AR&D Reinventing Local Media

Despite all the evidence that the Web is different, there are those who are still trying to turn it into a form of cable television. These folks are happy with what they’re doing, and there certainly are elements of the Web that can function this way. But if you’re going to try and make cable TV out of the Web, then you cannot count on the norms of the Web being relevant to your product.

An Online Media Daily article today is headlined with what appears to be an “Ah-ha” moment: Research Contradicts Myths About Online TV Shows. The research is from Futurescape, a London-based digital entertainment R&D firm, and it appears to disprove the “myths” that with viral marketing, engaging and well-produced content will distribute itself online.

“It’s what we we’ve dubbed the ‘viral fallacy,’” explained Futurescape Director Colin Donald. “Producers are adamant that launching a show requires a full-scale promotional campaign, possibly employing broadcast television.”

As a result, said Donald, “total budgets will rise to reflect promotional costs, unless the producer has been commissioned by a social network that can be the promotional vehicle.”

Mr. Donald also refutes the “myth” that it’s cheap to produce online television and provides production cost numbers to prove it.

Here’s my beef with all of this. Futurescape’s “findings” are not findings at all, for what do you expect when the producers of online TV only see the Web as a form of cable TV? The “myths” of viral marketing and cost that the company cites cannot be applied to traditional television online, and, to be frank, I’ve never heard anyone make these assertions anyway.

What I see here is the conflict between web video and television for the Web. They’re two different animals, and what I fear is that false arguments such as those posed by this “research” will spread to media companies trying to figure out what to do in the wake of declining ratings and ad money shifting online.

The processes that are a part of making traditional television aren’t disrupted by the Web, for the creation and distribution of programs for the mass media world are the same whether online or off. The “myths” to which Mr. Donald refers are all part of the personal media revolution, a phrase coined by J.D. Lasica in his book, Darknet, Hollywood’s War Against The Digital Generation, and these people have a big dog in that fight. Rather than dealing with it, however, Hollywood wants needs to keep things as they are. Hence, “revelations” like those painted in this “research” are self-serving and, therefore, useless. The disruption is much deeper than people shifting viewing habits from one place to the next.

Dear Les Moonves,

It was a very smart move for you to acquire CNET. I’ll save all the business analysis for others, because I’m not sure you really understand a certain intangible — namely that the talented group of observers and writers who make up your acquisition can really, really help you with your, um, other business.

The first thing you should do is invite Dan Farber (and if they’ll come, the rest of the Gillmor Gang) into your office and have a nice little sit down. I know you’re the guy who normally does all the talking, but this time, I’d suggest you might want to just listen. Bring your underlings along and tell them to listen, too.

Take a hard look at CNET-TV and invite the writers in to talk to them about communicating with an audience. Yeah, I know; tech isn’t Iraq (and so forth), but neither is a lot of the other crap that passes for news these days.

There’s a point to this whole strategy, Les, and it’s why I think you’d be wise to implement the “CBS listens to CNET” campaign: These folks grew a media business without being a part of the media business! That means they BEGAN outside your box, and while I’ll bet you want to suck them into it, you’d be smart not to. Why? Because they can teach you things that those inside the box don’t even see, and isn’t that exactly what traditional media companies need in this day and age.

Now go out and make it a great day.

Your pal,

Terry

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)

As if it really needed defining, right?

In an ongoing case that continues to baffle common sense, the Electronic Frontier Foundation (EFF) has refiled its suit against Universal Music Group for bullying YouTube into pulling a 29-second clip of little Holden Lenz “dancing” to background music of the Prince tune “Let’s Go Crazy.” The original suit was tossed out by Federal district court judge Jeremy Fogel in San Jose, who said the EFF hadn’t proven their claim that the clip’s fair use of the song was “self-evident.” Any sane human being could recognize that it was, so the EFF’s new case spells it out, and it’s precious:

“The video bears all the hallmarks of a family home movie–it is somewhat blurry, the sound quality is poor, it was filmed with an ordinary digital video camera, and it focuses on documenting Holden’s ‘dance moves’ against a background of normal household activity, commotion and laughter,” the new complaint charges. “The snippet of ‘Let’s Go Crazy’ that plays in the background (not dubbed as a soundtrack) of the Holden Video could not substitute for the original Prince song in any conceivable market.”

Kudos to the EFF! There’s no reply from Universal yet, and they’d be well-advised to just settle the thing, because if this makes it through the courts, it’ll become a fatal setback in their efforts to win the personal media battle through the legal system.

It was, as we say here in Texas, dumber than a bucket of hair to push this case in the first place (the video had only 29 views when Universal lawyers found it - now over 463,000), and anything from here on out just adds to the foolishness of Universal’s actions.

The Senate, with the full blessing of our two Democratic candidates, is about to put the skids on the FCC’s decision to loosen cross-ownership rules, whereby media companies can own both a television station and a newspaper in the same market. Damn those big media people, huh? They want to control the voices in our communities, so we can’t let them narrow choices “for the American people.” Word.

Given the realities of the current media conundrum, however, this strikes me as a bit like waving off the RMS Carpathia on its journey to rescue the survivors of the Titanic. I mean, really, folks; who cares if big media is owned by one person? It’s all drifting slowly into the sands of yesterday anyway.

The issue is over independent and varied voices, which is a BIG part of the disruption in the first place.

Odd that I find myself actually siding with Kevin Martin.

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!

Michael Arrington offers an insightful look at what’s happening to the Encyclopedia Britannica. Wikipedia is, of course, the Britannica’s summer heat, so the company has chosen to make its content available for free to what it defines as web publishers. Interesting move, but it won’t stop the company’s business model from melting under the blazing sun.

According to Comscore, for every page viewed on Brittanica.com, 184 pages are viewed on Wikipedia (3.8 billion v. 21 million pave views per month). In short, they are a classic example of the Innovator’s Dilemma (see also the Music Industry).

…Instead of going free and opening up to all, they’re using the new program to simply price discriminate. Give people who may link to the site free access. Everyone else has to pay. So in effect they’re aiming to be half pregnant - they want the benefits of web linking but don’t want to give up the subscription fees from the fools who continue to pay them.

What Michael doesn’t mention is that the Britannica was advertiser-supported and free before the internet bubble burst, which I wrote about extensively in the Feburary 2005 essay, The Devaluation of Information:

One of the most visible warriors in this free/paid debate has been the Encyclopaedia Britannica. During the Internet bubble days of 1999, the Britannica got a ton of recognition for the bold move of making its pages free to consumers online and adopting an advertising model. Tom Panelas, Director of Corporate Communications for Britannica, says they bought into the free information argument.

“The theory behind the model was traffic,” he remembers. “If you could get enough traffic, you could make it work. We did that. We had 8-10 million unique visitors a month. We were doing all the things right, and it seemed to be working.”

Then in 2000, the bottom dropped out of the market. Ad rates plummeted, and the Britannica’s experiment stopped working. “Of the different aspects of our revenue model,” Panelas says, “advertising was the most important ingredient, so when rates fell, it broke the model.”

The company did extensive research and concluded that the advertising model wasn’t sustainable, and that belief remains today. Panelas adds, “We believe that good quality, reliable information that is well-edited is somewhat rare and therefore valuable. People should be willing to pay for that.”

The Britannica online boasts a couple of hundred thousand subscribers, according to Panelas, many of them coming through third-party bundling of products and services, something he believes we’ll see a lot more of in the future.

The Britannica has weathered many storms in the last 15 years, as technology has rewritten their business. Even now, the online “Wikipedia” — which is written and edited by the public — poses a new threat, but the company has faith in its model. “This stuff is constantly changing,” Panelas admits, “and the way customers understand this is changing all the time.”

He’s quick to add, however, that “we live in a society that’s too sophisticated to completely abandon empirical and rational thinking.”

In a Postmodern world, such assumptions can be dangerous, and this is what’s at the heart of the free-versus-paid argument. The rational Modernist world is the one with the institutional doorways and permission gates, but that world is fading, and our culture is rapidly moving in a different direction. It’s a “new wine” thing, and it requires new wineskins.

In the three plus years since I wrote that, we’ve moved down the postmodern stream quite a distance, and the Britannica now finds itself in need of a different business model. Why they don’t just go back to the innovative status they enjoyed in 1999 is beyond me.

It’s been an interesting couple of weeks for CBS. First, its local station group reduced expenses by cutting 150+ people, including some very well-paid anchors. Observers expressed astonishment, and overnight, every local news anchor began to squirm just a little bit and discover that those expensive office chairs at the anchor desk aren’t quite as comfy as they used to be.

Then this week came word that the network is continuing talks with CNN to take over some of its newsgathering. Observers gasped again. “What’s the world coming to?” they may have asked. Jeff Jarvis, on the other hand, cut to the chase with the provocative headline, “CBS is leaving the news business.”

We don’t need three evening newscasts exactly alike except as a repository for erectile dysfunction commercials. So let one or two networks win the ratings. Let CBS put more resources into investigations on 60 Minutes. Let CNN cover breaking news — with more help from witnesses with cameras.

Ouch! And now comes word that CBS appears to be giving up on Katie Couric, something that 99% of Americans have seen coming since the day she was first brought into the fold. CBS is denying the CNN and Couric stories, but people view that with the same raised eyebrow that accompanied “I didn’t inhale.”

And so the entire tribe of media observers stands poised to pounce, because CBS seems to be blazing a trail that others will have to follow, and everybody’s got an opinion about that.

Meanwhile, Philadelphia TV columnist Laura Nachman writes of a panel discussion in Philly involving the state of local television news, quoting WCAU-TV news director Chris Blackman.

“In my 26 years in news, I’ve never seen things as dicey as they are now. With layoffs, shrinkage, and downsizing, we need to reinvent ourselves.”

“We are not relevant the way we used to be because viewers don’t need us anymore,” Blackman said referring to mobile devices and the internet.

Blackman proved his point when only a handful of people in the audience of around 150 television professionals raised their hands when he asked if anyone needed to watch local television stations to get their news.

What Mr. Blackman is feeling is the same thing that the CBS observers are feeling, and that is the enormity of the disruptive innovations brought about by technology and a shift away from the modernist, colonial culture that spawned traditional media in the first place. Put a fork in it; it’s done.

Oh, mass media will be with us for a long time yet, but it will never again enjoy the status it once held, and to think otherwise is just nostalgic denial. And I would add that the reinvention process is so pressing that we don’t have time for blame assessment, nor do we have time to do a lot of research. An industry run by bean counters has little chance when entrepreneurship is what’s required, so we need to take a few chances along-the-way.

I’m reminded of the wonderful lament by Henry Adams, “The law of nature is change (chaos), while the dream of man is order.”

Embrace the chaos of change; it’s our best hope for tomorrow.

Sometimes a simple choice of a word can make all the difference in how we think. John Morton, the dean of American newspaper analysts, writes for the American Journalism Review (Enough is Enough) that by relentless cost-cutting, newspapers are committing a form of suicide. He calls cutbacks “wrongheaded” and “shortsighted” and believes they threaten the future of the industry altogether.

He writes that the days of “exceptional profits” for media companies are over, and he worries that the brand name and reputation of papers needs protecting as we move forward.

Mr. Morton has been around a long time, and there’s certainly room for his position in the broader discussion of media disruption. It’s true that when push comes to shove with public companies, the bottom line is all that matters, and adjustments by cutting staff, while not easy, are a necessary part of survival.

But John Morton’s thinking about the suicidal nature of such cuts is colored by questions over the validity of the disruption:

All these reductions are a response to two years of declining revenue and profit and a perceived shift of readers and advertisers to the Internet.

Perceived shift? Perceived? That’s not a slip of the pen keyboard, I suspect, and it underscores the difficulty of accepting change in the culture of skepticism that envelopes most newsrooms. After all, if all of this is just a “perceived shift,” then it’s not really real, right? Advertisers aren’t really moving money to the Web, and consumers aren’t really getting their news and information online, right? It’s all just a matter of perception.

Or not.

Charlton Heston is gone and all of Life mourns his passing. But here’s an interesting tidbit from my friend Holly.

I was reading a discussion board at 11:10 (last night, central time) when someone posted that Charlton Heston had died. A few minutes later, I went to Wikipedia to look at his Wiki entry. Yep, already there. It beat the front pages of all the major news sites. It’s not on CNN’s front page as of my clicking Compose Mail to send you this.

Like it or not, mainstream media, this is the way it is.

A week ago, I wrote about the concept of “finding” news consumers based on a comment from a student during a focus group. “If the news is that important,” the young man said, “it will find me.” How does that happen? Word-of-mouth and examples like this.

The change to Heston’s Wikipedia page could have come from his own people, or it could have come from a fan. But the fact that it occurred ahead of major news outlets is a stunning example of how people are able to sidestep the gatekeepers in the quest to be informed.

I just did an interview with the AP about the CBS O&O stations firing high-paid anchors (Chicago, LA, Boston) in a dramatic cost-cutting move. The reporter asked, “So what does a station do after it has fired its own face?”

Good question.

I saw this one coming in 2003 in my essay “News Anchors: An Endangered Species.”

The industry’s obsession with celebrity and the easy marketing thereof is meaningless in a Postmodern world that has demystified the industry and its hype, rejects elitism and doesn’t need its information spoon fed by good-looking faces anyway. As the world of video news shifts to a broadband environment, where users can pick and choose what they want to watch and when they want to watch it, there are powerful forces at work that will make news anchors unnecessary.

What will the CBS stations do? I don’t really know, but I do know that the move must have every anchor in the business sweating bullets. If I were an anchor, I’d fully embrace New Media and use my leadership position to make a difference.

(Note to all my broadcasting critics who told me I was crazy five years ago: It’s going to get worse.)

Articles like this one by Peter Osnos of The Century Foundation tug at the heartstrings of anyone who has been around media very long. What’s happening to newsrooms is sad. Every day seems to bring more bad news. The CBS O&Os laid off scores of people yesterday, even high-priced anchors, because business has gone south. Newspapers have been buffeted for several years now, and it’s taking its toll.

Osnos writes of the morale in newsrooms as if comforting an old friend.

…the real problem is something deeper, I sense. It is a belief that no matter how good your work, how thoroughly reported and influential, it isn’t going to matter in protecting your newspaper. Because of the revenue declines and cutbacks, the mood of proprietors and managers, on the whole, is near panic. Outstanding work by their staffs, the newsroom has become convinced, isn’t going to make a difference in the outcome of their institution. The effort at morale-building in the stream of front office memos announcing departures, the cheerful exhortations to survivors to do great work, only adds to the cynicism that pervades.

News people are by nature skeptics, and given to grumbling. One of their missions is to find fault. Self-criticism in newsrooms is standard, and so is defensiveness when the criticism comes from outsiders. None of these characteristics are at issue. The problem is that the prevailing mood of a declining and deteriorating industry is so pervasive and so discouraging that it reinforces itself. “What’s the point?” is a debilitating attitude, and it is very difficult to reverse.

What’s happening hurts, but I believe it’s the same necessary kind of hurt that comes with the death of a loved one. And I think we would all do well to think of it as such.

Elisabeth Kubler-Ross identified the five stages of grieving, and they are as appropriate for this situation as any.

Denial
Anger
Bargaining
Depression
Acceptance

We’re past denial, although who can argue we went through that? We’re also past the anger phase. Professional news people lashed out at anybody they could tag, beginning with the blogosphere. That’s gone now, as is the stage of bargaining. If we could do this… If we could do that… Sorry, folks we can’t talk our way out of this one. Besides, to whom does one bargain for justice anyway?

I think what Osnos is describing is textbook depression, and that’s the stage that we’re in now. Television may not be as advanced as our newspaper friends are, but it’s there just the same. “What’s the point?” is the behavior of an industry depressed.

But look what comes next? Acceptance. That’s where we need to be, because minds who have fully accepted that those nostalgic days are gone and are not coming back are minds that can actually move forward. It’s the darkness-just-before-dawn syndrome.

As my friend Gordon Borrell likes to say, “Things are very positive where I work.” Indeed. Growth is on the web side, so let’s all get on board the Cluetrain. Historians will write what they must, but we’ve all got work to do.

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.

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.

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.)

They said it couldn’t be done, but I’ve gone and done it, LOL — written the ultimate New Media book: Reinventing Local Media, Ideas for Thriving in a Postmodern World, thus joining the world of published non-fiction authors. AR&D is publishing the first go-round of the book, although we’ll be seeking a contract with a major publisher in the weeks ahead.

This book is a compilation of the essays I’ve written over the past five years, a time of epochal change in the world of communications. It’s over 500 pages long and fully indexed, and it’s my hope that it will be used as course material in colleges and universities everywhere.

The book will be available via Amazon and other online distributors within a month, and we’re going to try and make copies available at NAB next month in Vegas. The price is $24.95.

I’ll have copies next week that I’d be happy to autograph and sell to readers of my blog. It’ll take a couple of weeks to process everything, but feel free to drop me a note with a check to AR&D for $30 (to cover shipping and handling), and I’ll personally take care of the rest. Send it to:

Terry Heaton
Audience Research & Development
1913 Redwood Trail
Grapevine, TX 76051

Of course, anybody’s work in this field is really an aggregation of the thinking of many. I’ve written before about The Unbroken Web, and I certainly feel I’ve been touching it throughout the process of writing this ongoing series of essays. The Unbroken Web is a place where many thoughts mingle, and it would be arrogant to assume that the ideas expressed there belong to any one individual, self included.

So I am honored to be a part of something so big, and to make this book available to you.

Eric Alterman has written an excellent piece for The New Yorker that gives me a chance to remind people of the core of my philosophy: that the real disruption that’s taking place in our world today is the empowerment of people through technology. This is so profound that it will impact every institution of “modern” humankind, and first up is how we communicate with each other, a.k.a. “the media.”

Called “Out of Print, The death and life of the American newspaper,” Alterman brilliantly goes back to the source of “professional” journalism and the social engineering of my old pal, Walter Lippmann. Here’s a sample:

Lippmann likened the average American—or “outsider,” as he tellingly named him—to a “deaf spectator in the back row” at a sporting event: “He does not know what is happening, why it is happening, what ought to happen,” and “he lives in a world which he cannot see, does not understand and is unable to direct.”

…Lippmann’s preferred solution was, in essence, to junk democracy entirely. He justified this by arguing that the results were what mattered. Even “if there were a prospect” that people could become sufficiently well-informed to govern themselves wisely, he wrote, “it is extremely doubtful whether many of us would wish to be bothered.”

…in one of the oddest formulations of his long career, Lippmann proposed the creation of “intelligence bureaus,” which would be given access to all the information they needed to judge the government’s actions without concerning themselves much with democratic preferences or public debate. Just what, if any, role the public would play in this process Lippmann never explained.

Alterman brings into play John Dewey, who made it his calling to “debate” Lippmann’s positions. Dewey would love today’s blogosphere.

Dewey did not dispute Lippmann’s contention regarding journalism’s flaws or the public’s vulnerability to manipulation. But Dewey thought that Lippmann’s cure was worse than the disease. While Lippmann viewed public opinion as little more than the sum of the views of each individual, much like a poll, Dewey saw it more like a focus group. The foundation of democracy to Dewey was less information than conversation.

…Dewey also criticized Lippmann’s trust in knowledge-based élites. “A class of experts is inevitably so removed from common interests as to become a class with private interests and private knowledge,” he argued. “The man who wears the shoe knows best that it pinches and where it pinches, even if the expert shoemaker is the best judge of how the trouble is to be remedied.”

As I have been writing for years, Lippmann is the “father of professional journalism,” and the apple never falls very far from the tree. And so we’ve had decades of an elitist press getting all comfy with the power brokers of the culture — in fact, becoming the NEW power brokers — and it is against this that the people of the culture are objecting.

I mean who wants to be treated like a herd of dumb cattle, a la Lippmann? And worse, Lippmann’s elite gets its status, in part, from money earned by the relentless carpet bombing of the herd with unwanted ad messages. Does anybody really have a problem understanding the revolt? This is the energy that drives J. D. Lasica’s “personal media revolution.”

Contemporary journalism MUST honestly deal with this issue or face certain extinction.

So Dow Jones is leaving the Associated Press. This is a very big deal, folks, and I think it’s fair to examine the assumption of the “co-op’s” value proposition in light of disruptive technologies. While the AP began as a cooperative, it has evolved over the years to that of a monopoly, and one that can exercise complete control over pricing. You want the “service,” you pay for it, whether you can afford it or not. This is reflected in AP Chief Revenue Officer Tom Brettingen’s reaction to the Dow Jones decision.

“We did not believe we were being adequately compensated for the use of our content on DJ Newswires,” Brettingen said in a statement. “We weren’t able to resolve that with DJ, so we’re going our separate ways.”

I love it. “Our” content. If the AP paid members for that content, it would be easier to justify such a statement. That’s not the case, however. AP members contribute the content and then pay stiff fees to get in on the aggregation of everybody else’s. Regardless of the shade of your rose-colored glasses, the reality is that it is very much a one-way street.

So the question for media companies is whether the service is really necessary anymore. DJ has decided to go with the French news service Agence France-Presse, but the bigger issue remains — what will the AP do when “members” begin searching out a less-expensive, less dictatorial system?

A wire service is a middle man in the news business, assembling items from members and passing various feeds back to those members. This is the spirit of a cooperative, but there are two problems with this for the group. One, the Internet makes assembling items into a feed ridiculously easy, so the cooperative simply can’t make the case that costs keep escalating. Two, newspapers are especially well-position to go their own way, because they’ve been working together with the Yahoo! consortium and other cooperatives for many months in an attempt to shift their business model to one that’s more web-centric.

The AP has recognized that shift, but rather than use its resources to help the industry, it’s used the occasion to charge more for “different” uses of the same material.

Believe me, it isn’t cheap to be an AP “member,” and at a time of industry-wide expense reduction, one wonders how long that money can be justified. And anytime the AP decides to create a new feed from its content pool — niches, for example — the price goes way up, period. The AP argues that it’s cheaper to pay them than to organize such content for yourself, but that value proposition is, frankly, on-the-table.

Meanwhile, the AP continues to go where the dollars are. They just hired 21 new staffers to bolster their entertainment news offerings, knowing that media companies covet this content. That feed, I promise you, will cost plenty. The problem in this niche, for the AP, is that the existing sources of entertainment news don’t give a rip about being a part of the cooperative, so the AP has to have its own staff to keep up.

And that reflects the real problem for the AP overall: sources of news content aren’t scarce anymore, and machines — like Google News — are taking the place of editors required to assemble all that content and spit it out.

Like everything else in the world of media, the nature of the wire service is being disrupted by technology. Just because the world of journalism once required wire services to organize and distribute news from faraway lands doesn’t necessarily mean that it does today.

Moreover, the real battle that media companies face is local, and with consumers able to tap other sources for regional, national and global news, the value of that content to local media companies is declining rapidly.

These are tough times that call for asking hard questions.

Dow Jones is just the beginning.