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March 28 2013

14:00

At The Wall Street Journal, a smartphone app has reporters on board for shooting video

The text-based web is dead, says Michael Downing. When AOL CEO Tim Armstrong announced his intention this month to transform the company into a platform for video, Downing heard a death knell — one he’s been expecting for some time. We are, after all, as he says, on the precipice of “the rise of the visual web.”

Downing has a dog in this fight; he’s the founder of Tout, a video sharing website and app that makes it easy for users to upload and share short — under 15 seconds — videos in real-time. Although originally designed as a consumer device, it also appealed to publishers: The Wall Street Journal approached Downing with the idea for a proprietary app that reporters could use as a news gathering tool. With the addition of some analytics tools and a centralized management function that allows editors to quickly vet clips before they’re published, that became WorldStream, which we wrote about in August.

“Consumer behavior has become much more accustomed to consuming the news they want as it happens,” says Downing. “The WSJ was trying to be much more in line with real-time news and real-time publishing.”

More than half a year later, how’s WorldStream working out? The Journal seems pretty happy. On the business side, WorldStream point man and WSJ deputy editor of video Mark Scheffler describes the project as a “destination but also a clearinghouse.” While all of the WSJ’s mobile videos are first published to the feed, many go on to live second lives across a wide variety of platforms. Some clips follow reporters to live broadcast appearances, while others are embedded into article pages and blogs. Andy Regal, the Journal’s head of video production, said that they don’t break out WorldStream views from the newspaper’s overall video numbers, which he said total between 30 and 35 million streams per month.

That kind of traffic across platforms draws the attention of advertisers. The WSJ says video ads generate “premium” rates, meaning somewhere around $40 to $60 CPM. Says Tim Ware, WSJ director of mobile sales, of the Journal’s broader video strategy: “We’re very bullish on the growth of WSJ Live this fiscal year, and thus the growth in video ad revenue. We’re also starting to contemplate some one-off sponsorships within our overarching video coverage of select events and stories.” (After spending about a total of about an hour on WorldStream, however, I only saw one ad — for a “smart document solutions” company — repeated about a half dozen times.)

But the surprise, both for Downing and WSJ management, is how readily — and ably — the WSJ’s reporters have taken to the new medium; getting reporter buy-in has been a struggle for many newspaper video initiatives. “It started out as an internal tool because we didn’t know how many people would be able to accommodate this kind of approach with the technology and the software,” Regal says, “but they think about it as part of their daily work now.” Armed with iPhones, iPods, iPads, and Android devices, hundreds of WSJ staffers have filed video clips via Tout; in the 229 days since launch, that’s 2,815 videos. In many cases, Downing said, the reporters didn’t even need training: “They just jumped right in and started using it.”

Charles Levinson has been reporting for the Journal from places like Syria “What are the assets that give us an advantage over the competitor? We have 2,000 reporters around the world,” he said. “How do you parlay 2,000 reporters into good video?” Levinson says the Tout app is helping the WSJ avoid print media’s tendency toward “mediocre” video production.

Christina Binkley is a style columnist at the WSJ who first experimented with the app while reporting on New York’s 2012 Fashion Week. She says there’s a lot of pressure on reporters to be producing a huge variety of content — articles, columns, blogs, Instagrams, tweets. She said, unlike some other apps, WorldStream has really stuck with her: “I can add a lot of value to my column very quickly without having to mic somebody up.”

Scheffler says some of the reporters have gained basic video shooting skills so quickly that the footage they file can be edited together into longer clips that could pass for more traditionally produced video. Going forward, Scheffler hopes to put better mobile editing tools in their hands: “Being able to be full-fledged creators on a mobile platform is something that we’re just going to continue being at the frontier of,” he said.

Regal’s focus, meanwhile, will be to make sure none of that prime footage is being lost in the ever quickening deluge that is the WorldStream feed. He’s considering a “Best of WorldStream” weekly digest, and a variety of other news packages that make that valuable content more findable, and more shareable.

News organizations have been chasing the promise of video advertising for years now, and the rise of apps like Vine illustrate the rise of social video sharing. But Downing says he isn’t worried about the competition. “Ninety-nine-point-nine percent of the existing video sharing apps have to do with self-expression,” he says, comparing Vine to something like Instagram. Tout’s enterprise apps skip the idea of sharing with friends and focuses on fast, concise updates from outlets that users follow based on broader personal interest.

“It’s a real-time, reverse chronological vertical feed of updates,” says Downing, “Whether it’s Twitter or LinkedIn, that is becoming the standard form factor for being able to track that information that you curate yourself.”

Since partnering with The Wall Street Journal last year, a number of publishers have pursued similar agreements with Tout — CBS, Fox, NBC Universal, WWE, La Gardere and Conde Nast are among them. By the end of 2013, Downing expects to host around 200 media outlets, including some of News Corp.’s other brands. Downing says these publisher agreements are now the company’s “primary mode of business,” not the consumer product.

What does Downing see coming in video? He confidently points to Google’s spring 2012 earnings report, when for the first time, its cost-per-click rate fell. “That was the sounding bell. That was the beacon. That was the one clear signal to the world that the era of the print metaphor defining the web experience…was over.”

December 18 2011

19:19

AOL's Patch will lose at least $100m this year and revenue is tiny

Business Insider :: AOL's local business, Patch, will lose at least $100 million this year and generate paltry revenues, according to documents we've obtained from a source. Analysts say that, during 2011, AOL CEO Tim Armstrong invested approx. $160 million into Patch, a network of 850 or local news blogs. His big bet was that AOL could, eventually, richly profit by filling one of the last remaining "white spaces" on the Internet by creating local content and selling local ads against it. 

How did the bet do this year?

Continue to read Nicholas Carlson, www.businessinsider.com

September 16 2011

19:58

A tech-industry punchline: can AOL and Yahoo come back to life?

Businessweek :: Shortly after the news broke that Yahoo! had ousted Chief Executive Carol Bartz on Sept. 6, Tim Armstrong’s phone began ringing. According to people with knowledge of the calls who were not authorized to speak on the record, the AOL CEO spoke several times that day with bankers who wanted to reopen talks begun in 2010 about merging the two companies under Armstrong’s leadership. The logic: By combining the companies’ content and audience, the former Google executive could extract better ad rates and build a more profitable business.

It’s a terrific idea—if you’re Armstrong or a fee-seeking investment banker. But the idea of merging these struggling Internet icons has become a tech-industry punchline.

Continue to read Peter Burrows, www.businessweek.com

May 25 2011

21:47

Huffington Post employees flee ... AOL

Business Insider | SAI :: So far very little has been said about the HuffPo employees after it was purchased by AOL. Many of whom have been with Arianna for years, and who, on many levels, are responsible for building HuffPo and making it at valuable as it was. - Turns out many of them are not happy. "Brutal", "Awful", "The worst few weeks." And the cracks are beginning to show.

Continue to read Glynnis MacNicol, www.businessinsider.com

May 24 2011

05:53

Manipulated AOL stock? - Arianna Huffington: "if you buy AOL stock right now ..."

TNW Industry :: Section 9 of the Securities Exchange Act (link to PDF download) of 1934 prohibits market manipulation, a deliberate attempt to interfere with the free and fair operation of the market and create artificial, false or misleading appearances with respect to the price of, or market for, a security, commodity or currency.

According to a Tweet (see below) from Dylan Byers, a reporter for AdWeek, Huffington, speaking to Michael Arrington, founder and co-editor of TechCrunch at TechCrunch Disrupt New York, stated the following,

Clipped from: twitter.com (share this clip)

@DylandByers tweet: "Huffington to Arrington: 'Ithink if you buy some AOL stock right now, you're goint to make a lof of money.'"

That said, it could be argued that that Huffington is engaging in market manipulation concerning AOL’s stock.

Details - continue to read Jeff Cormier, thenextweb.com

05:37

AOL's Tim Armstrong to Mike Arrington: paid content can work

Techcrunch :: Tim Armstrong and Michael, Arrington touched on a variety of subjects, including AOL’s agressive content strategy at TechCrunch Disrupt New York. While AOL’s content has remained free, Armstrong does seem to think that a paid content model can work. “It’s a matter of how you do it…but I’m a long term believer in paid content as a strategy.

Continue to read Leena Rao, techcrunch.com

March 10 2011

15:00

The newsonomics of AOL/Patch buying Outside.in

Editor’s Note: Each week, Ken Doctor — author of Newsonomics and longtime watcher of the business side of digital news — writes about the economics of news for the Lab.

There are two ways to be local, we’ve learned.

You can create local news, as newspapers, TV, and some radio stations — and more recently, tens of thousands of bloggers — have done. Or you can aggregate local, sorting through what those newspapers, TV and radio stations, and bloggers have created, picking up what you want, lifting a headline and quick summary and providing a link.

Over the years, the aggregators have often laughed — not publicly, of course — at those silly people who sink millions into creating local news, or content of any kind, while creators have joked — sometimes publicly — that some day those aggregators will have to turn out the lights, when all the content creators have gone bankrupt and out of business. Creation is hugely expensive, when all you have to do is build a better algorithm, scoop up what’s already there, organize it better than someone else, and sell advertising against it. That’s why the first decade of this century has been largely the decade of the aggregators, with the Googles, Yahoos, MSNs and AOLs, among the leaders in aggregation — and revenue.

So as much as AOL CEO Tim Armstrong talks about sparking a content revolution and creating lots of original content, in the background, he also needs to up his aggregation game, using more and more of other people’s content. That’s how I read the recent announcement that AOL’s Patch is buying Outside.in, a company that uses technology to roundup local content, dividing it into the categories of local news and local blogs — and which has partnered with newspaper companies in its four-year history. (Sadly, the memorable url construction, owing to an Indian .in domain, will probably fade into history.) It’s a small play, but one that may have bigger impact on the emergence of hyperlocal news — and local advertising/marketing dollars — in the years ahead. Let’s look at the newsonomics of the Outside.in deal, and what it tells us about the future of Patch itself and AOL’s play to get bigger audiences faster.

The deal — for a purchase price of less than $10 million — is small when compared to the investment ($14.4 million) put into Outside.in by some high-profile investors (Union Square Ventures, Marc Andreessen, John Borthwick, Esther Dyson, and CNN) and when compared to AOL’s $315 Huffington Post buy. It’s tiny, also, when compared to AOL’s spending of $606 million for 14 acquisitions since the beginning of 2010 — a number, of course, that itself pales against Google’s 48 purchases for $1.8 billion over roughly the same period.

Yet it parallels the HuffPo buy in a major way: It’s an attempt by AOL to get bigger faster. Look at AOL’s financials and it’s clear Armstrong is in a race against time. As one savvy newspaper veteran pointed out to me last week, AOL looks, ironically, a lot like a newspaper company. It has a legacy circulation product, in slow, but unmistakeable decline — its AOL-brand Internet access service — and a digital ad business (in turnaround mode) that isn’t growing fast enough to turn the company sustainably profitable in the future. So The Huffington Post not only pasted the face of Arianna atop the site, in hopes her followers will follow, but acts as the wished-for rocket fuel for overall company traffic growth over the next couple of years, especially as the election season, with its political interest, dawns once again.

Patch is part of that strategy for audience growth, drawing into AOL customers through the local pipeline.

The Outside.in deal aims to do a simple thing to support that growth: create more page views around local content, at a lower cost to AOL. Or putting it even more simply: bulking up Patch, on the cheap.

And isn’t that what critics of fast-growing Patch — more than 800 served up across the country, the fastest-growing news startup and hirer of journalists in the last several years — have said since Armstrong and Patch President Warren Webster announced its hypergrowth plan last summer. For all of you who have said, “I don’t get the business model, they’re paying too much for content,” Armstrong and Webster apparently agree with you.

Patch still needs to make its one editor/reporter per Patch pencil out, but it can do something about the costs of lassoing other content. Peruse the Patches around the country — mainly on the coasts, but with a growing representation in the Upper Midwest — and you see lots of vitality and lots of variable quality. At the top sites, you’ll find the site updated with posts and tweets every few hours, and that owes itself both to the hard-working Patch editors (10-plus hour days are still not uncommon) and their ability to pull in good stringers. The budget for those stringers actually varies by the month, as Patch balances budgets and getting its allocations right. Take a bigger Patch site — serving a city of 80,000, for instance — and it may get more than $2,500 a month in freelance budget, while smaller ones serving communities of 20,000 may only get $1,200.

What Outside.in offers Patch is a new tool to manage how much local content it offers through aggregation — rounding up news from other local sources, including local dailies and weeklies and blogs, and how much it decides to pay for directly. Add Outside.in to Patch pages and you may get the sense of a fuller news report, Patch+. Sure the plus requires readers to link off the site, but that’s the nature of the aggregation game. You get more readers to come to because you’ve created one of the largest centers of local content. If you do it right, you can be ahead of the game — and trim costs.

Let’s look at it on a pure cost basis. If Patch gets 1,000 sites up and going, which should happen this year, and it can trim what it spends on stringers by an average of $500 per site per month, that’s $6000 a year in savings per site. For the Patch network in general, that’s $6 million a year. With Outside.in costing no more than one and a half times that number, you’ve paid for the acquisition in less than two years. (Of course, there are also ongoing operating costs as Outside.in CEO and able web serial entrepreneur Mark Josephson and some other team members join Patch.)

The tweaking, of course, is both about the algorithm — tour Santa Cruz Outside.in today, and the top five news stories are from the local Patch!; where’s the local daily, the Sentinel? — and in the content model. What’s the mix of paid, fresh voices and local aggregation that pulls in, and retains, audience?

That question is, of course, what leading local newspaper sites have been trying to figure out as well. A number of newspaper partners of Outside.in itself have tried, without significant commercial success, to figure out the formula. Other sites like SeattlePI.com have used aggregation (SeattleTweets) and innovators from the Miami Herald to the Journal Register papers have signed up local bloggers, in distribution and ad-revenue-sharing programs. All of these are works-in-progress at getting the local original content creation/aggregation model right.

Patch could get it right, or righter, and become a more formidable challenger to local newspaper sites — especially as they go to paywalls of various kinds. (Although that also reopens the question of how findable and linkable their own local content is for the aggregating algorithms of Outside.in and others.) If it does get it righter, it could also become a more likely potential partner for media companies looking to cut their own local costs and reach audience. It’s all in getting that cost of content unit/ad yield per unit of content right, and no one’s yet minted the winning formula.

We can see the dilemma in one current market. Journal Register CEO John Paton (who talks about competing with Patch, here) has been working with Outside.in, to supply aggregated content for the planned fyi.Philadelphia site. He put that relationship on hold this week, and delayed the product launch, as he conjures the question: Is the new Patch/Outside.in a friend, a foe, or some in-between still to be figured out?

October 09 2010

00:56

4 Minute Roundup: AOL Buys TechCrunch; Knight Updates News Challenge

news21 small.jpg

4MR is sponsored by Carnegie-Knight News21, an alliance of 12 journalism schools in which top students tell complex stories in inventive ways. See tips for spurring innovation and digital learning at Learn.News21.com.

In this week's 4MR podcast I look at the recent shopping spree by AOL, including buying tech news blog TechCrunch for more than $30 million. PaidContent founder Rafat Ali tells me what TechCrunch needed to do to finally seal the deal. And I also talked with Knight Foundation's director of digital media, John Bracken, about recent changes in the Knight News Challenge contest for next year's entrants.

Check it out:

4mrbareaudio10810.mp3

>>> Subscribe to 4MR <<<

>>> Subscribe to 4MR via iTunes <<<

Listen to my entire interview with Rafat Ali:

rafat aol full.mp3

Background music is "What the World Needs" by the The Ukelele Hipster Kings via PodSafe Music Network.

Here are some links to related sites and stories mentioned in the podcast:

AOL Tried To Buy TechCrunch Twice Before at Business Insider

AOL Officially Announces Acquisition of 5Min at MediaMemo

AOL Will Buy TechCrunch, Mike Arrington and All at ClickZ

AOL Acquires TechCrunch at PaidContent

AOL's Wild Acquisition Day Concludes With Thing Labs, Maker of Brizzly at PaidContent

5th Knight News Challenge Opens For Entries Oct. 25 at Knight Foundation

Knight News Challenge '11 focuses on new areas at Lost Remote

Also, be sure to vote in our poll about what you think about AOL buying TechCrunch:




What do you think about AOL buying TechCrunch?survey software

Mark Glaser is executive editor of MediaShift and Idea Lab. He also writes the bi-weekly OPA Intelligence Report email newsletter for the Online Publishers Association. He lives in San Francisco with his son Julian. You can follow him on Twitter @mediatwit.

news21 small.jpg

4MR is sponsored by Carnegie-Knight News21, an alliance of 12 journalism schools in which top students tell complex stories in inventive ways. See tips for spurring innovation and digital learning at Learn.News21.com.

This is a summary. Visit our site for the full post ».

September 30 2010

17:00

The Newsonomics of journalistic star power

[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.]

Maybe it’s a trend, or maybe it’s a bubble, but Jim Romenesko’s blog is chockablock with high-level journalist movement. The Newsweek Six are on the auction block, sought by eager bidders, as Time Warner solidifies its relationship with Fareed Zakaria, making him a wholly owned, cross-platform phenomenon, and Howard Fineman gets tapped on the shoulder by The Huffington Post, soon after it hired away The New York Times’ Peter Goodman.

Daniel Gross jumps from his long-time Slate home to Yahoo Finance. The National Journal makes acquisition after acquisition, this week reeling in Dave Beard, the well-respected editor of Boston.com, where he joins numerous other veterans (AP’s Ron Fournier, Newsweek’s Michael Hirsh, The Atlantic’s Marc Ambinder, Fox’s Major Garrett, among them) who’ve recently made a switch. After an apparent flirtation with AOL, Kara Swisher and Walt Mossberg stay safely in the News Corp bosom, while AOL spends its bonus dough on TechCrunch, buying a brand and an established news operation.

Other well known journalists are also suddenly fielding calls of interest — and often moving on to new adventures. Bloomberg’s been hiring pedigreed journalists by the dozens, for Bloomberg Government and other initiatives. Patch is snatching many of its regional editors from daily newspaper ranks.

What we’re seeing is a market develop. This is market that newly prizes talent, but a certain kind of talent. Most of the hiring is at the minor star level, though the lumens emitted vary. How do you measure — critical to digital success — the light?

First off, the hiring companies believe they know sustainable models of building businesses on higher-quality content. That may seem basic, but when we look at the much of the newspaper, broadcast, and consumer magazine worlds, that belief is flagging. They look at well salaried, professional staffs and see high “cost structures,” which are harder to justify, given current levels of advertising and the lack of successful digital revenue models.

We know that Yahoo and AOL, increasingly competitive with each other, believe they’ve found a working formula to make good content pay profitably. Tim Armstrong, AOL’s CEO, talks about “sparking a content revolution.” His formula, and Yahoo’s, is fairly straightforward, and borrows its commandments from the Demand Media bible. It’s all about the efficient ad monetization of content, with analytics — know the nature of the content, target the reader and align the advertiser — that seem to grow better week by week (see The Newsonomics of content arbitrage).

(AOL, ironically, is milking its online access business — yes, lots of people still think of AOL and Internet service as the same thing — drawing 43 percent of its revenue from it. That’s similar to newspapers milking the print business for as long as possible, as they can make the inevitable digital transition. By that comparison, AOL’s lifeline is much shorter, with a 25-percent 2Q drop in customers paying for that access, while most newspaper companies’ circulation revenue down only in low single digits.)

The newsonomics of the star hires is intriguing. Think of these “star” hires as individual SKUs, “products” whose value can be estimated against the customers they bring in the door. Those conversion customer metrics are evolving. Counting pageviews is the simplest way. Take those views at whatever (premium?) rate you can sell them, and you’ve got a first number. The intangibles are how many new unique visitors the Zakarias, Finemans, and Grosses bring with them from their old haunts. How many of those new customers become regular customers of the outlet? That gets you to some annual and/or lifetime value metrics. As metrics are collected and tested, we’ll see some more science brought to what is now a star-search art form.

There certainly are other intangibles. What is Yahoo News exactly? What is HuffPo? What is AOL? As they define themselves as legitimate news companies, the new stars bring cred — and legitimacy. In addition, they are magnets to other, lesser-known talent, signaling, “it’s okay to come here.” There’s economic value in that, too.

Notably, few established legacy brands are hiring new top-end talent; Time’s Zakaria hire is a smart, though unusual one, enabled by the Newsweek uncertainty and Time/CNN linkage. For the most part, legacy news companies’ growth scenarios are borrowed, curiously, from those now hiring those stars: multiplying the amount of content available under their brands, harnessing amateur and lower-cost stuff from local bloggers, licensing from Demand Media and aggregating content through FWIX, Outside.in, and OneSpot. They’re the ones paying heed, at least indirectly, to Wikipedia’s Jimmy Wales’ observation that hiring six-figure columnists in this time is silly: “The best of the political bloggers are easily the equal of the opinion columnists at the New York Times. I don’t see the added value there and question whether a newspaper should be paying large sums of money for that any more.”

The hirings at the National Journal and Bloomberg point to a different kind of business model. Those companies have found niche models involving significant reader and/or enterprise payment, and now are building out, and around, those businesses. They, too, believe they can make a new business out of superior content.

It’s complicated, and there are more than two phenomena happening here. Yes, some players that have built successful enterprises — think Yahoo, AOL, Huffington Post — on non-professional staff content (through aggregation, pro-am sites, and more) are now adding the pros at the top, to reinforce brands and put faces on them. At the same the high-cost, pro-based enterprises are going the other way.

It’s not an equilibrium, nor will these models meet in some neat middle, but there’s some sense of coming at a similar solution from two ends of the spectrum. It’s a blend of old and new, expensive and cheap, and no one yet knows the best formula.

Arianna Huffington explains it as a maturation, and indicates the hiring of pros was part of the original Huffington Post plan: “From the day we launched, it was our belief that the mission of The Huffington Post should be to bring together the best of the old and the best of the new. Bringing in the best of the old involved more money than we had when we launched. But now that our website is growing, we’re able to bring in the best of the old.”

The likely result of these moves? By 2015, news companies will pay top dollar, and pound, euro and yen, for top-end talent, and they’ll pay as little as possible for good-enough newsy content that fills many topical and local niches. Over the next several years, the most successful media brands will have mastered better the economics of pro-am journalism.

Infrared image of a star cloud courtesy of NASA.

June 09 2010

08:58

Econsultancy: AOL on why journalism is technologically challenged

Interesting summary of AOL CEO Tim Armstrong’s comments at a recent industry event, at which the chief executive flagged the importance of human editing and journalists in using technology to give the content they produce scale.

Armstrong is betting that content will be the next huge development area online:

“The content space will be the epicenter of the internet.”

Part of the reason for that is how slow journalism has been to adapt to changing technologies. Even at the most basic level. For instance, journalists are often not included in corporate technology upgrades. Says Armstrong:

“Journalists I met were often the only people in the room who never had access to a lot of info, except what they already knew.”

That is a problem he wants to fix at AOL, by creating platforms and strategies for writers and editors that utilise the best the web has to offer.

Full story at this link…

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May 20 2010

14:00

The Newsonomics of content at the margins

[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.]

Yahoo’s purchase of Associated Content, for over $100 million, seemed to come out of the blue. Actually, though, it didn’t. Yahoo made a foray at buying Demand Media two years ago, but the parties couldn’t come to terms. At that point, Demand’s model seemed to make sense, but hadn’t matured to a point of conventional-wisdom validation.

We’re now at that point: The well-dissected, advertising-drives-content Demand model is at the center of Demand Media, AOL’s Seed, Examiner.com and Associated Content. The Newsonomics of content arbitrage that I wrote about for the Lab a month ago is a certified phenomenon; the conventional wisdom is that these algorithm-driven, user-gen-aggregated, SEO-augmented, metrics-monitored businesses are at the center of a new way to produce “content.” Not news, mind you, but newsy content, some of it wonderfully useful, some of it wince-worthy. News content is far too costly to produce, doesn’t produce enough of a long-tail and doesn’t link that easily to commerce — the buying of stuff that fuels advertising.

The newsy stuff, though, is an annuity. That’s an interesting term, used by Associated Content CEO Patrick Keane, when I interviewed him a couple of weeks ago. An annuity. That’s a business made from the long tail. Pay for something once — and not much; in the case of Associated Content, $5 to $30 per piece — and monetize it forever. That’s why the evergreen content encouraged by the Associateds and Demands runs to “How to Teach Your Dog Sign Language,” and “10 Surefire Tips on Selling Your House at a Competitive Price.

It’s content written for search engine optimization (good piece on SEO ascendancy Monday by the Times’ David Carr). It’s also, to put it simply and directly, ad bait. Ad bait of the kind that newspaper ad directors could only dream about over the decades, the kind they gained with advertorial sections (wedding guides, personal finance sections) as journalists — can you imagine! — wrote stories about what they thought was newsworthy. The hubris — and sometimes, good news judgment.

It’s those algorithms and deepening technology under content, under advertising and under the matching of the two, that drives this Yahoo/Associated Content deal. Over the last several years, Yahoo has built an advertising targeting platform on acquisitions (Right Media, BlueLithium) and its own development, leaving the paid search business to Google and Microsoft. That platform is all about matching up content, web users, and advertising messaging. Yahoo has fine-tuned it, though it’s always a work in progress. It’s brought in partners (including half of U.S. newspaper companies) to gain more inventory and identified its future along those user/content/advertising lines.

The next step: Gain lots more content to sell ads against. Yahoo can do that several ways: organic growth; more partnerships; bringing more content under its own brands, on its own site. The Associated Content buy meets that third goal. The $100 million purchase price buys the annuity, lots of ad-bait content to feed the ever-smarter ad engine.

Here’s the best part: margins. When I asked Patrick Keane, who will apparently be joining Yahoo as part of the deal, how much of Associated’s revenue derived from selling ads on its own site and how much from partner sites to which it licensed the cheap user-gen content it aggregated, he didn’t want to talk percentages. He did acknowledge that more than half, though, came from the Associated site. And Keane liked it that way. Why? “The margins are a lot better,” he told me.

That’s a simple statement, but one driving much of the new digital business. Revenue and profit growth are going to get tougher for such big companies as Yahoo and Google, and it’s a big challenge for the new independent AOL. One way to boost dollars is to boost margins. That means transacting more business on your own site — where you don’t have to share revenues with other sites, other content owners.

I’ve tracked Google’s progression along those lines. Go back to 2004. Then, Google reported that 49 percent of its revenues were coming from affiliate sites, as it offered its technologies to help affiliates make a few bucks. That was the high-water mark of affiliate earnings, by percentage. In 2009, the affiliate percentage was down to 30 percent; 66 percent of revenues come from Google’s own sites. Over time, it has smartly directed more and more traffic to stay at its owned websites — its time-on-site has increased consistently — and monetized that traffic, without having to share revenues. In part, that’s contributed to its amazing profit growth, a banner $6.5 billion in profit, up $2 billion year-over-year, in the terrible-for-everyone-else 2009.

Yahoo breaks down its revenue into “owned and operated” sites and “affiliate” sites, though its trend lines are less easy to see. Clearly, though, the push toward O&O revenue is a key one, and one that the Associated purchase reinforces.

What might that push mean for Yahoo’s affiliates, especially those in the Newspaper Consortium, which have gladly used Yahoo ad technology to better their ad rates in selected topical areas? It’s hard to see how it is good news. The Associated content aims at many of same topical categories that newspaper sites target; so the industry looks like it has gained new competition — competition owned by its partner.

Maybe more significantly, Associated is welcomed on the Yahoo site by Matt Ledma, Yahoo VP for local. “We feel that a contributor-driven model is absolutely part of the future of media,” Idema told Reuters. User-gen content can be topical — travel, health, pets, you name it — and it can be local. Local user-gen is the territory voraciously being chased by Examiner.com. Looks like Examiner may have a new competitor in the pro/am, user-gen local space: Yahoo.

These — Yahoo, Associated, Examiner, Demand — are the companies showing aggressiveness today, leaving one question for the moment: Where are the legacy news-producing companies, those who have long created the features-like content in this picture — and why haven’t they bought these startups or built similar models?

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Don't be the product, buy the product!

Schweinderl