Making money with news web sites

Graeme Newell –the president and founder of 602 communications– is a consultant “who shows cable and broadcast teams how to effectively market and tease their shows.” We’re talking TV here but his ideas for increasing revenue from news websites apply equally well to all media.

Most broadcast web sites are money pits. Still, there are a lot of companies making serious money on the web. These are entrepreneurial pirates who have a bloodhound’s ability to sniff out revenue models that actually work. All of these moneymaking sites share some common traits and business characteristics.

Lesson #1 – Web moneymakers are entrepreneurs, not businessmen.
Lesson #2 – Businesses making money on the web are typically small.
Lesson #3 – A 30 year old is considered ancient.
Lesson #4 – Moneymaking web sites focus on niche content.

If one of the Learfield Grownups called me in tomorrow and asked me for a strategy to make money with our news websites… I would point them to Mr. Newell’s lesson plan.

I searched (in vein) for his article on the 602 COMMUNICATIONS website. I hope Mr. Newell doesn’t mind me posting it (after the jump). Emphasis (bold) is mine. [Thanks, Bob Priddy]

Lesson #1 – Web moneymakers are entrepreneurs, not businessmen.
These guys are idea people. What makes them great is their constant moving and changing. Most are start up garage types who have days jobs just to pay the bills, but have a true passion that sparks an entrepreneurial transformation in their lives. They are WILD about technology and see it as a social mission, not just a line on a spreadsheet.

Lesson for broadcasters: Don’t look to traditional veteran employees to charge up the internet technology hill. Years of working for “the man” saps the entrepreneurial spirit. Most people in television tend to compartmentalize. They are a salesman, a reporter, a news director, etc and rarely wander into other departments to see what’s going on. Look for people who can’t seem to stay with just one job. Look for employees who quickly get bored with routine and are continually fighting the system to make things easier. In this environment, attention deficit disorder is a good thing.

Lesson #2 – Businesses making money on the web are typically small.
Fortune 1000 companies are noticeably absent from the moneymaking web ranks. Nothing kills internet revenue like big overhead. With such low operating costs, the lean and mean start-up guys can make a lot of mistakes and still stay in business. You’ll see a familiar pattern with profitable web sites these days. A small team of technologists creates a hot viral site. Then, a big corporation buys them, puts them into the corporate structure and the site starts losing money. For an internet company, hiring a CEO is often the kiss of death. There is a saying in the industry, “Big companies deliberate. Small companies obliterate.”

Lesson for Broadcasters:
Hire new small teams that work independently from the corporate structure. Hire them, give them clear goals, then let them do it on their own, without too much corporate oversight. Requisite meetings and reports will just slow down their efforts, making them less effective. In the on-line world, nimbleness is everything. NBC has started up a company just like this. It is apart from the main company and has the freedom to pounce on opportunities as they arise. Realize that big companies are usually too slow. If you hope for significant cultural change using the staff from the existing corporate food chain, you’ll have a hard time pulling that off. Bigger, better funded companies have left a trail of broken web sites.

Lesson #3 – A 30 year old is considered ancient.
It is amazing how many web moneymakers are still in high school. You will see company presidents with million dollar businesses who look like they should be back in math class, not in a board room. Younger entrepreneurs understand the internet because they grew up with it. They have never known a time without computers. They were banging on keyboards at age two, so their brains are wired differently. After a lifetime of consuming traditional media in standard ways, most older managers tend to push the traditional media model on to a new medium. They turn the web into a TV channel – something ignores the web’s specialized opportunities.

Lessons for Broadcasters:
Employees who have spent a lifetime in traditional media should not be in charge of creating new internet revenue. I have met far too many project managers who have other people tell them about what’s hot and new on the internet. Sure, they read all the journals and blogs, but are not web freaks themselves. Many have barely mastered email. They have never created a MySpace account, contributed to a blog, or created a web site for family photos. Managers who serve the company’s web-savvy audience should be ultimately comfortable in the constantly changing on-line world.

Lesson #4 – Moneymaking web sites focus on niche content.
Sites like Google, Yahoo and YouTube have the critical mass to monetize wildly varied content. They can afford to lose a few million while they incubate sites that show promise for the future. TV groups just don’t have the critical mass to sustain revenue serving a general audience. Most web moneymakers have latched on to a particularly valuable demo and hyperserved their often obscure demo. They start by identifying specific audiences that can’t be reached using traditional media. Next, they do an inventory of all the other sites serving that niche. If the audience is being neglected, they hyperserve those audiences with niche content and build solid relationships. They start with the revenue producing demos and build the site out from there. This is quite different from the way most broadcasters create web businesses. Broadcasters typically start with a web site topic in mind and try to find an audience. Successful web entrepreneurs start with an audience and are happy to create web sites on just about any topic in the book. Examples of these sites would include specific medical conditions, hobbies, lifestyles and consumption habits.

Lessons for Broadcasters:
Most television news provides a broad overview of all the day’s events. We provide the headlines on a variety of topics, never drilling down to the minutia on any of them. On the web, this is a recipe for failure. If I’m looking for detailed weather information, I’ll go the weather.com, a dedicated weather site with acres of information on my local weather. Weather from my local TV station is far too simple for my taste. If I want great health information, I’ll go to a specialty site like WebMD.com. It is far better to produce content that is narrow and deep than wide and shallow. If you hope to serve a community, you better hyperserve them with incredibly deep and rich content available nowhere else. Stay away from general topics like weather, national news, health, and consumer tips. Instead identify an underserved local audience and aggregate all the content on the web dedicated to that niche. By doing this, you have a specific audience that advertisers want to buy. Selling general audiences is very tough to do on the web. Traditional media can deliver a much lower CPM in this space. The web excels at delivering highly valuable niche audiences that traditional media can’t touch.

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