Is the writing on the wall?: the future of digital newspapers

Introduction: The impact of a networked world

The media world has altered dramatically over the last half century, moving from a situation where consumers would loyally turn to one of a relatively small number of television and radio stations or newspapers for their news, to one where a myriad of television channels and online services compete for their attention.

The recent rapid rise of online has raised more serious concerns about whether the newspaper can survive in its current form in the digital age - and is beginning to prompt radical changes in the business of newspaper publishing.

This EPS Focus Report examines national newspaper markets in the US and UK, asking how the business model, content and delivery of the newspaper is evolving in the digital age.

The cyclical nature of the advertising market has always caused newspapers to suffer times of growth followed by periods of decline, and will always do so. Online news is, for the most part, available for free. Particularly for younger readers, who tend to spend more time online, the expectation that news will be free has become ingrained and has contributed to the commoditisation of news content, which is no longer viewed as having significant value.

As the focus shifts from a business that is print-only to one where a growing proportion is online, many newspaper publishers have had to adjust their operations as a whole.

Business Models for Digital Newspapers
Since newspapers started to move online, plenty of experimentation has taken place to discover the most successful business models. In many cases newspapers have combined several models for their online versions.

Business models examined in this report:

1) Display advertising
Display advertising is a key revenue stream for online newspapers. It consists of adverts that are shown alongside the text and other features of the site in formats such as banners, pop-ups, skyscrapers, buttons and leaderboards.

In this report, EPS looks at behavioural targeting: the identification of a user for advertising purposes based on their actions. In the online context, this can mean a number of approaches from monitoring a user?s click-stream to keeping a database of purchasing history.

EPS also look at how, over the past few years, newspapers have experimented with the use of rich media advertising. This includes audio, video and animation and is an approach that takes advantage of the interactive nature of the web to deepen user engagement with ads.

2) Classified advertising
While it is important to recognise that newspapers? classifieds revenues are still far larger than online, the trend is downward. While the US online classifieds market is more advanced and has thus had a bigger impact on newspapers than in the UK, UK publishers face the same challenges of falling classifieds revenues.

Additionally, newspapers now face a range of online-only competitors in classifieds. There have been a number of different approaches by newspaper publishers to deal with the threat from new players. Acquisition is an obvious route, and one taken by a number of US publishers. Other publishers have chosen to form partnerships, or have attained organic growth by looking to model themselves on the successes of the pure-play online classifieds sites.

Two key trends taking place in online classifieds are 'social classifieds', where classified ads are combined with social networking features. Another trend is the use of mapping in ads.

3) Paid-for content: subscriptions and pay-per-view
The online newspaper market has not settled in the way in which newspaper publishers hoped, and paid-for online content is now the exception rather than the norm. Virtually all online newspapers now make their headline news stories free to read online.

In some online newspapers, particular types of content are now placed behind subscription walls, while other newspapers that do