The Praized Blog

Continuing our series on the atomization of content and business models, today I look at the newspaper industry.

First, from the user point of view: online (vs. the print version), it’s much more difficult to find the glue that will make your news container (your URL) stick together. if you have a strong brand (the New York Times, for example), people will navigate directly to your site but readers can now access your content via RSS readers, blog posts and news aggregators like Google News. These have been flourishing, reorganizing newspapers’ articles (the new content atoms), into flexible reading formats. For newspapers, it’s a catch-22. You want to be indexed by news aggregators to drive traffic back to your site but you wonder if you’re losing brand equity at the same time. Efforts at trying to get readers to register to newspapers’ sites (to generate potentially valuable socio-demographics information) have been a major failure. Clearly, the only strategy now is building a strong brand online while allowing readers to access your atomized content via a variety of vehicles but that creates problems from a monetization point of view.

Traditionally, the newspaper business model has been found in these three revenue categories: reader subscriptions, traditional display advertising and classifieds. Except for a few exceptions (the Wall Street Journal comes to mind), experiments in paid online user subscriptions have been failures as digital content is much more difficult to sell as an aggregate than print content. Classified revenues are being nuked by free sites like Craigslist or Kijiji, or aggregators like Oodle. Newspapers have been also forced to offer free classifieds, managing to generate some priority placement /enhanced content revenues but not to the previous print level. Online display advertising is working but it does not monetize as well as print advertising.

To better monetize their destination site, newspapers have been looking at various new solutions. One is in-line text ads (double-underlined sponsored keyword ads appearing directly in the article text) delivered by companies like Vibrant Media but, as I mentioned yesterday, the blurring of the line between editorial and advertising content has created ethical issues within news organizations. Already in 2006, in an article called “Is It News…or Is It an Ad?”, the Wall Street Journal exposed the various issues around the product:

“This type of online advertising within the text of an article, known as in-text advertising, has been around for a while. But it used to be relegated to niche sites like the videogamers’ haven IGN.com and ScienceDaily.com. Now it is appearing on some mainstream journalistic Web sites, like those of News Corp.’s Fox News, Cox Enterprises Inc.’s Atlanta Journal-Constitution and Hearst Corp.’s Popular Mechanics magazine. That marks a departure from a long-observed tradition in the print medium of keeping editorial content separate from advertising. “Journalism ethics counselors decry the trend. “It’s ethically problematic at the least and potentially quite corrosive of journalistic quality and credibility,” says Bob Steele, the senior ethics faculty member at the Poynter Institute, a journalism school in St. Petersburg, Fla.”

More recently, Tim McGuire from the Walter Cronkite School of Journalism in Arizona wrote about its use in the Arizona Central web site:

Michael Coleman, Vice-President of Digital Media for AzCentral, told me late Friday that the site has been using Vibrant Media for “two or three weeks.” Coleman described the relationship as a test and said this is not a “Gannett roll-out” of the concept even though some Gannet papers are using the system. “We’ve got a pretty non-committal contract with them, Coleman said. “The publisher made the call, and we decided to try it and see what happened.” Coleman said the experimental aspect of the deal explains why nobody has announced this deal.

Business Week wrote about the phenomenon in December:

Many journalists believe that selling the words in a story blurs the line between editorial and ad content. Some worry it creates an incentive to insert ad-linked words or order up certain types of stories. Forbes’ online arm caused a ruckus in 2004 when it rolled out in-text ads. After an outcry among the editorial staff and negative media coverage, Forbes ended the practice. (…)

Publishers are paid by Vibrant and other marketing companies based on how many times readers scroll over a word. Advertisers only pay Vibrant for how many times a reader actually clicks on an ad. In-text ads draw a higher response than traditional Web ads: About 0.2% of Web users click on posterlike ads known as banners; Vibrant CEO Douglas Stevenson says 3% to 10% scroll over and click on in-text ads, depending on the category.

I think the use of in-line text ads might be problematic thus far because newspapers have been using the technology to better monetize their destination site. I would suggest that the better use of this new ad vehicle would be to monetize a smaller atom of content, i.e. the news article, decentralized from the destination site. Embedding in-line text ads within RSS feeds or other distribution mechanisms might be a small price to pay to allow readers to access news article outside of the newspaper’s site. Another option would be to have RSS ads, like the Feedburner Ad Network.

I think the general takeaway here is that newspapers shouldn’t look at the same business models to monetize centralized and atomized content.

Update: The Kelsey Group discusses “Newspaper Next 2.0, a “progress report” by the American Press Institute on the evolution of newspaper companies beyond the print edition.” I took a quick glance at it (it’s a 110-page document) but it does not seem to address many of the business model issues that newspapers are facing. As my friend Peter K. says in the post, “The report has a better fix on consumer-oriented solutions than business solutions. But that’s not surprising for a newspaper industry (i.e. editorial-driven) product. If the Yellow Pages Association commissioned similar research, it would probably be the other way around.”

TechCrunch offers a list of new start-ups operating in the space they call “the holy grail of mobile social networking”: “physical presence detection and information exchange with other users.”

Aka-Aki (Germany): “create a profile and download the java app to your phone. You can also create and join groups that say things about your life, job, etc. When you are near other people who are members, data about you is transmitted to them via bluetooth, and vice versa. Users have control over data flow with privacy settings.”

Imity (Denmark): “it detects other members via bluetooth and send basic profile information to your phone. It also keeps track of people on its website, so you can check that out periodically from your normal computer. It’s bridges mobile and traditional social networks, which may help it gain critical mass.”

MeetMoi (USA): “it uses text messaging to help connect people. It’s dating focused - text your location to the service and it notifies other users in your area that you are there. If they are interested, they can contact you.”

MobiLuck (France): it “is another bluetooth solution similar to Aka-Aki and Imity. Download the software to your phone and it vibrates when other users are nearby. You can then chat with them, send photos, etc.”

BrightKite (USA): “serves location based notifications (”place streaming”) over email, instant messaging of text messages. The idea is to stream content about a place, from a place. Friends are alerted when you are nearby. You receive offers from local businesses. Etc. Targeted towards conferences, bars, parties and public places. It is also a platform for third party applications.”

What it means: Talking about critical success factors, TechCrunch mentions that “what’s harder is just plain getting a critical mass of users.” I would answer that’s only one side of the equation. The other one is monetization and I believe local advertising plays a key role there. If you operate a local play, you should be thinking hard about your mobile strategy today. My gut feeling is that we’re 18-24 months from real breakthroughs in local mobile advertising but, when that happens, it might become a very important source of revenues. How big? The Kelsey Group just released a report on US mobile search advertising revenues and they forecast that it will reach $1.4B in 2012.

Yes, there is such a thing as a widget conference! I’m not there but some bloggers and one article from Online Media Daily have some insights about it:

As opt-in distribution networks popular among young consumers, widgets are on the rise, according to the analysts and agency types who gathered Wednesday in New York for the first WidgetCon. “This space is just showing some incredible month-over-month growth,” said Linda Boland Abraham, executive vice president, comScore. “If I were a widget maker, I’d be touting the young demographic that widgets are reaching.” In North America, more than 81 million consumers–or a full 40.3% of all online consumers–were exposed to Web widgets in April, according to a widget tracking service recently launched by comScore. For now, its Widget Metrix service only tracks widgets–mainly photo and video-streaming players–that can be embedded on Web pages like blogs and social networking pages, rather than desktop widgets. (Notably, it is not tracking YouTube’s video players.)

Joanna Pena-Bickley adds: “The widget is facilitating the evolution through giving us a mechanism for portable content, commerce, community and transactions in consumers lives.”

Daniela Capistrano says: “I do not believe that widgets will completely replace websites as some might believe, but I do believe they will change the way that all content is published, promoted, and shared.”

Jeremy Pepper thought that “NYC is about monetization. San Francisco is about community. Or, NY is about style and SF is about substance - either would work. And, at this conference, no one seems to care about the community. I came to this on my vacation, so just stayed for the two key panels - and walked away with the realization that while advertising and marketing (the majority of the people at the conference) are in deep in widgets, they are the last people that should be touching this space. Why? They don’t communicate - they push content, and don’t seem to care about community. ”

What it means: Widget(s) have enormous potential as a content/brand/business model distribution vehicle. When working on their design, make sure you think about the user value you’re offering. Think feature, not advertising, and let it go. If you build a large network of widget users but you’re not monetizing in the short term, don’t worry about it. It’s a great problem to have!

(via O’Reilly Radar)

Everyscape aims to be able to show you the whole world — both inside and out — from its website. It plans to do this with normal 2D photos. Using proprietary technology Everyscape will stitch these photos together and 3D-ify them. The result is a pan-n-scan world accessible through a Flash viewer.

When looking at their viewer you are presented with small, green arrows that direct you around their representation of the realworld. When you click one of the arrows you zoom though the 3D’d photo (a neat affect). It’s not just outside some of the arrows will take you inside buildings. Throughout the app you’ll see web links and info boxes in the form of small blue circles. You can currently check out San Francisco’s Union Square with the Everyscape
viewer.

To make their representation of the world Everyscape needs to know the lat-long and the orientation of the camera when a picture was taken. This data is used to stitch the photos together and place them in the world. The comparisons to Microsoft’s Photosynth are very obvious. The models generated by Everyscape are less CPU-internsive to generate and require less data, but are not nearly as detailed — given Everyscape’s goal I am not sure that it needs to be. (…)

Everyscape is launching with San Francisco this fall. They told me that they would have ten cities by the end of the year. On the homepage they list San Francisco, Boston, New York , and Seattle as coming soon. They claim that takes three weeks for them to record a city (the same number that MS quoted at Where 2.0) so expect the roster to expand quickly after the initial batch. (…)

Everyscape is still determining their revenue model. They can easily embed advertising and local search into their application. There may be other methods of monetizing their “eye-level search”. Real estate agents would probably love to put their houses up in a viewer like this. (…)

Update: Techcrunch has more information about the various players in this space.

What it means: I had seen the Microsoft technology last year at Mix06 and it really excited me. More players in the field means more opportunities for technology licensing (and better prices!). I think I’ve said before I’m a big believer in 3D visual city navigation. I’m convinced that it will become a new way to do local searches in the future. In the demo above, you can even enter in the Salvatore Ferragamo store!

(via the Center for media research)

According to preliminary estimates from the Newspaper Association of America, advertising expenditures for newspaper Web sites increased by 22.3 percent to $750 million in the first quarter versus the same period a year ago. Advertising on newspaper Web sites made up 7.1 percent of total newspaper ad spending in the first quarter compared with 5.5 percent for the same period a year ago. (…) Advertising expenditures at newspapers and their Web sites totaled $10.6 billion for the first quarter of 2007, a 4.8 percent decrease from the same period a year earlier. Spending for print ads in newspapers totaled $9.8 billion, down 6.4 percent versus the same period a year earlier.

Of note in the first quarter of 2007, classified advertising fell 13.2 percent to $3.4 billion with the following detailed information:

• Real estate advertising fell 14.2 percent to $953 million
  
• Recruitment dropped 14.3 percent to $975.3 million
• Automotive was down 20.1 percent to $751.3 million
• All other classifieds were down 0.5 percent to $699.3 million

What it means: clearly, growth in online advertising revenues at newspapers does not compensate for loss of print revenues. Especially important are drop in automotive, real estate and recruitment (three verticals that are really strong online). What’s most important at this point is making sure newspapers increase the traffic to their web properties by all means (distribution agreements, search engine optimization, launch of new verticals and hyperlocal sites, etc.).
The creation of forced Print/Online bundles might also help them sustain their total revenues while online monetization improves in the future.

“The paid video download market in its current evolutionary state will soon become extinct, despite the fast growth and the millions being spent today. Television and cable networks will shift the bulk of paid downloading to ad-supported streams where they have control of ads and effective audience measurement. The movie studios, whose content only makes up a fraction of today’s paid downloads, will put their weight behind subscription models that imitate premium cable channel services.”

Forrester Research Principal Analyst James McQuivey in their newest report “Paid Video Downloads Give Way To Ad Models”

I’m alway a fan of business model discussions and Don Dodge this week had an interesting post regarding conversion rates of the freemium business model.

I am at DealMaker Forum today. We just finished the speed dating sessions with start-ups and I was struck by one common theme. The most common business model is Free Service with an up sell to paid premium subscriptions, commonly known as the “freemium” model. I asked each of them what kind of conversion rates they were seeing. The average is less than 3% conversion. The companies presenting include; Echosign, Seriosity, Smartsheet, Central Desktop, Oddcast, Yugma, and others.

Freemium business models usually involve a Free service, sometimes time limited or feature limited, supported by advertising. The ads rarely cover costs. The goal is to convert these free users to paid subscriptions. Most services start with a $10 per user per month subscription and scale up to $20 or $50 per month based on a small, medium, large usage scale. They all have slightly different measurements and cut-off points, but most have some notion of small, medium, large.

What it means: keep those numbers in mind when building a business case around the freemium model.

(via MediaPost)

According to a new Hitwise report, 25% of the traffic coming to newspapers Web sites arrives from search engines.  This comes on the heels of a custom Nielsen//NetRatings study for the Newspaper Association of America (NAA) showing record traffic numbers of 59.5M unique visitors to these web sites in March.

Challenges:

1) Monetization is not happening as fast as that traffic growth.  “While online ad revenue has been growing, our share of that revenue is not in synch with our reach into the audience,” said Randy Bennett, vice president of audience and new business development for the NAA.”

2) User fragmentation.  “Info from the Hitwise report revealed that news consumption is beginning to fragment, with the share of visits to the top 10 News and Media Web sites (which include newspapers like The New York Times) declining by almost 4%.”

Solution?

“According to Bennett, building awareness of that reach and making it easier for advertisers to buy bundles of local and national ads are key steps toward securing more ad revenue.”

What it means: as Martin Nisenholtz of New York Times Digital said this week at the YPA Conference, the “walled garden” era is dead.  Search engine optimization is a key strategic element if you run a media operation.  Search engines are entry doors to web content and because of their extensive reach, you want to be found in them.  But SEO is not enough.  You need to have a specific syndication strategy to disseminate your content, your brand and, hopefully, your business model throughout the web.

According to the Wall Street Journal, the newspaper industry’s online revenue growth seems to be slowing down and might not be the lifeline they were expecting. Here are the highlights of the article:

Last week, that lifeline began looking frayed. New York Times Co. warned Thursday that online advertising growth this year won’t be as strong as the 30% it had projected. On the same day, Tribune Co. reported that the growth rate for first-quarter interactive revenue was sharply lower than a year earlier. Gannett Co. likewise said online revenue growth slowed in the first quarter from a year earlier.”(…)

(…) last week’s news came as the number of online news outlets proliferates. Rival media such as TV stations and magazines have beefed up their presence, adding to threats posed by Web giants such as Google and Yahoo and popular sites such as CNN.com. Even the social-networking site MySpace has added a news feature and is boosting its ad-sales efforts. (…)

One major issue for many newspapers online: Roughly 70% to 80% of their online revenue is tied to a classified ad sold in the print edition — known as an “upsell,” says Paul Ginocchio, a newspaper analyst at Deutsche Bank. And as newspapers see a sharp erosion in classified advertising for real estate and jobs, their Web sites are being hit as well. Analysts say papers need to find new categories of advertisers. “Newspapers need to move beyond the traditional classified sources they’ve relied upon,” says Borrell’s Mr. Cassino. (…)

Underlining this pressure is a shift under way within Internet advertising. The ad formats that have so far proved strongest for newspapers — banner ads, pop-ups and listings — are losing ground to formats such as search marketing. Ad buyers say automotive, entertainment, financial-services and travel companies — all major newspaper advertisers in print and online — are aggressively shifting dollars into search marketing.(…)

What it means: here are my two cents as an outside observer (and newspaper junkie): obviously, media fragmentation online is hurting newspapers but I believe their general reluctance to embrace content syndication as a distribution/marketing strategy might be hurting them more. If you have an authoritative voice nationally or locally, you need to allow content syndication everywhere to try to drive traffic back to your site(s). Because of the lack of aggressive syndication, newspapers are being removed from the equation by news aggregators and undifferentiated content offer. I’m also a firm believer that becoming either a hypernational or hyperlocal-focussed news source will position you for the future. Everyone positioned in the middle will suffer exactly like what happened in retail with Wal-Mart. The launch of specific vertical sites (with or without a local angle) could also improve their situation. Finally, newspapers need to embrace blogging technology to improve their SEO strategy.

Update: Rich Gordon, Associate Professor at Northwestern University, suggests similar solutions: ”Instead of trying to build the best destination, build the best network.”

Found on Mashable this morning:

Facebook is considering the launch of a local classifieds service, a source told Mashable. Under the proposed system, it would be free to list items in your own network, and cost a few dollars to post to each additional network. (…)

Facebook reportedly has low clickthroughs on ads, so it’s hardly surprising that they’d look to launch a classifieds service which will no doubt be popular with poor students. But it seems odd that they’d make it free: why not charge $1/posting, thus keeping out spam and guaranteeing a nice revenue stream? (…)

What it means: large social networks have reached critical mass and will be looking at additional revenue sources to improve their top and bottom-line. Classifieds are a natural extension as it’s one of the best way to monetize C2C (consumer-to-consumer) relationships.