Bad News / Good News

by: Douglas Tengdin, CFA

Editor's note: Originally published on November 18, 2014

Newspapers have been reduced to a shadow of their former selves. Twenty years ago a couple of Silicon Valley entrepreneurs came to The Washington Post Company looking for money for their search-engine startup - Google (NASDAQ:GOOG)(NASDAQ:GOOGL). A few months ago the Post itself was bought out by a tech-angel, Amazon’s (NASDAQ:AMZN) Jeff Bezos.

New technologies are radically altering the way we communicate. In their heyday, major news organizations were economic and cultural behemoths. Everyone watched Walter Cronkite tell us, “That’s the way it is.” Papers and networks maintained huge corps of correspondents around the world. They bestrode the globe like a colossus. Now, news organizations are folding. What happened?

In a word, the internet. Google’s advertising revenue is now twice that of the entire newspaper industry:

Global Market Update - GoogleAdRevenue


Instead of buying mass-market exposure, marketers now target specific segments. A retailer selling sheets pays for an ad that just goes to people who searched for sheets in the last week. Those ads are a lot more effective than traditional vehicles. Nearly 20% of ad-spending still goes to print media, but that’s probably too much - kept there by inertia and nostalgia.

The other online engine that’s killing papers is Craigslist. Why pay for a classified when you can list it for free? There’s still a market for old-line media, but it’s aging. After he bought the Washington Post, Bezos commented that the average age of print-readers goes up about one year every year. You can see where this is going.

But while internet has destroyed depth it has created breadth. Where there were once only a few giant news outlets there are literally hundreds of focused news-engines: ESPN, Politico, and are every bit as powerful in sports, politics, and finance as CBS once was. Segmentation has created specialization. And Facebook (NASDAQ:FB) and Twitter (NYSE:TWTR) deliver what you want when you want it right to your pocket.

The news business isn’t dying, but it is changing. James Madison once noted that the advancement and diffusion of knowledge is the only guardian of true liberty. He surely didn’t have YouTube in mind, but with millions of folks now competing for space on our screens, liberty seems to be advancing.

Disclosure: No positions