AP Looks for Money in Ads
The other day I compiled a series of questions for the Associated Press, given that the organization has indicated that it plans some strategy to deal with sites that "walk off with our work under misguided legal theories." One of the questions was essentially what AP wanted to get. The obvious answer was money, and a potential new partnership is showing one of the ways AP wants to get it.
According to AP, there are two main reasons that the organization is planning an initiative to "protect the news industry's content from being misappropriated online":
Our mission is two-fold: enable consumers to find news from authoritative and original sources in the most flexible ways and to ensure that those who gather, report and publish the news are properly reimbursed for it.You can question the assumption that the "news industry" is synonymous with AP. But a big clue as to the organization's interest is the remark about having consumers find new from "original sources" -- otherwise known as AP's own site, as it seems intent on creating its own news portal.
That clue combines with the desire to increase revenues in the news that AP is reportedly going into partnership with QuadrantOne, an ad network owned by Gannett, Hearst, The New York Times, and Tribune Co..
QuadrantOne is owned by its four founding companies, but has actively sought affiliate partners to create a larger pool of online ad inventory for national advertisers. "QuadrantOne's understanding of the newspaper market makes them a logical partner," said Jeffrey Litvack, general manager of mobile and emerging products at AP.One of the problems that AP has faced is revenue that did not keep pace with demand. According to its annual report, its primary source of revenue has been newspaper, broadcast, and online subscriptions to its content.
As organizations go, AP is not well-heeled: at the end of 2008, current assets were $123 million, roughly flat from the previous year and a fragment of the billions that many online media companies command. Net income for 2008 was $25.1 million on revenue of roughly $747.7 million. But AP has had to face the economic realities of the news business, reducing rates. At this point, newspaper revenues cover only 20 percent of the organization's budget, and as those publications struggle, the amount is likely to drop. Although 2008 revenue grew five percent over 2007, operating expenses were up seven percent. To be fair, most of the increase was due to covering the Beijing Olympics and the US presidential election. But it's still a difficult situation.
Think of AP as a magazine that has been charging subscriptions but not including ads. When there is downward pressure on the first, the second becomes attractive. But ad revenues depend on the size of the audience. That puts AP into a difficult position. The subscriptions allow member organizations to use the material, cutting out part of the potential audience that might become AP ad fodder.
At the same time, the nature of AP's material often means that people can read a headline, maybe a summary paragraph, and get the details of a news story that interests them. In other words, that peek is enough for most consumers to derive the value they want, hence, no click-through and no revenue to AP.
Even an ad partnership like the one reported only helps if a business can drive enough traffic to the ads, and having people satisfied with what a web site might reasonably call fair use is enough to put that entire scheme into the circular file. So AP will likely push to keep anyone other than licensed users from showing even headlines.
And AP's gambit might actually work. A company like Google, if sued, could easily settle by taking a sizeable subscription and barely notice the expense, as it effectively did with the book publishing class action suit. (Yahoo already licenses AP content.) Small sites may not have the resources to deal with a legal fight, and so cave in on receiving a cease-and-desist letter, even though they might prevail in court. That would leave AP with more control over its content -- and more money in the coffers.
Of course, there is the irony that AP's partnership to gain revenue is with a consortium of publishing companies that have not been notable for the savvy of their own recent finances. So this could become a case of the destitute leading the broke.
My BNET Media colleague David Weir thinks that AP is trying to enter the portal field ten years too late. Image via stock.xchng user svilen001, standard site license.