Media 2.0 101: The niche is what matters

NBC and Golf Channel co-brandedNBC’s coverage of Arnold Palmer’s tournament at Bay Hill last week was presented as “The Golf Channel on NBC,” something that would have been unthinkable just a few years ago. ABC’s sporting events are now billed as ESPN on ABC, another sign that cable brands are where it’s at. These are signs of the obvious decline of the network brands, and it’s both sad and inevitable. Disney (ABC), of course, owns ESPN, as Comcast owns both NBC and The Golf Channel, and the piggybacking isn’t so much to boost the cable brands as it is to use the cable brands to boost the old motherships.

Through roughly three quarters of the 2010–2011 season, the broadcast networks are down double digits in viewing compared to slight growth for cable channels. According to data from Turner Research and Nielsen and reported in Media Daily News, Fox is averaging around 4.6 million adult 18–49 viewers, down 6%; CBS is at 3.9 million, off 10%; ABC is at 3.202 also, losing 10%; and NBC is right behind ABC at 3.198, off 17%.

And there are no signs whatsoever that those lost viewers are ever coming back.

Season-to-date, the big four networks are down 11% in 18–49 viewers (to 13.5 million) and off 16% in the first quarter 2011 (to 13.4 million).

Meanwhile, ad-supported cable is up 3% to a collective 18.5 rating among 18–49 viewers during the period. A year ago — for the season — ad-supported cable was down 1% at a 17.7 combined 18–49 viewer rating versus 2009 for the season.

This is not good news under anybody’s magnifying glass, and it speaks volumes about the entire television industry and where it’s headed. The day of the “all things to everybody” approach to programming is clearly on the wane, and that’s the very essence of “broadcasting.” We’re witnessing the rise of the niche, and that ought to send a clear message to broadcasters who are struggling with trying to find a viable business model for the future.

Niche channels are easy to understand. They promise more of the same, instead of the hit-or-miss randomness of the networks. In my house, Lifetime is a big hit, but even more so the Lifetime Movie Channel. As Lifetime diversifies to try and grow, it becomes more like a network, but the Lifetime Movie Channel provides only one thing: movies for women. That’s what my house wants, and that’s what we get. For me, it’s all about sports, and that’s where I hang out. I also like crime dramas and especially shows like Forensic Files, and those are easy to locate via digital cable as well. My house is fairly typical. We’re into genre, not channel, and we can also find those things through video on demand, the ultimate “watch what I want when I want.”

If I’m a local television company, I’m plenty worried about this for two reasons. One, the ratings declines impact everything I do and support my advertising rates. As those go down, it gets tougher and tougher to sustain any kind of upward growth, and make no mistake, business is about growth. Two, the continued erosion of the broadcast model makes it harder to fight those in Washington who are after our spectrum. This is a bigger threat than most people realize, and I’m waiting for Google or Facebook to come up with a civil defense strategic plan that will put broadcasters further on the defensive. It’s coming. Trust me. And when it does, it’s going to be tough to justify those airwaves for anything other than broadband.

High on my list of strategic questions for local media are these:

  • What niches really matter to this community? I’d begin my search with local sports franchises. Do we have a college sports franchise here? Even if I had to purchase an existing franchise, that might be smarter than starting my own, even though I could drive the brand with my legacy media brand. What makes this community unique? What businesses sustain it? What natural attributes draw people here and keep them here?
  • What can I create to capture eyeballs and loyalty pertaining to those niches? Make it participatory and don’t forget social media. This is about things near and dear to my neighbors, and I must remember that. I must have a “take no prisoners” approach to owning these niches, because they will determine, in large part, my future in the community.
  • Are there television programs I can produce about these niches? The answer, of course, is yes, and these programs could be more important than we think. Instead of simply reinventing news for the 21st Century, perhaps some of that energy should go towards producing niche-oriented programs that tie us to the community.
  • What must I do to become THE go-to brand for those niches? Serve the niche well. The essence of ESPN, for example, is if it happened in the sports world today, you’ll see it on ESPN. That’s a big, big mission but one they fulfill every day. We need that kind of commitment — ownership, if you will — if we’re going to be top dog in any niche.

Niche verticals seem like an easy no-brainer for local media, but few people have dedicated the resources necessary to really own a niche. That’s likely because the return on investment requires a longer runway than most people are willing to abide. Meanwhile, however, we run the risk of anybody in the community creating such a service (many already have_, so the window of opportunity here won’t be open forever.

Borrell benchmarks 2010

Borrell Associates released its annual media benchmarking report this week and there are three big stories to report, one that we would consider good news, the others not so much. The report is an annual broad study of the local online advertising marketplace and one that reveals trends that media companies need in order to make good strategic and tactical decisions for the coming year.

THE THREE BIG STORIES

pureplays remain at 48%The slice of land held by the “pureplays” has stopped growing. For the past ten years, we’ve watched the pureplays’ slice of the revenue pie locally grow and, like Pacman, devour everything in its path. For the third year in-a-row, the share of revenue going to pureplays has stayed the same. In terms of actual dollars, it grew, because the overall pie grew, but this is an important stemming of the tide for local media companies, because their efforts appear to have stopped the growth of their biggest competition, pureplay Web companies like Google, Yahoo, Groupon, etc.

These Internet companies, which grew share of local online ad dollars from zero to 48% between 2000 and 2008, have hit a wall. Some have folded, others continue to grow, and the biggest have formed partnerships with local newspapers, TV, radio and directories.

Content is king, but not the content most people think. As we say here at AR&D, advertising is content in the Media 2.0 world, and that is born out by this report. According to the Borrell report, the Top 5 local online companies derive all their content from their own advertisers. In fact, half of the top 20 are all-advertising sites.

In 44 of more than 200 markets we track, Groupon or Autotrader.com generates more revenue than the largest local newspaper, TV or radio station online operation in that market. It is a startling revelation considering the fact that Groupon did not have a dime of revenue two years ago. This year, about two dozen of its local operations will generate more than $10 million each. Craigslist, meanwhile, generated about $20 million from its site in New York and about $1.6 million each in Phoenix and Houston. Autotrader.com will bring in more than $10 million per site in more than two dozen cities.

advertising content dominates

A canyon has formed between legacy media companies that are gaining share in the digital space and those that are losing it. There seems to be no helping some local media companies, those who, for whatever reason, decide not to or are unable to dedicate resources to online efforts, placing their future in jeopardy. At this late date, the energy required to cross the canyon is significantly more than it was a few years ago, and that spells trouble for some.

The most aggressive are seeing 20 percent or more of their ad revenues coming from digital sales. In 2010 they reported double-digit and even triple-digit growth in online revenue as they continued to invest in staffing and technology. On the other side of the canyon are companies that have hamstrung their online ventures with little to no dedicated staffing, allowing the new-media venture to be directed by old-media managers. Their digital revenues remained flat or declined last year.

Overall, the report shows a healthy and blooming market, one that shows promise ahead due to mobile. Online media accounted for $13.5 billion, or 14.9 percent of all local ad spending in 2010.

We are forecasting that to grow this year by 17.8 percent as the economy rebounds and mobile media fuels greater excitement at the local level. Without mobile advertising, “local online” (basically banners and search advertising served up on Web pages) would likely be flat for the foreseeable future, signaling the maturation of what is now a 15-year-old medium and the emergence of a new one to steal the attention. By 2015, the majority of all “online” advertising will become untethered from desktops and will be delivered to mobile devices such as iPads and other tablets, smart phones, and GPS-enabled laptops.

local online forecast

By 2015, Borrell projects that newspapers will be toppled as king of the local advertising marketplace, ending a run that has lasted since anybody first started counting such data. Online will, by then, be a $24 billion dollar market, representing a 22.7 percent share of all local advertising. The Local Web has become a relentless juggernaut, and yet we understand so little about it. And for a marketplace that’s just 15 years old, we can safely predict that many more disruptions lie ahead.

The annual Borrell benchmarking study can be obtain via the Borrell Associates website.   <Link>

TV on portable devices, the real war begins

the great media warA battle is brewing between cable companies and program owners over the use of streaming television via iPads, and it threatens to sidestep the value proposition of Mobile Digital Television (MDTV). Time-Warner has released an iPad app — and launched an advertising campaign about it — that allows subscribers to watch 32 cable channels via streaming to their Apple tablets. I’m a Time-Warner subscriber, and I can tell you that the thing is nice. I can watch basic cable anyplace in my home via my iPad. Why would I want to do that? You’d be surprised.

But the idea isn’t sitting well with channel owners like Viacom or Scripps Networks, who view streaming as a contract violation, because they see the dollar signs that streaming could produce. So far, Time-Warner isn’t giving them any more cash to stream their wares, with Melinda Witmer, an executive vice president at Time Warner Cable, saying “I already bought these rights.”

Brian Stelter wrote for the New York Times that other cable companies are coming out with their apps, too.

Legal threats were made last week, and the dispute was brought into public view on Monday when Time Warner Cable introduced a Web campaign that promoted “more freedom to watch on more screens” and asked, “Why do some TV networks want to take it away?” The television industry is, in effect, joining book publishers in being unsettled by the iPad and the new era of tablets. There is little doubt that people will be watching more TV on tablets in the future. (Imagine a son watching “SpongeBob SquarePants” on an iPad while his father watches basketball on the big-screen TV.)

What is undetermined is whether people will be watching through an application provided by their cable company, an individual channel’s app, or through a paid service like Netflix.

Larry Kramer of Business Insider says what has happened here is the beginning of “the great media war.”

To many of the top cable networks, TWC’s actions are nothing less than a land grab, or rather a spectrum grab. The networks, owned by parents like Viacom and Scripps networks, have claimed that TWC’s actions are violations of their contracts, and that if TWC wants to put their shows on a form of distribution other than cable TV, they have to pay for that privilege.

This all goes to the heart of convergence. Suddenly the video world is in the midst of a content platform convergence that promises to be as confusing and unsettling as everything that has happened in the newspaper, book, magazine and music worlds.

This is going to get really nasty and so far, there’s one voice that’s been missing in the mix, that of the Mobile Digital Television (MDTV) industry. Broadcasters have a huge dog in this fight, and its name is MDTV. Equipment providers are supposed to begin adding the MDTV chips this year, and soon consumers will have another choice when it comes to TV on their portable devices. Is Apple planning on adding the chips to iPads? I don’t know. Are other tablet manufacturers going to do likewise? I’m guessing some will. What about smartphones?

I’ve been trying for the past two days to get somebody in the MDTV world to comment for this piece, and so far, everybody has declined. I understand it’s a hot potato, but to keep quiet at this time is pretty pathetic, for MDTV has a significant dog in this fight. The silence, however, suggests otherwise. Are we really going to let Kramer’s “great media war” go on without throwing even a punch?

I certainly hope not.

Advertising, not content, is our business

it's all about commerceOne of the themes often expressed here is that media companies are not in the content or information business; we’re in the advertising business. This rankles media company executives who often respond, “You’re not going to get very far with that around here, Terry.” I appreciate that and realize it’s not popular, but it is, however, the truth. That which generates revenue for media is advertising, not content, and efforts to reform media without this fundamental understanding will go nowhere. When observers shout the need for a new business model, what they’re really referencing is a different way to do advertising, because that is the business of media.

Newspapers may not have invented advertising, but they played an enormous role in its development over the years. The local papers were the source of knowledge and information about commerce-related matters, and the Sunday paper remains popular, in part, because it contains the sales inserts. Radio and television followed, and their business models are likewise advertising-based.

So the issue to me isn’t so much one of reinventing ways to provide content — or the essence of that content itself — as much as it is getting in sync with what’s happening in the world of advertising, for that is our real business. Even if media companies innovated new types of tantalizing and compelling content, the business model of putting advertising adjacent to that content remains disrupted and evolved. It will produce the same results of all the other content models, because it isn’t the disruption to content that’s the real business problem for media. It’s what’s happening in the world of advertising that matters.

And specifically what’s changing is advertising models based on reach and frequency alone, the very ad models that media companies use.

Ben BolesIn our newsletter this week, auto industry outlier Ben Boles wrote a guest item that most likely missed. Titled “National guys are after your local car dealers — it’s worse than you think,” it contained this gem for local media. Remember as you read this that automotive is the largest ad category for media.

Auto dealers have numerous sources that sell “leads.”  They range in price anywhere from $9 to $75 per lead.  Armed with this information, what is your incremental pitch of $3000/month going to yield?  Using the $75/lead model, you are effectively saying you are going to provide an additional 40 leads per month to the auto dealer.  Presuming the car dealership can close 10% of those leads, that means the incremental increase of $3000 they gave to you… is going to generate 4 sales.  At $2000 per car (After commissions, selling the loan, after market accessories and dealer holdbacks) that means you generated $8000 in additional income.  With your $3000 incremental bill, you netted the car dealership $5000 profit.  Did you follow that math?

Now the $64 question.  Can you, off of television advertising, positively identify which 40 leads you provided? The answer is NO if you sold them television.  If you sell them web advertising, your chances of identifying your 40 leads increase dramatically thru custom analytical tags.  And of course, through selling them banners and placement on your website, you are building link juice too, and that’s where the real value of your media company domain is.  Only savvy car dealers are going to know this, though.  So, your real goal is to educate.

So here you have a brilliant thinker in the auto industry saying that mass media sales efforts need to shift from selling “Cost Per Thousand (CPMs) or Gross Rating Points (GRPs) to selling leads, because that’s what’s being sold by powerful outsiders after the same money that we’ve taken for granted in selling reach and frequency. This is what we mean by suggesting that media companies recognize that they’re in the advertising business, because this is what demands our attention, not the content that we create. We can and do sell cars, and if we believe that, then we’ve got to find ways to state it to potential customers (advertisers).

And this is just one example. If we were to fully immerse ourselves in the reality that our “business” is advertising, we’d stand a better chance of overcoming revenue declines than if we experiment with new content concepts that emphasize the old advertising models.

If newspapers are dead, it’s because the methods of making money have changed while we haven’t. Advertising is the disruption that demands our attention. Selling leads to car dealers is a great example of how a simple shift in thinking about the real business of media can make a big difference in arming our account executives with something new to sell.

Content’s the thing problem with hyperlocal

local media's love affair with 'hyperlocal' sectionsEveryblock, the MSNBC hyperlocal venture, relaunched this week with a new design. Mashable quoted EveryBlock founder Adrian Holovaty as saying the mission is to increase interaction between neighbors. While I like the premise, the reality is that it’s likely a long way off (and do we really want to know our neighbors that way?).

The web doesn’t yet offer an easy and effective way for people to post messages to their neighbors,” Holovaty explains. “Other social media tools are focused on people you already know ‐ professional colleagues, friends, family. But how many people become Facebook friends with their neighbors?” he asks, noting that EveryBlock is in a great position to do so because it “already has an audience of people who are using [the] service to follow news in very specific geographic areas.”

Everyblock offers hyperlocal news aggregated from sources “nearby” the users who provide their addresses or zipcodes as a way of joining the site. In addition to the neighborhood-specific news, business reviews, crime reports and real estate listings the site delivered previously, a slew of new features encourages users to share and discuss local news, meet one another and coördinate neighborhood activities, according to Mashable.

Everyblock

Holvatny, who’s been at this hyperlocal thing for quite awhile, told Mathew Ingram that he’s changed his mind about the concept over the years.

It may be kind of obtuse, but I have stopped believing that “You’re more informed” is an end. It’s a means to a different end, if that makes any sense. There’s probably a bigger lesson in here somewhere for journalism.

Adrian is a super smart guy, but my first question upon reading all this is do I really want to know my neighbors like that? I’m not so sure, although I might be interested in more gossipy stuff like bankruptcies, divorces, and other forms of public information. The problem here, like most “hyperlocal” plays, is that the intimacy of up-close relationships gets lost in the bigness of what’s being offered. I agree with Dave Winer that local character is what makes local (or hyperlocal) media work. There’s not much character in a one-size-fits-all aggregator community, regardless of its intentions to improve the ‘hood.

This is the major reason why I’m not a big proponent of this latest craze for local media companies — at least so far. I’m all for the energy and effort, because nobody really knows the future of content, myself included, and the truth is there may be a pretty cool market for it downstream. However, the efforts I’ve seen to date — with the possible exception of Seattle, where neighborhood news sites flourish — produce lots more sizzle than they do steak. And steak is the problem, because in most places, there’s precious little content to drive the business model. And rather that pursue it from the bottom up, companies in search of big dollars try to do it from the top down.

Hyperlocal carries a potentially compelling value proposition for advertisers. Think about it. If I want to reach potential customers in a specific zipcode, then content from that zipcode presumes an accompanying audience from that zipcode, so geographical targeting becomes possible. There are two factors that impact this, however. The first is a biggie: can you present content that is honestly relevant for people in that zipcode (that they can’t get elsewhere)? Secondly, technology easily allows the identification of individual users from that zipcode regardless of the content on the page, so why is it necessary to create “hyperlocal” content pages in the first place?

The answer is simple. Media companies like hyperlocal today for two reasons. One, they understand how to make money with content, and, two, it’s an incredibly easy sell today for legacy media account executives. Most sales people don’t understand the technology of targeting browsers, and they don’t feel a need to learn it, as long as they have something like this. You won’t hear many companies talking about the rich content experience that their hyperlocal efforts are bringing to the community, but you’ll hear lots about all the new advertisers they’re getting. In the end, that lack of content is what will ultimately determine the viability of hyperlocal, because the advertisers will figure it out.

So “hyperlocal” is more of an immediate revenue solution than it is a strategic solution for media disruption, and this is why I can’t fully get behind it. The pursuit of quarterly revenue goals is fine, as long as it doesn’t take energy and resources from the pursuit of media reinvention. That is a vastly more important goal. When local media companies wave hyperlocal in front of advertisers, they’re presenting an old model in new clothing. It may satisfy a need to see immediate financial results, but let’s not be fooled into thinking we’re really doing something that will help in the overall disruption of media.

Data is new media’s heartbeat

Data is our futureThere is no subject that terrifies traditional media company executives more than the ubergeeky word, “data.” Who knew, they ask themselves when the lights go out, that math and analytics would become the go-to revenue generator for those in the content business? And yet, that’s exactly what’s happening, and efforts to understand the value of user data will be rewarded downstream. Instead of focusing on making media money the old fashioned way, we need to focus on gathering data and figuring out how to use it for profit.

Data is the plastic of the 21st century,” said Om Malik at the beginning of GigaOM’s Structure Big Data conference in New York City this week. Local media companies are data-generating machines, and yet we use virtually none of it in advancing our business models. We don’t understand it. We think it’s beyond our grasp. And so we abdicate what could be a strong local data position to those better equipped to handle it. This is a shame, because data is the future of media, assuming advertising is the essence of how we make money.

Jeff Jonas, an IBM Distinguished Engineer, told the group Tuesday night that as the number of people connected to the web continues to grow, so too does the vast amount of information about those individuals. When you add geolocation, you create “space-time travel” data, because that data feeds other big data analytics “like a super-food.” With roughly 600 billion data transactions from cellular phones on a daily basis, he told the group, adding space and time to traditional data objects can help predict where someone will be on a given day and time with up to 87 percent accuracy. It’s the stuff of marketers’ dreams.

Why would companies want to add the physics of space-time to their data efforts? More context is needed, Jonas says, because the amount of captured data is rising faster than the creation of algorithms to make sense of the data. That’s creating a gap in the understanding of vast information stores and adding space-time adds much more context. Observations are where the sense-making begins but without context, it’s like trying to build a jigsaw puzzle without the picture of the final product.

This is why data is such a big deal for LOCAL media companies. If Web pureplay companies are able to create space-time commerce applications ahead of us, then any advantage we have in terms of community or proximity vanish. Local data is the most valuable form of data, because it can put merchants in touch with potential customers while they’re in the vicinity of the merchant. This concept should belong to us, not outsiders. We employ local people. We pay taxes. We contribute to the community chest.

I encourage clients to take the time to create databases, because those databases will produce new value for our companies downstream. Whether it’s simply gathering email addresses or defining the local Web, the ability to manipulate data equals the ability to make money in the data-centric world of Media 2.0. We can’t mine data we don’t have, so now is the time to emphasize data gathering in all that we do.

Nobody should understand the people who interact with our content like we do. As SiliconAngle’s John Furrier noted at the Big Data conference, “Data is the heartbeat of cloud, social and mobile,” and that means that if we’re not gathering, mining and monetizing the data associated with our efforts here, we’re only playing games around the edges, and that won’t cut it in the 21st Century.