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June 03 2010

15:00

The Newsonomics of commercial crowdsourcing

[Each week, our friend Ken Doctor — author of Newsonomics and longtime watcher of the business side of digital news — writes about the economics of the news business for the Lab.]

There are no new ideas in the digital business, just ones recycled from earlier dreams — ones that vaporware couldn’t make work, but newer technologies can.

Take business directories, for instance. The idea built huge Yellow Pages businesses, businesses now mature and, well, yellowing. You know you need a service — fix a broken water heater, a sore tooth, a cranky marriage — and you knew where to turn; let your analog fingers do the page-turning. Classic, order-taking annuity business. The web comes along and the Big Yellows, SuperPages and dozens of others — huge and small — take the print Yellow Pages business online. Of course, they struggle with the new medium, adding not much value, and usage is low; business growth is challenged. Angie’s List, Yelp and OpenTable come along, eating away the edges.

Now we’re seeing a next generation, best symbolized by PaperG’s new PlaceLocal product. In a nutshell, PlaceLocal creates instant ads for a business, drawn from the best of the available information out there on the web — photos, user reviews, basic address, phone, hours, menus.

It gives publishers — TimeOut, Hearst TV, and McClatchy are three of the first companies testing it — the ability to create ads on the fly, spec ’em out and use their sales staffs to do the selling. Victor Wong, one of the young geniuses behind the PaperG’s innovation — its first product, FlyerBoard, simply updated for the digital age the old notion of the ubiquitous kiosk flyers found around college campuses — tells me he thinks PlaceLocal will be a bigger product. It should sell for a higher rate, and that’s what his publisher customers are hoping. Initial rates — we’re talking about smaller businesses which aren’t frequent advertisers — run in the hundreds up to a thousand dollars monthly. That $1,000 target would more than double the pricing of the FlyerBoard product, a key in PaperG’s growth plan as the company of a dozen plus leaves the friendly confines of New Haven for Silicon Valley North, San Francisco.

Why a higher rate? Well, it’s potentially a highly actionable piece of commerce. As the commercial world moves increasingly beyond online display ads (a fairly static category of spending), beyond paid search (where almost half of today’s digital ad dollars are spent), to cost per call and various flavors of cost per acquisition, a PlaceLocal-kind of product — expect many knockoffs — is well-positioned.

One big lesson here for everyone to get their heads around. This is commercial crowdsourcing. Why outsource the collection, organization and checking of “directory data,” as numerous Yellow Pages companies have done over time, when you can have the crowd do it — for free. It’s using the web, as a whole, to find, value, and associate commercial content. We can see roots of Google PageRank, Demand Media content organization and Yelp user reviews in the thinking behind the product.

Newspaper companies have cut the cost of their ad production markedly over the last several years, as they’ve outsourced to companies like 2adpro, Affinity Express and Express KCS, with much of the work done in India. Those companies have made it possible for newspaper companies to cut their print (and increasingly online) ad production — often at union wage — costs by 40 percent or more. Now, a PaperG comes along, with a new kind of disintermediation notion, replacing that outsourcing with websourcing. Of course, we don’t yet have an apples-to-apples comparison of the advertising done the traditional way — asking a business what they want to sell and creating the ad from there — vs. the web-scraping PlaceLocal will test out. PaperG takes a revenue-share percentage of the ad sold, so publishers will have lots of comparisons to make on ad quality, ad effectiveness, net profit, and the ability to sell new customers.

My Newsonomics Law 9 — “Apply the 10-percent rule; the heavy lifting of journalism can be aided and abetted by smart use of technology” — comes into play here. Sometimes it takes 10 percent of the effort it used to to create news products — through smart aggregation, for instance. In this commercial case, we’re seeing a different twist on the 10-percent rule, and one that bears watching as city-based news and entertainment operations look for new revenue streams as the older ones morph rapidly.

March 11 2010

17:00

The Newsonomics of new news syndication

[Each week, our friend Ken Doctor — author of Newsonomics and longtime watcher of the business side of digital news — writes about the economics of the news business for the Lab.]

It’s tough to get the printer’s ink out of news people’s veins. For many, journalism = printing, and in printing, each copy costs extra. It’s an analog, manufacturing mindset, and one to finally bid goodbye.

Of course, we all know how freely we can fling stories about on the web, but second copy value — and cost — has an evolving business model implication, as the news industry looks for new pillars of support. That business model implication is syndication. Syndication in the old world meant the syndicates — among them, King Features, Universal Press Syndicate and now-put-up-for-sale United Media —and it meant wires, like AP, Reuters, and AFP, all of whom built big businesses on the increasing margin in the second, third and fourth copies of editorial content created and redistributed. Other syndicators (think Lexis-Nexis and Factiva) have built big businesses, selling multiple copies of stories to corporations and governments for their workforces and to schools of every level and size.

Now, we’re beginning to see next-generation syndication embraced by digital news startups, and that’s good news, a good supplement to advertising and sponsorship revenues, to membership charges and conferences.

Take GlobalPost for example. GlobalPost CEO Phil Balboni embraced syndication as a revenue source from the site’s early planning and rollout. “I knew I needed multiple revenue streams to support our business, and syndication of our original content — in a world of rapidly diminishing international reporting — seemed like a no-brainer to me especially given our pricing flexibility.”

GlobalPost now gets about 12 percent of its overall revenue from syndication. It shares its correspondents’ posts with about 30 newspaper, broadcast and other news sites in the U.S. and worldwide. It counts among its clients CBS News, New York Daily News, the Times of India, Australian Associated Press, Pittsburgh Post Gazette and the Newark Star Ledger. Sites pay a monthly flat rate and can use their fill of GlobalPost stories. In addition to web use, print publications can and do use them in print as well.

GlobalPost isn’t alone. Politico added a syndication network, the Politico Media Network, to its bag of tricks early on. For Politico, it’s a multi-pocket pool play, leveraging a related advertising network around the syndication and its own partnership with Reuters.

California Watch, the new initiative of the Center for Investigative Reporting, is figuring out the contours of its syndication business. Early in its life, it has found daily newspapers, broadcasters, start-ups and the ethnic press to be eager customers of its work, with some big stories reaching audiences of two million or more. Early on, CIR has priced its work fairly inexpensively, in the low hundreds of dollars. As it is getting traction, it is thinking of syndication as a key business model and will test pricing models over the next year

The Chicago News Cooperative, the supplier of local news coverage for the Chicago edition of The New York Times, operates on a similar principle, able to sell stories to multiple customers.

The principle here is devilishly simple — but has not been well enough applied. It’s been described from the inception of the Internet: the second copy is free (or really close to free). It’s also part of a basic Newsonomics law, Law #9: Apply the 10% Rule. Let technology do the value multiplication, not expensive-to-hire-and-feed humans.

Every syndication dollar earned is another dollar that doesn’t have to be wrung out of highly competitive advertising markets. Importantly, the syndication dollars derive from what journalism organizations do best: create high-quality content. The big notion: create better-than-good-enough content, the kind of stuff that is beginning to flood the web. It’s another way to affirm worth: the more companies that want to use your content, the clearer the value proposition in the digital world.

So what’s old is new again. In addition, syndication offers the potential of selling beyond traditional media that may offer significant new revenues. For local news companies, established for more than a hundred years or a few months, it’s a destination-plus model. It’s not about readers coming to your site; it’s about getting people to read your content —and get paid for it. It’s also — witness the Politico model — a way to enable an ad network, related to syndicated content. In fact, I can envision a range of locally oriented sites — from the Yelps, Open Tables and Zillows to government sites to niche mom’s and family sites and beyond — that may find use for various kinds of content. The first step for would-be syndicators: inventory and categorize what you have, and talk to would-be customers about what they might want to use.

Some have said that in the digital world, news companies need to think of themselves both as creators and aggregators, doing what they do best and linking to the rest. Let’s amend that: creators, aggregators, and syndicators, doing what they do best, licensing with zest and linking to the rest.

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