 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.
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> <<< >>>
WHY MICROHOO! MATTERS FOR LOCAL MEDIA (Terry) 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. 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> <<< >>>
WEB USERS MORE LIKELY TO WATCH SHOWS ONLINE THAN ON VOD (Steve) That's according to a study from Solutions Research Group called "Prime Time is Anytime." It's based in Toronto, but did the study of U.S. Internet users (12 and older). According to the study nearly 80 million Americans have watched a "TV" show online. That's 43% of the online population, and it's up from 25% of the online audience just a year ago. Here's the wild part - compare that 20% to the 14% of the same group who say they watch shows on cable video-on-demand. You can certainly attribute part of the higher adoption rate to the fact that the online audience is, well, online. There are also far more shows online than on VOD. But would you have guessed the numbers would be so high? And with the demand now obvious, why are the nets so reluctant to offer more shows on VOD? Here are some other notes from the study: - People rated abc.com as having the best user experience. Not surprising - the streaming quality is excellent (the site is starting to offer some shows in HD) and the selection is great. - Among viewers 18-34, more than a third of those who watched the top 20 prime time shows did so by "time shifting. When you look at just the houses with DVRs, among 18-49 year olds, the number jumps to 55%. The audience is watching "prime time" on its own time. So much for local news lead-ins. Network programming is being watched online by 80 million Americans. More than half of those with DVRs are watching the top prime time shows when they want (and skipping the commercials). Where does that leave the locals? In need, more than ever, to get creative. The "network" model has changed. It isn't dead - but it has changed, and the locals' share of the network audience will continue to erode. We have to find ways to create original local content and give our audience a compelling reason to watch. The opportunity is there and you have the creative people to make it happen. Marketing 101: Differentiate the product. <Link> <<< >>>
SUPER BOWL PROVES WE DON'T HATE ADS - WE HATE NOISE (Steve)
Watch any other game, and the ad breaks are - yes - a time to attend the call of nature. During the Super Bowl, people at parties will actually hush you so they can hear the ads. Blogs are taking ads they like (or hate) and embedding them. The best are viral videos. There's always the argument whether a funny ad will translate to more sales, but you can't deny that the entertaining ones will get your attention. What's the lesson for us? It all goes to what Terry has written extensively about - advertising as entertainment. Every company is in the entertainment business. And, thanks to the web, they can take that entertainment directly to the consumers. That's disruption. Even though the Super Bowl ads aired via conventional means, they now belong to the web and the audience. If we can work with local advertisers to create engaging content for our sites, we can take advantage of this phenomenon. Engaging the audience actively is the goal here. The value of an entertained audience is exponentially higher to an advertiser than a preroll that is of no interest to a given viewer. Challenge your sales staff to work with local advertisers to come up with entertaining and engaging sponsored web material. Note that I'm not suggesting giving over your news to advertisers. Your website is more than news - it's a channel, and there is room for all kinds of content. You may not be able to create a $3 million ad - but there are plenty of million dollar ideas just waiting. <Link> <<< >>>
TRAVEL KICKER — STEVE'S ENCOUNTER WITH A TIE SCALPER (Terry) Steve and I were on the road together this week making a presentation in a large, East Coast city. Steve arrived much later than I did, and when he checked into his room at the Sheraton, he discovered he'd forgotten to bring a tie. This is not good when your meeting is with the board of directors. Not to worry. The first floor gift shop would have one, so he ventured downstairs and panicked for a moment when he couldn't find any. Panic gave way to relief when he moved aside some other items on a rack and stared face-to-face with an ugly little number that actually matched his suit. Talk about luck! Those of you who actually know Steve understand that he's really a comic disguised as a consultant. "How much?" he inquired about the blended polyester beauty. "Twenty-five dollars," responded the clerk, knowing he had Steve by the short hairs. Highly skilled in the art of negotiation, Steve was preparing a pithy comeback, when he turned the tie over and discovered a price sticker on the back that someone had forgotten to remove. It was from Wal-Mart, and the price was $11.95. In his usual charming manner, he made the clerk aware of this, and the price suddenly fell from $25 to $11.95. So the local Sheraton gift shop's supplier is the local Wal-Mart, with the price doubled. How nice. We had a good laugh, and proceeded to our meeting, where Steve actually got compliments on the stupid thing. Well, it did match his suit really well. <Link>
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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.
How do I know? Look at all the attention that the Super Bowl ads get. People talk about them almost as much as they talk about the game. (And, being a Patriots fan, I'm fine with that.) USA Today's 