In the beginning was the newspaper, and the newspaper was with the people, and the newspaper was the people. And the people, being people, needed a place to put announcements of a legal nature in order to self-govern, so they chose the newspaper. This made sense at one time, but the model continues today, despite two important facts: One, the newspaper is no longer with the people, and, two, there are much more efficient ways to handle such things. Today, the “legals” section remains one of the last, highly profitable (and exclusive) branches of what’s left of the money tree that used to be the American newspaper.

Over the last few years, attempts have been made to remove the exclusive nature of these announcements from the newspaper industry, and the voices are getting louder. In Pennsylvania, a bill is moving through the state senate that would allow such announcements to be distributed through free, community papers, and the slight opening of the door to non-exclusivity is not going over well with Pennsylvania newspapers.

An article in the Philadelphia Inquirer says the opposition is framing their argument as one of public access. Deborah Musselman, director of government affairs for the Pennsylvania Newspaper Association, told the paper, “The idea was that people have a right to know what their government is up to,” adding that the bill would “make it a lot harder to know what your government is up to because you wouldn’t know where to look to find the information.”

Um, okay.

There’s been some name-calling in the matter, with newspapers being referenced as a “cartel,” and the free dailies being called “junk mail.” There’s a whole lot of money at stake:

Local governments now must place legal notices in a “newspaper of general circulation” in a county. The bill would expand that to include “community papers of mass dissemination” that are distributed free through the mail or delivered by carrier to all households in a political subdivision.

“Right now, the legal-advertising law grants an exclusive monopoly that doesn’t recognize that there are other bona fide options out there,” said Jim Haigh, a consultant to the Mid-Atlantic Community Papers Association, which represents 300 free papers in seven states, about half of them in Pennsylvania. “We are just looking for fair competition.”

Haigh argues that community papers would do a better job of getting the word out. They are sent free to every household in a community, while newspapers require a paid subscription that not everyone has.

The bill has the support of associations representing municipalities and schools, which long for cheaper ad rates.

“We are always looking for ways to get the message out to more individuals, but at the same time to save money,” said Holly M. Fishel, research director at the Pennsylvania State Association of Township Supervisors.

Whether this bill passes or not is just a blip in the overall disruption of the mass media model. I’ve yet to hear of any broadcasters getting into the fray, and that’s interesting, because eventually there will be a digital version of all of this. The technology exists today for law firms, school districts and municipalities to publish these themselves, to be aggregated by a smart third-party, and there’s no reason that couldn’t be any local media company.

That’s oversimplified, to be sure. These types of announcements are a part of our various branches of government, so they cannot be considered lightly. There are issues of accessibility to digital media by ALL members of the community, tampering with the announcements, and questions of governmental control of the Web — all things to be seriously weighed and discussed.

But this is another attack on the classifieds armor that used to be a primary revenue support for local newspapers, and it’s hard to believe this one will end pretty either.

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

A web application for realtors that’s been around awhile challenges the traditional media company role (and anybody else’s, for that matter) in the creation of hyperlocal information sites. Those media companies trying to execute a hyperlocal strategy will likely find Connecting Neighbors websites already in place in at least some of the communities they’re trying to reach. Connecting Neighbors targets neighborhoods and operates 14,000 websites across the country.

In a remarkable example of how anybody can be a media company today, the sites are managed and sponsored by realtors, who use them to mine for potential clients. While declining to provide site statistics, Connecting Neighbors Marketing Manager Lisa Knight told me that the sites do very well, especially with a sponsor who dedicates time and resources to marketing it within the neighborhood. Simple yard signs (like the one pictured on the right in Huntsville, Alabama), postcards and word-of-mouth are all it takes.

Connecting Neighbors offers you the opportunity to become the exclusive Neighborhood Expert in your targeted market, while locking out your competitors. Begin building relationships in your market today!

The sites are simple and spartan, but packed with useful information and opportunities for user-generated content. There are publisher disclaimers throughout the site where users interact, just like you’d find with any other media company. Classifieds are free, local news comes via Topix.net (note: your local news is likely being presented on these sites via Topix), a directory, recipes, lots of referrals and links, and the general “feel” of a community site. The difference is that it’s run by a realtor who’s using it to mine for clients. How terribly smart!

A few sites serve communities beyond just a neighborhood, and the company has experimented with aggregating neighborhoods. Some of the content is provided by feeds, but the quality of the sponsor’s marketing is what makes the difference in generating content from residents of the neighborhood.

The price to the sponsor varies and is based on the number (and in some cases, the prices) of homes in the neighborhood being served and the services the sponsor chooses to offer. “On average, our one time setup fee is $1.65 per home,” added Ms. Knight, “and on average our monthly hosting fee is $0.09 per home.” The Connecting Neighbors website lists the following options:

• A Neighborhood Website that allows residents to connect with one another, read community news, post free classified ads, share pictures, and more.
• A Neighborhood Newsletter that features information specific to the neighborhood and is emailed to residents each month.
• A personal Neighborhood Marketing Coach assigned to help announce and promote the program to neighborhood residents.
• Quickshow multimedia presentations to engage and welcome residents to their Neighborhood Website.
• MLS data integration (where available) to constantly provide up-to-date real estate information.
• Relationship Manager feature (where available) for Members to manage all of their communications with their new prospects!

This provides two important lessons for media companies. One, anybody can be a media company today. Any. Body. I have been harping on this for years, but those of us in “professional” media feel we can take our time in exploring niches, when we really can’t. The discovery of a company such as Connecting Neighbors, to me, is like getting to the end of a voyage to plant a flag on some distant land only to discover there’s at least one other flag already there. Two, the people formerly known as the advertisers are spending money that used to go to us in order to bypass (expensive) filters and speak directly to potential customers, something about which I have also written in the past.

We may look at these sites and feel a sense of well being, because they’re not “up to our standards” or they don’t carry “a trusted brand,” but in the end it’s all about meeting information needs. Connecting Neighbors does that well, and the users (a.k.a. the people formerly known as the audience) could give a hoot if it’s sponsored by a realtor or not. Moreover, if a media company did this, they’d likely look to realtors, among others, to sponsor them the moment they were launched.

The message here is loud and clear: certain well-funded advertisers don’t need us anymore.

(NOTE: Originally published in AR&D’s Media 2.0 Intel client newsletter)

Read my latest essay.

Then read Scrolling: No Longer a No-No by Poynter’s Fons Tuinstra, where he writes that scrolling is actually the tool of choice for younger users.

Told you so.

Here is the latest in my ongoing series of essays, Local Media in a Postmodern World.

The price at the pump is bumping up to the four dollar range, something I’ve not seen in my lifetime. While paying $50 the other day to fill my little car, it occurred to me that we’d best be prepared to pay these prices through the summer, because regardless of what’s causing the pricing, the law of supply and demand is at work. People drive more come Memorial Day, so the demand drives the price.

In this often frustrating world of supply and demand, the pendulum swings one way or the other as the factors influencing price begin to change. These factors can be seasonal, like the price of gas, or they can be determined by other forms of behavior. In the world of online advertising, it has clearly been a buyer’s market, with advertisers determining rates for revenue-hungry media companies.

All of that is about to change.

The Problem With Web Advertising

The views and suggestions expressed in this essay may seem radical, but like other things I’ve written, they’re designed to make you think. Publishers need to take control of the pricing of their web properties, and I believe it will happen sooner than later.

The first volume of this essay series (Reinventing Local Media) is now available in book form and “in stock” at Amazon.com. Get yours today!

Every time I read an article in one of the trades that refers to the need for a “sustainable ecosystem” for advertising online, I shake my head and say, “Who says there will ever be one?”

What the phrase really means is “when will the Web sit still long enough for us to create a lasting system that we can exploit?”

At what point do these folks begin to realize that the people formerly known as the audience really ARE in charge?

No ecosystem is going to save anybody; it’s all about hard work.

Cabel Sasser is a world class tech whiz who co-founded Panic (a software company specializing in shareware applications for Macs) and travels frequently between the states and their offices in Japan. On his last trip, Cabel noticed something new on the advertising placards on board the various trains in the country. He took pictures of the signs and posted them on his blog.

Instead of company URLs, the ads all show search boxes with recommended search terms.

It makes sense, right? All the good domain names are gone. Getting people to a specific page in a big site is difficult (who’s going to write down anything after the first slash?). And, most tellingly, I see increasingly more users already inadvertently put complete domain names like “gmail” and “netflix” into the Search box of their browsers out of habit — and it doesn’t even register that Google pops up and they have to click to get to their destination.

I always advise media companies to use keywords to drive people to various sections within their sites. It’s just easier on-the-air, for example, to say “enter keyword ‘cows’” than to give people the path to the page or, worse yet, tell them to go to a “as seen on 2″ page. AOL and CompuServe created the keyword frenzy, and basically everybody knows what they are.

Clearly, advertisers in Japan see the value of using them to bring people in through the search engines, and I’d be surprised if it doesn’t begin to happen here. I recall seeing Pontiac ads that encouraged people to Google the word “Pontiac,” but that has been the exception.

Market share should drive local television station online revenue efforts, not budget goals or growth. That’s one of the key findings in a new television benchmarking study from Borrell Associates released this week at the annual Television Bureau of Advertising (TVB) conference in New York. While local stations have gained market share in the past year, that share still pales in comparison to local newspapers, which have been at the game longer and more seriously than TV stations.

Local online ad spending is projected to increase by 40-50% in the next year, so even a station that grows its local revenue by 35% will be losing ground in terms of market share. Of course, the big gainers in local online revenue are the outside-the-market internet pureplay companies like Google, Yahoo!, MSN and AOL.

This strategic approach to attacking the existing ad marketplace is foreign to television stations who are used to competing only with each other over the airwaves. That sense of competition is carried into the online world, and it is one of the things that is keeping stations from reaching their online potential. Online, it’s not about WWWW-TV versus KKKK-TV, for that “market” is an illusion. The real market is vastly bigger and includes many, many other players, so when station managers compare their revenue only against what the other stations in the market are doing (and even the newspaper), they commit a form of self-delusional business suicide.

Total online ad revenues for local TV stations this year are projected to be $1.1 billion, according to Borrell Associates CEO Gordon Borrell. That’s a 45% increase over the $770 million last year.

Another key recommendation for broadcasters is to adopt a niche mentality for the Web.

Some 90 percent of the respondents to our survey say that at least two-thirds of their TV Web inventory remains unsold. That’s likely because the “mass” appeal of news, weather and sports pages aren’t as attractive to advertisers as pages that contain content specific to their business (think health care, real estate, and automotive content), or to their customer base (think young adults, women, or suburban communities).

One of the most striking differences between this benchmarking study and the one Borrell has done for newspapers is the complete lack of stations who perform in what Borrell calls “the green zone,” those local media companies who have a market share of 28% or higher. This demonstrates how far behind local stations are in their competition with their print counterparts for local online revenues. All broadcasters need to study this green zone approach, for these companies approach selling the Web very differently than traditional media account executives.

Green zone performers have dedicated online sales people, work with non-traditional clients, have an amazing thirst for data, use a consultative sales strategy, can’t get enough training and set much higher rates.

The salespeople at these sites seem to understand that this is an early-stage medium, so you can’t just go out and plop a proposal down on someone’s desk and expect them to understand what they’re getting. They look for data — loads of it, on traffic, Internet usage, the rate of online ad spending by the type of advertiser they’re approaching — anything that will help the advertiser understand what’s happening with the Internet and how they might take advantage of it. And of course the consultation — they ask the advertiser questions before blurting out what they have to sell him or assuming they want a massive broadcast and online reach. They do not.

Television stations with at least one online-only salesperson achieve an average of 26 percent more online revenue than their counterparts who rely solely on broadcast salespeople to sell the Internet.

Every day we’re reading stories of company after company laying off people and tightening belts, because business for local media companies is going south. The remarkable thing about this, to me, is that this is an Olympics and election year, the kind that normally produces significant revenue growth for stations. Unless local stations do something with the only market that’s actually growing (online), it’s hard to rationalize how they will survive 2009.

Gordon Borrell understands this like few others, and we need to pay attention to what he says.

I know this isn’t really new, but it’s the kind of local media killer that keeps me up at night. Follow the money, folks.

Speaking of local search, have you noticed the Yellow Pages ad campaign? “We wrote the book on local search” is a clever tag line, and one that follows basic Reis & Trout marketing. It will be interesting to see how it plays out, because while they may have written the book, Google owns online. The difference is that the Yellow Pages folks have feet-on-the-street.

Stay tuned.

The amount of money advertisers are spending on their own web applications has skyrocketed in the past year, offering a chilling clue as to where the disruptive nature of the Internet is taking media companies next. According to new data obtained from Borrell Associates, advertiser spending in the “online marketing and promotions” category jumped 130% between 2006 and 2007 to an estimated $8 billion nationwide. That’s money that advertisers would likely have spent on conventional advertising before the Web.

“The meteoric rise of promotional spending on the Internet is changing the face of advertising ’sales’ as we know it,” Borrell Associates CEO Gordon Borrell told me in an email. “Media companies are having to become far more creative and consultative, acting a lot like agencies, to help local businesses attain their marketing and sales goals. They can’t get away with just taking orders anymore.”

Some of the specific categories within the whole show growth that can only be described as incredible. Every category in the medical profession, for example, is far above the average. Doctors, up 160%. Other medical professionals, up 236%. Pharmacies, up 245%. Hospitals, up 150%. Other medical facilities, up 225%.

Political organizations have increased spending in this category a remarkable 1,021%. I’m sure television will still reap a windfall in political ad dollars, but this is an area that ought to concern everybody.

It’s important, again, to understand that this is brand new in our world. Never before have businesses been able to, in essence, become their own media companies, and that’s clearly what’s happening.

“The Internet,” said Borrell, “is far more utilitarian than, say, newspaper advertising or TV advertising. And it’s phenomenally measurable. So when Oil of Olay wants to spread the word about a new wrinkle lotion, instead of a mass-mailing of free samples and coupons, it can place an Internet campaign that collects names and addresses of people who actually want the free sample — and continue marketing to them.”

Promotional opportunities for (former) advertisers are something media companies have been slow to understand. In today’s world, it’s often far more important to help businesses with their web strategies than it is to simply provide brand message opportunities. Advertisers are willing to spend money without actually running ads, as long as the opportunity to obtain data is there. It’s why Borrell’s “green zone” performers (those who get 28%+ market share of online ad revenue) all use a consultative sales strategy in working with clients. This whole game is increasingly about their needs, not ours.

If you follow the money in this strange new world, it’ll lead you down paths you don’t expect, and if you pay attention along the way, it’ll also open doors to new opportunities. The ad-supported content revenue model is slipping slowly into the past, but if we’re smart, we’ll see that all of these new websites and web applications that the people formerly known as the advertisers are making offer a significant revenue growth opportunity for the company that can tie them all together.

This is why one of our top recommendations is the creation of a local ad network for media companies, regardless of where local advertisers are in their level of web sophistication. The trend noted in the Borrell data is unmistakable and will impact every business downstream. In my book, the smart local media company will do whatever it can to accelerate the trend in its market.

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

(UPDATE: This report in yesterday’s Online Media Daily about American Airlines’ Facebook widget is a textbook example of the above.)

Here is the latest essay in my ongoing series of essays, Local Media in a Postmodern World. “It’s Always About the Money” takes another hard look at how trends in advertising and personal media are working around traditional media offerings to choke the money spigot and threaten the business that is mainstream media in our culture. It’s our own fault, because we cannot bring ourselves to actually compete in an arena with which we are unfamiliar.

Google’s announcement last week of a free ad manager for web publishers is just the latest evidence that the drain of ad revenues from local markets will continue to flow to outside pureplay companies. Data from Borrell Associates clearly demonstrates what’s happening, but local media companies are doing nothing to stop it. The Project for Excellence in Journalism’s fifth annual State of the News Media report is due to be released Monday, and it reportedly shows that despite huge growth in audience for legacy media offerings, advertisers aren’t following yet. This essay will help you understand why.

The simple model of Continuous News will eventually replace much of what local and national media companies produce online and not just because it makes sense for journalism. We can make more money this way, and it’s been on my mind a lot lately.

As I’ve previously written, it’s the era of “finished product” news that’s drawing to a close, those packaged models of information designed to appeal to a mass audience. Today, the demand is for now, raw and even unedited up to a point.

With Continuous News comes the reality that there is no such thing as a page view online. This is an archaic term that serves no one, especially publishers and advertising wishing to use the Web to do business. Continuous News elevates the scroll bar over the page view, because the cost of interaction is lower, and the scroll bar suits the blog software necessary to do the model justice. And in so doing, it reveals many things about advertising and browsers that ought to get the attention of Madison Avenue downstream.

So I’m going to call it “browser views” as opposed to page views, but a browser view doesn’t encompass everything on a page. That’s because the “page” is very long and can occupy many display ads along the side rail. If they are positioned so that only one appears with content for reading to the left, the advertiser’s wish of being the only ad adjacent to content is fulfilled. That moment, when in the scrolling process, there is content to the left and one ad to the right is what I’m calling a “browser view.”

I also want to state that the value of that ad is determined not by the eyeballs that view it at that moment, although advertisers would love to devalue the experience by looking at it that way. Its value should be determined by the daypart in which the ad is served, with the noon hour going for the highest rates.

We’re way off base in determining online ad values, and this is part our fault and part the fault of the advertising industry, which can’t seem to view anything other than through old eyes.

A television commercial, for example, is viewed in a pod of other ads. Those pods are getting longer, and the individual ads fight for attention with other ads, regardless of their position in the pod. The same is true with display ads in newspapers or magazines. Every ad competes with other ads and marketing clutter. It’s what we do.

But the Web offers a different experience, one that’s clean and simple, if we’d only design our sites according to the scroll bar instead of the clicking on pages. We’re giving away the store otherwise.

While we’re at it, what is the value of a news and information site? How is it determined? Assuming it makes money, why don’t we take the total amount of revenue and divide it by users to determine a price-per-user, or divide it by the minutes of the day to determine price-per-minute? These values become negotiable in terms of setting rates, not locking rates based on individual metrics and hoping to increase them to grow revenue. The goal should be to raise the price-per-minute or the price-per-user, not demand more, more, more content to grow the page view model.

And let’s remember that in a simple Continuous News environment, the likelihood of engagement — that attracting of real attention — is much, much higher than it is with a banner among other blinking and twirling items. If we create value for advertisers and price it accordingly, all this business about trying to find the right metrics becomes moot.

Approaching advertisers this way will be met with resistance, because “that’s not the way we do it.” But we must stick to our guns here, because eventually we’ll win out. It’s not only good for publishers, but it’s good for advertisers as well. Somebody has to break the mold. Who will be first?

I’ve had a few days to calm down after reading Newsweek’s “Web Exclusive” this week — Revenge of the Experts — so I think it’s safe to comment now. Newsweek has done what many of us feared, they’ve picked up Andrew Keen’s meme about the “cult of the amateur” and manufactured a new lede without taking into consideration the fallacy of the meme in the first place. This is how falsehood gets spread throughout the culture, which is exactly what Keen — and apparently now Newsweek — believe is the problem with “amateurs.” For all of Keen’s rantings about truth, there is little to be found in the Newsweek argument.

Let’s begin with the assumption in the title, that there is a battle underway in our culture between experts and amateurs. Says who? The so-called experts, that’s who, because they feel their protected turf is being threatened. It is, but not by any amateur movement or cult. Institutional arrogance is their biggest threat. They need to look in the mirror.

Let me repeat; there is no movement by amateurs to take anything away from professionals, and this is especially true in media. The extent to which everyday people look to non-traditional sources of information today is not an indication that they are being lured away from “truth” by roaming mobs of ignorant automatons. That defection is more illustrative of the failure of traditional, institutional media than anything else, along with the arrogance-gone-to-seed of anyone claiming exclusive access to “truth.” In the words of the immortal Frank Barone, “Holy crap!”

“The individual user has been king on the Internet,” the article says, “but the pendulum seems to be swinging back toward edited information vetted by professionals.” What? Wait, there’s more:

In short, the expert is back. The revival comes amid mounting demand for a more reliable, bankable Web. “People are beginning to recognize that the world is too dangerous a place for faulty information,” says Charlotte Beal, a consumer strategist for the Minneapolis-based research firm Iconoculture. Beal adds that choice fatigue and fear of bad advice are creating a “perfect storm of demand for expert information.”

Again, this assumes facts not in evidence, such as we’re coming out of a season when people were quite happy with crap. This is hogwash. Only to the modernist, pragmatist mind is there any sudden lust for truth. Hell, it’s been there all along.

The story points to start-up Mahalo with it’s “people-powered search” as evidence of the “shift” and then goes on to quote its founder, Jason Calacanis as an expert. To add weight to Mahalo, the writer lumps it in with other efforts supported by its major investor, Sequoia Capital — names like YouTube, Yahoo and Google — as if that qualifies the expertise of Calacanis. This is textbook modernism at work, expertise by association. It’s also crap because, while fielding an impressive list of winners, Sequoia has also had its share losers. Remember eToys?

Calacanis’s comments are combined with those of Keen, who joyfully breathes his poison into the story.

It’s also easier to woo advertisers with the promise of controlled content than with hit-and-miss blog blather. “Nobody wants to advertise next to crap,” says Andrew Keen, author of “The Cult of the Amateur,” a jeremiad against the ills of the unregulated Web.

A jeremiad? Ills of the unregulated Web? What ills? Boy, there’s nothing the pragmatist mind enjoys more than rules and regulations, because they’re always made by the haves to sustain what they, well, have.

The article at least gives the final word to Glenn Reynolds, whose book An Army of Davids contains the phrase, “the triumph of personal technology over mass technology.” I’ve read that book, too, and I can tell you it doesn’t even remotely suggest the cult-like attack on truth that Keen is taking to the bank.

The Newsweek article actually has the gall to make the statement that we’re in a new period of “podium worship,” a validation of expertise that somehow had been stripped away by the chaos of personal media. But hidden in the story is its real purpose — to send a message to Madison Avenue that things will be okay and that vetted content will be there for them and their money. For all the popularity of the pejorative “user-generated content,” nobody’s been able to make a lot of money with it, and Calacanis, et al, want to assure us all that their content will be equally attractive to users but also safe for ads.

That, of course, remains to be seen. Advertisers don’t just want a sterile environment; they also want eyeballs, and that’s the real conundrum for the pragmatist’s view of new media. In this way of thinking, there is only one reason to make “content” and that is to make money. Why else do it? Indeed.

The Telcos want the government to think of the Web as just another medium, so that they can police the thing for everybody and sell access to the highest bidders. Keen and Newsweek likewise want everything to just return to the way it was. Sorry, but that horse left the barn years ago. And while Newsweek uses the term “revival” to describe what they hope to see happening, I think “nostalgia” is a more accurate term.

And the saddest thing of all about articles like these is that they are added to record. People hoping for relief from the disruption of personal technology will point to them as evidence of hope, when in reality, they’re pure folly, bathed in assumptions that aren’t real.

And again, isn’t that exactly what “experts” are supposed to prevent?

UPDATE: Howard Owens brilliantly deconstructs the entire Newsweek piece.

Chris Anderson is one of the most influential new media thinkers in the world. His book The Long Tail has transformed the way we look at the economics of media distribution, and now he’s working on a new book that will certainly get everybody’s attention: “Free! Why $0.00 Is the Future of Business.” As he did with The Long Tail, Chris has begun this project with a 6,000-word article in the magazine he edits, Wired.

In addition to being a compelling title, it’s also another longtailesque concept that media companies everywhere need to understand. Anderson told me by email that media types certainly should.

I think the message to media executives should be clear: the business model you already understand better than anyone has become the dominant business model of the digital economy, from software to services. The world has come your way!

But do we really understand it? I’m not so sure.

If Viacom understood the concept, it would not be suing Google/YouTube. If NBC understood the concept, it would never have pulled its early content from YouTube. HBO announced this week that it is creating a YouTube channel. Confused yet?

If the networks understood it, they’d follow the advice of a new white paper from market research firm Parks Associates and the Entertainment Technology Center at USC titled “How Hollywood Can Out-Apple Apple.” The paper suggests that the studios and TV networks should offer free content for cell phones as a way to prime the pump for tomorrow. “In the end, ‘advertainment’ becomes content in and of itself,” the report says, “and a profitable way to provide consumers something to watch when they find themselves in situations where a little diversion is welcomed,”

Free is a strategy, not a business model.

The problem with “free” is when it runs into the bottom line, and this is especially true in the world of traditional media. Our content has value to us, but that value is directly tied to the economic laws of scarcity, whether we’re asking people to pay for it or using scarcity to create a mass that our advertisers seek. In the world about which Anderson writes, however, abundance replaces scarcity, so a business strategy based on the latter falls flat on its face. What is the real value of “content” in a world of abundance? This is what mass media executives can’t or won’t understand, because we automatically — and in an old media sense, rightly — assume that the only currency involving content is money.

So Anderson is right in saying that we “should” understand the new model, but the truth is we don’t. This has to change or we’re going to continue to fall behind smart people who really do understand.

(Originally published in this week’s newsletter)

The opening line of this CNET story says it all: “For online advertising, the word is that portals are out, but search, entertainment, and social network sites are in.”

Are you paying attention, local media companies?

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)

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.”

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>

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.

…is when it’s out of context.

Witness the Google Ad row on the header for Pajiba’s review of Doctor Zhivago. Yes, that says “Foot Slave.”

In case you’re wondering, clicking through (I couldn’t help it) leads to a list of ads for thing like “Latina Foot Fetish,” “Free Slave Personals,” and, my favorite, “Kiss My Feet Shoes.” Who knew?

Advertiser Perceptions latest survey of 2,047 ad executives (published twice yearly) — as published by Online Media Daily — reveals growing pessimism among ad buyers about traditional forms of advertising. I view this study as significant, because it speaks directly with people who are making decisions about spending money. Note the highlights in red.