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June 10 2010

15:00

The Newsonomics of tablet ad readiness

[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.]

Are you ready to receive? That’s the question news company should be asking themselves this month, as the second half of the year — with its unexpected flow in mobile ad dollars — beckons.

The numbers are mostly anecdotal at this point, though as some of us forecast, tablets promise a new, significant source of revenue for the companies that are ready to play the tablet game, and play it well.

Among the early evidence, reported by AP’s Andrew Vanacore, are:

  • $50 CPMs ($50 per each one thousand views) for USA Today’s iPad ad, as compared to maybe $10 for its web ads.
  • Irrational exuberance! Brian Quinn, WSJ’s VP/general manager for digital ad sales, says overall ad spend is increasing because of the iPad version, not just switching dollars from one platform to another. “Out of the gate, there was an exuberance about this,” he says.
  • Chase Sapphire, which is a New York Times iPad sponsor,  says its ads are getting a remarkable 15 percent clickthrough rate. That’s 150 times the rate of an average web ad.

Add to that the July 1 launch of Apple’s iAds, which will introduce ads within iPhone and iPod Touch (but not yet iPad) apps, and which will begin with $60 million in sales, with such companies as Disney, AT&T, and Best Buy participating. You can bet that when the program launches on the iPad, a vastly superior ad medium given the screen size, it will do well. Even just on the “phone” side of the business, the iAds launch should give Apple — and, importantly, apps — almost half of the mobile ad spend in the U.S.

Want a little flavor to understand advertiser enthusiasm? Check out this Steve Henn Marketplace report featuring a VP for The Gap. She’s near-ecstatic in describing her enthusiasm for the iPad/tablet as a way of selling stuff and gaining customer knowledge.

So, yes, maybe the iPad ad euphoria should come with a few grains of salt. But, still, the “multi-touch” immersive future, painted by Steve Jobs and talked up by the big digital ad agencies (themselves looking for new reasons to be in the supply chain) is upon us.

So, are publishers ready?

I had a conversation recently with someone who runs a digital division for a major newspaper group — smart guy, a pioneer in the field. I asked: “So are you working on an iPad app?” Answer: “We’ve looked at our logs, and we’re seeing increasing traffic from the Kindle, but not much yet from the iPad, so we’ll wait awhile.”

I felt a rant coming up, but suppressed it then and will channel it now: If not now, then when?

We can look at each of the major revolutions in digital news and commerce, and see how news companies responded.

Search. Late.

Paid search. Way too late.

Video. Late.

Social. Too late.

Mobile. Largely too late.

News companies have used old yardsticks to measure new technologies, and the results have been, predictably and disastrously, too little, too late.

Now with the iPad, the advent of tablets generally, and the invention of the app metaphor as a way of navigating the digital life, news companies have another chance. The newsonomics of tablet ad revenue are uncertain — will iAds simply flood the ad market with more low-cost ads, as developers happy to get any ad revenue price their ads low? — but the tablet offers the biggest do-over potential for engaging readers anew and re-engaging advertisers, at rates somewhere between the laughably low of the web and the near-impossible-to-sustain-long-term highs of print.

The digital division head told me that the logs told him that there was insufficient customer demand to justify investment in an iPad app. This, I think, is like managing by rearview mirror.

The whole metaphor of the iPad is the app; ask anyone who uses it, and they’ll tell you they are surprised how little they use the browser and use search. So if you are counting browser views of your website coming through the iPad browser, you have no idea how a reader might use your product if it were built to take full advantage of the tablet’s abilities. In addition, consider that the sale of iAds require an app — not a browser-available site.

If this sentiment were uncommon, fine, but I fear it’s too commonly held. Wait and see. Wait — until it’s too late. That’s what I generally see happening among regional and local newspaper companies. They talk about early adopters and the high cost of a state-of-the-art iPad app, and most are waiting.

The big guys — what I’ve called the Digital Dozen — aren’t waiting. The Wall Street Journal, The New York Times, Thomson Reuters, The Guardian, BBC, and AP are in the game — some with better apps than others — and all planning the next generation of products. We’re seeing impressive sales in the thousands for the WSJ paid app and can wonder about the applicability of Wired’s impressive sales of 73,000 (which are on a trajectory to beat print newsstand sales) to news and newspaper companies.

We’ve already seen a great separation in product development, audience engagement, and ad revenues between the nation’s and world’s biggest news companies — each with struggles of its own — and the other guys. Yet as they struggle, they’ve gotten most of the ad revenue smartphones have so far generated, as local news media has failed to get any revenue of scale. At this point, the iPad era looks like it the opening of an even greater divide among the largest media — and the rest.

[Ken will be on vacation the next few weeks, but back in July. —Josh]

May 27 2010

14:00

The Newsonomics of wilting flowers

[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.]

Ah, the Dream of the Wilting Flowers. Like many web dreams, premature, premature, premature…and then, maybe soon, pop. A sensation, with lots of dollars involved. Our best current example: Steve Jobs’ “invention” of the iPad, which of course was dreamed up in quite similar forms, decades before, in the fancies of Alan Kay and Roger Fidler, among others.

It’s all timing, right?

So it’s a good time to get a sense of what’s happening in local mobile commerce among news companies.

A friend visiting the exhibition hall at the NAA Orlando convention in April told me he’d been besieged by mobile commerce vendors. Then there’s the group (mobile commerce) grope, symbolized by the Groupon craze. Get a whopping good deal — but only if you can get enough of the crowd to go along with it as well. Of course, iAds are on the horizon, with Apple offering a sweet-smelling twist on walled-garden marketing pitches. Google’s AdMob — the leading mobile ad network — just got the thumbs-up from the FTC and has launched AdWhirl, its open-source (take that, Apple) “mediation layer” to facilitate mobile commerce. You can’t stay on top of all the mobile-marketing plays these days, no matter how much you try.

Let’s look at newspaper companies and what they’re doing with mobile commerce. Talk about timing: When Dan Finnigan ran Knight Ridder Digital a decade ago, one of his favorite mantras was the Dream of the Wilting Flowers. As in: It’s 4:30. You’re driving down the street. Your phone knows where you are, of course, and coming up, on the right is a florist…with a perishable commodity, flowers that will be worthless within 24 hours. Your “smart” phone, knowing where you are, who you are, your flower-buying habits, and maybe your spending proclivities, sends you the florist’s coupon for half-off, if you stop by within the half-hour. Satisfied merchant, satisfied customer, a perfecting of supply and demand.

It’s still a great vision, with a new generation chasing it, and getting closer. Talk to newspaper companies, though, and you’ll hear the answer is “we’re not yet there.” Closer, but not quite there.

Bill Ganon sees that wilting-flower dream, but he’s drilling down into something more basic: mobile sales training and the establishment of mobile pricing standards and analytics. Then, maybe by the end of the year, he says, the location-aware capabilities of smartphones may start to smell the daisies.

Ganon is the general manager for local market development for Verve Wireless, and Verve is the newspaper industry’s biggest mobile play. Spurred first by AP investment and partnership in summer 2008, many newspaper companies have turned to Verve for mobile content and, now, ad solutions. Verve now powers more than 400 mobile news sites for newspaper and broadcast companies including MediaNews, Hearst, Belo, McClatchy, Freedom, and Lee.

Verve is making a new ad push, after seeing its first forays fall flat locally. That push is predicated on scale. Its network — the Blackberry has just been added to the iPhone, with Android and iPad applications on the way, says Ganon — has grown dramatically. Year over year, for April, it has grown to 8.9 million uniques (from 2.9) and 130 million page views (from 51 million).

When Ganon — a veteran of old media sales at Newsweek and Sunset, as well as eight years with Qualcomm — took over local sales eight months ago, he found a ragtag group of local mobile efforts. Now, as Ganon describes his work, we can see the emerging newsonomics of local mobile pricing. As the mobile commerce world explodes, Ganon is focusing on the basics. He says Verve can now count 75 local sites beginning to make consistent sales, up from around 20 when he came on board. The basics of the push:

  • Training: Verve’s local market sales team of four is spending lots of time training newspaper and broadcast sales staffs on how to sell mobile. That’s reminiscent of the ongoing training done by Lem Lloyd’s merry band through the Yahoo-powered Newspaper Consortium. (In fact, with all the Yahoo, Verve, and marketing-services training ongoing, I’d wager that newspaper sales people have gotten more training in the last two years than in the previous two decades.) Verve’s training focuses on taking the mystique out of mobile: “Advertisers don’t like stealth solutions. They like to know what’s behind the curtain,” says Ganon.
  • Pricing: Ganon urges a $15 CPM (cost per thousand) floor for selling mobile. With that guideline, he says Verve-powered sites are averaging $19 CPMs, which would be about twice the average of what news sites on getting on the desktop web. Says Ganon: “This is your time to define metrics.” In other words, try to establish a price, not allowing prices to fall to low single digits as inventory is sold by middlemen, as has happened in the main digital business. Right now, most newspaper companies can count no more than five percent of their digital revenue, coming from mobile. Most of that total — maybe $100 million — is going to bigger, national brands like The Wall Street Journal and The New York Times. That’s out of maybe $500 million involved in mobile advertising overall in the U.S.
  • The Pizza Sale: Salespeople are being trained to sell the crust (a banner ad), the sauce (a landing page, tailored to action off the ad), and the toppings (call-to-actions, whether “click to call” or map directions). Pricing is still impression-based, though, Verve sees cost-per-click and cost-per-acquisition offers down the road.

What’s apparent is how early we are in local mobile selling — and how far away it is today from adding appreciably to news site revenues. The deals are small, and even the best-performing sites can count no more than 20 advertisers, with most having far fewer on their sites at any one time.

And the Dream of the Wilting Flowers? Ganon says Verve should be able to add in location-aware selling, maybe by the end of the year, but he believes that it “will be a major breakthrough.” So, 2011, maybe. When that breakthrough comes, the big question is who will benefit most: the local newspaper and broadcast companies, or Apple, or Google, or Yahoo, or maybe Verizon or AT&T?

Ask Walter Sanchez, publisher of BQE Media in Brooklyn and Queens and a Verve client, and he’ll tell you it’s an uphill climb. I met Walter at a recent New York Press Association conference, and his marketing efforts were way ahead of the curve, among publishers. He’s busy selling social sites, SEO, SEM, and mobile sites, he’s proud of getting such small businesses as Beach Bum Tanning sold on mobile ($500 a year for a landing page and 3,000 short-text messages). But he’ll tell you that most local merchants are indeed still mystified by the web, and they’re slow adopters: “When those 21-, 22- and 23-year-olds start buying their own businesses, in a few years, then, we’ll see real adoption.”

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