Polygraph Media Blog

Proposed SXSW Panel - The Future of Big Media

I have submitted a panel for SXSW Interactive to cover how big media is responding to the lightspeed changes in journalism, local news, hyperlocal, etc.  Check it out here:

The Empire Strikes Back: How Big Media is Responding to Disruption

I have lined up some top-notch panelists who understand the issues far better than you'd think.

Feel free to vote early and often ;-

My Time at Stratfor & How Journalism Has Changed Since 1999 - Part I

When I graduated high school in 1992, I thought it equally likely that I'd be either an attorney or a journalist.  Law seemed to be a natural career progression for me, but I was also very interested in journalism after a stint as sports editor of my high school newspaper.  But... I got involved with what turned out to be my first startup in 1994 and the rest is history.

That first startup, Stratfor, ironically evolved into Web journalism after I put everything on a shoddy, poorly-designed portal for the first time in 1999.  Intuitively, we knew that the content we produced on a regular basis was interesting.  So we took a chance and threw it all online.  It was a raging success -- after sending a brief announcement to a few thousand people on a slowly cultivated e-mail distribution list, our Unique Visitor traffic went from 100-60,000 in a single day.  I won't bore you with the rest of the details, but it was indeed an exciting time.

On the technical end, we grappled with a number of issues that have since been solved:

• Taking advantage of the fact that you can publish to the Web immediately (live blogging infrastructure)
• Delivering short, high-importance messages (real-time, open messaging a la Twitter)
• Cross-referencing content with different characteristics (tags/tag clouds)
• User feedback & identification (comments/social media)

Although the Stratfor story certainly had its ups & downs, I like to think we were way ahead of the curve in 1999.  The Huffington Post and others get a lot of credit for redefining journalism today in 1999, but we were pioneers in many ways at Stratfor in the late 1990s.  Stratfor ultimately created a subscription service from the portal, and has done a good job monetizing their content ever since.  The business is a (seriously underreported) success today despite the ups and downs of learning at that time.  If you think people have a hard time with the online media business models today, imagine how it was in 2001!

But enough of that... the point of my post is to talk about how things have changed since then.  My favorite example is referencing content from other news sources.  We would occasionally find an interesting story on Lexis-Nexis (remember, this is B.G. - Before Google) and want to summarize it on Stratfor.com.  We were very concerned about doing this -- whether or not the referenced newspaper or magazine would like it or not.  I remember wondering whether or not we should summarize the story, reference another news source via hyperlink, or do a ton of additional research to weave it into something greater.  It seems odd today, links to stories appear everywhere -- Google News, Fark.com, Digg.com, etc.  All of those companies are making a ton of money as aggregators.  I think I read recently that Fark.com makes ~$10m in revenue with two employees.  I'm not sure if that's true, but even if it's a 10x exaggeration... WOW!

Then look at today -- in a highly unscientific poll by Time Magazine, respondents say that they trust Jon Stewart over and above all other major media newscasters.  Here's a guy with no journalism pedigree and a background in comedy of all things.  And folks in America trust him more than decorated newscasters at major networks.

So what can we conclude from this?  A few things:

• "Just the facts" is, for better or worse, regarded as boring or uninteresting by today's viewer/reader.
• People want to hear their news from people who share a similar perspective on the world.  This is why people like Rush Limbaugh, Jon Stewart, Bill O'Reilly, Rachel Maddow, Keith Olbermann and others are media stars as recognizable as news anchors.
• Content aggregation, curation, and comment is the new journalism -- like it or not.
• The free flow of information brought about by the Web makes this a reality.  The reporting of news is more of a public dialogue than a recitation of facts.  People read this type of analysis either because it reinforces opinion or it is controversial.

In Part II, I will talk about where all of this is increasingly taking place -- the blogosphere -- and how attitudes towards bloggers have changed over the last few years.

Microsoft & Newspapers/Local Media - more alike than you'd think

A few weeks ago it occurred to me that, at least conceptually, I have seen the problems faced by the newspaper industry before... at Microsoft.

Both face classic Innovators' Dilemma challenges.

Microsoft is trying to hang on to huge annuity streams from client software, which is a tougher business than ever in 2009 and one that isn't getting any easier.  So Microsoft is forced to straddle the fine line between hanging on to the client and "Modernizing" with Web business models, which I've argued for some time are at least a mildly deflationary force thanks in large part to Google.

The newspaper/local media business is in exactly the same place.  Old advertising models, which are today characterized by inefficiency and questionable effectiveness, are becoming less and less popular with advertisers.  Everything is moving to the Web, where monetization is similarly questionable.  Better monetizing the Web is critical to the future of the newspaper/local media industry, yet it can't quite replace the revenue provided by the old business model.

I suspect that Microsoft and Newspapers/local media businesses will find that the easiest path to success is in being aggressive... by devoting a meaningful but not overwhelming % of available resources to experimentation.  Take two examples I am very familiar with for example:  work done by the Austin American Statesman around Twitter, and alternative Web properties and the Dallas Morning News around "big media" hyperlocal.  These are organizations that place a premium on learning and experimentation -- two major keys to getting the Web.  Veterans in the Web business know that experimentation pays off with serendipity.  You don't know where your experimenation will pay off, but you commit to the process because you know that it will eventually create business opportunity & create shareholder value, even it isn't immediately apparent.

So if you're looking to see how things will go for these incumbent businesses challenged by disruption, pay close attention to signs of experimentation and innovation.  Typically, a success story or two are right around the corner.

Are Newspapers & Big Media Dead? Think Again... My Contrarian Take

This was originally written as a guest post for hyperlocalblogger.com, but I didn't get a response from them after sending it over.  So here goes... my contrarian take on what will happen with newspapers and big media over coming years.

It doesn’t take a lot of effort to find stories on the death of newspapers and the rise of citizen journalism and the hyperlocal movement. Certainly, we’re at a point in history where technology has adapted faster than incumbent media businesses. Setting up a blog took effort & expertise five years ago, but now it takes about 2 minutes on services like Wordpress or Typepad. Anyone with time, ability, and commitment can create an effective hyperlocal blog. Meanwhile, almost all major newspapers are reeling – struggling financially and cutting costs where they can to survive.

So major media is done, right?

Nope. Not even close.

I know it isn’t chic to write about all the advantages of big media on a hyperlocal blog, but I’m also not out to sugarcoat anything for anyone. IMO the days are getting numbered for hyperlocal (at least in terms of new opportunity). Here are six reasons why:

1) Hyperlocal is getting too cool – Too many people are getting into the hyperlocal game for it to remain a novelty. Sure the first few local blogs to succeed in a city are generally interesting, but each new one is marginally more interesting than the last. At a certain point, you get too many entrants and the novelty is gone. Competition increases significantly for readership. Lesser known, high quality hyperlocal brands face the choice of toiling in anonymity or perhaps partnering with the local newspaper for eyeballs. Reputation begins to matter again, which is the turf of the established local newspaper + the top few new brands created in the hyperlocal craze. Everyone else loses. Then what? Will the long tail of hyperlocal blogs vanish because the effort expended outweighs the benefit of say 100 unique users a day?

2) Astute, empowered newspaper management – Management at major newspapers – at least the ones I speak with regularly – are very, very astute. They aren’t dumb fat cats who sit in their office & extol about the virtues of the print medium. They’re awake. They understand that some of their product is now “commodity” product that can be consumed hundreds of ways. They understand that their future is in hybrid print/online product offerings and business models. They understand that advertising is evolving along with the old ways of consuming media, and that effective ads for both advertisers and consumers will increasingly be in the form of hybrid offline/online formats. In other words, they get it a lot more than conventional wisdom would dictate, which means they are experimenting more and more in areas where only hyperlocal folks have roamed in recent years. And if you believe otherwise, you are in serious denial.

3) Distribution Advantages + New Hyperlocal Products from Big Media = uh oh – Sure, newspapers are struggling financially, but they are still powerful. Print publications, archaic as you may think they are, still have wide distribution. Even though we see a lot more available print ad inventory in newspapers today,  that space can be used to promote new online, hyperlocal ventures. This is a *huge* advantage for local newspapers. Add to that the fact that newspapers are often diversified beyond just print. Even the worst newspapers have an online presence (web site, e-mail lists, etc.) that they can use to promote new ventures. Take for example 29-95.com, a new hyperlocal site launched by the Houston Chronicle. Scan the site, and you won’t find much of anything identifying the site as being produced by the local newspaper. This, arguably, is the future of hyperlocal – *not* a network of new, largely unfunded web sites put together by anonymous members of the local community who actually have day jobs.

4) Advertising Sales Infrastructure – Sooner or later, all hyperlocal initiatives have to make money. Whether you like local newspapers or not, they still operate the most extensive local advertising infrastructure in almost every major metropolitan area in the United States. They offer a wide range of advertising options to local businesses, from print to online to search engine marketing. And guess what – local advertising, especially online, is a huge growth opportunity expected to achieve 18% CAGR (compounded annual growth) over the next 4 years according to the Kelsey Group. Because newspapers already have a decent (albeit poorly optimized) local advertising sales/service infrastructure, they have significant economic value – perhaps more than a lot of people credit them for today. On the basis of this economic value, I predict that newspapers will either recover or they will be bought by healthier technology companies like Google, Microsoft, and others who have a keen interest in local advertising. Don’t underestimate the value of local advertising sales infrastructure; it will matter more and more as time passes.

5) Only the strong will survive, but probably not on their own – Simple economics dictates that a few winners will emerge & generate enough economic value to continue developing/enhancing their content products. Others will be seriously marginalized, which kicks off a vicious cycle that makes it harder and harder for those hyperlocal blogs to get attention and readers.  Therefore, in each local market, only a few prominent hyperlocal blogs will win.  I suspect that five years from now, the top 4-5 hyperlocal blogs in each market will be integrated (through acquisition or partnership) into the next-generation online/offline newspaper with the major newspaper taking the lead. Newspapers will benefit by getting unique content produced at a lower cost. Editors will have the ability to republish content from hyperlocal sources that can afford to have “a voice”, while the paper can keep its traditional journalistic objectivity. Most importantly, perhaps, newspapers can rebrand themselves as being the definitive source of news and local information in their communities.

6) When in doubt, big media will throw money at the problem – We’ve seen this cycle before in other industries and we’ll see it again here. Large companies fail to react quickly enough to new technology, so they solve the problem with bags of cash. Take for example the Internet. I remember in 1996 – there were hundreds if not thousands of companies poised to be the next Microsoft or IBM. It was a fragmentation cycle where the economics & promise of starting a new tech company were attractive enough that a lot of folks jumped in. What happened? Well, that cycle gave us a few big winners (Yahoo, Google). It gave us some companies that did fairly well – a host of companies that were ultimately acquired by major tech companies with comparatively deep pockets. It gave us a ridiculous number of losers as well – companies that simply couldn’t survive. What didn’t occur was the destruction of the old business. It won’t happen here either. Major newspapers may never be as strong as they’ve been for many years, but they aren’t necessarily going to die either. The recent acquisition of @cnnbrk is, in my view, evidence that big media will correct the mistakes of ignoring new media by simply throwing money at the problems. This may very well happen on a smaller scale in/around the local newspaper ecosystem.

Should Newspapers Republish Local Blog Content?

Just thinking aloud this morning, but I'm wondering how much newspapers could cut from their operations budget if they replaced say 1/3 of their print content with articles from existing bloggers in their community.  It could be done in a number of ways -- either as a separate section or by cleverly integrating blog content into existing sections (i.e. bloggers specifically for the Sports section, Metro-State, Business/Tech, etc.)

I don't like suggesting that anyone should lose their jobs, but it's clear that newspapers can source at least some content for a fraction of the cost of what they are paying today.  I think a hybrid model like this makes a lot of sense -- it's a win-win:

- Bloggers get exposure & more audience for their content, which is written out of passion, business necessity, and/or personal interest,

- Newspapers could get reprint rights for this content for a fraction of the cost of the support staff.  They could focus on editorial functions -- i.e. sifting through the available content for a given day & choosing what they think should be in print.

Maybe there is a business opportunity here?  Connecting bloggers to newspapers that will inevitably look to save money on operations/content?

Observations on Newspapers & Possible Solutions

Old media continues to fascinate me... probably because I do a lot of work with book publishers and we are speaking with more and more newspapers about the MinutesNotice local advertising platform.  Of all the folks I see rejoicing over the creative destruction of newspapers, ironically I don't know of many of them who actually engage with newspaper people on a regular basis.  Tonight's post includes some observations I've made on the local news industry through my experiences of helping redefine the business back 10 years ago at Stratfor, participating through this blog and my blog at Microsoft, and now working with newspaper people on a regular basis.

Allow me to generalize for a moment, but I have found newspaper folks to be very, very knowledgeable about what's going on with technology.  They get what is happening with the social Web.  In fact, I think they know more than a lot of venture capitalists.  ;-)  They understand that people are consuming news & community information in new ways.  They see the demographic shifts and they recognize that something needs to be done.  But what exactly?  Prop up the old business?  Stand up a new business?  Experiment?  Hunker down?  Anyone who has at minimum read a Harvard Business School case understands that these things are complicated by legacy employees, management, and the economics of the incumbent business.  These are difficult problems without any clearly logical solutions.  And these companies are run by astute business people who are aware yet grappling with the realities of a local, print product in an increasingly online, social world.

What are the realities?

• Geography doesn't matter in 2009.  Someone who isn't a fan of the hometown team can follow that team through RSS and Google News Alerts better than he/she can follow them in the local newspaper.  And often times, they can follow the home team through the local newspaper's web site... or local blogs... or message boards... or e-mail lists... etc.
• Yet Local still matters in 2009.  We may be consuming more things from national/international chains and we may be following news/entertainment from other parts of the country or world... but local still matters.  How do we know this?  Well the proliferation of local publications is a hint.  In Austin, we have no less than 5 major ones in print along with a series of local blogs designed to capture "local local" news, events, and advertisers.  And it's working.
• Newsprint is out of favor in 2009.  Because of convenience, online preference, environmental concerns or whatever, many consumers today prefer online content to physical content.  I'm not making a value judgment here... it's just what I see in the marketplace.
• Consumers are busier than ever before in 2009.  The average person doesn't have time to scan a paper every day with breakfast to discover what he/she wants to read.  Maybe folks can do this on Sundays but certainly not the rest of the week.  Not enough to matter to the circulation of a newspaper.

So what do I think newspapers should do?  A few strategies that I'd recommend... but with the caveat that I am *not* intimately familiar with all the economics of a newspaper:

1. Use the strength of your numbers -- despite current difficulties, many newspapers have large #s of print subscribers, e-mail subscribers, etc.  This is your strength... utilize it to compete in new areas,
2. Buy upstarts -- don't be afraid of local blogs and community publications... bring them into the fold.
3. Discounts -- the only time I've considered a newspaper subscription is when I've thought about using the Sunday coupons.  Most newspapers should also provide a pretty easy consumer ROI through coupons/discounts.  Push it... it's a big benefit especially nowadays.
4. Ramp up sales to businesses -- every time I walk into a business, I should see flowers, a few magazines, and the local paper.  You'd be surprised how often you don't find a newspaper at the reception desk.  Every local business should have a free newspaper.
5. Blanket the community -- I've always heard the newspaper doesn't cost much to print on a per unit basis.  If that's the case, newspapers should be freely available everywhere.  Put one on my doorstep every day.  Make a dozen copies available for free in every restaurant and coffee shop.  More readers = more leverage for local <insert initiative>. 

Just a few thoughts from an observer... if papers can keep the eyeballs together, they'll weather the storm because they'll eventually figure out the operational + business model changes necessary to win.

One final thought... here are two particularly interesting observations over the weekend... from Brian Solis and Fred Wilson.  I liked both.  People are getting smarter & consuming media in new ways.  The challenge is on for newspapers to stay relevant in these changing times.  It's time to experiment & adapt.

http://www.briansolis.com/2009/04/decline-of-newspaper-revenue-and.html
http://www.avc.com/a_vc/2009/04/you-cant-take-the-paper-out-of-the-newstand.html

A Moment of Clarity re: Advertising... for me at least

After a few meetings today & rereading this Techcrunch musing about local advertising and newspapers, I had a moment of clarity regarding the advertising industry... where it's been... and where it's headed.  Random thoughts in no particular order:

• People consume media and ads from thousands of sources today.  Consumption is ridiculously fragmented, perhaps permanently, although for all the fragmentation there are a lot of efforts to centralize as well.
• There are so many media outlets, it's arguable that people have media/advertising fatigue.  Hence, they perhaps trust friends/colleagues and a "personal touch" more than ever before.
• Small, local businesses that achieved success in the "Age of Retail" (i.e. until the mid-80s or so) either became chains or went out of business in the succeeding generation.
• Despite the relative lack of local businesses, there is still a need for advertising at the local level... and that need bridges online and offline methods.  Sophistication in online models is largely non-existent even in 2009 while it's extreme in offline advertising.  This will change but only after a lot of experiments take place.
• Web entrepreneurs smell blood in the water when large, successful offline advertising companies fail to move quickly enough to play the game with the "new rules".  Most Web entrepreneurs underestimate the power of existing brands, but managers of most large, successful offline advertising companies also aren't empowered to be bold enough to compete as well as they perhaps should.
• Chains, large and small, spent the better part of the last 10 years optimizing operations, data mining activities, etc. but they have not yet undergone the same optimization of advertising spend.  I suspect this is an anomaly and large agencies will struggle with the realities of deflation sooner or later.
• Consumer behavior, overnight delivery services, and the efficiency of the Internet combine to make ads from other parts of the country or perhaps the World more relevant than an ad for a store right around the corner.

I don't know what this all means just yet... I'm rolling around on a few ideas that I'll share in more detail over coming weeks.

Creative Destruction & Newspapers

I read this article on why it's OK for newspapers to die with great interest the other day.  For one, I was very, very close to majoring in Journalism in undergrad.  But I got involved in a startup and found my calling elsewhere.  Second, I was a junior Founder of one of the first successful web publications... where we similarly struggled with controlling costs (through operating efficiency) and revenues (through Internet advertising) years ago.  And now, we've built a product in MinutesNotice that may provide a compelling Internet Advertising complement to traditional print advertising in newspapers.  More on that later.

Unlike the author of the article, I am not eager to see newspapers go.  I don't revel in the creative destruction, that in this case IMO isn't necessarily positive. I don't think that new Web 2.0 products, technologies like blogging, and hyperlocal businesses will even remotely fill the void either for that matter.  Sure, information about community events could be covered by bloggers in their spare time.  But can community, hobbyist journalism effectively serve as a watchdog over our public officials?  Hell, most people I know are far more concerned about their happy hour plans than they are the actions of their local, elected officials. Good journalism takes time. Investigative reporting takes time.  I'm all for modernizing businesses & making things more efficient, but I worry that in this case we may just do it at the expense of the public good.  Put differently, if the ROI isn't immediately obvious for something like local investigative journalism -- are we really better off to see it killed?

It's kinda "macho" or popular to say in our Web entrepreneur circles that creative destruction is great.  As long as the world continues to get better, cheaper, and faster, everything will work out.  A lot of folks are laughing at the local newspaper industry & hoping that it dies.  For a lot of other businesses, I'd ordinarily agree.  But I do believe in the societal benefit of local journalism, and I don't think the world would be a better place without it.

Local newspapers are a mere microcosm of what is happening more broadly with the Web... i.e. the mature Web as a truly deflationary phenomenon.  We may just be at a point in history where the pace of creative destruction likely exceeds the capacity of the economy to reinvent itself.  That may bode well for some of us, and it probably explains the vibrant environment of SXSW this past week.  But it's likely to result in more "winner-take-all" situations in business... an American society more divided between "haves" and "have nots".  Are you ready for a dramatically reduced Middle Class?  I'm perhaps overexagerrating, but in my opinion we're in uncharted territory here.

New Advertising Models, Newspapers, and Advertising Deflation

Last week, I had an interesting chat/demo with a colleague who has been in the local advertising business for the better part of 5 years now.  I'll spare you many of the mundane details, but he had an observation that I thought was really compelling.

We were talking about the economics of newspapers and the evolution of Google Adwords and Craigslist, etc. over the years.  Assume for a moment that it costs something like $500-$1,000 to run a 3" x 3" advertisement in a local newspaper for a week or so, depending on duration, placement, circulation, etc.  Although intuitively, we all think newspaper advertisements are a bad idea and the money could be better spent online... nobody *really* knows because of the lack of tracking in the old model.  Meanwhile, newspaper advertising has the benefit of years of "incumbency status" (i.e. this is how business has been done for a long time and nobody will get fired or criticized for running a newspaper ad, which is to some degree a semi-known commodity.)

Anyway, the "ah-ha" moment was this guy's question of whether or not tracking is a good thing & an appropriate competitive differentiator for internet-based local advertising alternatives.  Are we going to deflate ourselves into oblivion if we rely upon ROI tracking as our competitive differentiator?  It's a great question.

The challenge from a business perspective is to extract as much economic value as we can from a customer who adopts a modernized advertising model.  Customers are continuing to spend hundreds or thousands of dollars a month on newspaper ads, but will they do the same with Internet Marketing that ironically may be more effective as people do more online?

Comparing Local Newspaper Circulation to Social Media Coverage

Daily Circulation of the Austin American-Statesman -- 173,527
Weekend Circulation of the Austin American-Statesman -- 215,984
# of Facebook Users in the Austin Metro Area -- 318,000+

Wow.