Dan Lyons’ media rant highlights HubSpot’s new digital dimes on Globe’s old print dollars

In late March, at a lunch hosted by the MIT Center for Civic Media, Globe editor Brian McGrory recited the well-known ills of the newspaper business.

“I want to talk about the idea that newspapers are dying and that the Globe is in trouble. One of the biggest changes has been the shift in classified ads,” he told the crowd of academics, bloggers, and journalists. “The ‘dirty secret’ of newspapers was that classified ads funded most of print journalism ... The Globe once made 160 to 180 million dollars a year on these ads. That money has been lost to Monster.com, Craigslist, and others, and it’s not coming back.”

In his list of the marquee start-up siphoning away advertising dollars that were once the domain of newspaper monopolies, McGrory left off at least one prominent local company: HubSpot, an online marketing services firm which is preparing for an IPO in the near future.

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Fortunately, in a recent blog post Dan Lyons provided a nice reminder about how HubSpot growth comes directly from the ashes of traditional media advertising.

Lyons, formerly a technology editor at Newsweek, a technology columnist at Forbes, and most recently editor of ReadWrite, was writing about his departure from journalism to the greener grass of marketing.

“I’ve spent my entire career in the media business, and now I’ve bailed out. In the end it was a pretty simple decision. I came to the realization that advertising is dying, and therefore any business that depends on advertising to pay the bills is a dead end,” Lyons wrote. “At my first meeting with HubSpot, they told me about one of their customers, a company that used to spend $800,000 a year running newspaper ads but now spends $12,000 a year for a subscription to HubSpot and gets better results.” (Emphasis mine.)

That statement, if true (you have to consider the source: HubSpot’s new “marketing fellow”), is both inspiring and terrifying.

On the positive side, it means that companies that once had to plow almost a million dollars into untrackable, mass-media campaigns can now invest most of that sum into building new products, improving existing ones, or passing the savings along to the customer, while having a more real-time, measurable understanding of how their marketing dollars are paying off and while building a more direct relationship with their customers.

And the savings are meaningful all along the spectrum: I have spoken to a number of small business owners who are simply priced out of any kind of traditional media buy, but are finding great success with the low cost and measurable results of online marketing tools.

But it also means it will be much, much harder for newspapers to recover even a fraction of lost advertising revenue as the rest of the marketing world surges forward, and it means the rewards for winning are much less meaningful.

Because even if the Globe and other publications could compete with the rich tool set and marketing services offered by HubSpot, the gold at the end of the rainbow is not enough to fund basic operations: HubSpot reported that its annualized revenue run rate is $60 million. That’s $60 million in international revenue, from all sources, compared to the $160 to $180 million the Globe once made on just classifieds.

Like many others, I do not think paywalls are a strong long-term solution to the problems that face the news industry. But the incredible success of local hero HubSpot in selling marketing just starkly illustrates how much of a task the industry faces as it tries to build revenues and cut costs to fill a staggering gap.