The Rocky Mountain News, a Denver fixture since 1859, was one of the U.S. newspapers felled by tough times in the past year. (John Leyba, Denver Post/Associated Press)

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It seems almost perverse to suggest that the most cogent analysis of what has happened to newspapers over the past decade comes from the famously obtuse Donald Rumsfeld.

But let's give it a try. Newspapers were blindsided by a bunch of knowns that they didn't know how to respond to, by some unknowns that they should have known about, and by those always dangerous unknown unknowns.

But the one thing we know for sure is that North American newspapers began the decade riding high and they ended it on life support.

The problem is particularly acute in the U.S. There, circulation is at its lowest point since the 1940s, advertising revenue declined by a staggering $7.5 billion in 2008, and more than 15,000 newspaper employees have lost their jobs this past year alone.

Canadian papers have done a better job of weathering the storm.

Still, there are seven fewer daily newspapers in Canada today than there were in 1999 (105 to 98).

Daily circulation is down nearly a million (5.1 million to 4.3 million), and advertisers spend roughly the same today on newspaper advertising as they did 10 years ago (about $2.5 billion), which means operating revenues have been continuously eroded by inflation and other costs.

Dead-tree media

To keep afloat, Canadian publishers have become careful custodians of the bottom line, ruthlessly cutting costs, downsizing and, the latest move, outsourcing their workforce.

Most, it seems, have been rewarded with continued profitability, although the double-digit profit margins of the 1980s and '90s have shrunk dramatically.

Still, with the proliferation of non-traditional news sources available online and a rapidly aging readership, few people are placing bets on the long-term viability of what is now despairingly referred to as "dead tree media."

So how did it all go so wrong?

With the benefit of hindsight, we can now see that there were several dark clouds looming on the newspaper industry's horizon at the turn of the century. Many of them were coming from sunny California.

Most people in the newspaper game were oblivious to the gathering storm (an unknown unknown), but even those who saw it coming, couldn't grasp what it all meant (an unknown known).

By the time the internet storm hit, it was too late to seek shelter.

Googled

The first cloud emerged from a Silicon Valley startup company called Google.

At the end of 1999, Google had just 39 employees and no business model.

It had raised $25 million in the venture capital market during the first internet boom. But about half a million dollars was going out the door every month and very little revenue was coming in.

Between December 1999 and June 2000 Google went from about four million searches a day to 18 million, making it the largest search engine on the web. But it still had no revenue.

Search engines had been around since the early 1990s. Many people in the newspaper industry knew search was going to be a big deal, but no one knew the many ways it would revolutionize the news business.

Besides, it was hard to take search seriously since nobody had yet figured out a way to make money from it.

But by the end of 2000, they had. It was called Google AdWords. The idea was to attract advertisers by delivering targeted traffic.

Unlike the large, undifferentiated mass of readers who may or may not look at an ad in a newspaper or in an online banner, Google could deliver readers who had already expressed an interest in a product or service because of their search.

It was more efficient than newspaper advertising and cheaper, too, because advertisers only paid for readers who came to their site.

Craigslist, founded by Craig Newmark, has been bad news for the classified sections of North American papers. (Frank Franklin II/Associated Press)

The problem was that newspapers have historically relied on advertising for more than two-thirds of their operating revenue.

Anything that threatened the continuing flow of ad dollars threatened the viability of the paper itself.

Hello Craig

As it turned out, Google wasn't the only threat coming from the West Coast in 1999.

In his San Francisco living room, Craig Newmark, a former IBM tech nerd, was operating a service he called Craigslist on a single PC with a 128 MB hard drive.

Newmark had come up with the idea to run a non-commercial online community bulletin board with classifieds and discussion forums.

Nobody, including Newmark, could possibly have known that within a decade, Craigslist would devastate the classified sections of North American newspapers, which had been some of the most reliable money spinners.

But now that readers could advertise their apartments, used cars and stereos online for free, there was little reason to pay their local newspaper for the privilege. In the U.S. last year, revenue from classified ads declined by nearly 30 per cent.

A known known

You can hardly blame newspaper people for not knowing what Craig Newmark was up to in his living room in 1999. But blogging was a different story.

Web logs had been around since 1994. You might say they were a known known.

What was unknown was the impact they would have on the news business.

In August 1999, a company called Pyra Labs launched software called Blogger, which, for the first time, made it easy for anyone to publish to the web. Within months, millions of people were doing just that.

Few at the time knew what a transformational moment that was.

As Jay Rosen, a journalism professor at New York University put it, the tools of journalistic production now belonged to the masses.

Everyone could now reach everyone else if they so desired, in the process becoming "the people formerly known as the audience."

And when your audience is now your competition, your business model is in need of a serious rethink.

The original sin

There was clearly much the newspaper industry didn't know in 1999, but one thing it did was that its readers were starting to go online for news. What publishers didn't know was what to do about it.

The first Canadian newspaper to publish an online edition was the Halifax Daily News in 1994. Others quickly followed.

It was at that point that Canadian publishers, and newspaper proprietors everywhere, made a fateful decision that is now often characterized as "the original sin."

They decided to give away their online content for free. They believed free content would attract millions of readers to their websites, where advertisers would be sure to follow.

But it didn't work out that way. The first part of the equation unfolded as expected. Millions did shift their news consumption to online sources, often abandoning paid subscriptions in favour of free news online.

But the advertisers didn't live up to their end of the deal. Readers were now dispersed across millions of websites and many of them were coming to stories through aggregators and search engines such as Yahoo News or Google, further lessening the value of the newspaper's brand.

Revenue gained from online advertising simply could not replace the revenue lost by the dramatic drop in newspaper advertising.

As a result, newspapers started closing their foreign and domestic bureaus just to keep costs down, raising the question of where tomorrow's news will come from. And how much variety it will have.

The Toronto Star, for example, has half as many foreign bureaus now, four, as it did in the 1990s. The Washington Post recently shuttered the last of its domestic bureaus in other U.S. cities.

Some newspapers in the U.S. shut down entirely or moved their operations online, with many fewer staff.

Today, some publishers, led by News Corp.'s curmudgeonly Rupert Murdoch, are trying to repeal the original sin by charging for their online content.

But as there are so many news sources now, that battle seems lost even before it begins.

An unknown future

So what do we know about the future of newspapers?

The known knowns are that people will continue to use social media tools such as Twitter, Facebook and YouTube to be their own editors, publishers and reporters.

We can also be pretty much assured that the old newspaper business model based on advertising is no longer viable.

But as Donald Rumsfeld knows only too well, it is the unknown unknowns that can really trip you up.

What is the next Craig Newmark cooking up in his or her living room? Will there be a new technology that finally drives a stake into the just-beating heart of the daily newspaper?

At the beginning of this decade, newspaper publishers were pretty confident they knew what the future looked like.

People were always going to want something to unfold at the breakfast table, they felt. Advertisers were always going to want a way to reach a mass audience.

As the decade ends, the biggest unknown is whether we'll still even be talking about newspapers 10 years from now.