“Why does the New York Times website, which gets close to thirty million unique users, generate so much less revenue than the print newspaper, which has nine hundred thousand weekday subscribers? It just doesn’t make sense?”–Bill Grueskin

Bill Grueskin’s question is one that motivated his decision to write, with Lucas Graves and Ana Seave, The Story So Far: What We Know About the Business of Digital Journalism. The book is based on extensive interviews the authors conducted with news organizations, both old and new, and reveals how they allocate resources, what patterns are emerging in revenue streams, and what might generate revenue more effectively.

Throughout the week, we’ll feature elements of the book but we begin with an interview with Bill Grueskin and Lucas Graves in which they discuss the book. In the interview, Graves and Grueskin talk about the importance of their project and how it started. They also talk about how and why news organizations will have to change their relationship with advertisers to survive as well as vexing issues confronting digital journalism such as aggregation.

Here are some excerpts from the interview:

Question: In your conclusion section, you wrote that media companies should rethink their relationships with advertisers. Are those the kinds of things that you’re talking about?

Bill Grueskin: Right. Well what we also said, that we firmly believe in here at the journalism school is that this is not a way of saying that advertisers ought to be able to dictate coverage by journalism organizations. We believe that that’s a critical element to the credibility of reporters and editors everywhere. But we found that advertisers are much more aware of the many, many options available to them to reach consumers. If you start from the standpoint that advertising has historically generated the huge amount of revenue for most news organizations, what news organizations are facing, although a lot of them have not really dealt with the consequences of this, is that advertisers can reach out to consumers in ways that don’t require a media company.

One of the most interesting quotes that we got was from the vice president of The McClatchy Company, which is the third largest newspaper company in the country—his name is Chris Hendricks, and he said, basically, the idea of selling advertising adjacent to content, and expecting that’s going to make your media company work, is pretty much over. Or if it’s not over, it’s at least waning. Yet most media companies still operate that way—We’re going to produce a bunch of stories, we’re going to go to a bunch of advertisers, the advertisers will stick their ads next to the stories, and we’ll have twenty-five percent profit margins. Those days are really over; or if they’re not over, they’re certainly ebbing. And so, if you think that advertisers have a lot of different ways, whether it’s social media or direct outreach to their consumers, how can media companies become a part of that, rather than relying purely on the model that was so lucrative for so long?

Question: Another chapter focuses on aggregation, which can also sometimes be a touchy topic in this industry we’re in. What conclusions did you come to about aggregation?

Lucas Graves: It’s not surprising that traditional media companies that put so much effort and so many resources into producing really valuable news coverage are chagrined when they see that appearing and generating ad revenue at someone else’s media outfit, whether that’s The Huffington Post or even just a small blog. But at the same time, one of the things that we wanted to point out is that aggregation has always been around in some form or another. It’s something that every news provider does to some extent, even the New York Times. News companies exist in a pretty complex ecosystem, they’re always picking up cues from one another, and it’s certainly part of the landscape now, and they have to contend with it to some extent. Even when they want to build their own audiences, intelligent and savvy news providers are going to have to use aggregation intelligently to bring readers and viewers to their own sites—even as, of course, they police the most egregious examples of aggregation, where they see themselves losing revenue.

BG: There are certainly examples out there of websites that are just outright stealing content, and we feel that the full brunt of the law ought to be brought forth on those people. But one of the examples we used in the report was a story that New York magazine broke on their website—it was a wonderful little piece by Gabe Sherman, who’s a great media reporter. He looked at how Roger Ailes had told Sarah Palin not to do her famous “blood libel” video after the shooting of Congresswoman Giffords. And it was just a great scoop, it was only about five hundred words. He spent a couple days doing the reporting on that, another day on the editing and vetting, they published it one night, and it got a lot of buzz. The next day, The Huffington Post picked up a very short version of that, and if you look at the number of comments, New York magazine got about a hundred and thirty comments, and Huffington Post got over two thousand.

So you could say, “Wow, that’s really unfair.” But actually, when you look more deeply into it, New York magazine was fine with Huffington Post picking it up, because they got a ton more traffic that they never would’ve gotten otherwise. It was also linked to by Andrew Sullivan, by HotAir.com. So the simple fact is, media companies are not going to be able to put this toothpaste back into the old tube here. The way copyright laws are written, other news companies can and will aggregate. So the idea is to kind of figure out how to make the most out of it.