Front page, back page -- what's important is where the money comes from

So the New York Times is running display advertising on the front page. And there's a great disturbance in the Twittersphere and an upheaval in the Blogosphere. Either this is a crime against the purity of the newspaper, or it's something that should have been done long ago, depending on who's talking.

Ultimately it makes no difference whatsoever.

What's important is: What money is this? Where's it coming from? Is it new revenue, or just another case of moving money from one pocket to another?

The New York Times is often a special case, but in this it mirrors the newspaper industry at large. We are dependent on too few advertisers, and our customers are all suffering from the sins of the mortgage scammers who started this economic collapse.

An ad space on the front page of a print edition may deliver great value to the advertiser, but does it prompt the advertiser to increase the ad budget? It looks to me like yet another example of focusing on the narrow top of the advertising pyramid, a practice that has left the newspaper industry increasingly exposed to the effects of consolidations and other shifts in retailing.

Go to your local library and browse some microfilm. Take a look at the advertising base of a typical U.S. newspaper in 1970. You'll probably find big ads from a locally owned department store that since then has been crushed by a discount chain. You'll find medium-size ads from locally owned appliance stores that since then have been crushed by big-box retailers. You'll find a lot of in-paper display advertising that since then has evaporated. You won't find so many free-standing inserts printed on some long-run press in Michigan, trucked in, and stuffed into the Sunday paper for a few cents each.

Online or offline, newspapers have been like a frog slowly boiled in a pot as the sweetest and most reliable sources of local revenue disappeared. Usually this change has been obscured by local market growth, just as sagging readership has been obscured by population increases. But it's real.

So now we're faced with a burning need to find ways to bring in revenue. Many of us believe the place to look is at the wide bottom of the pyramid, the large numbers of small businesses that have a story they need to tell. But to get there, we have a lot of work to do -- lowering our costs of sales, simplifying the process, and finding new ways to precisely target messages so we can get the cost down and the results up.

This is the area where innovation can really pay off. But it's going to be harder, and not nearly so spectacular, as putting a strip of brightly colored advertising across the front page and collecting from a big existing account.