Sunday, May 15, 2011

News aggregators aren’t exactly raking it in

Newspapers and other traditional news organizations have struggled to monetize their content online.
But aggregators like the Huffington Post have profited from that content.
They’re not making a whole lot from leveraging the content of others, but their overhead is lower and profitability is easier to reach.
The problem with the transition from a traditional news product, like a newspaper or magazine, to an online version is that advertisers pay much less for online ads. So analog dollars get converted to digital pennies, as former NBC Universal chief Jeff Zucker famously said.
But when an aggregator cherry-picks the best parts of someone else’s article, it can get by with less ad revenue because it isn’t paying the salary of the writer or writers who researched and wrote the original article.
The Huffington Post, purchased by AOL in March for $315 million, is expected to generate $50 million in revenue, with a profit margin of 30%, according to the Associated Press. That works out to $15 million in profits.
That’s a pittance compared with what news organizations like the New York Times and Gannett spend on original reporting each year. No wonder New York Times executive editor Bill Keller is peeved at HuffPo. Keller slammed HuffPo in an article titled “All the Aggregation That’s Fit to Aggregate.” HuffPo co-founder and editor-in-chief Ariana Huffington quickly responded with some choice words of her own for Keller.
Last year, HuffPo posted its first annual profit since its founding in 2005, Bloomberg reported. It reported sales of $30 million.
The Huffington Post has been adding more original reporting, but still gets a large share of its articles by summarizing news from other publications, including the New York Times.
Another prominent aggregator, Business Insider, recently revealed that it generated $4.8 million in sales last year and a profit of $2,127.
Aggregators can do what they do because of fair use, a legal provision that allows people to use snippets of news stories and video for purposes of commentary, criticism and education. How much of the source material can used is a gray area.

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