Media disruption

News Corp demonstrates the importance of MySpace and the social network phenomenon at its ultra high powered executive retreat this weekend at Pebble Beach. Thanks to the LA Times we can read the href=”http://www.latimes.com/media/acrobat/2006-07/24616306.pdf”>agenda and see the following session:

Meet the MySpace Generation
A live focus group and instant response dial session to explore the attitudes and lifestyles of our new consumer…a presentation conducted by pollster and researcher Frank Lutz with 20 students. Introduction By Ross Levinsohn.

A good story at the Economist about Christine Dolce, Californian cosmetician who has turned here MySpace page into a solid revenue stream thanks to the 900,000+ MySpace ‘friends’ who link to her page. This story underscores the shift marketers and advertisers have to deal with in this era of online social networks and explains some of the challenges.

Media and other players are in a global race to connect to the mobile consumer.

Speaking in London in March this year, Rupert Murdoch said:

“…media becomes like fast food – people will consume it on the go, watching news, sport and film clips as they travel to and from work on mobiles or handheld wireless devices..”

Google yesterday launched a traffic jam application covering several US cities for mobile devices. Read what Google has to say here. It is applications like this which are more relevant to mobile consumers. Connect this traffic jam information with in context advertising as Google will and you can see the revenue model. This information from Google is more relevant to a commuter than a celebrity story or sports results.

While it may be years before we see this mobile activity in Australia, newsagents need to consider the US developments in terms of capital investment in their businesses today. They would be well advised to take their investment lead from their suppliers.

Image courtesy of Google.

newassignment.net is a fascinating new US based model for publicly supported journalism. Read more at Jeff Jarvis’ blog BuzzMachine. NYU Associate Professor Jay Rosen is behind the project and he outlines his plans here. Newassignment.net is an exciting initiative. It puts people interested in news in play with those writing news stories. It uses open source methods and professional reporting skills to bring a story to completion. The more voices we have participating in reporting news the better. It will be interesting to see if any Australian Journalism schools support the project.

No wonder News and Fairfax contemplated, even if only briefly, a joint venture to compete with Seek. This graph from Alexa shows daily reach per million for the last six months for Seek compared to MyCareer. The reach for CareerOne was around the same as MyCareer. Seek is the stellar performer in the online employment space. They built their business quietly while newspapers played in their rivers of gold, not realising that the world had changed.

The latest issue of Digital Magazine News covering the digital magazine scene is available here. It contains an interesting article about work by Zinio in the adult title space. Over the counter adult magazine sales have all but collapsed as people access what they want in this area online and usually for a lower cost. BusinessWeek has a story about Playboy staff cuts announced yesterday.

What I don’t get about the whole digital magazine thing is why? Why take a product designed for one medium and move it to a more flexible medium yet ignore the flexibility. The successful online titles are those created purely for the online experience. Creating a magazine like (page turning experience) must only be considered a transitional strategy.

Crikey reported yesterday that News Ltd and Fairfax are believed to be in secret talks to merge their recruitment websites CareerOne and MyCareer to compete with Seek. Based on site traffic, Seek dominates online employment advertising in Australia. This is in part due to features on their site and in part due to poor competition by Fairfax and News over the seven or eight years Seek has been in business. Early on they refused to carry Seek advertising as they were (possibly) in denial about the online opportunity. More recently, they have allowed their commitment to print revenue to treat their online employment plays as the poor cousin. That has clearly changed this year with both sites improving offerings, but not value for the advertiser.

If the Crikey report turns out to be true, News and Fairfax will need to go to market with a new offering which leapfrogs that from Seek. They will also need to turn their back on print employment advertising. That decision, if taken, will have a knock on effect through their newspapers – more so at Fairfax than News since white collar employment positions seem to be advertised more online than blue collar.

As one who has advertised more than thirty positions online, mainly at Seek, in the last five years I would hope that any renewed competition among the big players in the online space would result in a pricing model based on the cost of providing the service and not based on what they can get away with as at present. Seek, CareerOne and MyCareer charge too much for employment ads and do so because they can get away with it. This is what comes with cozy competition. Having said that, I’d expect the ACCC to reject a proposed joint venture between News and Fairfax.

As readers here would know, I am preparing to play in this space with Find It and online classified website. But we’ll be small – tiny, in fact. But we will be independent, visitor driven and offer points of difference and value propositions which we expect will resonate with advertisers and consumers. Our pricing will not be arrogant. Our key point of difference will be our newsagent connection. Newsagents are signing agreements to represent Find It at a great rate. This will give us an engaged local sales force to promote our offering and demonstrate the local focus of search. Newsagents like the idea of connecting with online advertising and are pleased to earn not only through commission but also profit share.

The Wall Street Journal publishes an excellent commentary piece by Brian Carney, a member of The Wall Street Journal’s editorial board, about Craigslist and classified advertising.

“The Internet at large, and free classifieds in particular — and even beyond that, Craigslist free classifieds in particular — certainly pose challenges to the newspaper industry as far as being able to raise their profitability over time.” Many in newspaper publishing would consider that an understatement. But Mr. Buckmaster is sanguine: “The demise of the newspaper has been overstated.” Phew. I expel a nervous chuckle of relief. In Mr. Buckmaster’s view, newspapers would be better off being a little more Craigslist-like: Go private, eschew Wall Street’s demands for continually “goosing profitability” and give your readers what they want. Much trouble in the world comes, in Mr. Buckmaster’s view, from losing sight of that essential goal.

It is good to see a newspaper discussing the Craigslist phenomenon and classifieds more generally without the usual shrill and denial.

No matter where you turned over the last two weeks, all commercial media outlets were reporting and commenting on the now infamous “turkey slap” incident on the Big Brother tv game show. People who really wanted to know what happened went to YouTube and watched the footage unedited.

While I care little for the contestants in the Big Brother house, I do care about manipulation of the truth by the producers of the game show and the gullibility of mainstream media when it comes to reporting what allegedly goes on inside the game show house. Prior to watching the YouTube footage I had read the newspaper stories, watched the TV news reports and heard the shock jocks shrill across the airwaves. YouTube provided context for the event. In a few minutes I was able to see the truth for myself. I was able to understand the con played on media outlets by the game show producers and the Network Ten. I am astounded that Network Ten and mainstream media outlets were so reckless with the truth and the reputations of two young men.

I wouldn’t have known this had it not been for YouTube. There was a time I relied on TV news and newspapers for the truth.

A big challenge for mainstream media in this age of massive disruption is how to compete with social media sites like YouTube and the people who load content on them. In the case of the Big Brother turkey slap, how does mainstream media compete with the truth? The approach of the last two weeks, conspiring to repeat spin put out by one of their own – will alienate consumers. Trust in mainstream media product will erode. Younger consumers are smarter – why do you think they are embracing social media? There, stories can speak for themselves.

In the case of the Big Brother turkey slap, the truth is less interesting than producer spin. To compete with the truth of social media, journalists and editors will need to realise that their laziness and bias will more easily and quickly outed.

Crikey reported earlier this week that PBL’s SEEK is preparing to launch into the real estate classified space. In part, their report says:

Seek had revenues of just $47.3 million in the December half, but managed a net profit of $27.1 million and is now capitalised at $1.5 billion.

This result demonstrates how removed the pricing for online classifieds is from the real cost. Companies like SEEK are purchasing bandwidth for a fraction of what they charge the advertiser.

Fairfax, News, Telstra and PBL control online classifieds in Australia and do not seem to compete on price as one could expect.

Disclosure: I am involved in Find It which is set to launch in the online classified space later this year.

MediaPost reports on a Hitwise research showing MySpace commanding 4.64% of all US Web traffic. Social media is huge, obviously and any online play without a social connect will struggle to gain traction.

A good post from Greg Stirling of SearchEngineWatch (courtesy of Brad Robertson, VP Advertising for the Des Moines Register), referencing recent research and views on local search. It’s best summed up in this quote.

I tend to believe that what one might call an “integrated local marketplace” is what consumers ultimately want — the convenience and efficiency of getting their local needs met in one place. If I’m right this gives the search engines/portals an advantage “on paper” because of their more comprehensive content. But, to date, they’ve failed to fully leverage that opportunity in their local offerings, although they are improving under the intensifying pressure of competition.

I agree. Australia has plenty of vertical local search offerings. News Ltd’s True Local is the most interesting recent entrant but it’s overpopulation with brief listings ‘acquired’ from elsewhere without knowledge of the those listed makes the search results of dubious value. Searchers want honest results. That is, not results listing rich businesses which pay for more attention.

The Internet is a democratic place of equals and businesses paying to get in the way of good search results will soon frustrate consumers.

Smart local search will be about less but more accurate and more valuable content. Size (of one’s database) does not matter.

It’s good to see a newspaperman publishing this material for comment.

This Yahoo Finance report quotes research by analyst Telephia indicating that four of the top five revenue-generating titles fall into the Puzzle/Strategy category and that 65% of mobile game revenue is driven by female wireless subscribers. I wonder what the numbers for Australia. I also wonder how this data plays out as an indicator for moving crossword and puzzle magazine consumers to online product. Crossword product sales are very strong in Australia and newsagents dominate the category. Any move online would hurt.

Wired magazine has fascinating profile of Rupert Murdoch in the July 2006 edition. The article opens with this quote from Murdoch which gives context to News Corp’s current mission online:

“To find something comparable, you have to go back 500 years to the printing press, the birth of mass media – which, incidentally, is what really destroyed the old world of kings and aristocracies. Technology is shifting power away from the editors, the publishers, the establishment, the media elite. Now it’s the people who are taking control.”

Deeper in the article Murdoch provides the business case for their online investment:

“Everything we’ve ever done is about giving people choices,” he says. “The Net has a billion people looking for news, sports, and entertainment. Another billion are on mobile phones, and another couple of billion are coming up behind those. That’s a hell of a lot more people making choices.”

But these quotes don’t do the long article justice. There are opinions on all manner of things including newspapers – which, by the way, are discussed as online entities. No comment on print product. Read the article at Wired for yourself. My take away was the extent of Murdoch’s commitment to social media. It’s as if he sees social media as bigger than news in pulling viewers/readers/traffic. I’d like to hear from others in his organisation on this.

The article ends with this quote:

CONTENT VS. DISTRIBUTION
Distribution was nearly king – you couldn’t get a cable channel going in this country without John Malone. But when real broadband arrives, owning distribution will be less and less important.

Fascinating.

True Local (News Ltd) and Yellow Pages (Telstra via Sensis) are the two major online business directories in Australia at present. My Local (PBL) is on the track but not achieving much traction due to lack of promotion. As this Alexa generated graph of daily reach from the last three months shows Yellow Pages is way ahead but True Local is gaining traction thanks to its extensive outdoor campaign. Fairfax is the only major online advertising player not currently in the space but that could change if the rumor put to me is true. I’m told that Fairfax Digital is close to announcing entry into the now competitive directory space. I wonder if their entry will make for competition on price though. Take a look at the True Local and Yellow Pages advertising fees and you soon get an understanding of the size of the game being played and that there is not significant price competition. While each site offers basic free listings, it is the featured listings and options like photos which bring in the millions in revenue. Charges of between $1,000 and $6,000 for featured display are not uncommon.

Buyswapsell.com.au has launched a consumer campaign with billboards popping up – certaily around Melbourne. They offer free and low cost online classifieds. From their site:

Line ads are free and stay on line until the item is sold.

Photo Ads cost $4.95 and stay on line for up to 6 months unless sold earlier and as an Introductory Offer
you can have 5 additional Ads FREE.

US internet advertising research and consulting firm Borrell and Associates has released a new report into online real estate advertising. Here are some interesting highlights from the executive summary:

For years we’ve heard how most brokers and agents despise their local newspapers. They’ve repeated their mantra ad nauseum: The only reason they buy newspaper listings is to appease the seller, not to sell homes. Newspaper ads don’t sell homes, agents and the Internet do. Yet, agents and brokers continued to plow money into newspaper advertising.

Toward the end of 2005, the nearly rotten started looking truly rotten. As home sales slowed down and the inventory of unsold homes grew, the Internet became the most-used method of selling a home – beating out even the old-faithful yard sign. The $11 billion spent on total real estate advertising stagnated, growing less than four percent over the past four years, while the available advertising inventory – the number of existing homes for sale on the market – rose 41 percent in the last 12 months. That metric alone is enough to stop a real estate advertising executive dead in his or her tracks.

While the Australian real-estate and advertising marketplaces are very different to the US, three real-estate agents I am close to tell me that, in their businesses, more than 85% of their leads come from online. In fact, one recommends an online only strategy to vendors.

PaidContent reports that a new division of Hearst magazines is charged with moving its magazines online.

Today’s Australian Financial Review carries the story of the planned launch next month of Red Zero, a new woman’s magazine from Pacific Magazines. What makes Red Zero unique is that it is being published online. You won’t find this magazine on newsagent shelves.

It’s a smart and entirely appropriate move by Pacific Magazines. The target demographic, 16 to 29, spend plenty of time online. If their execution is smart, the magazine will deliver a better return on investment for advertisers than traditional magazine advertising. However, the AFR article talks about an ad cost per page whereas I would have expected to see a cost based on consumer action.

The imminent launch of Australia’s first purely online mass market magazine is further proof of the digital iceberg on the horizon for newsagents. Just as publishers evolve their models in response to consumer trends, newsagents must evolve to ensure they avoid damage from the iceberg.

I am in the middle of a national road show to newsagents presenting our soon to launch Find It online classifieds business. Part of our goal with this new business is to take newsagents from standing behind the counter processing sales for a dollar or two and getting them outside their businesses proactively promoting our online classified model as a stakeholder. This is a significant change in mindset for an average newsagent. for decades they have been treated poorly by suppliers and have returned that treatment with little entrepreneurial spirit. Based on the reaction thus far, Find It will wake many newsagents and get them chasing a new revenue stream.

As part of the Find It model, newsagents earn commission on sales and trail commission on customers they bring to the site who may go on and purchase advertising online directly. We are the first business to offer newsagents trail commission in this way. Find It newsagents are also being treated as stakeholders through a profit share arrangement. Again, this is a first for newsagents.

Several newsagents have asked how we expect publishers to respond. My answer to that is that newspaper publishers have been developing their online models for years and have done so without newsagent involvement. Through these models it could be argued that they are competing with themselves and, indeed, getting much close to their customers to the detriment of the traditional newspaper supply chain (newsagents). Publishers are doing what they should do and so I cannot see them having any concerns with newsagents doing the same by actively supporting Fid It as the new way for consumers to advertise online when it launches later this year.

We are chasing 1,500 newsagents. While I do not expect to have that many signed up for the first round, the network will be considerable and more important, proactive. While other online classified businesses rely on advertising themselves to build consumer connect, Find It will have a highly motivated sales force in its newsagent network.

PaidContent reports that The Pilot, a local newspaper in North Carolina is going to offer free wi-fi access across its market. It’s a smart move for any newspaper wanting to connect with consumers – the broader and more accessible the distribution network the more readers and the greater the advertising opportunity.

CBS News in the US ran a story last night about the impact of the Internet on newspaper classifieds. The full text of the story is here. For an extended video of an interview with Jim Buckmaster, CEO of Craigslist, click here. Here’s what Peter Zollman, a consultant to newspapers on classified advertising, had to say on CBS about the impact on online classifieds for newspapers:

“Publishers are, and should be, scared witless,” Zollman says. “Classifieds globally is a $100 billion a year business. A hundred billon dollars a year, and every nickel of it is in play.”

Disclosure: I own Find It, a start up online classified business inching closer to beta release in partnership with a network of newsagents.

Newsagents seem unconcerned with Perth Now, the new News Ltd daily which has launched online. Maybe ignorance is bliss. The move by News is further evidence of the shifting sands in the world of newspaper publishing. This weeks MediaWeek has a good story about Perth Now. As MediaWeek points out, Perth Now will raise the News profile in Perth. It also gives News a place to play away from the spotlight of the eastern seaboard.

From the Church of the Customer Blog comes a comparison by Ben McConnell between traffic to the New York Times site and YouTube. The New York Times has been around 155 years. YouTube is six months old. The graph of traffic speaks for itself.

As McConnell says: “comparing the two is like putting Pamela Anderson up against Margaret Thatcher”. Maybe. The reality is that YouTube is getting the traffic and advertisers like traffic.

What consumers want from the media is changing. They are seeking engagement beyond voting someone off a reality TV show or voting in a half-baked newspaper poll. Social media like YouTube is the new game in town and mainstream outlets will need to move quickly if they are to attract the kind of online traffic advertisers are looking for. Every day, legal issues notwithstanding, the News Corp. purchase last year of MySpace seems prescient.

If the data I am seeing is accurate, Trading Post sales fell 23% for the eight weeks to June 15 compared to the same period a year earlier in ten newsagencies which are usually a good indicator of industry trends. Elsewhere in the same category, sales of classified related magazines have also fallen sharply. The folks at the Trading Post will most likely deny that there has been any fall. Denial helps no one, especially not newsagents who are chasing new products and services to ensure future relevance.