It’s easy to forget now, but when The Daily was first launched a little less than two years ago in February of 2011, there was a tremendous amount of attention paid to it. Apple’s iPad was still relatively new, and many publishers were hoping it would become a kind of magic carpet that would whisk them all out of the doldrums and into the promised land of revenue-generating digital content — and Murdoch was seen by some as leading the way. Obviously, the tablet newspaper failed to do anything of the sort, and in that sense its failure is just part of a gradual process of publishers waking up from their dream about apps.

Are tablet-only publications an impossible dream?

Reuters writer Felix Salmon, in fact, argues in a post on The Daily’s death that it proves tablet-only publications may actually be impossible:

“I think that The Daily has taught us all an important lesson — which is that tablets in general, and the iPad in particular, are actually much less powerful and revolutionary than many of us had hoped… the tablet is basically just one of many ways to see material which exists on the internet; it’s not a place to put stuff which can’t be found anywhere else.”

The @daily bet traditional business/editorial assumptions would work in a new medium that resists them. Is that innovation?

—
John McQuaid (@johnmcquaid) December 03, 2012

In many ways, the seeds of The Daily’s demise were (or perhaps should have been) fairly clear from the start: in my initial review of the app, I mentioned that the two most obvious things about it were that it ignored the web almost completely — showing anyone who came to the website via a shared link what amounted to a photograph of the relevant page from its app — and the content seemed rather disappointingly dull, in a traditional newspaper sort of way. Both of these criticisms have also been echoed by many of those who responded to its death notice on Monday.

Why did it have to be daily?

In addition to criticizing The Daily for choosing to go with a paywall for product that was unknown to most of the market it was trying to reach, journalism professor and author Jeff Jarvis says the iPad venture also took a flawed approach to news:

“Finally, there was the absolutely befuddling decision to make The Daily daily. News was only ever daily because it was forced into that limitation by the means of production and distribution of print. The internet freed us from those shackles of time. Why put them on again? Nostalgia?”

@carr2n @mathewi @Penenberg Innovate? No, it tried to shoehorn an old business & product model into a new device built on pay wall zealotry

—
Jeff Jarvis (@jeffjarvis) December 03, 2012

Alexis Madrigal at The Atlantic notes that The Daily failed in part because it was aimed at a “general news reader” instead of a niche, but also says it ignored the fact that media outlets no longer control the distribution of their content, regardless of whether they have an app-only approach. By divorcing the product from what Om has called the “democratization of distribution,” The Daily doomed itself, he says:

“There’s not much anyone on your Internet’s favorite websites can do aside from stick a story on the homepage, tweet/Facebook/tumble/Reddit/LinkedIn it and then pray. We do not control the distribution of our work. Period. It’s horrible and bizarre and it is also the way that the media world works now. You can’t push; the content has to pull.”

Peter Ha, an early employee at The Daily who now writes for Gizmodo, echoes this point in a post he wrote about his experience with the iPad paper. Great content, he says “doesn’t do much good if there’s no good way to share it… The Daily had every chance of flourishing and succeeding, but operating independently of the Internet as a whole was clearly a huge mistake.” And another former employee, Trevor Butterworth, summed up his view of the venture’s cause of death in a posting on his Facebook page:

“You can’t create an entirely new brand and take it behind a paywall after 4 weeks, while limiting its footprint on the Internet, and then expect people to buy it. Where was the marketing? Second, it simply added more average-reader content to a market saturated with free average-reader content.”

If you are tablet-only and paywalled, it better be good

The Daily was never an "experiment," it was an expensive, stupid, business decision.

—
  (@dansinker) December 03, 2012

John Abell of Reuters also says that regardless of whether you believe an iPad-only app like The Daily could have survived, it was doomed in part because the content was so underwhelming. He writes that he “grew increasingly annoyed at the extent to which I was reading wire service copy… In other words, I couldn’t find any reason to turn to The Daily as a news brand, and that has to be the absolute baseline requirement for a publication.” Peter Kafka at All Things Digital made the same point:

“The Daily’s key issue was a conceptual one. While the app boasted lots of digital bells and whistles, in the end it was very much a general interest newspaper that seemed to be geared toward people who didn’t really like newspapers. You can’t make that work no matter what kind of platform you use.”

For his part, Josh Benton of the Nieman Journalism Lab says that despite the issues with content and the paywall and ignoring the web, he believes that the biggest issue was the structure of The Daily — in other words, its sheer size and its daily-newspaper style approach to a digital business:

“The Daily had over 100,000 paying subscribers. That ain’t nothing! With most subscribers paying $39.99 a year (others paid 99 cents a week), minus Apple’s cut, that’s around $3 million in annual revenue — and that’s before you add in advertising revenue… You can absolutely build a real online news organization on that kind of revenue. You just can’t build one that has 200 staffers. Or 150 staffers. Or 100 staffers.”

Any analysis of The @Daily's fall that doesn't begin and end with it having a staff of more than 100 is useless on arrival.

—
Michael Roston (@michaelroston) December 03, 2012

A bold experiment, yes — but still doomed

A number of observers, including Benton, say that despite all of its flaws, Murdoch and News Corp. should be given some credit for at least experimenting with something like The Daily at a time when many newspaper companies are content to just cut costs by laying off staff. Benton said that News Corp. “made a pretty big bet on an idea. It didn’t work out. But at least they tried.” David Carr, media writer for the New York Times (which has just announced a new round of layoffs — its fourth round in five years — had a more visceral response on Twitter:

@mathewi @Penenberg Y'all kill me. You say dinosaurs need to innovate. News Corps tries something really new that flops, you grave dance.

—
david carr (@carr2n) December 03, 2012

In a sense then — to answer the question posed in the headline of this post — The Daily was both a bold experiment and doomed from the start. It was bold from the point of view of a major media empire with little or no understanding of the web or mobile, and a lot of other media companies without Rupert Murdoch’s deep pockets were watching it closely to see whether they should jump, and if so how to proceed. But then many of the lessons that could be learned should have been obvious even before The Daily launched: don’t ignore the web, don’t make your content platform-specific (unless it is unique), and don’t put a paywall around something no one has ever seen before.

Post and thumbnail images courtesy of Flickr user Stephen Brace

News Corp. says The Daily will cease as a “standalone”, “though the brand will live on in other channels”: “Technology and other assets from The Daily, including some staff, will be folded into The (New York) Post.”

In a statement, Rupert Murdoch says: “We will take the very best of what we have learned at The Daily and apply it to all our properties.”

The Daily publisher Greg Clayman is staying to head all digital strategy for the publishing business News Corp is splitting off from its TV and movie operations, while editor-in-chief Jesse Angelo is being upped to The New York Post publisher. Says Murdoch:

“Under the editorial leadership of Editor-In-Chief Col Allan and the business and digital leadership of Jesse, I know The New York Post will continue to grow and become stronger on the web, on mobile, and not least, the paper itself.”

The Daily‘s closure represents the failed end — at least, commercially — to a very worthwhile experiment.

Murdoch was in on the tablet explosion well before the fuse was lit, growing enamoured with Steve Jobs’s vision during iPad’s inception and becoming convinced that hundreds of millions of consumers would buy tablets that could be used to deliver news content to eager readers.

When News Corp. devised The Daily, as iPad’s first tablet-only news title, it was a tacit recognition that existing news brands, already challenged in print, could also be struggling in their digital migration. In launching The Daily, News Corp. was testing the notion that a news publication could leverage old consumer publishing know-how but needed to divorce itself from its print brands’ legacies in order to court an audience of young tablet owners.

But that hasn’t worked. Angelo disclosed in July that The Daily had “over 100,000 paying subs”, renewing at a 98 percent rate. But my former colleague Staci Kramer has previously reported the title was losing $30 million a year and Murdoch had previously said it would take 500,000 subscribers to break even.

What the closure represents is a recognition that it is hard to launch a new news brand with an old model, even on a brand new, sexy device that is nevertheless still on a very attractive growth curve.

Existing news brands already have significant market traction. But, as everyone knows, their outlook is increasingly challenged.

So the next challenge is to inject what The Daily has done right (journalism innovations like drone-based storytelling, for instance) in to “traditional” outlets like The New York Post.

According to a report at Capital New York, the executive editor of Huffington magazine — former New York Times editor Tim O’Brien — told the publication’s staff at an all-hands meeting this week that the company had decided its content should be free of charge. As writer Joe Pompeo notes, this was the original concept for the magazine to begin with, in part because it was originally seen as a collection of existing content from the Huffington Post website, presented in a different format. As it took shape, however, the site decided to create custom content and that made it seem worthwhile to charge a subscription fee. As O’Brien put it at the time:

“We feel it’s a premium product and it deserves to carry a price with it in order to access all the value we’re giving people.”

Although a Huffington Post spokesman told Capital New York that the company was “thrilled” with the reception the app has gotten (O’Brien apparently told the staff meeting that it has had been downloaded 115,000 times) it couldn’t have been all that thrilling, or the AOL unit would presumably have continued charging for it. The spokesman said asking users for money “was inconsistent with the Huffington Post itself, which has never charged for content,” and that could be part of the problem — i.e, a mismatch between what readers have come to think of as the HuffPo’s core brand value (namely, free content) and the new magazine app.

I think there is more to it than just that, however. As I’ve tried to argue before in posts about the HuffPo launch and the all-in-one magazine newsstand offered by Next Issue Media, I think dedicated magazine or even newspaper apps in many cases don’t jibe with the way that increasing numbers of people consume content.

Dedicated apps don’t fit the way content works any more

Whether media companies like it or not (and they mostly don’t), much of the news and other content we consume now comes via links shared through Twitter and Facebook and other networks, or through old-fashioned aggregators — such as Yahoo News or Google News — and newer ones like Flipboard and Zite and Prismatic that are tailored to mobile devices and a socially-driven news experience. Compared to that kind of model, a dedicated app from a magazine or a newspaper looks much less interesting, since by design it contains content from only a single outlet, and it usually doesn’t contain helpful things like links.

The Daily suffers from this problem and plenty of others, in my view. Not only is it content from a single entity, but it doesn’t even offer a website where readers can find or easily share that content — and while that may have looked to some observers like an ambitious bet on a mobile-only model when the paper launched, for many readers I expect it is merely a hassle. Publishing veteran Jean-Louis Gassee Frédéric Filloux put it well in a post at The Monday Note about The Daily’s flaws, saying:

“It is everything and nothing special at the same time. It’s not a tabloid, but it doesn’t carry in-depth, enterprise journalism either. It’s a sophisticated container for commodity news — i.e. the news that you can get everywhere, in real-time and for free.”

Now The Daily has laid off almost a third of its staff, as my paidContent colleague Laura Owen reported earlier this week, and there continue to be reports that the lifespan of the digital-only newspaper could be short — especially since News Corp. is going through a somewhat tumultuous restructuring that will see the media assets severed from the entertainment assets. The fact that The Daily has only managed to sell 100,000 or so subscriptions in the 18 months since it launched (compared with the 500,000 that News Corp. said it would need to break even on the publication) certainly doesn’t bode well for the future.

The dream that many publishers seemed to have was that the iPad would create a market for their individual apps, and that legions of readers would happily download and pay for them, creating a brand new stream of significant revenue. With a few exceptions, however — such as The New York Times and other publications that have strong brands or are targeted at a very specific market — that doesn’t seem to be the case. Some publishers, like Jason Pontin of MIT’s Technology Review, are waking up from that dream, but whether anyone else takes the hint remains to be seen.

The news was first reported by Peter Kafka at All Things Digital. In a blog post, Daily editor-in-chief Jesse Angelo confirmed the changes to the sports and opinion sections, and News Corporation issued a press release (below) confirming the layoffs.

Sports and opinion “garnered the lightest traffic and reorganizing them will allow us to focus on the areas that have proven most popular,” Angelo writes. The opinion section will be folded into the rest of the news pages, and the sports section will sacrifice original reporting for “[offerings] from our friends and partners like Fox Sports.”

As a further cost-saving measure, The Daily will be locked in portrait mode — though the company notes in a press release (full release below) that’s also “the mode in which the vast majority of its readers view content.” The Daily still plans to launch its weekend magazine, WKND.

The Daily, which launched in February 2011, is reportedly “on watch” as News Corp plans to spin off its publishing unit. In a recent letter to staff, Daily editor-in-chief Jesse Angelo told them to ignore “the latest misinformed, untrue rumors of our imminent demise.” The Daily has been vague about sharing its number of paid subscribers — the most recent figure is “over 100,000,” suggesting just a small increase since the beginning of the year.

Release:

The Daily Announces Content Changes, Staff Reorganization 

New York, NY, July 31, 2012 – The Daily, News Corp’s daily national news publication built exclusively for tablets and touchscreen devices, today announced content and personnel changes at the publication designed to streamline its production, focus resources on its most popular features, and reflect the changing business environment for news and media.

The implemented changes to The Daily include the following:

 Ø  A total of 50 full-time employees, 29 percent of the full-time staff, will be released.

Ø  The Sports and Opinion sections, which saw the lightest traffic, are being reorganized.  Sports reporting will now be provided by content partners, like Fox Sports, while existing features like photo galleries and the ability to track favorite teams via a customizable sports page will remain. The Daily will no longer have a standalone Opinion section. Opinion pieces and editorials will appear in the news pages, clearly marked, from time to time as appropriate.

Ø  The Daily will move to a portrait-only orientation – the mode in which the vast majority of its readers view content – though video will still be viewable in landscape mode.

Ø  The Daily will continue to invest in the content its readers use the most: original reporting, strong visual elements, great photography and video, award-winning design, infographics, and interactivity.  These are the features that continue to make The Daily unique and that have seen heaviest traffic; they will make up a greater percentage of each edition going forward.

 “These are important changes that will allow The Daily to be more nimble editorially and to focus on the elements that our readers have told us through their consumption that they like and want,” said Editor-in-Chief Jesse Angelo.  “Unfortunately, these changes have forced us to make difficult decisions and to say goodbye to some colleagues who have worked hard to make The Daily successful.  These moves were driven by the needs of the business. The Daily is the first of its kind, and it remains the best of its class.  We are still in the infancy of this innovative new media platform, but we have delivered excellent content, steadily increasing readership, quality reporting, and award-winning design. Our standards will not diminish as we move forward, nor will our enthusiasm for creating an outstanding daily digital publication.”

“We continue to believe in the future of tablet publications because we know the market for tablets and touchscreen devices will only expand,” said Publisher Greg Clayman. “As more and more people buy and use tablets in their daily lives, The Daily will grow with them. We have consistently remained one of the top-ranked paid news apps since our launch, we have steadily grown our subscriber base, and we have the world’s largest media and publishing company behind us.  Like all good digital products, however, we must change and evolve to remain fresh, competitive and sustainable.”

We do — that was that state of digital media when paidContent launched in 2002. Other weird things were happening back then too: People still got much of their news from television and newspapers, and they learned about major events after they had already happened.

There have been some huge shifts since 2002: Tablets and smartphones are now ubiquitous, lots of people read on their digital devices, and just about everyone is part of a social network or three. This summer is the tenth anniversary of our launch. In an effort to gain some perspective on the past decade in digital media, I’ve been reading back through paidContent’s archives — a collection of over 80,000 posts.

Since I was only a freshman in college when paidContent came to life, I often didn’t know, as I read through the stories from the early days, how things had begun or how they turned out. As I watched them unfold, I wanted to grab our readers’ arms and give them advice (“Don’t buy that Zune!” “Invest in Facebook!” “Go for the good Twitter handle now!”). But I also realized how difficult it is to predict success.

Some takeaways from my trip through the archives:  Some companies — AOL and Yahoo come to mind — have been consistently bad at predicting what consumers want. And a couple of companies, namely Apple and Amazon, have been very good at it. Also, being a native digital company helps, but it’s no guarantee of success (what up, MySpace?). And after all these years, it’s still not clear what content customers will pay for, or how much they’ll pay.

Streaming and Moviebeaming

What do analysts, CEOs and bloggers have in common? None of us can predict the future. Roger Ebert joked in 2002 that “on-demand streaming movies on the Web, like HDTV, are five years in the future — and will be for at least another 10 years.”

If Disney’s Moviebeam had been the only game in town, Ebert probably would have been right. When it launched in three cities in 2003, customers paid $6.99 a month to use a device that could hold 100 movies and plugged into the back of a TV set. They also had to pay for each movie they watched– billing was done via the phone line. The company went through various unsuccessful iterations before India’s Valuable Group bought it in 2008. It was never heard from again.

Netflix almost went down the same road. It had a plan to release a Moviebeam-like “proprietary set-top box with an Internet connection that could download movies overnight.” But instead, it decided to forge ahead with streaming — starting with a complicated “quota hours” system in 2007 and moving to unlimited streaming in 2008. By 2010, the majority of subscribers were streaming something, and the company began offering streaming-only subscriptions, though CEO Reed Hastings said that same year that the company would keep shipping DVDs until 2030. (We’ll see about that.)

ABC was the first network to sell episodes of its shows on iTunes, back in 2006, and to stream shows free with ads on ABC.com — and later on AOL. But by the time premium subscription service Hulu Plus launched in 2010, the platforms getting the attention were devices with built-in access, like Internet-enabled TVs, Blu-ray players, and tablets.

Return of the living dead

Speaking of AOL: It’s something of a miracle that the company still exists. In 2000, when it merged with Time Warner, it was valued at $350 billion, and the next year, more than 24 million people in the U.S. were paying for its Internet access service. By the end of last year, that number had dwindled to just 3.3 million subscribers. Here’s a quick recap of some of AOL’s miscues over the years:

• AOL Voicemail ($5.95 per month)
• A teen service called Red (featuring “a talking head—using the image of an actual employee—that uses software to answer users’ questions”)
• A digital music partnership with Burger King
• A reality show called “Gold Rush”
• Social networking site AIM Pages
• Going free
• The hyperlocal Patch blogs

Though AOL was once a high flier, no other company ever liked it quite enough to buy it. Google bought a five-percent, $1 billion stake in AOL in 2005, leading analysts to wonder if Microsoft missed out. That resulted in a $726 million writedown in 2009. Time Warner bought back Google’s stake and finally spun off “the albatross” in December 2009.  AOL is still promising a bounceback. “The executive team expects a profitable content business by next year,” CEO Tim Armstrong said in May 2011.

Yahoo hasn’t fared much better. The company launched Yahoo Platinum in 2003; for $9.95 a month, subscribers got access to audio and videos.  The program was dead by October of that same year. It later tried a Twitter-wannabe microblogging service (“Meme…where you share everything that you find that’s interesting,”). Perhaps the smartest move Yahoo ever made was not buying AOL.

Where did these companies go wrong? In 2010, former Time Warner CEO Gerald Levin pondered that question in an interview with the New York Times . The AOL-Time Warner deal was “undone by the Internet itself,” he said. “I think it’s something that no one could have foreseen, and to this day, whether Apple is going to dominate entertainment or whether Amazon is going to dominate publishing, all the old business plans are out the window. How do you get paid for content?”

Know what’s cool? A billion dollars

In 2006, an RBC Capital analyst estimated that a certain social networking company would be worth $15 billion in a few years, based on “raw, unprecedented user/usage growth.”

Six years later, Facebook went public with a valuation of $104 billion. Too bad the analyst wasn’t talking about Facebook but about MySpace. The social networking company that Rupert Murdoch acquired for $580 million in 2005 sold for just $35 million in 2011.

Why did Facebook soar while MySpace — and other social networking services like Friendster — sank? It allowed people to build real connections using their actual personal information, and rolled out a product that was ready to scale and had good technology. Other companies realized sharing was important too — in 2005, Yahoo SVP Jeff Weiner called sharing “the next chapter of the World Wide Web” — but Facebook was able to implement it in a way that kept users coming back. The site surpassed Yahoo and AOL for “stickiness” in 2009, when Nielsen found users spending an average of four hours and thirty-nine minutes a month on Facebook.

Social has already disrupted some industries — witness the rise of Twitter and the way it has changed the way news is reported, with stories like Osama Bin Laden’s assassination breaking there first. In a sign of the importance of these emerging platforms, newspapers like the Wall Street Journal and New York Times are launching “Everywhere” initiatives to deliver news to readers where they are already hanging out.

Fast food and music don’t mix

Hard to believe it now, but there was real skepticism that iTunes’ 99-cent songs would be able to compete with peer-to-peer file-sharing services. “According to academics who’ve studied the economics of digital music distribution,” we wrote in 2003, the year iTunes launched, “the cost still seems too high to attract users of peer-to-peer file trading services.” The piece cited an economist who believed “the appropriate price of a downloaded song is 18 cents.” In fact, Real Networks dropped its song prices to $0.49 in an attempt to compete against Apple.

In the end, consumers choose selection and convenience over P2P networks. We called iTunes “a kickstart for the micropayments industry.” Was it? While Steve Jobs said in 2004 that Apple wouldn’t hit its one-year, 100 million songs downloaded goal, global digital music sales crossed $1.1 billion in 2006. In April 2008, Apple surpassed Walmart  as the largest music seller in the United States.

The company that arguably started the digital music revolution — Napster — didn’t survive. Once it no longer offered “free,” it was done, though it tried to reincarnate itself: launching a mobile music service, “Napster To Go,” with AT&T in 2004 (the one smartphone that supported it could hold up to 6 songs), partnering with Circuit City on a digital music store, getting itself acquired by Best Buy in 2008 ,and then being bought back by Rhapsody in 2011. Unfortunately, Rhapsody was already losing out to newer (and free) streaming services like Pandora and Spotify.

The partnerships with Circuit City and Best Buy, though, were probably the kiss of death. One of the big trends of the past 10 years has been brick-and-mortar retail stores’ consistent failure to compete effectively against digital-native companies. Best Buy wasn’t the only retailer to try to crack the digital-content business — and fail: Target and Sears both took a shot. And McDonald’s sold digital content over its WiFi network and even tried DVD rentals in its restaurants.

Do you like the feel of paper?

Just as digital music didn’t really take off until Apple introduced the iPod, the ebook revolution didn’t take place until the arrival of the Kindle. In paidContent’s early years, ebooks were written off as a failure in part because publishers couldn’t figure out what to do with DRM. (In 2003, “temporary electronic ink” that would disappear after a few months was floated as a possible solution.) Barnes & Noble decided to stop selling ebooks in 2003, and Yahoo stopped selling them in 2004.

Meanwhile, Amazon and Google were pushing forward. Google launched Google Print – now called Google Book Search, and still besieged by lawsuits seven years later. Amazon tested two now-defunct programs: Amazon Pages, which allowed customers to buy access to digital copies of select pages from books, and Amazon Upgrade, which bundled print books with online access to the complete work.

Customers weren’t biting. Then Amazon came out with the Kindle in 2007 for $399. Less than two years later, Amazon was selling more Kindle books than print books, and ebooks now make up over 20 percent of some big-six publishers’ sales. Barnes & Noble has had some success with its Nook e-reader and digital bookstore, but bankrupt Borders shuttered all its stores in 2011. Meanwhile, the Department of Justice suit against Apple and five big publishers for allegedly colluding to set e-book prices drags on.

Good thing Steve Jobs looked beyond ringtones

A Forbes survey back in 2002 found that “business professionals” would be willing to pay for “news content to be delivered to their cellular devices,” and some media companies tried early mobile experiments. Verizon offered a cell phone version of the Yellow Pages — which, at $19.95 per year, gained 15,000 subscribers in three months. But starting in 2004, everyone decided the future was in ringtones. A $4 billion global business by the end of the year, one company projected.

So, so many ringtones. You could buy them from Rolling Stone or from an ATM-like device called E2Go. A fall 2004 marketing campaign let you mix your own ringtones on Levi’s website. Billboard launched a top ringtones chart.

Could ringtones “prove to be a passing fad”? we wondered late in 2004. Luckily, yes — a new technology came along to shake up the mobile market. No, it wasn’t the $500 ESPN phone, but the iPhone, which came out in 2007. And by opening its platform up to third-party app developers, Apple got users ready for its next ecosystem-changing device, the iPad, in 2010.

Monetizing mobile

Advertising has always been a fuzzy business — how exactly do you measure engagement and success? Well, that’s still the big debate about advertising in the digital era.  ”If here’s anything that’s really holding back ad spending on the web, it’s the lack of good measurements,” Tim Armstrong, then Google’s VP of national sales, said in 2007.

Mobile advertising has also faced obstacles. In 2006, mobile carriers began allowing advertising despite fears of annoying customers. Customers were indeed annoyed – 79 percent of them found mobile advertising annoying, according to a 2007 Forrester study — but they could “see the potential benefits of mobile advertising and marketing to themselves,” particularly if they could get a useful special offer or coupon.

Further complicating matters for advertisers: The smartphone market is fragmented among different brands — marketers don’t want to spend the money to create different ads for Android and iOS — and there are two mobile ad universes: mobile browser and apps.

Nevertheless, mobile advertising has gained ground, crossing  $1 billion in the U.S. for the first time in 2011, according to the Interactive Advertising Bureau, totaling $1.6 billion for the year.

The next opportunity is social media advertising. And once again, it will be a challenge to figure out some standardized metrics. What’s a retweet worth, anyways?

Back to where we all began

Though micropayments worked well for music when Apple launched iTunes, the path to payments for written content has been rockier. In 2004, we wrote that “micropayments today are still characterized by a large number of competing transaction types” – including direct-to-bill, merchant aggregation, prepaid accounts and direct transfer – and “each of these face the current incumbent in digital content distribution: the flat-fee subscription model.”

Eight years later, it appears that the subscription model has won out. The iPad opened the door for magazine and newspaper publishers to create new revenue selling content on that platform, but the results have been mixed. When Rupert Murdoch’s “The Daily” iPad newspaper launched in early 2011, the company called it “the model for how stories are told and consumed.” We wrote, “The bet here is that while consumers are less and less likely to reach into their pocket for a few quarters to buy a newspaper, they might not care about the 14 cents on their credit card for a copy of an e-newspaper.” A year and a half later, The Daily has over 100,000 paying subscribers — but it’s living on borrowed time and may not get through the five years its publisher has said it needs to break even.

Writing for the web, of course, has been around for awhile. At the beginning of the decade, blogging was called “nanopublishing,” and the question was how blogs could support themselves doing it. All sorts of models have arisen. For example, Gawker tried a licensing deal with Yahoo, but that relationship ended a year later. The deal “garnered way more attention than we expected, but less traffic,” Gawker CEO Nick Denton said in 2006.

Some bloggers have stayed independent and make a living from advertising (or from their day job); others write their blogs under a newspaper, website or larger magazine’s umbrella — see the Dish’s Andrew Sullivan, FiveThirtyEight’s Nate Silver, WaPo’s Ezra Klein. Or, they go to work for the Huffington Post!

Magazine companies have grappled with whether to bundle digital editions with print subscriptions or charge for them separately. Time Inc. — which first put digital editions of its magazines behind AOL’s paywall in 2003 — started out charging separately, but today Time Inc. and Condé Nast print subscribers get the digital edition free. Hearst, meanwhile, is charging separately, and it said its digital business in the U.S. became “solidly profitable” for the first time in 2011.

Could there ever be a Netflix for magazines? Time tried it for print versions with its 2008 Maghound service. It failed, due to a lack of marketing and reader interest. Magazine publishers are trying again with joint venture Next Issue Media.

Many newspaper publishers, most notably the New York Times, tried paywalls at the start of the decade and then abandoned them – only to return to the model in the past couple years.  In its most recent earnings report, the NYT said it has 454,000 digital subscribers. Is that enough to sustain the newspaper in its 21st-century transition?  Probably the best answer to that came from  Vivian Schiller. But it was in response not to the NYT’s recent digital subscriber numbers, but to the NYT’s decision in 2004 to close the paper’s first paywall, known as TimesSelect. Schiller, then the SVP and general manager of NYTimes.com, was asked whether TimesSelect had worked.  “It did work,” she said. “It’s just a matter of as compared to what.”

Birthday cake photo courtesy of Shutterstock user [Robyn Mackenzie].

TV photo courtesy of Shutterstock user [Somchai Buddha].

Zombie hand photo courtesy of Shutterstock user [lineartestpilot].

Piggybank photo courtesy of Shutterstock user [cardiae]

Fast food photo courtesy of Shutterstock user [Sergio Martinez].

Book photo courtesy of Shutterstock user [TrotzOlga].

Ringtones and apps photo courtesy of Shutterstock user [violetkaipa].

Cash register photo courtesy of Shutterstock user [titelio].

Magazines photo courtesy of Shutterstock user [bernashafo].

After much speculation, News Corp. has confirmed that it is considering a split that would see the media and entertainment conglomerate cleave itself in two, with the newspaper (and book publishing) assets carved out as a separate unit from its TV and movie businesses. Although the company could still decide not to do so, the idea raises an interesting question: Assuming that chairman and CEO Rupert Murdoch is interested in seeing that newspaper-only unit succeed — as opposed to just selling it to someone else or slowly liquidating it — what would he have to do in order to make that happen? (Update: News Corp. officially confirmed the split on Thursday)

When it comes to the digital aspects of its newspaper business — which includes the Wall Street Journal, the New York Post, the Times of London and the Australian, among other prominent names — News Corp. is a creature of contradictions. Many have criticized Murdoch for being too quick to erect “hard” paywalls at newspapers like the Times (as opposed to soft or metered paywalls like the one at the New York Times), since that resulted in a massive loss of readers for the venerable British paper. Murdoch also maintained the paywall at the Wall Street Journal after buying it in 2007, despite initially saying that he planned to remove it.

At the other end of the spectrum, there’s The Daily, a bold experiment aimed at creating a digital-only newspaper designed and produced specifically for the iPad and other tablets. Even if you see the venture as something of a failure — given that it doesn’t seem to have come close to the readership or revenue targets News Corp. envisioned when it was launched — it is still a substantial ($30 million plus) bet on the mobile and digital future of news. It may be an attempt to duplicate the old scarcity model of news, but that’s a much bigger investment than many other traditional media entities have made in the potential future.

Less like The Daily, more like the Pulse deal

Is The Daily something that News Corp. could build on or expand with its other newspaper properties? It no doubt has lessons it could teach the conglomerate’s other papers about what works and what doesn’t in terms of mobile or digital apps, but to some extent the iPad newspaper is a very different animal. For one thing, it still doesn’t even have a website where you can go and browse the content the way you would with the Journal or the Australian — so it is more or less a hermetically sealed tablet product, and it’s not clear yet whether that’s what readers (or enough readers) actually want.

Arguably more interesting as an indicator of future direction are some of the moves the Wall Street Journal has been making. As we’ve noted a number of times, the Journal has been experimenting with a variety of ways of moving what it does into a digital future, including the expansion of its video offerings — which my colleague Jeff Roberts has described in more detail — as well as more recent ventures like the partnership it signed on Tuesday with Pulse, the news-reader/aggregator app for the iPad.

What’s particularly interesting about the Pulse arrangement is how it differs from a similar deal that the New York Times struck with Flipboard, another news-reader/aggregation app. While the NYT is distributing content to existing subscribers through the tablet app and hoping to generate additional revenue from advertising within Flipboard, the Wall Street Journal is actually selling subscriptions to some of its content in a new way: readers can click and get access to just the Water Cooler, the Technology Digest and other sections rather than having to subscribe to the whole newspaper.

Is that how people want to read the news? No one really knows yet, but at least the Journal is experimenting with one possible solution — and you could argue that it is a smart way of taking advantage of the brand value that the newspaper has in the financial sector, where readers are theoretically more likely to want to pay for content. With the Pulse deal, they can subscribe to only the specific content they want (which might attract more casual readers than a blanket subscription to the whole paper) and they also take advantage of the alternative distribution method that Pulse represents. Those are both arguably smart moves.

Let the content flow and monetize it elsewhere

So what does the future hold for a standalone News Corp. newspaper company? Undoubtedly, there would have to be cutbacks and even asset sales, since the newspaper operations will no longer have the financial support provided by the parent’s entertainment assets — and $30-million bets on experiments like The Daily would probably also be a thing of the past, for the same reason. As media analyst Ken Doctor notes in a post on the future of News Corp., Murdoch might even wind up deciding to sell or dispose of everything other than the Journal.

But if News Corp. (or whoever winds up owning the newspaper assets) wants to try and make the transition to a digital future instead of just liquidating its properties, it would do well to continue the kinds of experiments that the Wall Street Journal has been implementing: in other words, let content flow through different channels like the Pulse app or Flipboard and find readers wherever they are, and then monetize that content where it is being consumed instead of pushing people to a website. And think more about how to make use of video — and other alternative content forms — rather than just the traditional news story.

At some point, the Journal and some of Murdoch’s other properties could also try to implement some of the ideas that former Washington Post managing editor and now WSJ managing editor Raju Narisetti has proposed with respect to a “reverse paywall” approach — one that focuses on membership benefits for devoted readers, rather than simply penalizing everyone with a paywall. Whether News Corp. or its successor company have the gumption to try something like that, however, remains to be seen.

Post and thumbnail images courtesy of Flickr users Mark Strozier and Rego Korosi

Social sharing is bound to become more valuable than print distribution, Quittner said. “The newsstand business is a horrible business. Magazines pay something like 50 percent of their costs of distribution to newsstands, and then if they sell 20 to 30 percent of their magazines, that’s considered a home run. Then they have to pay to kill — to destroy — the 30 to 40 percent of the magaines they don’t sell. It’s a really ugly, uneconomical business that is probably not long for the world.”

The Daily editor-in-chief Jesse Angelo said “we always wanted to be a subscription product, with paid ads” and said that “when we talk about apps, it drives thousands and thousands of downloads to the Apple Store. There’s beginning to be a re-creation of the original Web link economy in apps.”

As for paid content, many Flipboard publishers are asking for paywall support, Quittner said. “People will pay for ‘essential’ — the WSJ, the NYT, and the Daily,” he said. Flipboard hasn’t introduced a paywall option yet, but “we have to create systems that allow for the most engaged users to pay for that which they think is essential.”

“Advertisers want much more integration with content,” Angelo said. “They want to sponsor a page, or to have content that’s ‘brought to you by’.”

The Daily won’t do pre-roll advertising, Angelo said: “Short of a video of the president getting shot, I’m sorry, I’m not waiting through your pre-roll for anything. But post-roll, or ‘best video of the day as brought to you by Canon SureShot’ or something — that sort of thing is much more on the rise.”

Digital magazines could take one cue from print

“My tech fantasy is that within the next couple years, smartphones and tablets will have external-facing screens” so readers can show others what they are reading, Quittner said. “It’s a huge social signal. Right now we can’t do that. We’re all in our own little content silos.”

Image from Livestream

Verizon was the launch sponsor for The Dailylast year, supporting its free trial. Now it will give the digital tab a chance to work out any kinks in a controlled environment, rolling out device by device. The just-announced Samsung Galaxy Tab 7.7 will also get the app

The app will be pre-loaded in new devices — a first for the fledgling paper — and will be added to existing ones with a software update.

That doesn’t mean it’s free: users will get a one-week trial, then choose whether to pay $3.99 a month, $39.99 annually or drop it. The plan also marks another change in sales strategy. The iPad version has a weekly auto-renew option.

Update: From CES, Publisher Greg Clayman explained via e-mail that the relationship with Verizon is why he opted for a slow rollout over a full Android app: “Verizon is a strong, long time partner of ours. We’re thrilled that they’ve chosen to pre-load our application on their tablets, and that’s
what is driving our launch strategy here.”

As for the pricing differences,The Daily is testing different models on various platforms and will stick with the current plans for iPad.
The Daily app was the third highest-grossing iPad app on iTunes.

The digital paper currently has 100,000 paid subscribers, according to Clayman. That’s an increase of 25 percent over the 80,000 he reported in early October. The next big test will be how many of the early users who went for annual subscriptions renew.

While I earlier viewed an Android app as a chance for The Daily to gain a substantial amount of new subscribers, given the relatively small number of Samsung and Motorola (NYSE: MMI) tablets compared to the iPad it’s hard to see this deal boosting subscription numbers by much. But it should help shift the iPad-only image and give The Daily a shot at gaining new readers in a new environment.

The rest are cycling through two-week free trials. Clayman told AdAge about 15 percent “ultimately” end up subscribing. It’s not clear whether that’s the immediate conversion rate from the trial or if that’s based on tracking trial users who eventually subscribe.

The majority are paying $39.99 a year instead of the weekly $.99 rate, according to Clayman, keeping the churn during the first year to more-than-respectable low singles digits.

Doing the math: I used a cautious estimate of 60 percent, or 72,000, at the highest rate — $.99 a week for 52 weeks — for my back-of-the-envelope reckoning last week. That put subscription revenue at about $3.7 million a year. Using these official numbers, that would come to about $4.1 million — less Apple’s take, of course. But the Daily is getting more consistency than currency from an undefined majority.

For discussion’s sake, let’s do the same math with 50,000 annual subs and 30,000 weekly. That would be roughly $2 million plus $1.5 million or $3.5 million. Put another way, that’s a little about $67,000; again, before Apple’s cut. Apple (NSDQ: AAPL) gets 30 percent from most publishers but the Daily may have a better deal.

Another bit of math — factoring in only the $30 million for the initial fiscal year investment, that’s $375 per subscriber.

Circulation is part of the picture. The Daily launched with advertising support and continues to have it although it’s unclear what kind of revenue it represents. It also has some e-commerce revenue. And, of course, it has Rupert Murdoch as an internal champion.

The AdAge story also comes with a chart that shows Daily subscribers crossing the U.S., instead of skewing to the coasts. I’m a little surprised that Clayman and News Corp. (NSDQ: NWS) were surprised about the spread. Early adopters are all over the country, not just on coasts, and the Daily has done a good job editorially of stretching across the country. Also, the tabloid format could have more appeal for those who don’t have anything like it in their own areas.

Not so fast: Being tied to the iPad gave it a big head start in terms of publicity and Apple made sure it got the iTunes spotlight. (Even now it’s in the top 25 grossing iPad apps.) But it’s not going to be able to thrive or even survive on iPad alone. The Android app, initially expected this summer, is on the way, which should help. The Daily got a little boost by adding a Facebook Social news app at f8. (Their current practice of tweeting links that require that app for viewing misses the point about Twitter as a tool.)

TheDaily.com site, which hosts a good tumblr, needs a refresh from its front-page look with launch video featuring special guests from Apple. (It also needs a new intro video that doesn’t date back to February.) I don’t expect a change in the overall internet philosophy, which is to allow some content sharing but to use the site primarily for marketing app subscriptions. In this age of cross-platform access, as a subscriber I’d like to have a way to check the table of contents on my iPhone and read a few things on the go or mark them to save for those days when I can’t download and read the edition before it’s replaced but I don’t expect that either.

Some people, particularly those who’ve been dismissive of the Daily all along, took last week’s numbers from Bloomberg and my post last week as signs that it was failing. Some on the inside thought it was harsh when I pointed out that if the Daily can’t do better it’s not likely to last.

To be very clear, I don’t think it’s time to write the Daily off. Getting to 120,000 unique weekly users from zero with 80,000 paid and engagement levels of at least 20 minutes a day is no small accomplishment. That’s after dealing with new technology, a ground-floor-up design that continues to evolve and staffing. No one at News Corp. expected it to be profitable this year or next; it’s always been a multi-year plan and it is still very much in start-up mode. (The cynic in me thinks Murdoch would like to keep it running at least through the 2012 elections.)

The first big test will be what happens when the initial wave of annual subs has to renew — and whether the Daily has to provide incentives.

But with a weekly run rate of nearly $500,000 and a threshold of 500,000 subs, the tablet tab is going to have to show not only that it can keep subscribers but that it can grow. And it has to hope that corporate patience holds out.

That weekly average, which we’ve confirmed, includes paying subscribers and people giving it a test run on a two-week free trial. How many are paying subs (besides me)? We don’t have an exact number or know the split between weekly ($.99) and annual ($39.99), but paidContent has learned from sources familiar with The Daily that nearly two-thirds are paying.

True, that’s not close to the 500,000 subscribers Rupert Murdoch said it would take to make the Daily pay off and it won’t pay the bills for a staff of 100 putting out a paper seven days a week. Figuring 60 percent at the weekly rate — 72,000 times $.99 times 52 weeks would be about $3.7 million a year from subscriptions. The amount is likely lower than that given the discount for annual subs — and Apple (NSDQ: AAPL) gets a cut.

If it can’t do much better, it likely won’t last. Pet projects, even those of the chairman and CEO, run out of good will eventually.

But it does show a willingness for subscribers to pay and if Murdoch and company are patient, it will find out whether that interest extends beyond a certain number of iPad users. The Daily also has been telling advertisers users put in 20-30 minutes a day with the app.

The glitches it ran into from the Feb. 2 launch kept the full subscription engine from kicking in until spring. That suggests the earliest signs of whether annual subscribers will renew would be spring 2012. Given that subscriptions are auto renew, people who don’t want it will have to cancel. We also don’t know the conversion rate from download to trial to paid. At paidContent 2011, Publisher Greg Clayman said it had been downloads hundreds of thousands of times; soon after, he refuted reports of only 5,000 paying subs by saying there “more” than that. This summer, the figure went to more than 1 million downloads.

The Daily, which has limited access online, has yet to mine some potential audiences. It only recently went international in the iTunes store and last week expanded beyond the iPad for the first time, adding a Facebook Social version last week. It has yet to launch an anticipated Android version, hampered, in part by development issues. As Bloomberg notes, the app is finally due next month. My understanding is there also are plans to make it available on the Kindle Fire although it’s not clear if it will be on board for the Nov. 15 launch of the new Amazon (NSDQ: AMZN) tablet.

Plus advertisers remain interested. Bloomberg’s source is John Nitti, an EVP at media buyer Zenith Optimedia; the agency works with Daily sponsor Verizon. Nitti told Bloomberg 120,000n is a respectable figure and Verizon is sticking with it. New advertisers, presumably getting the same info, are in the pipeline. It’s also a promo vehicle for Fox movies and TV shows and has made some money from click-thru commerce.

The shelf life of other News Corp. digital experiments suggests the Daily isn’t likely to survive, no matter how respectable the numbers, unless it shows real signs it can get in the black.

Update: One small bit of perspective. On the eve of the Kindle Fire launch, Hearst and Conde Nast gave digital circulation updates: Hearst Magazine says it has exceeded 300,000 in paid distribution (subscriptions and single copy) for its digital editions across iTunes, B&N Nook Color and the Zinio Newsstand, while Condé Nast said it has 500,000 digital circulation, with a subscriber/authenticated print reader ratio of 50/50. That’s with established magazines and brands. That sheds a slightly different light on getting 72,000 or so from scratch.