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.

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.

Bypassing Media: Is PR the New Advertising?

It’s hardly news that the internet is leading to big changes for the advertising business, a transformation that has important consequences for online media companies that monetize with ad revenue. But in a Web 2.0 world where social media complicates the landscape and yesterday’s hierarchical models of content presentation give way to the audience’s collective wisdom, will brands start shifting resources from advertising to PR? If so, what does that mean for online media businesses?

Advertising and PR exist side by side, as complementary strategies for shaping opinion and motivating behavior. Traditionally, advertising has been a more direct investment in an anticipated outcome, where the advertiser has lots of control of the message and presentation—and pays for the privilege. PR, on the other hand, is about more subtle influence that attempts to work its way through the audience’s network of influencers and authority figures. It’s the network idea that makes PR an interesting option in the social media environment.

In classic PR, the “PR man” (or woman), either at an agency or a company, has a powerful file of media contacts to leverage when it’s time to get the word out. That model is endangered as change roils the media industry: there’s rapid turnover in newsrooms, and in any case, audiences now rely less on the voice of big media to tell them how to think. In a world where social networking and Web 2.0 put the “me” in media, people are more likely to depend on their favorite blogs, discussion groups, RSS feeds, wikis, online Q&A, and direct online networks such as Facebook, LinkedIn, YouTube, Flickr, or Twitter. For an old-school PR traditionalist that could be a challenge; for a PR 2.0 professional, it’s a big opportunity.

That’s because PR’s classic strength of developing opinion-influencing messaging, and its intuitive grasp of how to navigate the web of persuasion, map well to Web 2.0’s proliferating content channels and network-based communication structure. The savvy PR professional can insert himself or his brand directly into the network without having to rely on a third-party introduction from a journalist—not via subterfuge, but by establishing the client brand as a valuable information resource. Then, through strategies such as tagging, RSS, voting, and old-fashioned hyperlinking, the content is disseminated virally.

The viral uptake model is also coveted by online advertisers, who look to social media to drive deeper engagement with products and brands. To be sure social media has many benefits for advertisers, especially in uncovering preferences, needs, and affinities that can provide better targeting, higher conversions, and an advertising experience that feels less intrusive. But the fundamental quid pro quo of the advertising value proposition can only go so far in social media. There’s a point where efforts cross the line into PR. That might mean companies will shift some budgets from advertising to PR as social media gains traction, cutting media sites out of the revenue stream.

The online medium constantly challenges us to rethink assumptions about boundaries between business categories. Advertising and PR will continue to exist as the conjoined twins of the persuasion industry. But in this new world we’re creating online, don’t be surprised if the bright line that used to divide them begins to blur around the edges.

Social Networking: Connections and Reconnections

A current trend in social networking is empowering real-time connections--think Twitter's up-to-the-minute mobile tweet-streams. A startup I'm working with, iPling, helps you connect to others nearby who share your needs and interests at the moment. But there's another side of social networking, reconnecting with people you may have lost touch with. Venerable sites such as Classmates.com have offered that service for years. Now it's getting more sophisticated.
Last weekend I tried out the reconnection angle by creating a group on LinkedIn for colleagues at a former company, GoTo.com. An Idealab spinoff during the dotcom boom, GoTo--based in Pasadena, California--was founded in 1997, went live with a product in 1998, and morphed into Overture Services in October 2001. In 2003 the company was acquired by Yahoo; the name changed again, to Yahoo Search Marketing (YSM), and operations moved to Burbank. GoTo was notable for originating the world's first successful pay-for-performance bidded marketplace for search advertising--the product concept Google improved upon when it created AdWords.

The company also gained a bit of notoriety as the object of one-time celebrity stock analyst Henry Blodget's hypocrisy, when he publicly touted it, pumping up the price, while privately disparaging it--an action that eventually attracted securities fraud charges from the SEC.
My first day on the job at GoTo was Monday, March 13, 2000...a date memorable as the first business day after NASDAQ hit its all-time high of 5132.52 on Friday, March 10. In other words, my first day in the internet sector coincided--hopefully in a random rather than correlated way--with the beginning of the bubble bursting. For a few weeks I worked in the helium-headed environment of the bubble days--a time when GoTo still aspired to be a consumer portal rivaling the likes of Yahoo. As 2000 wore on and we began to accept post-bubble realities a new, less costly business model was needed. The biz dev team began talking to large portals about a back-end service to monetize their search traffic. In the fall of 2000 we went live with a partnership with AOL and GoTo v2.0 was born. The new strategy was so successful that we were one of the few dotcom winners in the difficult 2000-2001 period.

As is often the case, competition eventually eroded our success. Google launched its competing cost-per-click version of AdWords in 2002, luring away AOL. Because we were completely dependent on partners for distribution, and therefore for all-important scale, our stock price became quite volatile, shooting up and down as big partners signed or departed. Also, as the partners recognized their critical role, they bargained harder and our margins shrank. Ultimately, acquisition by a large portal that could guarantee a steady traffic stream made good business sense.

In any case, I left GoTo--by then Overture--in February 2002 for a job at Yahoo. When I arrived at GoTo two years earlier, it was in the midst of ramping up after an IPO the previous summer. There were about 250 employees when I joined and close to 1,000 when I left. It was a pretty tight-knit group that had been through highs and lows together and bonded accordingly. When Yahoo bought Overture in 2003 it was a reunion with old colleagues, many of whom I continued to work with until I left Yahoo in 2005.

Recently, with the corporate turmoil at Yahoo, I noticed a number of connections from the GoTo days were reaching out to fellow GoTo "alumni" on LinkedIn. Since I have a special interest in social networking and media, I decided to take the small step of creating a GoTo group. LinkedIn makes it easy to set one up and invite a seed group of members. From there, virality takes over, as friends and friends-of-friends show up in one another's updates and display the group logo. Already, less than two days after inviting the seed group, there are more total group members than initial invitees.

My biggest gripe so far is that I have to hand-approve membership requests from people not on the invite list. I would prefer that people be allowed to join by default, then inappropriate individuals could be removed if needed. However, LinkedIn doesn't offer that feature. One thing's for sure: with hand approval required, LinkedIn gets a lot more pageviews.

By the way, if you worked at GoTo before it was Overture and want to reconnect with old friends, you can join the group here