The Praized Blog

Very interesting first half-day yesterday at the Kelsey Group’s Drilling Down on Local ‘08. The theme of the conference is “Marketplaces”. It regroups products such as classifieds, auctions and vertical sites. Here are highlights from the first two sessions:

As an introduction, the Kelsey Group’s team provided us with some background information on “Marketplaces”. Neal Polachek first described the local end game as “better search, discovery, and engagement”. He even quoted the Cluetrain Manifesto’s “Markets are conversation”. He also talked about their latest global ad revenue forecast for 2007-2012, stating that the biggest category winner would be Internet and the biggest loser would be newspapers. As I wrote last week, the Kelsey group believes that Verticals will capture a large chunk of online advertising by 2012. Matt Booth then talked about three specific verticals (travel, automotive, home services) that have had a tremendous impact on offline/online business and media spending. For example, Matt showed two juxtaposed graphs showing the decline of newspapers’ automotive revenues vs. Autotrader.com’s revenue increase. Peter Krasilovsky finished the intro by stating that it’s now time to “uncouple” print and online media bundles. As print revenues decline, you need to have online-only ad products to compensate. Peter added that you also want to “verticalize” your offer to expand your revenues.

The second session “Remaking the Los Angeles Times (Online)” starred Rob Barrett, Senior VP of Interactive Media, GM, LATimes.com. He started by mentioning that most of what he’s currently working on is not very visible online now. He spent the first couple of years at the LA Times refocusing the online business. His main focus has been to build the display ad business (as opposed to classifieds). It’s going to generate $25M in revenues this year. Barrett says it’s now “time to finally break the newspaper paradigm online”. The LA Times’ online strategy needs to be local as opposed to national as it will allow them to differentiate their offer versus other “national” newspapers like the New York Times. They’ve realized that local users are key to online revenues as they generate more monthly page views and twice the display revenue per page views. Their product approach is “we want to own Los Angeles”, i.e. be integral to life of Angelinos, be the source of news and information about Los Angeles to the world and be an information retailer by creating, aggregating and curating LA content.

The Latimes.com web site is slowly transforming itself into a hyperlocal social network. All content pieces are going to be tagged and indexed by category and geography. By targeting on demographics and on geo, the LA Times is hoping to raise their average CPMs and improve ad effectiveness. They are creating the best targeting machine for the LA DNA. Barrett then showed us pilots of various new vertical sections that are very promising:

• The Travel section: http://travel.latimes.com
• A hyperlocal arts & entertainment guide: http://theguide.latimes.com
• Hollywood backlot to show pictures of movies shooting: launching next week
• User-generated photo and video content: photos & videos, http://yourscene.latimes.com
• The Homicide map: http://www.latimes.com/news/local/crime/homicidemap/

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.”

Yesterday morning, I had the opportunity to moderate a social media panel at the Infopresse conference on social networking. Sitting on my panel was Guillaume Bouchard from NVI, a Montreal-based SEO/SMO firm. He explained to the crowd of more than 280 people how, by using social media tools, he manages to generate brand awareness and increase the online street cred of Canpages, a Canadian directory company competing against Yellow Pages Group in Canada.

It starts with the creation of original and quirky content in the Canpages blog. His team then seeds that content in the various social news sites like Digg and Reddit. Working with a large network of friends and contacts, he’s able to catch the eye of online influencers who might (or might not) promote that piece of original content.

His best success so far with Canpages has been this blog post about “Weird Canadian Restaurants”. It was submitted to Digg and generated 676 diggs and 101 comments. It was promoted to the first page of the site and generated good traffic (he did not disclose how much) for the Canpages blog. It was also favorited by people in StumbleUpon, another social tool that has the reputation of driving a lot of traffic. The post was well enough crafted to be picked up by Dan Mitchell from the New York Times, which generated some more traffic to the Canpages blog.

What it means: a great use (and a great understanding) of social media tools and sites to build a new directory brand and make it more exciting for “cool kids”. This is also a great strategy to build new incoming links to your domain, thereby increasing your page rank in Google. You’ve got to wonder though if there are long-lasting positive effects from both a brand equity and online directory site usage but I don’t think it hurts given the runner-up position they occupy in the market.

I read with great dismay this morning the possible demise of one of my favorite magazines, Business 2.0 .

According to the New York Times article, even though the magazine has a circulation of 623,000, there’s a couple reasons why this might happen:

Aside from the overall downturn in the magazine business, current and former Time Inc. employees point to what appears to have been an ill-advised move this year to combine the advertising sales teams of Time Inc.’s finance and business publications, which include Fortune, Money, CNNMoney.com, Fortune Small Business and Business 2.0. Consolidated under a single banner, Time Inc.’s Business and Finance Network (or Tibfin, as it is known inside the company), Time sales representatives stopped pitching the distinct appeal and audience of Business 2.0 to focus on the larger titles like Fortune. That often turned Business 2.0 into an afterthought; big advertisers like Microsoft and Intel were offered discounts on other Time Inc. business titles if they would also buy pages in Business 2.0.

I’ve been a reader for many years and even though I read multiple blogs and online news sources daily, I always find interesting stuff in the magazine. It also helps me synthesize what I’ve read on the Web in the last few months. I’ve also found it’s a great media vehicle to introduce non-web business people to new web initiatives.

I then posted a short status update in my Facebook micro-blogging feed that said “Sebastien is sad to think Business 2.0 magazine might fold in September…”

45 minutes later, I get an e-mail from one of my new “friends”, Colin Carmichael, who’s inviting me to a new group he’s created to save Business 2.0. He told me I had tipped him off to the demise of Business 2.0 and he wanted to do something. I obviously joined the group and invite you to do the same if you like the magazine.

What it means: it’s my first opportunity to experience first-hand the power of micro-blogging, those small atoms of information written in new communication tools like Twitter, Jaiku, Pownce and Facebook (via the status update section). Very powerful tools. On another note, I believe print magazine usage growth (and by extension revenue growth) will come from specializing, not becoming more generalist. By consolidating their sales force, publishers run the risk of abandoning their specialty titles and future growth. The same debate takes place all the time in the directory business. Should publishers use a different sales force for Internet products or for vertical publications? I think you need to take a good look at where you think your growth will come from in the future and support adequately those initiatives.

I’ve been reading many articles about social search in the press in the last few months. Jimmy Wales’ Wikia (and to a lesser extent Jason Calacanis’ Mahalo) has been getting a lot of buzz and I’m not sure I saw the big potential until I read this article in today’s New York Times. Naver.com isthe leading search engine in South Korea with 77% of all web searches (vs. 1.7% for Google) and it’s leveraging social search.

Highlights:

When NHN, an online gaming company, set up the search portal in 1999, the site looked like a grocery store where most of the shelves were empty. Like Google, Naver found there simply was not enough Korean text in cyberspace to make a Korean search engine a viable business. “So we began creating Korean-language text,” said Lee Kyung Ryul, an NHN spokesman. “At Google, users basically look for data that already exists on the Internet. In South Korea, if you want to be a search engine, you have to create your own database.” The strategy was right on the money. In this country, where more than 70 percent of a population of 48 million use the Internet, most of them with high-speed connections, people do not just want information when they log on; they want a sense of community and the kind of human interaction provided by Naver’s “Knowledge iN” real-time question-and-answer platform. (…)

Each day, on average, 16 million people visit Naver — the name comes from the English words neighbor and navigator — keying 110 million queries into its standard Google-like search function. But Naver users also post an average of 44,000 questions a day through Knowledge iN, the interactive Q.&A. database. These receive about 110,000 answers, ranging from one-sentence replies to academic essays complete with footnotes. The format, which Naver introduced in 2002, has become a must-have feature for Korean search portals. The portals maintain the questions and answers in proprietary databases not shared with other portals or with search engines like Google. When a visitor to a portal does a Web search, its search engine yields relevant items from its own Q.&A. database along with traditional search results from news sites and Web pages. Naver has so far accumulated a user-generated database of 70 million entries. (…)

Google, which started its search service in the Korean language in 2000, introduced an upgraded Korean-language service in May. The new version deviates from Google’s celebrated bare-bones style. In South Korea, people prefer portal sites that resemble department stores, filled with eye-catching animation and multiple features. “It’s obvious to me that Korea is a great laboratory of the digital age,” Eric E. Schmidt, the chairman of Google, said in Seoul at the introduction of the new search service.

What it means: I’m starting to think social search has a great future but I also think it’s difficult to start from scratch like Wikia and Mahalo. I also think there might be an amazing opportunity out there for directory publishers (and anyone operating a local search site with a good amount of traffic) to launch a social search application to complement their current database of content. Who will be the first large-scale local social search site?

Catching up on some interesting blog posts this week, I found this superb analysis by Publishing 2.0 about why newspapers should embrace online aggregators.

Highlights:

What it means: a couple of things. First, if you are traditional media, you need to re-think how you see your brand. There is a retail version of your brand (your destination sites) and there is a wholesale version of your brand (rss feed, SEO strategy, content licensing, etc.). Both are as important strategically. Second, the idea of branding content pieces in addition to your destination site is brilliant. Make sure you take that into account when working on your wholesale strategy. Finally, embrace search engines and aggregators to increase your reach.

(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.”

(via the Los Angeles Times)

News organizations confronted with declining revenue and increased competition are entering an era of more limited ambition in which they will drop a broad worldview for more narrowly focused reporting, according to an annual review of the news business being released today by a watchdog group.

The Project for Excellence in Journalism reports that the struggle to create sustainable media brands is driving “hyper-local” coverage in newspapers; encouraging citizen journalism on the Internet; and giving rise to opinion-driven television personalities like CNN’s Lou Dobbs and Fox News’ Bill O’Reilly. “The consequences of this narrowing of focus involve more risk than we sense the business has considered,” said the report from the project, an arm of the Washington-based Pew Research Center. “Concepts like hyper-localism, pursued in the most literal sense, can be marketing speak for simply doing less.”

The review describes print, radio and television news operations as weathering “epochal” changes — with audiences splintering so radically that is has become difficult to accurately measure new viewing and reading habits. Daily newspaper circulation declined 3% in 2006, for instance, but the increase in online readership is more difficult to quantify. The three television networks collectively lost an additional 1 million viewers — about the average in each of the last 25 years — but YouTube and other online services created a new delivery vehicle for the networks’ content.

Traditional newsrooms remain the primary source for information, and the report suggests that news organizations need to be more aggressive about mining revenue for their work. The old-line media may have to form consortiums to force Internet “aggregators,” which compile content from other sources, to pay licensing fees for news and information, the report says.

Tom Rosenstiel, director of the Project for Excellence in Journalism, said that most news organizations would have to shrink their staffs but that much more thought needed to go into how the reductions are made. “The current thinking, hyper-localism, seems problematic,” he said in an e-mail response to a question. “In an era of globalism, how can you suggest that the L.A. or Boston market does not need its own specialized foreign reporting that informs the local economy, the local culture and more, in a way that is different than what generic wires would cover?”

Respected newspapers such as the New York Times and Washington Post have placed high hopes in replacing declining print advertising with ads on their websites. Indeed, as audiences online have expanded, newspapers have seen their online revenue grow by more than 30% a year. But the Project for Excellence report suggests that the boom in online news audiences and income has begun to wane. A Pew Research Center study cited in the report found that the number of Americans who said they went online for news every day declined to 27% in June 2006, compared with 34% in June 2005. (…)

Today’s report says that the loss of about 4,000 newspaper journalists since 2000, combined with the smaller number of pages devoted to news, “suggest that American newspapers have reduced their ambitions.” Newspapers have traditionally served a “complete diet” of news to the public and alerted television, radio and other media to stories, the report found, suggesting that more study is needed to determine “what is lost and what is left uncovered.” (…)

The Project for Excellence report says that the ethnic media sector is one of the few experiencing solid growth. Spanish-language newspaper circulation, for example, jumped 900,000 to 17.6 million in 2005. That was the most recent year with available data. (…)

What it means: is hyperlocal all about reduced ambitions or increased relevancy and differentiation? I think it’s all about the latter. I personally believe that we will see a polarization between what I now call hypernational news sources (very credible news organizations that cross borders like the ones I mentioned here) and hyperlocal ones (very relevant local news and content sources). Those in between will possibly lose a lot of their former luster. Smart news organizations will own one or two hypernational brands and a multitude of smaller hyperlocal brands. Hypernational content will flow into hyperlocal vehicles.

Journalism Fan just sent me a note to le me know Arthur Sulzberger is going to address his staff today to discuss the comments he made to Ha’aretz last week. I found more details on the New York Observer’s web site.

Here is in essence what Sulzberger is going to be talking about:

“We are continuing to invest in our newspapers, for we believe that they will be around for a very long time. This point of view is not about nostalgia or a love of newsprint. Instead, it is rooted in fundamental business realities: Our powerful and trusted print brands continue to draw educated and affluent audiences.

“Traditional print newspaper audiences are still significantly larger than their Web counterparts. Print continues to command high levels of reader engagement. And, of course, we still make most of our money from print advertising and circulation revenue. And yes, I remember what I said here last year and what I was supposed to have said last month at Davos about not having a printed product in five years time.

“So let me clear the air on this issue. It is my heartfelt view that newspapers will be around–in print–for a long time. But I also believe that we must be prepared for that judgment to be wrong. My five-year timeframe is about being ready to support our news, advertising and other critical operations on digital revenue alone …whenever that time comes.”