Misunderstanding Media Customers

The New York Times doesn't understand that readers are its product not its customers.

When we celebrated IBM's 100th anniversary, we praised IBM's well-known customer focus.  Every business realizes it has to focus on customers, but not all businesses understand who their customers really are.  Even when management knows who pays the bills, that understanding isn't always communicated to the bottom of the pile.

We used Google to illustrate the difference - Google users are the product, they're not customers since they do not pay Google any money.

One of our readers objected to a point we made:

"Are those people Google customers? Nope - they don't pay Google a dime....Are the cell phone manufacturers that put Android on their products Google customers? Nope - they don't pay Google a dime."

Actually they are. Google doesn't make anything from the advertisers unless the end use clicks the ad. Merely placing the ad image/text on the product page gets them nothing. The real customer IS in fact the end user because without their click (and product patronage, for that matter) there would be no advertisements from which to profit.

Furthermore, if Google doesn't care about the end users' desires, product patronage declines and advertisers go somewhere else.

The end user is Google's customer because it is their eyeballs and mouse clicks that transfer money into Google's bank accounts.

Google is a media empire; let's compare their business model with another media empire, the New York Times.

Google's only product.

The New York Times Business Model

The Times is sold on newsstands and by subscription.  A number of years ago, the Sunday Times retailed for $1.50.

At that time, newsprint cost about $1.50 per pound by the time the massive rolls were shipped from Canada and delivered to the Times' printing plant in Times Square.  When someone bought a paper, the retail price barely covered the cost of the blank newsprint.  Delivery costs and newsstand commissions came out of that, of course.  The sale didn't even cover the cost of the blank paper.  The Times lost money on every single paper sold.

How did they stay in business?  By selling advertising.  Advertisers gave the Times far more money than subscribers were willing to cough up.

When the Times had a subscription drive, each additional subscriber lost money, but they made up the losses caused by circulation increases by boosting ad rates.

Decades ago, there were very few advertising channels in New York City so advertising rates were very high.  When a potential advertiser approached the paper, the answer was often, "I'll have to see if I can get you in."  Limited channels made it easy to boost advertising rates - for many large advertisers, the Times was pretty much the only game in town.

From the advertisers' point of view, readers weren't customers, they were the product they were buying.  Advertisers paid the Times to expose readers to their ads.  The Times justified its rates by bragging about how many gazillion readers would see each ad.  They'd calculate the "per view" cost by dividing whatever the advertiser was going to pay by the number of subscribers.

This was bogus, of course.  Very few if any readers actually looked at each and every page of the Times.  Uncertainties as to who looked at each page, how long they spent there, and where they went next led to the saying, "Half of what I spend on advertising is wasted, I just don't know which half."

Misunderstanding their Market

The Times editors and correspondents gloried in working for the Times as IBM-ers gloried in working for IBM.  IBM prospered as long as it saw itself as helping customers solve complex problems.  They nearly went under when they lost customer focus and saw themselves as a mainframe company.

The Times not only gloried in "keeping the public informed," they took pride in being "the paper of record."  If something wasn't reported in the Times, it didn't happen.  Whatever the Times said on any topic, that was the way it was. 

They were somewhat justified in seeing subscribers as customers because customers actually paid something, but advertisers were their real customers.  The Times wasn't really in the news business.  The newspaper was a channel by which advertisers generated sales, but the Times didn't want to admit that their purpose was so crassly commercial.  Unfortunately, they got so caught up in the glories of being the "paper of record" that they let the costs of generating, packaging, and distributing hard-copy content get out of hand.

The Google Model

Google has exactly the same problem - how do we get eyeballs on our customers' ads?  How do we manufacture product to sell?

Google realizes that search engine users and Google app users are the product, not the customer.  The Times was somewhat confused about this.  Their solution was to spend more and more money making bigger and better content.  They thought that outstanding content would attract high-end readers who could be sold to advertisers; the fact that high-end writing generated Pulitzer prizes had nothing to do with their desire to emphasize news, of course.

Unlike the Times, Google doesn't generate any content to speak of.  They access the entire World Wide Web for free.  Their solution is to make it so convenient to find free content via Google that users will use their gateway to the WWW instead of, say, Yahoo or the Times' own web site.

Google doesn't spend a dime generating content.  It spends its money packaging other people's content to attract readers to sell.

Once they dominated search, they started spending money tracking reading habits.  The readers are the product, not customers.  The more Google knows about readers, the more it can charge each time a "product" clicks an ad.

What Google Knows

Google and the Times are competing for the same advertising dollars and selling the same product, except that Google has far more content available than the Times has.  The Times can't tell advertisers what fraction of their readers actually see or respond to any given ad.  Google can not only track individual clicks, it can tell advertisers a lot about who generated each click.

Google Analytics tells advertisers how many people visited each site, from whence they came, how long they stayed, and which pages they viewed.  They can compare how many visitors hit the "buy" button by pretty much any attribute Google collects including which page they started on.

Google software reads everything gmail users send or receive; how else can they post relevant ads?  They know who your main contacts are by watching your mail volume.  They know which of your friends visited other sites.  They turn Google voice messages into text to send to your cell phone; they can determine what your Google Voice calls are discussing.  Call volume tells them yet more about who influences you and whom you influence.  The Times can tell its customers none of this.

Not only that, the Times pays to generate content; Google gets content for free.

So many bloggers are willing to write for nothing that Google will never suffer a content shortage regardless of topic.  People used to think that quality would become an issue, but Google is fine-tuning its searches to give each user precisely what he or she wants so that they can skip over all the schlock out there on the web. 

The New York Times is slowly selling off other parts of its business.  Which model will win in the end?

Will Offensicht is a staff writer for Scragged.com and an internationally published author by a different name.  Read other Scragged.com articles by Will Offensicht or other articles on Business.
Reader Comments

As the reader that induced this article (thank you for the honor of being formally addressed from on high by the way) I still have to protest.

I think your article actually proves my original point by showing the difference in how money is made from the advertisers between Google and the NYT.

Again, Google *does not make money* by merely placing eyeballs in front of ads.

As you pointed out, the NYT does. No matter how many/few people respond to NYT ads (by buying a new car or doing whatever the ad says), they still get paid. So your assertion that their advertisers are the customers is correct. Eyeballs are the only thing that matters.

But Google doesn't work that way. They have to be far more creative in getting customer to INTERACT with the ads. Eyeballs don't matter, clicks do.

I say this as someone with lengthy experience working with Google products - both their Adwords and Adsense line. They do not get paid for placing ads. They get paid for getting customers to CARE about the ads.

You might consider my point to be a 'distinction without a difference' but I would disagree.

It matters because if Google doesn't treat the end user as a customer (building features that they like and placing ads in the right position) then they won't get paid. The NYT has no such worries.

July 20, 2011 9:47 AM

An interesting article.
I am not an expert in modern day advertising; but, I did once work in the big agencies and it is different today.
I have noticed that there is a change occurring in Internet advertising which should affect Google. The Internet is becoming so crowded that it is very difficult for new sites to be found unless they revert to traditional methods of advertising their site. And, traffic now goes to known, big sites for information and participation, and for buying. Certainly Google is making lots of money, but I don't need Google to find my normal sources of activity and buying. I use Google to get information and new sources, and that does lead to some buying, but primarily I buy from the places I know, and they are bookmarked.

AS for the New York Times, they are losing business to the Internet, just as all print media is; and, they chose to become arrogant and politically biased, which narrowed their audience to people who held their own views. So, instead of being a high volume media source, they became a highly opinionated political source, preaching to the elite, which is not that big an audience. And, what respectable elitist wants to consume half a tree to buy a NYT paper?

Incidentally, I am very impressed with Scragged. It has excellent writing and thought provoking topics. You're bookmarked.

July 20, 2011 12:20 PM

"And, what respectable elitist wants to consume half a tree to buy a NYT paper?"

P Jones, you just blew my mind.

July 20, 2011 12:33 PM

The argument between Ifon and the author seems to me rather like a delusional exchange between two wounded and dying soldiers on a battlefield.
"It was a Mark VI. 0 that hit us that is why we have green ooze dripping from our orifaces."

"No no no," argues back the other, "A Cablina Z22, has the very same droze dose, and...well, you heard that high pitch buzzing and the ten count after it attached to the hull, a Z22...no doubt about it..."

And this is the reason for my analogy:

"Google software reads everything gmail users send or receive; how else can they post relevant ads? They know who your main contacts are by watching your mail volume. They know which of your friends visited other sites."

I find the reality presented here, much more important, and having deep effects beyond such academic questions of which munitions are causing our rupture, but that either one is deadly, we are hit, we are oozing green goop, it won't be long to morbidity.

Neither "Products" nor "Customers" are "free and independent people".
Just the sentence above is indicative of an insidious "Big Brother" society that should take anyones breath away that reads it and comprehends the consequences of what it really means.

Honestly...I feel like I am living in a Kurt Vonnegut novel and reading a story by Kilgore Trout here...

July 20, 2011 12:37 PM

I also wish to agree with P Jones about Scragged - very thought provoking topics, and interesting exchanges take place.

Your addition to your name is funny Dave.


July 20, 2011 12:44 PM

Google is the big brother. Google knows everything. Google probably knows when you leave your house, and how long you were gone. Google knows, and Google reports.
In the past I wondered how many people were paid to view the recordings made by the cameras on each street corner. Google views, Google reports.
The CIA is making a killing with Google.
Thank you,
Robert Walker

July 20, 2011 1:25 PM

"The CIA is making a killing with Google"

Robert, do you believe that the CIA secretly owns Google, or a portion of it? I've heard that claim made before. Basically, Google is the Web 2.0 version of ARPANET that the government secretly financed in order to get information at the ground floor. I haven't seen a credible evidence for it, but the assertion has been made. It would be hard for me to believe that the government did something so efficiently, smartly and lucrative.

July 20, 2011 1:38 PM

The CIA isn't the government. The CIA has many business fronts. I believe the founder of Google is an "ex" CIA operative, or asset, as is the wikileaks goon.
Thank you,
Robert Walker

July 20, 2011 2:08 PM

That's true in the same sense that the Federal Reserve isn't the government either. It's a banking system that loans money to the banking network and makes suggestions on economic policy (most of which are followed). It's not funded by taxpayers.

But it's still referred to as 'the government' since it was created by government act (Federal Reserve Act of 1913) and its top executives are gov appointees.

The CIA was established sort of the same way. Government act officially created it (National Security Act of 1947) but it had civilian origins and purposes before that, and continues to.

All of which is mincing words. Obviously 'the government' of the USA controls the operations of both. The US Senate can, and does, change them as they see fit from time to time.

July 20, 2011 2:16 PM

"Obviously 'the government' of the USA controls the operations of both. The US Senate can, and does, change them as they see fit from time to time."~Ifon

It is well that you put 'the government' in some form of brackets here Ifon. Because in fact it is the other way around. The government is owned and operated by those who control the Federal Reserve.
This can be characterized as 'corporatism' or it can be characterized as 'communism', depending upon the perspective [L or R] it is viewed from.

July 20, 2011 2:25 PM

It's times like these that I wish I could draw Larry Page and Sergey Brin into a quick conversation...

July 20, 2011 2:33 PM

"..draw Larry Page and Sergey Brin into a quick conversation..."~Ifon

Personally, I might be more inclined to draw them into a room with some interigation devices...for a longer conversation.
Of course, a doctor would be one hand...


July 20, 2011 3:43 PM

BTW, my last comment was [mostly] in jest...

July 20, 2011 4:29 PM

I know much of America is in a state of almost unbearable prolepsis. As several have commented here - there seems to be this calm before a storm, the feeling that rebellion, revolution, or a military crackdown is just on the horizon.
Perhaps it is some activity in the pineal of those who still have an operative one...that hasn't been calcified by aluminum flourides...?

But it reminds me of the Byrne - Eno song on BUSH OF GHOSTS album; 'America is Waiting'..."for a message of one sort or another"...

If it is not too esoteric for this audience - I would say it is almost like some form of mass dejavue.

Or it could be a matter of "Predictive Programming"...there have certainly been a fair share of 'disaster' and sci-fi dystopia films in the last few years.

July 21, 2011 1:24 AM

Here's how it works.
The international bankers get a man elected president (Woodrow Wilson). The Federal Reserve Act is passed, along with the XVI Amendment.
The Internal Revenue Service is set up as the collection agency for the Federal Reserve Bank - a privately owned corporation, but no one knows who the stockholders are.
Roosevelt withholds the information from the Commander of the Pacific Fleet and Pearl Harbor gets bombed and we are drawn into the Second World War.
The Office of Special Services (OSS) is formed as a spy agency. After the war the OSS becomes the Central Intelligence Agency (CIA). It is not supposed to operate in the United States of America, but its headquarters is in Virginia.
The Federal Bureau of Investigation (FBI) is not supposed to operate outside the United States of America, yet agents have gone to Iraq, Afghanistan, and India to name a few countries to investigate crimes committed in those countries.
No President has been informed of the actions of the CIA since, probably Truman. Kennedy had some suspicions and was going to dismantle the CIA and was murdered for his efforts.
A higher percentage of Americans are in jails and prisons than any other country in the world. Yet we are considered to be a free people.
Cameras are placed at intersections that record voice and film of all of the activities in the area.
We are forced to eat poisoned food grown by commercialized farming. Monsanto and others like that company have almost complete control of our food supply. They are gaining control of our water supply.
There is no conspiracy.
Thank you,
Robert Walkre

July 21, 2011 12:15 PM

"There is no conspiracy"~Robert Walker

That's right, after reading the text you offered that IS the only rational conclusion one can come to.

July 21, 2011 3:49 PM

In one of these chains of comments, it was suggested that I might be a "truther".
May I ask; What the hell's wrong with the truth?
I like the truth. And the truth is that two airplanes did not bring the WTC buildings.
No work permits were pulled for the work that was being done on the WTC buildings. The mayor had an emergency office in one of the buildings, but moved to a smaller hq prior to the bombing.
Where is the passenger lists of the airplanes? Where is the passenger list of the "airplane" that hit the Pentagram...er...the Pentagon?
Again, I say, there is no conspiracy.
Thank you,
Robert Walker

July 24, 2011 11:20 AM
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