uk

There will be a massive shake out over the next couple of years with many old brands lost and new, niche ones created. Here's why publishers face a critical challenge to survive.

With the changing economics on how advertising will be shared out online, many publications will fold and editorial teams cut or streamlined. A new equilibrium will be reached in the publishing industry and the remaining brands with global audience reach will be heavily technology-led and deliver multiple services to their audiences -- delivering their own content but also the best global content alongside it.

The current publishing industry situation
Quite aside from the economic chaos, there are a number of fundamental factors at work in the current market:

1. Offline revenue is continuing to decline quickly
No question there -- falling high-street newspaper and magazine sales are, and will continue to be, in decline. The next generation of audiences will access content online, whether via a smart phone, tablet or desktop PC. Online ads (CPM or affiliate) are growing long-term, despite the near-term blip due to the economy, but this simply won't offset prior offline advertising revenue contribution.

2. Google and other search engines are taking control
Google and other aggregators are now the first port of call for most people searching for a news story and are consequently taking a large slice of the available advertising pie. When searching on a story, Google simply presents ten or so different source options according to its own 'black-box' algorithms. In an age when many online publications all publish good commentary on a particular story, the end-user doesn't really mind if they are directed to New York Times, The Guardian or Joe Blogger.

The true transparency provided by Google is a good, almost democratic, solution for the consumer but bad in the eyes of the disintermediated publisher, despite the obvious fact that it does generate a decent amount of traffic for them. Realistically, no one is brave enough to go it alone and close off Google, which still drives much of their online eyeballs and ad revenues.

3. Online channels continue to explode
This dilution of existing online brands is further exacerbated with continued massive growth in number of online news outlets, whether individual blogs, the likes of Huffington Post or now Twitter. Twitter is essentially a massive redirection engine for individuals to flag quickly to their friends and followers the best source of news on an interesting fact or current story -- a quick bit.ly URL redirection. For many, Twitter is a more timely and trusted source of relevant news than a Google search.

The unspoken truth that the publishing industry is gradually acknowledging is that these newer online sources typically break news stories faster than old publishers -- something that was a key tenet of their value proposition in the former glory days of publishing.

4. Future value of traditional brands to the next generation of audiences is highly uncertain
Current publishing brands do maintain strong trust and authority factor. Despite the fact they rarely now break major news, there is still a high degree of perceived value that these do research and verify a story before publishing.

However, the future generations of online-savvy users may put higher value on features and ease of delivery or access to 'good enough' content above the trust factor of old brands.

The 22-year-old graduate joining Goldman Sachs has heard of, and admires, the Wall Street Journal and FT but is less likely than ever to buy the physical paper. In five years' time, s/he will access relevant content through a potentially anonymous brand app on his iPhone or BlackBerry that just delivers relevant news streams independently of wherever it originated. The traditional brands risk being further 'removed' unless they cater to this next generation of audience.

5. Editorial cost structure is mismatched in the current climate: a shift to 'curation' is needed
The large traditional writing teams in place at most publishers are now typically inefficient for the modern world. The Guardian has a recently claimed base of 850 journalists as an example. The old mindset of having large numbers of experienced 'investigative' journalists needs to adapt for both economic and end-user reasons to meet the requirements of the next generations of audience.

Publishers need to change to a mixture of a few highly talented, investigative journalists who will research and write deep commentary and opinions on a topic but have alongside these a small army of 'curators' who simply write succinct, informative commentary on a breaking story and direct audiences to the best global sources on the web.

6. Users demanding personalisation and access anywhere -- the 'MyPortal' approach
Users have disparate interests and currently have to search for news on those interests in multiple sources -- whether on several news sites, Google alerts or try to filter from a multitude of RSS feeds.

Overall, the publishing industry needs to adapt fast. There will be a massive shake out with lower profits, job cuts, closures and mergers as the revenue pie changes. Surviving brands need to reinvent their content models and adapt their technology to be ready to rapidly exploit new content opportunities in the current market.

Next week in Part Two: There are no silver bullet answers for publishers, so what DO we do?

Nick Gregg is the CEO of StrategyEye and a former analyst with a Wall Street firm.