Publishing 2.0 » Media Economics http://publishing2.com The (r)Eevolution of Media Mon, 07 Jun 2010 20:36:31 +0000 http://wordpress.org/?v=2.9.2 en hourly 1 The New Associated Press for the 21st Century http://publishing2.com/2010/05/25/the-new-associated-press-for-the-21st-century/ http://publishing2.com/2010/05/25/the-new-associated-press-for-the-21st-century/#comments Tue, 25 May 2010 11:48:16 +0000 Scott Karp http://publishing2.com/?p=1611 This week, at TechCrunch Disrupt, we’re announcing the launch of Publish2 News Exchange, a platform aimed at disrupting the Associated Press monopoly over content distribution to newspapers. With Publish2 News Exchange, newspapers can replace the AP’s obsolete cooperative with direct content sharing and replace the AP’s commodity content with both free, high-quality content from the Web and content from any paid source.

With Publish2 News Exchange, we’ve created what the AP should have become, but can’t because of a classic Innovator’s Dilemma. The New AP is an open, efficient, scalable news distribution platform. We’re enabling newspapers to benefit for the first time from the disruptive power of the Web, and from the efficiency of content production on the Web.

Read more about the New AP at the Publish2 Blog now.

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]]> http://publishing2.com/2010/05/25/the-new-associated-press-for-the-21st-century/feed/ 0 The Problem of Media Economics: Value Equations Have Radically Changed http://publishing2.com/2009/01/07/the-problem-of-media-economics-value-equations-have-radically-changed/ http://publishing2.com/2009/01/07/the-problem-of-media-economics-value-equations-have-radically-changed/#comments Wed, 07 Jan 2009 05:53:06 +0000 Scott Karp http://publishing2.com/?p=1205 Entering 2009, the future of media is undoubtedly a quandary, with no end of head-scratching across the industry. As with everything these days, it seems that it all comes down to radically changing economics. There are way too many conversations about the future of media, news, journalism, etc. going on out there that don’t reference economics, so I’m going to kick off the year with two personal anecdotes that illustrate the problem of media economics.

Last weekend, my wife and I wanted to watch Becoming Jane, because we’ve been on a Jane Austin kick. We watched Pride & Prejudice the night before (highly recommended). We subscribe to Netflix DVDs, but we hadn’t ordered the movie, and we didn’t feel like waiting. I went to iTunes, and it was available for purchase for $15, but not for renting (for $3 or $4). Amazon, same deal, not on their video on demand service, just the DVD for $15. I checked out Neflix’s Video on Demand offering and found that we don’t have the right hardware (nor do we have the required “unlimited” subscription). Hulu, well, they’re making progress on movies, but it’s mostly old stuff. Video store — the Hollywood video near us is an empty shell — and I can’t remember the last time we got into a car to rent a movie.

So here we were, ready to spend $4 even $5 dollars on content, and nobody would take our money. Seriously.

So that $5 stayed in my walled. No sale. No revenue. Nothing. We didn’t end up watching a movie.

Here’s another story.

Over the holiday, we helped some relatives post a listing for basement apartment on Craisglist. They had already listed the apartment in the newspaper, but they responses had been entirely from older people — 70s and even 80s. They had been looking for a young professional (it’s a steep staircase down to the apartment). And the responses had been coming in slowly. The apartment remained unrented.

We posted the apartment listing on Craigslist, and over the next few days they were flooded by phone calls, mostly people in their 20s. In less than a week they had rented the apartment to a public school teacher who had been living at home and was looking for her first place.

So they were able to achieve for free on Craigslist what they couldn’t achieve by spending money in the newspaper.

To me, these two incidents represent media value equations that have radically changed. It seems that most media companies still haven’t figured out how to adapt to or even understand the changes to the fundamental exchange of value in media.

Some of that stems from a failure to understand legacy media economics.

People ask why no one wants to pay for news anymore, referencing the decline in newspaper circulation, when in fact that misrepresents the value equation. People were paying for newsPAPERS, which contained a lot more than news, and they were also paying for newspaper delivery, which is a service.

For all those people searching for apartments on Craigslist, the value equation for their local newspaper has fundamentally changed. They may still value local news, but some of the highly valuable information that used to ride along with the news has been removed, which changes the equation.

It’s not that no one wants to pay for music or movies, it’s that increasingly we want to pay for content when, where, and however we want. We’re willing to pay for the convenience of video on demand, but the service isn’t always being offered. Digital technology has put content producers in the services business, but they don’t yet fully understand that value exchange.

New business models for media require entirely new exchanges of value — it’s not about finding new ways to balance the old equation.

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]]> http://publishing2.com/2009/01/07/the-problem-of-media-economics-value-equations-have-radically-changed/feed/ 13 When A Newspaper Stops Publishing In Print, What Happens To The Print Advertising Dollars? http://publishing2.com/2008/12/17/when-a-newspaper-stops-publishing-in-print-what-happens-to-the-print-advertising-dollars/ http://publishing2.com/2008/12/17/when-a-newspaper-stops-publishing-in-print-what-happens-to-the-print-advertising-dollars/#comments Wed, 17 Dec 2008 07:44:10 +0000 Scott Karp http://publishing2.com/?p=1202 With all the debate over the future of newspapers, here’s a question I haven’t heard anybody ask (much less answer): If a metropolitan newspaper suddenly ceased to publish, leaving the city with no newspaper, what would happen to all of that newspaper’s ad dollars?

Most newspaper companies’ strategy right now is based on the assumption that you can’t shut down the print newspaper because it brings in 90% of the revenue, and you couldn’t possibly support the same news gathering operation with the 10% revenue slice that goes to the website. (The 10% problem)

There’s just one problem with this assumption. All of the ad dollars that the print newspaper gets are, by definition, ad dollars that the newspaper’s website does NOT get.

Think about that for a second. Newspapers know that they are competing with their websites for ad dollars. But newspapers are also essentially competing with their websites for survival.

So what WOULD happen to those millions of dollars in advertising if there were no longer a print newspaper to collect them? 

Some of it would simply vaporize due to one of the following factors: 

  • Craigslist, Kijiji, or other free classified websites
  • Businesses stop advertising altogether (never saw ROI)
  • Businesses shut down entirely (e.g. retailers)
  • Prolonged cyclical downturn (e.g. real estate)

But what would happen to the rest of it, to the ad dollars that businesses still want to spend?

Who would compete for those ad dollars? How much pricing power would they have with the old monopoly gone?  How would the value propositions and ROI (perceived or real) differ from that of newspaper advertising (e.g. search advertising vs. display advertising vs. new ad models). How would advertisers perceive these alternatives to print advertising?

Most importantly for newspapers, what share of these suddenly liberated ad dollars could their news brand (which used to be the name on the advertisers’ checks) capture with an online-only reincarnation, now that the brand was no longer competing with itself? (I’m following ASNE’s lead in calling it a news brand instead of a newspaper brand.) What kind of newsroom and journalism could those “reclaimed” ad dollars support?

If I were a newspaper executive, I would cancel all meetings, clear off my desk, get out a really sharp pencil, and start trying to answer these questions. You can be sure that many other companies are already working on figuring out the answers.

To be clear, I’m not saying that newspapers should shut down the print product. I’m saying that newspapers should make sure they think through what would actually happen to all that advertising revenue if they were forced to stop publishing in print (which increasingly looks like a real possibility for some newspapers). Figuring this out could, in some cases, make the difference between surviving in some form (or even thriving) and ceasing to exist.

P.S. Regarding circulation revenue, those dollars will likely vaporize if the newspaper stops publishing in print. Why pay for distribution when its free? (Yeah, newspaper subscriptions were mostly for the distribution, not for the content. Everyone understands printing the newspaper and delivering it to your door is costly. And everyone knows it’s not the case with bits. Which is not to say readers don’t value the content, but there’s a big difference between paying for news and paying for the delivered bundle of news and information that is a newspaper.)

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]]> http://publishing2.com/2008/12/17/when-a-newspaper-stops-publishing-in-print-what-happens-to-the-print-advertising-dollars/feed/ 41 The Challenge Of Non-Local Newspaper Advertising http://publishing2.com/2008/05/12/the-challenge-of-non-local-newspaper-advertising/ http://publishing2.com/2008/05/12/the-challenge-of-non-local-newspaper-advertising/#comments Mon, 12 May 2008 05:00:51 +0000 Scott Karp http://publishing2.com/?p=1064 Newspaper brands like the NEW YORK Times, WASHINGTON Post, BOSTON Globe, etc. face a unique challenge in the online media age — how to value non-local readers.

I received this offer in the snail mail this week from the New York Times:

New York Times Circulation Marketing

As I observed previously with my critique of the Washington Post’s circulation marketing, this marketing piece gives me, an avid reader of NYtimes.com, no explanation whatsoever as to the value of also receiving the New York Times in print (with the exception of receiving free access to some premium online services, which has nothing to do with the value of the print edition itself).

It appears the objective of this marketing pieces is strictly to convert people who already read the New York Times print edition or who are predisposed to read newspapers in print — and we all know this group of people is shrinking. For the six-month period ending March 31, 2008:

The New York Times lost more than 150,000 copies on Sunday. Circulation on that day fell a whopping 9.2% to 1,476,400. The paper’s daily circulation declined 3.8% to 1,077,256.

The New York Times is clear trying to bolster this declining print circulation by marketing to prospective non-local subscribers like me. The problem is that as a reader, I have little or no value to local New York City advertisers, especially classified advertisers.

This presents a quandary for “national” newspapers like the New York Times, particularly in light of the online readership of NYTimes.com.

According to Nielsen Online, NYTimes.com had 18,869,000 unique visitors in March 2008, up from 17,502,000 in October 2007, a 7.8% increase.

Nielsen’s numbers are estimates, but assuming they are directionally correct, think about the orders of magnitude we’re talking about here: 1 million vs. 18 million

You would think a media property with an audience of 18 million would be worth more than a media property with an audience of 1 million.

And yet it’s not. This is the ten percent problem.

I’m still more valuable to the New York Times as a print subscriber than and as an online reader because my advertising value is still so much higher in print — despite my not living in New York City.

Here’s the economic reality for national newspaper brands: Print readers are scarce. Online readers are a commodity.

Just look at the numbers: Washington Post Sunday print: 890,163; monthly online: 8,929,000 (almost exactly 10x); Boston Globe Sunday print: 525,959; online (boston.com): 4,184,000

But why aren’t these newspapers’ online businesses 10x larger than the print businesses instead of 10x smaller?

Here’s the bottom line business model problem: Unlike in print, newspapers create no unique value for advertisers online.

Newspapers had a monopoly over print advertising in a defined geographic area, which provided a lot pricing power for ads that were uniquely local and uniquely suited to print, e.g. classifieds.

Look carefully at the online advertising formats of most newspaper websites, and you’ll notice two things:

  • Most are direct analogues of print advertising formats
  • Most are the same as ad formats on thousands of other content sites

Take a look at the New York Times online ad formats. It seems like an impressive product list at first, but what it boils down to is a fancy list of display ad offerings.

And how many other places can you buy display ads on the web?

Just look at the name of their large rectangle display ad unit: Big Ad — you know, like that full page ad in the paper — you see it and think, wow, that’s a big ad. Problem is the BIG ad on the web site is a whole heck of a lot smaller than the big ad in the paper, despite being a whole heck of a lot more interactive and measurable.

Which gets to the problem of non-local readers.

In the market for local advertising on the web, newspapers are competing with other traditional local media companies, e.g. TV station, as well as with new web-native local publishers, and with search engines — this is a newly leveled and expanded competitive landscape, but still limited.

For non-local readers, on the other hand, newspapers are competing with hundreds, even thousands of other content sites.

That’s why the NYT’s 1 million print readers are more valuable than their 18 million online readers.

For example, here are the NYT print rates for the Technology category:

If you do the math, the cost of 1 page, or 126 column inches at the National Weekday rate of $1,233 is $155,358, to reach 1,077,256 weekday subscribers. That works out to a cost per thousand (CPM) of $144.

Compare that to the $15-40 CPMs that TechCrunch gets for displays. Imagine what TechCrunch’s business would look like if it could command $144 CPMs.

So given that the New York Times can charge 3-4 times as much to show me a technology-related ad in print than TechCrunch can charge online, is it any wonder that they are trying to convert me to a print subscriber?

The issue is even more acute because at least TechCrunch can prove that the ad was displayed, even if I didn’t pay attention to it. NYT can’t even prove that I didn’t throw the paper straight into the recycling bin.

It would seem this is a market anomaly that can’t last.

So what should newspapers with a national audience online do?

Well, one obvious choice is to stop trying to be both a local and national (and even global) media company. The problem is that for companies like the New York Times, the local newspaper supports the global news enterprise — but that state of affairs is in rapid decline.

Another choice is to produce a local print product that MORE people want to read, not fewer — the perceived infallibility of the current declining print product is a subject for another day.

There’s one other choice that you don’t often hear discussed: Find new ways to create value for advertisers online.

That’s what Google did. The value proposition of search advertising has no analogue in print or anywhere offline. That’s where the pricing power comes in.

Creating unique value for advertisers online could also help newspapers better compete for and better price local online advertising as well.

So how can newspapers and other news brands create unique value for advertisers on the web?

I’ll have to get back to you on that one.

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]]> http://publishing2.com/2008/05/12/the-challenge-of-non-local-newspaper-advertising/feed/ 9 The Declining Value Of Redundant News Content On The Web http://publishing2.com/2008/05/04/the-declining-value-of-redundant-news-content-on-the-web/ http://publishing2.com/2008/05/04/the-declining-value-of-redundant-news-content-on-the-web/#comments Mon, 05 May 2008 04:21:15 +0000 Scott Karp http://publishing2.com/?p=1061 Microsoft withdrawing its offer to buy Yahoo is a sufficiently large story to demonstrate the problem of redundant news content on the web. Google News is currently tracking about 2,000 versions of this story. To get a better sense of why it’s a problem to have 2,000 stories about the SAME THING, I’ve reproduced about ten percent of them below — just the headlines and ledes. If you have the stomach to scroll through them all to see what else I have to say about it, check out the sources as you scroll:

UPDATE: The Google News example is reproduced here instead. You’re reading this in RSS or email a day after I posted it because this post was so large it broke my Feedburner feed. Too much content breaks the web — there you have it. Keep reading for my original argument.

If you’ve made it this far, you may have noticed the absence of blogs from the sources. So this is far from a representative sample of all of the websites that published a version of this news story.

Let’s check out Techmeme, again reproduced in its entirety, because seeing is disbelieving:

Yahoo!:

Yahoo! Issues Statement in Response to Microsoft — SUNNYVALE, Calif., May 03, 2008 (BUSINESS WIRE) — Roy Bostock, Chairman of Yahoo! Inc. (Nasdaq:YHOO), a leading global Internet company issued the following statement today in response to Microsoft Corporation’s announcement that it has withdrawn its proposal to acquire Yahoo!:

RELATED:

Microsoft:

Microsoft Withdraws Proposal to Acquire Yahoo! — Microsoft Corp. today announced that it has withdrawn its proposal to acquire Yahoo! Inc. — Microsoft Corp. (NASDAQ: MSFT) today announced that it has withdrawn its proposal to acquire Yahoo! Inc. (NASDAQ: YHOO).

Kara Swisher / BoomTown:

MicroHoo: The Odd Couple Meetings Led Nowhere — After today’s events, I guess you could say Yahoo and Microsoft tried, holding a series of meetings about a possible takeover that ended up proving exactly how incompatible the companies were. — Kind of like Oscar Madison and Felix Unger, but not funny in any way at all.

Ina Fried / Beyond Binary:

OK, so what’s Microsoft’s plan B? — With Yahoo apparently off the table, it’s time to see what Microsoft’s back-up plan looks like. — Microsoft has said for some time that it has a strategy with or without Yahoo, but it’s a strategy clearly in need of a jump-start.

DealBook:

Guessing Yahoo’s Opening Stock Price — Well, Yahoo seems to have gotten what it wanted. — The company managed to fend off Microsoft’s unwanted advances, even after the software giant sweetened its bid by $5 billion — an amount Yahoo felt still wasn’t enough.

Wall Street Journal:

Microsoft Withdraws Yahoo Offer After Attempt to Bridge Gap in Price — Microsoft Corp. said it abandoned its offer for Yahoo Inc., as the two companies failed to bridge a gap between them on price. — Microsoft Saturday released a letter from Chief Executive Steve Ballmer …

Dawn Kawamoto / CNET News.com:

Report: A peek behind the Yahoo-Microsoft meltdown — Curious how Microsoft’s multi-multi-multi-billion dollar buyout bid for Yahoo sputtered, then crashed? — Kara Swisher’s BoomTown column in All Things Digital has an interesting account of the missteps, sidesteps …

Kara Swisher / BoomTown:

Yahoo’s Nightmare Scenario: I’m From Google and I’m Here to Help! — Here’s what a top-notch source at Yahoo joked to me tonight, after Microsoft walked away from its unsolicited takeover bid to acquire the long-troubled Internet giant. — “Google is now officially our best friend.” — Oh no.

Discussion: Groundswell

Michael Arrington / TechCrunch:

Yahoo’s Tough Week Ahead — At around 4:30 California time today news broke that Microsoft has formally withdrawn its offer to acquire Yahoo (see Ballmer’s email to Microsoft employees here). — Among other things, that ends a three month stock party where the market value of Yahoo jumped …

Yi-Wyn Yen / Fortune:

Blame it on Google — Microsoft CEO Ballmer said the software giant decided to walk away from a bid because Yahoo would become ‘undesirable’ if it formed an alliance with Google. — (Fortune) — Google proved to be the final straw that broke Microsoft CEO Steve Ballmer’s back.

Discussion: MacDailyNews and CNNMoney.com

Paul Kedrosky’s Infectious Greed:

Analysis of the Microsoft Decision, Plus Yahoo’s Hari-Kari — Here is my first-cut analysis of what has happened here: — On the friendly front, Yahoo drew a hard line at $37 per share, well above the $33 that Microsoft now says it told Yahoo this week it was willing to go

Discussion: broadstuff

Michael Arrington / TechCrunch:

Email From Steve Ballmer To All Microsoft Employees — The following email was sent to all Microsoft employees from CEO Steve Ballmer at 5:17 pm PDT (see Breaking: Microsoft Withdraws Yahoo Bid; Walks Away From Deal): — To: “Microsoft – All Employees (QBDG)”

Michael Arrington / TechCrunch:
Breaking: Microsoft Withdraws Yahoo Bid; Walks Away From Deal (Updated)

Ina Fried / Beyond Binary:
Microsoft pulls its Yahoo offer

Ina Fried / Beyond Binary:
Microsoft says proxy battle not worth it

Discussion: BloggingStocks

BBC:
Microsoft walks away from Yahoo

Discussion: Gizmodo and TECH.BLORGE.com

Kara Swisher / BoomTown:
BREAKING: MICROSOFT WALKS

Discussion: Digital Daily, Valleywag, Changing Way, Paul Kedrosky’s … and Hollywood Newsroom

We all know how this happened, of course. All of the print publications, including non-niche pubs like the Washington Post, have to create a version of this story for their print publication, and then dump that story on the web. All of the web-native tech sites, competing tooth and nail for page views, are all obligated to publish at least one if not multiple takes on this story. Then there are all the sites that reproduced the wire version of the story.

If each site were, as in print, an island unto itself, this would make sense — if the news outlet did not cover the story then its readers might not know about it. But seen as a whole on the web, which connects each and every one of these websites, and especially seen through the lens of an aggregator like Google News or Techmeme, this huge mass of content about the same story doesn’t make much economic sense.

I am purposely choosing not to write about the story itself, finding it much more interesting to make this meta-observation, but if I had chosen to write about it, I could have reduced the economic value of every other version of the story.

Why? Because there is a zero sum game for attention on this story. Even tech insiders will read a finite number of stories. If I put my version in the mix, for each time mine gets read, someone else’s doesn’t. So each version of the story reduces that marginal economic value of all the others.

Here’s another way to look at it. Imagine a Midwest city where a factory that is a major employer announces that it is shutting down. Now imagine that instead of one local newspaper and one local TV station covering this story instead there are 100 newspapers and 50 TV stations. Reporters from each of these outlets file their coverage of the story. Newsstands in the local Walmart display all 100 newspapers, each with the factory closing story on the cover. Anyone who turns on their TV station can flip channels at 6pm and find the same story being reported, over and over again.

Yes, that’s a silly example, but is it really all that different from what’s happening on the web?
Can you imagine a content economy five or ten years from now that supports 2,000 versions of the same story? Is it any surprise that the company that creates far and away the most economic value on the web produces NO ORIGINAL CONTENT? (Yes, that would be Google.)

Here’s the takeaway for original content creators: BE ORIGINAL

That means when you consider publishing an original news item, be aware of the larger marketplace for that news. If it’s hugely competitive, consider allocating your limited reporting resources elsewhere, and instead find other ways to create value around the story, as the Seattle Times did:

Imagine how much more value local media brands, for example, might create if they did any one or more of the above rather than publish yet another commodity version of the story. Practicing link journalism could leave more time for original reporting that ISN’T being done by other news organizations.

(Of course, the Seattle Times still publishes a print edition, so they had to have their print coverage. And Microsoft is a local story for them, so the original reporting is a rational allocation of resources.)

Here’s the other takeaway: Don’t add to the noise, help reduce it.

An engineer who works on Google News said during a presentation at the NewsTools conference that Google is studing whether the amount of news on the web is actually decreasing.

So while there’s more content on the web, there may be less news.

Final takeaway: Don’t contribute to the commodification of news on the web.

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]]> http://publishing2.com/2008/05/04/the-declining-value-of-redundant-news-content-on-the-web/feed/ 32 Can Pay-For-Performance Improve The Quality Of Content On The Web? http://publishing2.com/2008/01/01/can-pay-for-performance-improve-the-quality-of-content-on-the-web/ http://publishing2.com/2008/01/01/can-pay-for-performance-improve-the-quality-of-content-on-the-web/#comments Tue, 01 Jan 2008 19:22:29 +0000 Scott Karp http://publishing2.com/2008/01/01/can-pay-for-performance-improve-the-quality-of-content-on-the-web/ Nick Denton and Gawker Media are wrestling with the problem of content quality on the web — specifically, how to give bloggers incentives to create content that drives traffic based on quality rather than quantity. Gawker has announced that incentive pay for its bloggers will now be based entirely on the number of page views that each blogger’s posts generate, rather than on the total number of posts a blogger writes. (Vallewag has posted the entire internal memo, which anyone interested in the economics of publishing on the web should read and re-read.)

The downsides of this approach are obvious — the incentive rewards content that is salacious, titillating, slanderous, nasty, etc. — anything that appeals to the base interests of a mass audience. It rewards gaming of social news sites, i.e. creating content that appeals to the most parochial interests of users on Digg, Reddit, StumbleUpon, etc. And of course it rewards search engine optimization, writing content that is packed with keywords and that foots to the top searches, with headlines written for search engines rather than people.

Google AdSense is in many ways the most successful pay-for-performance content system on the web, rewarding content that ranks high in search and draws in readers who then click on ads. It’s easy to argue that this system has flooded the web with junk “Made for AdSense” content that has no purpose other than to generate ad revenue.

But the flip side is that Google AdSense has also financed innovation on the web, giving web start-ups and niche content creators an easy stream of revenue to help bootstrap new sites. AdSense may not be a long-term business model, but it does reward innovative new sites that can attract attention.

So what about Gawker? Nick seems to believe that pay-for-performance will lead to an overall improvement in the quality of Gawker content. He uses the adjective “linkworthy” to describe content that is of sufficiently high quality that other sites will link to it. Of course, the same salacious, titillating, slanderous, etc. content can also be linkworthy, but I think Nick is less focused on the problem of offensive or “cheap thrills” content, and more on the problem of mediocre content.

When blog networks like Gawker paid writers based on the number of posts, they provided an incentive for writers to post even when they didn’t have any interesting information or anything interesting to say. The result of this “infinite news hole” was that blog networks generated a lot of mediocre content.

You could argue that mediocrity is the real scourge of content the web, and that more “linkworthy” content means, on balance, higher quality content. Links are of course the principal driver of search engine ranking, so writing linkworthy content is ultimately the best SEO strategy. Search can and does reward the best content as easily as it can reward poor quality content engineered to game the system.

So in the final analysis, does pay-for-performance create incentives for better or worse content? I think the answer is both. The web in many ways turns a blind eye to quality — it rewards both the good and the bad.

What the web lacks most right now is a content filter that adheres consistently to a high standard of quality. If their were such a content aggregation system, it might be possible to significantly improve the quality of content on the web with pay-for-performance systems.

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]]> http://publishing2.com/2008/01/01/can-pay-for-performance-improve-the-quality-of-content-on-the-web/feed/ 34 Music Recording Industry Will Be First Traditional Media Industry To Be Utterly Destroyed By Digital Technology http://publishing2.com/2007/12/28/music-recording-industry-will-be-first-traditional-media-industry-to-be-utterly-destroyed-by-digital-technology/ http://publishing2.com/2007/12/28/music-recording-industry-will-be-first-traditional-media-industry-to-be-utterly-destroyed-by-digital-technology/#comments Sat, 29 Dec 2007 02:21:16 +0000 Scott Karp http://publishing2.com/2007/12/28/music-recording-industry-will-be-first-traditional-media-industry-to-be-utterly-destroyed-by-digital-technology/ The maxim goes that new technologies don’t kill off old media — radio didn’t kill newspapers, TV didn’t kill radio, etc. But it’s not clear this maxim will hold true in the digital age. The first industry to suffer the slings and arrows of digital technology was the music recording industry, back when MP3s and Napster gave birth to digital music sharing. Now it seems likely that if digital technology is capable of utterly destroying an old media industry, the music recording industry will be its first victim.

In a desperate, senseless, lunatic attempt to save the collapse of their business, the recording industry has declared jihad on their own consumers — trying to literally to sue their customers back into the stone age. This war on consumers has taken a bizarre and potentially fatal twist as the music recording industry has declared it illegal to to copy legally purchased music to a computer for personal use.

Yes, you read that right:

Now, in an unusual case in which an Arizona recipient of an RIAA letter has fought back in court rather than write a check to avoid hefty legal fees, the industry is taking its argument against music sharing one step further: In legal documents in its federal case against Jeffrey Howell, a Scottsdale, Ariz., man who kept a collection of about 2,000 music recordings on his personal computer, the industry maintains that it is illegal for someone who has legally purchased a CD to transfer that music into his computer.

The industry’s lawyer in the case, Ira Schwartz, argues in a brief filed earlier this month that the MP3 files Howell made on his computer from legally bought CDs are “unauthorized copies” of copyrighted recordings.

And you thought you actually owned the digital bits on the CD you bought. No, silly. The recording industry owns them. Who knows if you even have the right to listen to the music when you have friends over. Maybe they all need to bring their own copies. Maybe you need to buy a copy for each room of your house, or one for listening in the morning and one for listening in the evening, or…

Un-frigging-believable.

The implication of course is that virtually every individual who owns both a CD and a computer — and thus has likely copied that CD to the computer — can be subject to a lawsuit by the recording industry. Imagine the revenue potential from suing hundreds of millions of people, i.e. suing every one of your customers.

Is it possible for an industry to develop a business model based entirely on litigation?

More likely is that both consumers and recording artists alike will continue to abandon major record labels at an accelerating rate, causing at least one major label to declare bankruptcy and shut down, perhaps even in the next 12-24 months.

There is a simple, if cliched lesson in the recording industry’s bizarre death spiral, which every media company needs to carefully note:

CHANGE OR DIE

“Change” means that you should assume, worst case, that everything you know is wrong, that nothing that has worked in the past will continue to work, that complacency and resistance to change = failure, and that anyone who doesn’t get with whatever the new program is needs to be show the door as quickly as possible.

Of course that’s stating it in the extreme, but never has the disruption of technology moved so rapidly and with such extreme impact as it has in the media industry.

Don’t become the buggy whip — or the music recording industry — of the digital age.

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]]> http://publishing2.com/2007/12/28/music-recording-industry-will-be-first-traditional-media-industry-to-be-utterly-destroyed-by-digital-technology/feed/ 14 The Web’s Link-Driven Attention Economy http://publishing2.com/2007/12/15/the-webs-link-driven-attention-economy/ http://publishing2.com/2007/12/15/the-webs-link-driven-attention-economy/#comments Sun, 16 Dec 2007 03:41:35 +0000 Scott Karp http://publishing2.com/2007/12/15/the-webs-link-driven-attention-economy/ Photographer Lane Hartwell, by making all of her Flickr photos private to prevent uncredited use, and by forcing the take down of a parody video containing one of her photos, has shined a spotlight on the question of content owner’s rights on the web.

Mathew Ingram and Mike Arrington argue that Lane is on the wrong side of copyright law with the video take down, which she may be, but the reality is that the web has developed a de facto law of it’s own when it comes to fair use.

In the post-YouTube, post-BitTorrent era on the web, there is no content that can’t be easily reproduced by anyone, anywhere, for free. But that doesn’t mean there isn’t a currency for content on the web, which most content producers accept in exchange for a fair-use excerpt or even reproduction of the entire work.

The link.

The entire content economy on the web is based on the link, because the one resource that remains scare amidst all the plenty of the web is attention, and the link is what drives attention. The link drives search, the most powerful attention engine on the web. The link drives Digg, which can crash servers with its avalanche of attention. And the link drives the humble exchange of attention from one blog to another — or the transfer of attention, via a photo credit link, from a photo reproduced on one site to the photographers’ page or site.

If Lane Hartwell had consistently received a link in exchange for use of her photos on Flickr, I’d bet her photo stream would still be public. On the web, it’s not just the name credit that matters — it’s the link that enables a photo editor to discover the rest of Lane’s work, find her contact information, and offer her an assignment. It’s the link enables more people to discover her work, which enhances her reputation. And it’s her reputation that is the monetizable asset.

Still, fair use linking for images on the web is not a simple issue. When a content excerpt is sufficiently limited, such as a line of text or a video thumbnail, the result can be a promotion for the full content where it lives on the publisher’s site, driving attention to that publisher to monetize by a variety of means.

But it’s hard to excerpt a photo. The only option is thumbnails, which is what Digg uses — in most cases, there is sufficient incentive for users to click through to the site where the image is published, to see the full-size image. But it’s a fine line.

digg-image.jpg

(Here’s the original photo on Flickr)

Of course, I’m sure Lane would prefer, beyond a link, to be paid whenever her photos are reproduced on the web. But the web is, for better or worse, an attention economy — content creators who demand payment for distribution face stiff competition from a much larger group willing to accept attention as payment, with or without the ability to effectively monetize that attention.

For content creators, making money from content on the web is not a simple, linear process as it was in analogue media. There are moments when they may have the leverage to charge for distribution of their content, and others when they may have to make a strategic decision to make it available for free in exchange for attention.

The New York Times decided that the content previously behind the TimesSelect pay wall was worth more monetized through attention, i.e. from search engines, than through subscriber fees.

The web is a dynamic, networked system that can be leveraged — even optimized — to deliver maximum business value to content creators, but unlike traditional content value chains, the economics of content on the web cannot be tightly controlled.

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]]> http://publishing2.com/2007/12/15/the-webs-link-driven-attention-economy/feed/ 14 Paid Content on the Web Is Not Impossible, But It’s Hard http://publishing2.com/2007/12/09/paid-content-on-the-web-is-not-impossible-but-its-hard/ http://publishing2.com/2007/12/09/paid-content-on-the-web-is-not-impossible-but-its-hard/#comments Sun, 09 Dec 2007 18:51:13 +0000 Scott Karp http://publishing2.com/2007/12/09/paid-content-on-the-web-is-not-impossible-but-its-hard/ The case for why publishers should be able to charge for content on the web always revolves around the exceptions that prove the rule, e.g. Consumer Report and WSJ — which, let’s be honest, are the same examples everyone was using back in 1998. The problem with paid content on the web isn’t that it’s not possible — it’s that it’s HARD to do, because it requires that the content not be a commodity — and content not being a commodity typically means it’s not available anywhere else for free. And the web has made free content ubiquitous.

Richard Perez-Penz at the New York Times does another round on Consumer Reports as the case for paid content:

It makes no sense for publications to charge readers on the Web — at least, that’s the conventional wisdom. But conventional wisdom does not carry much weight at Consumer Reports, that detailed guide to buying everything from prescription drugs to pickup trucks.

Consumer Reports is actually a great example, but not for why everyone should be able to charge for content on the web. Consumer Reports is a great example of just how hard it is to produce non-commodity content that people are willing to pay for — how many web publishers are going to run their own testing lab?

But it’s also an example of a content brand defending the fort against an onslaught of free content — how many other places are there to get product reviews on the web? Hundreds? Thousands? Do all of these sites rigorously test products in a lab? Of course not — but not all people who seek product reviews value that.

Consumer Reports has probably cornered the market on people who do value rigorous, academic-like testing — probably the same people who have been using Consumer Reports for decades (hint: they aren’t under 25, or even under 30).

Then there’s brand. And trust. It’s not that WSJ, or Consumer Reports, or O’Reilly produce the type of content that isn’t available anywhere else on the web for free. People pay for content from those brands because they trust them. And on the Wild Wild Web, trust is key — at least for the generation that didn’t grow up with the web, and who still doesn’t natively trust it as the digital generation does.

But Consumer Reports is in many ways a retroactive example — it’s not a forward looking example of how and why the digital generation will embrace paid content on the web.

And let’s not forget the role of search — many people who seek content on the web do so not by going to an established, trusted content brand like Consumer Reports. They find it through a different trusted brand — Google. People who find content through a search engine typically find free content (monetized with AdSense) that they perceive as “good enough.” So it’s not just about having content that people are willing to pay for — it’s making sure they can find it.

I think the first step to succeeding with paid content is to create a blockbuster online brand — one that is strong enough for people to prefer as a source of premium content, even if they have to pay for it. For example, Brian Clark wrote here about his success with charging for content — but he has built a blockbuster brand with Copyblogger, which gives him the leverage to charge for his content.

The rules of what enables a business to charge for a product haven’t changed. It’s just that for content companies on the web, the competition is fierce — more so than anyone could ever have imagined.

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]]> http://publishing2.com/2007/12/09/paid-content-on-the-web-is-not-impossible-but-its-hard/feed/ 7 Advertising Trend Ratio: A New Metric For Publishers http://publishing2.com/2007/05/29/advertising-trend-ratio-a-new-metric-for-publishers/ http://publishing2.com/2007/05/29/advertising-trend-ratio-a-new-metric-for-publishers/#comments Tue, 29 May 2007 14:39:11 +0000 Scott Karp http://publishing2.com/2007/05/29/advertising-trend-ratio-a-new-metric-for-publishers/ Publishers trying to manage rising online ad revenue against declining print ad revenue are looking at the wrong metrics. Instead of looking at the advertising trends in silos and comparing percentage increases and decreases, they should be looking at the relationship between absolute increases and decreases in ad revenue over time.

For this purpose I’ve created a metric called the Advertising Trend Ratio, which is the ratio of the absolute decline in ad revenue for all shrinking ad revenue sources (i.e. print) to the absolute increase in ad revenue for all growing ad revenue sources (i.e. online).

For example, the Newspaper Association of America just release newspaper advertising data for Q1 2007 (via MediaPost).

Year-over-year first-quarter ad spending on newspaper Web sites grew by 22.3% to $750 million, the Newspaper Association of America reports.

Still, total advertising expenditures at newspapers and their Web sites were down for the period, totaling $10.6 billion for the first quarter of 2007, a 4.8% decrease from the same period a year earlier. Spending for print ads in newspapers totaled $9.8 billion, down 6.4% from the year-ago period.

If you do the math, you’ll see that newspaper online advertising revenue increased in absolute dollar by $136,753,883. Newspaper print advertising revenue decreased in absolute dollars by $670,085,470. Therefore, the Advertising Trend Ratio, i.e. the ratio of print advertising decline to online advertising increase, is 0.204. When the ratio is less than 1, i.e. the absolute decline in print advertising revenue exceeds the absolute increase in online advertising revenue, then you’ve got a big problem.

The goal of all publishers should be to manage this ratio up until it exceeds 1 — when it’s below 1, the business is shrinking. Here’s the formula:

advertising-trend-ratio.jpg

Here’s how you can use the Advertising Trend Ratio to assess trends in advertising economics. Let’s take a look at the newspaper advertising data from Q4 2006:

Advertising expenditures for newspaper Web sites increased by 35 percent to $745.5 million in the fourth quarter versus the same period a year ago, according to preliminary estimates from the Newspaper Association of America.

and

Spending for print ads in newspapers totaled $13.2 billion, down 3.7 percent versus the same period a year earlier.

So the absolute decline in newspaper print advertising was $507,165,109, and the absolute increase in newspaper online advertising revenue was $193,277,777, resulting in an Adverting Trend Ratio of 0.381. The lower 0.204 ratio for Q1 2007 shows the actual decline in the newspaper advertising economics — a 46.4% decline in the Ad Trend Ratio.

This ratio can be applied beyond advertising to manage all declining revenue streams against all increasing revenue streams.

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]]> http://publishing2.com/2007/05/29/advertising-trend-ratio-a-new-metric-for-publishers/feed/ 10 Magazine Publishing Businesses Are Portable And Can Be Moved Into Digital http://publishing2.com/2007/05/22/magazine-publishing-businesses-are-portable-and-can-be-moved-into-digital/ http://publishing2.com/2007/05/22/magazine-publishing-businesses-are-portable-and-can-be-moved-into-digital/#comments Tue, 22 May 2007 17:13:02 +0000 Scott Karp http://publishing2.com/2007/05/22/magazine-publishing-businesses-are-portable-and-can-be-moved-into-digital/ I’ve been pondering this quote from Time Warner CEO Dick Parsons, dismissing rumors that Time Warner is considering selling off Time Inc.:

“I like our publishing business, I like the magazine business and I like the fact that it’s portable and can be moved into digital,” he said. “I am not an advocate of selling Time Inc.”

So what does this mean, exactly? Does it mean that a magazine’s entire business can be “ported” online, i.e. so that it stops publishing in print? Or does it just mean that the content assets can be moved online?

If the latter, yeah, well, duh. If the former, could it be that Time Warner is considering following IDG down the path of all digital publishing? I doubt it, but such cryptic statements can certainly make you wonder.

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]]> http://publishing2.com/2007/05/22/magazine-publishing-businesses-are-portable-and-can-be-moved-into-digital/feed/ 3 How To Make $10 Billion In Ad Revenue Without Measuring Unique Vistors Or Page Views http://publishing2.com/2007/05/13/how-to-make-10-billion-in-ad-revenue-without-measuring-unique-vistors-or-page-views/ http://publishing2.com/2007/05/13/how-to-make-10-billion-in-ad-revenue-without-measuring-unique-vistors-or-page-views/#comments Mon, 14 May 2007 03:20:12 +0000 Scott Karp http://publishing2.com/2007/05/13/how-to-make-10-billion-in-ad-revenue-without-measuring-unique-vistors-or-page-views/ Can you name an online media company that has billions in ad revenue but has never had to bother with measuring unique visitors or pages views — those antiquated measures that keep the dynamic web locked into antiquated ad sales processes and ruin the online advertising economics of most media companies?

Ok, so that was a loaded question. The answer, of course, is Google.

Scoble revisits the perennial hand-wringing by website owners over the inaccuracies of panel-based online traffic measurement and asks:

What stats do you think are the most important? What’s the most accurate way to measure your sites’ visitors? What will advertisers insist on seeing in the future?

The answer is right in front of everyone’s face. Google never had to worry about old fashioned audience metrics because Google figure out how to optimize the delivery of ads based on what people DO, and more importantly, based on what’s on their minds — their intentions they reveal every time they type words into a search box. Google also optimized ad delivery based on text-based context for any web page ( i.e. AdSense), which isn’t as efficient as search keywords, but its worked pretty darn well.

The secret is that advertisers don’t really need head counts — they need to get into people’s heads.

Dan Mitchell had a piece in the NYT about online ads vs. privacy, which looked at the privacy-related downside of get-inside-your-head advertising, but for Google, the upside of getting inside people’s heads is clear.

And it may turn out to be Google that rescues every other website from the tyranny of the headcount — beyond sharing in some pay-per-click AdSense revenue — if Google (with DoubleClick in tow) succeeds at creating the universal ad platform.

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]]> http://publishing2.com/2007/05/13/how-to-make-10-billion-in-ad-revenue-without-measuring-unique-vistors-or-page-views/feed/ 18 Watershed Moments In The Publishing Industry’s Radical Transformation http://publishing2.com/2007/04/12/watershed-moments-in-the-publishing-industrys-radical-transformation/ http://publishing2.com/2007/04/12/watershed-moments-in-the-publishing-industrys-radical-transformation/#comments Thu, 12 Apr 2007 12:32:27 +0000 Scott Karp http://publishing2.com/2007/04/12/watershed-moments-in-the-publishing-industrys-radical-transformation/ Here are some watershed moments that mark the radical transformation of the publishing industry to a non-print-centric business:

1. New York Times becomes an aggregator

The New York Times, paper of record and one of the last great bastions of the belief that one entity can create all the content that anyone needs, has finally capitulated to the realites of the networked, content-exploding media world of the web. The Times announced that its new auto section online will aggregate third-party content:

The new Automobiles site introduces aggregated feeds, a new listings section, and vertical navigation. The new features mirror recent moves made by sports site SI.com and Time.com, among others that aggregate content from other sources with the goal to create the best one-stop destination for visitors who are passionate about a subject.

One of the key enhancements of the redesign is that NYTimes.com’s own auto content is now buttressed by information on car makes and models from other sources such as New Car Test Drive, a popular source of auto information.

“We wanted to surround our own auto content with supporting information for any new make or model [data, pricing, rebates, photos], as well as third-party content,” said Ira Silberstein, vice president of product development, NYTimes.com. “We want to be a resource for consumers so that they can get a wealth of information…reviews from us, from other parties, ratings, pricing and specs all in one place.

“The biggest thing about the redesign is it’s more of a meta-search approach,” Silberstein said. “By aggregating content around each of our reviews, we think we can become the one source where consumers start their research process.”

The Times, like all other media brands, is fighting tooth and nail against disintermediation, principally by search, but also by other aggregators like TechMeme (where I find all NYT articles on media and technology) and Digg.

If you can’t beat ‘em, join ‘em.

2. Print ad revenue is no longer the majority of B2B publisher revenue

B2B publishers now get more revenue from events than print advertising, and custom publishing and digital media advertising are the fastest growing sources of revenue. Print ad pages declined 3% year-over-year in January 2007.

According to a compilation of 2006 revenue data released Monday by American Business Media, “face-to-face revenue” has surpassed print advertising sales for the first time in the history of the industry. By face-to-face revenues, the ABM means conferences, trade shows and events, which garnered $11.3 billion among ABM members participating in the association’s Business Information Network tracking reports. That brings events to a 36% share of B-to-B revenues, nudging out B-to-B print advertising’s 35% share for the first time ever.

It’s a trend that is not likely to reverse itself. The ABM estimates that events is the third fastest growing source of revenues for B-to-B publishers, surpassed only by the rapid rise of digital (online) advertising sale and custom publishing. Print advertising, by comparison, has been steadily declining.

3. Publishers Information Bureau no longer reporting monthly print ad pages

The magazine industry has stopped reporting monthly ad page totals, moving to quarterly reporting. Why deliver bad news more frequently when you can deliver it less frequently?

In the latest move in an ongoing trend reducing the flow of information about the advertising performance of major traditional media, the magazine industry Tuesday announced it would discontinue its monthly reports on advertising pages and revenues booked by major consumer magazine publishers. The reports, which have been distributed publicly to advertisers, agencies and the industry’s trade press by the Publishers Information Bureau for more than a quarter century, will now be released quarterly effective with the first-quarter 2007 report.

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]]> http://publishing2.com/2007/04/12/watershed-moments-in-the-publishing-industrys-radical-transformation/feed/ 9 Do MySpace Users Care That It’s Not Really THEIR Space? http://publishing2.com/2007/04/12/do-myspace-users-care-that-its-not-really-their-space/ http://publishing2.com/2007/04/12/do-myspace-users-care-that-its-not-really-their-space/#comments Thu, 12 Apr 2007 11:24:42 +0000 Scott Karp http://publishing2.com/2007/04/12/do-myspace-users-care-that-its-not-really-their-space/ Last spring I wrote a post “Has The MySpace Downturn Begun?” Dan Mitchell at NYT picked it up in a piece “MySpace No Longer Their Space?” My post was purely speculative and, not surprisingly, completely wrong. But the fact remains that MySpace belongs to News Corp, not MySpace users, which is why News Corp can set the rules for ItsSpace, such as blocking third-party widgets like Photobucket.

MySpace blocked Photobucket because it was serving ads on MySpace without paying MySpace — the reaction in the blogosphere has focused on the implications to Web 2.0 business models — see Om Malik’s 5 lessons and Nick Carr’s sharecropping analogy.

The more interesting question to me — and the one that will have the greatest business consequences — is how do MySpace users feel about this? Clearly, most of them don’t know nor could care less about the spat over who controls the ad revenue. All they know is that their Photobucket videos suddenly went kaput.

Last year, I might have argued that this was a bad omen for MySpace. Now, I’m not so sure. After all, video hosting is fast becoming a commodity — MySpace users can turn to dozens of different service providers to replace Photobucket.

I bet most MySpace users are savvy enough to know it’s not really THEIR space — and I bet most of them don’t care.

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]]> http://publishing2.com/2007/04/12/do-myspace-users-care-that-its-not-really-their-space/feed/ 6 Google’s Core Competency Does Not Translate To Offline Media — But That May Work To Google’s Advantage http://publishing2.com/2007/04/03/googles-core-competency-does-not-translate-to-offline-media-but-that-may-work-to-googles-advantage/ http://publishing2.com/2007/04/03/googles-core-competency-does-not-translate-to-offline-media-but-that-may-work-to-googles-advantage/#comments Tue, 03 Apr 2007 14:31:41 +0000 Scott Karp http://publishing2.com/2007/04/03/googles-core-competency-does-not-translate-to-offline-media-but-that-may-work-to-googles-advantage/ What is Google’s core competency? I would argue that it’s harvesting the value from massively scaled, complex human activity, i.e. millions of websites linking to each other and hundreds of thousands of advertisers bidding on key word and experimenting with ad creative, clickthrough rates, and conversion rates. The other critical element of this core competency is a natural feedback loop, e.g. the “relevancy” of a search results page or an online business’ cost of sales through paid search advertising.

The reason that Google has struggled to apply this core competency to offline media, i.e. magazines, newspapers, and now TV, is that these media lack both the scaled of activity and the natural feedback loop that enables Google to create efficiencies by harnessing these market dynamics.

If you read Google’s press release about its new TV ad system, it’s clear that they are aiming to pump as much feedback data and activity into the system as possible:

Advances in set-top-box technologies make it possible to report aggregate statistics on how many times an ad was viewed and whether it was watched through to the end. As part of this trial, we will be working with partners to use aggregate, anonymized set-top-box metrics to deliver timely and accurate viewing reports. Advertisers can use this data to understand the effectiveness of their TV ad campaigns and use this information to provide more relevant ads to viewers.

The problem is that the “sensitivity” and “specificity” of the data and the scale of activity (i.e. number of advertisers using the system and the number of bids per advertiser) don’t even begin to compare to what exists in search. First, the number of advertisers who will be able to create video ads is likely to be dwarfed for some time to come by the number of advertisers who have created text ads. Second, the ability to track, at the individual user level, the performance of each text ad for each keyword AND, critically, the ability to track that individual user’s behavior on a site AFTER they click doesn’t even begin to compare to “aggregate statistics on how many times an ad was viewed and whether it was watched through to the end.”

The irony here is that Google is running in the completely opposite direction with its cost-per-action advertising program, which provides the ultimate feedback loop.

Back in the days of mass marketing of mass products, i.e. when everyone was a potential customer, TV was an immensely efficient medium because reaching everybody was the objective. As consumer audiences and product target markets fragmented, TV became more and more inefficient, to the point where the entire system is now propped up by the inertia of deeply entrenched economic interests. While Google will no doubt introduce greater efficiency into the TV ad sales system, it will have the net effect of driving money out of the system.

Of course, if that money is driven into the more efficient online marketing space, Google will ultimately be the beneficiary — perhaps the whole foray into offline media is all a strategy to crush the competition from other media by completely disrupting each medium’s core advertising market, and thereby freeing up those dollars to flow into Google’s online coffers.

Rather than create new money-making machines, wouldn’t it be far more efficient for Google to find new ways to feed the one it already has?

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]]> http://publishing2.com/2007/04/03/googles-core-competency-does-not-translate-to-offline-media-but-that-may-work-to-googles-advantage/feed/ 8 Reinventing The News Business Requires A Little Imagination http://publishing2.com/2007/03/24/reinventing-the-news-business-requires-a-little-imagination/ http://publishing2.com/2007/03/24/reinventing-the-news-business-requires-a-little-imagination/#comments Sun, 25 Mar 2007 04:00:47 +0000 Scott Karp http://publishing2.com/2007/03/24/reinventing-the-news-business-requires-a-little-imagination/ There seem to be two principal reactions to the collapse of the print classified business that is destroying the print newspaper business. The first reaction is to insist, as San Francisco columnist David Lazarus does, that people should pay for the news. The second reaction is evident in the report from Tim O’Reilly about trouble at the San Francisco Chronicle:

Apparently, Phil Bronstein, the editor-in-chief, told staff in a recent “emergency meeting” that the news business “is broken, and no one knows how to fix it.” (“And if any other paper says they do, they’re lying.”)

The reality is that they are both half right.

It is true that the newsPAPER business is broken. But let’s be clear about what is actually broken. Newspapers were once the most efficient means for connecting private buyers and sellers (merchandise, jobs, real estate, etc.) in a defined geographic region — for decades, local newspapers’ monopoly control of this channel paid for local journalism. Then came the Internet and Craigslist, which were much more efficient for this purpose. You know this story well enough by now.

It is also true that if the the professional practice of local journalism is to survive — and by this I mean people who do original reporting on a regular basis and whose work is trustworthy because it adheres to a known standard (i.e. NOT a free-for-all of citizen journalists, most of whom will never put on their shoes and socks to go out and actually REPORT, i.e. fact gathering) — then citizens of a locality are going to have to proactively value this service.

BUT…it is not correct that we can expect people to pay for the news directly online. There is just too much free information, even if most of it is no substitute for the full-time work of journalists doing original fact gathering. I’m NOT saying ALL of it, because there are many bloggers who do original reporting, but the reality is that most do not, AND the standards for accuracy and fairness, while evolving, are far from clear. And let’s face it — there are limits to what the most dedicated citizen journalist can and will do without compensation in their free time without formal support.

It is also incorrect that “no one knows how to fix” the news business. What the news business and the entire media business are suffering from most right now is a failure of imagination. Nobody imagined that somebody would be so recklessly uncapitalistic as to create a website where people could post classified ads for free. Nobody imagined that an online software company specializing in information retrieval, but which produced no information of its own, could create the largest market for small business advertising that the world has ever seen.

So how can the news business be reinvented? Dave Winer has some fantastic ideas. So does Doc Searls. I found the seed of an idea in this clip from Tim O’Reilly:

We talk about creative destruction, and celebrate the rise of blogging as citizen journalism and Craigslist as self-service advertising, but there are times when something that seemed great in theory arrives in reality, and you understand the downsides. I have faith both in the future and in free markets as a way to get there, but sometimes the road is hard. If your local newspaper were to go out of business, would you miss it? What kinds of jobs that current newspapers do would go undone?

ewspapers are mourning the loss of life-giving classified revenue to Craigslist. And citizens like Tim O’Reilly are mourning the anticipated loss of local newspaper journalism. And we don’t think anyone is going to pay for the news. But — what if people are still willing to pay for classified advertising? Stay with me here.

If you login to the San Francisco Chronicle’s website to place a classified ad, here are your options:

sf-chronicle-classifieds.jpg

We all know the problem with these options. Even notwithstanding the availability of a free online-only text ad, the inevitable conclusion is that you’re better off using Craigslist. It’s free. You can post over and over again to keep your listing current. And everyday there are more people checking Craigslist and fewer people checking the Chronicle’s classifieds.

BUT…what if we introduce another factor into this equation. I’ve argued that journalism should become nonprofit, like NPR, because the reality is that the journalism we all value as citizens — the kind that brings down administrations (not that it’s done much for us lately, but that’s another story) — has never been a for-profit endeavor. It just rode along with the for-profit business. But let’s put aside the issue of profitability for a moment. The critical element in the NPR model is that it’s driven to a large degree by DONATIONS from people who value the civic service it provides.

So here’s the idea (finally) — instead of asking people to donate cash or pay for news to help keep journalism alive, neither of which will fly, why not ask people to donate classified advertising.

Ok, Karp’s totally lost it, you’re probably thinking. But hang in there with me.

Last year I bought a Toyota Prius knowing full well that the savings on gas would take many, MANY years to pay off given the premium I paid for the Prius over a comparably equipped car. If you run the numbers based on the amount of car I got for the money, it was a completely irrational purchase. But that’s until you introduce an entirely new factor: near zero emissions. Now, I am not generally, or at least I haven’t been for most of my life, a green freak. I’m as wasteful as the next guy. But when it came time to buy a new car, I found myself starting with the previously irrational premise that I was going to pay thousands of dollars for a benefit that would not immediately accrue to me in any tangible way, like power steering.

And it seems I’m not alone in this “irrational” behavior:

hybrid-sales.jpg

It’s important to note that I did not donate thousands of dollars to an environmental charity. I needed a car, so I bought a car. But the extra money I spent was effectively a donation to the environment (or at least that’s how I perceived it, and perceptions are all that matter for this idea).

Here’s another example. Once upon a time, millions of people downloaded music for free — and illegally — from Napster and other file sharing services. Then iTunes came along and those same millions of people started paying $0.99 to get the songs legally when they could easily still get them free with no real risk of getting caught breaking the law. How completely irrational. I’ve actually gone and purchased most of the songs I downloaded from Napster back in the day. Craziness.

SO, sure I can post a classified for free on Craigslist. And most people happily do so, completely oblivious to that fact that their actions are putting their local papers out of business. Most newspaper executives probably assume that people will continue to choose free Craigslist over paid listings in their paper or on their website because that is the “rational” thing for those people to do.

But I wonder what would happen if newspapers introduced a new factor into the equation: the civic benefit of supporting local journalism.

Imagine that you decided to post your classified listing with your local newspaper rather than with Craigslist because you knew it would support the work of local journalists who help make your locality a better place. AND, imagine, you also chose the local newspaper listing because you knew knew that your listing would be more likely to reach civic-minded people like yourself. Imagine how much more (smugly) satisfying would be to conduct your personal commerce in such a community — WAIT, there’s that word “community.” Isn’t the media revolution supposed to be all about community? Now, imagine we discover this thing called the web that has proven such a powerful platform for bringing communities together and scaling them up through the miracle of the network effect.

Of course, this assumes that people can understand and appreciate the civic benefit of supporting local journalism. But the convenient truth in this case is that the civic affairs of this country — like the environment — are a sufficient mess to motivate enough people to want to do something.

You never know what might happen when you just ask people to care. (Ask Gore.) The failure of newspapers to do so is not from a fear of failure, because failure seems to be the only option right now, but rather a failure of imagination.

So instead of bemoaning the loss of journalism amongst themselves, newspapers should try TALKING TO THEIR READERS about it. And see what they say. It’s a “conversation,” remember?

Of course, this leaves aside the issue of whether the PRINT newspaper should be allowed to survive in an age of hyper-efficient, networked online media. If you look at the Chronicle’s classified price list above, you can see the stark difference between the print and online pricing, which is evidence of the enormous pricing power the offline newspaper monopoly once enjoyed. Oh well. You can’t have everything.

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]]> http://publishing2.com/2007/03/24/reinventing-the-news-business-requires-a-little-imagination/feed/ 58 Why Have No Major Media Companies Invested Heavily In Original Content For The Web? http://publishing2.com/2007/03/23/why-have-no-major-media-companies-invested-heavily-in-original-content-for-the-web/ http://publishing2.com/2007/03/23/why-have-no-major-media-companies-invested-heavily-in-original-content-for-the-web/#comments Fri, 23 Mar 2007 20:16:48 +0000 Scott Karp http://publishing2.com/2007/03/23/why-have-no-major-media-companies-invested-heavily-in-original-content-for-the-web/ Or maybe you know of one that has. If you do, let’s discuss.

I’m just curious.

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]]> http://publishing2.com/2007/03/23/why-have-no-major-media-companies-invested-heavily-in-original-content-for-the-web/feed/ 8 NBC Universal/News Corp Online Video Deal Demonstrates That The Content Creation Business Is Dying http://publishing2.com/2007/03/22/nbc-universalnews-corp-online-video-deal-demonstrates-that-the-content-creation-business-is-dying/ http://publishing2.com/2007/03/22/nbc-universalnews-corp-online-video-deal-demonstrates-that-the-content-creation-business-is-dying/#comments Fri, 23 Mar 2007 01:33:16 +0000 Scott Karp http://publishing2.com/2007/03/22/nbc-universalnews-corp-online-video-deal-demonstrates-that-the-content-creation-business-is-dying/ Did NBC Universal and News Corp cut a deal to create content for the web? New production capabilities? New armies of web-only content creators? No. This is about creating a platform for aggregating and distributing existing content, which they already have too much of.

You’re looking at the new media business. It’s not longer about creating content — we’re drowning in content. No, it’s about creating platforms for content on the network, then letting the network do its thing.

Everyone is of course focusing on whether NBC and News Corp are going to allow “user-generated content” or just “premium content” — but the reality is, IT DOESN’T MATTER. It’s just one big mass of content along a spectrum from great to crappy. And there’s more of it than anyone knows what to do with.

No, the business here is about platforms and distribution.

From the conference call:

Extending offer to other distribution partners, wants to work with everyone.

we want ubiquitous distribution

this is a web distribution venture

When there’s an overabundance of content and not enough consumer attention to go around, the value creation opportunity is in connecting consumers with content — it’s in aggregation, distribution, and filtering. Google gets it. The big media companies get it.

So when I say the content business is dying, I don’t mean you can’t make money off of content creation anymore. I just mean you can’t make a lot of money.

Want to see the future of media? Follow the money.

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]]> http://publishing2.com/2007/03/22/nbc-universalnews-corp-online-video-deal-demonstrates-that-the-content-creation-business-is-dying/feed/ 21 Is Content Still A Business? http://publishing2.com/2007/03/21/is-content-still-a-business/ http://publishing2.com/2007/03/21/is-content-still-a-business/#comments Thu, 22 Mar 2007 03:11:17 +0000 Scott Karp http://publishing2.com/2007/03/21/is-content-still-a-business/ Is it possible that the future of the content business is worse than being less profitable and worse even than not scaling anymore — is it possible that content creation will cease to be a business?

I was struck by this quote from a music business manager in the WSJ article about the complete collapse of CD sales:

Jeff Rabhan, who manages artists and music producers including Jermaine Dupri, Kelis and Elliott Yamin, says CDs have become little more than advertisements for more-lucrative goods like concert tickets and T-shirts. “Sales are so down and so off that, as a manager, I look at a CD as part of the marketing of an artist, more than as an income stream,” says Mr. Rabhan. “It’s the vehicle that drives the tour, the merchandise, building the brand, and that’s it. There’s no money.”

No money. The content that used to be at the center of the music industry has been reduced to a loss-leading marketing platform for the real business, which is live entertainment and related merchandise sales. Apple’s iTunes is not really a platform for selling music but rather for selling hardware.

It seems in recent years that as the music industry goes, so goes the rest of the media industry. Is there reason to believe that other forms of content will suffer the same fate as music? There’s one critical commonality to what the Internet and digitization has done to all content that would support this theory: disaggregation

All the focus on the digitization and online distribution of music — and now video — has been on piracy. But what if that’s just a red herring?

You could argue that the most striking consequence of digitizing media and distributing it online is that all content is now available in a discrete, granual form. Music file. Article page. Video clip. Podcast. Photo. There are very few places on the web that require you to buy a whole package in order to get one item.

This is a radical transformation of the content business. Think about it.

How many CDs have you bought for just one song? How many magazines have you bought just to read one article? How many cable channels do you subscribe to in order to watch just one channel? How many radio stations have you kept on in the car because you heard one song that you liked? How many newspapers have you bought just to read one section?

The media business has always been about selling you content that you don’t really want by stapling it (literally or figuratively) to the content that you do want. The digitization of media on the network has obliterated this model. What if music is just the canary in the coal mine?

There’s already one high-profile instance of this trend in the video content business. TV clips on YouTube. I’ve heard a thousand times the argument that media companies should embrace YouTube as a “free promotional channel.” Let users upload clips of your shows — don’t sue YouTube– it’s free promotion.

This argument has bothered me every time I’ve hear it, and now I know why — because it’s following the pattern of music sales in the quote I cited above. Can’t make money off the content in one channel? Use it to promote your other channel. BUT, that assumes that the other channel is not, in fact, being eaten alive by the channel you’ve written off as free promotion.

Henry Blodget posted a dialectic about whether Google is the “King of Media,” which was based on this assumption:

For the purposes of this debate, I’m going to assume that to be “King of All Media” one can’t just be a distributor.

I would assume just the opposite — that content distribution businesses, or more accurately in digital network terms, content platform and content aggregation businesses (think Google, YouTube, MySpace, Facebook, Digg) are the only real media businesses left.

Oh well. If Google has its way, maybe the content business can transform itself into a direct marketing business.

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]]> http://publishing2.com/2007/03/21/is-content-still-a-business/feed/ 57 Why Online Advertising Economics Are So Messed Up http://publishing2.com/2007/03/17/why-online-advertising-economics-are-so-messed-up/ http://publishing2.com/2007/03/17/why-online-advertising-economics-are-so-messed-up/#comments Sat, 17 Mar 2007 16:27:03 +0000 Scott Karp http://publishing2.com/2007/03/17/why-online-advertising-economics-are-so-messed-up/ We’ve all heard that page views are dying. Jeremy Liew of Lightspeed pointed out a few weeks ago the problem with scaling an online advertising business based on revenue per thousand page views, an analysis which has now been picked up by the Dan Mitchell at the NYT. Jeremy’s analysis is correct, on one level, but it also exposes a deep flaw in the way online media is currently valued and sold to advertisers.

According to Jeremy, untargeted, run-of-site page views are worth about $1 per thousand. It’s RPM because it’s taking into account ALL forms of advertising on the page, including display ads sold on a cost per thousand impressions basis, pay-per-click ads, and pay-per-action ads. $1 per thousand sounds about right, but it’s also deeply disturbing.

Part of the problem is that there’s a disconnect between page views and human beings. On a site with very low page views per user, a thousand page views could be generated by a thousand people. Or, across a month, it could represent the activity of a single highly active user. So imagine a page with three display ads sold on a cost per thousand basis. An advertiser could, in theory, be paying $1 OR LESS to reach a thousand people with all three display ads.

In what other medium can you pay $1 to reach a thousand people with three ads each???

At that rate, you could reach 1 million people for $1,000. Now, granted most thousand page views are generated by less than a thousand people (in many cases far less). And granted we’re talking about untarget advertising. A highly targeted site can earn a revenue per thousand pages of, say, $20. But still, $20 is a pretty good deal to reach as many as a thousand people with your advertising. And if you assume that $20 is from multiple ad sources on each page, then each source is paying less than $20 to reach a highly targeted audience of up to a thousand people.

Compared to other media, online publishers are pretty much giving it away. Because the reality is that EVERY page view is in viewed by someone who has some value to some advertiser. The problem is when you DON’T KNOW who your users are.

This is the problem with all the focus (particularly in Web 2.0 circles) on total traffic numbers — 10 million uniques is great, but not so much if you don’t know who these people are.

Of course, you know why so many sites are valuing their traffic in bulk — Google AdSense, which doesn’t care who your users are, as long as they click on ads. Pay-per-click advertising is, on one level, all about targeting, but on another level it’s a volume game.

Is it possible that Google, the great driver of efficiency in online advertising — and the great democratizer of online ad revenue — has in fact dragged down the average value of ALL page views?

So what is online media to do? It already commands a third of total media attention, rivaling television, the ultimate monopoly medium. So why can’t websites charge monopoly prices? Well, the handful of big online media brands, like Yahoo, AOL, MySpace (homepage), MSNBC, CNN, etc. DO charge premium prices for their premium inventory. The top online destinations can and do price like high-priced offline media.

But for as the long tail — it just doesn’t scale.

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]]> http://publishing2.com/2007/03/17/why-online-advertising-economics-are-so-messed-up/feed/ 53 Media Meditation: What Is The Value Of YouTube In 2007? http://publishing2.com/2007/03/05/media-meditation-what-is-the-value-of-youtube-in-2007/ http://publishing2.com/2007/03/05/media-meditation-what-is-the-value-of-youtube-in-2007/#comments Mon, 05 Mar 2007 17:05:48 +0000 Scott Karp http://publishing2.com/2007/03/05/media-meditation-what-is-the-value-of-youtube-in-2007/ Here’s a koan for everyone in media: YouTube had revenue of $15 million is 2006; what is the value of YouTube in 2007?

If you’re not familiar with koans, this is from Wikipedia:

A kō·an is a story, dialogue, question, or statement in the history and lore of Chan (Zen) Buddhism, generally containing aspects that are inaccessible to rational understanding, yet that may be accessible to intuition. A famous koan is, “Two hands clap and there is a sound; what is the sound of one hand?”

As with tradional koans, I do not believev the answer to the one I posed can presently be arrived at through rational analysis. But I do think it’s worthy of mediation — in doing so, you may achieve media business model enlightenment.

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]]> http://publishing2.com/2007/03/05/media-meditation-what-is-the-value-of-youtube-in-2007/feed/ 4 The Great Media Industry Schism http://publishing2.com/2007/02/25/the-great-media-industry-schism/ http://publishing2.com/2007/02/25/the-great-media-industry-schism/#comments Sun, 25 Feb 2007 18:52:03 +0000 Scott Karp http://publishing2.com/2007/02/25/the-great-media-industry-schism/ The once monolithic media industry is undergoing a radical schism, dividing itself into content creation, on the one hand, and content aggregation and distribution on the other.

The nature of this transformation suddenly crystallized for me when I read Tom Foremski’s piece on the new West Coast/East Coast media industry divide. Tom seems to be focused more on media as defined by publishing, since New York has traditionally been the center of the publishing world, while Hollywood has been the center of the video-based media industry. Regardless, I think Tom gets it half right, because the schism in media has nothing to do with geography.

The real divide now emerging is between companies that create original content and companies that create platforms for aggregating and distributing that content. Newspapers embody the old media world where content creation, aggregation, and distribution were inextricably linked. But the digital media revolution has made it possible to separate these functions.

For traditional media companies, original content creation still straddles both coasts, but geography is quickly becoming irrelevant as an army of newly empowered individual and small enterprise content creators are storming the web from every corner of the globe.

The radical shift in the newly disaggregated business of original content creation is that, with so much competition (one might even call it a content creation bubble) and no control over distribution, content creation is no longer an easily scalable business — in fact, many players in the new content creation game are not in it to build scale business, or even to make money at all.

Individuals can now make a good living as content creators, without ever creating or becoming part of a scale content business. What’s more disruptive, however, is that in the market for original content, the attention economy is draining dollars out of the cash economy. There remains a zero sum game for consumer attention, so for every minute a consumer spends with content created by an entity whose compensation is in form of attention, there’s a minute not being spend on content created by a for-profit entity.

In contrast, the content aggregation and distribution side of the divided media industry has all the advantages of scale, with the technology-enabled platform (e.g. MySpace, Facebook, YouTube, search) serving as the organizing principle for the new scalable media businesses. Content creation is asymptotically approaching commodity status, while platforms that can effectively aggregate content and allocate scarce consumer attention can unlock immense value in the new media marketplace.

YouTube is now ground zero for the battle over the new scalable half of the divided media industry. Content companies like Viacom who have lost all of their distribution leverage are fighting YouTube to control the new platform-based media economy. The future of media will be determined by how well legacy media companies survive the unbundling of their business models, how much better legacy companies like News Corp who have acquired a platform (MySpace) can restructure their business, and the degree to which the new native platform media companies like Google can position themselves to dominate the new media landscape.

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]]> http://publishing2.com/2007/02/25/the-great-media-industry-schism/feed/ 42 The Real Problem For YouTube http://publishing2.com/2007/02/10/the-real-problem-for-youtube/ http://publishing2.com/2007/02/10/the-real-problem-for-youtube/#comments Sun, 11 Feb 2007 03:25:13 +0000 Scott Karp http://publishing2.com/2007/02/10/the-real-problem-for-youtube/ Everyone assumed that when Viacom demanded that YouTube take down 100,000 clips of Viacom content, it was just a hardball negotiating tactic…but maybe it wasn’t. What if Viacom suddenly realized that they don’t need YouTube.

I went to ComedyCentral.com, and thanks to a recently introduced embedding feature, here I am with a Comedy Central clip on my blog. Isn’t that a huge part of YouTube’s appeal?

So maybe I don’t have full access to all Comedy Central shows, and I can’t edit the clips, but give Viacom some time. They’re just getting started.

If I were YouTube, I’d think long and hard about a business model based on cats flushing toilets and flatulence flambe. Anyone with any kind of professional interest in their video content will soon realize that YouTube’s platform is increasingly a comodity, and that if your content is 1) really good, and 2) embedable, you’re pretty much good to go, regardless of which platform you use.

If YouTube hopes to keep any of these professional video creators (broadly defined) on their platform, they better get moving with that revenue sharing, and it better be a NICE share.

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]]> http://publishing2.com/2007/02/10/the-real-problem-for-youtube/feed/ 16 The Rapid Transformation Of Publishing Economics http://publishing2.com/2007/02/10/the-rapid-transformation-of-publishing-economics/ http://publishing2.com/2007/02/10/the-rapid-transformation-of-publishing-economics/#comments Sun, 11 Feb 2007 02:26:48 +0000 Scott Karp http://publishing2.com/2007/02/10/the-rapid-transformation-of-publishing-economics/ The death of print publishing is coming, it’s just a matter of whether it happens in 5 years, 10 years, or 15 years. I’m betting it happens sooner than anyone expects. Colin Crawford, the SVP of online for IDG, posted some stunning figures:

Today the absolute dollar growth of our online revenues now exceeds the decline in our print revenues. This occurred in the US in 2006 and in Europe during the last quarter.

With this change in the revenue mix and the higher margins from our online businesses – the company is more profitably today than it has been previously.

and

In the US, our online revenue now accounts for over 35% of our total US publishing revenues. Next year, for many brands online revenues will be greater than print revenues, if fact they already are at some of our key brands and by 2009 – approximately 50% of IDG’s US revenues will come from online.

When you think about how fast the fundamental business model of publishing is changing, it’s truly mind boggling. These numbers are already moving faster than anyone expected last year — the rate of acceleration will continue to exceed expectations. Colin goes on to say:

The brutal reality that we’re facing today is the costly process of dismantling and replacing legacy operations and cultures and business models with ones with new and yet to be fully proven business models. However, we face greater risks if we don’t transform our organization and take some chances.

Print publishing is kept alive today only by inertia, because dismantling the business is a huge cost to bear, not because the business itself has any sustainable rationale. The efficiencies of digital distribution of information will soon reduce print publishing to an art form. There will be plenty of artistic reasons to publish in print, but for news and business information, it will become an utterly irrational undertaking.

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]]> http://publishing2.com/2007/02/10/the-rapid-transformation-of-publishing-economics/feed/ 26 Silicon Valley vs. Madison Avenue http://publishing2.com/2006/12/21/silicon-valley-vs-madison-avenue/ http://publishing2.com/2006/12/21/silicon-valley-vs-madison-avenue/#comments Thu, 21 Dec 2006 16:36:54 +0000 Scott Karp http://publishing2.com/2006/12/21/silicon-valley-vs-madison-avenue/ If you spend too much time in Silicon Valley you’d think that the technology industry — with Google leading the charge — already owns the future of advertising. But don’t count out Madison Avenue just yet — they may be responsible for perpetuating the imbalance between media time spent online and ad dollars spent online (double digits vs. single digits), but all that may be about to change. Take the announcement today of Publicis’ acquisition of Digitas (via MediaPost):

THE MERGER OF DIGITAS WITH Publicis’ interactive media assets creates a new digital media powerhouse, the likes of which has not been seen on Madison Avenue before. The resulting organization will have the global resources of Publicis’ multinational marketing services network, as well as the media-buying scale to compete in a sector where the power has been steadily shifting to the major portals and search players.

“This allows us to work with Yahoo, Google and Microsoft in a different way, because we are clearly the biggest player in digital media now,” boasts David Kenny, chairman-CEO of Digitas, who emerges from the deal with responsibility for leading Publicis’ overall digital media strategy.

“We can really scale up with the portals in a way that has not been done yet. Nobody has the media scale and the global reach we have now. Those are the two main structural things we gain from this.”

Kenny says Digitas had already been developing the means of leveraging its estimated $1 billion in annual digital media billings on its own–but coupled with the digital media-buying clout of Publicis’ shops, will triple or quadruple its market presence virtually overnight.

Everybody is betting on online video advertising and the prospect of taking a big bite out of the $67 billion TV ad market. The key ingredient here is the creative. Anyone can pick up a video camera, but creating compelling video ad content is not as easy as creating compelling text ad content. And Madison Avenue is starting to wake up to the fact that they can’t just bring TV ads online.

Here’s an excerpt from an interview with Jamie Tedford of Arnold Worldwide, whose clients include brands like Volkswagen, Fidelity Investments, Timberland, and RadioShack:

Advertisers think, `We’ll just put our existing TV spot up, and it’ll become viral.’ A lot of marketers are learning quickly that the rules for what makes something viral are a totally different set of rules.

Video also gets passed on because it’s surprising, funny, new, comical, sexy, or provocative. People want the currency of having found something first.

Many clients have a more traditional view: `Here’s the product message I want to come through, and if you can get some entertainment in there, great.’ Now, you’re asking someone to discover this on their own, and figuring out what would make a consumer forward it to a friend.

The whole notion of viral video “advertising” is disruptive even to the disruptors like Google — Google ads still need to ride along with content, which is why they bought YouTube. But when ads become fully fledged entertainment, they don’t need to ride along with content. They don’t need to be in Google’s ad system — you can just post the ad content on YouTube for free:

If YouTube is overtaken by Google’s monetization, Madison Avenue will find other platforms for distribution — video distribution platforms will become (and to an extent already are) a commodity. (The idea that you can “own” the “community” will also be disproven, I predict, but that’s a topic for another post.)

The big structural issue to be resolved is the separation of “creative” from “media buying” that has taken place on Madison Avenue over the past decade or so. With online media completely changing the game, some ad agencies are recombining these functions, even as Google and others in Silicon Valley position themselves to disintermediate the agencies. It may be that media buying agencies are more vulnerable than the creative agencies, because Google has sent the ball rolling downhill towards the commoditization of media buying, with national advertisers developing their own platform with eBay. If that happens, the power may resides in the hands of the “creatives” — somebody is going to have to create all of these online video ads.

The credit rating service Fitch issued a fascinating report this week on the evolution of Madison Avenue in a digital media world — MediaPost has a great summary. Here are some excerpts:

Madison Avenues’ biggest players face some considerable challenges – the erosion of the traditional TV advertising marketplace, the continuing fragmentation of media and a corresponding consolidation of media services, a shift from traditional advertising to “below-the-line” marketing services, the reintegration of creative and media services, and the threat of “disintermediation” from advertisers dealing directly with online services – but are generally better positioned than the rest of the media industry to weather some big changes in the years ahead. “The rapid evolution of the media landscape has required that ad agencies adapt their offerings in favor of the new media alternatives that are gaining acceptance with clients.

One of the biggest organizational developments, Fitch says, is the reintegration of media and creative services. Citing Interpublic’s recent realignment of media shops (Initiative and Universal McCann) with brand agency networks (Draft FCB and McCann WorldGroup, respectively), and Publicis’ integration of Arc Worldwide with Leo Burnett, the credit agency said it believes that agency holding companies, “that fail to develop tighter coordination are at risk of client defections to other [holding companies] or upstart agencies that can deliver integrated solutions to clients.”

“So far, major advertisers typically buy their Internet advertising with one of the [holding companies'] buying operations acting as intermediary. There is the potential for the Internet companies to try to move up the value chain to deal directly with advertisers,” warns Fitch. “These developments, and others described previously, continue expose agencies to potential to the risk that certain functions may get commoditized or that agencies themselves could be disintermediated in this broad media transition toward more consumer and advertiser control.”

Here’s a prediction for 2007 — the convergence of media and technology will manifest in an increasingly overt battle between Madison Avenue and Silicon Valley for control of the $300 billion advertising market.

UPDATE

Matt Terenzio thinks my prediction is wimpy, and he’s right, so here are some bolder predictions (which are of course likely to have a lower hit rate):

- Google buys or forms its own creative agency to produce video ads for video advertisers, and starts producing ads for TV in addition to ads for online video
- Google launches a platform to compete with eBay for auctioning TV ad space
- Google becomes the agency of record for a major national advertiser
- At the behest of a group of national advertisers, eBay adapts its ad buying platform for online video, and the advertisers pressure Google into making YouTube compatible with the system

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]]> http://publishing2.com/2006/12/21/silicon-valley-vs-madison-avenue/feed/ 12 The Page View Can Only Be Dethroned By Innovations in Online Advertising Value http://publishing2.com/2006/12/19/the-page-view-can-only-be-dethroned-by-innovations-in-online-advertising-value/ http://publishing2.com/2006/12/19/the-page-view-can-only-be-dethroned-by-innovations-in-online-advertising-value/#comments Tue, 19 Dec 2006 23:08:34 +0000 Scott Karp http://publishing2.com/2006/12/19/the-page-view-can-only-be-dethroned-by-innovations-in-online-advertising-value/ There’s more talk about the death of page views, this time from the Chief of Insights at Yahoo, the recently dethroned page view king.

The reason page views persist is that they are a key variable in the still dominant currency of online advertising — impressions, and its derivative CPM. Impressions themselves are merely the clunky online analogue to TV ad “exposure” — the currency in big money advertising has long been whether the ad was seen.

The reason Google has been so disruptive is that they abandoned not only page views and impressions but also all audience demographics, and they replaced them with the elegant keyword and click. Clicks have their problems, of course — they can be gamed and they are only a way-point on the way to a destination. But they sure beat the hell out of impressions as a clear measure of advertising value. CPA, or cost per action, has long been positioned as the next evolution, because advertisers only pay for the end result — the problem is that in many instances it’s difficult to attribute an end result, particularly long sales cycle purchases, to one specific ad.

I’ve written before that the future of online advertising lies in the fuzzy middle between direct response and branding — at the end of the day, the challenge is finding currencies for advertising that map to advertiser objectives.

It’s no coincidence that Jason Calacanis is studying multivariate analyses of advertising effectiveness — the “traffic game” remains a clash of titans (as Richard MacManus demonstrated), but all the action going forward will be the quest for Google-like innovations in advertising value.

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]]> http://publishing2.com/2006/12/19/the-page-view-can-only-be-dethroned-by-innovations-in-online-advertising-value/feed/ 15 Content Businesses Don’t Scale Anymore http://publishing2.com/2006/12/03/content-businesses-dont-scale-anymore/ http://publishing2.com/2006/12/03/content-businesses-dont-scale-anymore/#comments Sun, 03 Dec 2006 14:16:31 +0000 Scott Karp http://publishing2.com/2006/12/03/content-businesses-dont-scale-anymore/ Can anyone think of a content business — meaning a company that produces original content — that has scaled dramatically in recent years? I can’t. Look at the businesses that have scaled — Google, MySpace, YouTube — all platforms for content, but not producers of content. Compare those to original content businesses like Weblogs, Inc., Gawker, TechCrunch, Paid Content — they are successful at their scale, but that scale is still tiny compared to the scale of the aggregation businesses. Even portals like AOL and Yahoo are much more aggregators of content than original producers of content.

Last spring I wrote about the Long Tail of Revenue 2.0, observing that the most of the revenue goes to aggregators in the head, and the rest is spread very thinly across an ever growing and ever thinning tail of content creators. Tim O’Reilly has posted a version of this obeservation in The Economics of Disaggregation:

…long tail businesses disproportionately benefit the aggregator. While they create new opportunities for content providers “down the tail” who might not otherwise have been noticed, they create even greater collective benefits for the Amazon, the Google, the Netflix, who hosts the entire collection, the dog who wags the tail.

William Bulkeley put this phenomenon in a larger context in a WSJ article title, “The Internet Allows Consumers to Trim Wasteful Purchases“:

Marketing 101 says success comes from selling things people want. But advanced marketing calls for companies to leverage the relationship to get the buyer to pony up for other products — or at least for extra product. When customers find a way to avoid buying the excess baggage, they change quickly.

Take the film business. Eastman Kodak and Fuji Photo Film had a highly profitable duopoly for 20 years before digital cameras came along. They never dreamed customers would quickly abandon film and prints. But customers are happy to pay for new digital cameras because the cameras let them pick the good pictures without having to pay to print out a roll of mostly mediocre shots. Now film sales are dropping 20% or more a year and Kodak has reported losses for eight consecutive quarters while closing plants around the world and laying off thousands of people.

Jack Shafer in Slate narrows the lens on the newspaper industry:

Bulkeley could have easily applied the wisdom of his lesson more broadly to newspapers. It’s not that the complete gestalt of local, state, national, and international news plus sports, comics, classified, opinion, and hints on fashion, home, entertainment, and food isn’t still useful. It is. But given a choice, and the economic means to make a choice, many buyers prefer to make an unbundled purchase. Unbundling the news they want from the news they don’t want is what the Web allows readers to do now.

The result of unbundling, disaggregation, the loss of pipe control (to use Andy Kessler’s construct) — i.e. the inability to force people to consume content they don’t want — is that content businesses don’t scale anymore. That doesn’t mean creating content isn’t profitable — independent publishers like Mike Arrington and Rafat Ali can have nice little businesses — but the same phenomenon that allowed them to become business at all will probably prevent them from becoming large businesses. I’ve heard Mike Arrington say he wants TechCrunch to be as big as CNET — the problem is that CNET’s audience is not only being chipped away by TechCrunch but also by hundreds of other independent technology publishers, which limit the growth of TechCrunch as much as they shrink the reach of CNET.

Robert Young posits the “fat belly” as a missing link in long tail economics:

The recognition of the existence of the Fat Belly is critical for many reasons, but allow me boil it all down to this overarching statement: Any economist or political scientist will agree that the health of any democratic society that’s fueled by free market capitalism is measured by the robustness of its middle class. A large and vibrant middle class demonstrates a healthy redistribution of wealth within a nation and its economy, ultimately serving as a catalyst for the power of one vote and equality amongst its peers/citizens.

The comparison to the middle class is exactly right — content businesses will have a share of the welath, but they will never scale to be “wealthy” like the aggregators.

So does that mean that content creation will forever be a small business? Likely, yes, unless you can aggregate your way up to scale — this is what Weblogs Inc attempted, realizing that none of its blogs would ever be a big business unto itself — aggregation also enables an internal network effect that gooses the scale. But even Weblogs is still dwarfed by the aggregator businesses, even after it was acquired by one (AOL).

The democratization of the content businesses, like any other democratization, requires a flattening of the business — a lot more people can play, but the opportunity is limited by each successful entrant. There’s still a finite amount of attention for content. And let’s not forget that much of the new content is being produced by people who have no interest in being in the content business — they just want attention in some form. But all those MySpace pages and silly YouTube videos take dollars off the table — except for MySpace and YouTube.

The real wealth generation opportunity for businesses like Weblogs, TechCrunch, and Paid Content is the prospect of being acquired by an aggregator — but I think we’ll see the continued growth of a new breed of “mom and pop” content business, content (pun intended) to make an independent albeit middle class living.

UPDATE

Some additional thoughts occurred to me on the treadmill:

Many of the aggregator businesses, like YouTube and MySpace, are better described as platform businesses, i.e. they provide a platform for content creators and distributors, which makes them de facto aggregators. Also, new platforms like Brightcove are likely to support lots of small content businesses rather than launch any large scale businesses.

The content creation space is also being crowded by brands, which are increasingly trying to create content as a destination rather than commercial messages as an interruption — and because they can leverage platforms like YouTube, they no longer have to pay content creators to ride along with their content. Every minute we spend with a brand’s content, whose objective is selling the brand, is a minute we don’t spend with content whose objective is selling the content.

Jonathan Miller at Web 2.0, shortly before his abrupt departure from AOL, effectively conceded that the content business is losing scale. John Battelle asked him whether portals like AOL can hold onto their monopoly, or whether they will go the way of cable TV, i.e. infinite fragmentation. Although he gave the dutiful public company answer, that in practice he didn’t see why AOL wouldn’t hang onto its monopoly, his first answer was frank and honest — in principle, there’s no reason why these monopolies shouldn’t unwind.

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]]> http://publishing2.com/2006/12/03/content-businesses-dont-scale-anymore/feed/ 71 Is The Video Content Business Eating Itself Alive? http://publishing2.com/2006/11/27/is-the-video-content-business-eating-itself-alive/ http://publishing2.com/2006/11/27/is-the-video-content-business-eating-itself-alive/#comments Mon, 27 Nov 2006 16:10:52 +0000 Scott Karp http://publishing2.com/2006/11/27/is-the-video-content-business-eating-itself-alive/ Snake Eat TailLast week the big news was CBS and YouTube crowing that distributing video clips of CBS TV shows through YouTube was (ostensibly) increasing CBS broadcast TV ratings. Today, the big news is that UK viewers who watch online video are watching lest broadcast TV.

The online video boom is starting to eat into TV viewing time, an ICM survey of 2,070 people for the BBC suggests. Some 43% of Britons who watch video from the internet or on a mobile device at least once a week said they watched less normal TV as a result.

So will online video save the broadcast TV business or kill it? Perhaps the better question is — will the video content business come out on the other end of this transformation greater or more diminished? Will loss of control over distribution mean loss of control over monetization? If consumers won’t tolerate pre-roll ads, and if the success of YouTube is driven by embedding the player in other sites, i.e. no control over the surrounding real estate, will new modes of monetization be nearly as profitable as old modes?

Google and every media company on the planet are racing to figure out the video conundrum. The MIT Ad Lab blog had an interesting suggestion — just embed the ad in the viewing screen:

Ad in YouTube Player

But isn’t this the same overbearing approach that made people hate ads in the first place?

Maybe the real question is whether innovations in advertising and other monetization models can prevent the video content business from eating itself alive.

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]]> http://publishing2.com/2006/11/27/is-the-video-content-business-eating-itself-alive/feed/ 17 The New Media Audience Measurement Business Model Conundrum http://publishing2.com/2006/10/26/the-new-media-audience-measurement-business-model-conundrum/ http://publishing2.com/2006/10/26/the-new-media-audience-measurement-business-model-conundrum/#comments Thu, 26 Oct 2006 23:30:24 +0000 Scott Karp http://publishing2.com/2006/10/26/the-new-media-audience-measurement-business-model-conundrum/ I was struck by this comment from a session on audience measurement at the Business Blog Summit (via conversationrater):

I don’t care about how many page views or visitors I really get. I care about getting the right visitors, the influential visitors, or the potential customer visitors. How can I tell who’s who?

Duh! But this truism of media seems to be lost in the gross measurements of audience, page views, video views, etc. that you constantly see cited for MySpace, YouTube, Digg, etc. It’s lost in the spat between Ze Frank and Rocketboom over audience size.

But most of all, it’s lost in New Media’s lame efforts to articulate its value to advertisers. As Stowe Boyd observes in his discussion of metrics (including has own Conversational Index):

But none of these has the authority that Neilsen ratings have had in the world of television. Looks like it would be a good opportunity for Nielsen or its competitors to create some industry-accepted metric, based on a combination of these sorts of factors: total readers, by demographic, how much they read, how long they stay, do they subscribe, do they read the RSS, how often do they click through, etc.

Indeed, beyond pay-per-click, online media is still desperately lacking a killer metric to capture the value of its dynamic community and network effects. Highly networked communities like MySpace are still fumbling around with CPM display ads instead of seizing the HUGE opportunity to innovate how brands connect with customers through community.

If new media — or any media — is going to have a viable business, it has to turn its focus to business side innovation, which lags sorely behind technology and content innovation. Either that, or media can just capitulate and hand the business side over to Google’s voracious monetization engine.

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]]> http://publishing2.com/2006/10/26/the-new-media-audience-measurement-business-model-conundrum/feed/ 7 Does All Advertising Want to Be Free? http://publishing2.com/2006/10/25/does-all-advertising-want-to-be-free/ http://publishing2.com/2006/10/25/does-all-advertising-want-to-be-free/#comments Wed, 25 Oct 2006 14:18:43 +0000 Scott Karp http://publishing2.com/2006/10/25/does-all-advertising-want-to-be-free/ Isn’t there an odd contradiction in all the thinking about new media? Individuals are now empowered to create content, to publish and have a voice without going through the old corporate hierarchy. You can blog and be heard, all for free, without asking permission. But what about brands? The assumption that online advertising will finance the next generation of media and software implies that individual companies still need to pay to play. They may be paying empowered individuals like Rafat Ali and Om Malik, but they still need to pay.

If individuals can bypass traditional media and connect directly with a community of common interest, why can’t brands do the same with their customers? Well, they are (via Search Engine Journal):

A growing number of Louisville businesses are turning to the social-networking Web site MySpace.com to connect with customers, promote events and, ultimately, make money.

Taverns, clothing stores and gift shops — many of them independently owned — are creating virtual profiles of themselves on the site as an informal approach to free online advertising. For Peter Berkowitz, owner of Old Louisville Coffee House, the effort was so successful that he abandoned his traditional Web site in favor of MySpace.

I’ve written before about the challenge MySpace faces in getting companies to pay for what individuals can get for free, i.e. a MySpace page. But really all of media — including the newly adopted software industry — faces the same problem. In fact, small businesses connecting with customers directly sounds like a challenge to Google as well.

Despite massive innovation on the content side (what used to be called “editorial”) — blogs, MySpace, YouTube, Flickr, Digg, search — there’s only been one real innovation on the old “business” side — pay-per-click text ads. But even search advertising is based on companies paying to ride along with a content provider (search results) to deliver a commercial message — sure it’s more relevant, but it’s still paying a big media company to deliver the message. Search ads can lead people to useful information or “meaningful brand experiences,” but when you push the new media revolution to its logical conclusion, you get companies setting up their own identities on the network (in this case MySpace) for free, empowered just like everyone else.

Sure, companies paying to advertise isn’t going to go away anytime soon — old habits die hard, and the network isn’t nearly efficient enough yet. But if brands drink enough of the Kool-Aid new media is serving, they may start to realize that self-empowerment is indeed liberating — and much more cost effective.

Or to put it another way, if it’s all about “conversation,” then why play a game of telephone by putting a media company between you and your customers?

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]]> http://publishing2.com/2006/10/25/does-all-advertising-want-to-be-free/feed/ 24 Edelman, Wal-Mart and the Loss of Control in Media http://publishing2.com/2006/10/15/edelman-wal-mart-and-the-loss-of-control-in-media/ http://publishing2.com/2006/10/15/edelman-wal-mart-and-the-loss-of-control-in-media/#comments Sun, 15 Oct 2006 22:19:55 +0000 Scott Karp http://publishing2.com/2006/10/15/edelman-wal-mart-and-the-loss-of-control-in-media/ It’s inevitable that a PR firm like Edelman would create a phony blog for one of its clients (in this case Wal-Mart — see Shel Holtz for a great analysis). For all of the hype over “conversation” as the new media paradigm, no one has yet figured out how to use conversation to reliably achieve any business objectives. So Edelman naturally fell back on the approach that has worked for decades — control the conversation by manufacturing it, because if you can’t control the conversation, then you can’t make it do what you want. Edelman wanted to make consumers think that Wal-Mart is a hip place that you’d want to use as the anchor point for a roadtrip. The problem is it’s not. And because blogging is not a conrol-based medium, Edelman couldn’t make Wal-Mart appear to be something it’s not. It rang false, and they got caught.

The control infrastructure of media is beginning to unwind. Copyright holders can’t control the distribution of their content. Brands can’t control their images through mass advertising. So, gripped by fear, brands and media companies are embracing the new paradigm of ceding control and engaging in a conversation. The problem is that no one has figured out how to make money in all instances by letting people run off with their content and brands, as wonderfully liberating as it all seems.

If you have a great established brand like Apple, or a great new product, like an iPod, then sure, let people run away with your brand, because most people will say good things about it and encourage other people to use it. But if you have a problematic brand like Wal-Mart or GM, where a lot of people think your product/service is socially irresponsible, for example, then letting people control your brand is going to perpetuate your image problem. The only real solution is to improve your product or service — which is a lot harder than vague notions of “conversation.”

As for ceding control of your content, look at what happened to the music industry. Illegal file sharing crippled music sales, and the only saving grace has been the iTune platform, which functions by rigidly controlling distribution.

Media companies cutting deals to distribute video content will profit IF the “free” distribution is only a promotional channel and most people still consume that content on channels that those media companies control. But if distributed platforms like YouTube become the preferred channel for video content, then those media companies will lose the control mechanism that enables them to profit — and they’ll be left with whatever revenue Google, with its ultimate control over information pathways and distribution, chooses to “share” with them.

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]]> http://publishing2.com/2006/10/15/edelman-wal-mart-and-the-loss-of-control-in-media/feed/ 60 More Evidence That Media 2.0 May Be Less Profitable Than Media 1.0 http://publishing2.com/2006/10/12/more-evidence-that-media-20-may-be-less-profitable-than-media-10/ http://publishing2.com/2006/10/12/more-evidence-that-media-20-may-be-less-profitable-than-media-10/#comments Thu, 12 Oct 2006 19:51:46 +0000 Scott Karp http://publishing2.com/2006/10/12/more-evidence-that-media-20-may-be-less-profitable-than-media-10/ There is now macroeconomic data to support the theory that Media 2.0 won’t be as profitable as Media 1.0 (from MediaPost):

In a break from historical patterns, the equities research team at Merrill Lynch says the rate of advertising price inflation now trails the overall rate of economic inflation. “Interestingly, advertising growth seems to be tracking real [gross domestic product] growth instead of nominal GDP growth, as it did in the past plus some,” writes Merrill Lynch ad industry analyst Lauren Rich Fine in a report released early this morning. “This supports our belief that media no longer enjoys the benefit of above average rate inflation, rather the opposite where increased competition & measurement is putting pressure on rates.”

“Increased competition & measurement” is one explanation, but there’s also this (familiar) explanation:

Neither Merrill Lynch nor TNS have explained why this is happening, but other economists, including GroupM Futures Director Adam Smith have suggested that at least part of the change may be due to the increasing efficiencies of digital media, which may be taking pressure off overall media inflation, especially in the traditional media, as marketers begin shifting budgets to lower priced online inventory.

The “increasing efficiencies of digital media” — indeed. As I pondered back in April:

What if the Internet has fundamentally lowered the marketing and advertising costs for big companies as it has for small companies? What if large companies can achieve the same sales objectives for a fraction of the cost of traditional mass media advertising?

Andy Kessler has an explanation for this phenomenon in the second installment of his must-read Media 2.Uh-Oh series (via Paul Kedrosky):

My definition is quite simple: Media is about control of a pipe.

But therein lies the problem. Senator Ted Stevens notwithstanding, the way the Internet is architected, there ain’t no pipes to control. No “end to end” pipes anyway.

But what about Web 2.0 and the second coming of the Internet, with its $1.65 billion all-stock acquisitions? Or Andy says:

Hey, how about Web 2.0? How about it – APIs, mashups, user content, hyperlinks, Mentos. Oooooh! Co-o-o-ool. We can just simulate a pipe. Google did it, right? $10 billion in ads. Yeah maybe. But without a pipe, is their platform precarioius?

Precarious indeed.

Andy put his finger on the deep structural problem that I’ve previously highlighted: the loss of control. Web 2.0 works great as an ideology, but maybe not so great as the basis for a media economy. Less control = less profit.

I’m intrigued by Andy’s suggestion that Google may lose control of its “simulated pipe” and thereby lose control of its profits. Already, Google can’t control the exploitation of its “pipe.”

Why did Google buy YouTube? Because they have to own it to control it, and they need to control it in order to monetize it. But on YouTube and other user-driven content platforms, the users control the network. If they don’t like the ads or other commercialization, they will just jump to another node in the network — or jump to another network.

Think of it like this:

Pipe = one way in and one way out

Network = infinite nodes, infinite entry and exit points

Why does everyone assume that MySpace and YouTube will eventually be wildly profitable? Because in the past, no who controlled that much attention failed to make money. The problem is that MySpace and YouTube don’t control anything. They are networks, not pipes. Many ways in, many ways out, many alternatives. Even worse (from a media economics standpoint), they are networks within networks (within networks).

No control, no profit.

Ceding control to consumers was the dominant theme of the Association of National Advertisers conference — but if consumers are in control of your brand, the best way to increase sales is not by advertising in the traditional sense, but by making better products and providing better service.

As far as I can see, Google is the only media company that has successfully profited from the new network paradigm, and only through the herculean effort of controlling the network (fighting search engine spam, click fraud, arbitrage, etc.).

You can feel good about the loss of media control, if that suits your ideological sensibility, but I’m still not seeing the scalable business models.

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]]> http://publishing2.com/2006/10/12/more-evidence-that-media-20-may-be-less-profitable-than-media-10/feed/ 31 Google Acquires YouTube, Becomes the Archetypal Media Company http://publishing2.com/2006/10/09/google-acquires-youtube-becomes-the-archetypal-media-company/ http://publishing2.com/2006/10/09/google-acquires-youtube-becomes-the-archetypal-media-company/#comments Tue, 10 Oct 2006 00:38:25 +0000 Scott Karp http://publishing2.com/2006/10/09/google-acquires-youtube-becomes-the-archetypal-media-company/ Google’s $1.65 billion acquisition of YouTube solidifies Google’s position at the center of media. Google already has Google Video, so they didn’t buy YouTube for the technology. No, they bought YouTube for the traffic, the same reason they cut the $900 million deal with Fox Interactive Media.

So don’t believe Eric Schmidt for a second — Google is now the archetypal media company — online video is just the next step in their quest to monetize the world’s content through advertising. The challenge for Google is that video ads are at the opposite end of the annoying/consumer-hating spectrum from text ads.

Google’s acquisition of YouTube is also the final step in the orphaning of content creation, which now exists completely separate from content distribution and monetization. You supply the content — Google will take care of the rest.

The content business just ain’t what it used to be.

UPDATE

Relfecting deeply on the Google/YouTube deal, Andy Kessler asks:

What is media anymore? Can you just slap videos up on the Web and become a younger and more vibrant Rupert Murdoch or Sumner Redstone?

I’ll add: Does media have anything to do with content anymore, or is it all about aggregating people’s attention by any means? Was media ever really about content?

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]]> http://publishing2.com/2006/10/09/google-acquires-youtube-becomes-the-archetypal-media-company/feed/ 26 Google’s Eric Schmidt Admits to Polluting Online Content http://publishing2.com/2006/10/04/googles-eric-schmidt-admits-to-polluting-online-content/ http://publishing2.com/2006/10/04/googles-eric-schmidt-admits-to-polluting-online-content/#comments Wed, 04 Oct 2006 14:27:02 +0000 Scott Karp http://publishing2.com/2006/10/04/googles-eric-schmidt-admits-to-polluting-online-content/ Buried in the Time interview with Google CEO Eric Schmidt is an astonishing admission:

Another example of a question that we are debating right now is: we have this amazing product called AdSense for content, where we’re monetizing the Web. If you’re a publisher we run our ads against your content. It’s phenomenal. How do we make that product produce better content, not just lots of content?

Not “lots of” content but “better” content.

AdSense has provided an incentive to produce content that makes people click on ads, but not necessarily content that best serves users’ needs and interests. AdSense made online content much more profitable — but it didn’t necessary make GOOD content more profitable.

It’s very telling that Google now sees taming the Made for AdSense beast as one of its main strategic challenges.

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]]> http://publishing2.com/2006/10/04/googles-eric-schmidt-admits-to-polluting-online-content/feed/ 3 The 2.0 Control Paradox http://publishing2.com/2006/09/13/the-20-control-paradox/ http://publishing2.com/2006/09/13/the-20-control-paradox/#comments Thu, 14 Sep 2006 02:28:32 +0000 Scott Karp http://publishing2.com/2006/09/13/the-20-control-paradox/ There is a fundamental tension in Web/Media 2.0 between openness and control — openness is required to leverage the network effect of the Web and harness the power of socially-connected users, but control is required to get a share of any money that changes hands.

Google has been most successful in walking this line — AdWords advertisers and AdSense publishers have a great degree of control over the system, but only to a point. Google still owns the system, and everyone needs to play by Google’s rules — and pay Google its share (which is undisclosed, i.e. obsessively controlled). Google shares just enough revenue with AdSense publishers to exceed other revenue sources — but only just enough.

Yet despite Google’s runaway success, they have struggled recently with this balancing act, as click fraud and other abuses test the limits of openness.

Hat tip to Nick Carr for crystalizing this issue:

This tension between technological structure and economic interest has been one of the main formative forces influencing the commercial internet since profit-making players first appeared. But it has become even more salient with the rise of Web 2.0, which amplifies openness at the technological level (by encouraging the free flow not only of the user’s attention but also of underlying data and applications) while at the same time increasing the economic rewards for keeping the user within a particular site (by making advertising even more important to profit-making).

The 2.0 control paradox is evident in two stories from the last 24. First, News Corps’ Peter Chernin’s comments about MySpace’s ambition to control the value chain:

“If you look at virtually any Web 2.0 application, whether its YouTube, whether it’s Flicker, whether it’s Photobucket or any of the next-generation Web applications, almost all of them are really driven off the back of MySpace,” Chernin said at the conference. “There’s no reason why we can’t build a parallel business.”

There was a great uproar in the blogosphere over MySpace’s will to control, but how else are they going to make money off their own ecosystem unless they control the businesses that feed off it?

Second, there’s NBC’s announcement of NBBC:

The new venture, called the National Broadband Company, or NBBC, will have content from NBC’s networks and local stations as well as from other companies. That programming will appear on NBC’s own Web sites as well as other sites.

Commercials will be inserted before each video segment, with the revenue split among the program’s creator, the Web site owner and NBBC.

and

For now, NBBC is going to keep a distance from the hottest trend in online video — programs created and uploaded by users. The company wants to work only with established producers, although it will feature programs from companies like Break.com that are edited selections of the best amateur videos.

Similarly, NBBC is not going to allow the programs it distributes to be inserted on personal blogs or Web pages, although it might work with well-established high-traffic blogs.


Jeff Jarvis rips into NBBC for what he calls “outmoded controlfreakishness”:

* They will not allow us, the people, to put stuff on our blogs. They want control.

* They will not accept video from us the people. Not up to their standards.

* They take a shameful share of the revenue: 50 percent (30 percent goes to the video’s creator, 20 percent to the site running the video).

The future of 2.0 economics — who wins the Google-sized pots of gold — will hinge on solving the control paradox.

Should NBBC let any site host their videos? Then what about the “made for AdSense” crowd who will approach it as a pure profit maximizing venture, even if it doesn’t maximize value for the advertisers?

Should NBBC distribute any and all content that “the people” create? But what if advertisers won’t pay for it? What if the check signers insist on standards and control? As an advertising-side commenter observed on my post “Will Content Quality Still Be a Driver of Advertising Online?“:

It’s not just that brand advertisers are concerned about quality for branding’s sake–we ran a Fortune 500 financial services client’s ads on an AOL content program and because there were not enough quality controls, our client was exposed to $2.5M in compliance liability. Without a controlled environment companies also expose themselve to legal risks, which can have a much more tangible and immediate negative impact than brand erosion.

How does the ideology of openness deal with legal liability? Are all the users going to chip in to pay the legal bill?

And, to the bottom line, should NBBC share more revenue? Does someone other than the content creator and the content distributor deserve 50% of the revenue? In the case of AdSense, Google is merely a broker, like NBBC — are they taking 50%? (Again, Google is enough of a control freak not to let such information leak out as NBBC did.)

The Google approach to revenue sharing is not to approach it as a matter of principal, but as a matter of profit maximizing — share too little revenue, and there won’t be enough profit motive in the network to optimize the system.

It’s easy to criticize NBBC and MySpace for not taking 2.0 ideological openness to the extreme, but the truth is that nobody has demonstrated yet how to maximize profits while ceding all control. Google, for all the leveraging of open architecture and network effects, is a notorious control freak — and their success is driven by figuring out how much to control.

Absolute openness makes for great ideological dogma, but until someone convincingly demonstraes how absolute openness without any control makes for great business, I’m going to stake my tent next to Google in the DMZ between the land of openness and the land of control.

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]]> http://publishing2.com/2006/09/13/the-20-control-paradox/feed/ 16 Everything Is Media: The Real World Edition http://publishing2.com/2006/09/12/everything-is-media-the-real-world-edition/ http://publishing2.com/2006/09/12/everything-is-media-the-real-world-edition/#comments Tue, 12 Sep 2006 14:07:13 +0000 Scott Karp http://publishing2.com/2006/09/12/everything-is-media-the-real-world-edition/ As if it weren’t enough that digital technology has turned everything on your computer, from software to online stores to music, into media — digital technology is rapidly turning everything in the “real world” into media.

THE HOTTEST FORM OF DIGITAL media on Madison Avenue isn’t online. It’s out-of-home. Digital out-of-home networks are popping up virtually everywhere: in stores, in theaters, in health clubs, in office buildings, and perhaps most importantly of all, on media planning flowcharts. The new networks, a subset of the outdoor media industry that is sometimes referred to as place-based television, are growing at a rate of about 10 new per month, according to a new report being released this week by marketing consultants Profitable Channels. The report estimates that the 700 digital out-of-home networks launched since 2002 will account for $1.2 billion in national ad spending this year, making it the size of a major network TV daypart.

“The 700 number is probably low,” says Stephen Diorio, a partner at Profitable Channels, and the author of the report. “It’s a lot like when all the dot.coms were coming out. Anyone with a venue and a good audience is launching something and calling it media.”

In fact, digital out-of-home networks are popping up everywhere from high-rise elevators to gas station pumps to public rest rooms, creating new places and states of mind for marketers to reach their consumer and business prospects.

It’s not enough for advertisers to bid for every moment of your attention while you are sitting in front of a computer screen. Now advertisers want to bid for every moment of your attention EVERYWHERE YOU GO — on the road, in the 7-11, at the gas station, in the restroom. There’s nothing that you pay attention to that can’t be transformed into a form of media. Word-of-mouth marketing has even turned people you meet at a bar into a form of media.

Remember that freaky advertising-saturated future that Tom Cruise navigates in Minority Report?

Minority Report Gap

The future is now.

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]]> http://publishing2.com/2006/09/12/everything-is-media-the-real-world-edition/feed/ 2 Marketing Services Is the Future of Media http://publishing2.com/2006/09/11/marketing-services-is-the-future-of-media/ http://publishing2.com/2006/09/11/marketing-services-is-the-future-of-media/#comments Mon, 11 Sep 2006 14:15:18 +0000 Scott Karp http://publishing2.com/2006/09/11/marketing-services-is-the-future-of-media/ I’ve advocated that media should evolve into marketing services — according to lastest Veronis Suhler Stevenson Communications Industry forecast, that’s increasingly where the money is going.

NON-ADVERTISING-BASED FORMS OF MARKETING – especially newer sectors such as branded entertainment, event marketing and experiential marketing – have emerged as the fastest growing segment of the media economy, outpacing advertising, as well as consumer and industrial spending on media. The finding, which comes from the 2006 edition of the Communications Industry Forecast being released this week by Veronis Suhler Stevenson, comes as strong evidence that U.S. marketers and their agencies are shifting spending into forms of marketing that have tangible measures of ROI associated with them. It also suggests that Madison Avenue’s shift from conventional ad-based media planning toward marketing-based communications planning is also having an effect, and that the definition of media is expanding well beyond traditional formats like TV, radio, newspapers and magazines. Perhaps most significantly, much of the shift toward new forms of marketing spending, especially the kind of experiential marketing aimed at active young adults, is a sign that marketers need to find new ways of reaching some important consumer segments.

Just as the media is bleeding into technology, we’re seeing advertising, marketing, PR, and CRM all bleeding into each other — companies are starting to de-silo the end-to-end processes of customer acquisition and customer relationship management. This presents a huge opportunity for media.

It used to be that media was strictly a delivery mechanism. Now that media is becoming a two-way, participatory, community-driven 2.0 entity (MySpace, YouTube, blogs, etc.), media companies can do more than just deliver messages — they can create services across the entire marketing services value chain.

PQ’s Kivijarv says much of marketing services growth, in fact are forms of media that are not classified under traditional advertising spending, such as custom publications created by consumer or B-to-B marketers that are beginning to supplant conventional ad spending in magazines – a big factor holding down growth in the magazine marketplace.

But as much as these new and traditional forms of marketing are beginning to cannibalize on traditional ad-supported media, VSS’ Greenberg notes that many traditional media companies are beginning to become significant players in marketing. “Take event marketing aimed at 18- to 34-year-olds,” he says. “Companies like MTV are helping to drive that.”

There is an opportunity for a single entity — call it media, marketing services, agency, whatever — to help companies connect with current and prospective customers through meaningful brand experiences and to empower those customers to participate in and increasingly drive the marketing process.

Media companies need to focus on leveraging their most important assets — relationships, engagement, and community — these are the new “vehicles” for marketing. Companies have these same assets with their loyal customers, but media holds the key to new customers. It’s no longer about just delivering a message — it’s about leveraging the connection that media (be it New York Times, MySpace, Boing Boing, YouTube, Digg, or Google) has with its users, who are increasingly driving the media (and in the case of MySpace ARE the media). It’s about enabling people to discover and connect with brands through meaningful, entertaining, and useful content and experiences, which media companies, who should know their audience/users best, are ideally positioned to facilitate.

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]]> http://publishing2.com/2006/09/11/marketing-services-is-the-future-of-media/feed/ 17 Advice to Blog Media: Get Better Metrics! http://publishing2.com/2006/08/21/advice-to-blog-media-get-better-metrics/ http://publishing2.com/2006/08/21/advice-to-blog-media-get-better-metrics/#comments Mon, 21 Aug 2006 16:11:06 +0000 Scott Karp http://publishing2.com/2006/08/21/advice-to-blog-media-get-better-metrics/ A debate has erupted over the definition of blogs and the value of blog “influentials” as drivers of advertising CPM rates, which is so Old Media in the particulars it’s really quite astonishing. Scoble challenges Windows Live Spaces’ definition of a blog and then plants this lightening rod:

What does Microsoft do when it says “we have the most blogs?” Or, when it says really ANYTHING about its Internet services?

It takes them to advertisers and says “pony up, we know you paid MySpace ‘XXX’ and we have the most now, so we want ‘XXX+y’.” See, the little game we’re all playing in this Web 2.0 world is advertising.

The other little dirty secret of advertising? Not all readers are the same. Unfortunately if you’re an A List blogger it’s egotistical (and elitist) to point that out. Since Dare pulled out the ad hominem card already might as well slap this elephant in the ass and make it sing!

Quick. Is Jeff Jarvis worth more or less to an advertiser than this guy? Or this? Or this?

Donna Bogatin wisely drills down on the issue of metrics:

Scoble may have pulled off the covers of Windows Live Spaces metrics, but, at the same time, puts forth advertising metrics related assertions about Google, MSN, Federated Media…that may need to be “audited” as well.

Donna proceeds to quote some available audience metrics from MSN and Federated Media, but it’s all Old Media-style demographics.

Regardless of whether Scoble is right about the definition of a blog, I do think he pointed to the elephant in the room, and what blows my mind is that it’s such a qualitative elephant — is Windows Live Spaces more “valuable” to advertisers if it’s defined as a “blogging” service? Are influential bloggers of higher “perceived” value to advertisers?

Is this 1.0 all over again? Where are the ROI metrics? Do bloggers vs. non-bloggers (if such a distinction exists) drive higher clickthrough rates? Do A-List bloggers drive higher clickthrough rates? If it’s about “branding” and not direct response, then what are the metrics? Are brands that are advertised on blogs or A-List blogs seeing a bump in brand perception metrics? Are they more likely to be discussed on other blogs? Do they SELL MORE STUFF?

For decades, Old Media has been selling the value of media and audience based on smoke-and-mirrors perceptions rather than any quantifiable ROI metrics. Search marketing, which actually has some workable ROI metrics, gave a good kick in the head to that old model, but apparently it’s still alive and kicking.

So my advice to the emerging blog media moguls — get better metrics! If it’s all about influence and buzz, then find a way to quantify it. Companies like Nielsen Buzzmetrics are trying to inject some metrics into this space — it’s not like people aren’t working on this.

But whatever you do, please don’t run back into the squishy quicksand of Old Media value propositions.

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]]> http://publishing2.com/2006/08/21/advice-to-blog-media-get-better-metrics/feed/ 8 Everything Is Media: The Online Retailer Edition http://publishing2.com/2006/08/19/everything-is-media-the-online-retailer-edition/ http://publishing2.com/2006/08/19/everything-is-media-the-online-retailer-edition/#comments Sat, 19 Aug 2006 14:37:20 +0000 Scott Karp http://publishing2.com/2006/08/19/everything-is-media-the-online-retailer-edition/ Folowing the 2.0 maxim that “everything is media,” online retailers have woken up to the media value of their website traffic and have started selling advertising on their sites (from WSJ, sub required):

Last week, Amazon.com Inc. quietly began testing the sale of display ads on its home page to companies such as Ford Motor Co. and Fidelity Investments. The move comes a month after Home Depot announced it was running ads on its site. Wal-Mart, meanwhile, is selling space on its main page promoting everything from Motorola cellphones to Kleenex tissues.

The retailers want to exploit their heavy traffic, which makes their pages prime real estate for marketers. But they are taking different approaches to their ad sales. Amazon will run ads from companies that don’t sell products on its site, such as Ford, while Home Depot Inc. and Wal-Mart Stores Inc. only take ads from their suppliers.

The moves come with relatively little risk, analysts said, as long as retailers find ways to incorporate the ads so as not to annoy shoppers. By taking ads from major vendors, retailers gain not only additional revenue, but they can also improve their chances of selling the manufacturers’ products.

The retailers are embracing Web advertising at a time when marketers are shifting more of their ad budgets to the Internet from newspapers, television and other media. U.S. sales of Internet advertising rose 30% to a record $12.5 billion last year, according to the Interactive Advertising Bureau, a trade group for marketers.

The challenge for Web retailers will be balancing the amount of advertising they run with maintaining sites that shoppers find easy to use. “I don’t think anyone wants their site to look like Nascar ads, because it really distracts from the shopping experience,” said Heather Dougherty, a retail analyst for Nielsen/NetRatings.

Here’s an example of a Delta Faucet ad running on Home Depot’s main plumbing category page:

Home Depot Ads

This type of advertising is as intuitive as search advertising — target consumers when they have indicated an intention to shop, in this case by visiting an online retail site. It’s strange that it took this long and that everyone isn’t doing it yet.

Of course, this is still the same “interruptive” advertising model — just because I went to the Home Depot plumbing page, doesn’t mean I’m looking for faucets, although the chances that I might be interested in a new faucet are a whole lot greater than if I were just reading news online. At the deeper category levels and with site search, these ads can become more granular and targeted, like search keyword advertising.

The other problem with display advertising on retailer sites is that it’s unclear whether any value goes to the consumers, despite claims that the sites are sharing the economic benefit:

Amazon, which sells everything from books to lawnmowers, drew 37.6 million unique visitors in July, making it one of the 10 most popular Internet destinations, according to Nielsen. The Seattle-based company began testing ads on its site last week because the revenue “allows us to even further lower product prices for customers,” said a spokesman.

Amazon may very well use ad revenue to lower prices, but we have no way of knowing — there’s no transparency to the system — at least not for the consumer.

If consumers could actually see how this type of advertising on retail sites was effectively lowering their prices — and not just interrupting their shopping with unsolicited brand messages — that would be way cool.

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]]> http://publishing2.com/2006/08/19/everything-is-media-the-online-retailer-edition/feed/ 9 Why Advertise For Free on MySpace When You Can Pay News Corp Instead? http://publishing2.com/2006/08/16/why-advertise-for-free-on-myspace-when-you-can-pay-news-corp-instead/ http://publishing2.com/2006/08/16/why-advertise-for-free-on-myspace-when-you-can-pay-news-corp-instead/#comments Thu, 17 Aug 2006 02:22:02 +0000 Scott Karp http://publishing2.com/2006/08/16/why-advertise-for-free-on-myspace-when-you-can-pay-news-corp-instead/ Flush with confidence after closing a $900 million deal with Google, MySpace is taking on its next challenge — convincing advertisers who have put up brand and product pages on MySpace for free that they should pay for “their space” instead:

Now, advertisers say the company is stepping up its efforts to convince big clients using MySpace’s free Web pages, known as profiles, to become paying customers as well.

“MySpace has started to reach out to companies that are setting up commercial pages on the site, encouraging them to reach some kind of financial agreement and forgo the free ride,” says Jeff Lanctot of aQuantive’s Avenue A|Razorfish online advertising agency. “While this could include paying to have the page up, I think buying an ad package to support the commercial page is also a reasonable solution.”

For example, this Wendy’s Smart Square page has 82,025 “friends” on MySpace (you’ve got to love the “About Me”).

Wendy's Smart Square MySpace Page

I don’t know whether Wendy’s pays already for this page, but if they do, you have to wonder why. And if they don’t, you can’t envy the sales rep who has to call them up and convince them to pay. And what if Wendy’s won’t pay? Will MySpace have to tear down the page? That would be a great advertiser relations program — policing for unpaid commercial pages and tearing them down. You can imagine the trade press headlines.

Google obviously thinks it can effectively monetize MySpace — and I think it would be far more interesting to watch and learn from how MySpace succeeds than to watch it fail (despite the inevitable morbid train wreck fascination). But when I read things like “encouraging [advertisers] to reach some kind of financial agreement and forgo the free ride,” I really can’t help but continue to wonder.

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]]> http://publishing2.com/2006/08/16/why-advertise-for-free-on-myspace-when-you-can-pay-news-corp-instead/feed/ 6 Google Local Coupons: A Limited Offer for Consumers http://publishing2.com/2006/08/15/google-local-coupons-a-limited-offer-for-consumers/ http://publishing2.com/2006/08/15/google-local-coupons-a-limited-offer-for-consumers/#comments Tue, 15 Aug 2006 17:22:22 +0000 Scott Karp http://publishing2.com/2006/08/15/google-local-coupons-a-limited-offer-for-consumers/ Google is allowing local businesses to offer coupons through Google Maps for free (some details from Google here), which is pretty good from the perspective of Google’s hallowed “user experience,” but far from revolutionary. Local searchers on Google Maps will be able to see which local businesses featured in the search results are offering a coupon. They will also be able to see relevant AdWords ads on Google search results from local businesses that are offering coupons but which might not have a web presence.

That’s certainly progress. But here’s a consumer need that isn’t being fulfilled: Which local businesses that offer the products/services I need are offering the BEST coupon deals?

Here’s the real problem: When local businesses use AdWords to promote their Google-hosted coupons, they will be taking some of the money that could have gone to consumers and instead paying Google to promote the coupons. Businesses will have to weigh how much they want to give to consumers through the coupons against how much they need to bid on AdWords keywords to drive traffic to the coupons.

So consumers are getting deals — but not the best deals. And businesses are competing — but on keyword bids, not on giving consumers the best deals.

Lending Tree’s tagline is: When Banks Compete, You Win

The tagline for Google Coupons should be: When Local Businesses Compete, Google Wins

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]]> http://publishing2.com/2006/08/15/google-local-coupons-a-limited-offer-for-consumers/feed/ 9 Does MySpace Matter in Google’s Deal with News Corp? http://publishing2.com/2006/08/09/does-myspace-matter-in-googles-deal-with-news-corp/ http://publishing2.com/2006/08/09/does-myspace-matter-in-googles-deal-with-news-corp/#comments Wed, 09 Aug 2006 06:24:28 +0000 Scott Karp http://publishing2.com/2006/08/09/does-myspace-matter-in-googles-deal-with-news-corp/ Om Malik took an interesting critical look at the Google deal with News Corp, which got me thinking about whether MySpace matters much at all to this deal, despite all the hype:

In a conference call, FIM executives noted that a very large number of people leave MySpace to go to Google. According to data collected by Hitwise, an Internet traffic tracking service, nearly 10.8% of Google’s traffic was coming from MySpace.com for the week ending July 29, 2006. Had Fox gone with Yahoo or Microsoft, it could have been a serious blow to Google.

It also gives them access to inventory to sell more ads, and thus become even a bigger player in the fast-growing online advertising business. But the ad-inventory that can be sold is unlikely to come from MySpace. Rich Greenfield of Pali Capital notes that most of the safer (read advertiser friendly) “Myspace-programmed” sections such as the homepage, main Music page, main Comedy page, etc are off limits for Google. Eric Schmidt, Google CEO during the conference call said that they would not serve ads on all MySpace pages and in fact they will let a lot of ad inventory go unserved.

First, I disagree with Om that FIM’s going with Yahoo or Microsoft could have been a serious blow to Google because of the loss of traffic from MySpace. Here’s what Bill Tancer of Hitwise observes about the 10.8% statistic:

Since over the last year there has been no formal relationship between the two companies, this high volume of traffic flowing from MySpace to Google would most likely be the result of users using their Google toolbar or manually navigating to Google while engaged in their MySpace session.

Google gets 10.8% of its traffic from MySpace because so many Google users are also MySpace users, and so they just happen to be on MySpace when they decide to do a search. Does that mean these MySpace users would suddenly stop wanting to use Google if Yahoo or Microsoft was the default search for MySpace? Unlikely. Perhaps Google will gain more search users from other FIM properties, but I’m not sure that was worth paying for.

So what about the advertising component of the deal? As Om observed, “the ad-inventory that can be sold is unlikely to come from MySpace” — Google is even more savvy than most corporate advertisers when it comes to avoiding ads running next to questionable content.

Through Om, Robert Young speculates:

“The real story here (in my opinion) is how Google is now going to adjust/modify their ad network to optimize for social networks.”

It seems on the face of that there should be a huge opportunity to better “monetize” social networks, but I don’t see how this deal is going to make the problem of uncontrollable MySpace content any easier to solve.

MySpace still can’t get more than $1 for a big chunk of its page views. Maybe Google can figure out how they can do better…good luck!

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]]> http://publishing2.com/2006/08/09/does-myspace-matter-in-googles-deal-with-news-corp/feed/ 5 The Rise of Online Video and the Fall of TV http://publishing2.com/2006/08/07/the-rise-of-online-video-and-the-fall-of-tv/ http://publishing2.com/2006/08/07/the-rise-of-online-video-and-the-fall-of-tv/#comments Tue, 08 Aug 2006 02:46:45 +0000 Scott Karp http://publishing2.com/2006/08/07/the-rise-of-online-video-and-the-fall-of-tv/ I’ve been predicting for a while that the TV advertising house of cards would collapse, and McKinsey just huffed and puffed and predicted (to its big Fortune 100 advertiser clients) that “by 2010, traditional TV advertising will be one-third as effective as it was in 1990″ (from AdAge):

That shocking statistic, delivered to the company’s Fortune 100 clients in a report on media proliferation, assumes a 15% decrease in buying power driving by cost-per-thousand rate increases; a 23% decline in ads viewed due to switching off; a 9% loss of attention to ads due to increased multitasking and a 37% decrease in message impact due to saturation.

“You’ve also got pronounced changes in consumer behavior while they’re consuming media,” said Tom French, director at McKinsey. “And ad spending is decreasingly reflecting consumer behavior.”

According to the report, real ad spending on prime-time broadcast TV has increased over last decade by about 40% even as viewers have dropped almost 50%. Paying more for less translates into a much higher cost-per-viewer-reached — a trend also true in radio and print.

Wow, you’ve got to love those numbers — almost the inverse of what’s happening online, e.g. the announcement of Google’s deal with Viacom/MTV:

Viacom Inc.’s MTV Networks has agreed to distribute clips from its cable networks over Google Inc.’s advertising network, in a test of what could become a new economic model for Web-based video delivery, the companies said on Sunday.

The project, a year in the making, marks the first time Google will distribute ad-supported videos across its AdSense network from a major programming provider. The ad-supported video distribution project will begin testing later in August.

Google’s AdSense network currently handles primarily text and graphical-oriented brand advertising. The MTV trial, if successful, would highlight the progress Google is making in evolving beyond its reliance on delivering Web-based text ads from which it derives most of its revenue and profit.

It’s undeniable now that TV is falling and online video is rising — the real question is how fast and how messy will the transition be:

“Should everybody shift 30% of their dollars to the web?” asked Amy Guggenheim Shenkan, senior practice knowledge specialist in McKinsey’s San Francisco office. “No. There wouldn’t be room today if everybody wanted to shift online. Last year [online media] was $12.5 billion, by end of 2007 digital advertising will be $18 to $25 billion. … So we’re seeing a lot of growth, but if you want to match up share of attention and share of dollars it couldn’t happen for that reason.” The TV ad industry is a $68 billion one.

Google has an infrastructure set up to receive those dollars — but will advertisers want to buy that way? Everyone is learning online video from scratch, so while infrastructure has some advantages, measuring the ROI of online video ads is still a brand new “science.”

While traditional video content providers like MTV still have strong brands, the meteoric rise of YouTube shows that the playing field is a lot flatter.

Of course, there’s another option besides “shifting” all of those TV ad dollars to online video — spend them on other forms of advertising with higher ROI — just as soon as it becomes clear what those are.

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]]> http://publishing2.com/2006/08/07/the-rise-of-online-video-and-the-fall-of-tv/feed/ 6 Lack of Transparency in Pay-Per-Click Ads and TV Ads: A Tale of Two Ad Councils http://publishing2.com/2006/08/05/lack-of-transparency-in-pay-per-click-ads-and-tv-ads-a-tale-of-two-ad-councils/ http://publishing2.com/2006/08/05/lack-of-transparency-in-pay-per-click-ads-and-tv-ads-a-tale-of-two-ad-councils/#comments Sat, 05 Aug 2006 13:05:02 +0000 Scott Karp http://publishing2.com/2006/08/05/lack-of-transparency-in-pay-per-click-ads-and-tv-ads-a-tale-of-two-ad-councils/ What does it say about an advertising format when an industry “council” has to be formed in order to arbitrate the problem of advertisers not knowing whether they are getting what they paid for? That’s what happened to both pay-per-click advertising and TV advertising this past week, and the similarities between these two ad councils says a lot about the future of both advertising formats.

Pay-Per-Click Ad Council
(From CNET)

The Interactive Advertising Bureau (IAB) and the nonprofit Media Rating Council said they are teaming with Google, Yahoo, Microsoft, Ask.com, LookSmart and others to form the Click Measurement Working Group.

The group’s mission is to establish guidelines for what constitutes valid clicks and invalid clicks on ads. Guidelines can help the industry measure how prevalent click fraud really is. Third-parties who sell click-fraud-combating services to advertisers claim that click fraud rates are as high as 30 percent. Google and Yahoo counter that click fraud rates are minimal.

TV Commercial Ad Council
(From MediaPost)

IN THE WEEKS SINCE NIELSEN revealed plans to begin providing ratings for TV advertising minutes significant problems have emerged in the way those ratings are processed. Now a coalition of influential buyers and sellers wants to put the brakes on that process before and is planning a meeting to rethink how the so-called commercial ratings should be manufactured. The meeting, which is expected to take place next month, before the launch of the new TV season, and before Nielsen begins doling out the new ratings, will likely lead to a new round of discussions on what data should – and should not – go into the commercial ratings, how they should be processed, disseminated and used in TV advertising deals. “I don’t think there’s anyone out there who thinks that Nielsen has a full grip on this,” acknowledges Alan Wurtzel, president of research and media development at NBC, who is one of the executives trying to organize the summit. We need to find a forum in which the industry can get together and start to deal with some of these details.”

In both instances, the problem is a lack of data transparency. Greg Stuart, chief executive of the Interactive Advertising Bureau, who is part of the click council, said (from BusinessWeek):

Media need to operate with transparency. There’s marketers and agencies who are paying money for things. They need to know, what are they paying for? What does that look like? What is the standardized way in which that’s being counted? And also ultimately, is that audited? Can we validate that (using a third party)? And so, in an industry that is now going to be close to $16 billion this year, it should be relatively obvious that we need to operate with the principles that all media operate under.

The problem is that the current pay-per-click and TV ad systems both make it difficult, if not impossible, to provide data transparency. For clicks, it’s the ad networks, e.g. Google AdWords and Yahoo Search Marketing, that can’t provide all the the data. For TV ads, the problem is Nielsen, who acts as the data proxy for the TV networks.

Pay-Per-Click Ads
(From the Tuzhilin report)

An operational definition [of click fraud] cannot be fully disclosed to the general public because of the concerns that unethical users will take advantage of it, which may lead to a massive click fraud. However, if it is not disclosed, advertisers cannot verify or even dispute why they have been charged for certain clicks.

TV Ads

One of the chief problems surrounding the new ratings is that the commercial ratings are processed by using a relatively shaky system for identifying when the commercial minutes actually air. That system, Nielsen’s Monitor-Plus service, was designed as a competitive advertising monitory system, which apparently does not have the same level of detail or rigor as the systems Nielsen uses to compile and process TV ratings.

I can’t fault the formation of these ad councils because, given that they can’t fix the real problem of data transparency, it’s the only way that all of the interested parties can address the problem. Of course, having interested parties like Google, Yahoo, ad agencies, and TV networks on these councils turns them into a tug of war between deeply entrenched economic interests.

Advertisers will begin to get wise to the similarities between the lack of transparency in pay-per-click ads and TV ads. Although pay-per-click is a leap forward in measureability and accountability, it still falls far short of a truly transparent system. You can see it in how Greg Stuart talks about pay-per-click ads (i.e. “search” ads):

Search produces results. End of story. It produces results. My guess is that these advertisers would like to see any concern that might seep into the view that their management has, or anybody else. Because they know in their heart of hearts that this really works. It’s in everybody’s interest to clean this one up.

“They know in their heart of hearts that this really works” — old media companies have been using such language for years to describe advertisers’ ostensible faith in poorly-measured and unaccountable TV and print advertising.

Wouldn’t it be great if there were an advertising system that was fully transparent and thus didn’t require advertisers to form industry councils and adopt articles of faith to prop it up?

That’s why we will we soon see the transition from clicks to actions and conversions.

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]]> http://publishing2.com/2006/08/05/lack-of-transparency-in-pay-per-click-ads-and-tv-ads-a-tale-of-two-ad-councils/feed/ 9 It’s the Users Calling…They Want Their Money http://publishing2.com/2006/08/01/its-the-users-callingthey-want-their-money/ http://publishing2.com/2006/08/01/its-the-users-callingthey-want-their-money/#comments Tue, 01 Aug 2006 16:16:09 +0000 Scott Karp http://publishing2.com/2006/08/01/its-the-users-callingthey-want-their-money/ The Guardian observes (via Jeff Jarvis) that YouTube has overtaken MySpace — but here’s the thing — it’s not really YouTube vs. MySpace. It’s user content and community hosted by YouTube vs. user content and community hosted by MySpace. The hosting is besides the point. It’s people like Fritz Grobe and Stephen Voltz who are getting people’s attention, not some entity called YouTube.

In case you’re not among the 5 million+ people who have seen it, Grobe and Voltz created an immensely clever and entertaining performance video that channels the explosive power of Mentos added to Diet Coke:

The video that you see above (press the play button after it loads) has appeared on YouTube and Google Video, but not with the permission of Grobe and Voltz. I got this code from their site, EepyBird, where they ask users:

Please do not post our videos on sites like YouTube and Google. [Emphasis theirs]

But why wouldn’t they want their video uploaded onto the immensely popular YouTube?

Because YouTube isn’t paying them a dime. Neither is Google.

Instead, Grobe and Voltz are distributing the video through Revver, which shares with them half the ad revenue generated by THEIR (i.e. Grobe’s and Voltz’s) content.

As BusinessWeek reported:

It took eight months for Fritz Grobe and Stephen Voltz to mastermind a now iconic Web video that shows them creating intricate fountains of soda by dropping 500 Mentos into 100 2-liter bottles of Diet Coke. The video became an instant hit after it was published in June on Revver, a service that shares ad revenue. Within days, bootlegs showed up on Google and YouTube. Voltz, a civil litigation lawyer, figured out the process for getting the videos removed. But as copies kept reappearing, Voltz learned that he had to keep contacting YouTube to take down each new version.

The Mentos/Diet Coke video was seen 5.5 million times on Revver and made Grobe and Voltz $30,000. But Voltz estimates they lost another $30,000 to pirated copies. And for several days recently, blogs buzzed with attempts to sort out the rights of artists to control uploaded videos. As the prospect grows for making money online, what started as a lark for many is becoming all too serious.

User-generated content is going through a novelty phase, where most “users” are content with attention as a form of recompense for their efforts. But for savvy “users” — or in this case video production artists, let’s get real here — getting paid in attention while hosting platforms like YouTube get all the take-to-the-bank revenue is sheer lunacy.

To all the Web 2.0 sites that think they are going make a fortune off of “free” user-generated content — it’s the users calling…they want their money. And if you don’t give it to them, they are going to take their content elsewhere.

UPDATE

Just came across this Heather Green post from a few days ago about Ze Frank’s Video Blog:

Frank is deliberately trying to create a show and a brand and he wants to figure out a way to support himself. That’s why he chose to upload his videos on Revver, a videos sharing service that shares revenues. But just as important, he’s trying to keep control of the archive of his shows so that sometime in the future he can figure out a way to make money with them.

Heather also references Amanda Congdon’s appeal regarding videos posted to Amanda UnBoomed (this one is very funny and worth watching):

Please do not upload my videos to YouTube or any other video hosting site that reserves the right to make commercial works out of other people’s vids. This video falls under the creative common non-commercial sharealike license. Thanks for understanding.

Ze Frank calls this trend a “coming of age” — indeed, it’s time for all the Web 2.0 business models to GROW UP.

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]]> http://publishing2.com/2006/08/01/its-the-users-callingthey-want-their-money/feed/ 27 Inform Enters the Search Economy http://publishing2.com/2006/07/30/inform-enters-the-search-economy/ http://publishing2.com/2006/07/30/inform-enters-the-search-economy/#comments Mon, 31 Jul 2006 03:39:38 +0000 Scott Karp http://publishing2.com/2006/07/30/inform-enters-the-search-economy/ Inform.com has wisely gotten out of the Web 2.0 news aggregator business and into the publisher services business. Erick Schonfeld at the Business 2.0 Blog has the scoop:

As readership declines for newspapers and online readership grows, every publisher faces the threat coming from the edge of the network. Sites like Google News, Yahoo News, and Digg are becoming the new destination sites because of the mere fact that they point to where the news is, no matter where on the Web it may be. But on Monday, news Websites ranging from the Washingtonpost.com and The Oklahoman’s NewsOK.com to the Huffington Post will have a new way to counter that threat. New York-based startup Inform, which last year launched it’s own consumer news aggregation site, is rebooting as a search utility for mainstream news sites (yes, HuffingtonPost, welcome to the club). Inform is offering to replace the sub-par search on most news sites, and add in results not just from their own articles and archives, but from the Web as well (including blogs, video, and audio).

Since Erick has all the details, I’m going to delve into two key questions that Inform’s strategy raises:

1. Can content sites with relevant links and search results pull people out of search pathways that originated with Google, Yahoo, etc.?

2. Can parked domains improve ad performance by providing links to real content?

On the first question, Inform’s theory of the case is that searchers who come across a news story on an Inform-powered content site will find relevant links aplenty and continue their quest through those links rather than backing up to the original search results that brought them to the content page. This is an intriguing theory — the key question here is how important are the search engine’s results relative to other relevant links that a searcher encounters? Do searchers have such deep faith in their search engine’s results that they will always go back to the original results page? Or are they sufficiently fickle that a good list of additional relevant links will pull them off their usual path?

My gut says that for Google or Yahoo search, it will be hard to shake users loose from their habit of exploring search results. But for Google News or Yahoo News, it might be an easier task.

So much depends on the value of the content brand. If someone goes from Google News to the Washington Post and finds relevant links, how important is it that those links are being provided by the Post vs. impresonal Google News?

For that reason, I think combating Digg is much tougher, because there the driver is not relevancy than but popularity — users are more likely to go back to their exploration of Dugg stories.

All of this is just speculation, of course — what I’d really love is to see the traffic data from Inform’s first set of clients a few months out. That will be very telling for the future of news online.

Interestingly, Inform is also trying to compete in the search engine wars with key features like clustered results (a la Ask.com) and “did you mean?” keyword clarifications:

Inform1

Inform2

The second question arises from one of Inform’s first clients — parked domain powerhouse NameMedia. Erick argued a while back:

As domainers account for more of the search advertising inventory one of two things will happen. Either the price per click will go down because advertisers will figure out that all those clicks coming from the domainers (which will make up a bigger and bigger portion of Google’s external ad network AdSense) are worthless, or the domainers will get smart and figure out that the best way to get people to click on those ads is if they actually build out their sites with real content. NameMedia, for one, intends to go down that route for at least some of its major domains.

Many parked domains already use scraped content from Wikipedia and other open sites, but Inform seems to be more in the business of providing relevant links than content (of course, links are a form of content).

So here’s the question — will links to actual content compete for clicks with pay-per-click ads that now dominate most parked domains? And if so, why bother with the content? Unless the goal is to turn some of these parked domains into real information sites that people may have reason to go back to.

What could change this equation — and make the domain game a lot more interesting — is the transition to cost-per-action ads, where the goal is not just clicks but actual purchases (or some other high-threshold action). In that case, there maybe a stronger argument for parked domains’ providing a more substantive context CPA ads.

One last interesting question is how Inform fits in with all the deals that Google and Yahoo have been cutting with news organizations:

Google and Yahoo, along with dozens of other Internet companies, have been quietly agreeing to deals that compensate some of the country’s top news organizations for their content and help drive more traffic to their Web sites.

Recently completed deals, which include arrangements in which media organizations such as the Associated Press will be compensated on a pay-per-click basis, could herald a major shift in the relationship between the old media and new Internet gatekeepers.

“The people who own the content did a lot of work to generate the content,” Google Chief Executive Eric Schmidt said in an interview with the Mercury News. “We want them to get the majority of the revenue from advertising.”

Looking at the big picture, Inform’s approach speaks to a future where the competition over relevant links, the coveted click, and the holy grail of meaningful actions will become ever more intense.

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]]> http://publishing2.com/2006/07/30/inform-enters-the-search-economy/feed/ 4 MySpace’s Business Model Conundrum http://publishing2.com/2006/07/28/myspaces-business-model-conundrum/ http://publishing2.com/2006/07/28/myspaces-business-model-conundrum/#comments Fri, 28 Jul 2006 21:02:08 +0000 Scott Karp http://publishing2.com/2006/07/28/myspaces-business-model-conundrum/ I’ve been predicting for a while that companies would find ways to leverage the community marketing power of social networking sites like MySpace without the network seeing any financial benefit. Here’s a perfect example (via The Economist):

MySpace seems to offer a chance for companies to take their marketing into new, potentially more lucrative territory, by becoming, in effect, members of their customers’ network of “friends”. A growing number of firms have established their own pages on MySpace, to which users can link. In the process, some are getting into bed with some unlikely partners. Earlier this year, for example, Unilever, a consumer-goods giant, hooked up with Christine Dolce to promote Axe, a deodorant. Ms Dolce, who goes by the alias ForBiddeN, boasts around 900,000 “friends” who link to her MySpace page. Bleached, buxom and with impressive marketing savvy, she is arguably the most successful brand to emerge from MySpace, and has already launched a line of clothing.

That made her perfect, Unilever concluded, to draw in the 18- to 24-year-old lustful lads to whom Axe is shamelessly marketed. So Ms Dolce hosted an interactive game, called “Gamekillers”, based around dating tips and designed subtly to promote Axe. Some 75,000 MySpacers signed up for it.

It’s not clear whether MySpace is getting any revenue from ForBiddeN’s Axe deal or any of the ads she runs for her own products. My guess is if they are, it’s not a significant percentage of the total dollars in play (please let me know if you’ve heard otherwise).

The risk to MySpace and other social networks is that savvy users like ForBiddeN will monetize the attention of other MySpace users and cut MySpace out of the loop.

MySpace is serving ads on ForBiddenN’s page:

Forbidden - Christine Dolce

But I’ll bet Christine Dolce’s own ads are getting a lot more attention:


Forbidden Pherlure

So what if MySpace tries to strong arm their way into the loop?

The users will just go elsewhere. Ask Friendster. (Or MySpace users who found their accounts missing.)

There is also an opportunity for ad networks to cut out the social network middleman — uEndorse, for example, is creating an ad channel that allows social network users to chose ads that appear on their pages and to endorse those commercial messages.

As I’ve said before, I think the big opportunity is in giving users a piece of the action.

Users will increasingly want to monetize rather than BE monetized.

Donna Bogatin (one of my favorite skeptic bloggers) does some back of the envelop math to estimate that MySpace is currently able to squeeze about $2 out of each user on average:

Using very rounded numbers, here is a “quick and dirty” analysis:

* MySpace 2005 acquisition price: $580 million
* MySpace 2006 “friends” user base: 100 million
* MySpace 2006 ad revenues: $200 million

MySpace acquisition price reflects an approximate multiple of $5-$6 per “riend.”

MySpace is currently generating approximately $2 in revenue per “friend.”

This assumes, of course, that MySpace is able to act as the intermediary for each user’s attention…but when you live by the “users in control” sword…

UPDATE

According to the WSJ:

Popular members like Ms. Dolce represent something of a dilemma for MySpace. The site says it has no problem with the photographs and content on Ms. Dolce’s page, which, while racy, stop short of being pornographic. Recently, however, MySpace, which is owned by News Corp., has been working to promote a family-friendly image to appeal to potential advertisers — some of whom could be leery of sexually suggestive pages like Ms. Dolce’s.

Ms. Dolce’s commercial deals have occasionally run afoul of MySpace’s rules. The service doesn’t allow using the network for direct commercial gain; because of the site’s regulations, Ms. Dolce is prohibited from sending mass messages to her MySpace friends about the products she’s paid to endorse.

And yet Dolce is running ads for her own products on her MySpace page.

Why is it that information on the economics of MySpace is always so sketchy and fuzzy?

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]]> http://publishing2.com/2006/07/28/myspaces-business-model-conundrum/feed/ 8 3 Million Bloggers Looking to Make Money http://publishing2.com/2006/07/19/3-million-bloggers-looking-to-make-money/ http://publishing2.com/2006/07/19/3-million-bloggers-looking-to-make-money/#comments Wed, 19 Jul 2006 18:22:41 +0000 Scott Karp http://publishing2.com/2006/07/19/3-million-bloggers-looking-to-make-money/ The Pew Internet & American Life Project released the results from a blogger survey today, which detailed the reasons why bloggers blog. The report focuses on some notion of storytelling vs. journalism (whatever), but what jumped out at me was that 7% of bloggers said that making money is a major reason why they blog.

Why Bloggers Blog

(You can get the full report here.)

This was a relatively small sample survey of U.S. bloggers, but for the sake of some back of the envelope calculations let’s assume that this is roughly true for all of the 48.8 million blogs currently being tracked by Technorati. That’s more than 3 million bloggers looking to make money (only about a third of them in English).

Talk about a long tail.

No wonder Google makes billions of dollars from AdSense — and no wonder there are so many new ad networks looking to get a piece of that action.

For my part, making money is not the principal reason why I started Publishing 2.0, but it seems silly not to make money if there are viable ways to do so that don’t compromise other goals, which is one reason why I’ve done a lot of experimenting with ads on the site (also to learn by doing).

I just answered a BlogBurst survey that is trying to gauge the importance of making money — I wrote back and told them that damn straight it’s important. Here’s what I have a problem with:

Publishing 2.0 on SFGate

Where’s my name? More importantly, where’s my share of the revenue for the display ads?

With 3 million money-hungry bloggers, I hope for BlogBurst’s sake that this is in the works.

Revenue sharing — whether with bloggers, people generating content in other forms, people making a purchase, or people just giving their attention in general — is the new paradigm, and companies in the new media space are well advised to “democratize” their business models.

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]]> http://publishing2.com/2006/07/19/3-million-bloggers-looking-to-make-money/feed/ 39 MySpace Is Still Growing…At Least in Terms of Visits http://publishing2.com/2006/07/11/myspace-is-still-growingat-least-in-terms-of-visits/ http://publishing2.com/2006/07/11/myspace-is-still-growingat-least-in-terms-of-visits/#comments Tue, 11 Jul 2006 20:03:30 +0000 Scott Karp http://publishing2.com/2006/07/11/myspace-is-still-growingat-least-in-terms-of-visits/ According to Hitwise, MySpace accelerated past Yahoo and Google…in terms of visits, that is.

MySpace Traffice - Hitwise

No word yet on whether revenue growth has matched traffic growth. I’m on the edge of my seat to see the next News Corp quarterly earnings report. If the revenue curve matches the traffic curve, I’ll be the first to agree with Jeff Clavier and the many others who have declared News Corp’s acquisition of MySpace for $580M a “bargain.”

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]]> http://publishing2.com/2006/07/11/myspace-is-still-growingat-least-in-terms-of-visits/feed/ 0 Gawker’s Restructuring, Old New Media, and Bubble 2.0 http://publishing2.com/2006/07/03/gawkers-restructuring-old-new-media-and-bubble-20/ http://publishing2.com/2006/07/03/gawkers-restructuring-old-new-media-and-bubble-20/#comments Mon, 03 Jul 2006 13:23:54 +0000 Scott Karp http://publishing2.com/2006/07/03/gawkers-restructuring-old-new-media-and-bubble-20/ Gawker’s Nick Denton has announced a restructuring, including a staff shake-up and the sale of two under-performing sites. Nick is a smart guy, and he’s clearly getting ready for the inevitable moment when the new media bubble begins to deflate — a “perversely countercyclical move” he calls it.

What I found most fascinating is the traffic trend chart that Nick posted:

Gawker Traffic Trends

If you look at the growth in Gawker’s most successful sites, you’ll see that what sells in new media is what has always sold in media:

1. Porn – Fleshbot (NOT work safe)
2. Gossip – Gawker, Defamer
3. Sports – Deadspin
4. Games – Kotaku

Gizdmodo represents a relatively new category that was underserved in mainstream media — gadgets for geeks.

The two sites that Gawker is selling, Sploid and Screenhead, were also attempts to go after established media niches — supermarket tabloids and Boing Boing.

With all the talk of revolution, it’s amazing how little new there is in the media galaxy. David Carr writing about the Gawker restructuring in the Times observes:

But the whole digital veneer masks a bit of a media traditionalist. His sites are arrayed over very common contemporary interests — celebrity, pornography, sports, Hollywood — that would not be out of place in mass magazines (a dead-tree medium, by the way, that he believes is far from dead). He thinks all of the bluster around blogs, fueled in part by AOL’s purchase of Weblogs, has brought stupid money off the sidelines. He has felt the touch of clammy hands from venture capitalists more times than he would care to count.

Mathew Ingram makes a similar observation:

In many ways, Denton’s Gawker.com stable — much like Jason Calacanis’s very similar Weblogs Inc., now owned by AOL — are more like traditional magazines than they are like blogs. They have short items posted regularly, just like blogs, and they often have personality and a point of view just like blogs, but many of them don’t accept comments (Valleywag makes you apply to be a member who can comment) and don’t really have a sense of community about them.

I’m not saying any of that is bad — I’m just saying they are very much like magazines, and magazines need to be ruthlessly managed and pruned. And as Nick points out, online magazines are even more vulnerable than the print kind. “The barrier to entry in Internet media is low,” he said. “The barrier to success is high.”

Nick himself talks about the realities of advertisng that old media companies have face for decades:

First, advertising is a fickle thing. Particularly the entertainment advertising upon which so many websites depend. A change in the advertising industry’s conventional wisdom, cutbacks by the studios: it wouldn’t take much to prick the current exuberance. Better to sober up now, before the end of the party.

I wrote a while back about the bubble in media — add this to the mounting evidence.

Nick concurs: “There is no doubt that there is a bubble right now,” he said.

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