In my last post, I described the vertical disaggregation process occurring within the news industry, wondering aloud (as is fashionable these days) what business model will support the news in the new media environment.

Actually, this question needs to be more precise. A better one is: Which business models will support which types of news generation processes – regardless of whether they happen in a newsroom or not? I believe that, in addition to vertical disaggregation, there will be a simultaneous process of horizontal disaggregation. That is, various types of news that have historically been created within a single company will end up within distinct entities, which are in turn supported by different revenue streams and cost structures.

The gurus of news 2.0 believe geographical scope will be a (if not the) major fault line along which content creation and aggregation are broken down, though hyperlocal journalism has had limited success so far. The national and regional news sites that already exist will be complemented by hyperlocal sites that tell you what’s going on in your neighborhood, on your block, or even in your apartment building. As it would be hard for a single neighborhood to generate enough advertising revenue to support paid reporters and editors, this type of hyperlocal site will only become possible through partial reliance on user-generated content, which the site obtains practically for free. A number of startups are already targeting this market.

But geographical breadth is just one of a number of social and technological fault lines along which horizontal disaggregation can occur. Any social or technological variation in the news content creation process could necessitate a different business model, and thus, be housed within a distinct entity.

Jeff Jarvis (CUNY professor of journalism and well known blogger) proposes separating the functions of newsgathering, editing, and analysis:

So maybe we need to disaggregate the newsroom yet further into its distinct and, we hope, marketable skills. Reporting and news-gathering (words, images, sound, video, data, investigation) may well be something that freelancers (professionals and amateurs) do. And editing — curating, vetting, enabling, educating, to cut up the task yet further — may find new value. Analysis may happen more and more in the commentsphere that the community has become.

This makes sense. But why stop there? Why not further divide the news generation process into its component steps? Conversely, will it make sense in some cases for news production processes remain unchanged? (Indeed, some magazines are thriving even as other print media declines.)

It will all depend on what type of news is being produced. Let’s consider five types of journalism. These are by no means exhaustive, or completely distinct from one another:

- Investigative journalism involving in–depth interviews, breaking news from private sources, or a high degree of technical expertise
- Crafting narratives from widely available, understood, and agreed-upon facts (e.g. sporting events, political events, market information, etc.)
- Opinion and analysis
- Hyperlocal news
- Collection and dissemination of raw data

These vary in the extent to which they can be crowdsourced, in citizens’ desire to participate in their production, in their need to be fact-checked, and in the degree of subjectivity involved in crafting narratives.

If we were to do an analysis of how much it costs to produce each category of journalistic text, either in per-article or per-word terms, I suspect we’d find huge variation, perhaps even an order of magnitude or more. We’d also find huge differences in revenue per unit, as some news is more viral, and some news inherently leads users to spend more money (which generates higher demand for advertising). In other words, it makes perfect sense that they would need separate business models!

These days, somewhat counterintuitively, news crowdsourcing experiments often create more work for the journalists who organize them – not less. Someone must generate internal support for the project, set up one or more technology platforms, encourage the community to participate, and/or monitor large numbers of contributions (the quality of which varies significantly). But eventually, as the technology improves, and as news sites institute permanent, flexible processes and deploy them with greater frequency and scale, these costs will shrink on a per-unit basis. Technology will selectively afford opportunities to crowdsource expensive components of the news creation process, thereby eliminating those costs from newsrooms. In this way, technology will magnify the differences in cost and revenue per unit between different types of news.

My prediction is that we’ll end up with multiple, distinct business models, each associated with different processes for gathering first- and second-hand information, crafting narratives, editing copy, fact-checking, etc. These processes may happen within a single company or within separate firms – I imagine there will be some examples of each. The point is that different types of news will become sustainable in different ways.

Intensive investigative journalism will probably always require a high level of professional journalism. The others, theoretically at least, could some day be largely crowdsourced, though the processes for crowdsourcing would likely vary significantly. A lot of data is already being collected by readers (polls, photos, comments, videos, etc.), though one might argue we have a long way to go in finding a structure that approaches traditional journalistic standards and fully exploits the value of this content.

Eventually, I think it will be possible to crowdsource a much larger share of journalism than we currently anticipate. MixedInk will be a socially and technologically different way to produce some types of news. It will enable motivated crowds of readers to assume responsibility for certain phases of the news generation process. Along with other technologies that facilitate crowdsourcing of content creation, it will help to cushion the fall of traditional media while producing a more democratic public sphere.

It’s important to acknowledge up front, though, that there won’t be a single solution to the news ‘crisis,’ but many distinct solutions. Journalism may be transformed almost beyond recognition, but I, for one, do not worry about its future. The demand for news is clearly not going anywhere. If anything, by providing pressure for change, the crisis is helping to avoid stagnation in our public discourse. It will result in a stronger news product that better engages and reflects the priorities of readers.

Much has been written on the subject of the internet-induced transformation currently underway within the news industry. (Those who’ve already had their fill of this topic should feel free to wait for Part 2.)

The basic idea is that the economics of distributing information online are radically different from print, so the business models that evolved within the physical world of newspapers no longer apply. The gradually declining fortunes of today’s newspapers mark the end of the previous era.

In meatspace, it made sense to keep the entire value chain – ad sales, news and editorial content, printing, and distribution – under a single roof. Given the economies of scale and high coordination costs from one end of the chain to the other, companies consolidated into local monopolies and national oligopolies in order to minimize costs and maximize profits.

The internet is changing things. Distribution costs are now much lower due to the ease of online publishing; new communication tools facilitate coordination among the different activities; and buying and selling advertising inventory is much simpler through automated web-based ad networks.

With the reduction in coordination costs, suddenly there’s much less pressure towards vertical integration. The value chain is more efficient when divided between multiple entities, each focusing solely on a single stage of the chain rather than doing everything (newsgathering, printing, distribution, etc.) in-house. Separate companies can develop their core competencies and engage with complementary firms within a competitive marketplace that stimulates innovation at each step in the chain.

So, the consensus among many internet gurus is that the news media is being reorganized. Within the new value chain, distinct companies are performing different functions – selling advertising (e.g. Google Ads, Tacoda), creating content (e.g. AP, NYTimes.com), and aggregating content (e.g. Digg, Google News), and other more narrow ones. They integrate almost seamlessly to deliver a product that was previously provided by a single company. Communications infrastructure firms, like Comcast, are also part of this new chain – they’re today’s delivery boys. But they’re simultaneously a part of many other web-based value chains, and they’re paid by end users, so their fortunes are much less dependent on the news industry.

This is not to suggest that the disaggregation process described so far is complete. Far from it. As more and more consumers get their news online instead of in hard copy, print advertising sales dry up. Online ad revenue, while growing, will probably never make up the difference – a major reason for this is that classified advertising, once a major source of newspaper revenue, has moved elsewhere. (Anyone heard of a site called Craigslist?) Newspapers of all shapes and sizes are being forced to cut back on editorial staff.

So the big question on everyone’s mind as the media ecosystem transforms is: As newsrooms cease to be able to support themselves as vertically integrated newspaper monopolies, how will they continue to do their jobs – if at all? It isn’t only journalists and news companies with a natural self-interest in protecting their livelihoods who ask this, but also foundations, academics, media watchdogs, and others who seek to safeguard a robust fourth estate out of a conviction that the health of our democracy depends on it.

Stay tuned for my thoughts on what’s in store in an upcoming post. The short version: Different types of news will sustain themselves through different business models.

MixedInk is founded on the premise that citizens/consumers/members/employees want to tell the people in charge, and other members of their group, what they think. That’s why people vote, blog, comment, write letters to the editor, sign petitions, rate products, respond to surveys, etc.

And politicians and executives want to hear from us – or at least, they make a big show of saying so. The thing is, sometimes it seems like they want credit for giving us a voice without actually allowing us to be the final arbiters of what we can express.

On the political side, the next Democratic presidential debate on CNN is taking the innovative step of letting voters submit their questions to the candidates by uploading a video to YouTube. This seems like a move toward a more democratic primary process, and it certainly is an improvement on just having Brian Williams or Tim Russert (or their staffs) write the questions.

The problem is that ratings and comments have been disabled on the site where you view questions that have been submitted. So, we (the voters) can’t register our support for questions or tell how popular a question is. CNN gets to choose which questions to ask from among thousands, and they don’t have to choose the ones we like best. They’ll be able to find questions they would have asked anyway, more or less, only the questions will come out of the voters’ mouths.

On the corporate side, a recent survey found that 57% of senior marketers found user-generated media to be “very” or “somewhat” important – a sign that things are headed in the right direction. Yet only 22% said they were “very willing” to give their consumers more control. The pollster explained, “Despite the increased awareness of the power of consumers in a digital age on brands and sales, marketing executives are reluctant to loosen their grip on marketing content, unwilling to give too much control to these empowered consumers.” General Motors’ first foray into consumer-created advertising is a great example of what can go wrong for marketers.

But the answer is not for companies to institute top-down solutions. The marketing department should not simply choose which ads they think are best and which are inappropriate – as XLNTads, MasterCard and others would have marketers do. Instead, they could use better aggregation and voting mechanisms, limit participation to trusted contributors, disallow certain words, and/or enable trusted users to flag inappropriate material. And they need to be transparent about how any final content is selected.

We have no doubt that citizens and consumers will ultimately come out on top, as the more transparent, democratic efforts to collect content from users will attract more, higher quality contributions. But in the short term, in the absence of standards for soliciting bottom-up content, corporate and political marketers will do everything they can to create the illusion of incorporating our input.

A high school teacher named David Colarusso has created a new site called Community Counts, which provides the functionality missing from YouTube off-site, allowing viewers to vote on the debate question videos submitted via YouTube. The site has benefited from James Kotecki’s (and others’) promotional support and has already collected thousands of votes.  As bottom-up, innovative side-steps like this one gain increasing traffic and attention, hopefully corporate, media and political organizations will begin to understand that we won’t settle for partial control of our collective voice.

We have to keep the pressure on them, with efforts like Community Counts, to institute truly democratic systems for their users to express themselves. If they want to reap the benefits of our free labor and ideas and our commitment to their products and policies, they have to earn it.

You guessed it – that’s where MixedInk fits in