The brave new world of digital journalism
What will become of the country's newspapers? The CEO of phone book company Golden Pages knows a thing or two about the transition from print to digital, and he offers his insights.
This year, the country's news organizations have been forced by market conditions to make a sharp strategic change. A severe drop in advertising budgets for print media forced newspapers and news websites to respond instantly. The privilege of slow, gradual change in keeping with a long-term analysis was not an option. Management launched sharp cutbacks while attempting to answer a critical question: What forms would their institutions take in the future?
Some of the newspapers believe they are facing a unique crisis, and that they need to pave themselves a new, hitherto-unknown path - one that will launch them into the digital era and reduce their reliance on print. But the story of the Golden Pages telephone directory company, now known as Zap Group, could offer important insights for Israel's papers.
Zap CEO Nir Lempert is responsible for the company's transformation. As of 2005, 90% of the company's revenue stemmed from printed phone books. In 2012, 85% of Zap Group's revenues are anticipated to come from the digital sphere. The company still isn't out of the danger zone, Lempert notes, but "it is undoubtedly standing on its own legs."
The dilemmas currently facing newspapers are similar to those he faced when he entered the job in 2005, he recalls: the need for new revenue sources, the question of branding, technological challenges, and internal organizational conflicts. But Lempert wishes to begin the interview by discussing the differences. "These are two similar worlds, but they're not identical. The main difference is consumers' needs," he says. "Newspaper readers have an emotional connection to their newspaper, while people using telephone directories are seeking functionality and no more." This emotional connection gives newspapers an advantage, and will help them survive, he notes.
Did you ever think that one day you wouldn't have a print product?
"Yes, my internal debate was whether I'd manage to foster new growth engines before print died. I was more pessimistic than our shareholders, and in retrospect I can't really say who was right. Golden Pages was seeing its revenues slowly eroding, but I feared we'd have some unforeseen collapse, so that's why I pushed really hard for the digital."
The 2008 global financial crisis reinforced Lempert's decision. That crisis calls to mind current events in Israel's news industry.
Water cooler discussions
The first phase of the transition from print to digital is creating new revenue sources, he says. "We did that by means of two concurrent processes - developing an online platform for Golden Pages and via acquisitions and mergers. We tried to transfer the logic of a printed phone book into the digital realm. In parallel, we realized the Internet's strength lay in its own niches. In 2006 and 2007 we bought out a significant number of niche sites that were leaders in their field, and they now comprise the Zap Group's 'mini cosmos.' These two steps brought us significant web traffic, which brought advertisers," he says.
Local media companies also need to find new revenue sources, since income from online advertising does not cover the hole left by the loss of print advertising. Some of the newspapers are owned by groups that already have multiple operations - the Yedioth Ahronoth group, for instance, has several distinct newspapers as well as several unrelated websites. The same can be said of Haaretz and Maariv, albeit to a lesser extent.
"One of our central questions was when we should start merging our acquisitions," Lempert says. "The owners wanted it to happen quickly in order to cut expenses, but my instinct was that if we merged companies with drastically different organizational dynamics, we'd kill our acquisitions. We decided to go for an interim phase - aggregating all the sites into a single office, but joint management and technological infrastructure. We started off very slowly. The physical proximity was important. I believe in workers' water cooler discussions. That's how knowledge is shared."
The slow merging process was completed only this year, when the company officially changed its name to Zap Group. This was preceded by the dangerous process of rebranding. "Over the years we'd invested tens of millions of dollars in the Golden Pages brand, yet we still were looking to do away with it in favor of a younger brand like Zap. In the newspaper field, this would be like an august paper like Yedioth Ahronoth deciding whether to preserve its traditional brand or replace it with X. I don't know what the answer is, but I know this discussion needs to take place," says Lempert.
"Now we really are one company," he adds. "We sit together in one building. We've reorganized, and the organization is no longer divided up based on the original acquisitions."
One of Lempert's most meaningful decisions - and possibly one of his most difficult - was encouraging the company's advertisers to forgo print and switch to digital - a process that scares newspapers deeply. "Until 2007 I wasn't fully convinced about this," Lempert admits. "Now I choose to convince our advertisers to switch to our digital platform, even if it comes at the expense of our printed product. Some of the most senior employees have accused us of cannibalizing the old product."
This clearly is a dilemma. Lempert notes that the country's major newspapers decided against posting their personals pages online, and as a result, they lost their business to the classified advertising website Yad2.
Content will always be king
Lempert started out in the Israel Defense Forces intelligence unit 8200, where he worked on creating and analyzing content. His first civilian job was with the satellite company Yes, where he advanced to become a vice president. In 2004, he was charged with managing Channel 10 after the company sought court protection from creditors.
"I come from the intelligence field, so I'm not naturally optimistic, but unlike many others right now, I think journalism has a promising future," he says. "The platform will change. So will the organizational structures. It's possible that many of the current professions in the field won't exist in the future, but content will still be king and anyone creating it will continue to be important.
"One of the strengths newspapers have is the faith that readers place in them as an institution," Lempert continues. "Newspapers project a sense of trustworthiness onto their writers. There may be some change in the balance between the writer's personal brand and the brand of the newspaper, but newspapers as a platform have a future. Of course the expenses need to be trimmed significantly. It'll take time, but ultimately the field will reach equilibrium. If I had a magic fix, I'd sell it to someone. It's not that we've finished this process and succeeded. We're still fighting."
Beyond surviving, will newspapers preserve their public role?
"We at Golden Pages do indeed have a different role, but it's a public one nonetheless. We strengthen consumers, create transparency and thus improve the service offered by small businesses. But we're also not a philanthropy. You can maintain your public role while still making a respectable livelihood."
Lempert adds, "I think the broad salary cuts are a mistake. I saw this when I was CEO of Channel 10. You have a group of top talent earning a ton, and under them a large swath of people who do most of the work, but earn very little. It's a strategic mistake to create these kinds of salary gaps within an organization. Salary cuts are much more painful for those who are earning less. Over time, if you can't promise them fair wages, they won't stick around, and then you lose your skilled employees. Content is king, so you need to invest in content and make cuts elsewhere."
Is there a reason to preserve the print format?
"There are two considerations: Can print maintain itself financially, and can it be separated from the digital operations? Our challenge is isolating the print within our organizational DNA, so that it won't create issues as we go digital. If we can't make the organization move away from its old print mind-set, we'll have to stop printing altogether.
"I believe we'll manage to draw out the print for a few more years, and then shutter it partly or entirely," Lempert says. "As for newspapers, I believe there's a large number of readers who still want print, including no small number of digital people like me."