A few reasons NewsLabs is a worthwhile idea

There’s a news start-up called NewsLabs (born at YCombinator) that was among a bunch of start-ups introduced at Demo (or perhaps it was another start-up launch conference). Media Memo are talking about NewsLabs and it’s worth taking a closer look.

Reasons that NewsLabs is a worthwhile idea

The Collective Idea

It’s akin to a blog network where each blog is an individual journalist’s work and brand. The real power is the collective aspect –

  1. Successful News Journalist A can send his readers to successful journalist B or even to upcoming Journalist C. 
  2. There are economies of scale – hosting, coding, marketing, design, and most other costs.
  3. Specialization and lessons can be shared.  

There is an incredible amount of power in bringing together a few hundred very good journalists and linking them to each other.

Journalists can focus on their core competency and build their brands

The collective idea and the support of NewsLabs means that journalists can focus on creating great content –

 The idea is that the writer writes and NewsLabs does everything else: Ad sales, “community management,” promoting the work on Google, Facebook, Twitter et al, and so forth.

Being able to focus on their core competency and the opportunity to build out their own brand gives journalists a lot of freedom and motivation to create quality content.

On their end NewsLabs have to figure out some way to become more than just a producer of journalistic brands that newspapers snap up or that leave for their own sites.

The Community Idea

If NewsLabs takes this in the direction of KK’s 1000 True Fans and let’s the journalist’s true fans financially support the Journalist this could be all the revenue they need.

The other aspects are not very efficient – it sounds great to build social networks and forums and let people socialize but people don’t spend money on either.

They said in an interview that they have 40 journalists registered and another 100 interested.

Taking Journalists with proven experience and Focus on Quality

It’s good to see that the first three journalists they have are all very experienced. They also seem to be focused on quality journalism and quality content and not just mirroring the content factories.

Founders have technical skills

Both the CEO and CTO have solid technical skills. It’s essential because otherwise news companies just get fleeced at all levels by technically adept companies.

Quick summary

There are three very good ideas here – Journalists as Brands, Brands organized into a Collective, Focus on Quality.

Some of the obvious candidates to be added are – Selling Content and not something else, 1000 true fans, Customers of Good Intent, Choosing Good Channels, Setting themselves apart.

It’s a model that could not only work but also scale up remarkably well.

Unfortunately, there are currently a lot of flaws in NewsLabs’ model. Mostly to do with the fact that NewsLabs are still too tied up with models that worked in the past and models that never worked.

Reasons that NewsLabs might fail

They want to make money off of things other than content

Their focus is on making money off of things like Job Boards, Advertising, and making money off of the Brand.

This is a really flawed idea we’ll discuss later – Why give away what people come to you for and what they are willing to pay for?

At some level it’s depressing that even News Start-ups don’t think their content is worth enough to ask customers to pay for it.

To make things worse want to sell their content to news sites – which is madness. That content is their identity and differentiator.

Infinite competition and lack of differentiation

Media Memo point this out –

My concern is that the help NewsLabs says it can offer doesn’t solve the real problem:

            The economics of Web publishing are brutal, and in most cases they only work on a Google (GOOG) or Yahoo (YHOO)-size scale.

Media Memo are right – The Web is brutal and there is a lot of competition.

It’s basically two points – move away from the web, don’t position yourself as news content. Let’s start with the latter.

Having News in the name and being ‘news’ oriented

The biggest mistake any content company could make is position their content as zero-value news.

Breaking News is better than News. Editorials and Op-eds are better than news. Analysis and Reports are better than News.

Anything is better than news which has been devalued to zero.

Lack of adequate funding and they’re taking too little

It’s a start-up and it’s going up against giants. They’re taking only 20% of revenues when the revenue is amorphous things like advertising and branding related things and job boards.

How are they going to survive?

They should go find a billionaire who’s willing to give them $10 or $20 million to test out their idea over 5 years. Not VCs and other profit-driven entities who just want to make money and don’t care about what, if any, impact the survival of journalism has on democracy (or whatever reasons journalists have for being overworked and underpaid).

Plus journalists are desperate – Take another 30% and put that into building great infrastructure which helps both the company and the journalists.  

It’s focused on hiring journalists

Along with the good (experience, skills, committment) they get the bad – All Journalists are trapped in the failing business model of newspapers.

All those beliefs are going to be impediments as they try to work with new models. Even journalists that have worked for 3 to 5 years will have lots of trouble letting go of what they know. The ones who’ve worked for 20 years are going to really, really struggle.

The perception (and perhaps the reality) that laid-off Journalists are being targeted

If it’s about branding and quality they need to hire the very best.

The whole giving away content and making money off of something else mistake

Let’s consider a few of the models that have worked for newspapers and news sites –

  1. Selling content.  
  2. Giving away content and selling ads in print. 
  3. Giving away content and selling ads online. 
  4. Selling content and ads and classifieds.
  5. Giving away content and selling Classifieds.
  6. Selling breaking news and breaking financial news.
  7. Selling exclusive analysis and in-depth reports. 

There were always one of two key things – selling content or having a captive audience that had no option other than to consume what was attached to the content (classifieds, advertising). With the Internet the second is gone. That only leaves content.

There are three big mistakes news sites make when they try to make money online –

  1. Assume they can trust another company or even users to pay for what content is worth.  
  2. Assume that they can no longer sell content. 
  3. Assume that users MUST or WILL do something in return for the free content they get.

Users are coming to the site for content. The entire Internet is built on content. Quality content is what drives everything – even low quality content is propped up by quality content.

Newspapers have to start looking at sites that actually make money off of content and the ways that money is made from content. Very, very few of those models involve giving away content for free.

If you can’t sell your main product you need to find another line of work

Newspapers and news sites and journalists need to face the grim truth – If their news content isn’t good enough to get users to pay for it then they need to quit.

It’s very simple –

  1. Create great quality content and sell it.  
  2. If you can’t get people to pay for your content – Quit and do something else. 

Quality content costs money to make and sooner or later people are going to realize that and start paying for it. By choosing a ‘content has no value, let’s trick users into something else’ model news organizations are killing themselves and the value of content.

It’s best for everyone if all the ‘give away content’ companies die out so we can move to a ‘pay for quality content’ model sooner.


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