AR&D Reinventing Local Media

I’m no economist, but…

We’re in the throes of a banking crisis due to bad decisions on loans. The credit crisis has never been worse. The dollar isn’t worth a dollar, depending on where you are in the world. The deficit has reached an all-time high. The national debt? Forget about it. Confidence in darned near everything is slipping.

And what does the government do?

It prints more money to give “rebates” (huh?) to taxpayers (um, don’t you actually have to pay taxes to be considered a taxpayer?) in the belief that it’ll help make everything better?

Call me a nut, but this is like 1+2=4.

(but I’m not giving my 300 bucks back, either)

New data from Borrell Associates show an evolving picture in the shares of local online ad dollars, and none of it is really “good” from a traditional media company perspective.

Over a three year period, newspapers have lost 17.2% of market share on average. Television has picked up share (7.6%) since 2004, and that’s due to a more focused effort by stations and the rise of online video, among other factors. But the big gainer is internet pureplay companies (34.4% market share gain), including the biggies, like Google, Yahoo, AOL and MSN.

Remember, this is LOCAL online ad revenues. The category, however, also includes a growing number of niche verticals and other local online sites, many of which are no doubt run by media companies — sans the brand.

Borrell Associates president Colby Atwood told me that these are interesting times, to be sure.

The acceleration in local online ad spending is giving newspaper sites some serious whiplash. Those sites are growing far faster than their print parents, but not fast enough to keep up with the market. New online advertisers are swarming out of the woodwork while newspapers continue to lean heavily on their print customers for online revenues. TV and radio sites shouldn’t get too smug, though. They are gaining share right now, but if they don’t get beyond selling Web packages to their on-air advertisers, they will roll into the same patch of deep sand that is holding the newspapers back.

Colby’s exactly right. Growing online revenues may be putting smiles on some faces, but the truth is the market is growing faster. When you combine radio, television and newspapers, the problem comes into focus (down 11%). It’s not television versus newspapers; it’s traditional media against new.

So media companies will continue to fight for a decreasing share of the local web advertising pie, while pureplays will continue to grow. This is just one of the reasons why we see opportunity increasingly as outside the media brand’s reach/frequency strategy.

(Originally posted in AR&D’s Media 2.0 Intel Newsletter)

Let’s file this one under unreal.

Chez Pazienza, a producer at CNN assigned to American Morning, was unceremoniously fired from his job today — without severance — over the content of his popular and edgy blog, Deus Ex Malcontent (warning: adult language). He had worked for CNN for four years, beginning as a Senior Producer in Atlanta. Chez is a member of my tribe and a friend, and I’m not happy about this turn of events.

According to Chez, he was terminated for violating network policy by not running what he was writing through their vetting system. So he was fired not for blogging but for the content of his blog. “It’s not that I’ve been writing,” he wrote in an email. “It’s WHAT I’ve been writing.” That may be the official decision, but the truth is he was fired because he had the balls to write about the industry without telling CNN. I would add that there is no mention of his connection to the network on his site, and as a producer, it’s hard to justify the notion that he’s in any way a public figure or publicly connected with the company.

What Chez Pazienza is is a damned fine writer and an even better observer and commentator on life. So spot on is the guy that he’s been “discovered” by sites like Fark, Pajiba and the Huffington Post, where he was recently brought on as a guest commentator. The guy is a brilliant new media writer, and CNN’s position is that it’s in their best interests to fire the guy. Go figure. What they should have done is find a place for that sensational talent.

Chez told me he knew that this day was possible, because he was determined to be true to himself, his history, his observations and his craft. Frankly, our industry needs more people like this and a few less of the people who fired him. What’s WRONG with us?

I feel bad for Chez, but I think this will turn out to be a blessing. I know that’s hard for him to see, because he and his wife are alone now in New York with a baby on the way and with only Jayne providing income. This is one extremely talented, albeit angry man, and I can hear the sound of doors opening elsewhere.

The strike is about to end, and Hollywood is preparing to get back to normal. The problem, of course, is that “normal” is the problem, and all the smiles and “atta-boys” in the world won’t change that.

Diane Mermigas has an excellent overview today, and “the problem” is outlined in this statement:

The advertising-supported streaming Web video online is television’s new syndication pipeline and film’s speediest exhibition window–replacing more tightly managed sources of wealth.

I’m sure that Hollywood views the Web as its “new syndication pipeline,” and that’s the problem. They view the disruption as just a shift from one form of mass marketing to another, and that is sadly ignorant. Jeff Zucker said the strike will make them stronger, because it allowed them to look at “the way we do business.” Right. His response so far has been to cut pilots and up-front parties. Now that’s creative!

From my position, I see this a lot. Traditional media is caught trying to either maintain the status quo or move it elsewhere, and that alone won’t save the institution. While this is taking place, venture capitalists with deep pockets are investing in “what ifs” designed to dismantle what the old institution is trying to save.

There is much confusion about exactly what’s happening to the old world, but here is a point of clarity that ought to be at the forefront of everybody’s thinking. From a business perspective, it isn’t the fragmenting, unbundling and disintermediation of “content” that’s causing the problem; it’s the evolution of advertising — how to do business absent mass. We need to pay more attention to that than looking for the illusionary replacement known as the “new syndication pipeline.”

I’m getting ready for a series of meetings, but I wanted to make a brief comment about news today that Google has launched a new “local news” application for its Google News page. This is pretty huge, folks, and it spotlights the need for everybody in the local news business to adopt best practices when it comes to unbundled distribution. Your content won’t show up in Google’s local news application (initiated by simply entering a zip code) unless it is available in unbundled form.

Let’s repeat an old theme. Your portal website doesn’t matter anymore, because people are hanging out where they want to hang out and expecting us to bring our products and services to them.

The following is from our Media 2.0 Newsletter this week.

MICROSOFT AND YAHOO: A LESSON FOR ALL MEDIA (Terry)
History will view the offer by Microsoft to acquire Yahoo as a seminal moment — a turning point — in the evolution of the Web and the web economy. It marks the closing of one era and the opening of another, and it’s a classic case study of old economics versus new. We need to study carefully the reaction to the deal, because it, too, is divided into camps — those who view things through the eyes of the mass, including Wall Street and Madison Avenue, and those who view things through the eyes of the dismantling of mass, including Silicon Valley and the venture capitalists.

Because the question is whose is the prophetic voice? If you read media industry trades and the Wall St. Journal, make sure you also read TechMeme, Venture Beat, CNet and especially the blogosphere.

Michael Arrington, founder of TechCrunch and one of the most influential observers of new media and technology, notes that the merger/takeover is more and more likely with each passing day. Yahoo wants another bid from somebody, but the current debt market makes such a rescue unlikely. Yahoo will take their time, but economic conditions and shareholder demands makes it appear that Microsoft will eventually own Yahoo.

But Arrington writes that this whole thing is evidence of something much bigger, and Steve and I certainly agree:

Whatever happens, the salad days for Yahoo are long gone. 2008 will be the year Yahoo ceased to be one of the big independent Internet heavyweights. They’ll almost certainly become an operating subsidiary of Microsoft, or Google’s whipping boy. And if by some chance the government puts a stop to either deal, they’ll have a short reprieve before facing similar decisions next year or the year after. The world is an unforgiving place. Yahoo is cute, cuddly and likable, but they did not execute the way Google did. And because of that they are quickly turning into collateral damage in an epic war that is really just beginning between Microsoft and Google.

While that “epic war” will be interesting to watch, there’s a lesson for all media companies in how Google has executed while Yahoo has not. As Jeff Jarvis relentlessly observes, Yahoo is the last old media company, “for it operates on the old-media model: It owns or controls content, markets to bring audience in, then bombards us with ads until we leave. Contrast that with Google, which comes to us with its ads and content and tools, all of which I can distribute on my blog. Yahoo, like media before it, is centralized. Google is distributed.”

It is vital that we understand the difference, for Jarvis is spot-on, and local media companies who choose the Yahoo path will ultimately find themselves in Yahoo’s current conundrum. The opportunity exists for local media to seize the Google mission locally — to organize the community’s information and make it easily accessible and useful.

That’s different than driving eyeballs here and there in an attempt to control mass.   <Link>

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WHY MICROHOO! MATTERS FOR LOCAL MEDIA (Terry)
Behind all the posturing and big numbers of Microsoft’s unsolicited bid for Yahoo is an attempt by Microsoft to dominate online ad serving in the same way it dominates the desktops of the world’s computers. Microsoft is a software company and they rightly recognize that whoever operates the online advertising ecosystem (the software) that serves and tracks ads is going to be the dominant tech company of the generation. This is the ultimate prize of the deal, and it ought to concern all of us in local media, unless we’re happy with just being content companies forever.

A Wall St. Journal article Sunday noted that Microsoft has gained desktop dominance by providing the operating software that nearly everyone uses, and its bid for Yahoo is “an attempt to replicate that same kind of broad influence over the Web by supplying the underlying software for placing ads online.”

In the interview, Mr. Ballmer (Microsoft CEO Steve Ballmer) noted that an ad platform is possibly even more strategic than an operating system such as Windows, because it is a system that conveys information about ad pricing and is actually used to collect money for ads.

“So the very strong market position that the market leader has is even more interesting, I think, for all industry participants,” Mr. Ballmer said.

Mr. Ballmer predicted that such advertising engines will evolve in other ways that the greater scale of a combination with Yahoo can help. He said that he expected online ads will be sold through automated Internet auctions.

On the surface, this seems like a good thing. Not a week goes by that we don’t hear someone from this world (a.k.a. “Madison Avenue”) complaining about the lack of an ecosystem similar to what exists offline. We hear that the money flood will come when such an entity exists, and that we’ll only see dribs and drabs between now and then. This kind of infrastructure favors the guy with the deepest pockets, because you can influence just about anything with the right number of GRPs. This is the essence of mass marketing, the “head” in Chris Anderson’s “Long Tail.”

But would this really be a good thing for local media companies?

If you’re the local newspaper, and somebody wishes to buy print, they must come to you and run their ads via your infrastructure. If you’re a TV station, you’re battling for the biggest piece of the money set aside for TV. Those ads will run via your infrastructure. If an agency wants to create a multi-media deal, they can do a little print here, a little TV there, sprinkle in some radio and outdoor, and basically saturate the market. It’s highly efficient and uses the ad infrastructures of each media partner, partners who keep all of the money provided by the contract. In this system, each controls the inventory, price, performance and billing.

The Web, however, is a different animal. Online, a website — anybody’s website — is just a pixel on a page. All are equal. Some may have more pages that others, and some may have higher traffic than others, but structurally, they’re all just a pixel on a page. Hence, the ad ecosystem will service millions of sites in the years to come, and achieving scale for our individual properties becomes more and more problematic. The Web doesn’t belong to media companies; everybody’s a media company on the Web, and that includes many advertisers. Hence, an attempt by the same ad agency to saturate the market doesn’t need to depend on the inventory of the current media company players. An ad impression is an ad impression; the software doesn’t give a ripple chip where that page resides, only that it delivers the proper demos or targets.

If we’re running the ad network, that’s a good thing. If, however, we’re just a node on that network, not only do we have to work harder to justify the spend with us, we’re likely going to be splitting the revenue with a 3rd party now — the network itself. Even the inventory we sell ourselves for our own websites will likely reside on the Microsoft-run ecosystem, and that means a revenue share of some sort downstream.

At a time when traditional media revenues are declining, the real danger is that we’ll end up mostly as content companies — stuck on the most expensive end of the new media value chain,

To repeat a theme you’ve read here before, we must be the controller of the ad infrastructure, even if it means sharing it with the other traditional media companies in town. Then, if Microsoft wants to serve ads in our markets, they have to work through us.   <Link>

My life has gone to the dogs, literally.

In December of 2001, Piffy came into my life. Her history is pretty unique, having come to me via the Rescue911 people through an animal-lover friend in Huntsville, Alabama. Her former owners were on one of the planes that hit the World Trade Center during 9/11. She’s California born & bred, half border collie and half lab. She’s been my friend for many years.

Her name is short for “epiphany,” something I had while dealing with her separation anxiety early on. I came to see that she was completely dependent on my presence, afraid to let go. As she overcame that, I overcame my dependency on people as well. Piffy seems an appropriate name.

And she used to have me all to herself until I moved to Texas. My daughter Brittany moved in with me last summer and brought her dog, Brandi Fate, and my life hasn’t been the same ever since. BF (a.k.a. “Boo-Boo”) is a very tiny miniature dachshund. She’s energetic and full of joy, and she’s caused a few raised eyebrows from Piffy.

The personality of that little dog is truly remarkable, and I can’t begin to tell you how much she means to me.

The two of them cause me to actually stop several times during the day and appreciate the moments that God has given me with them. They’ve become inseparable buddies, despite the differences in size and age. Piffy has become much more clingy, because she’s jealous as hell of all the cuddling that BF gets. I imagine Piffy thinks she, too, can fit in my jacket.

The little one loves to climb on my chest while I’m watching TV in bed at night and force me to kiss her cheek. She leans against my face so hard that I have no choice.

She used to drive me nuts with relentless licking, but now she’s just a kiss whore. It’s as if she just can’t get close enough.

The two of them will chase throughout the house, Piffy in the lead and BF yelping as they speed round and round. Piffy is house-broken, and BF has been litter box trained. When they go outside now, Piffy is teaching the little one how to be a real dog, and it’s absolutely hilarious.

Dogs — like all of creation except mankind — live in the moment, and they live every one as if it was the only thing that matters. The truth is they’re right.

I’ve waited a day to absorb the big news yesterday about Microsoft’s $44 billion, unsolicited offer to purchase Yahoo!.

There are a variety of opinions about the deal drifting around cyberspace, most of them not so good. That’s to be expected, I suppose, given the nature of my tribe and the people I read. The only really positive comments are coming from Wall Street, and that always gives me pause. I certainly think it’s interesting, but I’m always struck by the words “reach” or “scale” when used in analytical stories about mergers. In this case, the story goes, Microsoft can leverage Yahoo’s reach to better scale its online advertising growth.

You hear that a lot these days, as if increasing reach or better scaling were the solutions to all revenue problems associated with advertising. In the world of public companies, it’s ALWAYS about growth, so this is a logical strategy.

The problem with it, though, is that those words were birthed in the history of mass marketing. To be the advertising king, one must be able to “reach” the greatest audience. Yahoo is a walled garden that is stumbling right now, in part, because it has reached a saturation point of sorts. The company cannot create enough content or make content deals with enough people to produce investor-satisfactory growth, and this is problematic when its business model calls for exactly that. The newspaper consortium is there to give them more — and local — impressions, and I keep waiting for somebody in the consortium to take a real hard look at what they get in return. The assumption is that Yahoo cumes more people in a market than the local media companies do, so access to those people through ads that the media company can sell makes them more attractive.

I buy that, but it loses rationality when the company itself needs to add deals in order to sustain growth built around ad impressions under its control. The local media companies want Yahoo’s reach. Yahoo wants their content. And now Microsoft is going to want to sell those same impressions? It’s a reach/scale nightmare, if you ask me. Everybody is looking to Yahoo’s unique visitors as hills laden with gold, but one day somebody is going have an ah-ha moment in understanding that Yahoo’s back simply isn’t (and can’t be) big enough to carry everybody.

Google, on the other hand, doesn’t have that problem, because the Web itself is its platform.

The deal had been the source of speculation for a couple of weeks, where it has been painted as the rebel alliance trying to defend itself against the evil empire, a.k.a. Google. I’m a little puzzled though, because I can’t decide which one really represents the empire. Microsoft would have us believe the bad guys are Google, that all-consuming life form that’s swallowing up institutions with ease. Duncan Riley at TechCrunch (the link includes the letter from Steve Balmer to the Yahoo board) even went so far as to reference Google as “the Google Borg.”

But wait. Isn’t Microsoft the company that owns your desktop and the desktops of nearly every office computer in the world? Aren’t these the guys with an operating system that has been the source of entire cottage industries that have sprung up in order to make it safe to use? Aren’t these the same folks who escaped an anti-trust monopoly probe by the Federal government?

But here’s the real nut for me. Wall Street and Madison avenue look at Google and salivate over its “reach” and incorrectly view matching that reach as the path to competing with them. It’s not, because Google’s mission isn’t about obtaining reach; it’s about organizing information. Its reach is a consequence of that. Again, the Web itself is Google’s platform, and their method of operation is to serve it. The company describes its business as being an advertising platform, and of course they like the reach they’ve acquired. But they didn’t do it by going after impressions, etc., and this is a night and day difference between them and the Microsoft/Yahoo combo.

One thing that infuriates both Wall Street and Madison Avenue (don’t you love the way we describe institutions by their location in New York City?) about Google is that the company never asked their permission to do anything. Not playing by conventional rules has been its modus operandi from day one, and in that sense alone, it could hardly be described as the evil empire.

Google will do just fine. In fact, I’m not sure that either Microsoft or Yahoo has it in their nature to really be competitive with Google, because they’re stuck in the old business school model.

And I continue to press the belief that local media companies would be better off following the Google model in becoming the ad platform for their markets rather than swapping spit with Yahoo in an attempt to expand their holy reach.

And put yourself in the shoes of the people formerly known as the audience. Who wants all those hands reaching at them anyway?

Read: Jarvis, Umair, Duncan, TechMeme.