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.

gawker.png At first glance, the numbers don’t seem to add up: The New York Times has more than 30 million online readers and weekday circulation of less than 900,000 newspapers. Yet the print edition still accounts for more than 80 percent of the Times’s revenue. A broader recent study revealed the same phenomenon: It showed that the Internet occupied 28 percent of Americans’ time spent in media in 2009 but generated only 13 percent of total advertising spending.

To understand why, it’s important to realize that the prices advertisers pay digital news organizations depend on many factors. Some are tied to the overall market, especially the vast and growing amount of ad space (or inventory) that’s available online. Other factors have to do with a site’s own dynamics, including the size of the audience it reaches and that nature of that audience—its demographics, how much time its users spend with the site, and so on.

So the web offers a lot of advantages to publishers and advertisers. But its audiences are more wide than deep.

Journalists constantly feel the push and pull of these numbers. “What am I today?” asks Jeff Cohen, editor of the Houston Chronicle. “I’m an aggregator of eyeballs.… We’re doing around 79 million page views a month—almost a billion in a year.” Yet for all that web traffic, his newsroom’s 206 employees are about half the number employed in 2006.

Digital numbers are confusing when compared with traditional media metrics and are often inflated for all sorts of reasons. Users can be counted several times if they deploy multiple devices, such as a PC, laptop, and mobile phone, to access a site. Also, many people delete their computers’ “cookies”—small text files that allow them to be identified and tracked; because of that, they appear to be new visitors to sites rather than returning ones.

For all that, digital audiences usually far outnumber those from a traditional outlet. As a result, the industry faces a perplexing set of questions: Why do so many digital users generate so little advertising revenue? Is it simply that digital systems are more efficient than the previous oligopolies of the print and broadcast world? Or is there something more fundamentally askew about the way media companies make money off digital customers? And, more importantly, what should publishers be doing to make the most of the readers and viewers they have?

At its most basic level, advertising is a numbers game. A news organization needs a certain number of readers or viewers, and the more it gets, the more ads it can sell and the more it can charge those advertisers. Users also spend varying amounts of time with the magazine, newspaper, or broadcast, and the more time they spend, the more an advertiser values the audience.

Digital platforms, thanks to their ubiquity and ease of use, are terrific at the first part of the numbers game. News sites have demonstrated the ability to attract huge numbers of users. And in the first decade of the digital era, particularly as search engines became more powerful, publishers and broadcasters focused on building a mass audience. They poured resources into search engine optimization—the term used to describe a way to improve the odds that headlines will be picked up by Google or other search sites and that topics will be timely enough to appear prominently on a results page. News sites initially welcomed aggregators, such as Drudge Report and Huffington Post, that linked to their material and increased traffic.

As a consequence, audience sizes swelled, and publishers have proclaimed that to be a success. So when the Los Angeles Times in March 2011 logged a record 195 million page views, clicked on by 33 million users, the site’s managing editor took a moment to proudly announce those statistics on the site.

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.