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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.

May 06 2010

14:30

The Newsonomics of simplicity

[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.]

More and more, I’m thinking we’re making this new digital business too complicated. Sure, the technology behind the business is awe-inspiring — but then so was hydropower and electrification. Technology is often complex and developed by only a minority of us, while a majority of us are put to the task, and the fun, of using it.

The digital news business itself can be a blur, followed via Romenesko, Twitter, or the PowerPoint poison of your choosing. Lots there, always on. But business solutions — serving readers and advertisers better — aren’t complicated, and the more complex we make them, the less seems to get done.

Take this well-used quote from Larry Bossidy, once chairman of Honeywell, a prince of another technology era: “If you can’t describe your strategy in 20 minutes, simply and in plain language, you haven’t got a plan. ‘But,’ people may say, ‘I’ve got a complex strategy. It can’t be reduced to a page.’ That’s nonsense. That’s not a complex strategy. It’s a complex thought about the strategy.”

We can parse the differences between complex and complicated in the digital business, but won’t do it here. Probably the better exercise is to see how good a strategy you can express in a single tweet. And, of course, the collective consciousness has that figured out; small business blogger Lora Kolodny talked about the art — and four competitions based on it — recently in her New York Times blog.

Recently, as I look at the latest strategies being deployed, I’ve been using this emerging prism of simplicity. Here the newsonomics are simple: Make it easier to make new revenue; save expenses by adopting simpler solutions. I’ll share a few here, and hope you’ll add to them.

  • People love coupons: That’s at the top of the duh list, but the love is still eye-popping. Nielsen recently reported the explosion of digital coupons, with their redemption up 263 percent year-over-year. According to the report, newspapers are still the main source of coupon distribution, at 89 percent, and newspaper inserts account for the most coupons redeemed, at 53 percent. As Twitter studied commercial patterns, in the run-up to launching Promoted Tweets, what did they notice? Retailers like Whole Foods and Starbucks found their followers (and Facebook fans!) loved coupons. So now the challenge: taking that simple challenge and delivering location-aware, buying-interest-aware coupons, on the right platform, to the right customers, at the right time. Yes, that Wednesday food coupon is less old-fashioned than we think; now the simplicity required is finding the right technology to seamlessly offer digital coupons to news customers — before non-news companies do a better job of it.
  • Flyerboard: I recently talked to Victor Wong, one of the co-founders of Flyerboard, the oh-so-simple digital ad flier product that now finds itself on more than 100 newspaper sites, first adopted by Hearst and most recently by McClatchy. As a Yale undergraduate, he and a couple friends noticed that someone had begun digitizing the printed fliers commonly found on college neighborhood kiosks and walls. They then opened a company — PaperG — moved to commercialize the notion and have found great early uptake, based on an incredibly simple idea. They are now moving forward with PlaceLocal, a potentially far bigger idea: Harvest all the freely available digital information about local busineses, sweep it into templates, create spec ads on the fly and sell those to local retailers. Both ideas simply use already available information, repurporsed by smart technology and a company of a dozen or so people.
  • Outsourced regional editions: Okay, so you are The New York Times, and you want to double down on local engagement. You want to be a great national paper, but also a little regional, aware that such content might increase retention of all-important print subscribers. But you’re The New York Times, and the economics of the business don’t justify paying six-figure salaries to new regional staff. So you ask where can you get high-quality, low-cost journalism supply, and take advantage (in a symbiotic way) of the advent of the Chicago News Cooperative and Bay Citizen. You simply take advantage of the outflow of real talent out of top newsrooms — and stretch your six-figure payments to get lots more content than a single staffer would provide.
  • Content management in a cloud: Emerging from bankruptcy, Freedom Communications just announced an expansion of its relationship with technology provider DTI. It will move what had been its own hosted circulation and marketing management to DTI Cloud. Why hire, train and pay your own full-time tech staff — at each paper, I’d imagine — when a single company can give you a hosted, software-as-a-service solution in the cloud? Simple, in concept, at least: use someone else’s centralized technology to solve a problem that is replicated multiple times across multiple properties. Cloud computing, of course, isn’t new, but the newspaper industry has adopted it unevenly. MediaSpectrum (ads and content management) and Clickability (content management) are among the companies that have worked this cloud landscape in the news industry. Cloud “installations” carry their own support issues, of course; all solutions do. We’d have to believe, though, that the often-complex and costly solutions to production, printing, distribution, finance, and HR used in the news industry can benefit from some more heavenly solutions. Better to slim here and put resources into content creation and ad selling.

That’s just the top of a list. What else has the news industry done to introduce smart simplicity — or what else should it do?

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