Spotlight on Research
Is the Digital Content Bubble About to Burst?
Questions with Tom Nicholls
One of a regular series of articles that highlights research in the academy and in the profession on the emerging threat of news deserts or changes in media ownership.
How can digital news organizations keep pace with ever-changing technology? While these organizations are often financially leaner than legacy media companies, challenges are arising in the industry’s reliance on digital advertising and social media.
Tom Nicholls, Nabeelah Shabbir and Rasmus Kleis Nielsen analyzed seven international media organizations that launched as digital news companies for The Reuters Institute for the Study of Journalism’s report, “The Global Expansion of Digital-Born News Media.” Nicholls and his colleagues found that international digital companies build large audiences across multiple countries through a distribution model that combines aggressive search engine optimization, social media promotion and content that is free for readers.
Unlike nationally-or-niche focused digital organizations that often have a broader range of distribution strategies and revenue models—such as membership approaches or merchandising—international digital companies rely on display advertising. However, this focus is becoming increasingly challenging due to a shift to mobile, competition from large platform companies, and the spread of ad-blockers. As most of these international digital organizations remain in investment and growth mode, Nicholls asserts that the digital news bubble will eventually burst unless more diverse and sustainable business models are found.
In addition to being a research fellow at the Reuters Institute for the Study of Journalism, Nicholls is a political scientist whose research interests include the dynamics of digital news and developing new approaches to studying online activities using digital trace data. He is working on a comparative analysis of digital news startups as part of the Institute’s wider Digital News Project.
How did you become interested in this topic and research?
I’ve long been interested in the internet as a site of social and political activity. There’s a certain narrative that says that the internet is fundamentally a new world, while in reality, many things play out the same. People interacting online are still people, embedded in their offline identities as well as with their online personas. The same is true of media organizations.
People have been talking about how digital-born news media are fundamentally new, and that online media will sweep away legacy competitors and change the way news is done. Certainly, some things are different for new online-only news organizations—they tend to be smaller and leaner, and obviously don’t have legacy print and broadcast revenues to support them — but each of the organizations we’ve studied is distinctly recognizable as a journalistic organization. Different media have always had different approaches, content focuses and audiences, and this is no different online.
What is some of the major research that preceded and contributed to your report?
There’s been a surprisingly small amount of work done on digital-born media specifically, which is one of the reasons we wanted to look at it in-depth. Our report is part of the Reuters Institute’s broader Digital News Project, which is an in-depth comparative, global, study of how journalism works in the digital world; we intend to build on the excellent comparative data that comes out of our main survey with some richer qualitative and contextual analyses of this particular area of the online news world. We did a broad analysis of digital-born media as a sector last year and felt that the process of global expansion, and sometimes contraction, was one of the most interesting stories to look at in more depth.
What did you learn?
Our first key finding is about distribution and business models: internationally-oriented digital-born news media have used a combination of on-site and off-site distribution, often involving aggressive search engine optimization and social media promotion coupled with content that is free at the point of consumption, to build large audiences across multiple countries, generally on the basis of a much leaner organization than most legacy media. The key monetization approach is via digital display advertising, which is becoming increasingly challenging because of the move to mobile, competition from large platform companies and the spread of ad-blockers.
This contrasts with many of the more nationally- or niche-focused digital-born organizations we studied in 2016, which had a broader range of distribution strategies (including partnering with traditional news media to distribute stories) and revenue models (such as pay models, membership approaches, merchandising, and events).
Critically, most internationally oriented digital-born news media remain in investment and growth mode and have not been consistently profitable. In some cases, investors and owners seem to be losing patience and are pushing for cost-cutting as a way of turning a profit.
Our second key finding is around the challenges of expansion itself. While expansion across multiple markets has enabled internationally oriented digital-born news media to expand their audience, this expansion also comes with challenges, and involves dealing with the tension between globalizing and localizing pressures, decisions about whether to partner or go alone, maintaining consistency in branding and tone across multiple editions and languages catering to sometimes very different markets, and the challenges of coordinating global newsrooms— challenges to which several of our case organizations are in turn developing technological responses. In many ways, these management challenges are similar to those of any other organization trying to build a global organization with limited resources: another sign of how digital-born media are a particular kind of news organization, rather than a completely new form of organization we can expect to behave very differently.
What are some of the major implications of your research?
Our main takeaway is that internationally-focused digital-born media compete in the same space as both legacy incumbents and domestic digital-born competitors. The challenges they face are fundamentally similar—how to develop editorial, distribution and funding strategies that enable a sustainable, perhaps even profitable, production of quality news in an increasingly digital, mobile and platform-dominated media environment. In this sense, it is clear that they are not so much disrupting legacy news media and other domestic players as they are facing many of the same challenges and opportunities. The overall digital news situation resembles a digital content bubble where most providers continue to operate at a loss — in the case of legacy media sustained by profits from offline operations and in the case of digital-born organizations sustained by investors with varying degrees of patience. This bubble will eventually burst unless more diverse and sustainable business models are found. Having global reach does not insulate them from the changes in the online advertising market, and it’s no clearer for digital-born media than for any other kind of journalism that it’s sustainable to try to make up by scale what is being lost in CPM (cost per thousand impressions) rates.
What are you focusing on next?
My next research project is a comparative look at the actual online news output of major US and UK news media organizations. I’ve built a corpus of 300,000 published news articles and have developed methods for tracking text shared between articles, with a particular focus on quantifying the reuse of newswire and public relations material. With the Reuters Institute’s multinational audience survey for the Digital News Report, we have a good handle on the consumption of news, and our qualitative work on news producers gives insights into the work practices and motivations of those who produce it. The news itself is the bit in the middle, and it’s previously been difficult and expensive to analyze it at scale. Computational methods are changing this for some kinds of research questions. My background is in the quantitative analysis of internet data at scale, so it’s work I’m keen to help drive forward.