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.

Impact: Highly focused audiences can provide more value to advertisers. But separating audiences into too many niches can bring on a new set of problems. Consumers may find that dealing with multiple content providers—with few guideposts to judge the quality or authority of the source—isn’t worth the bother.

• Publishers have more information about their readers, in real time.
Whether a citizen is using free Google Analytics on a blog, or a mainstream organization is deploying more sophisticated usage-tracking services like Omniture or Chartbeat, journalists know much more about who’s viewing their content, where the audience is coming from, and how it is engaged. Unfortunately, many of these numbers are unreliable, misconstrued, and prone to exaggeration. Usage estimates often vary by 200 percent or more. This issue was explored in detail in a report last year by Columbia University’s Tow Center for Digital Journalism.

Metrics have always been challenging for advertisers, especially in the broadcast world. But as the Tow report notes, digital media have failed to come up with common standards; they have not yet settled on metrics, whatever their flaws, as broadcast media did a generation ago. “It is a long-appreciated irony of media measurement that accuracy matters less than consensus,” the report said. “Doubts don’t matter much as long as no competitor is seen to benefit.”

Impact: Media companies can measure the popularity of articles, videos, or sections and adjust their strategy to maximize revenue and audience. But uncertainty around metrics inhibits advertisers from investing fully in the digital marketplace and depresses advertising rates for those who do take part.

• Digital platforms fundamentally change the customer experience, in ways that are both advantageous and harmful for news organizations’ economics. Publishers can now capture highly valuable bits of user information, ranging from areas of interest to credit-card numbers. But new media rarely provide the immersive experience found in traditional platforms. Many users keep numerous sites open on tabs in their web browsers and don’t focus on any one for very long; they often come to a news site through a search and quickly leave for another. Links to other sites provide value to readers but also send them elsewhere, sometimes never to return.

Impact: By tailoring content and advertising, publishers can charge higher rates to advertisers and win greater loyalty from users. But privacy concerns may lead to regulations that will limit the information publishers can glean about their users. And most readers spend far less time on digital sites than they did on legacy platforms, so news organizations have less opportunity to attract advertising dollars. In the words of Steve Harbula, an editor at “Readers have a large appetite but a short attention span.”

IV. Cutting Costs And Seeking Revenue

• Digital upsets media’s typical pattern of high fixed costs and low variable costs. It costs a lot—and often requires companies to take on a great deal of debt—to produce the first copy of a newspaper or magazine. But the second copy, and the thousands or millions that follow, are relatively cheap. In the digital realm, many of those initial costs are eliminated, and in some instances—such as starting a blog—they decline to zero.

Impact: This is a particular challenge for companies that have sunk mounds of cash or taken on debt to make acquisitions that have high fixed costs; those publishers now find such investments to be drags on profitability. Their digital competitors aren’t saddled with the same disadvantages.

• Digital enables news organizations to trim the cost of doing journalism, particularly if they can get citizens to provide content by bringing them into news production or encouraging them to participate on comment boards.

Impact: Since news and content supplied by paid professionals begets free content by readers/users, the average cost to produce a page view is driven lower. But the quality, accuracy, and authority of this content are highly variable and susceptible to manipulation.

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.