005: The Tampa Bay Times. 

Thus, the 25 titles that collectively sold 15.1 million papers on the average weekday in 2005 sold only 8.8 million papers on the average weekday in 2013. 

In fairness, some of the circulation decline results from decisions by publishers to stop selling promotional subscriptions at heavy discounts and to discontinue the costly practice of shipping papers to locales outside their primary markets. It also is fair to note that circulation may have been more stable in the last seven years in small- and medium-sized markets than among the metros on the list of the top 25 properties.

At the same time circulation has been contracting, it has become increasingly difficult to track the trends, because the previously simple and uniform metrics employed by publishers have been replaced in recent years by a series of complex rules that now make it possible for publishers to include far more products than paid print papers in their circulation tallies.  In addition to paid print newspapers, publishers today can count digital subscriptions and even free products that deliver preprint advertising to the homes of consumers who don’t happen to buy the newspaper. 

The positive side of the new rules is that they allow publishers to fully portray the breadth of their audiences, as they endeavor to make their content available in free print products, on the web, on mobile platforms and in the social media. But the flip side of the latitude afforded publishers is that the new methodology can lead to incongruous, if not to say unbelievable, outcomes.  

In one example, the new rules make it possible for the Chicago Sun-Times to appear to be larger than the Chicago Tribune, which unquestionably dominates the market in which they both compete.  Here’s how that can happen, based on the AAM data published here: 

By counting digital subscriptions and give-away products in conformance with the rules that publishers have adopted for themselves at the AAM, the Sun-Times claimed total weekday circulation of 470,548 in the six-month period ended on March 31 vs. the Tribune’s 414,930. But...

When it comes to selling the print newspapers that generate the bulk of advertising and circulation revenues, the Tribune swamped the Sun-Times with weekday circulation of 368,145 vs. 184,801.  On Sunday, the day of the week that typically generates 50% or more of a newspaper’s revenues and profits, the Tribune’s average circulation was 706,840 papers a week vs. 186,182 for the Sun-Times. Which paper looks bigger now? 

A close look at the data shows the Sun-Times pulled ahead of the Tribune by legitimately counting the 208,087 newspapers in publishes in suburbs around Chicago. But the Tribune, which publishes hundreds of thousands of sister titles of its own, does not include their circulation in its publisher statement. The disparity in reporting practices forces an advertiser to parse through the conflicting data to understand the dynamics of the market. Is confusion the outcome the industry desires? 

Among the other anomalies on the list of the 25 largest papers published by AAM, the Honolulu Star-Advertiser, which has a print circulation of 125,726, is listed as being larger than the San Diego Union-Tribune (print circ: 192,782), Boston Globe (print circ: 172,048) and Atlanta Journal-Constitution (print circ: 149,523).  Once again, the question arises:  What is the relative value of the products that put the Honolulu paper ahead of the papers in the much larger markets? 

Because there is no unanimity in the way publishers report circulation, some newspapers  can count the same individual twice if her print subscription is bundled with digital access.  How can an advertiser tell if someone is double-counted? 

In the future, as noted here by Rick Edmonds at the Poynter Institute, publishers will have even more latitude in counting noses by cherry-picking the days of the week they report circulation. Will increasingly idiosyncratic circulation data help – or turn off – advertisers? 

With print circulation flagging and digital products evolving, it is understandable why publishers want – and need – flexibility in the way they report the size and nature of their audiences to advertisers.  

But the anything-goes approach to circulation metrics – which raises more questions than they answer – seems to be a counterproductive path to achieving the objective. 

If credibility is a critical factor in building confidence among advertisers, why is the industry producing such confounding data? 

Citizen ‘journalism’ ran amok in Boston crisis

With an entire city on lockdown and the whole world watching, crowd reporting on the drama in Boston last week reached critical mass. Now, we are facing a critical mess. 

Armed with iPhones, empowered by Twitter and amplified by the high-tech witch hunt known as Reddit, perhaps more self-appointed citizen “journalists” than ever broadcast whatever came to mind in an instant, unencumbered by such quaint considerations as accuracy, fairness and balance – or concern for the damage that erroneous accusations can inflict. 

Fired by outrage and fear at the appalling events in Boston, the crowd blurted, bleated and brayed so much misinformation, so many false accusations and so much paranoia that they heightened the collective angst understandably triggered by the cascading horrors of the marathon bombing, the overnight police shootout and the daylong dragnet that brought a  metropolis to a standstill.

If that were not bad enough, some in the mainstream media – the “Bag Men” cover at the New York Post being top of mind – joined the scrum, seemingly succumbing to the relentless pressure of Internet chatter by publishing inaccurate, unverified and defamatory information when they damn well should have known better.  

As the free-for-all fulminated on the Net, a smart, sophisticated and sensitive friend from Silicon Valley said he saw no harm in the transition from classic, professionally produced journalism to the unfettered ability of all comers to publish all manner of content in the digital era. Based on what we saw last week, I couldn’t disagree more.  Here's why: 

To be sure, some citizens helped the authorities by providing useful photographic evidence, while others assisted the mainstream media with valuable eyewitness accounts of the serial madness in Boston.  

But those contributions paled beside the many incendiary and irresponsible threads at Reddit and other sites that, to cite two of the most egregious examples, wrongfully named an innocent high school student and a missing college student as suspects in the marathon bombing. Details of each case can be found here and here. 

Now, I am the last guy who will argue that professionals are more noble, more believable or more capable of producing quality journalism than unaccredited and unaffiliated individuals who take the time to properly report a development, to piece together a complex investigation or to provide well-considered commentary on matters as they see fit. The epic failure of the MSM to expose the WMD fairytale is all the evidence you need of the fallability of the professional press.  

But, apart from occasional abuses by rogues (scoundrels unfortunately materialize in every profession), most professional journalists subscribe to the values of fair inquiry, accurate reporting and balanced presentation.  The discipline, oversight and latency inherent in the traditional reporting and editing process helps to promote the accuracy, coherence and, therefore, the reliability of the final product.   

When untrained, undisciplined or even unscrupulous people can say anything that comes to mind – as happened repeatedly during the Boston emergency – they do far more harm than good, especially in the sort of  confusing and emotional situation we witnessed last week. 

While citizen journalists in some cases bring welcome light to matters than need attention, the overwhelming bias in certain online venues seems to be to bring additional heat to matters that are already hot enough. Nowhere was this sort of toxic behavior more evident than at Reddit, an increasingly popular online destination for self-styled scribes when big news breaks.

In addition to vigorously spreading unfounded rumors and defaming the innocent individuals referenced above, Reddit carried a particularly obnoxious discussion on the night of the Boston shootout about what level the suspects would have attained had they been playing Grand Theft Auto, the ultra-violent videogame.  

Another popular theme at Reddit was how the mainstream media had missed the story by not naming this or that phony culprit as the real bad guy. It was clear from many of the comments on the site that the crowd put more faith in the stuff they and their colleagues were posting than in what they were getting from the traditional media.  

The anti-MSM meme calls to mind the findings of a national survey conducted after the 2012 presidential election by George Washington University for ORI, a strategic marketing firm. The study found that 63% of respondents believed the quality of information about the election was the same or better in the social media than in the mainstream press. Breaking down responses by age group, the researchers found that fully 57% of those between 18 and 25 had more trust in the social media than in the mainstream press.  

Perhaps the declining confidence in the MSM is an inevitable by-product of the widespread and growing skepticism in our age with respect to such core institutions as government, business, organized labor and religion.  For a snapshot of the decline in  confidence over the years, see the chart below.

While the crisis of faith in the traditional institutions of our society is frightening, the apparent transfer of trust to inherently untrustworthy sources of information is even scarier.  

None of the above should be construed as a plea to muzzle the the citizen-generated media, as if such a thing were possible or advisable. There is no going back.

But we all need to take a hard look at ways that the democratization of the media enabled by digital technology can be channeled to more constructive purposes than is often the case today. 

The job of mustering, coaching, vetting and encouraging quality citizen reporting could well become a major new role for professional journalists. And, who knows? It might even be a path to sustainability for the media companies that, we hope, will continue to employ them.

Why paywalls are scary

The case for paywalls would seem to be compelling:  Stanch the decline in print circulation, get paid for producing valuable local content and tap into a fresh source of sorely needed revenue at a time advertising sales continue to shrink.  

All good?  Not necessarily. The reason to worry about paywalls is that they severely limit the prospects of developing a wider audience for newspapers at a time publishers need – more than ever – to attract readers among the digitally native generations that represent a growing proportion of the adult population.  

More on that in a moment.  First, the background: 

It’s easy to understand why close to half of the nearly 1,400 newspapers in the United States have raced, or are racing, to charge for access to their web and/or mobile products. 

In a typical digital-subscription plan, publishers start charging for access to their websites at the same time they boost the prices on print subscriptions, telling print customers that they can use the digital products for free.  The higher rates, whether a customer uses digital access or not, create a revenue windfall at the same time the publisher can rightfully argue that she has provided loyal readers with substantial added value.  

The revenue contribution can be significant. In a deftly crafted plan launched in the spring of 2012, the Charleston (SC) Post and Courier picked up nearly $1.6 million in combined new print and digital revenues in nine months by putting a metered paywall on its website at the same time it increased subscription fees, according to a presentation by Steve Wagenlander, the vice president of circulation of the newspaper. He spoke at the Newspaper Mega-Conference in February and his presentation is here.

Nine months into the Charleston paywall project – which was billed as a membership program and cleverly sweetened with things like free tickets to theatrical performances and the city aquarium – page views were almost as high as they were when the website was free. Gratifyingly to Wagenlander and his colleagues, only 5 of the paper’s 65,000 home-delivery customers dropped the print product in favor of a digital-only subscription.   The paper also sells 25,000 single copies, for a total circulation of 90,000.  

So far, so good.  But here's the rub: Notwithstanding the elegant execution of the plan, the paper gained only 1,437 new digital-only customers, a sum equal to about 1.5% of its over-all circulation. The program brought in $167,612 in new digital-only revenue. 

Although this performance is roughly equivalent to the industry average of the number of digital-only subscribers gained in a paywall initiative, the modest take rate is worrisome, because it means that the Post and Courier, like most other papers, is not attracting nearly as many new digital readers as it needs to.   

Digital readership matters, because digital, not print, represents the future for newspapers (and most of the rest of the media, too). Unfortunately, newspapers so far have failed to attract a significant number of individuals who came of age in the digital age.  

The generational disconnect is profound.  Scarborough Research, a private company hired by newspapers to measure readership, reports that 68% of newspaper readers are over the age of 45.   The International News Media Association, a publisher-funded research organization, reports that the average age of newspaper readers is 57.   Although newspaper web visitors are slightly younger than the average age of print readers, Borrell Associates, another private researcher, reports that the newspaper web audience grows a year older every year. And we all know what eventually happens to old people.    

Without younger readers to replace their steadily aging audiences, publishers run the risk of losing the relevance and scale that will attract advertisers to not only their print but also their digital products. A continued loss of revenues eventually will impair the long-term profitability and survivability of newspapers.

While paywalls for the moment seem to be doing a generally good job of extracting higher fees from loyal readers, the pay schemes that keep existing readers inside the wall are, for the most part, also keeping potential new customers out.  

So, what’s a publisher do?  Even as they celebrate the welcome windfall, publishers should invest their digital subscription revenues in developing new products on new platforms to attract the audiences they need – and their advertisers want. 

In a word, publishers need to think mobile.  And fast. The ComScore analytics service reported in its 2013 marketplace outlook that one of every three minutes of digital time now is spent with a smart phone, a tablet – or both at once.

Mobile platforms require entirely new types of interactive content and transactional services to satisfy consumers, who want to gather news quickly, locate information rapidly and share words, pictures and videos on demand.  

Modern consumers are looking for a completely different experience than you will find behind most newspaper paywalls. Charging for access to something a customer doesn't want is hardly a winning strategy.

© 2013, Editor & Publisher

Newspaper ad sales skid for seventh straight year

Advertising sales, the predominant revenue stream for the newspaper industry, dropped for the seventh year in a row in 2012, falling to less than half the record $49.4 billion achieved as recently as 2005.

More on that in a moment.  But first, let’s put things in perspective by comparing the meteoric rise of Google, the definitive digital media company, with the epic collapse that has cut the newspaper industry’s primary revenue stream by more than half since 2005:    

As you can see in the above chart, Google came out of nowhere in the early days of the millennium to create a revolutionary way of matching specifically targeted ads to specifically targeted consumers.  In less than a dozen years, this upstart start-up built a $46 billion advertising business that was twice as large last year as the combined print and digital ad sales of all of the 1,382 daily newspapers in the land. 

The stunning reversal of fortune for the newspaper industry, whose consolidated revenues last year fell 6.8% to $22.3 billion in spite of a brightening economy, reflects a long-running lack of imagination and initiative that publishers are attempting to reverse by paying fresh attention to digital advertising and, in many cases, imposing new fees for access to formerly free web and mobile products.  

To underscore the commitment to these new initiatives, the Newspaper Association of America, the trade group that annually reports on the industry’s financial health, argues fairly that “several” new categories of newspaper advertising are growing in spite of the long-term advertising decline.   

While this certainly is true in the case of such things as digital subscriber fees – which largely did not exist a couple of years ago – and interactive marketing services, the fact is that the combined advertising and circulation revenues of the industry, which accounted for 84% of aggregate sales in 2012, totaled $32.7 billion last year vs. $60.1 billion in 2005.  By any measure, the newspaper business is half the size today that is was seven years ago.   

Notwithstanding a modest uptick in the broad economy, newspaper ad sales last year fell to a level not seen since 1983. The difference between then and now is that $22.3 billion in 1983 dollars would be worth $ 50.6 billion today. Revenues fell in every print category: 

∷ National slumped 11.7% in 12 months to $3.3 billion.  This is 58% lower than the $7.9 billion recorded at the industry’s peak in 2005.  

∷ Retail slid 7.6% to a tad under $11 billion.  This is 50% lower than the $22.2 billion posted in 2005.

∷ Classified stumbled 8.0% to 4.6$ billion. This is 73% lower than the $17.3 billion reported in 2005. 

The only bright spot for publishers is that their digital advertising revenues gained 3.7% in 2012, generating an aggregate $3.4 billion in sales.  But the digital-advertising growth at newspapers last year – as well as in the prior 10 years – pales in comparison to Google’s bodacious growth in the same period. 

As illustrated in the green line in the chart above, the digital sales at newspapers and Google started out almost even in 2003 at $1.2 billion for newspapers and $1.5 billion for Google. Google’s sales doubled in 2004, handily outstripping newspapers, and then kept compounding to the point that Google’s sales were nearly 15 times greater than newspaper digital revenues in 2012.  

While Google and newspapers admittedly operate in different realms of the advertising business, a comparison of their respective performance is both fair and instructive: 

Newspapers (along with magazines, billboards and broadcasters) represent the traditional but inefficient “reach” model of advertising, which depends on spreading a commercial message to as large an audience as possible in hopes of connecting with qualified customers who happen at the moment to be receptive to it.  Google, on the other hand, represents the highly efficient “each” model of advertising, which lets marketers put customized commercial messages next to only the results of searches containing specific keywords they have selected to target their ads. The Google system not only enables marketers to target exactly the right prospect at the right moment but also makes it remarkably easy to monitor response rates and, thus, measure an ad’s return on investment in real time. 

While there is no known way for print publishers or broadcasters to provide a similar form of targeted advertising to specific individuals in their audiences, most newspapers, magazine publishers and broadcasters made the fateful mistake when the Internet came along in the mid-1990s of exporting the “reach” model of their legacy media to their products they created for the web and, subsequently, smartphones and tablets. 

Instead of investing in the technology necessary to gather customer data and target advertising on the emerging digital platforms, legacy publishers and broadcasters  – whether for want of insight, resources, skill or conviction – ceded the opportunity to Google and a host of other digital natives who understand that targetable customer data – not masses of unknown and undifferentiated eyeballs – is the Holy Grail of digital publishing.  

In fact, the high cost and imprecision inherent in “reach” marketing is an utter turnoff for a growing number of marketers, who want to establish direct and long-lasting relationships with known customers, so as to efficiently promote purchases through well-honed individualized offers.  As one example of this thinking, one major advertiser candidly confessed here  to his desire to stop buying inefficient newspaper advertising as soon as possible.   

The soaring growth of Google’s sales and the corresponding repudiation of print newspaper advertising objectively demonstrate a clear and growing preference on the part of marketers for “each” vs. “reach” advertising.  And the velocity of the shift, as illustrated in the above chart,  has been dramatic:  

When the NAA first started tracking digital sales in 2003 (nearly a decade after the commercial arrival of the Internet), the aggregate print and digital ad revenues of all the nation’s newspapers were 30.7 times greater than Google’s annual sales. When aggregate newspaper ad revenues peaked in 2005, their annual sales were 7.7x greater than Google’s.  As aggregate newspaper ad sales fell and Google’s revenues rose, Google and newspapers were neck-and-neck in 2009.  Google overtook the combined ad sales of all the newspapers in the United States in 2010 and has been on a tear ever since, outselling publishers by 1½x in 2011 and by 2x in 2012.       

Though publishers from time to time have blamed Google for taking advertising away from them, the fact is that newspapers, magazines and broadcasters never developed products to compete with Google, which now is applying the highly effective principles of keyword-targeted search advertising to banner, video and mobile advertising.  In so doing, Google and its fellow digital publishers are developing ever-richer profiles of individual users to help advertisers acquire, retain and transact business with customers more efficiently than possible in the past.   

As Google and other digital publishers move forward, newspapers and other legacy media companies for the most part have not committed to the bold investments in talent and technology required to deploy the contemporary and competitive digital products necessary to serve the readers and advertisers they want – and need.  

If the print advertising business continues to contract in the future, publishers will have even fewer resources than they do today to transform themselves into true digital publishers.  The market has voted. What are they waiting for?

‘Glory days’ of journalism? No, yes, no and yes.

In nine years of calibrating the health of the news media in the United States, the Pew Project for Excellence in Journalism never has painted a bleaker picture of the performance and prospects of the press than it did in the annual report issued on Monday. 

So, why is Matthew Yglesias of Slate smiling? More on that in a moment. But first, here’s a sampling of what Pew had to say:   

Signs of “shrinking reporting power are documented throughout this year’s report,” said the non-profit foundation in a must-read study that noted  newsroom staffing at newspapers has fallen by 30% in the last decade, that 40% of the content on local television newscasts is devoted to sports, weather and traffic instead of real journalism, that coverage of live events on cable news channels is down by 30% and that the staff at Time, the last-standing print newsweekly, was cut by 5% as its owner prepares to cleave it and the rest of the publishing group from the more prosperous entertainment businesses of the parent company.

Riffing off Pew’s gloomy survey, Matthew Yglesias of Slate proclaimed these to be the “glory days of American journalism,” adding:  “American news media has [sic] never been in better shape. That’s just common sense. Almost anything you’d want to know about any subject is available at your fingertips.”

Yglesias is at once absolutely right and absolutely wrong.  Here’s why: 

Noting the abundance of information produced about the Cyprus banking crisis, Yglesias cites the ready availability of an analysis by Paul Krugman, the Princeton economics professor, Nobel Laureate and New York Times op-ed columnist.  This is the same Paul Krugman, by the way, whose personal bankruptcy in recent weeks was widely reported (Google lists more than 1 million references) all over the web.  A personal bankruptcy, that, um, never happened.  

The false and defamatory story about Krugman, to whom I apologize for bringing it up again, is an excellent example of why it is a mistake to confuse, as Yglesias does, the quantity of infotainment available in the digital media with the quality of the journalism that goes into producing it. 

Real journalists independently report and verify facts and then attempt to produce balanced stories that give the reader or viewer something approaching a full and fair accounting of what they have learned.  These practices have been subjected to a considerable amount of shortcutting in the digital age, where even trained professionals have been known to tweet first and ask questions later. 

The abundance of bloopers in both mainstream and citizen reporting on the Newtown tragedy attests to this.  And don't forget the embarrassingly erroneous CNN and Fox News bulletins on the Obamacare ruling, as detailed by the brilliant (but uncredentialed to cover the Supreme Court) SCOTUS Blog. 

This is not to say that the open-sourcing of the news is all tsoris.  Were it not for a dude with an iPhone and a Twitter account, we would not have the iconic picture of US Air flight 1549 floating on the Hudson. Were it not for a bartender with a video camera, we would not have known about the 47% remark that may well have cost Mitt Romney the election. Were it not for the social and mobile media, we most likely would not have had the Arab spring.  

While we are blessed (or cursed) with at-your-fingertip access to more information from more sources than ever, the ability of anyone, anywhere to be a publisher means that we are in a free-fire zone of information, where the burden is on the consumer to figure not only what she needs to know but also whether she can believe it.   Who produced it?  What is the motivation of the author? How well was it reported? Is it true? Is there another side of the story?  

Beyond worrying about the provenance and veracity of the “news” we know about, I worry even more about the things we don’t know.   With newspapers, news magazines and many broadcasters relentlessly retrenching as audiences and advertising shrivel, the once-primary producers of news are cutting back on the journalists who used to unearth untold stories in City Halls, Statehouses and foreign lands. How much malfeasance, how much misery, how much abuse, how many scandals and how many other compelling matters of public interest are we missing?  There is no way of knowing. And we never will.      

So, are these indeed the “glory” days of journalism?

No, if you worry about the reliability of what you are reading and the important stories you are not being told. 

Yes, if you relish abundance and choice in the information you consume, as well as the frictionless freedom to publish anything that comes to mind, be it truthful, trivial or someplace in between. 

No, if you are a legacy media company hoping to be as powerful and profitable in the future as you were in the past.  

Yes, if you are an upstart journalist with the grit and grist to generate a proper income by building a steady following for your work in the new, and decidedly messy, order of things.  

What newspapers should cover

Last month, I talked about how newspapers often squander their scarce resources by running stories that are longer than they ought to be.  Today, I’d like to suggest what editors can do with all the space they save by not taxing the time and patience of their readers.

The way to make room for fresh and relevant coverage, as suggested previously here, is to use graphics instead of words; to stop rehashing stories widely broadcast on television and the web, and to quit writing background-padded articles about incremental but unimportant developments in long-running stories.

In the interests of making the most out of the 20 minutes the average reader spends with a newspaper each day, publishers can enhance reader satisfaction in the following ways: 

Be local, not global

Too many newspapers still follow the old formula of putting world and national news in the front section of the paper, even though this sort of news long since has been usurped and commoditized by the broadcast media and the web.  With local news and advertising being the principal value proposition for every newspaper, it is only logical to give up-front treatment to those assets.  Extra inches should be devoted to coverage that reinforces the paper’s unique sense and sensibility of the community it serves.  Not random AP filler. 

Cover people, not process

Too many papers cover episodic, and often dreary, institutional activity, favoring regulatory hearings, legal proceedings, government reports and a wretched excess of unfortunate but largely insignificant crimes and fires.  Instead, newspapers should bring issues alive by reporting on the human dimension – and consequences – of the major events of the day. Rather than covering City Hall politics and school board squabbles, newspapers should write in human terms about how policies and official malfeasance affect individuals and the community.  Rather than talking about abstract subjects like the state unemployment rate, newspapers should provide career and job-hunting tips.  How will a decision to reduce library hours affect users? What are cops and community leaders doing to fight high crime rates?  How does park maintenance in our town compare with the maintenance in others? Think about the things that affect the daily lives of ordinary citizens.  Then, cover them. 

Look forward, not back 

Too many papers feel obliged to provide a rote and reactive recitation of events that already have been widely covered by the broadcast and digital media.  There is a better way forward than putting first-day ledes on day-old stories: Look for local angles, fill in background and, whenever possible, look ahead. To keep the news lively, pertinent and fresh, follow the advice of my late and beloved mentor, Howard M. Ziff, who said, “Just ask yourself what will happen next.”

Show, don’t tell

Public trust in newspapers is lower today than at any point since researchers first started asking Americans about their perceptions of the media in the mid-1970s. Only 25% of Americans had confidence in newspapers in 2012 vs. a peak of 51% in 1979, according to the most recent Gallup Poll. Although I don’t think the press is any less reliable than it was before Fox News, Rush Limbaugh and Sarah Palin started sniping at the mainstream media, the best way for newspapers to build trust is to be as open as possible about what they do, how they do it and who produces the news.  Papers should explain their reporting methods, reveal their source materials and introduce their staffs.  This means (a) regular reports from editors on the stories behind the stories they publish; (b) the publication whenever possible of databases, official documents, polling data and other original source materials, and (c) publishing online bios, photos and contact information for every member of the news staff.  Familiarity, in this case, will battle contempt. 

Discuss, don’t dominate

Speaking of openness, newspapers have to do more to engage with their readers than simply accepting comments at the tail end of the stories they put on the web.  Although comments are a start, they are only a start toward building the rich, ongoing dialogue that every newspaper needs to develop in order to become the undisputed forum for the matters that matter in its community.  To engage, build and secure the widest possible audience – which is an absolute strategic necessity for newspapers at a time of dwindling circulation and tumbling advertising sales – publishers and editors need to actively invite community leaders to provide guest commentaries, articles and other contributions to the conversations that newspapers ought to be inspiring at the many points of presence they establish in print, in their own digital media and on third-party social sites.  In other words, publishers and journalists should think of themselves as hosts of an endless series of modern-day digital salons, convening discussions on everything from local politics to home schooling.  But the salons don’t have to be only digital.  There is nothing like face-to-face contact to build community, boost understanding and bring down barriers. What could be livelier than a regular series of live events? 

Be diverse, not insular 

Paging through most newspapers, you would think the world is run by a bunch of middle-aged white men.  OK, so maybe a disproportionate number of middle-aged white guys still happen to be governors, CEOs, symphony conductors, union leaders and university presidents. But the real world, as we all know, is far more diverse and complex than the universe portrayed in the institutionally driven coverage in most newspapers. Given the well-documented demographic changes overtaking the country, one of the chief things newspapers can do to make themselves more relevant at this pivotal time in their history (and that of the nation) is to feature the faces and stories that reflect the full measure of our wondrously diverse population.  This, incidentally, is not just good journalism. Like all of the ideas mentioned above, it will be good for business, too. 

Why retail apps should worry publishers

From Best Buy to CVS and from Kroger to Macy’s, the biggest buyers of newspaper advertising have launched sophisticated smartphone apps to establish increasingly direct and profitable relationships with individual customers. 

These efforts should give publishers the shivers, because this new channel represents a major threat to the retail lineage that constitutes half of what’s left of the advertising sold by newspapers – an industry, lest we forget, whose collective print and digital ad sales are less than half the record $49.4 billion achieved in 2005. 

Smartphone apps appeal to retailers, for starters, because they are far cheaper than buying full-page ads and preprint inserts in newspapers. Perhaps even more compelling to merchants is that apps enable them to precisely target offers to individuals, thus achieving not only happier customers but also fatter tickets at the checkout line. 

At the moment, the most prominent feature in nearly every one of the free retail apps is the local version of the retailer’s weekly newspaper advertising insert. While the presence of the ads provides publishers with a tangible representation of their immediate relevance to retailers, here’s why the apps pose a long-term threat: 

The more consumers interact with apps that know their names, locations and buying patterns, the smarter marketers will get.  The smarter marketers get, the more productive their direct-to-consumer promotions will become. At some point, retailers naturally will begin wondering if they need to spend as much on newspaper advertising as they did in the pre-digital era.  

Here’s what publishers are up against: 

Department and discount – Every national department store or discount retailer puts the local version of its weekly newspaper advertising insert front and center on its app. While some apps are better than others, the typical features include daily specials, store locators, handy shopping lists and registries for weddings, babies and other life-changing events. Many, like Best Buy, let you scan barcodes to get more information about products. Several merchants, like Macy’s, allow you to manage your charge card by monitoring transactions, checking balances and paying bills. For those disinclined to brick-and-mortar commerce, Walmart and others link directly to their online shopping environments, which feature broader product selection than often found in stores, as well as user reviews and – quite often – free shipping.  

Supermarket – In addition to promoting its weekly newspaper ads and daily specials, Safeway, which has had a long-standing and well-developed customer-profiling program, dishes up customized offers based on a user’s demonstrated preferences and past behavior.  App tools make it possible to create and update a standing shopping list, as well as to organize and redeem coupons.  The more you use the Safeway site, the more the company knows about you – and the better it targets the deals you receive. As discussed here, the company is "working hard" to reduce its reliance on newspaper ads. Kroger provides many of the same tools as Safeway with the added incentive of gasoline discounts for those participating in its loyalty program.  Whole Foods takes a different approach to customization, providing a robust app that enables users to plan menus for various occasions – including high-fiber, low-sodium and gluten-free choices.  As you make your dining decisions, the Whole Foods app provides recipes and shopping lists to speed you through the store. 

Pharmacy – In addition to billboarding weekly newspaper ads and daily specials, the apps from CVS and Walgreen’s include quick clicks to refill prescriptions or print photos.   CVS publishes links to its affiliated urgent-care centers and a handy tool to identify pills based on their color, shape and other physical characteristics.  Walgreen’s has a quick link to its customer-loyalty program, so you can monitor and redeem reward points.  It also has a function that plots every item on your shopping list on a map of each store, so you quickly can find hair gel or travel-size toothpaste.  As in-store tracking technology is combined with the abundant personal information carried on most smartphones, it won’t be long before retailers dynamically tune offers to a customer’s journey through the store. 

Home improvement – In addition to prominently publishing their weekly newspaper ads and daily specials, Ace Hardware, Home Depot and Lowe’s are among the national brands providing apps that allow customers to locate stores, scan barcodes and shop online.  A tool on the Lowe’s app allows registered customers to inventory honey-do projects for each room of the house, so they don’t forget to buy a light bulb for the bedroom or paint for the deck.  At the same time the app generates a shopping list for the next trip to Lowe’s, it learns a ton about who you are, where you live, what you bought and what you might buy in the future.  And that’s the whole point of retail apps: creating a personalized relationship with the brand.

Publishers hoping to expand – or, at least, retain – their share of local advertising dollars need to find a way to join the retail-app revolution.

© 2013 Editor & Publisher

So long again, Chicago Daily News

On March 4, 1978, the presses fell silent for the last time at the Chicago Daily News, an iconic and crusading newspaper that was unable to adapt to changing times. The following article, which originally appeared here in 2005, is reprinted as a reminder of what happens when a paper runs out of readers, revenues and ideas.

"It's fun being the publisher when things are going well," squeaked the young man who stumbled awkwardly to the top of a battered desk in the unusually silent newsroom of the Chicago Daily News. "But it's no fun today."

Swallowing a nervous giggle, Marshall Field V cleared his throat and read the assembled staff the short, typewritten death warrant of one of the most distinguished newspapers in American history.

An agonizing month later, on March 4, 1978, the Daily News signed off with the jaunty banner, "So long, Chicago."

The line was written by the late nightside copy desk chief, Tom Gavagan, a chain-smoking, working-class Irishman who seemed to own only two shirts -- one in burnt orange, the other in avocado green. The tears in Gav's eyes weren't from the smoke.

Although it happened 35 years ago, the story is worth telling today, because many of the zany, brainy people who made that paper sing aren't here to talk about it any more. They were my mentors, comrades and friends, and I cherish their memories.

But this isn't just ancient history. It is a valuable reminder to today's media companies of what happens when you run out of readers, revenues and ideas all at the same time.

The Daily News, like most afternoon newspapers, succumbed at the age of 102 to a declining audience and rising expenses.

Its readers had moved on. On to the suburbs, where delivery trucks couldn't reach them with a paper that didn't come off the press until afternoon. On to the sofa, where they favored Three's Company on television.

There were no home computers, no Internet, no iPods and no cellphones to get between our readers and us in 1978. Still, circulation dropped. The management was changed. Circulation dropped. We redesigned the paper. Circulation dropped. We tinkered with the product. Circulation dropped.

In the end, there was nothing left to do. Some 300 people lost their jobs, and Chicago lost a great newspaper.

The Daily News, in its best days, was a cutting-edge conscience in conservative Chicago, a husky, brawling town that wasn't always ready for reform. The paper stood fast against official incompetence and government corruption and stood tall for civil rights and the little guy. For years, the Daily News stubbornly held its price to a penny, so as to be affordable to laborers heading home from work.

It was one of the first newspapers to have foreign correspondents, to print photographs or to cover that new-fangled medium, radio. Its widely syndicated coverage won 13 Pulitzer Prizes, including three for meritorious public service.

The Daily News cultivated a limitless array of talent over a century, including Eugene Field, George Ade, Ben Hecht, Finley Peter Dunne, Carl Sandburg, Peter Lisagor, M.W. Newman, Lu Palmer, Lois Wille and our latter-day franchise player, Mike Royko.

The list is too long to print here. But the Daily News, in its classy way, printed the name of everyone working on the staff on the day the paper folded.

My name was on that list. It remains one of proudest, and saddest, moments of my life.

‘We’re working hard to get out of paper ads’

It’s hard to overstate the velocity and magnitude of the shift from mass to target marketing in an era when, as ComScore reports, 50% of mobile users have smartphones and 37% of digital page views occur on mobile screens instead of desktops. 

But don’t take my word for it. Instead of attempting to characterize the disruptive impact of these changes on newspapers and other mass media, I am sharing today the actual comments of a major newspaper advertiser who candidly states: 

“As people become more digital, there’s an opportunity – which we’re working hard at – to actually get out of the paper ads, and make the ad itself personalized for every household.”

The intention to shift from mass print advertising to targeted digital marketing was articulated by Steven A. Burd, the chief executive of Safeway, in an earnings call with securities analysts on Feb. 21.  

In reporting on the conversation, Advertising Age noted that Safeway, which is the 10th largest retailer in the country, cut its newspaper ad spend to $20 million in the first 11 months of 2012 from $33 million as recently as all of 2010. See selected metrics below. 

At the same time, Safeway has boosted the membership of its Just for You digital loyalty program to 45% of its base of 12 million customers, according to Ad Age. Burd’s goal, reports Ad Age, is to get some three-quarters of his customers into the program, which sends targeted offers to individuals based on their carefully monitored consumption patterns.  

Thanks to Seeking Alpha.Com, here are the relevant excerpts of the comments that Burd and his colleagues made in the recent earnings call:   

Deborah L. Weinswig, Citigroup analyst: Steve, you say that Just for U has been better than expectations. Can you talk about the components of that and what you think the key drivers have been?

Burd: Well, when I say better than expectations, we’re delivering about 50% more on – of added weekly sales per household – than we had anticipated. And what’s happening is, our best customers are becoming increasingly more loyal and buying more items per trip. And that’s been true now for – since the beginning of Just for U. Did that help you?

Weinswig:  Yes. Are you seeing that you’re getting kind of more loyal customers?

Burd: Yes, our loyal customers are becoming more loyal, and customers that were less loyal are entering into that more loyal category.

Robert L. Edwards, Safeway president:  Yes. And Deborah, I'd also add that mobile users are higher than we had predicted. We’ll show you some slides at the Investor Conference in a couple of weeks, but we’re very pleased with the percentage of Just for U users. They’re using mobile technology because their incremental spend is higher and more frequent as well.

Burd: In fact, it's higher by about 40%. And we have – I think since our last call, we’ve – maybe we launched the iPad application.

Edwards: Right.

Burd: So we basically are on all smartphones, plus an iPad application, which is quite different from the pure mobile application. And it’s attracting a lot of users. Still, I would say, the majority of users are still at the desktop stage. But we think that will change over time.

Edwards: I think we’ve also been surprised at the amount of digital coupons that people are accessing on the website. Well, again, we’ll show you some data on that in a couple of weeks. So that's been a very positive feature of the program.

Weinswig: And how has your relationship with your vendors changed as a result?

Edwards: Very positive. Again, we’ve got some slides prepared to show you some incremental sales that our top CPG [consumer product goods] vendors are realizing relative to rest of market. And so the participation has been quite high. And so I think we’re pleased, but more importantly, our major CPG vendors are very pleased as well.

Burd: You might recall that we started Just for U with about seven or eight of our key vendors and only recently have expanded that to the broader group.

John Heinbockel, Guggenheim Securities analyst:  Steve, if you think about Just for U, and the impact of payroll tax and more recently – I guess two reasons — the rise in gas prices, do you think Just for U has offset that impact, or the impact from those negatives have not been nearly as great as we might have feared? What do you think it is?

Burd:  Yes, I think that Just for U has clearly had an impact. When you look at our numbers, we can’t really see any decline that resulted from the payroll tax going up. Keep in mind that a Just for U user can save anywhere from 10% to 20% off normal Club Card pricing. And so that puts you right down there with the dollar stores and mass and everybody else. And so I think that Just for U has really helped. We cannot see any blip in our numbers as a result of the payroll tax kicking in.

Edwards: I think actually that if disposable income is down because of higher payroll taxes or fuel cost, I think it actually plays to the strength of Just for U, because we can target specific individuals based on their shopping patterns and what we think is happening with their disposable income, because it doesn’t affect all of our customers equally. And so I think it actually plays to the strength of Just for U.

Burd: The other thing, John, is that Just for U applies to people of virtually all income levels. Talking to people at really some relatively high income levels, even the so-called top 1%, they’re using Just for U because they all have iPads, they all have iPhones. And it just seems crazy not to take advantage of pricing tailored to the individual household.

Heinbockel:  And one other thing related to Just for U: At some point there should be a benefit for you in terms of pulling back some promotional spend more broadly. When – I know we’re not there yet – when do you think we get to the point where it does have a positive impact on gross?

Burd: I think that we could get there probably late in 2013. Also, as people become more digital, there’s an opportunity – which we’re working hard at – to actually get out of the paper ads, and make the ad itself personalized for every household.