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Jim Chisholm: Social networks are a waste of time for traditional media

Social networks are a waste of time for traditional media, as sending off the audience is not a good idea for publishers, whose biggest problem is to keep the readers on their websites, says Jim Chisholm, the well-known media consultant and analyst, who advises the world's leading media organizations on strategy and development in business and practice.

The challenges in securing the profits for traditional media, the threat of newspapers' extinction and the future trends of media industry were among the questions Chisholm discussed with RIA Novosti journalist Alina Gainullina ahead of the International Future Media Forum.

Do you consider as logical the trend of readers moving from print media to Internet, while the profits are not following them?

We are not seeing anything new at all and we shouldn't be surprised about what is happening. The profit historically has been in the print product, but so were the costs. Therefore it must be possible to make good profits in a digital world and there are some companies that successfully do.

But there are some critical issues, and this is what I'll be talking about in Moscow. The first one is that the intensity of consumption of digital products is far lower than that of the print products, and that's why they find it so hard to get revenues.

The publishers are successfully getting people to read our products in the digital world, but what they are not doing is making them read those products often enough and spend enough time with them.

So you basically think there is a direct connection between the time users spend with media and the profits, don't you?

Absolutely. If you look at how each newspaper copy is distributed, about 2,6 people read it in print and about 1,3 read it in digital format these are the average figures for Europe. Of course, there are the exceptions like The New York Times, The Guardian and so on.

If you see, how often in a month do people visit media, they visit the print papers 16 times, while the for digital papers it's just six. At that time they look at 36 pages in print and just 3,5 in digital. Over a month, print continues to deliver over 50 times the audience intensity of newspaper digital websites.

So the net result is that people are far more likely to see an advertisement in print than in digital, and they are far more likely to pay for the content in print than in digital. This is why it is going to be so difficult and is difficult currently to make revenues.

Does the major challenge for traditional media lays in the area of social networks, UGC or anything else?

I think that social networks are a waste of time, a passing fad.  When you see the invitation on the top of the homepage to go away from the newspaper immediately and to go to Facebook first to me, it's really dumb. Basically what you're doing is you're sending your readers off, while your biggest problem is to keep them on your website.

I have a lot of worries about the social networks. I also personally do not believe that the idea about discovering the content on Facebook and getting readers from there really works.

UGC is a completely different world. This content needs to be well-managed, needs to be well-presented. We need far more opportunities in terms of data journalism and getting through the thousands of messages. And that's going to be a real breakthrough, I think.

At the same time, it's going to need editorial resources. There was a feeling during last couple of years, that the journalism was under threat because of UGC. But I think the opposite UGC is not going to replace professional journalism.

The real challenge is people's time. The older generation across all media abandon media brands as they get older, because they grow older, they grow socially, they buy a house, they have children. People read newspapers most when they are younger, and they give up when they are older. Exactly the same happens with Facebook and others. Over the last 50 years young readership has fallen by over 60%, and that's the real challenge.

Are you going to speak about those issues on Future Media Forum? What else are you going to discuss with the participants of this event?

I will talk about the reading intensity print purchase and reading frequency, the number of visitors relative to circulation, the number of pages the user visits and the amount of time he spends there. Small increments in each step has a major effect on the outcome.

If the Russian specialists in digital media want to attract the users and consequently to secure the profits, they have to deal scientifically with the issue of reading behavior. For example, many websites are extremely difficult to navigate, and the digital editors do not admit it. Sometimes you have just to look at the websites to see why some of them work and some not.

One of the things I'm working on separately with Moscow is a project where we compare  the creative aspects of the website (the way it looks, photographs, navigation) with its statistics.

Another thing we need is to spend far more on marketing and far more on our customers to be loyal.

What are the current sources of income for the main publishers in Europe?

As a general rule, in Europe about 46% comes from circulation, 46% from advertisement, and 8% from digital. So the digital is very small. There are some exceptions there is the Schibsted publisher in Sweden which gets 29%.

So, the print business is actually still a very healthy cash generator.

At the same time, newspapers' share of digital advertising has been declining since 2006, having seen significant growth up until that point.

Do the revenue models of the newspapers and magazines differ? If yes, then how?

A lot of the magazines were more successful than newspapers in moving to digital. The first reason is that a lot of the magazines are highly specialist. And secondly, their format and content of advertising is more compatible with digital. But it would be very difficult to compare the average newspaper and the average magazine in print. Their business models are very diverse.

Has the crisis already passed by the newspaper holdings or not yet?

The industry is still in the crisis, in part because of the economy, and in part because of a history of lack of investment..

We can observe a structural change. We see that analogue advertisement TV, print is decoupling from GDP. Although historically, there was a strong relationship between the two. There is no longer the reliability that when GDP comes back, the advertising is going to come back as well.

Is there a chance for the print newspapers to find their way back to the audiences?

They are unlikely to make a significant recovery in their current form. We are likely to see more specialism, so more papers in print business. Localization remains strong. But the chance to attract the young readers to the new print form is actually nil.

Particularly in the country like Russia, where the penetration of the newspapers is very low indeed, the situation with the newspapers getting tracks is very unlikely.

However, the huge opportunities are in tablets, e-readers etc. The reading behavior on these devices is very similar to the print products, and here it is possible to get the profits from working similarly. Le Monde reports that reading times of eReader applications are as high as those of printed newspapers. American publishers have found that subscription conversion and retention levels for eReaders are higher than for print products. Finally, a German study found that older people read faster on the iPad than in print.

Now about 1% of newspaper digital revenues are from mobile. The reason is that the handheld devices have limitations in terms of navigation, and advertising presentation. But mobile offers an effective content pricing mechanism, if the content format can be tailored to the device.

The growth rate of tablet readership worldwide is a big area for optimism. Tablets offer demonstrable usage as a reading device, print levels of intensity, willingness of users to pay for content, appeal to older readers and the excellent environment for advertising. This medium justifies investment in alternative presentation and navigation

Mobile offers dramatic audience and revenue potential, but requires new medium concepts repurposing current content won't be enough. And that will also be a big area of my presentation in Moscow.

So you don't think that the newspapers are going for good?

I think they are not doomed, as they still have a lot of cash with them. The problem is that they currently carrying a lot of debt. It's not the cash flow within the newspapers themselves. Too many newspapers, specifically in the Anglo-Saxon market, kept investing into declining products.  And now they've gone too far.

But they are still healthy cash generators, bringing about 20% return on sale. There are some reasons to be optimistic.

Which media startups do you consider to be interesting today?

All the startups like Mashable and so on are interesting. The Huffington Post is interesting in terms of the scale it has become. I think that in Russia there are some interesting community services growing on, at a highly local level. I think we will see some new services developed to overcome the problems I've described.  

I personally don't think that content aggregators like Flipboard or Google Currents help the publishers in their digital strategies. The big thing here is branding.

Which trends of the media development we will see in the coming five years?

The first trend is an absolute exposure in usage of tablets, e-readers and other devices.

We will also see the more meta-forms of navigation, because the navigation on mobile substantially differs from the screen of computer. That makes a big difference in terms of how the media is consumed.

I also think we will see a new generation of search, built around the tools of data journalism. It will be far more granular and intuitive, than, for example, Google is, and it will empower our reading and knowledge experience. Those things will drive the new digital world.

Alina Gainullina