What Warren Buffett Doesn't Know

Warren Buffett won himself some headlines today with another call for newspapers to charge people for content. 

Newspapers grabbed this one eagerly but there's something neither they nor Buffett know.

They already do charge. All of them.

They charge you in time. The time it takes you to read anything is a real cost, to you. I can very much understand why you would resent anyone talking about charging you money for something you're already paying for, with your time, attention, and (assuming you believe what you read) credibility. I resent it, too.

Especially since, in the old print model, content was always free to begin with. The cost of the paper was never more than the cost of getting it from the printer to you. The cover price was split between the newscarrier (or newstand) and the truck that dropped piles of paper on the street (or driveway).

How were writers paid 20 years ago? Advertising. The ads that surrounded the content paid for the writers, the editors, the salesmen, the typesetting, and the printing. Not to mention the executives at the top of the tower and the profits that went to shareholders.

How was this possible? It was possible because newspapers knew who was reading them, could guarantee audiences to advertisers, and could prove the value of the space they were selling.

Say you were a car dealer. The guy who sold you ad space could tell you how many of his readers drove by your place of business every day, and what the impact of seeing your ad in his paper was likely to be. Here is how many cars you sold when you didn't advertise. Here is how many you sold when you did.

Knowing your audience, knowing the value of that audience, and extracting that value from businesses is the heart of publishing. It's a market-making exercise. To say reporters are what the newspaper business is about is like saying lions and tigers are what the circus is about. Cirque du Soleil would say you're missing the point, and they'd be right.

How does this work online? Understand, first, that you're making markets, not producing news. You want to prove to a potential advertiser that, if they place an ad on your page, they will sell more stuff. You want to show them just how much more stuff. So here's the formula:

• Make certain the right people are seeing your pages. This may include making sure the wrong people aren't seeing your pages. The more specialized your news content, in other words, the less likely someone is to see it elsewhere, the more important it is to at least have a registration wall put out. And the power to withhold access to anyone you decide shouldn't get it.

• Make certain you're hitting your target. Know the place, industry or lifestyle you are covering. Make sure you have all the news of importance to your segment of the market. Don't include extraneous material. Local newspapers don't need national news. Bike publications don't need stories about running (unless it's a triathlon).

• It's not all about the Web. The best way to know you're hitting your target is to have regular e-mail contact with readers, and be able to prove those e-mails are opened and read. It's important to make this a two-way street, and to make your Web site a place where everyone in your chosen community feels safe in speaking their mind.

Warren Buffett is 81. I get it he doesn't understand the nature of the newspaper business. He's an investor. A very good one. One who has been smart enough to avoid the newspaper business.

So why is anyone in that business thinking he knows what he's talking about?