Show Me the Spreadsheet

(MoneyWatch)  Many people go on about the salvation for news media being sites that offer free content and find other ways -- most often advertising -- to pay the freight. I understand that the industry is heavily populated by people who are most comfortable with words, but we're talking about the business of news. And when business is the topic, you'd better have numbers and a spreadsheet on hand. However, if you did, most of the easy solution talk would show itself for what it most often is: wishful thinking.

In advance, I'll note that some of the people most often associated with the "free content" mantra are either misquoted or at least partly misunderstood. Wired editor-in-chief Chris Anderson may be associated with the terms "long tail" and "freemium," but he's been clear in saying that a publication cannot give everything away. He's advocated tiered approaches, where some content is free to bring in people and that which might have significant value for some portion of those coming in is on some sort of paid subscription basis.

The more I read from Jeff Jarvis, the more I'm convinced that he's actually a media cheerleader who simply believes that the paid content model is impossible because too much has been given away for too long. Perhaps I'm wrong, but I get the sense that he says that smaller, more innovative organizations using an ad model make sense because they are the only type that might find the right combination of cost structure and online access to audience to make a go of a business.

But whether you think that ads are the only possibility, that news sites need subscriptions, or that old media people simply don't get that advertising around free content is the only way to go, or even that an ad-supported site is automatically impossible, critics and pundits alike must get beyond reasoning by assertion. Virtually all of the discussion along these lines is circular in nature. The "expert" proclaims what can or must be and then criticizes media companies for doing something other than the obvious.

There is a reason that the study of rhetoric exists: to illuminate the construction of sound argument and to identify when someone tries to sway an audience without a sound logical foundation. Blindly declaring that media companies would be fine if they provided free content is sheer idiocy. I might as well set my cap on becoming independently wealthy by simply declaring myself to be a multi-millionaire.

Proving whether an ad-driven, or even a combination of free and paid, approach will work is simple. You open a spreadsheet and start going through the numbers. Add everything that the online publication needs to have in place: reporters, editors, designers, production people, tech staff, salespeople, computers, servers, software, telephones, electric, facilities, and so on. This isn't rocket science. It's called establishing your pro formal P&L, the profit and loss statement. Once the realistic costs are in place, you can look at the revenue side. Given that most media companies already have sites with traffic histories, it becomes relatively easy to start calculating ad rates -- but not with amounts that a pundit might wish were available. Online ad rates are low because of an overabundance of supply, and no talk of how they should be higher will do any more good than declaring that all realized print ad rates should increase.

When the numbers are in place, you look at the results. If the bottom line is positive, then the undertaking should be possible even if it's different from everything your publication has done in the past. If they are a loss, then this is not going to be a self-sustaining venture. Either the expenses have to come down somehow or the revenue has to increase. But declaring that a given approach to business is possible without undertaking this simple step and testing your assumptions is becoming a not-too-skilled fantasy writer.

Related Posts by Erik Sherman Aftermarket Journalism Spreadsheet image via stock.xchng user Logbook, site standard license.