Business | The MarketFarm

A fascinating prediction about the future of media

In iMedia Connection, Adam Broitman boldly predicts the death of offline media. His skillful headline almost – but not quite – predicts that it will happen in 2010.

Ignore that; that’s just headline-writing 101 – making the message immediately relevant. 2010 will inevitably bring more bad news for old-line media. But it will still be very much alive by the end of 2010.

But Broitman makes a great point, and I think he’s dead on.

His point is that online media will continue to supplant what he calls offline media (and what I, anachronistically perhaps, refer to as traditional media) at ever-increasing speed.

He gives two examples why (he claims there are three, but only two clearly jumped out at me from the column):

The skill and frequency with which offline media are using the web and social media – moving from passive entertainment/information to true interaction.
Applications being developed that shift the notion of information and search from keywords you type into a box on the web to something more contextual: information that comes to you because you ask a question out loud, or because you point a camera phone at an object.

There’s another irony; while media is becoming more active, search is becoming more passive. When selling print advertising, I made the point that consumers use print and online differently. Print was for grazing – looking for things you didn’t know to think about; online was for finding information you knew you wanted. Those purposes are merging. If Marshall McLuhan were still around, he’d have to rewrite Understanding the Media as TV becomes “hot” and Google becomes “cool.”

Too often, media allow themselves to be steered by past experience – their own and that of consumers.

For instance, all sorts of new studies proclaim to know whether people will pay for online content. How do they know? They ask.

But they ask things like: “Would you pay for this newspaper online.” The answer to that isn’t helpful; a newspaper isn’t built for online consumption – and the prospect of reading it online is unappealing. So people will say no.

People who answer such surveys haven’t generally put thought into what they would pay for online. They’ll just know it when they see it. Which means that it’s the job of the media to figure out its own future; the audience isn’t going to be much help.

So the real point that I take from Broitman’s column is one that’s essentially unspoken: offline media will continue to decline because of the relentless growth in online offerings that will be worthy buying.

The unresolved question is how many of these offerings will be created by startups vs. the existing “offline” media.

The Adventure is over

National Geographic Adventure has lost its passport. It’s the latest casualty in the 2009 media meltdown. Staff was told today that the magazine, a 10-year-old extension of National Geographic, would close, according to a report by Folio:.

Seventeen staffers will lose their jobs, the report says. The brand will continue online and with other affiliated products.

More on AOL’s content push

This article in Media Buyer/Planner goes into more detail about AOL’s plan to differentiate itself with original content. With a staff of 3,000 journalists, AOL could differentiate itself simply by assigning them beats and cutting them loose to go report on stuff. It would be, by far, the largest deployment of journalists from a single U.S. media source.

But I don’t have much faith in the ability of algorithms to deliver pleasant surprises. By shackling its journalists to algorithmic results, I can’t help believing that they only thing we’re going to get from AOL is more of the same that it’s TMZ.com website is already producing. And heaven knows, nobody is sitting around wishing we had more of that.

More on AOL: It’s new content strategy is dead wrong

A week ago, I wrote about the futility of AOL’s rebranding unless it figures out how to become more relevant to its audience.

This week I have to write about the futility of AOL’s effort to become more relevant to its audience.

The centerpiece of that effort, according to PaidContent.org, is a three-pronged approach to generating new content:

Hire lots of journalists. It’s good news that AOL is trying to generate original content, and I’m pleased that it’s using trained content professionals – of which there are plenty available. It has a staff of 3,000 journalists, according to PaidContent, which puts it into the top tier of U.S. news-gathering organizations.
2.

Use algorithms to predict what stories people want to read, and then assign these to the journalists. The objective is clear. AOL CEO Tim Armstrong hopes that by giving people content they want, AOL will become the content place to go.

He’s wrong. This is the kind of thinking that puts Jon and Kate Gosselin in our faces day after day, week after week, month after tawdry month. It takes variety out of the news cycle, just as Wal-Mart’s unceasing desire to stock only the best-selling SKUs limits the variety of what you can buy at the world’s largest retailer.

When someone says, “I want more stories like the one about Jon and Kate,” they aren’t really saying they want to hear more about the Gosselin family. They’re saying they want information that makes them feel the same way they did when they heard it (for better or worse), and that makes them feel as informed as they did when they talked about it at work the next day.

People can tell you what was important to them yesterday, but they don’t know what’s going to be important to them tomorrow. Media have not succeeded until now, nor will they in the future, by giving people what they want so much as by giving people what’s new, important and interesting.

The real function AOL’s journalists could serve is to present information that is new, important and interesting. AOL has hired the journalists but it’s about to screw up in deploying them.

Get advertisers more involved with content. This isn’t unique and it isn’t new. It’s just one more effort to help marketers bludgeon their target audiences into submission. Hey, I’m a marketer and I still can’t stand the thought of this. Everybody on one side of the equation is doing this, and everybody on the other side of the equation is trying to tune it out. Creating more and more advertorial microsites – no matter how well intentioned some of them will inevitably be – is not the big-internet business model of the future.

In fact, this is the very reason why social media is so hot right now: because social media lets users find the information they want. AOL’s model is to deliver the information, fire-hose style, right down the user’s gullet. It may generate some short-term revenue, but it won’t make AOL relevant or desirable.

It will do the opposite.

None of this is to say that AOL’s plan is evil or particularly dreadful. I think it’s pretty typical. But that’s why it won’t work. AOL is trying to distinguish itself by doing what every other large media company is trying to do. For a company in trouble, that’s a formula for failure.

The great search engine standoff

Seth Godin is one of my favorite bloggers, and I quote him regularly. He’s been a source of clear thinking and wisdom for me since long before blogs existed.

But in today’s blog, he writes about News Corp. Chairman Rupert Murdoch’s idea to control how news content is indexed on web sites. He got it wrong. He writes, in entirety (and you’ve got to admire Godin’s brevity):

Rupert Murdoch has it backwards

You don’t charge the search engines to send people to articles on your site, you pay them.

If you can’t make money from attention, you should do something else for a living. Charging money for attention gets you neither money nor attention.

If Murdoch were just another blogger, or just another guy with another product to shill, I would agree with Godin. But Murdoch owns one of the largest news-gathering organizations in the world. And here’s the point that Godin misses:

When search engines index vast troves of original content, such as Murdoch’s News Corp., the impact is synergistic:

It drives traffic to News Corp.;
It provides the kind of top-of-the-charts, original content that makes a search engine valuable;
It provides a large class of users with the kind of content they’re seeking.

Here’s the nuance; there is less and less original content of the kind that News Corp. produces. Anyone who has ever used the Web has had the experience of following one good link after another to find they’re all connected to the same piece of mediocre content. The money dedicated to generating high-quality content has evaporated; it’s down by more than $1.5 billion in the U.S. newspaper business alone – not to mention all the other businesses that pay content providers to create information that people want and need.

So anyone who wants this kind of content to continue, must make some kind of investment in it.

When search engines index to content like that provided by Murdoch’s company, they profit by selling sponsored search results in the space around it.

But the news organizations’ only means of profit from this activity is to sell advertising around the content. But advertising isn’t selling – nor is it expected to significantly recover. Further, a portion of the money that marketers no longer spend to advertise in newspapers and magazines has been reallocated to the paid search function of search engines.

So why shouldn’t they pay for the right to index high-end content?

The attention that search engines generate is doing less and less good for newspapers and other free-content websites. If News Corp. can’t sell ads around its content, it has no reason to care if search engines promote the content.

So Godin has it wrong. He supposes that news media get the larger share of value in their relationship with search engines. In fact, to the consternation of anyone in the news business, it’s the other way around.

Further, the search engines may be able to extract even more value. Right now, one search engine is much like another. But if one could brag that it’s the only search engine to index the world’s largest news generators, that might make a difference to consumers. I know it would to me.

I don’t know if even Rupert Murdoch has the juice to take on Google. But he may be able to set the big search engines against each other. I don’t know if he’ll succeed in getting paid by one search engine and in locking out the rest. But to me, like it or not, it sounds like the kind of clash that isn’t likely to go away without creating some kind of change that affects everyone.

Here is more background on the issue:

Murdoch no longer alone in desire to block Google

Murdoch wants a Google rebellion

Bing not likely to outbid Google for news

Murdoch could block Google searches entirely

What is the world’s smallest deck chair?

It’s the period in Aol. As in, America Online’s new branding effort, which changes the company from AOL to Aol. – but doesn’t make it any more relevant in a post-internet-service-provider world.

Seriously, this isn’t like rearranging deck chairs on the Titanic; as AOL and Time Warner complete their de-merger, it’s like replacing the rubber pad on a leg of a deck chair so it doesn’t scuff the deck.

I don’t understand why Aol. even exists anymore, except that it’s too big to go away quietly. The services it provided in the early days of the Internet – everything under one roof like a well-lit mall in an otherwise under-developed part of town – have all been superseded by a wider variety of offerings on the well-developed ‘Net.

Its search engine has dropped out of the top tier and offers no unique user value that would separate it from any others.

And I’m always startled when I find myself exchanging e-mails with someone who still has an address at the aol.com domain. Actually, it’s not an exchange; any e-mail I’ve sent in the last few months to the few Aol.-users I know has bounced back to me. Just this morning, I printed out a document and put it in an envelope with a stamp, because the Aol. user’s address rejected the attachment.

Yes, Aol. has a brand problem. If you’re an investor who bet your retirement on AOL-Time Warner, the brand represents broken promises and unfulfilled dreams. For pretty much everyone else it represents obsolescence.

That’s obviously not what the folks at Aol. and its branding agency, Wolff Olins (of the Omnicom Group) are thinking.

In its coverage (linked above), The New York Times quotes Sam Wilson, managing director in the New York of Wolff Olins, the branding agency Aol. has hired. The Times writes:

The period in the logo was added to suggest “confidence, completeness,” Ms. Wilson said, by declaring that “AOL is the place to go for the best content online, period.”

The article also quotes Aol.’s CEO (or is that Ceo.?) Tim Armstrong:

Mr. Armstrong said he liked to describe the period as “the AOL dot” because “the dot is the pivot point for what comes after AOL,” whether it is e-mail, Web sites or coming offerings that will “surprise people.”

What will surprise me is if Aol. can provide the Internet community with a reason to exist other than its legacy – something about which the online world is notoriously indifferent. To me, the dot looks a lot like the head of a nail, a coffin nail maybe – which might be enough to keep the deck chairs from sliding around as the ship continues to list.

People will pay for online news? Now we’re talkin’

A study by Boston Consulting Group indicates people are increasingly willing to pay for local and national news delivered to their mobile devices.

On average, according to the study, the price would have to top out at about $3 a month, which admittedly isn’t much. But it offers two strong points of optimism:

People are willing to pay SOMETHING for what was previously assumed to be of no commercial value.

$3 a month, for a product that no longer has the production or distribution cost of a printed product, is worth far more in the way of earnings than it would be for a traditional media product.

No, this isn’t proof that consumers will pay the full cost of journalism. But does demonstrate that they are aware of the pressure that traditional media models are under as advertising revenue continues to erode; and that they are warming up to being part of the solution.

News: Not dead, but being reborn

This article, on the effort by eBay founder Pierre Omidyar to start a local news service in Honolulu, validates my postion that journalism and the news business are not dead or dying. They are being taken up by a new generation of media outsiders – people who value news and aren’t so burdened by years of “training” in the industry, that they can see new possibilities that may exist. It also helps that they aren’t burdened by an infrastructure built over decades to support old business models.

The article doesn’t say much about Omidyar’s business model – but he intends the service to be for-profit and to generate new contet.

A couple things about this jump out at me – in addition to the obvious fact that it’s at least one more person who’s not willing to give up on the news.

New news businesses tend to be local – where there is less competition to provide information, and where the advertising crisis has had the least impact.
The goals of new news businesses are modest; the ones I’m hearing about tend to seek primacy in a small area, to have a good impact on a relatively small number of people, and make a little money in the process.

Which strikes me as a pretty good way to rebuild an industry that is in historic transition.

Years from now, there will be big players again, who have figured out how to consolidate the many small for-profit news operations that are popping up. Some of those big players will be the same names that are familiar in media circles today. Others will be new.

And the news business will look very different from the way it does right now.

But it will be a business and an industry.

Somehow.

A novel notion for monetizing the news

While newspapers are wallowing in catastrophic circulation losses, their online revenues are falling short of objectives, and more people look to the web for news, Amos Gelb, a former TV guy and now an associate professor at George Washington University’s School of Media and Public Affairs, suggests a new model for profiting from running a serious news operation: cost transference.

In short, the idea is for Internet Service Providers (ISPs) – his example is Verizon Internet – to pay for news feeds on a per-subscriber basis. It’s how CNN works – collecting 37 cents per subscriber from every cable television provider that carries CNN (which is pretty much all of them). While CNN does earn revenue on advertising sales, its most dependable revenue stream is from the cable providers – which in turn simply pass that cost along to consumers as part of the cost for basic service on their monthly bill. And consumers don’t seem to mind – even though there is plenty of market evidence right now that they wouldn’t pay the same 37 cents per month directly to CNN if given the choice.

How does this transfer to newspapers? The largest news organizations (Gelb cites Time Warner, New York Times and Washington Post) would block their content to ISPs, except when paid on a subscriber basis. Those ISPs that make the payments would then pass along the cost to subscribers.

People who care about getting news content online would gravitate toward those ISPs that provide it.

The model strikes me, on its surface, as incredibly complicated given the wide range of business models that exist among ISPs. It also doesn’t include the many smaller news organizations that, one way or another, are going to survive, but will never be large enough to command attention from ISPs.

I don’t ever really expect to see the model play out as Gelb describes it. But I like the out-of-the-box thinking he brings to the discussion, and I agree with his assessment that news is something people want, and something people will pay for – just not directly.

In fact, the way I see it, it’s already playing out on small scale and through a slightly different medium: the burgeoning app store business.

There are now multiple places where smart-phone users can buy applications: iPhone’s App Store, Blackberry’s App World, and soon, Palm’s App Catalog. Each of these offers apps that let you aggregate and read news from various sources. Many are free, some cost money – from a $2.99 one-time download fee to monthly subscriptions (or so I’m told, though I haven’t actually found one on the monthly model in my time at either of the functioning app marketplaces).

So people are paying money to download an app that will deliver the same news they could get for free right now on the Internet? It’s a little different than the model Gelb envisions, but it plays out the same way psychologically: People who buy these apps aren’t actually paying for news; they’re paying for a new gadget on the smart phone. The cost has been transferred.

Gelb’s notion is heavy lifting, to be sure. To achieve the kind of behavior change that he describes, large news organizations are going to have to give up on their most cherished belief: that increased profit necessarily derives from increased distribution. And then they would have to convince numerous other organizations – like Google, Yahoo, Verizon and AT&T – to alter their business practices, all while risking the anger of their paid customers.

It sounds like a long shot at best. But the drastic decline in circulation and revenue that news media is experiencing is, if nothing else, a strong motivator.

Condé Nast shocker: A hard move, but smart

cover_modernbride_190 In a move that startled almost everybody, Condé Nast is closing four magazines: Gourmet, Cookie, Modern Bride and Elegant Bride.

At some level, though, this shouldn’t be a surprise; the two bride titles are simply maids of honor to Brides magazine – also owned by Condé Nast. Elegant Bride, with 150,000 total circulation is a niche magazine for those who plan to buy luxury weddings. Modern Bride, with 335,000 total circulation, is positioned as the hip, fun and stylish magazine in the segment. Brides is simply the No. 1 with 340,000 total circulation and, notably, a network of local/regional bridal magazines. cover_brides_190

Once upon a time, this kind of segmenting made sense. It assured the perfect fit for every possible advertiser, and many of those advertisers – given a little incentive – could find reason to buy into multiple titles.

I don’t have any idea how many of its bridal advertisers are still buying in multiple titles; I’m sure it’s a lot – but I’m also sure it’s not as many as a few years ago. Much of that piggyback revenue will be hard to replace. That’s why company executives needed a third-party consultant to tell them what they already knew: In today’s environment, it’s no longer economical for a magazine publisher to serve a category both horizontally and vertically.

Casting away two out of three heritage brands is scary, and some observers are already beating up the company for the decision. But I’m guessing that the publishers (Modern down 21 percent this year and Elegant down 32 percent) were already getting early reports of a continued bloodbath in 2010, as more advertisers rationalize their purchases across a few broad-based titles per category. If Condé Nast hadn’t made this gutsy call now, then its recession would simply drag on into next year.

By consolidating all bridal business into Brides, Condé Nast undoubtedly gives up a lot of revenue, but it also reduces a lot of expense. And what it gains is the ability to focus all development efforts on the one brand that is already recognized as the industry leader and that already encompasses all bridal niches. In fact, the company has said it plans to double Brides‘ frequency to 12x.

cover_gourmet_190 The recipe is pretty much the same for Gourmet – which has a rate base of 950,000, compared to Bon Appetit (also owned by Condé Nast) with 1.3 million.

The company has probably had an increasingly difficult time justifying a two-book buy to its advertisers and has been told that it needs to make their ad buys simpler and more cost-effective.

Cookie is probably a different situation altogether. It’s a lifestyle magazine for the modern mother – a category that would overlap with parenting titles, women’s titles and shopping titles (of which Condé Nast closed one, Domino, early this year). It’s a hyper-competitive cover_bonap_190 category and, founded just four years ago, Cookie (total circ: 550,000) probably never had a chance to develop its own secure presence in the shrinking marketplace. Other titles in the Condé Nast portfolio include Vogue, W, Glamour, Allure, Self and Lucky.

Condé Nast CEO Charles Townsend told the New York Times that the decision was simple: The four magazines were losing money and that’s no longer going to be tolerated. He also said no more closings are planned.

Which may be the truth. Today.