To download the complete version of "The Story So Far: What We Know About the Business of Digital Journalism," a new report on digital news economics from the Columbia University Graduate School of Journalism, click here.

The company’s model is a repudiation of much of what has driven online revenue for media companies. “Banner ads seem such a relic of the 19th century,” Groupon founder Andrew Mason told wired.com. “If God created man and the Internet on the same day, we would see more stuff like Groupon.”

The company has drawn complaints, particularly from retailers like some Chicago restaurant owners who said many Groupon customers either came only for the discount and didn’t return, or gamed the system by copying coupons and using them repeatedly. Groupon has also spawned a host of competitors. And media companies have wavered between joining with Groupon or competing with it.

The Minneapolis Star Tribune launched a coupon service, called STeals. Cox Media has started DealSwarm. McClatchy is trying to have it both ways: it announced a deal with Groupon in July 2010. Less than a year later, McClatchy said it would launch its own deal service, while continuing to work with Groupon. As AdAge noted, “McClatchy gets 15% of revenue from Groupon deals … on its own, McClatchy could collect as much as 50% from deals it sells and distributes.”

But it may be too late for news organizations to get substantial revenue from this business. Groupon is reported to be considering an initial public offering that could raise as much as $15 billion. With so much capital, Groupon could compete on price and breadth in ways that would overwhelm ordinary competitors. And Groupon has its own challenges. It is possible that so many competitors’ coupons will flood the market that consumers and businesses will begin to tune them out, which would diminish the value of the idea.

Many media companies are trying to raise revenue through more untraditional means. Wired opened a physical “Wired Pop Up Store” in New York City during the winter holidays, where it holds events like a “Geek Dad Family Party.” The store sells gadgets and paraphernalia. New York sponsors a wedding showcase event every year, selling tickets to the public, and sponsorships to national fashion brands; it also caters to local disc jockeys, dress stores, bakeries, and other enterprises in the wedding business.

Such events may be good for branding, but tend not to bring in a great deal of new revenue. The Atlantic is different. It is involved in running about
seventy-five events a year, the most ambitious of which is the Aspen Ideas Festival. “Most magazines do events for advertisers,” says Justin Smith, president of the Atlantic Media Group. “We use the Atlantic brand and editorial prowess for attracting people.” The business, called Atlantic LIVE, also runs events with such names as the Green Intelligence Forum and the Food Summit. They usually include partnerships with organizations tied to the topic. Coverage of the event may appear on The Atlantic’s site or in the pages of the magazine.

Atlantic LIVE is run separately from the magazine and website and has its own sales group and editors who run the events. It has become a significant source of income for the company. Of the $32 million reported as revenue by the company in recent publicity, as much as $6 million comes from these events.

If the old formula of “adjacency”—selling ads and commercials alongside content—is fading, what will replace it? There are many possibilities, but few are likely, on their own, to provide the stream of dollars that advertising and circulation once did.

It may be most useful to resist the temptation to think about digital journalism economics in terms of moving an old business model to a new realm. The common thread in the strategies described in this chapter is that they demonstrate an embrace of the Internet, rather than an attempt to subjugate it to legacy business models.

When viewed that way, the Internet isn’t a friend or an enemy. It’s reality.

To continue to Chapter Nine, click here.

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Chapter Nine: Managing Digital

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Bill Grueskin, Ava Seave, and Lucas Graves are the co-authors of "The Story so Far: What We Know About the Business of Digital Journalism." Grueskin is dean of academic affairs at the Columbia University Graduate School of Journalism. Seave is a principal of Quantum Media, a NYC-based consulting firm. Graves is a PhD candidate in communications at Columbia University. For further biographical details, click here.