We now know exactly how valuable any given ad is, and the answer turns out to be: not much. Web ads provide almost perfect measurability for advertisers—someone did or did not click on your ad, then did or did not buy your product. As a result, the old saw about advertisers knowing that half their advertising dollars were wasted, but not which half, no longer holds true. An efficient ad business is a less profitable one for traditional media outlets.

The threat to ad-subsidized news was hidden in part by the fact that print revenues rose through 2005, even as the Web was spreading like an oil slick. After 15 years of trying to adapt to the commercial Web, no one has figured out a way to replace print revenue with digital. This makes significant reduction in cost a forced move for every traditional news outlet, leaving only three broad options over the next few years: shrinking, restructuring, or collapse.

We’re already in the shrinking phase, where organizations conserve their structure while dramatically reducing headcount. As has been pointed out by everybody who thinks about this strategy for five minutes, holding prices constant while reducing quality has never been much of a dangle. (Similar logic will probably hold true as TV ad revenues continue to fall in the next few years.)

The open question for shrinking is simple: Is there a smaller newsroom that can still create a worthwhile product? Can a 300-person newsroom shrink enough to operate on lower revenues, while still earning ad revenue that supports that smaller staff? Can they do it with 200 people? 150? Newsrooms have fired, on average, something like a third of their newsroom staff since the highwater mark of newsroom employment, and it has not yet been enough.

The best that can be said about shrinking to some small but stable state is that it beats going out of business. There’s another possibility, though, and that’s restructuring, which is shrinking plus dramatic organizational change. “Doing more with less” is the mantra of every publisher who’s just sacked a dozen reporters, because the “with less” part is a forced move. The “doing more” part, though, requires reinvention of method, not just reduction of employees.

News startups large and small—MAPLight, Smoking Gun, Homicide Watch, ProPublica—are all experimenting with new sources of informational value—amateurs, crowds, databases—and with new possibilities for producing news in partnerships and consortia. These organizations all punch above their weight, given their staff costs. In the same way the Industrial Revolution made an hour of a weaver’s time far more valuable, by increasing the cloth he could produce, an hour of a journalist’s time can similarly become more valuable, provided that journalist knows how to work with their readers, or to explore newly available data, and provided her institution supports that kind of work.

Working the way MAPlight or Smoking Gun do would seem to be options available to any journalistic outfit that is interested, but in practice, few large media organizations are yet willing to substantially transform the way their employees do their jobs. This isn’t just about individual job descriptions, but about rethinking the layers of accountability and control that characterize all large organizations. One advantage Talking Points Memo has over its larger competitors is that there are simply not enough employees to have a complex management structure, enabling tpm to try new things and stop doing old things at a faster rate. Presence of process turns out to be a bigger obstacle to change than lack of resources.

Then there’s collapse, the fate of the Rocky Mountain News, The Albuquerque Tribune, The Cincinnati Post, inter alia, requiescat in pace. Collapse is what happens when an organization can’t shrink or restructure to stability, or when it decides to extract the cash it can as it vanishes. Not much needs to be said about collapse except that more is coming.

Clay Shirky has a joint appointment at New York University, as a Distinguished Writer in Residence at the Arthur L. Carter Journalism Institute and as an assistant arts professor in the Interactive Telecommunications Program. He blogs at shirky.com/weblog.