What causes market bubbles, and are we in one?

An all-star group of media economics experts gathered at the University of Navarra Dec. 13 and 14 to exchange ideas and research results on the role and behavior of media during periods of economic or financial boom and crash.

Their approaches were varied: historical, media effects, content analysis, journalistic practice, political economy, etc.

(The full program is here.)

Many of the presentations centered on media coverage of the global financial crisis of 2008-2009 and its impact in countries including Ireland, England, Greece, Spain, the U.S., the Netherlands, Germany, and Denmark. The papers provoked lively debate among the participants, since there was significant time between presentations for questions and comments.

The studies used ingenious research methods and rigorous statistical analysis to tease out surprising insights. I had the unenviable task of providing a summary at the end, on a Friday night, in just 10 minutes. So here is the cheeky result, with apologies to my learned colleagues:

Cause of bubbles: audiences
    •    Overwhelmed by complexity
    •    Uninterested in economics
    •    Ignorant
    •     . . . even willfully ignorant
    •    Lazy, complacent
    •    Delusional

Causes of bubbles: journalists
    •    Overwhelmed by complexity
    •    Lacking training in economics
    •    Excessive sourcing from handful of public officials and financial industry experts
    •    Excessive sourcing from charlatans posing as experts
    •    Overworked, underpaid, forced to write click bait
    •    Self-censorship, serving ownership interests
    •    Uninterested, ignorant
    •    Lazy, complacent
    •    Unethical
    •    Sometimes corrupt

The benevolent virus that is saving the news media

The network effects that destroyed traditional news organizations are benefiting digital startups, which can grow virally and generate outsized impact in their communities. 

 

From Unimedliving

My teaching colleagues are experts on the economics of the media industry, and we recently had a lively debate on how to reverse the financial crisis of journalism. The collapse of the industry's business model is endangering the institution of journalism-the Fourth Estate, a counterweight to power--by eliminating journalists and media coverage, especially for local media.


It's a question that was explored recently by Ken Doctor at Nieman Lab in his report, "Newspapers are shells of their former selves. So who’s going to build what comes next in local?"

Doctor details a number of initiatives by non-profit and for-profit organizations aimed at filling the gaps in local news coverage involving hundreds of media outlets. But using the standard industry metrics, it doesn't a appear to be sufficient to plug the gaps in the short term without significant changes in the way news media do business. Entire communities are losing news coverage of any kind, a pillar of democratic institutions.

Versión en español

This hub nurtures investigative journalism in LatAm

Huertas: Developing the next generation

BOGOTA, Colombia --  Independent news media in Latin America often lack the financial resources to act as a counterweight to the political powers and multinational businesses in the region.

But these media, many of them digital natives, have found that by banding together they can multiply their scarce resources and magnify their impact beyond their borders to challenge these powers.

One example is a platform for journalists interested in investigative journalism, Connectas.org, based in Bogota, which organizes training and operates a collaboration hub for investigative journalists (in Spanish, ConnectasHub), offers grants of up to $3,000, and publishes investigative projects from all over the region.

Versión en español

The founder and director of Connectas, Carlos Eduardo Huertas, told me in an interview that the goal of the platform is to "pull together a new generation of journalists with training in practical methods of doing in-depth journalism and investigative journalism".

Innovation studies go back to the future

Predicting the future has always been a dangerous business in the creative industries. As any economist will tell you, products like books, movies, TV shows, and music are "experience goods", which can only be evaluated after they are purchased or experienced.

Making predictions or recommending strategies is especially difficult now with rapid technological change disrupting every creative industry. This theme appeared in several of the presentations at the  Creative Industries and Media Management Conference held at the University of Porto, Portugal, Sept. 19-21. The conference was organized by Paulo Faustino of Porto and Nova universities.

--Michal Glowacki, professor of journalism at the University of Warsaw, presented preliminary findings from a study of the dynamics of organizational culture in public media that identified success factors in what he calls creative media clusters.

WhatsApp, Instagram top classroom distractions

If I am not careful, my cellphone will wake me up in the wee hours with buzzes or pings to let me know that news organizations and family members on the other side of the world, in different time zones, are trying to get my attention.

Is it too dramatic to say that "there is a global war" for our attention? I don't think so.

Last year I did a little experiment with students in my Media Economics course. Each of them was asked to keep track of how many notifications or alerts they received on their phones or computers during a 45-minute lecture. The average was about 15 alerts, or one every three minutes. WhatsApp, Instagram, Facebook, and Snapchat were the chief distractions.

For a professor leading a class, these alerts could be considered competition.
(At left, Christian Zibreg tells how to remove distracting messages from the locked screen.)

The distraction industry

The competition for user attention has never been greater, and every news site and app is finding new ways to lure people away from whatever they are doing with ever-more-insistent alarms, buzzes, pings, beeps, lights, you name it.

This year, the Media Economics class is slightly larger, with 57 students, and the instructions were different: pick any 60-minute period and measure the number of alerts or notifications received--in essence, any signal that attempts to distract you from what you are doing.

On average, in 60 minutes students reported receiving 41.3 alerts (median 26).

The dirty words journalists have to say without blushing

The following text is a translation from the Spanish version of a lecture I gave at the University of La Sabana in Bogotá, Colombia, on Aug. 22.


My lecture, in Spanish, starts at the 6-minute mark of the video.

Journalists today have the opportunity to create the future of the industry. But to do so, we have to change some of our long-held beliefs and attitudes. We have to create new business models (O, those awful words!) and learn to say some words without blushing.

This need to change comes about because of the nature of our profession, which for most is a vocation. As journalists we have to keep our distance from political and business interests to maintain our credibility. Still, as a group we can be arrogant, self-righteous and holier-than-thou (I include myself in this criticism). We tend to view ourselves as high priests of an exclusive profession and bearers of a special ethical standard that few others can live up to. We see ourselves as purer, more objective, less affected by the prejudices of the mere mortals we cover.

That is at least part of the reason we have trouble in the new world of entrepreneurial journalism, where we can start and run our own news operations. If we want to go out on our own, we have to recognize for the first time that journalism is a business and that someone has to pay the bills. All of this involves getting our hands on the first dirty word: money.

1. Money. The very word makes us cringe because we associate it with dirty things like influence peddling, lobbyists, bribery, corruption and other topics of our investigative journalism.

But money is the fuel that drives any journalism organization. Without money, journalists can't be paid a decent salary. They can't buy a house, clothing, food, medicine. Without salaries for talented, experienced people, there is no high-quality journalism.

What animals teach us about customer relations

Scientists and philosophers have spent a lot of their time and energy trying to describe what makes humans different from animals. So have economists.

Blue-striped cleaner wrasses at work. Photo by Gregory R. Mann

But it turns out that animals have economic market behaviors similar to humans, such as customer differentiation (a fish called the cleaner wrasse) and bidding out their labor (the paper wasp).

For this blog post I am indebted to Stephen J. Dubner's "The Invisible Paw" podcast. He interviewed a scientist who described how the cleaner wrasse, which removes parasites and dead scales from other fish, treats its "clients" in line with the principles of market economics. (Photo is from the WildCoastBlog).

Scientists battle for credibility on the web

It is not just journalists who are under attack in the digital world. Scientists have to deal with their own conspiracy theories hatched by the ignorant and malicious.

Online, science competes with fluff and bluff

When science enters the sphere of politics, religion, and business, the battle is on. In the 17th century, Galileo was convicted of heresy by the Catholic Church for teaching that the Earth revolves around the Sun. Charles Darwin was heavily criticized by the Church of England in the 19th century for his theories of evolution. And the teaching of evolution is under attack today in U.S. schools.

The tobacco industry for decades successfully discredited science and scientists whose research linked smoking to cancer. The National Rifle Association has successfully lobbied Congress to prevent the Centers for Disease Control from doing research on firearms injuries and deaths.

And the New Republic recently chronicled how the new leaders of the EPA are discarding established scientific findings on air pollution, which pleases the coal and petroleum industries.

Climate change and vaccines

Today social media are an important battleground for science, although scientists don't always seem to know it. The increasingly popular online video format represents a powerful challenge to science credibility, particularly on the controversial issues of climate change and vaccines, as investigated in a series of studies edited by Bienvenido León (a colleague here at the University of Navarra) and Michael Bourk: "Communicating science and technology through online video: researching a new media phenomenon", (Routledge, New York, 2018, 140 pp.).

Publishers pivot toward users and credibility, away from digital advertising

For those who could not attend the annual convention of the Spanish Journalism Society (SEP, Sociedad Española de Periodística, in Malaga, Spain, May 24-25, below is a summary of my keynote address. (Here are slides of the English version, presented Sept. 22 at the Creima Conference in Oporto, Portugal.)

The talk focused on two major trends in digital journalism that are taking place in many places around the world. The slides highlight examples of media from France, Holland, Mexico, the U.S., Germany, Peru, England, Colombia, Argentina, and Brazil, among others.

Photo by José María Legorburu

1. Publishers are pivoting toward users and away from advertisers and investors as their main source of financial support. The business model that depended on advertising to support journalism is moribund and nearly dead. The automated buying and selling of advertising is controlled by the duopoly of Google and Facebook, which have more and better data about news publishers' users than the publishers' themselves. Publishers have no way to compete with that dominance of programming and targeting of ads. It's time to burn the ships and not look back. 

2. Amid the flood of junk, misinformation, clickbait, and false information, the added value of a news organization will spring from its credibility. News media need to build credibility and trust by interacting more directly with their audiences, listening to their audiences, adopting transparency about their owners and investors, detailing their funding sources and spending practices, and, above all, doing investigative journalism that holds political and business leaders accountable for their actions. 

Versión en español

Because of these two trends, there are 10 new paradigms for digital journalism:

Users will own the media: how journalism is evolving

Alfredo Triviño has worked largely behind the scenes on some of the biggest digital media projects for some of the biggest brands in the world. But you might not have heard of him.

Alfredo Triviño: users will own the media, in every sense

He spent seven years in senior management roles at News Corp., ultimately as director of innovation, where he worked on development of a pay model for digital journalism and on long-term editorial and commercial growth strategies. (He is a 1999 graduate of the University of Navarra School of Communication, where I teach.)

He was invited to give the closing keynote address last week to the annual conference of the Spanish Journalism Society (SEP, Sociedad Española de Periodística). He ruminated casually about trends he sees in the worlds of digital journalism and digital commerce, mixing some English terminology into his Spanish presentation. Among the shifts he sees:

A shift from journalism and commerce to journalism vs. commerce. That is, the two will operate in separate worlds. Journalism will depend on the support of user communities rather than advertising. Brands will create their own digital media rather than publishing their messages on TV, radio, and in print.

Versión en español

A shift from paid editorial (subscriptions) to shared ownership. By this Triviño meant that groups of users will form around a topic of shared interest--local news of a community, a social issue, or a shared cultural interest, for example. They will be active participants rather than passive consumers. They will interact with the journalists, suggest topics to editors, share their knowledge, create content, contribute money, and support the mission of the publication because they feel they are part of it and it speaks for them. "This is ours; we own it".

How Talking Points Memo has converted from an ad model to paid subscriptions

Readers now supply more than half the site's revenue.

Josh Marshall started out as a political blogger in 2000, made a business of it in 2003, won a George Polk Award, and has managed to stay independent through all the wild swings of the digital pendulum.

So his reflections on how to transition from an advertising business model to paid subscriptions have a certain authority.

He talked about the evolving business model of his site, Talking Points Memo, in a 47-minute podcast with Digiday Editor Brian Morrissey. Among Marshall's observations that are relevant to other would-be news entrepreneurs:

• Small, independent news sites cannot rely on scale to drive revenue. They need a strong relationship with their users. Many digital media organizations that have massive audiences will not be able to make the transition to paid subscriptions because they don't have that relationship, he believes.

• Many of the 26,000 paid subscribers to TPM, which are now supplying just over half the site's revenue, pay because they support the mission of the publication, which "draws on readers' knowledge to break stories." The sales pitch for the $50 Prime product is that you get "warm, fuzzy feelings from supporting independent journalism".

Plagiarism has profilerated; you can avoid it

Giving credit to others enhances credibility, trust

We are not born knowing common courtesy. Someone has to teach us, and then we have to practice it.

We also are not born knowing what plagiarism is, and those of us who haven't learned to avoid it could be in big trouble.

Plagiarizing the work of others will get you expelled from a university, fired from a news organization, or dismissed from public office

The issue of plagiarism is especially relevant at the moment in Spain, where high-ranking officials in two major political parties have had to respond to evidence of plagiarism — here and here — revealed in investigative reports by the web publication eldiario.es and the TV station La Sexta.

(See some other examples at the end of this post).

Today it is so easy to copy and paste material digitally that some are getting sloppy and careless in newsrooms and academia.

Here are some guidelines:

• On the most basic level, it's common courtesy. Don't take credit for someone else's work.
• Put direct quotes in quotation marks and name the source. 
• If you have paraphrased a direct quote, be sure to name the source at the end of the paraphrase. 
• If you make extensive use of a source, mention the name of the author in every paragraph.

'Students, you will determine the future of journalism'

"You have to practice the values of independence and honesty." University of Navarra photo.

An icon of Spanish broadcast journalism, Iñaki Gabilondo, delivered a message last week designed to inspire and challenge 400 students and professors of journalism.

"The future hasn't been written yet:, he told them. "The question, 'What is going to happen?' is irrelevant. What will happen will be determined by what you do, what you don't do, and what you allow to happen."

Gabilondo, 73, was speaking at his alma mater, the School of Communication of the University of Navarra (class of 1963), where he also was a professor for several years. His eloquent baritone voice is well known to Spaniards after decades of presence on the morning radio news program Hoy por Hoy, roughly equivalent to NPR's Morning Edition.

He recently asked Martin Baron, executive editor of the Washington Post, how journalism can survive amid all the problems we face, including the collapse of the economic model, the loss of credibility with the public, and the misinformation, disinformation, and junk published everywhere.

Versión en español

The key, Baron replied, lies in practicing the values at the heart of the profession: editorial independence, credibility, honesty, and commitment to quality. "These are not just romantic ideas," Gabilondo said. "They are the essential elements of journalism. With these values you can move ahead. They are going to last."

These days Gabilondo does a brief commentary on the news via a video blog carried on the website of El País, the country's leading daily newspaper. But he recently did a series of video interviews titled "When I'm not around: The world in 25 years", with leading scientists and technologists around the world. So Gabilondo is more interested in looking forward than in looking back.

Restoring trust: Nieman Lab's helpful list of news credibility projects

These projects aim to restore trust.

In a blog post earlier this year, I wrote about the importance of Credibility as the new currency of journalism, its significance in an era of distrust of the media, and its economic value for high-quality journalism.

A big thank you to Christine Schmidt of Nieman Lab who has just produced a helpful list of news credibility projects. Among other things, it shows how the Knight Foundation is giving help to many of them.

Below is an abbreviated form of Schmidt's list, with a few details on each project. 

Trusting News
Participants/partners: Mainly local newsrooms, such as WCPO, the Fort Worth Star-Telegram, St. Louis Magazine; also A Plus, Religion News Service, CALmatters, Discourse Media, USA Today

The Trust Project
Participants/partners: News outlets like the Washington Post, The Economist, the Globe and Mail, Mic, and Zeit Online; tech companies like Facebook, Google, Twitter, and Bing; Institute for Nonprofit News

News Integrity Initiative, Based at CUNY Graduate School of Journalism
Participants/partners: The following groups received grants from the initiative’s first round of funding: Arizona State University’s News Co/lab, Center for Investigative Reporting, Center for Media Engagement, EducationNC, Free Press, Listening Post Collective, Maynard Institute, OpenNews, Public Radio International, The Coral Project; Internews and the European Journalism Centre have also received funding

2 niche startups that attracted investors

Email has an intimacy that TheSkimm has used to build a loyal base of 7 million subscribers.

Digiday has a weekly podcast about the business of digital media, and two recent interviews with founders of startups had nuggets of wisdom applicable to any media startup.

Digiday's editor-in-chief, Brian Morrissey, interviewed The Business of Fashion's Imran Amed about its move to a subscription model, and the founders of TheSkimm, Carly Zakin and Danielle Weisberg, about how they used email to build a loyal community.

Elements of their success formulas

1. Passion for a topic that you can develop in a way that no one else is doing.

a) Amed, then a consultant for McKinsey &. Co., began writing a blog in 2007 that talked about fashion as a business. He felt that no one was exploring the meaning of the numbers behind the leading fashion businesses. Over time, he developed a loyal audience who began suggesting ways he could monetize that audience.

b) Zakin and Weisberg were both 25 years old and producers for NBC television news when they decided in 2012 to launch TheSkimm. They were frustrated at the time that none of their friends were seeing their best work. Their friends didn't watch TV news. So they started an e-mail newsletter that aggregated what they thought was the most significant news that young professional women like themselves needed to know for their professional and personal lives.

Versión en español

2. Build community first. Opportunities for monetization will present themselves.

a) Amed told Morrissey that he had been blogging about the fashion business for years in his spare time and had to hire an assistant to handle all the inbound traffic and questions. It was only after six years, in 2013, that Business of Fashion launched their first commercial product, a careers platform in which brands could advertise themselves and their open positions to the publication's audience. This platform was financed with $2.1 million from various investors.

Where the jobs are for graduates in journalism

"The new journalism specialties". The graphic shows that 56% of the Spanish journalists surveyed work in media that have community managers, and 30% employ data and traffic analysts. Click to enlarge the graphic.

Where will the jobs be for graduates in journalism and communication? The results of a survey of journalists in Spain give some indication. The urgent demand is for people with digital media skills, but more on that in a minute.

The Press Association of Madrid's (abbreviated to APM in Spanish) 2017 survey was sent to 13,500 professionals, and the overall response rate was a respectable 13%. A little more than a third were working in journalism while another third were working in other professions or were retired or semi-retired. The remaining 30 percent were working in communications, mainly advertising and public relations. (News articles about the survey are here, here, and here in Spanish.

Disconnect in training

The survey results show that the respondents to the survey are not the ones who are filling the new digital media jobs in their newsrooms. For example, 56% of the respondents said their publications had digital community managers--the people responsible for interacting with users in social networks and other channels--while only 13% of the respondents said they were working in those jobs.

How publishers can overcome loss of Facebook traffic

Now that Facebook has made clear that it will not be promoting journalism to its users, all of the publishers who were getting much of their traffic there should look elsewhere. (Frederic Filloux of Monday Note has one of the best analyses of the company's announcement.)

What now? Well, there are several tactics and strategies that publishers can take to replace what they have lost (and will lose) from Facebook's pivot away from news. (I have also written about such strategies in Spanish.)

1. A tactic: start an email newsletter with links to your content. Think of it as a walled garden that protects you from Facebook.

Daily, weekly, or monthly newsletters create a more intimate relationship with users. Some publications have several on different topics, such as technology, business, public safety, or politics that users can select from. Local news sites in particular can benefit from daily newsletters.

The links to your content send users directly to your site, and any ad revenue goes to your business rather than Facebook. Many digital news publishers report higher response rates from email subscribers to offers of subscriptions, premium content, or memberships.
 

2.  Focus on the quality of users instead of the quantity: relationship rather than scale, engagement rather than volume.

The metrics of the "attention web" focus on showing the value of the audience's relationship with the media brand rather than with an advertiser's product.

2018: Credibility will be the new currency for journalism

An organization I work with that promotes development of independent media in Latin America, SembraMedia.org, recently asked me to make some predictions for 2018.


I really had just one: Credibility will be the new currency of journalism in 2018 and the years to come.
 

But to explain, here are that prediction's corollaries:



1. Independent media--those based on serving the public rather than turning a profit---will grow in importance through revealing corruption and holding authorities accountable. There are many examples. In the U.S., organizations such as ProPublica and Texas Tribune; in Spain, eldiario.es; in Peru, OjoPúblico; in Colombia, Connectas and La Silla Vacía; in Mexico, Aristegui Noticias and Animal Político; in Argentina, Chequeado; and hundreds of others around the world.


2. These independent media that serve the public first rather than political or economic interests will gain credibility by challenging the powers that be. That credibility will have economic value that will be monetized through support from NGOs, foundations, consumers, wealthy donors, and service-oriented organizations.


3. Journalism will continue its transformation from a business to a public service, and traditional media that view journalism as a business will accelerate their own decline. The traditional media's focus on maintaining profit margins will cause them to continue gutting their staff, their products and their services. They will have neither the will nor the means to make the needed investments in personnel and technology to transition to the world of multimedia, interactive, multiplatform, interactive journalism. (There are a handful of exceptions.)