Monday, January 31, 2005

Tough love you can't paper over

With merchants increasingly conscious of how well their ads pull, the newspaper industry's relationship with retailers is "at risk," says an analyst who witnessed a tough-love encounter last week between news execs and some of the largest advertisers still patronizing them.

The occasion was the INMA summit in Miami, where vice presidents from Home Depot and Walgreen's expressed significant concerns about the effectiveness, efficiency and credibility of newspaper advertising. These are not exactly novel concerns, though they will be duly reported in a moment.

But newspaper execs will be startled by what Deutsche Bank analyst Paul Ginocchio learned when he got back to his office in New York and started crunching some numbers.

Down in Miami, Paul and fellow conferees were told that Walgreen's and Home Depot respectively spent 75% and 50% of their ad budgets on newspaper advertising. In checking the independent TNS Media Intelligence/CMR industry database, Paul found that Walgreen's reportedly puts 52% of its $159 million ad budget into newspapers and that Home Depot puts only 15% of its $636 million ad budget into newspapers. The difference between stated market share and CMR's numbers is a quarter-billion dollars.

No one at Home Depot or Walgreen's has responded to requests for clarification.

The good news for newspapers is that Home Depot still likes them so much that they run inserts 52 weeks a year, according to comments Paul attributed to John Ross, the vice president of advertising for Home Depot.

The bad news from Home Depot, according to Paul, is that newspapers deliver one the lowest returns on investment of all the media in Home Depot's toolbox. Home Depot's best media deliver $18 in sales for every dollar of advertising, while the the worst fetch only $5 in sales per dollar spent. Newspapers are "at the bottom of the range," reports Paul.

Given this relatively limp ROI, Home Depot feels "the retail industry's historical relationship with the newspaper industry [is] about to change," says Paul, adding:

Due to retailers capturing more customer data via in-house credit cards, loyalty programs and online sales, retailers now have much more information about their customers. As direct mail and online ad results are much more auditable and tangible, they are going to capture ever-larger allocations of ad budgets.

If newspapers are not able to segment more precisely, make themselves more measurable and help retailers reach their overlapping customers (via comparing databases and by household-by-household targeting), then newspapers will continue to lose retailers' ad dollars.

Walgreen's ad VP Craig Sinclair expressed concerns over the practice of increasing newspaper circulation by giving non-subscribers copies of newspapers purchased by a third-party such as a merchant or hotel. "Does the reader really want the [newspaper] or not?" he is quoted as asking.

Paul says advertisers are "confounded" as to why the newspaper industry is more focused on starting free newspapers and cutting expenses than on shoring up their flagship titles and investing in such strategic initiatives as new media and direct-marketing capabilities. "These speakers delivered a fairly harsh message to the industry," says Paul. "But, of course, it's in their best interests to do so."

It also would be in the best interests of the industry to listen.

Thursday, January 27, 2005

Let them entertain us

From the John F. Kennedy assassination to Janet Jackson's wardrobe malfunction, video clips this week suddenly became easy to find online at Yahoo. This engineering and marketing coup is one of a series of structural jolts that will unhinge the nearly $1 trillion global entertainment industry.

With video now as simple to search as text, advertisers can use this persuasive medium to connect directly with potential customers. They won't have to cram their messages into 30-second commercials scrutinized by network censors. They'll have room to spread out and tell the story they want.

Flush with the considerable sums saved by not buying pricey network commercials, advertisers will tailor highly-efficient custom spots to particuilar audiences like Hispanics, new mothers or cattle ranchers. With a little ingenuity, costs can be driven even lower by outsourcing ad production and placement to the customers themelves.

People who sell TV spots should worry about this.

A recent notable web commercial is the Red Cup video put out by Starbucks during the holidays. Designed to be passed along virally, it is not yet picked up in Yahoo's video index under "Starbucks," "coffee" or "Santa Claus" (despite Mr. Ho-Ho-Ho's cameo in the movie). As Yahoo gets better at indexing video -- and advertisers get better at tagging their stuff -- look for commercial "movies" to appear prominently in future searches.

In a world of quality home-video cameras, high-capacity computers, reasonably priced editing software and ample bandwidth, advertisers can encourage their customers to make spots for them.

General Motors is getting a free ride, so to speak, with an exhuberant video of a desert road rally produced by rattlesnake-braving Hummer fanciers in Southern California. In the future, GM could encourage Hummer-lovers to make more movies by awarding a huge prize to the effort with the greatest number of hits -- such as, say, a month of free gas.

Or, try this: If you are taping your daughter's volleyball game, why not superimpose a Nike swoosh, add a counter in the background, post the production on the web and collect an honorarium every time someone clicks the flick? You either can pocket the money or donate it to the school athletic fund.

Advertisers may worry about the appropriateness of content and click fraud, but these issues can be overcome. Videos can be screened in advance and monitoring metrics can pinpoint fraudulent activity.

A parallel phenomenon is the production of phony ads that spoof, or worse, malign a brand. Volkswagen has been trying to stop an unauthorized online video that features one of its cars in a simulated terror bombing. As VW is learning, rogue spots can't be stopped, but the producers of most of them would rather be paid to make legitimate commercials than toss bombs. After-the-fact litigation unfortunately won't work; co-opting the culprits generally will.

Searchable online video initially will manifest itself as more of an irritnant than a crisis at the networks. But the budgetary pothole will turn into a sucking sinkhole when the major studios start selling their product directly to consumers on the web via both pay-per-view and subscription.

A wholesale shift to online video distribution won't happen until the majors are confident their content is safe from bootlegging, but solutions are close at hand to provide a reasonable degree of control. Although institutional interia makes the studios reluctant to change their monolithic business model, they will be prodded to action by the hungrier independent studios.

In their eagerness to build sales and margins by cutting meddlesome middlepersons out of the distribution chain, the indies aren't nearly as worried about content protection as the big guys. With video search a reality, there is nothing stopping indie film makers from letting it all hang out. Their time is now -- and evermore.

Independent musicians will have to wait a bit longer for music search to be perfected, but help appears to be on the way.

The Meldex system, designed by the New Zealand Digital Library Project, allows a user to serach for a song by playing notes on the system's virtual keyboard, humming the song into a computer microphone or naming lyrics in a text query. If you type in "love," for example, you can hear the music to "I Gave My Love a Cherry" pecked out on a cheesy-sounding piano. Maybe Meldex is the answer and maybe it isn't. But something will be.

The bad-boy version of Napster showed consumers not only how to rip off tunes, but also how to cherry pick music to suit their individual preferences. iTunes and others are conditioning them to prefer buying songs by the "each." Improved music seach will give every musician equal shelf space in the online listening booths soon to appear at Google, Yahoo and other search meccas.

Yahoo's video-search scoop is a major victory in the three-way tussle among the entertainment, media and technology titans for the control of the Holy Grail: real-time, customer-driven, individualized home entertainment.

Combatants in the wide-ranging battle for your entertainment dollars will include, but not be limited to, the TV networks, the cable companies, the RBOCs, the studios, the electronics giants, the search portals, the software powerhouses and, of course, their platoons of lawyers and investment bankers. (To see whose skin is in which game, see the table immediately below.)

Because the stakes are large, the problems are difficult and the solutions are complex, the war will be characterized by many battles among an endless array of shifting of alliances.

So, pull up a chair, fix some popcorn and let them entertain us.

Posted by Hello

Wednesday, January 26, 2005

A not-so-dumb cluck

We all know how frustrating it is when you want to insert the sound of a rim shot or a clucking chicken into a phone call and just don't have a convenient way to do so. Well, problem solved.

PhoneBites, a San Francisco start-up, has created a headset that lets you slip any of 10 sounds into a cellphone call at will. In addition to the rim shot and clucking chicken, the RAZZ headset (price: $19.95), features a crying baby, a moan, a giddy laugh and the all-important fart.

In an instant car-pool survey of three tech-savvy 15-year-old girls, we found 33.3% thought it was "cool," 33.3% thought it was "weird" and 33.3% said "huh?"

After conducting presumaby more research into the matter than I, three venture capital firms have given the company $3 million to develop a downloadable "suite of interactive content and voice-productivity applications." The benefactors are Garage Technology Ventures, Cardinal Venture Capital and the Siemens Mobile Acceleration.

While most of us can ad-lib a pretty decent cluck without elaborate technical assistance, this technology looks to have legs as another pipeline for selling consumable audio (and perhaps other products like games) to the same people who buy $2 ringtones.

Personally, I am not going for canned sound effects. Any bodily sounds you hear from me will be strictly live productions.

Monday, January 24, 2005

An embarrassment of dot spots

The report of a shortage of online ad inventory is greatly exaggerated.

A lack of space to accommodate eager online advertisers was cited by the New York Times as the reason why four media goliaths bid up the price of CBS-MarketWatch, which joins the Dow Jones fold this week after notching a $520 million payday.

While it may be true that DJ and other establishment media companies think that they are facing a shortage of dot-com spots, their fear represents a profound misunderstanding of this Internet thing.

Yes, Virginia, there is a limit to the number of ads that can be pooped -- I meant to say "popped" but the Freudian typo was too good to fix -- over, under and next to the first page of any big-name website.

But the nuggets of gold at the end of the cyber-rainbow are the countless unexploited advertising opportunities available at all the wondrously segmented web sites and blogs that focus on everything from digital photography and rogue taxidermy to Linux and school menus in Gaffney, SC.

These "boutique" sites may appeal to comparatively small audiences, but they make up in passion and loyalty what they lack in aggregate eyeballs. Significantly for advertisers, the sites deliver self-selected, pre-qualified blocs of consumers who fit a predictable and largely homogeneous profile.

Connect advertisers with the avid readers/shoppers at these disparate destinations, and watch online advertising breeze past the back-to-back 20% gains projected for last year and this one. Of nearly $10 billion in online ads sales in the US last year, more than 40% were direct-response ads linked to keyword searches on Google, Overture and similar services.

New kinds of ad ops with the same characteristics as keyword search -- easy categorization, efficient insertion and pay-for performance pricing -- will create an limitless inventory of advertising on the Internet, on podcasts and over cellphones. Beyond key-word search -- not that there's anything wrong with it -- new formats that come to mind include blog ads, RSS ads, coupons and try-to-buy programs. Anyone out there got any other thoughts? Please comment.

Meantime, feel free to sell all the dot-spots you want. We'll make more.

Sunday, January 23, 2005

Rue the mugging of morgue readers

It is oddly strange and strangely irritating that many newspapers charge for searching their online archives. Let's review the facts, as painfully obvious as they may be:

Fact 1: Which current events are the most interesting to the most people most of the time? Duh! The latest events. That's why we call it "news," isn't it?

Fact 2: Which current events ordinarily are closest to heart, hearth and pocketbook? Double duh!! Local events.

Fact 3: What is the single most valuable and proprietary product of a local newspaper? Triple duh with a cherry on top!!! The latest local news.

Therefore, one may fairly conclude that the biggest opportunity for monetizing online newspaper content ought to be charging for the freshest local news. Contrary to this seemingly impeccable logic, however, most newspapers give away the news for free on the web, but then charge a nuisance fee for fishing an old article out of their electronic morgue.

For the uninitiated, "morgue" is what we called the place where old, yellowing clippings were filed in little envelopes for future reference. They have been replaced by vastly superior searchable online digitized multimedia databases. But old clips, which serendipitously contained interesting info-bits on their flip side, really were more fun to read. End of modest digression.

Charging $2 for a digital link to a soup recipe or the picture of the Kiwanis car wash really makes people mad. No one likes being nickel and dimed, and newspapers battling declining circulation need all the friends they can get.

The big newspapers got into the business of charging for clips when they licensed access to their archives to large database research companies like Lexis-Nexis. Under these contracts, papers are required to charge something for the use of their archives.

For the biggest newspapers, the aggregate licensing revenues may seem to outweigh the irritation caused the occasional users clipped $2 to look up an article. Smaller papers following the lead of the big guys have less of an argument for charging for clips, because their licensing sales are not that material. For papers large and small, a kindler, gentler approach would be to allow registered site visitors three or six free peeks a month before they have to pay for the use of the archives.

Most people have little personal interaction with the newspaper, except for a limited number of out-of-the-ordinary circumstances. Some are delightful, like having your kid's picture on the front page. Others are painful, like turning in your aunt's obituary or being exposed as a parking-ticket scofflaw. Newspapers can't bring back Aunt Ida or pay your parking tickets, but they can remain valued and respected neighbors by serving their readers with grace and compassion.

In those rare, often emotional, moments when readers interact with a newspaper, they form a strong and lasting impression of the people and the institution. For a business that depends so much on goodwill and public confidence, it makes no sense to ding readers for a lousy $2 when they only want to know the heft of last year's prize pumpkin.

Newspapers need to quit the clip job.

Friday, January 21, 2005

A very busy news-quilting bee

Heard the one about the woman charged with driving under the influence of alcohol after downing three glasses of Listerine?

That's not the straight line for a joke, though it could be. It's actually a breaking story at TakeBacktheNews.Com (TBTN), a do-it-yourself news site that formally launched this week.

Apart from oddities like the Listerine lady and a Christian group concerned about SpongeBob's unspecified "gay" tendencies, TBTN is attempting to present a serious tour of world news identified by a growing corps of citizen correspondents. Accordingly, you can click to view continuously refreshed sections covering international, political, entertainment, business, cultural and sporting news.

Since the site opened officially on Jan. 17, founder John W. Little reports that membership has grown to 500 correspondents and page views are running 8,000 per day -- or, a rate of 250k per month. The site ranks 3,698,333 on Alexa.Com (vs. Yahoo at No. 1), but everybody's got to start someplace.

Although the name of the site suggests it is a maverick, grassroots news operation, every article is sourced forthrightly to a name-brand news medium. Self-assigned citizen correspondents, who must register to contribute to the site, scour the web for fresh stories and send the links to TBTN. John and a few good buddies work 18-hour days to confirm the link and slot the contribution into the appropriate place on the web site.

TBTN calls itself a "news-sharing community" and is not to be confused with a citizen's journalism collective, says John. "We are not into grassroots reporting, because there is no way to ensure the credibility of most of that kind of material," he explains, "We value the product more than we value the participation," although the site in designated areas welcomes comments and home-grown editorials.

Still, John says there is a psychic payoff for TBTN news scouts. "Just submitting a story in a sense is participatory journalism," he says. "You submit a story and a link and help to determine what other people see. People are identifying with that."

TBTN is off to a good start as an over-flowing, almost overwhelming, "in" box filled by a growing cadre of information kleptomaniacs. But it may be too much of a good thing. With eager correspondents competing to contribute every scrap they can to the news-quilting bee, TBTN would benefit from further intervention from its overworked editors.

John likes to compare TBTN with the Drudge Report, a highly-trafficked news-tip service with a nasty, right-leaning edge. Drudge's success stems from, first, the need of the powerful and famous to assure themselves he hasn't written about them that day and, second, the fact that it is a short screenful of carefully selected, decidedly provocative items.

Drudge is a quick scan, not a lifestyle. TBTN does not have to ape Drudge by shoehorning all the news onto one screen, but it does have to become faster, easier and more convenient to digest. That will require focus on certain topics, certain articles and certain events.

If John wants to Take Back the News, he needs to Take Back the Site.

Thursday, January 20, 2005

Spam: It ain't chopped liver

Nearly 44% of respondents have curtailed their use of the Internet because of spam, spyware and similar toxic schlock, according to a survey by Osterman Research, a consulting firm that helps marketers worry about such things.

These findings are not good for anyone doing business on the Net. Not even the lucky companies selling filters, blockers, detectors and other gizmos promising to thwart spam, viruses, spyware, adware, worms, Trojan horses and other miscellaneous malware.

If people are sufficiently overwhelmed with unproductive enhancements to their productivity enhancers, they will go back to reading newspapers, sticking stamps on Hallmark cards and shopping in malls, where, heaven help us, they might have to pay retail.

If you think there ought to be a law against cyber-borne junk, then you would be glad to know that the feds have thoughtfully supplied us with one. It is called the Controlling the Assault of Non-Solicited Pornography and Marketing Act (CAN-SPAM).

When the initiative went into effect on Jan. 1, 2004, it was too much to hope that it would cleanse our "in" boxes of pitches for ink cartridges and bimbos. That's because the act merely required spammers to (a) identify themselves and (b) allow recipients a way of opting out of future missives.

You will be shocked to learn that CAN-SPAM has been spectacularly ineffective. Ten out of every 13 emails in 2004 were spam, according to MX Logic, a spam-trapping company that "processes billions of messages each month for over 3,000 organizations worldwide." Based on a survey of 10,000 randomly selected unsolicited emails each week, MX Logic says 97% of the spam last year did not comply with the aforementioned (a) and (b) requirements of CAN-SPAM. Shame on you, naughty spammers.

Apart from its prodigious lack of decorum, spam costs businesses between $90 and $2,000 per employee per year, according to a quick survey of available guesstimates. If you run a business and want to gauge the costs to your organization, several spam-fighting companies have handy cost-o-spam calculators on their web sites. Just Google "cost of spam."

Although everyone knows the spam problem is huge , the chore of quantifying it has daunted even such industry leaders as Steve Ballmer, the CEO of Microsoft. Anti-spamites gasped last year when Ballmer said Bill Gates, the man who needs no further introduction, gets a staggering 4 million pieces of spam a day. Turns out that Steve was off by a factor of about 364. In reality, Bill gets only 4 million spams a year.

Still, that ain't chopped liver.

Wednesday, January 19, 2005

Open source, open tsoris*

A gaggle of journalism's elite is convening at Harvard this weekend to agonize over the credibility of the media in the age of the blog -- as though they actually could do anything about it.

If these wise men and wiser women weren't able to stop Jayson Blair and the CBS Memogate crew from polluting Official Media's punchbowl, how are they going to housebreak the growing, global mass of anonymous bloggers? And, with all due respect, who put the gaggle in charge, anyway?

The valedictory for this not-so-modest undertaking was sounded by the thoughtful NYU prof Jay Rosen, who rightfully observed that "professional journalism is no longer sovereign over territory it once easily controlled."

Now that contemporary technology has endowed an infinite number of homo erecti with the ability to define and opine on events as they see fit, how is anyone going to enforce standards for open-source news?

Sure, you can suggest that bloggers attribute and verify information. You can urge journalists to take blog tidbits seriously, and, when taking them, to forthrightly credit the source. But the outcome will depend on the skills, integrity and intelligence of each individual practitioner. Odds are, everyone will not play nice.

If you look at the history of the mass media, you will find the press has been used more often as a bully pulpit than a holy one. When political parties and press lords lorded it over the newsrooms in this country, most journalists rivaled Karl Rove in their ability to dish invective and deceit. Perceptive readers, though undoubtedly amused, were not likely to confuse the news with the truth.

It really is a latter-day, mostly American, conceit that journalists are objective arbiters of fact and opinion.

Only in recent times has this once-scruffy trade been professionalized to the point that its practitioners actually have college degrees, mortgages and 401(k) plans. Sadly for my esteemed friends and colleagues, their professional sovereignty, though fun while it lasted, was more of a pleasant interlude than a lifelong entitlement. Now that airline pilots, software engineers, printers, physicians, retail clerks, teachers, garment workers and countless others get no respect, what makes you think journalists are to be spared?

Meantime, back at the worldwide info-scrum, truth-seeking will become an increasingly iterative, messy and non-linear process, forcing readers to resort to their own wits to separate fact from friction. Open source for them will be more like open tsoris*.

* tsoris n : (Yiddish) trouble and suffering

Forrest Gump for CBS anchor

In the continuing farce within a farce that is CBS News, we learned today that the Tiffany Network is considering an ensemble cast to anchor the Evening News when Dan Rather exits.

Comedy Channel kibbitzer Jon Stewart, who has been widely discussed as a potential member of the team, would be a popular choice. But the network at this point needs some gravitas.

They ought to be looking for a lead anchor who has been up-close-and-personal with all the major figures of the 20th Century. Someone, in short, like Forrest Gump.

Friday, January 14, 2005

Sheetrocking and rolling at HGTV

If you want to know how to leverage legacy media assets into a reader-pleasing web site rich in direct-response advertising opportunities, go to the new HGTVPro.Com. While you are there, you also can learn how to replace a toilet.

Using content from the Scripps home-improvement cable channel, HGTVPro has launched with more than 100 videos and articles aimed at both home handymen and professionals. Spanish versions for much of the stuff is promised for the future.

How-to tips are seamlessly blended with product pitches. Rustoleum provides painting tips, Armstrong talks about linoleum and so forth. Sorted by topic, demonstration videos start with a brief commercial while the main attraction downloads. As the spot rolls, links offer more information and dealer locations and adjacent ads push tools appropriate to the job.

In addition to edge-of-your-seat video like the one showing how to install lump-free sheetrock, the site is studded (cheap construction pun intended) with banner-ad and other sponsorship opportunities. Today, the site is showing ads from, among others, GMC, Moen, Lowe's and Purina.

Scripps is pushing the launch of the site with a sweepstakes in which you win not only a luxury dream home in Texas, not only an SUV large enough to live in by itself, but also $250,000 in cash. To be sure, the site also will be plugged heavily on the HGTV cable channel and the channels of its cocooning cohorts, Food Network and Fine Living.

Collectively, the Scripps channels publish a ton of email newsletters to cross-promo its properties and build a segmented database of direct-marketing targets. How are they doing? Scripps says 100,000 building professionals and 500,000 home enthusiasts have registered for the Pro newsletter.

Much as I would like to discuss this further, I've got to go. I have this sudden urge to hang some sheetrock.

Thursday, January 13, 2005

Podcasting, the trouser-optional medium

In the same way bloggers have taken publishing into their own hands, a small, equally determined band of latter-day Merv Griffins has begun filling the Net with home-brewed broadcasts.

Though these grassroots shows are known as podcasts, you don't have to own an iPod or even an MP3 player to hear them. All you have to do is drop by a podcaster's site and click a link to hear what just popped into his head. But the true joy of podcasting is downloading the show to your portable audio player and listening to it whenever and wherever you like. So long, yadda-yadda radio.

With the exception of several shows featuring hopeful garage bands, most podcasts are informal, chatty monologues covering technology, movies, politics, sports and such additional riveting topics as whether the host has taken a shower that day. For the theologically inclined, there's at least one Christian program cleverly called Psalmcast.

The conventions of good taste are strictly optional, as I learned the other day when I tuned into the top-rated Dawn and Drew Show. Drew, who is Dawn's husband, was irritating her by loudly scratching his knee through his corduroy trousers. To appease Dawn as they nattered in the living room of their 1895 farmhouse in Wisconsin, Drew took off the audibly offensive pants. Considerable sophomoric hilarity ensued, but you get the drift.

Not all podcasts are produced by pantless amateurs. The BBC and American public radio are producing podcast versions of some programs. It also looks like most of the Air America repertoire is offered in podcast, thus ensuring everyone equal access to Al Franken as the nascent network pursues additional affiliates.

Because podcasting is so new, it's hard to quantify. Podcast Alley, a directory started by entrepreneur Chris McIntyre, today lists more than 700 casts vs. 500 last month. Chris looks to be getting more than a dozen new submissions per day. Site visitors are encouraged to evaluate the feeds, and several hundred ratings have been published to date.

There are no reliable numbers on how many people listen to a given podcast. Steve Rubel, a New York publicist and self-described blogging evangelist, reported that the Engadget technology blog, which ranks No. 2 to Dawn and Drew at Podcast Alley, gets 50,000 hits on each of its podcasts. The No. 3 podcast reputedly draws 10,000 hits a day.

Although no podcast is going to deliver boxcar numbers any time soon, it is clear that podcasters have the capability of building the sort of loyal audiences that advertisers will love. Podcastvertising, if I may coin a phrase, will not take off, however, until merchants can identify appropriate programs and validate the size of the target audience.

Another hurdle facing podcast advertising is the largely non-commercial nature of the blogosphere. "We're really not going to sell out -- yet," said Dawn, attempting to reassure her listeners in a recent Firefox-side chat. "But we'll get there eventually."

Wednesday, January 12, 2005

We have met the enemy and he is us

The publisher of the Columbia Journalism Review suggests newspaper readership is declining precipitously because readers don't give a fig about public affairs. This may be true to a certain degree, but the primary blame for the decline of the newspaper lies with the industry itself.

In the years since commercial radio launched the Electronic Age, newspapers have not learned to overcome the latency inherent in producing and delivering a printed product. Scooped successively since the 1920s by radio, broadcast TV, 24-hour cable, web sites, email newsletters, blogs, podcasts and even cellphone text messaging, newspapers continue bannering tomorrow's paper with yesterday's news.

Papers are dying because they act like a breaking story isn't news until they write about it. They are dying because they write tedious articles about government process that only a wonk could love. They are dying because they are delivered too late, delivered too wet, or not delivered at all. They are dying because they lack the visual panache of even the simplest magazine, let alone a VH1 video.

They are dying because they have not learned how to produce compelling, must-read stories that play to the strengths of this classic, ageless medium. This is not -- repeat, not -- an appeal to dumb down the papers. Now more than ever, publishers and journalists need to raise the quality of their publications by taking risks and breaking rules to connect intellectually and emotionally with their readers.

Unique among all daily media, newspapers have the staff, time and space to investigate complex issues of sweeping importance. With superb writing and evocative graphics, newspapers can document a festering social problem or move you to tears with a tender human-interest story. Instead of writing for the heads, hearts and guts of their audiences, however, newspapers are playing it so safe that they are downright boring. Readers want to be surprised, informed, angered, moved, amused and comforted. Just about anything but bored.

As circulation erodes and advertising sales wilt, publishers are combating declining revenues by cutting expenses in order to preserve the profit margins expected by Wall Street (and demanded by their annual bonuses). Constrained by tighter resources, editors are forced to fill the columns with cheap and easy stories. Readers yawn. Circulation dips. Ad sales slip. Publishers squeeze expenses. And so it goes...

Even if it is true that more citizens can name the Three Stooges than the three branches of federal government, it is self-defeating to blame reader apathy for the industry's failure to evolve a product that has been begging for an extreme makeover for decades.

Remember what Pogo said? "I have met the enemy and he is us."

Monday, January 10, 2005

De-fib-rilating newspaper circulation

After crunching some numbers, the New York Times today enterprisingly exposed the extent of a phenomenon well known to anyone who has tripped over a copy of USA Today on the threshold of her hotel room.

Several of the largest newspapers in the country hand out unsolicited copies of their publications under the sponsorship of third parties like hotels and advertisers. Thanks to a three-year-old change in the standards by which newspaper circulation is audited, newspapers now can count discounted, third-party "subscriptions" in their tally of paid circulation, thereby increasing the numbers presented to the advertisers who buy media by the bellybutton.

The largest exponent of this dubious (albeit legal) practice is USA Today, which plumps its stated daily circ by 18% to 2.6 million through third-party programs. Next most ambitious is the Denver Post, which has used more than 100,000 third-party readers to inflate its Sunday circulation 13.2% to 783,274. They are in good company with such heavyweights as the Wall Street Journal, the Boston Globe and the Miami Herald.

A third party has to pay at least 25% of the value of each paper if giveaway circulation it is to be deemed legal by the Audit Bureau of Circulation, the industry-funded industry watchdog. So, it was surprising to read in today's NYT that one major Denver advertiser said it was "not exactly accurate" to characterize as a "cash transaction" his sponsorship of the giveaway of several thousand unsolicited Sunday papers over several weeks.

The use of legal third-party subscriptions to fluff flaccid circulation contrasts with the out-and-out fakery that last year embarrassed the Dallas Morning News, Hoy, Newsday and the Chicago Sun-Times. Although newspaper executives will tend to make much of the distinction between kosher and un-kosher number puffing, the long-term value of their franchises will not be sustained through Talmudic discourse, but, instead, through the delivery of efficient, quantifiable and credible results.

Anyone ever hear the one about "truth in advertising"?

Can you hear me now? See me? IM me?

A few decades ago, my wife came home to tell me that a slightly goofy friend of ours had begun selling cellular telephones.

"What are they?" I asked.

"Unwired phones that you carry around with you," she explained patiently. "You can talk to anyone, anywhere, whenever you want."

"Who the hell would want with one of those?" I responded.

With my bonafides firmly established as a technological visionary, I proffer the following thoughts about the bright future for these ubiquitous nuisances.

As all but the oblivious are aware, cellphones long since have moved beyond being mere portable talking machines. The gizmos now connect to the Net to do text (SMS), email and IM. Some serve as a PalmPilot and a phone (or is it the other way around?). Some take still pictures (the sleek new Motorola RAZR has 4x zoom) and a few are grabbing short bursts of video. Reductio ad absurdum, some phones are equipped with Bluetooth technology that lets you avoid being tethered to the phone itself by carrying a tiny a wireless headset that communicates with the host "portable communications device." Can't choose which of the above features to get? Buy the Treo 650. It does it all, if you can bear to lug it around.

But, as the Jazz Singer said in the talkie that rocked Hollywood, you ain't seen nothing yet.

Cellphones are poised to become platforms for the widespread delivery of games, music and video, which, in due course, will rattle the cages of the establishment media companies. Motorola and Apple will help get the ball rolling later this year by introducing iPods embedded in cell phones. And Verizon is touting a new high-speed network that in certain markets reputedly will be capable of supporting video and other bandwidth-intensive entertainment offerings.

Until now, cellphone electronics have been too puny and networks have been to slow to support true-motion video. The first cellphone TV company in the US is MobiTV, which for some time has been offering a clunky video programming service to the Cingular, Sprint and Midwest Wireless customers who are equipped with certain phones. Unless you have one of the handful of phones truly capable of processing live-action video, however, the pictures look like the slo-mo shots of Neil Armstrong loping on the surface of the moon. Even if you have the right phone, the network in your area might not be fast enough to power the signal. Now, Verizon says, next-generation phones and its speedy new net will take things a lot further:
Customers can expect video and games from a variety of familiar and popular sources, such as MTV Networks' VH1 and Comedy Central brands. A relationship with News Corp. and 20th Century Fox will bring Verizon Wireless customers hot exclusive programs -- "24: Conspiracy," "Sunset Hotel" and "Love & Hate" -- specifically designed for mobile phones. A broad offering of content will also be available from NBC, including newscasts made exclusively for mobile phones.
If Verizon really can make pictures fly over its promised super-charged network , the popularity of the services will be a slam dunk, as the perspicacious Presidental Freedom Medal winner George Tenet might say. Provided that cell networks are robust enough to support the powerful new phones heading for market, people -- especially young ones -- will subscribe enthusiastically to these services, grooving on the portability, individuality and immediacy available to them on their teensy, high-resolution screens.

Video on demand, which will be a small step down the road from one-to-many cellcasting, will create significant pay-per-view possibilities for not only established networks (if they are hip to the opportunity), but also to nightclubs, community theaters, prep sports teams, garage bands and even enterprising individuals like podcasters. It's safe to predict that one of the earliest adopters of this immediate and highly interactive medium will be the technologically astute porn industry.

All this new clicking and viewing will create huge and highly segmented databases, enabling advertisers to vector targeted propositions to consumers wirelessly wired to instantly respond. Watch the trailer, check the show times and click here to buy a movie ticket. Click there to test drive a Honda driven to your doorstep by an eager salesperson. Click everywhere to buy Viagra or refinance your mortgage.

As consumer awareness rises, prices fall, devices improve and programming expands, cellcasting will start nibbling at CD, DVD, gaming, move theater, radio and TV revenues. In addition to grabbing a growing share of a family's entertainment exchequer via subscription and pay-per-view services, cell providers cleverly will pre-empt entertainment budgets by offering mad-money accounts that top up to prearranged monthly sums that can be blown in a few keystrokes on songs, sodas, smut or the Simpsons.

Cell companies already have huge subscriber bases; minute-by-minute knowledge of who called whom, and comprehensive individual credit histories. Add entertainment-consumption profiles, buying patterns and the mad-money banking function to the mix, and you have an info-oligopoly powerful enough to make a robber baron blush. This raises interesting public-policy issues best saved for another day.

The gating factor for cellcasting, of course, is network speed and availability. More than two dozen of the world's cell companies have bought into a new DoCoMo standard that promises to multiply by 10x the speed of the 3G network that now represents the state of the industry's art. Within three to five years, if all goes according to plan, this standard will move off the drawing board and onto the airwaves.

Meantime, I am hoping for a more modest engineering feat from my singular mobile-phone provider: The ability to complete a call when I am no more mobile than sitting at my desk.

Saturday, January 08, 2005

Housekeeping note: RSS feed added

At the suggestion of a kind reader, I have added an "XML" tag under the sidebar at the right. You can click on it to add my scribblings to your automatic RSS feed. If anyone knows how to create a "Links" section under the Archives, this techno-klutz would appreciate some advice. Just click on the "Comments" button below. Viagra peddlers and mortgage brokers, from whom I already hear aplenty, need not write.

Friday, January 07, 2005

'Advertising is not going away, but...'

Amazon founder Jeff Bezos, the Adam Smith of modern commerce, offered a few remarks that deserve the attention of those who sell advertising (and other stuff) for a living. Reprinted from an interview with Wired, here is what he said:

About three years ago, we stopped doing television advertising. We did a 15-month-long test of TV advertising in two markets -- Portland and Minneapolis -- to see how much it drove our sales. And it worked, but not as much as the kind of price elasticity we knew we could get from taking those ad dollars and giving them back to consumers.

So, we put all that money into lower product prices and free shipping. That has significantly accelerated the growth of our business.

More and more money will go into making a great customer experience, and less will go into shouting about the service. Word of mouth is becoming more powerful. If you offer a great service, people find out.

I'm not saying that advertising is going away. But the balance is shifting. If today the successful recipe is to put 70% of your energy into shouting about your service and 30% into making it great, over the next 20 years I think that's going to invert.

Amazon is coming off a record holiday season, which featured its best day ever with more than 2.8 million items ordered worldwide -- equal to about 32 items a second. All without buying any TV ads.

Thursday, January 06, 2005

Half and half-not

The price of key words on places like Overture and Google leaped 24% in the fourth quarter to an average of $1.70 from $1.37, according to Fathom Online, a not-exactly-disinterested company that helps advertisers place such ads.

Though it's not possible for a mere journalism major like me to fathom the algorithm that underlies Fathom's assertion, a double-digit increase of even half that magnitude is a strong vote of confidence in the ability of this $4 billion-a-year medium to deliver measurable, credible results.

For those who have been dozing at a remote mountain retreat for several years, here's how key-word advertising works:

Advertisers bid for the relevant key words that enable their ads to pop up next to a search on Google, Yahoo and similar places. If you look up "Mexico" on Google, for example, you will see ads on the right side of the page for hotels, time shares and -- I am not quite sure of the relevance of this -- "sexy singles."

The more you pay Google or Overture, the higher your ad will appear in the column. If others pay more than you, your ad will not appear at all. The advertiser is charged only when someone clicks on it. If your ad does not generate enough clicks, it is suspended and you are advised to either change it or kill it.

Key-word advertisers get individual web pages to track the success of their programs, click by click. Reconciling clickthroughs to actual sales, advertisers can compare alternative ad programs, adjust inventory levels and so on. This takes a lot of the guesswork out of running a business.

Large advertisers are getting more and more sophisticated about key-word, email and other online marketing tactics. Enchanted by the precision possible with such programs, they increasingly are disenchanted with paying big bucks for legacy print and broadcast media, because they can't determine how much mud actually is sticking to the side of the barn.

Legacy media companies still have assets that advertisers find hard to resist: Excellent brand recognition, local market strength and lots of eyeballs. Legacy execs who want to leave a healthy legacy to their shareholders will leverage these strengths by creating appealing new-media (particularly Internet) ad vehicles that satisfy the need for advertisers to know where their money is going.

In the olden days, advertisers would say, "I know half of my ad budget is waste but I don't know which half." So, they kept spending it all. Nowadays, advertisers have a good handle on which half of their advertising is working.

If the legacy companies aren't careful, the half that demonstrably works (not theirs) will keep getting bigger. And the legacy half -- which, I daresay, hasn't seen a 24% quarterly rate increase in many moons -- will dwindle away.

Where's the fish wrap when you need it?

When I joined the San Francisco Chronicle as city editor in 1984, the newspaper was squandering a significant portion of its promotional budget on a color front-page ad on the cover of Editor & Publisher, the weekly trade journal of the newspaper industry.

The Chron was not alone in blowing money on this preposterous ego trip. Many of the nation's foremost newspapers and chains were similarly throwing good money after bad in an effort to impress -- and this is the part I never understood -- other newspapers and publishers. Why? Was the St. Louis Post-Dispatch suddenly going to be persuaded to start advertising for readers in the San Francisco Chronicle?

The worst thing about the Chronicle ads was the ads themselves. "A Great Newspaper Is More Than Fish Wrap," screamed fat type plastered across the picture of a carp flopped on the cover my newspaper. Other variations featured the Chron lining trashcans, birdcages and potting tables.

In what I then thought was my greatest contribution to American journalism, I pestered the publisher into killing the campaign. He put the savings to good use, if memory serves, by replacing the leather in his vintage Benz.

Two decades later, a new article in Wired Magazine has me wondering whether I goofed.

In arguing that the demise of the newspaper industry is pending, the article says a principal reason people don't like newspapers is because they don't want them piling up around the house. What with garbage now collected in big, wheeled plastic tubs; fish being mongered in plastic packs, and movers bundling saucers in bubble-wrap, it's no wonder that people can't think of anything to do with a newspaper but read the darn thing.

It kind of makes you think the Chron was ahead of its time in being the first newspaper to promote the holistic use of the product.

Tuesday, January 04, 2005

Making the case for cannibalism

Newspapers are so good at freely giving away valuable content on their web sites that some are further indulging their cannibalistic impulses by publishing give-away tabloids to compete with their own flagship brands. Is this really a good idea?

"It depends," as my friend, the decisively incisive engineer Ken Wright, would say when I blindsided him with a multi-threaded techno hypothetical. And Ken, being incisively decisive, was always right.

Let's cut to it by considering the following:

Scenario I: 'Red' and 'Red' and read all over

For all intents and purposes, the Chicago Tribune got the freebie ball rolling in late 2002, when it introduced the Red Eye, an edgy-looking tab, self-consciously styled as a hip antithesis to the staid mothership. The stated charter of the Red Eye was to capture the minds of the 18- to 24-year-old crowd, as well as the hearts of the advertisers who covet same.

Don't believe it. Red Eye's true mission was to siphon readers from the wounded Sun-Times, the breezy tabloid in the process of being plundered by Conrad Black & Co. Figuring that the best defense would be to shoot itself in the foot, the Bright One played brilliantly into the Trib's hands by launching its own complimentary tab called the Red Streak. In one smooth move, the S-T pillaged its own paid circulation and simultaneously increased its operating expenses.

Was Red Eye a good idea for the Trib? Yes, in that it forces the Sun-Times to play defense and stands as a major obstacle to anyone with designs on teh Windy City market. The Trib now has a nominal pricetag on the tab and says ad lineage has doubled in the last year, but it's likely that ad revenues are merely switched business from the main sheet. A money-maker, it probably isn't. But the Trib can afford it.

Good for the Sun-Times? No. Not only is the Red Streak undoubtedly losing money, but -- to make matters worse -- it is diverting resources from the No. 1 goal of restoring the battered franchise. With Roger Ebert and a crew of street-savvy writers, the Sun-Times itself should be able to attract the very audience it seeks with the Red Streak. It is the newspaper equivalent of Classic Coke and New Coke, and you know what happened to New Coke.

Scenario II: 'It's just business'

The New York Times Co. is paying $16.5 million to buy 49% of the Metro newspaper in Boston, where the Gray Lady coincidentally owns the dominant Boston Globe. This is no passive investment. The Globe is going to help sell classified ads (and maybe more) in the giveaway published by Metro International SA, the global king of free tabs with 14.5 million readers a day in 17 countries.

Although the Globe considered starting its own free tab, its management evidently decided the Metro investment was a cheaper, lower-risk, surer-fire way to jab the Hub's paid tab, the Boston Herald. Assuming no federal officials agree with the Herald that this alliance is anti-competitive (No hard feelings over the John Kerry endorsement, one hopes), then this is a pretty slick hedge.

To the extent the Metro is successful in selling ads, it probably takes more business from the Herald than the Globe. If Metro fails, then the Globe's risk has been limited, it has more of the market to itself and the carcass of the failed venture will prove a powerful disincentive to future potential interlopers. If Metro makes money, then the Globe gets almost half of it.

"Hold your friends near," said the Godfather. "And your enemies nearer." Call this one a win for the Globe -- and keep your back to the corner when dining in Beantown.

Scenario III: Brand Ex vs. Brand Ex

The Washington Post thought it innoculated itself against an incursion by the Metro Group when it launched a tab dubbed The Express about a year and a half ago. So far, so good. But they didn't count on the likes of Denver billionaire Phil Anshutz, who is using the newly acquired Journal suburban newspaper group as the launchpad for a new free tab cast in the image of his flagship property, the San Francisco Examiner.

Anshutz rescued the rode-hard-and-put-up-wet SF Ex early in 2004. After being divested by Hearst in favor of the larger Chronicle, the Ex suffered through a number of incarnations that left it, in the end, a free tabloid with a feeble pulse. Since buying the SF Ex, Phil's Clarity Media Group has pumped money into expanded circulaton, into increased staff and into decidedly nicer digs than the old office over the burlesque house. Making no small plans, Clarity has registered rights to the Examiner name in nearly 70 cities in the US.

Was the Post wise to cover its flank by launching a tab? Although this is not likely to be an out-and-out money maker, it's a lot like chicken soup in that, if properly run, it can't hurt. If the Express bleeds -- or, better still, kills off -- competitors, the Post wins. If it makes money, then that would be even better. What's not to like?

The $64 question is whether the publishers of free-standing freebies can build successful businesses for themselves. It's great that they are low-cost producers, with smaller, lower-paid staffs and none of the costs involved in running a for-pay circulation operation. But businesses are built on sales, not cost savings.

When it comes to selling ads, the upstart freebies frankly have a higher burden of proof than the established papers, which traditionally had enjoyed the comfort of credible audited circulation. Beyond merely representing that they reach a certain number of readers, freebies will have to quantitatively and objectively prove the efficacy of their advertising. Print-only publications are hard-pressed to do that, but Internet and other new media technologies can deliver the measurable response that publishers will need and advertisers will want.

Indie freebies have to think outside the box. They won't succeed as leaner, meaner versions of the traditional metro publishing model, especially when the model itself is being shredded by a host of new information and entertainment media.

Can the indies do it? It depends.

Sunday, January 02, 2005

My dog peed on your bag. Let's do coffee.

Peter Zollman, a doughty consultant trying to rescue newspapers from self-inflicted extinction, popped some eyeballs during the holidays when he put a big number on a phenomenon that was hiding in plain sight.

Peter, a partner in Classified Intelligence, estimated that Craig's List has cost the San Francisco area newspapers between $50 million and $65 million in classified-ad revenues by simply giving away (mostly) free listings on an expansive and ever-expanding web site.

All ads on Craig's are free, with the exception of $75 per help-wanted listing in San Francisco and $25 for each help-wanted ad in New York and Los Angeles. (The employer entering an ad online pays the fee for every category in which a job is listed; thus, the same ad in three categories would cost $75 in New York.) My cocktail-napkin calculation suggests Craig's could book easily $1 million a month in revenues, though founder Craig Newmark responds that "the estimate could easily be too high, much too high." If I am wrong today, which wouldn't be the first time, it is only a matter of time until the List fulfills my projection.

Craig's typically is among the 150 busiest web sites, according to Alexa.Com, an Amazon-owned index. Craig's averages nearly 20 views per session, or almost twice as many as the leading web destination, Yahoo. Craig's Lists are operating in 68 US cities; 12 European cities; 7 UK cities; 6 Asian cities; 6 cities in Australia and New Zealand; 2 cities in South America and Mexico City. You can see the cities and the relative extent of their traffic by clicking here. You can count on more lists opening in more places.

In reflecting on the Craig's juggernaut, it would be a mistake for newspaper and other legacy media execs to focus only on the loss of past and future ad revenues. Beyond listings for free moving boxes, old kitchen sinks, used Hummers, million-dollar houses and nude, "no sex" modeling gigs, Craig's has become the go-to place for urban dwellers hunting for a plumber; recovering from attempted suicide; hiring a polka band, and of, course, looking for love. Which brings to mind a recent "missed connections" listing from Boston headlined: "My dog peed on your bag on Monday afternoon, can we have coffee?"

Craig's List sprang from the desire of Craig, a San Francisco computer engineer, to create a virtual community to help virtual strangers navigate contemporary metro life. The community, sans promotional dollars, grew organically and exponentially, and Craig has continued to run the list privately with a headcount of 18 souls. Assuming $1 million a month in revenues and no Learjet for Craig, the company could be banking a profit of almost 50 cents on every dollar in sales.

Craig steadfastly resisted investors and would-be acquirers until eBay last summer bought 25% of the company from a former employee who decided to cash out his stock. Even though the folks at eBay said they wouldn't have done the deal if Craig had demurred and even though both sides pronounced the deal "amicable," Craig probably could not have stopped a determined eBay if he wanted to. Since then, eBay has been " a good partner [with a] similar moral compass," says Craig. "However, we're a community service, [and] had agreed that any equity in Craig's List had only symbolic value."

Craig is a thoroughly unassuming incipient millionaire. ("I have no idea where you got the idea I'm a millionaire," he said in a response to my original post. "Sorry, please don't spread that rumor.") He rapidly answers his own email, personally pulls postings that violate the rules of the web site and pursues his own closely held vision for the future of this phenomenon. Without a doubt, Craig could make much more money by charging for more types of ads in more markets. Or, he could avoid the muss and fuss of building his business by selling the enviable brand to any number of eager suitors.

Though Craig at the moment appears to be staying the course, he easily could add traditional news, entertainment listings, sports and weather to become -- Voila! -- an online newspaper rivaling the web traffic of most major titles. Add audio and video, and he becomes -- Voila again! -- a challenger to radio and TV. If he invites his community to contribute to his newsgathering efforts, he wisely will add another (no-cost) tie that binds.

As he ponders his next moves, Craig can take comfort in the knowledge that many media giants are slumbering. When Peter Zollman three months ago asked the executives of 36 large newspapers what they were doing about Craig's List, 14 said "they had never heard of Craig's List or were only vaguely familiar with it." The 14 unperturbed execs included a few who already had robust lists operating on their home turf, according to Peter.

One publishing exec admittedly alarmed by Craig's is Bob Cauthorn, the former VP of digital media at the San Francisco Chronicle. He notes in Peter's report that Craig ran 12,000 employment ads to 4,900 for the Chron in the week of Nov. 21, 2004. The Chronicle itself even advertises jobs on Craig's, reports Bob, "because its own recruitment ads deliver unsatisfactory results." That's gotta hurt.

Which brings us back to the wistful plea of the Boston woman whose dog tinkled on the cute guy's bag. If Mr. Backpack overlooks his ire, he may parlay Fluffy's indiscretion into the pleasurable embrace of the hound's flustered owner. If newspapers can swallow the humiliation of being beaten at their own game, they similarly may find it valuable to snuggle up with Craig.

If they don't act soon, however, they won't have a backback to pee on.

Lost in (cyber)space

Even readers of this blog are entitled to enjoy good writing from time to time. Accordingly, I want to share a nice riff by Michael Bywater, a Cambridge professor and columnist for the Sunday Independent in the UK. The snip is from Michael's book "Lost Worlds" (Granta Books):

For this most documented of all ages, 404 is the Warhol Number: the sign that your moment of fame (or at least your existence's being made available to others outside your immediate circle) is over. You typed out your story, your thoughts, your theory of conspiracy or angels, your tale of triumph or defeat, laboriously, perhaps. You scanned in your photographs. You checked your links. You worked out how the hell to get the stuff into...cyberspace. For a while, you were, if not known, knowable.

Then something changed. Your account expired. You remarried, moved away, died; your Internet company went bust; a hyperlink broke; something. There is always something, the third man in the diabolical trinity: Death, taxes and...something.

So you became 404: Not found. A blank where something once was. And in due course, the web-crawlers, the spiders and the netbots will give up, and even the link to your unfound memory will cease to appear; presently you will become unfit for consideration and disappear into the void beyond the reach even of Google. World
Aleph: the infinity of infinities.