1993-99: ERA OF DIGITAL PUBLISHING (WEB 1.0)

Despite widely articulated fears of cannibalization, the print media, particularly news­papers, began to experiment with the Internet relatively early on (e.g., FT.com was launched in 1995, NYTimes.com in 1996).

By 1999, nearly one-third of all daily newspapers (5212 newspapers worldwide) had online editions (Editor & Publisher, 1999). In comparison to newspapers’ current online services, these early online news offerings were unsophisticated. They reflected an assumption on the part of the newspapers that the Internet would function as a reuse platform for their existing content. Online editions were viewed as line extensions, in much the same way as new geographic editions.

Investment in dedicated online news content was correspondingly modest. In the words of Clay Shirky (2009), ‘the core assumption... was that the organizational form of the newspaper, as a general-purpose vehicle for publishing a variety of news and opinion, was basically sound, and only needed a digital facelift’. ‘Shovelware’ (print articles that were simply transferred to the Internet by software without adaptation) was common, meaning online news sites that were often little more than copies of their text­heavy, non-interactive print editions (Van der Wurff, 2008). ‘Churnalism’ was also wide­spread - online content derived from uploading little-altered items from sources outside the organization, particularly press releases from PR agencies.

Publishers initially hoped to finance their online editions by subscription; however, apart from a few celebrated examples from the financial press (e.g., The Wall Street Journal, which implemented a paywall in 1997 and has retained it ever since), in the main subscription funding models failed.

Faced with the failure of subscription models, newspapers began to experiment with variants of free content models. Here, online content was provided free to readers, in the hope that income from advertisers seeking to reach these online consumers would cover the costs of the online editions. At this point it was still widely expected that e-commerce would create a significant additional income stream for newspapers. This also failed to materialize. Although e-commerce did develop very substantially, newspapers never managed to gain a foothold in this fast-growing field for a variety of reasons: newspaper brands were not associated with shopping, large online retailers like Amazon.com and eBay emerged as dominant e-commerce destinations, major offline retailers grabbed large parts of the online market, and search engines sent customers directly to specialty and local retailers.

Legacy broadcasters’ move into online was more organic and less dramatic than their print media peers’. As it became clear that the Internet would develop into a third broad­casting medium, after radio and television, broadcasters gradually added Internet activi­ties to their portfolio, with news one of the first online genres. CNN.com was launched in 1995, and BBC.com in 1997.

Most broadcasters began with some kind of portal combining news, weather and sports content. Not only did the broadcasters have these content genres to hand, but it also reflected the fact that news, weather and sports are all excellently suited to the functionalities of the Internet in that it allows frequent updating, is perfect for short­form text-based stories, and has an addictive appeal to audiences.

Because the Internet was then primarily a text-based medium, these news portals required broadcast news organizations to acquire a new competence - that of text jour­nalism. Cable television news channels in the USA tended to handle this in-house or in partnership with digital firms. European broadcasters also produced online content by setting up their own digital newsrooms. In the USA, news broadcasters began to cooper­ate with their network affiliates and with newspapers within their media group in order to reduce the costs of online news and to increase the amount of content available.

In terms of business models, for radio and television broadcasters that have offered content that is free at the point of consumption, online news content initially represented an extension of their existing way of doing business. For public service broadcasters in particular there was a strong intrinsic match between the public service funding model, the news genre, and the Internet (Kung, 2005), and this fit will grow stronger as video comes to dominate Internet content.² The extent to which news provision will be domi­nated by video is uncertain because even broadcasters are increasing the supply of text­based news. Chan-Olmsted and Ha (2003) found that television broadcasters focused their online activities primarily on building audience relationships, rather than generat­ing online advertising sales. Thus the Internet was used mostly to complement stations’ offline core products.

Initially, for free-to-air broadcasters at least, the fact that they operated under indirect financing models (i.e., via license fee or advertising income) meant that they were free to concentrate on their content proposition, unlike their print media peers who had to devote time and energy to solving the problem of missing revenues. More fundamentally they were more at home with the underlying Internet content proposition that content should be free, or at least, not directly charged for. More recently, as media systems become both more fragmented and complex, legacy broadcasters’ and newspapers’ posi­tions have moved closer together as both face the challenge of funding the addition of an entirely new dimension of media activities against a backdrop of falling revenues.

Digitalization and the Internet made it easy and cheap to produce and distribute content to virtually unlimited audiences at minimal cost, and as a result many new media organizations moved into online news. These developed rapidly into a complex field with a range of organizations that can be roughly grouped into search engines; technology players and ISPs; and online-only start-ups (pure players), blogs and social media.

In the early days of the Internet, building a scalable publishing platform capable of supporting a news service was challenging for all but the largest companies, and as a result the early movers were largely Internet access providers like AOL and CompuServe and search engines such as Yahoo!, Lycos, Infoseek and Excite. They recognized that frequently updated free news could lure users to their portals - users who would hope­fully move on from there to other, premium, services. Their early sites combined news, weather, sports and business with services such as search and email in a single easy-to-use consumer proposition. The news provision was typically the top stories obtained from news agencies and local newspapers or broadcasters.

For these ISPs and search engines, news was an important part of the editorial formula. For the most part they were not only curating other people’s news and paying content providers for access to stories, but also taking a cut of the advertising revenues; they also ran limited newsroom operations. Portals like MSN, AOL and Yahoo! still have prominent news services on their home pages and these remain an important part of the online news landscape.

Technology companies like Microsoft also saw the Internet’s potential to disrupt tra­ditional print and broadcast news models and began to develop online news services, although even Microsoft’s deep pockets were unequal to the costs of establishing a global newsgathering operation. In 1996 Microsoft formed an online partnership with the US broadcaster NBC to create MSNBC, which for a time was the largest news site in the world.

In 1998 Google was founded. Its basic idea was that the relevance and value of a webpage could be measured by the number of other pages linked to it; the quality of its search results meant it quickly established itself as market leader in search. Google struggled to monetize its service until it introduced text-based advertisements based on users’ keyword searches. This transformed Google into one of the world’s most power­ful companies, and undermined newspapers’ ability to translate their advertising finance models online.

‘Pure play’ (online only) news providers have relatively straightforward profit-based business models. They have low cost bases and the advantages conferred by freedom from traditional media’s legacy asset investments. These providers also focus on specialist areas with strong audience appeal that had not been covered rigorously or in depth by tradi­tional media, such as technology and entertainment news, which can deliver advertising revenue.

One of the early notable pure plays is the Drudge Report. Founded in 1996, this was initially a weekly subscriber-based email that made its name with the sex and political scandals surrounding the Clinton administration. Today it is a low-cost news aggregation website - the front page is a simple list of news headlines and links from mainstream news providers, supplemented from time to time by tips and exclusives unearthed by proprietor Matt Drudge or his colleagues. By 2012, it was reported to have over a billion page views and 14.4 million US readers per month. Estimated revenues were $15-20 million a year, yielding after-tax profits of $10-15 million (Blodget, 2012).

Other new players sought to redefine feature or long-form journalism. Salon.com, founded in 1995 by a group of disaffected San Francisco journalists, created a forum for cultural and political commentary and allowed readers to offer their own thoughts via electronic discussion groups. But despite bringing in more than three million regular visitors, Salon.com struggled financially, burning over $83 million of investment by 2003.

These new players were squarely focused on the news and journalism area. Other new online organizations during this period were focused on other niches, but had important implications for legacy media organizations. Craigslist, founded in 1996, is a classified advertising website with sections devoted to jobs, housing, personal advertisements, and so on. This demonstrated and exploited the effectiveness of the Internet as a forum to match buyers and sellers. Craigslist spread to cover hundreds of categories of products and services in cities around the world, a development mirroring a wider shift whereby an ever-greater percentage of classified advertising moved from newspapers to online sites.

This first era thus created the basic ecosystem of online news, influenced expectations of news providers and audiences about how news would be provided, and brought new communication intermediaries into play that altered the nature of online markets and the business opportunities for news providers.

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