Archives for May 2010

Assumptions in the news

bridging gaps in logic with assumptionsIf there is a continuing theme of this publication, it is that understanding created by logic and reason must necessarily be built upon certain assumptions, because we are not omniscient, and where we cannot employ facts, we deduce logical suppositions to fill in the gaps in our reasoning. There’s also the not-so-little matter of the often slippery nature of “facts” that are self-serving; the point being that logic often drifts from logic, and that is best demonstrated in our use of assumptions.

When I first began writing, I did so to challenge my own assumptions, an exercise that is both frustrating and revealing. Why DO I believe some of the things I believe? At what point in my thought stream does assumption take over in the creation of arguments in support of this idea or that one? It’s quite liberating. It’s also an exercise in postmodern deconstruction and one that I highly recommend.

After that, the trick becomes identifying assumptions in others, but if you pay attention, you’ll spot them. So let’s examine the news this week.

Thursday, Time Inc. CEO Ann Moore told attendees at parent company Time Warner’s “Investor Day” that the iPad model for magazines was “a business model that is just really very delicious.” Reporter Jason Fell of Folio was present and recorded many great quotes from Ms. Moore. Bear in mind that the CEO of Time Inc. really needs to believe in the iPad/tablet model, because many think it represents the future of print media. This belief is the kind of thing that, in a logical sequence, needs assumptions, and here’s a doozie:

It’s become increasingly clear that customers will pay for trusted quality content that’s easy to access and fairly priced.

At best, it can be said that people such as Ms. Moore “hope” this is true. Research to support this assumption is not certain, because the model isn’t far enough along. In the example of Wired’s talked-about iPad app, its early success can largely be chalked up to a certain group of core readers, so where’s the proof to validate Ms. Moore’s statement? There is none, because this is an assumption in the logical progression of those who want it to be so. Will it become fact? Who knows? But such a statement should not be used to justify one’s excitement, for, at best, it’s a “forward-thinking” statement, which is the caveat of proclamations of companies speaking with investors.

Meanwhile, thought leaders in the world of new media are singing a contrary song. Jeff Jarvis bought an iPad and then returned it, because it offered him nothing new. “It’s filling a need,” he said, “that I don’t think exists.” Fred Wilson says he prefers the iPad’s browser (Safari) to its apps and offers eight reasons why.

I understand why content companies are so interested in iPad apps. It is a familiar model to them. But as currently configured most content apps do not take advantage of the power of the digital medium. And so they are mostly useless to me.

Like Wilson, Dave Winer has an iPad but prefers his netbook, because he’s all about inputting and the iPad is an outputting device. That, he predicts, could be its downfall.

Apple has a long way to go before the iPad is a useful tool. Lots of little things to fix and tweak, and a philosophy that’s going to keep the really innovative stuff flowing elsewhere (where — not determined yet).

These are three very prescient and influential fellows, but they are not alone in their thinking. It is, therefore, quite a stretch to make the statement that it’s “increasingly clear” that customers will pay for trusted content that’s fairly priced. Go to WalMart and stand in the over-the-counter medicine aisle for awhile. Count the number of times people buy Tylenol over the generic. People won’t pay more for something they can get cheaper; it flies in the face of human nature. The same is true with publishers trying to put the toothpaste back into the tube. There is not one single shred of evidence to validate a return to pay, and yet publishers keep driving down this path.

I’m not dumping on the iPad or the tablet model of publishing. It’s still far too new for any real judgments. I think tablets are pretty cool; it’s the draconian methods of Apple’s “store” in determining which apps are “appropriate” for the iPad that bothers me about it, but a tablet is really just another computer, and I think the market will be much clearer a year from now.

Until then, the jury’s out on the facts.

The paywall experience is already a failure

Media companies and their paywallsMy friend and colleague Jarvis Coffin, CEO of Burst Media, has a great post this morning that I recommend reading. Paywalls, he writes, don’t and won’t determine what is or isn’t “good” media. Many believe that the future of the newspaper industry rides on whether pay walls “work” or not, and Jarvis believes this is overstated, especially as it relates to the distribution of quality content. Threats from proponents of paywalls that we face a future of “bad” media if paywalls don’t turn things around, therefore, are just demagoguery.

But he also makes a really important point about paywalls that most people miss.

My understanding of the whole paywall issue isn’t that it’s so much about making subscription money as it is about reasserting the value of proprietary content to advertisers.

This is a very provocative observation, because, if true, then I can safely declare the paywall experiment a failure already. Here’s the problem: the creation of content that will be supported by ads is a business model in decay. Abundance isn’t the problem; it’s that the advertisers are now in the content business themselves, and this is a rapidly-growing sector of the advertising world. Advertising is in a full-blown revolution, as company after company discovers they don’t need media the way they used to, because they’ve become media companies themselves.

This is why I tell media clients — to their disbelief and dismay — that we are not in the content business, because there is no content business anymore. We’ve always been in the advertising business, although it sure looked and felt like we were in the content business. Our bottom lines were/are determined by advertising, and that’s the real business we’re in. Media companies need to accept that and move on to finding creative ways to enable commerce in our markets, because that’s exactly what our real competitors (the pureplays) are doing. The more we talk about and debate content solutions, the more we’re playing right into their hands.

I’m reminded of that great quote by Bob Papper that “television didn’t hurt magazines by taking away their readers; television hurt magazines by taking away their advertising.”

So if paywalls are a strategy to reassert the value of ads adjacent to proprietary content and not a subscription play, then they’re dead already.

Move along.

“Inventory” is an industrial age term

Inventory management is an industrial age conceptAnd we need something better.

In introducing the concept of Local Ad Networks to media companies — where we place ads on as many sites in the marketplace that will have us — I’m often met with the following response: “Why would I want to increase the number of sites I’m advertising on when I can’t even sell the inventory I’ve got on my own site?” It’s a logical question given the world we’ve created been handed. The answer is simple, but understanding it means thinking outside the conventional realm of reach-frequency in a display advertising model.

Implied in the question are at least seven assumptions, so let’s examine them one at a time.

  1. The CPM method of selling and accounting is the best way to handle online advertising. The reality is more that CPM is what we have, and that’s just the way it is and has to be. This is a compromise and one that values advertisers over publishers, especially when rates are established by third-party networks. CPM pricing is killing online publishing, but CPM accounting is arguably a good way to keep track of payments and trafficking. It does not necessarily follow, however, that this is the way we should sell advertising on the front end. Simply put, the industry is so accustomed to CPM pricing that the only way for us to increase the value of our content would be to dramatically increase the CPM. That’s just not going to work, and that’s a problem that we’ve created for ourselves.

    Moreover — and this, frankly, is most important — there’s no compensation for the data that’s acquired by the server handling the ads, which, to the server, is of greater value that the reach provided by serving the ads in the first place. Data is our future, and we’re giving it away by serving only or mostly third-party ads.

  2. CPM is lazy but it’s what we know. We sit back and take orders from advertisers and networks that want our inventory rather than fight for the value of what we create.

  3. All ad impressions are created equal. This bogus assumption has been used by the advertising industry to commodify online advertising in such a way that it has destroyed the value of the content around which these ads are served. In order to create a viable accounting mechanism for BIG advertisers, this one-sided proposition serves only advertisers and the networks that serve them. Publishers don’t stand a chance, and this became acutely apparent when the economy went south two years ago.

    The tail wags the dog for publishers, and we simply must find a way to break free, or local media properties will ultimately be worth a tiny fraction of what we used to know.

    The reality is that all ad impressions are not created equal, and the amazing thing to me is that we already know this is true, or why else would certain ad positions cost more than others. We continue, however, to perpetuate the myth that the ad industry needs to maintain its catbird position.

  4. Eyeballs are eyeballs, and inventory is inventory. Flowing from above assumption, this one is also needed to cement the necessity of easily assembling a mass for the CPM model. We’re content with the knowledge that, over a certain period of time, we’ll accumulate enough eyeballs that our advertisers will surely be able to hit their targets. This is old mass market thinking, for while we’re doing that, third-party ad networks are accumulating data, so that they don’t need mass eyeballs to deliver targets anymore.
  5. Cumulative reach is the same as real time reach. This is perhaps the most dangerous assumption we make in cultivating the CPM model, for as the news and information business shifts to real time, so, too, does advertising. The ability of an advertiser to immediately switch out ad copy is already a high value proposition for companies offering these types of ads, but there’s no place for it when all you’re doing is counting eyeballs over a period of time.

    The shift to real time is one of the clearest online trends of contemporary media, and we must find ways to work with the trend instead of fooling ourselves into believing that the old accumulation of mass over time will protect us. It won’t.

  6. Banner blindness isn’t a real problem. The notion that people don’t “see” the ads on media company websites has been proven by the eye-tracking studies of Jakob Nielsen, and yet we must set it aside to validate the CPM model. After all, if it was true, then the myth would be destroyed, and we can’t let that happen.

    Even companies who accept the idea of banner blindness fight it by turning plain banners into whirling, blinking “rich media” ads that fight for attention. All they do is piss people off. And how about those ads that do manage to pop up? It’s amazing how easy it is to find the “X” to close the ad without ever actually looking at it.

  7. The value of online advertising is determined by the advertiser, not the publisher. We’re getting exactly what we deserve by buying into the myths and assumptions of mass advertising online. We’ve dug ourselves into this hole, and as the old saying goes, the first thing we have to do in order to get out is to stop digging.” In order to “fix” this, however, we need an entirely new way of looking at the real value of online ads, and that won’t be found by affixing ourselves to the concept of “inventory.”
  8. Local advertisers are happy with the CPM model. As Gordon Borrell says, “Local advertising is sold, not bought,” so we automatically run into problems with the model locally, because advertisers who don’t or can’t “see” their ads don’t come away with a real warm feeling. The bigger the portal website we operate, the greater the problem, for ad visibility becomes a serious matter to the local guy whose shelling out money to “see” his own ads. If he can’t see them, he assumes nobody is seeing them, regardless of the report we can print from server logs that shows otherwise.

    When your site garners 10 million page views a month, a campaign providing even a half a million impressions doesn’t stand a chance of being seen by anything other than the server. Local advertisers want visibility, not to get lost in a vast sea of our greatness.

So inventory isn’t the issue that we think it is, and it’s certainly the wrong question in dealing with a concept like the Local Ad Network. Inventory is an industrial age term that finds meaning in a world of mass. Data, however, is our future, and that turns the world of inventory on its head.

Of all the issues listed above, none is greater than the shift to real time. This is much more problematic for the print industry than their broadcast competitors, for broadcasters know and understand real time audience reporting. We call it “ratings,” the percentage of households capable of viewing who are actually doing so.

So the accumulation of large numbers of sites in a market upon which we can serve ads is both a reach and data play. The reach, however, is both horizontal and vertical, and that stands a much better chance for future relevancy than “inventory” spread out over a single website.

(Originally posted in AR&D’s Media 2.0 Intel newsletter)

Addressable TV advertising

Which half of my advertising works?My friend Holly was watching an episode of  “House” on hulu last night, when a Budweiser ad appeared. At the end of the ad, hulu asked Holly if the ad was relevant to her. She said no. The next ad that appear was unsurprisingly different.

My next commercial was for allergy medication and starred a youngish white female.  I wonder if they assume a No on Budweiser makes a viewer female?

This is just the beginning of what’s the latest Holy Grail for Madison Avenue — the ability to interact with viewers in such a way that advertising can better target those who are watching. Hulu now has a little notation attached to Holly’s cookie (or IP address, although that’s a wee bit dicey) advising whoever has access to her data that she doesn’t want or need Budweiser commercials. By opting out of Budweiser, she’s opting in to alternatives.

This dramatically alters the old mass marketing adage, “Half my advertising dollars are wasted; I just don’t know which half.” It’s also why GoogleTV, AppleTV and a whole assortment of others that run viewing through a box (or the set’s internal wiring) — including existing cable or satellite boxes — are the potential revenue prize that the industry thinks they are.

It also helps understand why Senator Herb Kohl of Wisconsin wants Comcast to stay the hell away from hulu, if the deal for them to purchase NBCU is approved. He knows Comcast would rather run everything through their own box, and who’s to blame them.

This is a space to watch in the months ahead. With Sony already cranking out Bravias with GoogleTV wired within, it’s a race to see whose platform will gain dominance.

When all is said and done, the TV advertising you skip will at least be more relevant. And the one-to-many paradigm known as broadcasting will be toast.

UPDATE: Chris Pizzurro has a nice primer on addressable TV for MediaPost.

The current ad model won't be enough

A report from Bloomberg cites data from the Newspaper Association of America revealing that 1st quarter online revenue for newspapers increased 4.9% to $730 million. Nice, huh? It’s the first such increase since 2008 and is in sync with a Borrell Associates’ prediction that newspapers would bounce back online this year. It may be a dead cat bounce, but it’s a bounce just the same.

In a statement, NAA Chief Executive Officer John Sturm provided spin with a smiley face, “While broad, macroeconomic factors indicate we are not out of the woods yet, NAA is encouraged by the improvements we are seeing in newspaper ad spending.” Right.

That’s hard to believe, given the other piece of news from the report isn’t so encouraging. Traditional newspaper revenue fell 11% in the quarter to $5.25 billion. So while executives look at the headline, the acid build-up in their stomachs continues unabated, for what is a net $34 million gain online compared to a net $676 million loss in print?

So the problem is that while online revenues are growing again, they’re just not growing fast enough to offset other losses and avoid the disaster ahead. That is not supposition; that is a fact. Here’s the matter in graph form:

source: NAA newspaper expenditures report
Source: NAA’s Annual Newspaper Ad Expenditures Report

Despite every effort on the part of print companies, the print “problem” is acute. Subscriptions via tablets may provide some relief — at least the incentive to eventually scrap the printing press — but something new has to happen, or the industry is going to collapse entirely.

This is why we continue to emphasize the need for local media companies to completely reinvent online selling through local ad networks. We have to create our own demand and be willing to adopt strategies — such as flat rates — that, while less sophisticated than Madison Avenue wants (cough, cough), tilt the revenue balance in our favor instead of theirs. We must be willing to admit that we were wrong, that we’ve been fooled by an advertising industry that stole control of supply and demand from us while we were busy taking orders in what seemed like a revenue-rich no-brainer.

I’ll be talking much more about the value of flat rates in the weeks and months ahead.

UPDATE: Please note Gordon Borrell’s “mild correction” in the comments.

We're making this up as we go along

I’ve spent a few hours today watching Jeff Jarvis spread his evangelical new media message to various audiences. I love everything about Jeff, from his vision to his passion for sharing it, and any time “at his feet” is well spent.

During a live hook-up with an audience in Norway, a woman asked a question in the follow-up that I want to give a couple of thoughts about, because I think it’s important. After the presentation, this woman said, “Much of what you talk about is in the abstract, and I think we want a whole lot more. Are we expecting too much of you?”

Yes, lady, you are. Jeff did a nice job handling the question, but here’s my take (because I get this a lot myself):

Media people desiring insight want a road map from those of us who are making it up as we go along. “Give me the bullet points,” is what we hear. “Show me the plan, man, especially the revenue projections for the end game (parenthetically), so I can decide if it’s worth the time and effort.”

Innovation doesn’t offer a road map, and that’s at the core of what this woman was asking Jeff. “Get away from the abstract; I want the friggin map!” I’m sorry, ma’am, but you can’t have one. Not yet anyway.

This is one of the essential problems with all “industries;” nobody wants to be the first one to revolt, because, after all, if this new idea really worked, we’d all be doing it, right? We want the new paradigm all tied in a bow, so that we can just move from one to the next. Not. Gonna. Happen.

The logic is impeccable, but this isn’t the time for logic. We’ve got to take risks, plow headlong into the chaos, and move the damned rock!

What Jeff Jarvis is doing is way out there, but I think it’s based in a right alignment with trends, and I’m surprised that some others don’t see that. The idea is to get ahead of a rapidly evolving concept, because if we don’t, the only way we’ll see downstream success is by floating above the work of others as ghosts.

We are making this up as we go along, ready at a moment’s notice to alter course but steady on the horizon of tomorrow just the same.

I’m sorry if that’s abstract, but that’s all you get.