The disintegrating power of (old fashioned) marketing

Within the vortex of media disruptions today is the reality that money is less able to purchase market share than it was just a few years ago. The Web has done this, by changing the marketplace from one-to-many to its remarkable 3-way universe of up-down, down-up and sideways. Seth Godin hit on this in a wonderful post today, which is republished here with permission:

The Trip Advisor tail wagging the real world dog

More than fifty years ago, Duncan Hines (a real guy, unlike Betty Crocker), turned the restaurant business upside down. He began certifying restaurants as clean and safe, offering a sign for roadside diners that wished to welcome travelers from out of town.

The existence of his certification changed the way restaurants did their job.

Today, it’s sites like Trip Advisor and Yelp (among many others) that are transforming the way service businesses operate. Here’s how it works: at first, a business might try to ignore the system, but then they notice their customers talking about the reviews and their competitors. So some stoop so low as to attempt to game the system, sending sock puppets and friends to post reviews. But that doesn’t scale and the sites are getting smart about weeding this out.

The only alternative? Amazing service. Working with customers in such an extraordinary way that people feel compelled to talk about it, post about it, and yes, review it. It’s not an accident that Hotel Amira is one of the highest rated hotels in all of Turkey. They didn’t do it with the perfect building or sumptuous suites. They did it by intentionally being remarkable at service. And yes, the Holiday Inn in Oakland has the same story. They took what they had and then they deliberately went over the top in delivering on something that never would have paid off for them in the past.

Amplifying stories causes the stories that are built to change. Outliers are rewarded (or punished) and the weird and the wonderful are reinforced. Once people see what others are doing, it opens the door for them to do it, but with more flair.

The web changes everything it touches, sometimes in significant ways. Travelers ranted about poor service for a generation, but once the internet makes it easy to rank and sort and connect, the service has no choice but to change. Some businesses see Yelp and others as a tax, a burden they have to pay attention to in order to stay relevant, and they grumble about it. Others see these sites as the opportunity of a lifetime, a chance to deliver service (which takes guts and care, more than money) to get ahead.

Seth Godin has a remarkably clear view of reality these days, and what he’s saying is relevant not only for merchants of every ilk, but also for media companies — the people who used to be benefit from the deep pockets that used to fund messages of how wonderful they or their products were. Steven Covey wrote in his wonderful 1990 book “The 7 Habits of Highly Effective People” that “you can’t talk your way out of something you behaved your way into.” How very true this is today.

In researching the deep cultural changes being brought about by technology, Umair Haque, the brilliant Harvard economist, published paper after paper years ago about what he and I were both calling “Media 2.0.” I recall one thought in particular about this phenomenon — that media companies would be better off investing resources in the products and services they create rather than spending a dime on marketing. I summarized this view in January of 2006 in The Economy of Unbundled Advertising.

In the blockbuster concept (of mass marketing), he notes, attention has the highest value and therefore commands the most dollars, because attention is a scarcity that can only be overcome with a significant marketing budget. In the new world, however, where the customer is at the controls, attention isn’t the scarcity, because the customer is already providing it — quality snowballs (products/services that users can spread) are where the new scarcity exists, and that’s why the value shifts from attention to production. This has profound implications for television, because its core competency is the providing of attention.

What Umair wrote of back then is what Seth Godin is referencing in his post today. Businesses of all forms are learning that the greatest sin today is stretching the truth just because you can. It will change everything, and it’s only just begun.

The spectrum squeeze, Chapter 3,672

The Elvis tune “Suspicious Minds” must be humming in the boardrooms of broadcasters these days, because, like ol’ Swivel Hips, we’re caught in a trap, a squeeze play over the broadcast spectrum that at one time gave us our edge in the media world. The government, funded by the Telcos, wants the spectrum for wireless broadband — and they WILL win — but we need to hang onto it as long as we can. It’s a fascinating study in modern politics that just got a little more complicated.

It seems that sales of over-the-air antennae are skyrocketing as a growing number of people cut the expensive cord to cable, according to the Wall St. Journal. Over-the-air is free, and as my mother always used to say, “For free take; for buy waste time.” Now, you’d think this would be good news for broadcasters, because that’s digital spectrum being used for broadcasting.

As they say in the infomercials, “But wait! There’s more!”

Cable channels have become the most lucrative part of the entertainment business, mainly because of huge fees paid by cable and satellite subscribers, a cut of which is passed on to the channels. Broadcast stations found it difficult to extract cash payments from distributors until relatively recently. And even now these fees are a relatively small, albeit growing, part of broadcast stations’ revenue. SNL Kagan estimates stations will pull in nearly $1.5 billion in such fees in 2011, compared with $38 billion in fees for cable channels.

So while broadcasters “could” promote the idea of cord-cutting and sell against the average monthly bills for basic cable service and broadband service of $91.44 (SNL Kagan), they can’t, because they’re profiting from the same thing. The Journal article quotes Perry Sook CEO and President of Nexstar Broadcast Group as saying that he “sees the advantage to broadcasters of fewer channels—even against greater online competition—but worries that the potential ad revenue wouldn’t make up for lost subscription fees.”

It always comes down to profit, and there’s nothing wrong with that. It does, however, get in the way of a clear message and position about spectrum. The National Association of Broadcasters, of course, says that broadcasting may in fact outlive cable. That’s not likely, but this story is still being written.

Stay tuned.

Of original sin and downstream profitability

This may be the headline of the week:

The Boston Courant: Proud not to have a website until the owner sees “a profitable end game.” Publisher David Jacobs says he has no interest in the web — at least not until someone else figures out a business model for it.

The article, in Harvard’s Nieman Journalism Lab, is a fascinating tale of a man with a niche audience who decided long ago that his publication was a newspaper, period. Publisher Jacobs is a guy who sees the simplicity of it all. “I won’t launch (a website) until I find a viable business model…We’ve never come close (to launching),” Jacobs told Callum Borchers, author of the piece. He also gave Borchers this wonderful line:

In business, one of my philosophies has been the first pioneer into enemy territory gets all the arrows.”

How true, and it brings a warm smile to my face. There are those who would say that Mr. Jacobs is a man who resisted the temptation of newspaperdom’s “original sin,” that of giving away for nothing what people used to have to pay for.

I’ve long believed, however, that the original sin of the newspaper industry was in creating the Web version of itself in its own image, to use another Biblical reference. It’s a forgivable sin, because we didn’t know then what we know now, but the extent to which we continue in this error is another matter. The newspaper industry gave birth to the media Web and a new form of geek to manage it. These new individuals had ink in their veins and ones and zeroes in their brains, but they bore scant resemblance to their counterparts in California and elsewhere who were actually building the Web and its applications. A newspaper background was deemed essential in the creation and execution of a newspaper’s online strategy.

These people were invited to speak at conferences on “new media.” They wrote books and coined phrases. When national publisher groups met, these people were assembled to advise and teach. The newspaper industry was perfectly capable of taking care of itself, thank you very much (same with TV, but that’s another article). This is not to suggest arrogance. It’s just the way it was.

Imagine a whale oil convention a hundred years ago where the speakers about electricity only came from within the ranks of the whale oil industry. One session is dedicated to new innovations in oil lamp manufacturing where the oil is lit by a spark of electricity. Another looks at the benefits of listening to the radio while resting with the soft light and therapeutic fragrances of scented oil lamps. Still another examines innovations on the future use of electricity in steamship navigation equipment. You get the idea.

Newspapers never stopped to ask this one fundamental question: what is the best way to meet the news and information needs of the community online?

Instead, when the “real” geeks started asking the question and creating simple applications to accomplish the task, the best newspaper people could do was criticize them. Where institutions wouldn’t listen, individuals did, and so was born the tools of personal media. The term “blogger” became instantly pejorative with the newspaper industry, despite the reality that the software they used was far better in terms of communicating online.

Newspapers — and their broadcasting counterparts — have continued to bolt onto their core item after item, so that the finished product resembles more a complex Frankenstein monster than the simple money-maker that Mr. Jacobs continues to provide. This is why new media is about reinvention, not brand extension. Moreover, the venture-backed souls who are taking the money that used to go exclusively to us are quite content to “help” us bolt other things on. Meanwhile, we’re helping revenue shift to other people’s infrastructures, and so it goes.

David Jacobs recognizes his brand as a newspaper. The question for him is the same for everyone: What is it about that brand that will allow me to make money online, and here’s a hint: it’s not mass marketing.

Nuff said.

Whither Apple: It’s the infrastructure, stupid!

Apple LogoIf you’ve not been following the work of Dave Winer recently, I encourage you to do so. He’s on an impassioned quest, to keep the Web itself open for future developers, and I think he’s onto something terribly important. As Silcon Valley companies like Google, Apple and Facebook continue to develop their business models, they’re doing so by trying to keep us within the confines of their own infrastructures.

That’s because infrastructure is where the money is in a world where we — you and me — are the product being served to a hungry hoard of people with deep pockets: advertisers.

This is a concept that Dave is pounding away at, because when we’re inside someone else’s infrastructure, we’re playing by their rules, and we’re trapped in a universe that will always default to the best interests of the owners. The Web, on the other hand, isn’t owned by a corporation, and it must remain as such, complete with its own infrastructure.

Apple’s odd introduction of OS X “Mountain Lion” to its biggest fanboy writer, John Gruber, yesterday is an example. Apple’s future is built onpushing everybody and everything to iCloud, which it will own and operate. Sounds okay for now, but we’ll see.

Facebook wants you on its servers and inside its infrastructure. Same thing with Google, although Google  is a different iteration of the same theme, because it gives the appearance of growing an independent Web — with Google’s “help.”

I think this is a big story that’s not going away, because Madison Avenue lives in the pipes and stitchery of media infrastructures. Mass marketing’s infrastructures are on the way out, but those offered by Facebook, Apple and Google are alive and well.

I still remember AOL and the remarkable statements made when it was purchased by Time Warner. AOL’s entire value was based on its infrastructure, a captive audience that still needed the Internet training wheels the site provided. As a result, I’m not convinced that anybody has the wherewithal to pull this off completely, because the more the cinch is tightened, the more it will feel like AOL, and the goodies will seem beyond its reach.

Let’s be careful not to give away tomorrow for the sake of today’s convenient experience.

 

New Pew report should open eyes

Today’s new report from the Pew Research Center’s Project for Excellence in Journalism reveals some unsurprising but damning information about news websites that we can ill afford to ignore. Here are the key findings:

  • In-House ads, ads selling or promoting a news organizations own products, fill more space across these news websites than any other advertising category.
  • The finance industry is represented far more than any other on the news websites studied.
  • Discount or coupon advertising such as Groupon was fairly limited.
  • Most of the news sites did not feature ads targeted to consumers based on their online behavior.
  • News organizations tend to rely most heavily on static banner ads.
  • Even though search ads don’t appear on most news sites, Google’s advertising presence is still strong there.

What this says to me is that media companies continue to try and force “their” business model into a medium that rejects it. Moreover, I think this is right where Silicon Valley wants us.

Media, in its purest business sense, is an order-taker world. What we have is so scarce and so important that people call us to spend their money with us. In the good old days, regardless of which form of media we’re talking about, the sales force got into a nice rhythm of sitting at desks and counting the money. Oh I know that people will debate this, but a replacement for that rhythm is what we desperately seek today. We need something to replace it, because if we have to work harder to make and sell our audiences, the price of sale (POS) goes way up, and our business model itself collapses.

Searching for this replacement online, however, has been our mistake, because the obvious benefits of mass marketing are utterly disrupted by the Web, and mass marketing is all we know. All we’ve done is waste our time, and the Pew report makes that statement loud and clear.

Beginning with newspapers and continuing with television and other forms of media, we’ve built websites that serve (we think) the business model of mass marketing, and that has been nothing less than suicidal. So far downstream are we in this error that we can’t even imagine anything different for now, so let’s begin with a few basics:

  • Time is the new currency. We don’t care about this in the outside world, where scarcity earns us the right to stomp all over people in the name of “serving” them, but online, this is a crucial, crucial reality. We must conform our online products to this reality.
  • Do what you do best and link to the rest. In a world where infrastructure carries the monetization mechanism, it’s necessary to keep people inside that infrastructure for as long as possible. This doesn’t work forever online, however (think AOL, not Facebook), because the Web is bigger than anybody’s application. One of the oldest Web axioms is “If you send people away, they will come back.” This is a habit unpracticed by media companies, but one we must begin embracing.
  • Create “for” the Web by accepting the following: The Web is not TV. The Web is not newspapers. “The Web is more a social creation than a technical one,” said Sir Tim Berners-Lee. The Web is a three-way form of communication: up/down, down/up and sideways. The Web is real-time flows and streams, not static displays.
  • News content online must be unbundled, so that users in the network can pass it around to meet their needs to inform and share. Our need to drive users to our infrastructure is contrary to this, and we must find the courage and creativity to do something about it.
  • Advertising is content — the only new content that really matters. Advertisers are the new content makers, and we need to be exploiting our strengths as experts in the world of content creation in order to serve this burgeoning market.

There are so many things I could say about what we need to be doing, but that would take all day and then some. The point of this Pew report — and many others like it — is that what we’re doing isn’t working, and that’s being kind.

We’ll never get out of this hole unless we first stop digging.

Landing pages: a solution for local mobile

the deer now have gunsLocal television stations and newspapers must become “ammunition business” companies in an era when the deer have guns. Everybody is a media company these days, and there’s a market in helping people and businesses get better at the business of media. In so doing, we move from competing with them to making money off their growth, and we think this is smart business.

For the past year, a friend of mine has been developing a tool to enable local media companies do just this: an HTML5 mobile landing page generator for agencies and media companies. I’m not suggesting there’s a lot of money in media companies designing mobile websites for people, but there is a significant market for landing pages for ads that run anywhere within our ad infrastructures and beyond. If we sell clickable ads, we need to also manage (for clients) the destination of those clicks. There’s nothing worse that an ad that clicks through to a basic HTML website on a mobile device. If advertisers offer people a clickable bargain — or some other incentive — it needs to load quickly and have the versatility to do what the advertiser wants done in an affordable way.

Christian GurneyThe ability to do this on behalf of advertisers is significant, and that’s what Mojaba does. Mojaba is the brain child of Christian Gurney. It’s not the first landing page software, but it was created so that non-technical people could generate the finished product. Gurney told me via email that the “back-end analytics go way beyond Google to show you the exact GPS coordinates of mobile users.”

With this product, you’re making a statement that the browser is where it’s at with mobile. Is that true?
We think that the early success of applications — especially on the iPhone — diverted attention from the fact that for 95% of businesses and organizations, mobile websites are the very best solution. Study after study shows that the mobile browser is one of the top three applications used by consumers on their phones.

What was the inspiration for this product?
I was amazed and frustrated by constantly being unable to find information about businesses when I was away from a computer. Especially when traveling: going through an airport with my bags and you just can’t pinch-and-zoom with one hand. So clearly as a user, the experience with desktop sites on my iPhone was bad. A Google study showing that 79% of websites have no mobile solution was the wake up call to the opportunity.

Why did you create a tool for agencies and media companies rather than going straight to the businesses who need HTML5 landing pages?
Mojaba is our first step in the conversation with agencies. Our long-term goal is to add products and services to remove a number of pain points for them when it comes to mobile marketing. The global shift to mobile being the conduit for people to get information from the web is undeniable. Through our services and support, we hope to earn the right to become the agencies’ best friend for mobile. If we can do that, we think we can have a strong business that provides true value.

Mojaba is a smart addition to any local media company’s portfolio, because the more we are able to provide “ammunition” to those in the market with the audience hunting guns, the greater our value in the new marketplace.