SimsBlog

Everything You Need to Know About Big Media Leadership in Two Simple Charts

Recently, I came across a fascinating study that I believe is very revealing of the thought process of media executives.  

Published in January, 2011 by the Jordan Edmiston Group, the study focused on C-level executives across the media, information, marketing services and technology sectors and was “created to capture senior media executives’ outlook on growth opportunities and key challenges that face the industry in the months and years ahead.” 

Seeing how I spend a great deal of time on this blog complaining about the blindly arrogant and often hopelessly illogical decisions made by these same executives, I was gratified to find everything I’ve been saying summed up neatly in just two charts:

 

1. Media Executives Still Believe That Their Problems will Fix Themselves

When asked about their expected growth drivers over the next one to two years, the top three responses were:

1. Organic growth (82%)

2. Launching new products/services (76%)

3. Expansion of market share within existing markets (70%). 

It seems to me that two of the top three answers equate to “don't do much of anything and wait for things to get better”.

Gary Pruitt, CEO of McClatchy and one time hero of mine (he used to call his papers “athletic” because they were lean but powerful – I loved that), recently demonstrated this wait-and-see mindset when he stated in a conference call that he hoped the newspaper industry would soon “stabilize”.  In other words, there’s nothing we can do but wait. 

(Not that they do much better when they decide to launch new products and services as illustrated by Tribune’s baffling plans to enter the tablet hardware business, but that’s another blog post.)

 

2. Media Executives Still Don’t Know That They Are a Big Part of the Problem

When executives at companies with revenue of $250 million or more were asked about the internal barriers to growth, the top three responses were:

1.  Lack of talent in emerging areas (technology, Internet, etc.) (54%)

2.  Company structure slows growth/incompatible with path to growth (40%)

3.  Conflicting internal agendas. (34%)

Interestingly, only 13% of those same respondents cited lack of talent in senior management as a barrier to growth.

Huh?

Let’s see, our staff isn’t qualified, our company structure doesn’t support growth and everyone is off running with their own agendas, but this has nothing to do with the quality of our senior management?

It’s not us, it’s them.

We saw this attitude play out last month with Rupert Murdoch’s assertion that he’s not responsible for the hacking scandal at News International, but rather he was “let down” by those below him.

Where are the great media leaders?  I know of two. And I do know others are trying.

Being a great leader requires doing things no one else wants to do.

It may mean re-structuring for a new reality as Clark Gilbert did at the Deseret News when he separated the print and digital parts of his business.

It may mean putting the digital talent in positions of power as John Paton did when he put the digital people in charge and fired those who could not adapt.

These were not popular decisions.  They were not easy decisions.  They were gut wrenching decisions. 

But both companies are now launching into their digital futures.

That’s leadership.

 

 

 

9 Things: My Keynote to the ACNA

The start-up world has kept me hopping these past few weeks and I've been a very bad blogger.  Time to get posting again!  And I'm starting with the keynote presentation I delivered to the Atlantic Community Newspaper Association on May 13th.

Slide-by-slide commentary is below the SlideShare.

 

Judy Sims ACNA Keynote Presentation

View more presentations from Judy Sims.

1. Title

2. My name is Judy Sims and my day-job is as the COO of a Toronto Internet start-up called CanSport LIVE where I’m busy revolutionizing the business of amateur sports.

3. But up until 2009, I worked at the Toronto Star where as VP Digital media, I was responsible for thestar.com and also launched 4 digital products in 2 years.  Though my day-job is no longer in the newspaper industry, I keep a toe in the water as a member of the PostMedia Digital Board of Advisors.   I’m going to set the stage for our conversation today with a few slides on the new economics of media.  My apologies, there will be some charts and graphs, but I’m a nerd and I can’t help myself.  But the truth is, I find that talking in scientific terms, rather than emotional ones is the most effective way to begin discussing change.

4. What we’ve seen happening over the past 15 years is a fundamental shift in the way the economics of media work.  The root of that shift is the move from a world where media content was relatively scarce to one where content is very abundant.  The barriers to entry are down and anyone can become a publisher.

5. And not only is there a lot more content available, that content has become “atomized”.  Media is now consumed in smaller and smaller chunks across a wider and wider range of media sources.  The average YouTube video is only 3.5 minutes compared to a 30 to 60 minute TV show.  A blog post is only 3 to 10 paragraphs verses 20 or more in a newspaper or magazine article.  Twitter has reduced this even further to only 140 characters.

6. And now we’re even seeing this happening in the advertising world.  Ads have become unbundled from news.  Flyers are becoming daily deals. 

7. Workopolis, Kijiji, Autotrader, Flyerland, Craigslist – the ads are the content.  They’re the prime attraction.

8. The result of this atomization is that economics of this new media world are the inverse of the old media world.  Where content was once scarce and attention was abundant. 

9. Now content is abundant and attention is scarce.

10. Okay, here we go with the charts.  The economics of media, like the economics of any product or service are based upon supply and demand.  Where supply is low, demand is high and where demand is low, supply is high.  Where the two curves intersect determines the balanced market – the quantity produced and price it sells for.  This applies to the cost of a newspaper or movie or the cost of advertising.

11. This is what supply and demand for media looked like before the Internet.  Because there were significant barriers to entry as a media company, i.e. you needed a printing press or a TV studio or movie camera, supply was relatively limited and demand was relatively high.  Thus prices were high.  In our case, that meant that we were able to charge high rates to our advertisers.  Looks good doesn’t it?  We could even do a little marketing or increase circulation by moving into a new town or subdivision and we could even grow our demand and increase the price we charge advertisers.  It was awesome.

12. This is Umair Haque.  He’s an Oxford-trained economist who has been studying the impact of the Internet on various industries.  He defines this media 1.0 world as the Age of the Blockbuster.  The blockbuster resulted in very high revenues and profits for media companies for decades.

13. But Media 2.0 changed all that.  Reduced barriers to entry have increased media supply exponentially.  All this new content has made it easier for us to find what we like online so we actually consume more of it, shifting the demand curve out.  Good news right?  Well, the problem is that the demand curve hasn’t shifted out nearly as much as the supply curve.  The result is a hyper-deflation of media prices.

14. And we are in fact seeing this in action in the online world where supply of advertising inventory is much higher than demand.  And, technologies are being created everyday that make the purchase of advertising inventory increasingly efficient and increasingly complex.  As a result, there has been downward pressure on advertising rates both online and offline.

15. Umair Haque believes that we are witnessing the end of the Blockbuster Age

If Newspapers Cease to Be, There Will be Two Causes of Death -- Part 2

Cause of Death #2: Failure to focus on ROI

Read Cause of Death #1

Mainstream media organizations have spent insane amounts of time and effort trying to teach traditional sales reps to sell digital ads (give up, they will never do it well).  

Instead, that time and money should have been invested in discovering what drives Return on Investment (ROI) for advertisers and then building new products and services that deliver it.  Relationship selling is nice, but an advertiser cares much more about making the cash register ring than they do about who walks in the door to sell the ad.

Let’s face it, in the past, newspapers really didn’t have to worry about ROI.  They were the biggest game in town and sheer mass reach created results for advertisers.  There was no way to accurately measure ROI because there was no way to know how many people saw an ad.  Besides, there were very few other options.  So advertising rates could keep increasing and advertisers would keep paying because they believed that their businesses depended on it.

Unlike newspapers, advertisers (particularly retail advertisers) have always been very concerned about ROI.  Until recently, there simply weren’t tools to provide an accurate picture of what was working and what wasn’t.  But if legendary retailer John Wanamaker were alive today, he wouldn’t be worried about which 50% of his ad budget was wasted.  He’d know.  And everyday, he’d be finding better, more efficient and effective ways to spend his ad dollars. 

Hell, he might not even need media at all.

PFI Western Wear are online retailing pioneers (no pun intended) who have taken to creating their own high-value content including 30 to 50 second product videos and a weekly ½ hour show.  The results have been phenomenal.  More time on site, higher order values and a 50% higher conversion rates on products that have a video.  You can learn more about PFI and commercial video here.

Media execs need to get obsessed with what drives ROI.  They need to create teams of advertising, marketing and product development staffers to focus on nothing but building now ROI-based advertising products.

The solutions don’t have to be overly complex or even original. The simplest things can make all the difference. 

The Starlight Theatre in Kansas City (another PFI venture) discovered that marketing emails that include video (of live performances, interviews, behind the scenes) increased ticket sales by 593%.

Group-buying service Groupon is a relatively simple product that not only provides direct, measurable ROI, but guaranteed revenue too.  It’s also highly replicable.  I must admit, I’m somewhat puzzled by the newspaper companies which have opted to partner with Groupon rather than go it alone.  Most of them already have the advertiser relationships and are sitting on HUGE customer email databases.  It could be a highly profitable business opportunity.

Contextual environments provided by vertical sites are another way to drive ROI.  Vertical sites create much more engagement, more time on site and a more receptive audience for appropriate advertising messages.   

Behavioural advertising drives ROI.  A March 2010 study by the Network Advertising Initiative revealed that behaviourally targeted ads are more than twice as effective at converting click-throughs into purchases than run-of-network ads.  These ads also generate significantly higher CPM’s – on average 2.68 times higher.

Yodle and ReachLocal both offer live up-to-the minute reporting so advertisers can see exactly how effective their campaigns are right now.  No waiting with fingers crossed for the monthly click-through report.  They will even provide a custom phone number and record customer calls so advertisers can determine the quality of leads produced and their sales rep’s responsiveness.

That’s proving your value.

By the way, this message is not just for mainstream media companies.  Pure plays such as Washington’s TBD.com and Toronto’s OpenFile.ca need to focus just as much (probably even more) on ROI if they’re going to support themselves with online ads alone.  TBD is off to a great start (along with the Journal Register Company) by partnering with GrowthSpur.  (Full disclosure, I'm on GrowthSpur's advisory board).

In an age where ad blindness is causing click-through-rates to continue to fall through the floor, banners and big-boxes are surely to die.

Then what?

Without a dedicated focus on ROI, I predict that the end will be near.

A News Exec who Gets it! John Paton, new CEO of the Journal Register Company.

Last week, I had the pleasure of spending an hour on the phone with John Paton as he drove from Ohio to Michigan.  John is the newly appointed president of the Journal Register Company and up until February of this year, he was Chair and CEO of the Spanish language newspaper company, impreMedia.

The fact that a kid from public housing grew to be a prominent newspaper publisher in both Canada and the US isn’t the most amazing thing about John.  What's truly amazing is that he is a publisher who gets it.  And in my opinion, that's extraordinarily rare.

John blogs and tweets.  His eyes are wide open, he isn’t lying to himself about the state of the newspaper industry and he’s not afraid to make the tough decisions most other newspaper executives are avoiding.  And though his papers are in some of the economically hardest hit regions of the US, if anyone is going to figure out how to keep newspapers alive in the 21^st century, I’m betting it will be John.

In his December 2009 speech to the WAN conference in Hyderabad, India, John outlined the steps he took to save impreMedia during the economic downturn.  I’d give you a link, but it seems the speech has been (ominously) removed from the impreMedia site.  I have a copy of it though and it reads as a blueprint for all publishers to follow:

• An acknowledgement that media companies must work with the sea of change brought on by the digital world, not against it.
• A web first, brand first strategy.  A breaking news story will start as an SMS message, then go to the web and social media, be enhanced with video and audio and then be printed for the newspaper last.
• Smart outsourcing of non-value creating activities such as pre-press, printing and distribution.
• Investment in value creators such as editorial, marketing, reader research and technology.  Investment in editorial does not mean editorial processes don’t have to change.  John heeds Jeff Jarvis’s advice to “do what you do best and link to the rest”.  That means not sending “10 reporters to the world cup”.
• The beginnings of a newspaper-curated, hyper-local blogging network.

I think it’s safe to say that the folks at JRC can expect similar initiatives in the coming months.  Within 3 weeks of his arrival, he put his money where his mouth was by providing flip cameras for reporters.

After all the changes are done, John believes newspapers will make smaller revenues but also higher profits. The changes won’t come easily and in John’s words, there will be “blood on the floor”.  But when I hung up the phone, I felt, well, inspired.  It’s been a long time since a newspaper exec left me feeling that way. 

Edit: My original post said John was from Winnipeg.  John tells me he was born in Glasgow, then grew up in Toronto and London, Ontario.  God knows why I thought he was from Winnipeg.  This is why I'm a marketer and not a journalist.

Local Media: The Magic Combination that Means More Trouble for Newspapers

It seems to me that 2010 is going to be the year the game changed for online local. 

The right factors are finally converging:  quality local content, awesome mobile devices, and local advertising services.   It’s getting much easier to envision what the tapestry of local media and advertising will look like in just a few short years.

And for that reason, I say to the newspaper execs of the world:  please stop fussing about with pay walls and get serious about online local.

Let’s look at what they’re facing.

Content

Yes, there are thousands of excellent local bloggers out there.  But online local is not just about independents anymore.  Big money is being spent on local websites.  And the new tapestry is a mix of professional and amateur, old and new.

Examiner.com is now in 240 major local markets in North America with plans for continued expansion.  In fact, they recently announced that they hope to increase the number of “Examiners” (local contributors with specific interests or areas of knowledge) from 30,000 to 85,000 by the end of the year.  The site brands itself as the “insider source for everything local”.

NPR also has plans to delve further into online local.  Prong 1 of Vivian Schiller’s 3-pronged strategy is “A focus on local”.  In April, Schiller told MediaBistro that there is “a big gaping hole to serve Americans local coverage”.  Why local?  Schiller says “Because our unique offering is the fact that we are local.  The stations know their communities.  There’s different demographics.  There’s different sensibilities”.

BusinessInsider reported this week that AOL’s Patch.com will increase their number of sites from 30 to something in the 100’s in 2010.  Patch hires professional journalists.  AOL’s careers site has 53 job openings at Patch, mostly editorial positions.  (I believe there is huge potential for Patch to drive ROI for local advertisers by utilizing AOL’s network of 80+ other sites, but that ‘s another blog post.)

And then there’s the much anticipated and yet to be named Jim Brady project at Allbritton.  Jim is hiring 50 of the digital world’s best journalists (including Steve Buttry, a big favourite of mine), to go head-to-head with the Washington Post.  If Jim is successful, his site will spawn many imitators across North America.  (I had lunch with him last month.  I think it’s going to be terrific.  And he promises to give it a name soon.)

Last, but certainly not least, the Guardian in the UK is getting in on the act with the launch of their Leeds site earlier this week.

Awesome Devices

An iPad not only allows you to take the Internet with you wherever you go, but unlike a dumb-old lap-top, it actually knows where you are.  It’s connected to your community.  So is an iPhone, Blackberry or a Nexis One.  If the job of local media is to reflect, affect and connect the community, things just got a lot more interesting.

Not only is there now more local content, devices are able to target that content, along with advertisements to consumers with greater accuracy, creating greater relevancy and likely, greater ROI for advertisers.

I’d say something about Google Buzz here, but frankly, I’m still on the fence…

Advertising

An August 2009 Kelsey Group survey revealed that 77% of small and medium sized businesses are using online media (compared to 69% using traditional media).  However, a Nielsen study found that half of small businesses spend less than 10% of their marketing budgets online. 

Why haven’t more local advertisers spent more on the web?

I think it’s because it’s just been two damn hard.  Too hard for local businesses to buy online ads and too hard for local websites to sell online ads.  

Advertisers have had to manage a complex dance of multiple ads across multiple sites, calculating multiple ROI’s and working with multiple sales reps.  For publishers, the problem has been finding a profitable business model. Sales reps often encounter high-maintenance, unknowledgeable clients who lack websites and online creative.  The cost of sale becomes prohibitive in a high service, high volume, low revenue environment such as online local media. 

But it’s starting to get easier.

Take PaperG’s PlaceLocal product.  Enter a business name and it will pull images, reviews and other information from the web and create an online ad for the advertiser.  Automatically.  Cool.  The time and cost of creating online ads has been one of the major stumbling blocks preventing local websites from acquiring new advertisers, or generating sufficient profit from the ones they have.

Mark Potts is doing his part to make things easier with GrowthSpur.  As he told BusinessWeek, the platform will help enable “citizen ad sales” as publishers will be able to sell ads onto each other’s sites.  GrowthSpur will also provide much needed sales training.

In addition to GrowthSpur, networks such as CityGrid by City Search, Reach Local, Local.com and Addiply are all trying to make it easier for small businesses to begin advertising online.  If they succeed, the revenue potential is enormous. 

Now.  How will newspapers respond?

I hope they will separate their print and digital organizations and operate their websites like lean, mean, start-up machines.  I hope they will enable a team of smart, excited digital staffers to create the Complete Community Connection like the one that Steve Buttry will surely introduce at the new Allbritton site. I hope they will see the iPad as a tool for delivering more context to readers and ROI for advertisers instead of a great way to finally make users pay for content.  I hope they will form a local ad network such as GrowthSpur and hire expert digital sales staffers to make it hum. 

But I fear they will do none of those things.  I fear they will hinder themselves with their large, expensive infrastructures and traditions. 

You know what I mean.  Print staff selling online ads, old media notions of staff roles, (i.e. one role, no multi-taskers) and how they should be paid, a fear of voices and opinions from outside the newsroom…

Ugh.  It’s depressing.  I hope someone proves me wrong.

 

Keep the Print Guys Away From the iPad App

 Don’t worry. I’m not going to bore you with a long-winded post detailing my thoughts on the iPad.  I’ll just say that yes, I believe it’s a game-changer because it will hyper-personalize the experience a person has when interacting with media and change the times and places at which they do so.

But that’s not why I’m writing this post.  I’m writing to beg Editors and Publishers to keep the print guys away from the iPad app development process.

God knows, they will want to get involved.  After all, in the eyes of many a print staffer, the digital folks have already screwed everything up.  They gave it all away for free, let Google, Arianna and Tina “steal” content and diminished the authority of professional journalism by encouraging readers to comment on articles and expecting writers to respond.   Print guys believe the digital guys broke the print model through carelessness and overly optimistic, dreamy-eyed decision-making.

But the iPad could be a different story.

The format and shape of the iPad feels comfortable and familiar to print guys.  And for that reason, they will think they know how to design for it despite having little or no digital product experience. They will want to lay out pages the way they do in a newspaper or magazine.  They will want to charge per article or figure out a subscription model that can be included in their ABC numbers.  They will want to keep reader interaction, community and linking to a minimum.

In short, they will kill any chances of real innovation.  Don’t let them do it. 

Get a couple great developers, a product manager, a smart ad sales person and some enthusiastic digital editors and designers and send them away for a few weeks.  Don’t give them any rules.  See what they come back with.  It will likely be something you could never have thought of.   And, it just might blow your socks off.

7 New Years Resolutions News Execs Should be Making in 2010

I should be in the gym right now instead of writing this blog post.  Like most people, I suck at keeping my New Years resolutions.  That doesn’t stop me from telling other people what I think theirs should be.

So here they are, the 7 New Years resolutions newspaper execs should be making in 2010.  I've saved the hardest one for last.

Resolution 1:  We will talk to our advertisers.

Sounds simple enough, but you’d be surprised how little communication there is between newspaper executives and the people who pay the bills.  In talking to advertisers directly, instead of through the sales team (if you actually bother to do that), news execs will learn that advertisers are completely focused on return on their advertising investment and that the more they know about what drives ROI, the less likely they are to be advertising in a general news environment.

Another interesting thing about advertisers is that the smart ones often know your readers better than you do. Marketers know that it is better to study who a person is rather than ask them what they want.  It’s their job to know their consumers.  They spend a lot of time and money understanding the interests, lifestyes, needs (and yes, purchasing behaviour) of consumers during various stages of their lifecycle.

And who are your readers?  Yup.  Consumers.  Knowing them better could change your content strategy.

Resolution 2: We will not rely on banners and big boxes for our online ad revenue.

Two words – ad blindness.  My theory is that this is a much bigger problem online than in print due to the templated nature of most websites.  When you see the same layout on page after page, you’re more likely to start ignoring the ads.  Dismally declining click-through rates support this theory.

Online advertising needs to become a lot smarter.  There needs to be more cooperation between advertiser, sales rep and editorial department so that custom advertising products such as sponsorships, content integration, events and exclusive access promotions can be created.

Resolution 3: We will create vertical sites.

Context drives engagement.  Engagement drives ROI for advertisers.  It’s such a simple formula.  Don’t let content farms like AOL’s robo-content management system and Demand Media win in this space. 

Use your data.  Analyze audience and revenue trends in your market and then build vertical sites to serve them.  Create high quality environments that readers love and advertisers love more by including a mix of news, information, data, listings, maps, advertising and e-commerce.

Resolution 4: We will become the Complete Community Connection in our town or city.

I’ve written about my love of Steve Buttry’s Complete Community Connection before.  I think it is the best hope for newspapers to begin to win in the online space.

In Steve’s words:

“For consumers, we will be their essential connection to community life – news, information, commerce, social life.  Like many Internet users turn first to Google, whatever their need, we want Eastern Iowans to turn first to Gazette Communications, whatever their need.  For businesses, we will be their essential connection to customers, often making the sale and collecting the money.  We will become the Complete Community Connection. 

Resolution 5: We will start blogging and Twittering.

Don’t tell me you’re too busy.  Alan Rusbridger, editor of the Guardian does it.  Kai Keikmann, head of Bild does it.  Arianna and Tina do it.  It’s now a basic requirement of your job.  When anyone with a keyboard can be a publisher, you can no longer afford to hide behind your (dwindling) staff.

Listen to your audience and just like your advertisers, they will tell you important things you didn’t know.

And, appoint a community manager if you don’t have one.  It’s 2010 for God sake!

Resolution 6: We will not erect pay walls where we are not providing unique value.

Think very carefully about the value you are supplying and how easily it could be replicated by a lower cost organization.  Yes, I know, it works for the Wall Street Journal and Financial Times.  That’s because financial sites provide value that is difficult to replicate and directly impacts a user’s wallet.  It doesn’t hurt that the audience for financial sites are wealthier than the population at large and work for organizations that pay their subscriptions for them.

Where’s your value?  Put up a pay wall without finding it and you will assure your own quick demise while enabling new competitors to enter the market.

Resolution 7: We will get comfortable with being uncomfortable. 

Integrating your print and online organizations feels good.  It looks good on paper.  It makes you look like a take-charge leader whose eyes are on the future as your feet are planted firmly in the needs of today.  It keeps the print people from feeling that they are forgotten, left to manage decline as their skill sets become obsolete.  It makes the digital people miserable, but who cares about them?  They think they’re smarter than everyone else and that’s really annoying.  Besides, they’ll get used to it soon enough.

Know what else feels good?  E-readers.  They allow you to essentially duplicate the print experience online in a controlled, closed environment that looks an awful lot like our traditional printed product but with videos and photo galleries.  And, there’s no need to link to other sites or allow readers to comment or interact with us in any way.  Perfect.  Never mind that that’s not really how people use electronic media.

Ooh, and it’s also comfortable to tie most of your online revenue to classified advertising and then tie that to print revenue.  You can call it “leveraging our core assets”.

There’s just one problem with comfortable solutions.  In the online world, chances are, if a solution makes you feel comfortable and in control, it’s probably not radical enough to work.

That’s why in Q3, online revenue at newspapers fell 17% from 2008 when the online advertising industry as a whole fell by only 5.4%.

That’s also why when the online industry as a whole saw the beginnings of an advertising recovery with a Q309 increase of 1.7% over Q209, newspaper online advertising still declined 4.6%.

Stop trying to feel comfortable.  You are not in a comfortable situation.

 

A Tale of Two Strategies - AOL vs. Newspapers

Tom Peters said a great thing at a seminar I attended a couple weeks ago.

“The problem is never the problem.  The response to the problem invariably ends up being the real problem.”

This puts me in mind of the state of the media industry.  In a week when Newsday announced it will begin charging for content, the managing editor of the WSJ declared that Google encourages digital disloyalty, and Bill Keller told his digital staff that learning the web side of the business was like taking a graduate level course without the undergraduate prerequisites, AOL CEO Tim Armstrong revealed that his staff of journalists has grown from 500 to 3,000 in the past 6 months.

Much has been said about the newspaper industry’s financial challenges.   They are not alone, as AOL has been experiencing many of the same difficulties.  PC World reports that in the first quarter, AOL’s advertising revenue fell 20%, overall revenue fell 23% and operating income fell 47%.

It seems however, that AOL is going to have a very different response to those difficulties.

Let’s compare.

AOL

Structure

Time Warner hired an online expert and ex-Googler to run their online business who has in turn re-organized not once, but twice to form the team he needs for AOL’s transformation.

Very soon, AOL will be spun-off from parent mainstream media company Time Warner to form a completely separate entity leaving the AOL team free of the concerns of a mainstream media company as they seek to grow and innovate.

Audience Strategy

And grow and innovate they shall.  Tim Armstrong and the leadership at AOL understand that “fragmentation is our friend”.  The MediaGlow publishing division consists of a mix of 84 branded and standalone vertical sites like Engadget and TMZ that combined have a total of 70 million UV’s and over 7 billion PV’s per month.   

Community also seems to be a priority at AOL.  In hiring those 2,500 new journalists, attention was paid to the audience those writers attracted.  “You’re not just hiring the person, you’re hiring the community they come with.”

This is a smart strategy.  In a world where only 16% of Internet users click on a banner ad and 8% of Internet users account for 85% of banner ad clicks, mindless mass reach is becoming less attractive to advertisers. 

Content and community are the new critical factors for site monetization.

Why?

Quality content is more likely to create engagement, which leads to community activity on the site, which leads to even more engagement.  Engagement leads to more time on site, and the likelihood of more interest in the ads targeted to the site, which leads to ROI for advertisers.  ROI for advertisers leads to site monetization, profit and the ability to further invest in quality.

Makes sense.  In Armstrong’s words “…how do we get shareholder value?  I think it comes from customer value”.

Culture

Armstrong encourages a culture of innovation at AOL and understands that sometimes you have to fail in order to learn and grow. "If you're not going to take risks and you don't think the future is bright," he said, "the Internet is probably not the right place for you."

And they are putting their money where their mouths are.  Hyper-local experiment Patch.com continues to ramp-up.  AOL will soon launch a new content management system that will allow for easier sharing of content across the verticals.  It will also bring in more outside writers by enabling tracking that will make it easier to pay freelancers for the ad impressions generated by their content.  Why that’s starting to sound a lot like the very successful and very smart Glam.com model.

Newspapers

Structure

Newspaper organizations are not led by digital experts.  In fact, newspaper organizations are not spinning-off their digital divisions, but rather, are going in the opposite direction with a focus on integrating the print and web operations.   They are in effect asking their managers and employees to do two part-time jobs.  Create the exciting new digital future while managing the accelerating print decline. 

Bill Keller illustrated the difficulty of this strategy when he lamented that he, unlike his digital strategy predecessor Jon “stop Jayson from writing” Landman does not have the “luxury of mostly detaching himself from a lot of the other problems in the newsroom.  Little things like the print editions and the non-digital budget…” and therefore he won’t “master the intricacies of digital the way Jon did”.

Audience Strategy

For all their talk about the importance of content, most newspaper companies have not created a wide range of content verticals targeting multiple niche audiences.  Sure they have created classified verticals and even mommy forums and a few pet sites, but few of those sites have editorial content.

Why haven’t newspaper companies created national vertical content sites like those of AOL?  My guess is that these companies have never had a product culture.  New features or sections are created by editorial or advertising, rarely both, and never by a person actually trained and skilled at product development.

I find the failure to create content strategies almost more troubling than the attempts at integrated structures.  Clay Shirky says that one of the 3 non-economically based reasons that most newspapers will eventually fail is that the bundle of information they present online is “incoherent”.  That is to say that the mix, of say, crossword puzzles, sports scores and international news was made necessary by the scarcity of printing presses.  Newspapers produced the mix of content that would appeal to the broadest audience possible.   As the web allows for narrower and narrower niches of content, maintaining the old bundle cannot work.

As for community, although more and more newspapers are recognizing it’s importance in the form of commenting and social media, their primary discussions are actually about how to stop it from happening by erecting pay walls.

Culture

In their book, The Three Laws of Performance, Dave Logan and Steve Zaffron make the case that “as people see the world, so they behave”.   

Well, in most newspapers, the mood is like death.  A place where people are worried about losing their jobs during the worst recession in 70 years with little hope of working again in their chosen profession is probably not the best environment in which to encourage risk-taking and innovation.

So let me ask you.  Who’s got the better response to the problem?

Which looks like the better place to invest - an online media company that is led by Internet veterans and is growing and innovating, or one that is cutting, retrenching and retreating behind a pay wall?

Where would you want to advertise - an online media company that is focused on creating ROI through quality, community or engagement created by vertical sites or one that still bundles content for the masses and relies on the declining click-through rates of banner ads to provide results?

If you were a talented, passionate journalist, marketer, ad sales person or product manager, where would you rather work - a media company that is growing, hiring, innovating and encouraging risk taking or one that is shrinking, fearful and stuck?

It’s obvious.

Newspaper executives aren’t stupid, in fact quite the opposite.  So why are they not doing what needs to be done?

I think the real question is why are they not allowing their companies to do what needs to be done?

I can only imagine that it is the very unpleasant reality that to affect the real change that will enable media companies to survive, there must be a massive power shift. 

From old guard, to new guard.  From print publisher to digital leader.  From editor-in-chief to product developer.

Ouch.

A Perfect Storm. Where are the Skillful Sailors?

Newark mayor Cory Booker Tweeted an African proverb last week: “Smooth seas do not make skillful sailors.” 

Brilliant.   And, disturbingly applicable to the current state of the newspaper industry.

One has to wonder: how could floating along on margins of 20%, 25% even 30% and higher for the past couple of decades have created executives capable of fighting through a swell or two much less the perfect storm of recession, competition and structural change crashing down on them in 2009?

Case in point, check out the Live Blog and supporting materials from the API’s recent summit on their news media economic action plan where you will find a complete lack of actual business discussion.

Oh, there was lots of discussion about the various ways newspapers are thinking of charging for content, but no discussion at all about readers and potential readers, their needs, what they value and what kinds of things they might be willing to pay for. 

The session included the presentation of survey data complied by industry consultants Greg Swanson and Greg Harmon, which show a dismal perception gap between news execs and readers.  When asked how difficult it would be to replace newspaper sites, 52% of visitors think it would be easy while only 31% of news providers believe so.  When asked what would replace newspaper websites, the gap grows larger as 75% of news providers think it would be their print edition while only 30% of visitors agree.

News execs still aren’t looking to understand their users or to seek gaps in the marketplace, but instead they are trying to do the same old thing only now get paid for what has become free.  It’s all about existing products (i.e. news and features), nothing new.  What about data?  What about helping users to make or save time or money?  What about niche content that is rare or specialized enough to command payment?

As usual, newspapers are showing their complete lack of innovation.

I’m not talking about newsrooms.  Innovation has always been encouraged and valued in newsrooms.  Ask any old-timer (if you can find one) or new-comer for that matter (if you can find one) and you will be regaled with tales of brilliant journalists and the innovative techniques invented to get the story, get the quote, confirm that key fact, get the photo that proves everything…

No, I’m talking about the business side.  Why is that same innovation not encouraged and valued there?

Smooth seas.

Smooth seas allowed poor business decisions, counter productive structures and lackluster talent to be rewarded, fooling managers into thinking that they were better than they were.  How could they not be talented with all that money rolling in?

There are 4 P’s of marketing.  Product, Promotion, Place and Price.  The folks at the API summit just want to talk about price.  That’s because they’re not thinking of their websites as products.

The problem has been exacerbated over the years by the belief that only editors and publishers can be trusted with the integrity of the brand.  This simply isn’t true.  A good product person keeps a long-term perspective and knows that the key to success is the integrity, credibility and power of their brands even if that means saying “no” to advertisers from time to time (actually, a great product manager focuses on how they can say “yes” to an advertiser while maintaining editorial integrity instead of when to say “no”).

It’s time to break the cult of the editor and publisher and bring in product development expertise.  Not just someone from advertising or editorial or a committee of cross-departmental managers, but honest to goodness professional product people.  Product people who will examine the market data, study the demographics, lifestyles, challenges and habits of potential readers and then bring together editorial, advertising, technology and marketing to create digital products that serve users and advertisers and do so profitably.

Make sure they are digital experts.  Give them their own division.  And please, hire them from outside the organization.  We need some skillful sailors.

 

Norway's VG - Not Integrated, Very Profitable. Hmmmmmm.....

Earlier this week, I was thrilled to receive an email from Torry Pedersen, CEO of VG, Norway’s biggest newspaper and Chairman of VG.no, Norway’s biggest online service. 

I became obsessed with Scandinavian newspapers earlier this decade as one after another, they migrated from broadsheets to tabloids.  I used to annoy my coworkers with my love of saying their names – Aftenposten, Svenska Dagbladet, Dagens Nyheter….. 

But my favourite was VG.   Though its name is not nearly as fun to pronounce, everything I learned about its editorial and management strategies revealed that their teams certainly knew that a newspaper should reflect, affect and connect a city and the people who live there. 

Torry had read my post on the 10 lies newspaper execs are telling themselves and wanted to share an article he wrote for the Tinius Trust 2008 Annual Report.  You can see it here, it starts on page 27.

VG.no is profitable.  In fact, 40% of their media house’s ad revenues and almost 38% of total profit now come from their digital business. 

Fantastic results by any standard.  Interestingly, Torry doesn’t believe that news organizations should be integrated (Lie #1).  From his article:

“According to a survey by Zogby International, an overwhelming majority of the world’s editors – 86 percent – are convinced of the blessings of integrated newsrooms.  Staffed by journalists so effortlessly versatile that they will manage to produce high-quality material for both the online and print editions day in, day out.  Miraculous powers are attributed to integrated newsrooms.  They are expected to secure the future of newspapers.  They are the holy grail of editors – and managing directors.  Personally, I dissent”

Why?

He later goes on to explain that:

“All content produced for the print media is periodic.  Either daily, weekly or monthly.  The Internet is an environment that is suitable for continuous journalistic production.  At its best, this is often done in dialogue with readers.  Their presence and experiences become an integrated part of the final journalistic product.  These are two ways of working that obviously require different specialist skills”

How does this tie to revenue?

“The online business model – which relies almost entirely on advertising for revenues – means that the market leader receives a disproportionate share of the revenues.”

“…newspapers with a joint organization for their online and print editions are unlikely to make much money online.  It is impossible to capture the valuable number one position with that kind of organizational structure.”

Amen.

So why is Torry so smart?  Before he was CEO, he used to run VG’s online business, which is a separate company.  I've often thought that the first newspaper that will win on the web will be the one that puts a digital person in charge of the whole organization.

When I asked him why North American newspapers have been so afraid of the separate online organization, he replied that “My observation from Scandinavia – and I have to underline it is distanced – is that the papers in North America focus more on cost savings then really mastering the transformation everyone know will take place – from analogue to digital.”

Yup.

Incidentally, I also received an email from Luis Alberto Ferre Rangel, editor/owner of El Nuevo Dia who seems to be making the case for the integrated newsroom.  He and I may disagree on this point, but I like the way Luis made his case:

“We (the org and the newsroom) are disrupting from the inside and managing the transition from the industrial to the digital model. It’s ugly and it’s nasty. We will stumble and make mistakes. But we will get it done, through outsourcing, new hiring, training, investing, and a powerful vision that guides us.  We are creating a new company. Period.”

I’m going to stay in touch with Luis as he transforms his organization.  Something tells me that both VG and El Nuevo Dia will still be around when the dust settles.