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December 09 2010

17:00

The Newsonomics of Do Not Track

[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.]

Just in time for Christmas, we have cookie madness. No, not the sugared kind — the tracking kind. With pugnacious FTC Chair Jon Leibowitz taking on yet another big topic (saving media, net neutrality), we’re talking about tracking technologies — what’s fair, what’s legal, and what’s right.

On Dec. 1, Leibowitz put forward a 122-page Do Not Track proposal, officially inviting public comment due Jan. 31. Industry groups of many kinds, including the Online Publishers Association, are busily preparing responses. It’s unclear, as often the case with things digital, where the FTC jurisdiction ends and where Congress’ assent is required. There will be all kinds of twists and turns in the politics of Do Not Track (where, for instance, will the Tea Partiers stand, pro-unfettered individual liberty or anti-government regulation?), but when the dust settles, expect the following:

  • It’ll be easier for consumers to opt out of being tracked. That may be a simple one-click cookie, or something still a little complicated, but considerably easier than the multi-step approach required today. (I asked a group at NewsFoo, a tech-savvy bunch, how many knew how to turn off tracking. Only five out of 40 raised their hands.)
  • The advertising industry will seek to find new ways to further target, no matter what new hurdles are put in front them.

This isn’t an abstract debate about consumer rights or Big Brother. It’s a debate that could have profound implications for news media. If rules are re-written, we could see a re-balancing of power among news media, advertisers, ad agencies, and the ad networks. Therein may lie billions of dollars in ad spending — and revenue splits — in the years ahead.

If you attend an digital ad conference or talk to leaders in the industry, you’ll see the same PowerPoint (or Keynote): The perfection of commerce is coming soon. Ad-targeting technologies are getting smarter each day, creating better analytics about…us, collectively and individually. The coming perfection: I only get the kinds of commercial messages that make sense to deliver to me, based on all the known info about me, my reading patterns, and shopping habits. Sure, some mass branding — Coke in both Times Square and Tokyo’s Shibuya Crossing — will always be valuable. Most advertising messages, though, will be targeted. Targeted advertising is more effective, cheaper to deliver, and cuts out waste.

In that paradigm, media isn’t an enemy, exactly. It’s just friction. Media that helped deliver audiences for many decades now is a kind of friction. In the last several years, particularly, old media brands have eschewed ad networks as much as they thought they could, selling “premium” inventory. That means leveraging the authority of the news brand and its association with the deep pockets of affluent readers. We’ve seen some success there, but have to wonder how long it might last as targeting technologies get better and better. Why deal with the friction of separate media buys, if you can cherry-pick the audiences you want wherever they may be at the moment?

In classic web theory, it’s disintermediation: The connection between media and consumers is dissolving, with marketers able to reach end users more directly.

Enter a new age of Do Not Track. Maybe, in that world, news media’s role — and its engagement with audiences — becomes much more valuable. Maybe, it’s a reintermediation of a kind, as news media’s role in the shopping/buying lives of its readers re-emerges, digitally.

How might this happen? If we look at the potential newsonomics of Do Not Track, we can see at least two ways that real revenue can be driven out of the reordering of the tracking world.

First, the FTC proposal treats first-party tracking differently than third-party tracking. First-party tracking means that media, or really any company, tracks the behavior of its customers, those who have chosen to have a relationship with the brand. First-party tracking would allow online publishers to use analytics, drawn from web usage and registration data, to better target content for readers and viewers. And first-party tracking should allow some ad targeting of readers by a publisher on its own site — though that question will get muddier, depending on how Do Not Track actually works.

If publishers — especially big publishers, with the scale of audience of the Times, the Journal, Reuters, and portals — can help advertisers target consumers, then their audiences may become relatively more valuable, and advertising messaging higher priced. The “relative” here is relative to what advertisers can do off big brand sites. If Do Not Track constrains that in a significant way, that big news brands can offer relatively better targeting. That means a $10 CPM ad may be instead sold for $16, for instance, and the value of targeting can add up to tens of millions for each company annually. For a U.S. online ad industry now galloping to 17 percent 3Q growth (and expected similar growth next year) to a $25.8 billion expected 2010 final number, that targeting advantage could mean billions.

Second, publishers might further monetize the voluminous data they are harvesting. They could sell it. Data, media have come to understand, isn’t exhaust — it’s gold, if properly mined, and deeply valuable to advertisers and agencies.

Krux Digital, which works with publishers to track data usage, recently put out a report saying that “data skimming” by third-party networks was costing “premium publishers” $850 million a year. In other words, networks were placing cookies on publisher sites, alighting with lots of data that they then used to target other advertising. The number could be high (Krux has an interest in a high number; the higher the number, the more apparent need for its services), but there’s significant money left under some table, largely unbeknownst to publishers. If Do Not Track puts more power back into the hands of the publisher, then publishers may be help to re-sell the information — and that could help build toward the new business model news publishers’ need.

The FTC, of course, isn’t setting out to provide publishers with a new revenue stream. It’s trying to protect consumers.

Consequently, in industry responses to the FTC, OPA and other news industry groups have to be smart. They have to not only give lip service to being pro-consumer. They have to talk about how they can be pro-consumer, and much more transparent about how they use consumer data. They can proudly talk about delivering better news products. They can talk about improving the researching/shopping/buying experience. They can get beyond what some note as the “creepiness factor” of tracking, by offering up fundamental rules about how they’d be clear with their readers and viewers about what is being shared, what’s not and about consumer choices. They could also offer consumers incentives to share info.

They can re-establish, and reinforce, new stronger relationships with readers, in perfect synchronicity with the efforts of some to charge for digital news content.

The big opportunity, perhaps, is the ability of news publishers to transparently offer reader/consumers the opportunity to “opt in” to a wider world of reading and shopping targeting. Then, they could re-emerge, in the tablet era no less, as community and national centers of news — and commerce. Forget Foursquare; readers could check into their favorite news companies.

Track photo by HKmPUA used under a Creative Commons license.

September 22 2010

19:00

Journal Register Company joins with Outside.in for a hyperlocal news/ad portal in Philadelphia

At the Suburban Newspapers of America conference in Philadelphia this morning, Journal Register Company CEO John Paton made an announcement: The newspaper chain will soon be launching an online, hyperlocal news portal in Philly. A new step forward in the company’s “digital first” business model, the yet-to-be-named site’s content will come from a mix of journalists professional and amateur, curated by JRC editors. And it will leverage the partnerships the JRC already has in place with Yahoo (audience targeting) and Growthspur (contributor training).

Or, as Paton puts it: “crowd and cloud.”

The site will be a direct competitor to Philly’s existing establishment news sources: the Inquirer and the Daily News. It’s no accident that Paton announced the project the day before the financially plagued papers are to be put to auction. “They’ve had that town to themselves for a long time,” he told me. “And I think there’s room in this new ecosystem for a whole bunch of people to play. I’m sure they’ll think we’re no threat at all — and I hope they keep on thinking that.”

The idea of the new site is to bolster both content and audience — on the cheap. (JRC, you’ll recall, declared bankruptcy last February; since Paton took the helm of the company shortly after that — with an advisory board that includes new media thinkers the likes of Jay Rosen and Jeff Jarvis — it’s been engaged in the Herculean task of restoring a network of small, Rust Belt papers to profitability. Remarkably, it’s getting close.) The new effort will tap into Philly’s existing content infrastructure — the hyperlocal blogs that have already sprung up to cover the area — and then give that content, via the hyperlocal news provider Outside.in, a singular publishing platform. (The site will also mark a continuation of JRC’s partnership with Growthspur, which trains would-be journos in both blogging and the dark arts of content monetization.) The details are still being worked out, but the idea is a mutualization of resources and revenues that will benefit all involved, from the local bloggers to the Journal Register Company to its partners — to, of course, the site’s consumers. Think TBD, Philly edition.

Think also: TBD, “inexpensive tools” edition. Though JRC will dedicate some of its resources to the new site — in particular, staffers will provide additional content, curation, and general editorial oversight — “we’re hoping that this will be largely crowd-supported,” Paton notes. JRC, after all, doesn’t have papers in metro Philly. “We’ve surrounded Philly with our properties, and so we’re able to provide some context” — but, then, generally not “right-downtown context.” For that, the site will rely on the bloggers who know the terrain; and in turn, Paton says, “we can bring depth to this, and we can bring curation to this.”

And that’s true of audience, as well. The site will apply JRC’s “digital first” approach…to users. Last week, JRC expanded its partnership with Yahoo — the latter company provides behavioral and geographical ad targeting to the newspaper chain — to include the Philadelphia market. That was “the sales piece,” Paton notes; the new site will be “the content piece.” The hoped-for end result? “We’re collectively creating audience, collectively creating content, at a very low price point.”

It’s a “hoped-for” result, though, because the site is still in its development stages. (Hence, again, the lack of name — “I figured TBD was taken,” Paton laughs.) But the CEO values transparency, even if it means unleashing a gestational product onto the market. “It’s a work in progress,” he says of the site. But he and the JRC staff figured, he says, “Let’s just announce it — we’ll get some help in finalizing it just from the announcement. And our solution will come out of that.”

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