New York Times and the Paid Content Debate

Apologies for hibernating all these months. I've been doing so much blogging, tweeting, and other writing for clients (including editing a book), that there's been no time to keep my own blog going.

However, I'm re-entering the fray today because so many folks emailed this morning asking what I think about the New York Times decision to start charging for some content next year that the blog seemed like the best place to post my two cents. Paid content is one of the most heated debates in online media and when a major player like the Times puts a stake in the ground it gets a lot of attention. I'm not too optimistic about the future of paid content online, but we'll all be watching the Times' experiment (assuming it comes to pass) in 2011. In any case, here are my thoughts about the Times announcement:

Look at the Basic Economics
   Print publishing is a variable-cost model where costs increase substantially with wider distribution. A subscription payment model that both constrains demand and raises revenue is a great solution for this type of business. Moving from print to online the dynamic changes and you need to rethink the business model. Online media is all about scale; it costs little more to serve an audience of 10 million than of 1 million. Ideally, online media monetization strategies should reward scale, not suppress it. That’s why advertising is such a popular and (if done right) successful method for monetizing web sites.
   If you do charge for content, the price should be low enough that it doesn’t constrain demand. For example, the NY Times probably has upwards of 25 million unique visitors per year. Because of the strength of their brand, I’m sure that few people would object to paying an iPhone-app-like price of one or two dollars per year for full access. This could produce $25-50 million in additional revenue—by contrast with the $10.5 million they report from the shelved Times Select program—with less collateral damage to ad revenue. The Times could also charge for specific types of content that have high utility to a small audience.

Deploy Technology Efficiently
   For web sites ranging from the Times to mom & pop e-commerce sites, technology is an expensive and scarce resource. Therefore it should be deployed in a highly strategic way. The Times says they will spend the better part of a year developing a proprietary system to support their partial-paid content plan. You have to wonder, what else could they do with their developers’ time/budget that might have a higher ROI and longer shelf-life? One answer that jumps out is a system that provides more value to advertisers. One thing motivating the Times to charge for content is an erosion of ad revenue. While part of this is the unavoidable cyclical nature of the media business, it points to an opportunity for the Times to differentiate itself in ways that are impossible in print. There’s tremendous room for improvement in the intelligence behind ad serving, as well as in the data and analytics provided to advertisers.
   As the media and advertising industries are transformed for the digital age, the relationship can evolve toward a partnering model where each is helping the other learn and grow. The business advantage of this approach is that to the extent a media site can consistently deliver better results, the advertiser will lower the risk discount it assesses on that site’s ad rates, yielding higher revenue. Also, media properties that deliver superior results are best situated to weather economic downturns.
   Another scale-aligned option for the Times’ technology budget would be products/services that build audience and engagement, for example, new ways to present content, navigate the site, help the audience find what they’re looking for and discover additional content of interest, and encourage user-generated content. Technology that supports these goals exploits scale and builds the brand through a superior user experience.

Manage Content Costs
   When we reinvent media for the digital age we must revisit traditional thinking about content sourcing. The current Times model, with most content created by staff writers, is expensive and inelastic. Writers are compensated similarly whether they create content that’s valuable to the business or something few people read. A more strategic approach is to concentrate expensive resources on high-value content, with writers being rewarded for creating content that, for example, drives high pageviews or conversions. The long tail of less engaging information should come from cheaper and more flexible sources, such as freelancers and user-generated content, that allow better cost management.

Use Analytics to Get It Right
   The Times is doing a lot of fretting over how to get their new strategy right, but they should be well positioned to do so. Compared to traditional media, businesses operating online have a wealth of data on user behavior and preferences that point the way toward optimal solutions. In addition, thanks to having raised and lowered payment gates on its content in the past, the Times should be able to estimate demand elasticity and forecast the ultimate benefit or harm of new approaches. In online media you can make highly granular ROI calculations on both content and resources—down to the ROI for each article or writer, if needed. This unprecedented visibility into business drivers is one of the reasons online media is a revolutionary departure from its traditional roots. Companies that focus decisions around these insights will grow faster and experience fewer missteps than those that try to build online businesses derived from traditional media assumptions.

Hiatus

With the bad economy casting a long, dark shadow over so many initiatives the blog is on hiatus for awhile, as I continue to talk to folks at startups and in the media business and seek a clear strategic path out of the doldrums. Conversations these days tend to focus more on problems than on opportunities. While there are plenty of promising ideas in the hopper, the risk/reward balance is profoundly altered from just a few months ago. For now, the riskiness of the overall business climate makes even small investment or product risks untenable. Even in healthy companies, cash flow is a challenge. Many businesses are focusing on tried-and-true options such as pricing and operational efficiency, shelving more ambitious plans until better times.

History tells us that the stressful conditions and inversion of the status quo in downturns can give rise to notable pioneers. With a critical mass of great technologies and creative thinkers primed to unleash the next round of the media revolution, I’m optimistic about the future. While businesses may seem to be hibernating or (worse) going into reactive mode, from what I’m hearing the wheels are starting to turn as people come to grips with the new environment and the magnitude of innovation required to break free. The blog will be back soon with fresh reports from the front lines.

Web 2.0 Marketing 101

Earlier this month I gave a webinar on the fundamentals of online, social, and Web 2.0 marketing to a group in Texas. The client wanted the basics for an audience who was hearing the buzz about the potential of Web 2.0 but had operated primarily in the offline sphere until now. They wanted pointers on how to get started and where to focus initial efforts.

Increasingly, I'm running into organizations in this situation, as the Web 2.0 mentality trickles into the mainstream. It's exciting to see so much interest in these strategies and tactics. The Obama campaign's high-profile use of social marketing to organize and raise money attracted lots of attention.

Ultimately Web 2.0 will drive profound structural changes in the media, advertising, marketing, and PR industries. Old barriers and hierarchies will fall and new opportunities will emerge. It will take awhile to overcome the inertia of the status quo, but every company that adopts a Web 2.0 approach moves all of us a step closer to the new order.

Meanwhile, a lot of businesses are looking for help taking those first steps. My presentation was very basic, but not everyone lives and breathes Web 2.0 the way we do in Silicon Valley. If you want to review fundamentals or know someone who does, here are the slides:

Marketing 2 0

View SlideShare presentation. (tags: social marketing)

Lessons Learned from Bacon Salt

One question a lot of people are asking is how to use Web 2.0, social marketing, and the elusive phenomenon of viral growth to enhance conventional online marketing and brand-building strategies such as SEO/SEM and email marketing. I recently came across a blog post that details how one improbable brand's Web 2.0 efforts helped build a groundswell of awareness and trial that led to getting scarce shelf space in crowded retail chains. The brand is Bacon Salt, a humble food product with the seductive premise that "everything should taste like bacon."

It turns out that Bacon Salt was the brainchild of a couple of internet guys whose marketing instincts naturally gravitated to the web. They set up a web site and blog for their product, put it on YouTube, created Bacon Salt groups in MySpace and Facebook, promoted it on Twitter, and of course, sold it online. They didn't have much money, which dovetailed well with the web-based approach; online, many of the best strategies are free.

Within three months Bacon Salt was gaining significant buzz, including a mention in The New Yorker. Users began requesting it in local supermarkets; soon it claimed coveted shelfspace in major grocery chains.

The Bacon Salt story is a Web 2.0 marketing primer. If you're eager to rev up your online marketing efforts, start with the Bacon Salt checklist. Watch your analytics closely to see what works best in your market; that's where to focus followon efforts.

Want to learn more? Read details on the genesis of the Bacon Salt brand here; check out the Bacon Salt website; and follow the official Bacon Salt blog.

Putting YouTube to Work

I'm often asked how to integrate Web 2.0 opportunities such as YouTube into marketing programs. YouTube is a tantalizing distribution channel, reaching millions around the world. But it's also an unruly universe of user-generated content that's hard to steer in a specific direction, and the highly diverse audience requires further segmentation to deliver much value. Making the most of YouTube and its Web 2.0 peers is a tough challenge, but one that marketers must solve to capitalize on the opportunities offered by today's technology.

I recently came across a great advertising campaign that camps onto the YouTube phenomenon in some smart ways. It's a good case history in marketing via web 2.0.

Last year Freixenet, the Spanish sparkling wine manufacturer, working with mega ad agency JWT, hired renowned film director Martin Scorsese to make a nine-minute commercial couched as a film within a film. Titled "The Key to Reserva," it's an homage to/spoof of Alfred Hitchcock movies. Scorsese worked with friends on the project and seems to be having fun...plus he was no doubt well paid. In any case, one of the things that makes the concept work so well on YouTube is an exclusivity that closely maps to Freixenet's target demographic. People who would gravitate toward a Scorsese/Hitchcock video are an urbane lot who may well enjoy sparkling wine. It's a lot easier to extract needles from the haystack with a powerful magnet.

Note that Freixenet could have make the same investment in another top director, say Steven Spielberg, who might have drawn an even larger YouTube following. But quantity could come at the price of quality, with viewers who were unlikely to buy Freixenet while potential customers stayed on the sidelines, not sufficiently motivated to watch the film. A tight match between content and audience is essential to uncovering value in the YouTube distribution channel.

Freixenet and JWT did some other things right. Viewers remain engaged with the brand for more than nine minutes, a huge amount of time compared to conventional 30- or 60-second spots. The choice of a suspenseful Hitchcock-like format almost guarantees the audience will remain glued to their monitors for the full run time. The film doesn't feel like a commercial; the Freixenet brand is mentioned but downplayed until the end. The "Hitchcock" portions are full of rich details that satisfy even the most avid Hitchcock buff. And YouTube's social focus makes it easy to share the video with friends who have similar tastes, driving the "virality" so highly prized by online marketers.

Bottom line, it's easy to label a splashy marketing effort like "The Key to Reserva" as a stunt, but in this case it's an example online marketers can learn from. New media require new methods. As Alex Martinez, an executive at JWT Spain who worked on the project, put it: "We wanted to produce something that would be pure entertainment, something that was true to our philosophy that it's not enough now to 'buy' audience time--we need to create advertising that the audience chooses to spend time with."

Kudos to Freixenet and JWT for some creative ideas that expand our thinking about new ways to reach audiences and build brands in the world of Web 2.0. And now, have a look at "The Key to Reserva":