This morning, the Pew Research Center’s Project for Excellence in Journalism (PEJ) released the 10th annual State of News Media report. To little surprise, digital operations continue to dominate change in the news media, creating opportunities and posing challenges on every front — from advertising to content strategy, user experience to social media. According to the report, “Online was the only category of news that showed growth” in 2012. Below is a rundown of major findings in the realm of digital news, with insights by Mark Jurkowitz, associate director at PEJ.

1. Brands Creating Content

New digital publishing tools like Contently and NewsCred are making it easier for any brand or organization — in news media or not — to produce content directly for the public. Beyond helping freelancers find work, these tools are also giving rise to “brand-oriented magazines.” For example, Fortune recently launched its Trusted Original Content (TOC) program, through which Fortune writers create original editorial content for clients to use as part of their marketing efforts; Capital One already signed up. Additionally, Insidescience.org supported by organizations like the American Institute of Physics produces original science content, which NBC has aired with direct attribution.

“Clearly new technology and the shrinking traditional newsroom resources have created more of an opening for other content producers, ranging from those with a specific corporate agenda to those with an interest in filling the gaps in traditional reporting,” Jurkowitz told me via email.

As these new and specialized content producers play a bigger role in representing brands or replacing beat reporting, news organizations need to be careful in integrating content from a multitude of sources. In addition to doing quality control for content from freelancers and wire services, news orgs now have to do the same for the many new content producers, especially ensuring a clear distinction between editorial content from anything that’s not.

2. Rise of Native Ads, Video Ads, Targeted Ads

Digital advertising continued to grow in 2012 and with an increase of 47 percent to $2.9 billion, video ads showed the most explosive growth of all digital ad segments, according to the report. Video ads’ growth comes hand-in-hand with the rise of mobile devices — 38 percent of respondents in a recent Pew study said they use their tablets weekly to watch video. This is an important relationship for news media’s mobile strategy since video ads bring in higher rates than banner ads and are expected catch up to banner ads in the coming years.

Sponsored content — whether it be sponsored tweets or native ads — came in second place, growing almost 40 percent in 2012, according to the report. Despite the recent advertorial controversy at The Atlantic (MediaShift coverage) and the high time and labor costs of crafting these types of native ads, plenty of media companies (Gawker, Hearst, Time, Condé Nast, Washington Post) are undaunted.

The third digital ad trend is local digital advertising, which grew 22 percent in 2012, to $19.9 billion, according to Borrell Associates.

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The big issue for news orgs here is that these advertising methods don’t always translate to mobile revenue. Jurkowitz said, “Overall, mobile advertising grew 80% in 2012 to $2.6 billion. Of that, however, only one ad segment is available to news: display.”

Additionally, news orgs have to compete aggressively with big firms such as Google and Yahoo for the ad market. Targeted local ads are particularly useful for news orgs and are growing at an impressive rate of 100 percent a year, yet they’re also dominated by big firms.

Jurkowitz said, “News organizations have to get in the game of targeting, which requires technology investment or partnering with tech firms and sharing the revenue.”

3. Alt-Weeklies Struggle with Digital Shift

“Going digital” by way of carving out a web presence has been a lifeline of sorts for news organizations large and small. When alternative weekly Boston Phoenix announced last week that it’s shutting down both print and digital editions, it was another rude awakening that times are changing and that for some types of publications, “digital only” isn’t even an option. For the Phoenix, reinventing itself in a glossy format did not sustain ad sale growth, and critical revenue from print classifieds failed to translate into dollars online.

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Mark Jurkowitz

According to Jurkowitz, alternative weeklies have “some unique assets — such as their role as go-to outlets with the latest info on clubs, dining and entertainment — but at this point, not many alt-weeklies are leveraging that digitally in a way that pays major financial dividends.”

Alternative weeklies may also have difficulty standing out online from a content perspective as well.

Jurkowitz saud, “At one point, the alt-weeklies truly distinguished themselves with an alternative tone — snarky, subversive, fearless. But in the digital age, there are so many outlets that now feature that same kind of tone and tenor that the alt-weeklies have lost that some of that edge in the marketplace.” This is a reminder that in scrambling to figure out advertising and platform changes in news media, publications can’t forget to make their voices clear and indispensable.

4. Pay walls have mixed success

As 450 of the nation’s 1,380 daily newspapers have started or announced plans for some form of pay wall in 2012, more digital content experiments are in store in the coming years. While the New York Times continues to report success with its two-year-old paid digital subscription program — the Times’ circulation revenue now exceeds advertising revenue — it remains an uncommon success. Nevertheless, the report says “many news executives believe that a new business model will emerge in which the mix between advertising and circulation revenue will be close to equal, most likely with a third leg of new revenues that are not tied directly to the news product.”

If these experiments on paid models go well, we should expect innovative, higher-quality content. It’ll also be interesting to see what the “third leg of new revenues” will be — perhaps a mix of editorial and social media initiatives like Fortune’s branded content program or Google Hangouts with the public.

5. A Major Shift to Mobile

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The report’s findings confirm that mobile is helping people consume more news. According to a survey conducted by the Pew Research Center and the Economist Group, 31 percent of tablet users said that they spend more time with news since getting their mobile devices and 43 percent said that the device is adding to the amount of news they consume.

Jurkowitz said that mobile news consumption as a whole is especially striking — 64 percent of tablet owners say they get news on their devices weekly and 37 percent report they do so daily — and consumption rates for smartphone users are nearly identical. These survey findings correspond to what news organizations are seeing. The report cited Raju Narisetti, then head of the Wall Street Journal’s Digital Network, who said in February, “Last month, 32 percent of my traffic came from mobile. A year ago it was 20 percent and a year from now it will be 50 percent.”

In this race to capitalize on mobile, major news organizations are eagerly jumping onto the latest technology. The Boston Globe, the Financial Times, the New York Times, the Guardian were the first to experiment with HTML5, which enables sites on a browser to look and feel more like mobile apps, without actually building a separate mobile app. For smaller publications, it makes sense to wait and see, since HTML5 and the resulting wave of “responsive web design” bear major drawbacks, i.e. high cost of development, barrier to important smartphone features like GPS, and unclear mobile ad strategies.

Jenny Xie is the PBS MediaShift editorial intern. Jenny is a senior at Massachusetts Institute of Technology studying architecture and management. She is a digital-media junkie fascinated by the intersection of media, design, and technology. Jenny can be found blogging for MIT Admissions, tweeting @canonind, and sharing her latest work and interests here.

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