You don’t need to be a genius to understand that advertising will not pay for online journalism:

• Display isn’t adequate online, since it requires a scarcity of publishers to function. We all know that the unlimited inventory of the web pushes prices towards 0.
• Contextual ads don’t work for news. It’s been 10 years since the beginning of contextual and targeted ads. This system works only when users are in the mood for shopping. Google will still advertise offshore finance services in articles about tax evasion and flights to Tbilissi next to items about wars in the Caucasus.
• Classifieds don’t require news anymore. Several media groups (Le Figaro, Hürriyet, Schibsted) have noticed this fact and started to invest massively in online classifieds. Not in journalism.

Add to that that paywalls and voluntary payments don’t cover all the costs of content production (see Jeff Mignon for the paywalls and myself for the tip jar strategy).

Online advertising for news still runs on the old assumption that advertisers need space and attention and that news websites can provide them with it. But let’s face it: this value proposition is dead.

Any website can sell attention, and many do so in much better ways than media companies can. Yesterday’s advertiser now sells ad space itself, as LastMinute’s “50% of revenues must come from advertising” strategy shows.

What revenue streams are left for journalism? Online advertising has to be rethought.

Media brands still command some trust. Rather than selling attention to advertisers, they could start trading in trust. A major problem online is the lack of certainty as to whom is hidden behind an IP address. Consumer reviews can be distorted, as do social websites set up by brands.

Where do media organizations come into this? Their skills in conversation management could put them in the position of a fair broker between companies and consumers. The goal being for companies to pay to have the opportunity to discuss with a website’s audience.

That’s what VillageSoup is doing in Maine (via the Newsosaur). This hyperlocal outlet gives local advertisers an editorialized page to present themselves (here’s one) and lets them display business-related newsitems on a portion of the website. Technically it’s done on a blogging platform.

VillageSoup isn’t going far enough in the editorialization process. Blog posts from advertisers still carry stylistic flaws and typos, for instance. The editorial competences of a news organization could be put to use in helping out advertisers promote their businesses.

What difference with a communication agency? Trust. Journalists would be expected to tell the truth about such and such business they’re promoting and to tell the advertisers the truth about what consumers are saying. This, of course, is concomitant to improving journalistic standards and trust levels.