Thursday, November 12, 2015

Ad-block surge challenges digital publishers

The number of consumers actively blocking digital advertising has grown dramatically in the last five years, posing a difficult and daunting challenge to publishers across the web. Now, new developments may accelerate the troublesome trend. 

Between 2010 and the first half of this year, the number of global consumers installing ad-blocking technology on their browsers grew by nearly tenfold to 181 million, according to a survey published recently by Page Fair, a company aiming to help publishers and marketers reverse the tide.  

While active ad-blockers represent only about 7% of the world’s wired population, the practice has been adopted widely in the United States and United Kingdom, according to the Reuters Institute of Journalism at Oxford University. 

“Forty-seven percent of our U.S. sample and 39% in the U.K. don’t always see ads because they use ad-blocking software to screen them out,” said the Reuters Institute in its comprehensive annual survey of the media business. 
Elsewhere in the world, Page Fair found ad blocking ranged as high as 37% and 35%, respectively, in Greece and Poland and as low as 13% and 10%, respectively, in Italy and France.

In addition to those who actively block ads, the Reuters Institute found that 30% of respondents in the U.S. and 39% of respondents in the U.K. ignore ads when perusing the web. Further, the institute discovered that 3 in 10 respondents in the U.S. and U.K. “actively avoid sites where ads interfere with the content.”

Although marketers will be disappointed to learn that so many people tune out their carefully crafted messages, publishers at least get paid for ads that visitors ignore when visiting their sites. 

When blocking technology prevents an ad from being served, however, the publisher doesn’t get paid. And that is turning into a growing problem for everyone from gaming-site operators to the news media.

Page Fair estimates that ad blocking will deprive digital publishers worldwide of $22 billion in sales in 2015 – a sum projected to nearly double to $41 billion in 2016. The company estimates that blocking cost publishers $7 billion in sales in 2013.  

About half of the global revenue loss occurs in the United States, where Page Fair projects that blocking may crimp digital ad expenditures by 22% to deprive publishers of some $20 billion in revenues in 2016. Some analysts argue that the estimate is too high, leaving the magnitude of the potential revenue loss open to debate. But there can be little doubt that ad blocking is gaining steam.    

The reason ad blocking has accelerated in recent years is that the popular web browsers began providing free plug-ins to automatically nuke most ads. In the first six months of this year, the number of users enabling the ad blocker on Google Chrome climbed 51% to 128 million, the number of ad blockers on Mozilla’s Firefox rose 17% to 48 million and the number of blockers on Apple Safari grew 71% to 9 million. 

The majority of the ad zapping to date has occurred on desktop computers, because the penetration of ad blockers is far lower on mobile devices than desktops, according to Page Fair.  But that is about to change, because Apple, which came later to the “block party” than its competitors, is throwing its considerable weight behind improved ad blocking for its widely deployed Safari browser. Here’s why this is a big deal:

Even though Firefox holds only a tiny share of the mobile browser market, its users account for 40% of the ad blocking detected by Page Fair, thanks to the long-standing availability of ad-zapping software on Firefox. 

Safari, which is a far bigger player than Firefox because it enables 52% of mobile browsing activity, heretofore has not had a competitive ad-blocking capability. But that changed with the introduction of the recently released iOS9 operating system. As the new operating system rolls out, Page Fair expects “ad blocking on mobile Safari to trend towards the levels seen in the mobile version of Firefox.”

A number of analysts and commentators share Page Fair’s belief that the widespread adoption of ad blocking on mobile Safari will accelerate the growth of a challenge that publishers and marketers to date have been largely helpless to counteract.

Page Fair, among other companies, encourages publishers and marketers to improve the relevance of their ads while also paying ad-blocking services to let ads from their clients slip through the filters.  In addition to such efforts, some publishers have resorted to warning visitors that their sites could go out of business if too many users block too many ads.   

While there is nothing wrong with any of the above strategies, none to date seems to be slowing down ad zapping. It looks like advertisers and publishers have more work to do. 

© 2015 Editor & Publisher

Wednesday, October 14, 2015

Should newspapers abandon digital?

Newspapers are so bad at digital publishing that they should just give up and focus on print. 

That’s the bracing thesis of a recently published mini-book from journalism professor H. Iris Chyi of the University of Texas, who likens what she calls the “inferior quality” of online newspaper offerings to the desiccated ramen noodles that constitute the primary food group for many a starving student. 

Her publication is titled “Trial and Error: U.S. Newspapers’ Digital Struggles Toward Inferiority.” It is available here

Observing that newspapers have been experimenting with “new media” for the better part of two decades, Chyi marshals a raft of research to conclude “the performance of their digital products has fallen short of expectations.” 

She urges publishers to “acknowledge that digital is not your forte” and abandon the “digital first, print last” strategy that has been widely adopted in the business. 

“That is not to say that you don’t need to offer any digital product,” she adds, but “one may conclude that it is easier for newspapers to preserve the print edition than to sell digital products.”

Newspapers certainly have fallen short of expectations in the digital realm. Although interactive newspaper revenues have nearly tripled from $1.3 billion in 2003 (the first year the industry started reporting online ad sales), the over-all digital advertising market has soared by more than sixfold since then. 

But doubling down on print hardly seems to be a foresighted strategy when readers and advertisers increasingly are flocking to the digital media. We’ll get back to this in a moment. First, here’s Chyi’s take on where the industry went wrong: 

“In retrospect, most U.S. newspapers outsourced their homework to business consultants such as Clayton M. Christensen, whose disruptive technology thesis served as the theoretical foundation behind the newspaper industry’s technology-driven approach. The problem is that most assumptions on the all-digital future have no empirical support. As a result, during nearly 20 years of trial and error, bad decisions were made, unwise strategies adopted, audiences misunderstood and product quality deteriorated.”

Pointing to research showing that people who like to read newspaper-y kinds of articles will pay substantial sums to spend quality time with print, Chyi argues that the digital version of the typical newspaper is “outperformed by its print counterpart in terms of usage, preference and paying intent.”  

And she is right. Any publisher will tell you that print is more profitable than pixels. 

The problem with ditching digital, however, is that the number of readers and advertisers who value print has been steadily shrinking – and likely will continue to do so, owing to these seemingly irreversible market phenomena:

:: Tumbling print circulation. The print circulation of the nation’s newspapers has dropped by nearly half in the last 10 years, according to this analysis. While continuous changes in the way publishers report their circulation have made year-to-year comparisons increasingly difficult, most anecdotal evidence suggests that print circulation is continuing to erode.   

:: Dramatically aging readership. The New York Times recently reported that the median age of its readers is 60 vs. 37 for the U.S. population, making its audience 1.6 times older than the population as a whole. The average life expectancy of a 60-year old man is 21 years, while 70- and 80-year-old gents statistically have respective lifespans of 14 and 8 years, according to the Social Security Administration. Even though some readers will live longer than the predicted average, the superannuated readership of newspapers suggests that significant numbers of loyal readers will begin dying off in the next 10 to 15 years. (Women will be glad to know they get an extra couple of years, but not enough to reverse the trend.) Most publishers will tell you that the median readership of their newspapers is as senior as that of the Times, if not older.    

:: Steadily contracting ad sales. Fully two-thirds of the print advertising at the nation’s newspapers has dried up since hitting a record high of $47.4 billion in 2005. Most of the publicly held publishers reported sales declines in the first half of this year, suggesting that revenues are on track to slide for the tenth straight year in 2015 – unless an unforeseen miracle occurs.  

:: Declining economies of scale. Unlike websites that can serve one page or 100,000 pages at little incremental cost after they go live, print publishers must sustain substantial manufacturing and distribution investments in order to print a single paper. If circulation falls another 50% or print advertising slides another 67% in the next 10 years, will there be sufficient print subscribers and advertisers keep the business viable? This is the existential question facing the industry.  

As poor as the industry has been at finding its footing in the digital age, it’s hard to imagine how newspaper companies can survive over the long term if they put their primary focus on print. 

© 2015 Editor & Publisher

Thursday, September 10, 2015

Apple, Google and Facebook zero in on news

With Apple, Facebook and Google promoting powerful news-delivery platforms, the best days may be in the rearview mirror for the dedicated news apps produced by media companies and a host of independent players. 

Leveraging their enormous audiences, vast troves of user data and state-of-the-art targeting algorithms, the Silicon Valley behemoths have created master applications to deliver personalized feeds to serve everyone’s individual news, information and entertainment needs. They’ll use those platforms – and the rich user data they generate – to deliver premium-priced advertising to the right customer at the right place at the right time. 

Although the emerging news services may delight consumers and advertisers, they pose a significant threat to not only legacy news organizations but also to the many free-standing aggregation services that sprang up over the years to help users discover and organize information. We’ll discuss those challenges in a moment. First, here’s how the technorati are vying to be your go-to news destination:

Google. The granddaddy of aggregators is Google News. Founded in 2002, the site automatically culls, categorizes and personalizes articles from thousands of global publishers. Recognizing the considerable time people spend with their mobile phones, the company has super-charged its Google app so it can serve as both your primary news source and the roadmap to your life by tracking your calendar, your take-out orders, your shopping list and much more. Seeking to capitalize on the popularity of mobile video, Google’s YouTube subsidiary recently launched a news-aggregation site called NewsWire.

Facebook. Facebook ventured into news delivery in a serious way a year ago, when it introduced its well-regarded Paper app. In spring, the social network upped its game with Instant Articles, a system for delivering entire stories, videos and visualizations at speeds up to 10 times faster than previously possible.  Publishers from BuzzFeed to the New York Times are contributing their content to Instant Articles to get in front of the network’s 1.4 billion global users. 

Apple. Apple’s freshly minted News app promises to consolidate and personalize content drawn from far and wide. The app, which is installed by default in the latest version of the company’s mobile operating system, will go beyond acquiring and organizing content from the usual name-brand publishers. It also will carry the RSS feed of any independent content creator who is willing to permit Apple to use her content without payment and to indemnify the world’s most valuable company in the event someone files a libel or copyright complaint against something she wrote.

The Big Three are not alone in focusing on news delivery. Snapchat earlier this year launched a feature called Discover, which contains news and infotainment blurbs provided by a dozen partners ranging from ESPN to Vice News. Twitter and Instagram reportedly are crafting better ways to aggregate and organize news, too.

Taken together, these moves aim to capture as much screen time as possible from the booming audience for mobile news. With the typical owner poking at his smartphone nearly three hours a day, it is perhaps no surprise that two-thirds of the traffic at the nation’s 10 busiest news sites arrived via mobile device. 

The mobile-news frenzy in Silicon Valley poses profound questions for the incumbent players in the media ecosystem. 

Legacy publishers and broadcasters are being forced to decide whether to contribute their expensively produced content to the master apps – or risk being marginalized as consumers forsake their carefully tended digital brands for the convenient and compelling aggregation platforms fielded by the tech giants. 

The argument in favor of sharing legacy content is that media companies can expand their audiences at the same time they share in the fresh revenues generated by the superior reach and marketing power of their newfound technology partners. As discussed above, several major media shops already signed on to such arrangements.

But industry sentiment has not been unanimous. Will Lewis, the chief executive of Dow Jones, recently asked if publishers should “run, headless chicken-like, towards offers from companies like Apple and Facebook to put our content in their walled gardens.” 

While legacy publishers may have options, the techno behemoths could squeeze the life out of many of the independent news-aggregation sites that emerged over the years. Those indie efforts range from Flipboard, the most prominent and innovative of the ilk, to Circa, which succumbed over the summer for want of audience, ideas and cash. The increasing competition from Silicon Valley probably contributed to the Circa’s demise. 

In the final analysis, history may well regard the indie sites as point solutions, which is what folks in Silicon Valley call a spreadsheet that can add and subtract but cannot multiply and divide. Though the innovators in news aggregation pointed the way to better user experiences, they’re probably not destined to dwell in the Promised Land. 

© 2015, Editor & Publisher

Wednesday, August 12, 2015

Retail ad spending is speeding to mobile

There are few industries where mobile is having as big an impact as the disruption it is bringing to retailing. This should make publishers nervous. Very nervous. 

Though the rising popularity of mobile commerce may be great for consumers and could be pretty good for merchants, the phenomenon poses a sharp challenge to newspaper publishers, who rely on retailers to generate half of the roughly $20 billion in print and digital advertising they are likely to sell this year. Here’s why millions in newspaper advertising could be at risk:  

Now that three-quarters of Americans have smart phones, more than two-thirds of those consumers use their phones at some point in the shopping process. The Deloitte consulting group says that nearly a third of the $3.4 trillion in U.S. retail sales in 2014 were either influenced by, or actually took place on, a small screen – a six-fold increase from smartphone-shopping activity in 2012. 

In the interests of intercepting mobile-ized shoppers as they search for products, read reviews, compare prices and eventually click to buy, retailers this year are expected to spend nearly twice as much on mobile advertising as will be spent in any other digital ad category, according to eMarketer, an independent research service. eMarketer reckons that merchants will buy nearly $6.7 billion of mobile advertising, or about a third of the sum they’ll spend on retail ads in newspapers.  

Given the growing reliance of consumers and retailers on mCommerce, it seems fair to conclude that a certain number of the ad dollars formerly spent at newspapers will be diverted to the mobile channel as retailers embrace digital marketing. 

Retailing no longer is a matter of stocking shelves with cool stuff, buying some ads, throwing open the doors and hoping for customers. In the mobile era, retailing is becoming a subtle, sustained and increasingly sophisticated process of psyching-out customers through a relentless blend of cyber-sleuthing, cyber-seduction and cyber-salesmanship. It works like this: 

Tracking. The process starts when the consumer starts browsing, regardless of whether it is online or in a store. Merchants use cookies to track consumers who visit their sites, visit social networks and visit other digital venues to research products before heading to a store. Once in the store, customers can be tracked with the loyalty apps developed by most big merchants or with low-power devices called beacons that communicate automatically with a shopper’s smartphone. Although cookies have been around for a long time, Apple, Google, Facebook and other tech companies recently have launched aggressive programs to honeycomb retail locations with beacons. Business Insider predicts that more than 3.5 million beacons will be in place in American shops by the end of 2018.  

Attracting. To catch the attention of media-saturated customers, merchants will quadruple their investments on in-store digital signage to $27.5 billion by 2018, according to International Data Corp. Many of the flat-panels heading into stores will have touch screens enabling consumers to change the program by themselves, while others will have cameras that can detect a shopper’s age and gender to tune the content to her predicted preferences. 

Paying. Apple, Google, PayPal, Square and a host of other companies are jockeying for dominance in mobile payments. In addition to offering convenient smartphone apps, they and other digital platforms like Facebook, Pinterest and Twitter are adding buy buttons to their websites to capture transactions faster than you can say “shopping cart.” In addition to making it easier for consumers to part with their money, many of the payment systems are seeking to capture detailed information about customers by establishing loyalty programs that give points for every purchase someone makes. Even American Express has gotten into the act with its Plenti program, which gives points for purchases from partners as diverse as AT&T, Exxon, Macy’s and Hulu. The points can be exchanged for cash or credit.
Personalizing. Data captured from cookies, beacons, interactive displays, payment systems, product searches, purchase histories and loyalty programs can be combined with inferred and volunteered customer data to produce rich individual profiles and, thus, personalized offers tuned to a customer’s income, demographics, location, lifestyle and more. 

Engaging. The more retailers interact with customers, the more they will know about them. This will enable merchants to efficiently build the long-term individual relationships that they hope will lead to future low-friction, high-yield transactions. 

Unfortunately, print ads and much of the digital advertising sold by most newspapers do not capture the granular data that is the essential ingredient in the smart marketing programs that retailers are cooking up for smartphone owners. 

The more merchants require actionable data, the more they will put their marketing dollars into the digital media that deliver it. The shift in priorities could come at the expense of newspapers. 

© 2015 Editor & Publisher

Tuesday, July 14, 2015

What good is the Apple Watch, anyway?

The smartwatch market is so small that it only took a day or two for the Apple Watch to emerge as the biggest selling techno-timepiece in history. 

Now that it has been a while since the world’s most expensive Mickey Mouse watch has been glitzing the wrists of a few million early adopters (Apple coyly won't say how many), it’s time to ask what the thing is good for, anyway. 

The positive perspective from – full disclosure – this Apple shareholder is that I think the bauble may prove to be no less than the precursor of a paradigm shift in personal computing. More on that in a moment. 

But, first, I have to say that I am skeptical about whether smartwatches can deliver much value to media companies desperately seeking to burnish their digital bona fides. In fact, I think publishers should be cautious about dedicating significant resources to developing smartwatch apps, because the best ideas that publishers have marshaled so far verge on being downright irritating to consumers. Here’s why:  

Given the teensy size of smartwatch screens, it is not possible to tell full stories on them – and the user experience would be unpleasant if publishers tried. Recognizing this limitation, most publishers have elected to publish one-screen text alerts, which buzz the user’s wrist when a new one arrives. 

The problem, as noted by many early reviewers of the Apple Watch, is that they are inundated not only with pings for breaking news but also with daylong vibrating alerts to incoming emails, tweets, texts, meeting reminders, pizza deals and, well, you get the idea. 

While users will welcome the sparing use of text alerts for truly significant events – like an incoming tornado – publishers need to eschew text as much as possible in favor of graphically packaged information that can be consumed at a glance. So far, we haven’t seen much of that sort of creativity.

Because even animated emojis get old fast, the first order of business for many Apple Watch users is figuring out how to reduce incoming alerts. Therefore, it is fair to conclude that publishers who think relentless news alerts are the killer app are likely to find the only thing getting killed is their audience. 

Fortunately, there are better ideas. Instead of using smartwatches to distribute information, publishers should use them to interact with consumers in new and innovative ways through crowd reporting, polls, surveys, games, quizzes and other initiatives that take advantage of the persistent presence of the what Dick Tracy would instantly recognize as a two-way watch radio. These activities can be coupled with subtle and sensible commercial promotions to (a) boost revenues, (b) capture granular data that publishers can sell to advertisers and (c) leverage the very same data to enhance publisher marketing capabilities. 

Now, here’s why the Watch bears watching: 

The old way of computing required active engagement and considerable skill on the part of users to persuade the clever but obstreperous machines to serve their needs. Smartwatches are different, because they are passive devices that are unobtrusively strapped to your body throughout the day. The ubiquity and intimacy of a computing device that knows your heartbeat better than you know it yourself is unprecedented in the history of computing.

With scant effort on your part after you fire them up, smartwatches monitor your health by tracking your footsteps, your sitting time and the intensity of your workouts. They can serve as personal assistants, keeping you on schedule, routing you around traffic jams, presenting your boarding pass and unlocking your room at certain high-tech hotels. They can remember where you parked your car, remotely start the engine, unlock the doors and open the garage when you near home. They already can complete credit card transactions with the flick of a wrist and in the future could become repositories for your identity, replacing your driver’s license, serving as your office badge and archiving vital medical information like your DNA. 

Smartwatches could well emerge as the master controllers in the so-called Internet of Things, because they will be the single device that knows who you are, where you are, what are doing and what you are likely to want to do next.  

As discussed earlier here, it won’t be long before the techiest homes are wired with sensors, microphones, projectors, speakers and wall-sized displays that provide on-demand access to sports scores, shopping services, cooking videos, music and anything else you please.  

The Apple Watch, the Pebble and other competing smartwatches may not turn out to be the direct forebears of this sort of ubiquitous computing, but something awfully close to them will be. So, yes, smartwatches matter. Only time will tell how much they can do beyond just telling time.

(c) 2015 Editor & Publisher

Thursday, June 11, 2015

Mobile moves to digital ad domination

Any day now, we will cross another technological tipping point, as the majority of digital advertising purchases moves to mobile devices from desktops and laptops. 

The shift could happen before the end of this year or early in 2016, according to a variety of industry prognosticators. Either way, the move will be profound in the coming years, with eMarketer forecasting that mobile will account for 72% of the $93 billion expected to be spent on digital ads in 2019. 

The reason is simple: Mobile is where the eyeballs are. 

The Pew Research Center reported in a comprehensive study in April that more than 90% of Americans owned some sort of mobile phone and that two-thirds of the devices were smart ones.  Meanwhile, eMarketer.Com reported that Americans were spending just short of three hours a day on their mobile devices, as compared with only 24 minutes a day in 2010. 
With growing attention riveted on these pocket-sized media machines, it’s no surprise that ever more advertising dollars are shifting to mobile from the traditional print, broadcast and digital media. Mobile will capture nearly a quarter of the entire ad spend across all media in the United States in 2018 vs. only 3% in 2012, according to eMarketer. Assuming the projection holds true, mobile ad spending could be second only to television within three years, which captured 39% of the ad dollars in 2012 but is projected to shrink to 36% in 2018.  
Mobile’s momentum creates major opportunities and challenges for marketers and publishers, given the following superpowers: 

It’s addictive. Because mobile phones are always there and always on, they represent the most intimate, immediate and individualized media experience ever created.  In its April study, Pew found that 67% of smartphone owners frequently check their devices even when they don’t ring or vibrate, 44% said they slept next to their phones to avoid missing calls and 29% said they “couldn’t live without” their ubiquitous electronic companions. The powerful attraction that mobile phones hold over their owners overcomes the single greatest challenge facing advertisers: capturing a customer’s attention. 

It’s targetable. Because mobile phones have the capability of knowing who you are, where you are, where you are going, what you are reading and where you are shopping, they represent an unprecedented opportunity to send targeted offers to the right customer in the right place at the right time.  The more consumers use their phones, the more data is potentially available to marketers to create compelling and customized offers. Magna Global, the international ad agency, predicts that 82% of digital display ads will be bought and sold by computers, not Mad Men, by the end of 2018. That represents more than $25 billion in volume.  

It’s social. Although smartphones are used to surf the web, shop, play games, listen to music, capture images and sometimes even make telephone calls, the top activity among young consumers is interacting with their social networks. In its study earlier this year, Pew found that 91% of users between the ages of 18 to 29 used their smartphones to interact with their friends. If word-of-mouth is the Holy Grail of advertising, then it’s easy to see why marketers worship this platform.

It’s transactional. While your fingers may have done the walking in the olden days of the Yellow Pages, your thumb does the shopping today on a mobile device – pointing, clicking and buying in one, smooth motion. Global mCommerce sales are forecast by Goldman Sachs to triple to $626 billion in 2018, a sum almost equal to all the stuff sold on all the world’s digital platforms in 2013. The convenience and customization of mobile shopping streamlines commerce like never before. 

It’s measurable. The bundles of Big Data captured through mobile computing give marketers the ability to generate an unprecedented amount of actionable insights about consumers. As the art and science of targeting improve, marketers will further sharpen the pinpoint propositions they put to individual consumers. At the same time brands use data to boost the efficiency and efficacy of their advertising, they will tally clickthrough, sellthough and other metrics to continuously fine-tune their tactics.

It’s unavoidable. Because mobile advertising will force marketers to be accountable for the costs and results of their campaigns, advertisers are bound to hold publishers accountable for their performance, too.  

As mobile becomes the primary platform for digital – if not all – publishing, it will demand ever greater sophistication from every publisher aiming to succeed in the interactive realm. Publishers will have to have the technology and the personnel necessary to capture data, categorize customers, target offers, analyze performance and dynamically tweak their content and advertising offerings to continuously improve performance.  

In other words, legacy media companies hoping to succeed in mobile publishing can’t get away with simply selling buckets of miniaturized, run-of-site banners.   

© 2015 Editor & Publisher

Thursday, June 04, 2015

1 of 4 news start-ups flamed out

In 2009, David Boraks wrote an inspiring guest post here about the launch of his hyper-local news site in Davidson County, NC. Last week, he reluctantly shut it down, saying, “Alas, we haven’t turned it into a sustainable business.”

He is far from alone. One of every four news startups has failed, according to a survey I conducted of the 141 ventures listed in an online directory published by the Columbia Journalism Review since 2010. 

The survey methodology was simple. I searched for every site listed in the CJR list and counted the number that either were defunct or had not posted any new content since 2014. Because CJR depends on news entrepreneurs themselves to list their efforts, not all start-ups  or eventual crackups  are included. 

But the CJR sample is big and diverse enough to alarm those who hope grassroots journalism will replace the news-gathering resources that have been reduced over the years by newspapers and other local media. Since 2000, one out of three newsroom jobs has been nuked at the nation's newspapers, according a survey by the American Society of News Editors.    

The idled projects on the CJR list range from A2 Politico, an Ann Arbor (MI) effort which evidently has not been updated since 2013, to Yadkin Valley (NC) Sports, whose web address leads to a placeholder site with no content whatsoever. 

The toll also includes such high-profile, well-funded and ill-managed ventures as the Chicago News Cooperative and the Bay Citizen in Northern California. A late-breaking addition is the Bold Italic, a recently discontinued effort in San Francisco that had been funded by Gannett as a digital innovation laboratory. 

Although my survey did not delve into the circumstances contributing to the demise of each of the various news ventures, the cause of death in most cases likely was the one cited by Boraks in the farewell message to his readers in North Carolina:

“We’ve been unable to sell enough advertising to local businesses to sustain the sites, to pay me and, lately, to pay our staff,” he wrote. “At the same time, voluntary support from readers – which has always been limited – has dropped off.”

Although it is painful to watch  journalism entrepreneurs flame out, it is important to note that far more new businesses fail than succeed. Even in the technology world, where a handful of garage tinkerers indeed became billionaires, some 80% to 90% of all start-ups fail.

Failures occur in Silicon Valley in spite of the millions of dollars in reasonably patient venture funding that supports most nascent companies. Further, there is an abiding focus, if not to say frenzy, at nearly every start-up company on building the value of the enterprise as quickly as possible so it can go public or get bought by a sugar daddy like Google or Facebook. 

Neither of the above conditions is present at most news ventures, where the founders are admirably intent on afflicting the comfortable and comforting afflicted but put scant attention into funding the next payroll.  

As reported previously here, the Pew Research Center found that nearly a third of news start-ups spent less than 10% of their staff time on business development, while more than half said such activities occupied between 10% and 24% of their time. By contrast, 85% of the ventures said editorial tasks consumed at least half of their time. 

Unless and until people conducting news ventures take the business of their businesses as seriously as they take their journalism, the failures will continue.  

Saying he had struggled to save his news project from a number of near-death experiences over the years, Borak clearly was intent on building a sustainable business.  The lack of support for his effort among readers and advertisers suggests that the most intractable problem for news ventures may be a hopeless reluctance in the marketplace for paying for what journalists do.
Even dedicated newsmen cant afford to work for nothing. As rewarding and exhilarating as the experience was, Borak told his readers in his final missive, “We’re in debt, we’re exhausted and it’s time to go.” 

Thursday, May 14, 2015

Why publishers had to partner with Facebook

The natural order of the universe was disrupted yesterday when BuzzFeed, NBC News, the New York Times and a number of other prominent media companies shockingly ceded to Facebook the marketing and monetization of portions of their valuable content. 

The move, which represents a further step in the transfer of power from the media tribe to the technology tribe, means that some of the biggest names in media have conceded that they are neither large enough nor strong enough to thrive as independent digital publishers without the help of at least one of their fearsome frenemies in Silicon Valley. 

In addition to Facebook, the other frenemy, of course, is Google. Although the media companies like to think that the quality of their work speaks for itself, Facebook and Google referrals steer the preponderance of the traffic to almost every news site. 

The Facebook deal institutionalizes as never before this long-running dependency. In addition to the trio mentioned above, the other media companies who will be funneling content to Facebook are The Atlantic, BBC News, Bild, The Guardian, National Geographic and Spiegel Online. Fearful of being left behind, it is fair to assume additional media names in the not-too-distant future will feel obliged to join, too.  

Here’s how the deal works: 

The media companies will give full articles and videos to Facebook, so the social network can distribute them among its more than 1.4 billion usersPublishers can keep all the revenue from any ads they sell to accompany the content they allow Facebook to post. When Facebook sells ads against the content contributed by the media companies, both sides will split the proceeds equally. 

The choice to throw in with Facebook could not have been easy for the proud media companies. Historically, the last thing they wanted was to give their expensively produced content to another brand competing for the same eyeballs and ad dollars. But that was then and this is now. The media swallowed their pride because they know they lack the sort of massive global reach that only Facebook can provide.  

Difficult as the decision may have been, it was inevitable, given the several critical capabilities that Facebook has developed. These are its not-so-secret superpowers:

Superior mobile prowess. In addition to the sheer size of its audience, Facebook has mastered the art and science of mobile publishing better than almost anyone. In the first quarter of this year, the company reported, 65% of its traffic and 73% of its ad revenues came from such highly optimized mobile sites as its Paper app. 

Superior audience engagement. Based on the amount of time people spend on Facebook, it is fair to say its users are considerably more passionate about the service than the visitors to a typical news site. According to Alexa.Com, the average user spends 18.4 minutes per day on Facebook, as compared with 9.5 minutes at the New York Times, 6.4 minutes at NBC News and 5.4 minutes at BuzzFeed.  

Superior customer data. Because enthusiastic users frequently and liberally update the site with a plethora of personal data, Facebook knows more intimate and accurate details about more people than any company in the world. The information is updated dynamically in real time, as people report everything from their favorite new song to the jeans they want to buy to the fact they will have a baby in six months.  

Superior ad intelligence. Facebook enables advertisers to target messages with heretofore unprecedented precision, thanks not only to the rich information supplied by users but also by analyzing information captured from the friends in their networks.  The ad-intel is supplemented with location data acquired from Facebook’s popular mobile services. 

Superior content targeting. In the same way data is used to target commercial messages, Facebook has the capability to match the right content with the right user by monitoring her searches and media consumption. If Facebook sees that someone likes cooking Italian food, it can slip relevant recipes from the NYT food page into her news feed, paired conveniently with an ad for a pasta maker. When Facebook recognizes that a bride is planning a honeymoon in Florida, it can send her travel videos embedded with customized hotel offers. 

With everything Facebook brings to the party, the partnership ought to be a plus for the participating media brands. But some media partners are experiencing pangs of buyer’s remorse, because they fear Facebook may trim their split after they get hooked on this welcome new stream of  incremental revenue.  

It seems fair to conclude that the media companies who took the leap felt they were damned if they did and damned if they didn’t. In the end, however, this was an offer they couldn’t refuse.  

Wednesday, May 13, 2015

The LAT and U-T merger: Double trouble?

The pending purchase of the San Diego U-T by the Los Angeles Times represents a synergy not of strength but of tsoris.  

Tsoris, for the uninitiated, is the Yiddish word for trouble. And woe – unlike readership and revenues – has been plentiful at both of these newspapers in the last decade.  

As illustrated in the graphic below, the upcoming merger combines a faltering pair of former publishing powerlifters whose businesses are sagging as much today as the pecs of Arnold Schwarzenegger, the only governor in the history of California unable to correctly pronounce the name of the state (video). Here are the sobering metrics for the SoCal publishers:

Both newspapers lost more than half of their weekday print circulation between 2004 and 2014, dropping their respective market penetrations to 15.6% of the households in Los Angeles County and 17.8% of the homes in San Diego County. Circulation data comes from the Alliance for Audited Media, an industry-funded group. 

In the same period, Sunday print circulation – which typically delivers half of the revenue and more than half of the profits at a newspaper – fell by 48.1% in Los Angeles and 45.6% in San Diego. 

While the financial performance of the two publications is not publicly available, it is possible to gauge the general health of the newspaper business by comparing the 10-year financial performance of Tribune Publishing Co., the parent of the LAT, with the publishing division of its predecessor company.  

The annual reports issued by the companies show that Tribune publishing revenues tumbled by 58.5% to $1.7 billion in 2014 from $4.1 billion in 2004.  In the same period, earnings before interest, taxes, depreciation and amortization (EBITDA) fell 63.6% to $260 million in 2014 from $730 million in 2004.

It must be emphasized that Tribune’s holdings were not identical over the 10 years, so this is not a strict apples-to-apples comparison.  The predecessor company, which was roiled by the Zellistsas and an epic bankruptcy before it jettisoned its newspapers, divested Newsday in 2008. The new standalone publishing spinoff has started making fill-in acquisitions in the Baltimore and Chicago markets. 

Notwithstanding the imprecision of the available financial data, it is fair to conclude that both of the once enviable SoCal publishing franchises have seen better days. Hence, the question: “Why would anyone want to put these two struggling companies together?” Here’s a plausible answer: 

Tribune announced last week that it will pay $85 million to buy the U-T with an eye to consolidating operations as much as possible between the two newspapers. Normally, this means moving to a single production facility, a single administrative infrastructure, a combined advertising staff and a streamlined newsroom that can share content across the various titles.   

In other words, Tribune instantly can cut expenses by cutting staff in a way that is not readily visible to readers and advertisers.  At the same time, there theoretically is a chance to boost revenue for the consolidated operation because the ad staff efficiently can offer both wider and more targeted regional coverage. 

Interestingly, the San Diego purchase could turn out to be only the first step in a multi-phase plan to consolidate all the major dailies from the Tehachapi Mountains at the north end of the Los Angeles basin to the Mexican border.  

After struggling under the erratic management of Aaron Kushner, it is entirely possible the Orange Country Register soon could be up for sale.  If LAT bought the Register, it would own the only major paper separating it from San Diego. 

In the meantime, a group of smaller dailies in markets like Long Beach, Van Nuys and Whittier are immediately up for grabs as part of the auction of Digital First Media, a coast-to-coast publishing company that is being dumped by the disenchanted private investors who own it.  
While bigger may be better in many things in life, this seldom is the case when it comes to compounding woes. And that’s what the LAT is doing in buying the U-T. 

Even when two businesses are humming along smoothly, a merger takes months – if not years – to complete.  A merger profoundly distracts the managers and employees in both companies, taking their eyes off the ball of their day-to-day jobs because each is wondering whether she will survive the inevitable game of musical chairs.

The challenge is compounded when the business is troubled, because the mechanics of the merger necessarily have to take a back seat to the immediate problem of shoring up sales and meeting demanding profit targets.  This is all happening, remember, amid recurring rounds of musical chairs. 

The challenge is most formidable of all when the reason the business is weak is because there is shrinking demand for your product in the marketplace. And this is precisely the problem that every newspaper faces. 

Without question, an ever-growing number of readers are shifting their attention to the digital media and an ever-growing number of brands are shifting their advertising budgets to pursue them.  That’s why newspaper circulation, sales and profits have dived precipitously in the last decade.  

A roll-up strategy would make sense if Tribune had a plan to pivot its troubled newspapers to viable business models that would flourish in the digital era. But no such plan is evident.  

While the digital traffic reported by the LAT and U-T in the accompanying table looks impressively large, a quick check of census data raises questions. The 35 million unique monthly visitors claimed by the LAT is fully three times greater than the population of its home county. That is a hefty number, even if you credit the paper with a certain degree of national and global appeal.  Similarly, the 3.4 million uniques reported at the U-T suggest that everyone in the county visits its digital sites at least once a month. That would be nice, if true.  

The nose-counting problem is common throughout the entire digital publishing industry and newspaper companies can’t be blamed for the limitations of the technology. But it’s important to keep these vagaries in perspective.    

There is no doubt, however, that Tribune, whose eroding top-line revenues faltered another 5.7% as recently as the first three months of this year, is underperforming its peers when it comes to digital revenue production. 

While the U.S. newspaper industry in 2013 generated an average of 16.5% of its ad revenues through the sale of digital advertising, digital media produced only 12% of Tribune’s sales in the first quarter of this year.  The industry-wide figure for 2013 is the latest information available from the Newspaper Association of America.  The Tribune’s performance is called out in its quarterly earnings statement, where the company promises little more than to do a better job of selling ads.  

So, there you have it: Falling readership, tumbling sales, shrinking profits and a questionable digital strategy.  It makes you wonder why Tribune wants to double its troubles.  

Tuesday, May 12, 2015

4 new media platforms demanding attention

As if the web, mobile and social media were not enough to worry about, four new digital platforms are emerging to challenge the legacy publishers and broadcasters struggling to preserve the audiences and ad dollars that made them mighty. 

To dispense with any further suspense, the emerging technologies are Next-Gen Messaging Platforms, Wearable Technology, the Internet of Things and Automated Automobiles.  

A case can be made for developing new content and advertising formats for each of these broad categories, which represent hundreds of products and endless permutations. I will make a qualified case for doing so in a minute. First, a reality check:  

How can broadcasters and publishers focused on tending their legacy businesses afford the time and resources to research, develop and market products for the new platforms?  The answer, of course is that they can’t.   

The good news is that, with one notable exception, they have time to observe the ways consumers interact with the still-maturing technologies. But make no mistake: These platforms are direct competitors for the time and attention that consumers spend with periodicals, television and radio. Meet the competition: 

Next-Gen Messaging Platforms 

The exceptions to the wait-and-see approach mentioned above are the new messaging apps that compete with the likes of Facebook, Twitter and the other platforms people used in  the Paleozoic era of social media. The next-gen social sites, which deserve the immediate attention of legacy media companies, include Instagram, WhatsApp, Vine, Snapchat and others likely to turn up after I hit the send button on this article. (It should be noted that Facebook and Twitter, who are decidedly hip to the caprice of their audiences, have purchased all but Snapchat.) To see how some legacy media companies already have adapted to Snapchat, look at the Discover section of its app (which can be accessed by a button on the upper right-hand corner of the screen). 

Wearable Technology

While the makers of Fitbit, Pebble and Google Glass have been pursuing widespread consumer acceptance over the years, the introduction of the Apple Watch in April is bound to rivet new attention on interactive wearable devices, thanks to the free publicity the media showered on the Apple launch. After attracting a fair share of ink in its own right, Google Glass faltered for want of technical polish and, even worse, for want of widespread consumer enthusiasm. While the Apple Watch also could prove to be a dud, the increasing appeal of intimate of personal technology – like undies that monitor your pecs, your posture and your perspiration – seems to suggest that selfies alone will not suffice to sate the narcissism of our species. 

Internet of Things

The Internet of Things seems like a joke when you can buy a wi-fi piggybank called a Porkfolio that counts quarters on a dedicated app. But Google’s eye-popping purchase of the Nest smart thermostat company for $3 billion got the attention of both the tech community and plenty of consumer product manufacturers. As a consequence, a serious race is well under way for leadership in a market that, according to Fortune Magazine, could generate between $7 trillion and $19 trillion in sales in a few short years. You may not be captivated by a $17 smart tray that knows you are running low on eggs, but think about the potential of a home-monitoring system that provides surveillance, conserves energy, starts your car on a cold morning, tracks neighborhood crime alerts and remembers the stuff you need at the hardware store. 

Automated Automobiles

The secret Apple car project should have come as no surprise to anyone when it was revealed earlier this year, because vehicles are the perfect environment for a company – like Apple – that sells gizmos and services enabling communications, entertainment, navigation, search and commerce.  The owners of automated autos will appreciate being relieved from the tedium of commuting and long road trips, but here's why advertisers will be enthralled: Whether individuals are sitting behind the wheel or being chauffeured by an autonomous system from Google, motorists represent highly captive and highly targetable audiences.  Knowing who and where motorists are, marketers will have unprecedented influence over what they might be persuaded to buy next. 

Where Does This Leave Legacy Media? 

As different as the four emerging platforms are, there are common denominators: 

:: They can come out of nowhere and gain popularity surprisingly fast. 

:: They are mobile, location-aware and visual, relying on minimal (if any) text to communicate.

:: They represent immediate opportunities to conduct transactions, incentivizing marketers to intercept consumers early and often in the interests of closing in-the-moment deals. 

In short, the four new platforms will be prized venues for media companies and advertisers who want to connect with not only Millennials but also with people of all ages who consume media in increasingly frenetic and purposeful bursts. If legacy companies want a share of the new value chains being created by these new platforms, they need to start paying attention.

© 2015, Editor & Publisher

Monday, May 11, 2015

Made in NYC: New business models for new media

Tattoos, tight jeans and three-day beards are “in,” while meaningless page clicks, paywalls and backfill banner ads are “out.” 
That's the state of the art among the hustling, bustling start-up companies who are innovating the new business models for digital publishing in New York. 
In a two-day tour that I organized last week for 50 senior global media executives on behalf of the International News Media Association, we visited with the leaders of B2C start-ups as varied as Vice and Food52, as well up-and-coming B2B ventures like Business Insider and Skift. We also met with the founders of five ventures aiming to put serious journalism, writing and ideas on the web: Atavist, Gothamist, Longform, Upworthy and Roads and Kingdoms. We also stopped by Complex Media, which has built a network of more than 100 owned and affiliated sites targeting twenty-something males.  
The offices of each of these young companies was literally hot as they are, as an early taste of summer settled over New York. That's because they operate in tight, B-grade spaces with generally minimal access to such amenities as air conditioning or enough chairs to accommodate four-dozen visitors. But tight, spartan quarters evidently are the ideal environment to incubate fresh ideas that can be rapidly prototyped, launched, analyzed and refined – and then fed or killed, as the marketplace dictates. 
Each of the companies is pursuing a different audience and a different business model. Although Vice has raised more than $500 million and has stated it will achieve close to $1 billion in sales this year, the rest of the ventures are small to middling at this point.  
Not all of them necessarily will cross the chasm, but each is helping to write the new rules for new media, which are distinctly different from the rules followed by most of the old media companies.  Old media companies would be well advised to pay attention to the newcomers. So, dudes, listen up: 
Rule 1.  Chose a large, well-defined and underserved vertical, whether it is the travel industry (Skift), sharing recipes among home cooks (Food 52) or the Millennial generation (Vice and Complex Media). 
Rule 2. Develop quality content with an authentic voice. You may not like everything you see on Vice, but you have to admit it is authentic. And here are three words of advice as to the content you should endeavor to generate: Video, video and video. 
Rule 3. Create community through active inter-activity.  Upworthy was founded to find emotionally and intellectually compelling material and then make it as viral as possible through the use of clever headlines, clever copy and extra emphasis – you may have heard this one before – on video. Longform does roughly the same thing by curating and sharing links to well reported, well written and, yes, long articles. Taking community-building to another level, Food 52 actually was started to crowdsource recipes for a cookbook. After the book was published, the community kept growing organically and its founders  –  two women who head a staff composed almost entirely of fellow female foodies – wisely decided to go along for the ride. 
Rule 4. Build quality traffic. As important as growing traffic is to proving the strength and viability of a nascent site, several entrepreneurs stressed that they are more concerned with the quality than the quantity of the page views they attract. To measure quality traffic, they monitor the types of stories their users select, the time they spend on site and the ways that they share content with others. Several publishers explicitly avoid running stories that could be construed as clickbait in favor of articles appealing to the readers they aim to attract.  “This doesn't mean we won't run stories about Mark Zuckerberg's dog,” said Henry Blodgett, the founder and chief executive of Business Insider. “It turns out that people who are interested in his dog are interested in serious business stories, too.”      
Rule 5. Diversify your revenue streams, as follows: 
Sponsored content. Most of the sites are doing sponsored content, paid advertising or whatever you want to call it.  Roads and Kingdoms, a site that melds travel tips and serious  journalism, is hired by brands to produce what they call “off-site” sponsored content that doesn’t usually run on its own site. 
Technology tools.  Atavist built a content-management system to create the great-looking longform articles it wanted to feature in its eMagazine. Now, platform licenses are a major revenue stream for the company.  
Content syndication. Vice has a video deal with HBO and is about to launch a new 24-hour cable channel with the Arts and Entertainment Network.  Meanwhile, Atavist in some months generates the largest proportion of its revenues by selling the movie rights to the original stories it runs. 
Memberships.  Because most sites are intent on growing traffic, they tend to avoid the paywalls so popular among legacy publishers. The start-ups see paywalls not as revenue opportunities but, instead, as barriers to acquiring new subscribers. However, they implement paid services when they feel they can deliver sufficient value to make them desirable. Skift is generating a third of its sales by selling access to specially produced monthly reports that provide deep insights to industry leaders. Other publishers are thinking about ways to create premium access opportunities but aren't in a hurry to do anything that might constrain their growth.  
Merchandising.  This opportunity runs the gamut from generating commissions on the sale of iTunes playlists to merchandise orders placed at Amazon.Com. A third of revenues at Food 52 comes from the sale of kitchen gear, including products like the handmade, wooden biscuit cutters that are available exclusively on its site.
Physical media.  A subset of merchandising is the sale of books, videos and other media produced by the digital site. The cookbook published by Food 52 is an example of this. Vice Magazine, the cornerstone of the global hip-hop empire, continues to be available in print, too. 
Events.  Companies like Skift and Business Insider conduct annual events to not only build revenues and community but also to position themselves as thought leaders in the verticals they hope to dominate.  “It is better to do one big event well than to try to do a lot of small ones,” advises Rafat Ali, the founder and CEO of Skift.   
Advertising.  Although some sites depend on advertising more than others, most of the new media entrepreneurs agree that banner advertising supplied by networks represents what one called “a race to the bottom” in terms of quality and yields.  The most successful sites – like Business Insider and Vice – sell most of their advertising directly at respectable, double-digit CPMs, as opposed to filling their inventory with network-generated advertising that yields low rates while often delivering spots that detract from the editorial environment they are seeking to maintain.  When sites do use network advertising, they exercise close controls on the quality of the ads and often insist on guaranteed minimums from network partners. 
Taken together, the diversity of the start-ups in this sampling demonstrates that there is no one-size-fits-all approach to levitating a new digital publishing venture. All of the entrepreneurs will tell you that it takes a lot of trial and error to find what works. But first and foremost, they say, you have to be willing to try.   

Tuesday, April 14, 2015

‘No-hands’ ad sales challenge legacy media

Ever since legacy publishers and broadcasters got serious about selling interactive advertising, they have struggled with how to do it. 

Should veteran ad representatives be cross-trained to sell portfolios of traditional and digital advertising? This came to be known as the two-leg sales call.

Should specially trained digital ad specialists accompany legacy reps on four-leg sales calls?  

Should digital marketing strategists accompany digital ad specialists and legacy reps on six-leg sales calls?  

Now, some of the biggest names in digital publishing are going in a decidedly different direction than flooding the zone with sales power: They are moving to zero-leg sales calls that eliminate human beings altogether.  

As the new year dawned, Microsoft and AOL jettisoned hundreds (but not all) of their ad sales people in favor of turning their digital inventories over to powerful computers that auction individual page impressions in 0.0000002 of a second – or less. The phenomenon, which aims to maximize the value of an ad by matching the right offer to the right person at the right time, is called programmatic ad buying or real-time bidding. (See video explainer below.)
The shift is being propelled by the growing adoption among marketers of systems that slice and dice Big Data about existing and prospective customers to target expenditures as efficiently as possible. The most ambitious implementations not only send ads to carefully targeted prospects but also dynamically tune product offerings, sales messages and even pricing to boost in-store and online sales. 

The reason three-martini Mad Men are being replaced by triple-latte Math Men is simple, says McKinsey & Co. in a white paper celebrating what it calls the “New Golden Age of Marketing” (here). “Long gone is spending guided mostly by intuition,” writes McKinsey. “Instead, organizations are seeking greater precision by measuring and managing the consumer decision points where well-timed outlays can make the biggest difference.” 

Prominent consumer brands are jumping in. As reported last year in Advertising Age, Proctor & Gamble elected to shift some three-quarters of its interactive ad spend to programmatic buying systems, while American Express tasked computers with disbursing 100% of its digital ad dollars.  

More than half of the estimated $11 billion in digital display ads purchased in the United States in 2014 were bought via programmatic systems, according to a survey by Magna Global, the international ad agency. Magna predicts that 82% of digital display ads will be bought and sold by computers by the end of 2018, driving more than $25 billion in volume.  

The rapid and enthusiastic adoption of programmatic advertising by major national and international brands is great news for major national and international digital publishers like Microsoft and AOL. 

Because they serve hundreds of millions of page views per month, Microsoft and AOL – which consistently rank among the 10 largest digital properties – attract enough visitors to serve the needs of marketers seeking everyone from vegetarian Scrabble players in Scotland to burger-munching baseball fans in Muncie. 

Given the operating scale, financial heft and technical prowess at these digital behemoths, they (and their peers) have invested in the technology necessary to track and categorize users so they can efficiently provide access to marketers arriving via the increasingly sophisticated ad-buying networks operated by Google/DoubleClick, Facebook and others.  

In other words, the digital heavyweights essentially are abandoning the ancient practice of selling banners by the bushel, encouraged by the realization that the ever-growing inventory of web and mobile inventory will continue to commoditize, and thus depress, the pricing for untargeted ads.  

While the efficiency inherent in programmatic selling encouraged Microsoft and AOL to trim their sales staffs, they did not axe all their ad folk. The companies retained representatives to make big, strategic deals that involve not only advertising, but also promotions ranging from content development to product placement to native advertising. 

The shift to no-hands selling by the digital biggies puts legacy publishers and broadcasters at a competitive disadvantage. Because they don’t operate at the breadth and scale of the major digital brands, the legacy media lack the traffic and, quite often, the detailed data necessary to extract full value for their inventories in the RTB marketplace. 

While local publishers and broadcasters can improve ad yields by partnering with third-party data firms to optimize their RTB performance, they likely will be forced to continue to rely on person-to-person selling for the foreseeable future. 

To amortize the high costs of high-touch selling by actual humans, the legacy media must become indispensable marketing partners to local businesses by providing a host of holistic, premium and recurring services, such as: digital site development and hosting, content production, native advertising, search optimization, reputation management and social media marketing. 

Local presence is the key advantage that legacy media have over their digital competitors. If they don’t use it, they will lose it. But they have to do so efficiently. 

© 2015 Editor & Publisher