Paywalls Are Dumb, Statistics Prove

I don’t know how anyone could look at the traffic data coming out of Murdoch’s paywall initiative and not conclude that they are ill-advised and monumentally stupid.

According to data from Experian Hitwise, which charts Internet traffic, visits to The Times of London and The Sunday Times’ Websites have dropped by 66% since parent company News International put those sites behind paywalls on July 2.

[From London 'Times' Sees 66% Traffic Drop, Post-Paywall]

Just 12% of The Times pre-paywall audience created a registered account and of that new number of 10% actually agreed to pay for the content. Couple that with 12k iPad apps that have been sold and you are looking at less than $20 million a year in revenue, which come nowhere near close to supporting the cost structure of a newspaper as large as The Times.

As Steve Forbes said in an interview on Bloomberg radio just last week (I don’t have the link and am repeating the segment from memory), paywalls don’t change the economics of journalism and while these companies are driven by an absolute requirement to find new revenue sources paywalls alone are not enough. Forbes went on to describe how a fundamentally different way of delivering advertising, as integrated programs across many sites and tailored for specific advertiser audience targets (not demographics alone) are how they are changing the dynamic.

Paywalls are dumb, most certainly, not because they are an attempt to monetize content or because they attempt, as Murdoch has declared, to focus on a smaller but higher quality audience. Paywalls are dumb because they, as The Times numbers indicate, prematurely drive down the audience denominator number and limit the ability do the kind of integrated advertising strategy that Forbes outlines. The cost to serve the pre-paywall audience is not significant but the cost to create the content is, and now we know, at least so far, that the revenue generated by a paywall on a major media site is insufficient to fund either.

Newsday’s Paywall… the Numbers are in

In October of last year I wrote that Newsday’s paywall would fail to attract new revenue and as a defensive pricing strategy it does little.

In the final analysis, this is exactly why it will fail. By creating a pricing plan that defends rather than attacks a market the company is conceding defeat in print and this strategy will have the effect of slowing audience growth online in the one segment that the paper requires, young people. I am willing to give Newsday and Cablevision some credit for being creative with a multichannel strategy that covers TV, print and online, but this pricing plan is a throwback to a subscription model that simply doesn’t work anymore.

[From Newsday.com Destined for Failure with Pay Wall | Venture Chronicles]

Well the numbers are in and after 3 months of running a paywall, Long Island based Newsday has attracted a whopping 35 subscribers to the website… not a typo, 3-5. Of course now management is running with some creative spin saying it’s 35 more than they expected to get and the pricing strategy was, as I exactly opined back in October, a strategy to defend the existing customer base who are getting access to the web site as part of their cable, prompting one Newsday reporter to observe that “we’re the freebie newsletter that comes with your HBO“.

Of course that explanation makes no sense at all because why spend $4m, according to the Dolan’s representative, to redesign and relaunch the website if it’s something extra that subscribers of the core cable service are getting as a freebie? It’ll take them 444 years to recover their investment at this rate.

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Man Bites Dog or Who Really Owns a Community

tautonlogo

Taunton Press is a respected publisher known for a family of publications beginning with “Fine” as in Fine Cooking, Fine Homebuilding, Fine Woodworking, and Fine Gardening, we well as series of hard bound books and a premium subscription online service. Each of their publications features an accompanying online component that includes videos, blogs, and most importantly, a forum where enthusiasts have populated an impressive archive of content.

The online forums have been the subject of much controversy among the community members as Taunton replaced their old Prospero software, which was acquired by Mzinga a few years ago, and converted the forums to a Drupal-based system that they developed. Those of you who are familiar with Drupal know two things, it is a robust and much customized platform well suited for online content management, and it can be a real pain in the ass to work with.

I am, or more accurately said, I was an avid participant in the Fine Woodworking forum and like in all good communities found the content to be as engaging as the personalities that developed. When it became known that Taunton was doing a rolling conversion of all of their forums to the Drupal based system I decided to check out what the new layout looked like before the change was made in the Fine Woodworking forum. Oh the horror.

As is the case with any change it will take some getting used to but in this day and age there are well known design do’s and don’ts and Taunton displayed an impressive drive to break all of them. The color palettes were harsh on the eyes and made reading the text difficult, the 3 column layout compressed the main body text making reading an exercise in scrolling which was made all the more difficult by the threading of multiple messages with no break, the propensity for members to use signatures further complicated message threads, and the right sidebar was dominated by a Google Adwords widget (which has since been removed). The fact that Google ads feature so prominently on the forums (in the banners!) raises another point… Tauton is a publisher that sells, you know, advertising. Why are they not running their own advertiser messages on the forum?

Many of the obvious problems were fixed in the weeks following the conversion but that really begs the question that if these things were so obvious to everyone participating, why were they not obvious to the team that designed it in the first place? It’s also not clear on how they tested the design before committing it, if they tested it at all, and how they sought input from the community members who serve administrative functions in the forum. Lastly, the team that developed this apparently spent little time understanding the community needs, if they had they would have understood that older eyes don’t deal with strange contrast issues and running text.

I have been witness to a great many online forums and communities over the years and in my estimation what Taunton did is amateurish at best, both in terms of what they did and how they did it. The quality of the design reflects the work of a programmer who took an out of the box Drupal layout and tweaked it to fit what s/he believed would work rather than what was best. This is a blemish on the Taunton brand which is considered a high watermark for information design and high quality publishing.

The protest from the community members in all of the forums has been overwhelmingly negative and reached such a pitch that the VP of interactive features for Taunton, Jason Revzon, published an open letter to community members where he attempted to address the criticisms and defend his team but I wasn’t alone in finding that his tone was more defiant and petulant than engaging… he actually described the feedback they were getting as ranging from “grudging acceptance to mild mourning to xenophobic howls of rage”. Xenophobic? What is curious about his open letter is that he stated his credentials going back to his days at AOL (not sure he should admit to that) and has not responded to a single message; it is plainly obvious that Revzon’s idea of interactive is not what most people would consider interactive.

The reason why all of this is important is that they made this move for the well justified need to improve their visibility to search engines and better monetize the traffic, but in doing so they have alienated the small group of hardcore users that generate the majority of message traffic and serve as a stabilizing force in any online community. It is evident that the message traffic is down, way down, and increasingly posters are asking “where is everyone” or “what happened to so-and-so”. This is bad news for Taunton but something that they brought onto themselves with a poorly executed strategy that erased the goodwill that had been earned over the years.

No evidence supports this contention more than the fact that the members of the Fine Homebuilding community, called Breaktime, splintered off and started a competing community on Delphi Forums that looks exactly like the old Prospero layout that Taunton abandoned. Called Breaktime Classic, the forum has 436 members since launching last month (registered users, anyone can visit it) and 126 active as of my writing of this post, which I would be willing to bet is more active users than the official Taunton forum has right now.

The lesson that Taunton should be learning is that online communities represent a cooperative effort between the sponsoring entity – the folks that host the physical infrastructure – and the core community members that generate the content that makes the community compelling. When this balance is upset the turbulence is difficult to stabilize as the most valuable contributors leave and community momentum is lost. Companies have valid and understandable reasons for wanting to leverage online communities for editorial content, premium subscription services, and advertising, but all of that is premised on their actually being a vibrant community to build out those strategy objectives. Who owns a community? I say it’s the members and companies that lose sight of that lose far more than just a few ad dollars.

News Magazines, The Problem is in the Name

News magazines (Time, US News, Newsweek) have simple outlived their usefulness as a tool for informing and educating. The problem is in the name, none of these magazines are successfully presenting news and informed analysis that isn’t found on the web and typically well before being published in any of the above mentioned titles. It’s like USA Today… more actually USA Yesterday, the speed of bits will always beat that of ink and the ability to aggregate, e.g. link to, many sources will go deeper than 2 columns ever can.

Having recently been dumped by Time, I naturally had great hopes for this week’s much-anticipated makeover of Newsweek. Both surviving newsmags (US News is said to exist still in some form, but no one I know has seen it lately) are in an Internet panic like that affecting newspapers. Newsweek has always been a bit faster on its feet. But judging from its first issue, the new Newsweek is not going to be the instrument of my revenge, alas.

[From Backward Runs 'Newsweek']

News magazines are literally dying away and nothing will save them, but they persist in looking at their business as a print magazine with an attached website, rather than the other way around.

Publishers must stop thinking like content creators and publishers, and more like information services. Providing original content is still necessary but aggregating everyone else’s content by topic is far more important, and then providing metadata (e.g. geotagging, categories/keywords, search enhancement, quality scoring, sentiment) on top of content that is provided programmatically to other services and application developers is one key future strategy.

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Marc Cuban Is Psyched About Cable

Cuban is PSYCHED! Hey, it’s not like he doesn’t have a reason to shake the pom-poms for cable, right? He’s also been pretty vocal about his belief that content owners will never give up the fees they get from cable and go to a free online distribution model.

Marc Cuban just told me advances in cable technology are more exciting than what’s happening on the Internet right now.

[From Marc Cuban Is Psyched About Cable - Media Money with Julia Boorstin - CNBC.com]

It’s pretty hard to argue with any credibility that cable is a hotbed of innovation. I look at my Comcast on demand and I’m struck by the fact that the big content developments they have to show off are used car listings. Who the hell cares?

It’s also worth pointing out that Comcast’s on demand services only work with their set top boxes, if you have a current generation flatscreen and want to take advantage of a cable card you will just get a tuner without any on demand capabilities. So much for the mythical cable technology advances that Cuban talks about.

Here’s the core problem with cable operators, they are operating a walled garden where any new content offerings have to come from them in order to reach the last inch between the TV and a person. It’s not just that the distribution network is closed but the development platform as well and this ensures that cable will never be a hotbed of content and application innovation.

Apple’s distribution system for the iPhone is closed but accessible, and by that I mean they have opened up the development tools and provided a low hurdle for access to the distribution capability that is the iTunes App Store. The result is that this is the place app developers want to be and because the flywheel is spinning more consumers want the device in spite of few hardware upgrades.

The cable companies, pretty much off of them, by contrast have little third party developer support and the integration of online to television content is weak, practically nonexistent. Video is the single hottest driver of audience today and the cable companies have done the bare minimum insofar as pursuing this an an online strategy.

To add insult to injury, cable companies have silo’ed themselves based on how content is distributed and have not invested in an integrated advertising sales effort, meaning the online initiatives run ad network content as often as their own sold inventory and because they believe they don’t know how to sell online they simply don’t try. This revenue suboptimization leads to a vicious cycle of underinvestment and experimentation that risks their core business.

Cuban may be “psyched” about cable because he has to given where his investments are but it’s hard, make that impossible, for any rational person to argue that cable has eclipsed the internet when it comes to innovation. Lastly, Cuban is wrong about one very significant part of the argument, bandwidth does not develop to meet applications but rather the expansion of bandwidth leads the development of applications that take advantage of bandwidth whether it be network or processing capability.

Is Twitter Killing RSS?

For media, there are two primary use cases for RSS, promotion of new content and content syndication. The latter is true plumbing that offers low cost, reliability and convenience while the former is a means for promoting new content through RSS client applications, widgets, iPhone apps, purpose specific apps, and so on… you see the headline and click on the content that interests you. Twitter is killing this use case for RSS.

Few media sites enable full text RSS feeds and for a good reason, it robs them of site traffic that is monetized whereas RSS feeds are not. This has always hamstrung the utility of RSS outside of blogs, yet still provided “good enough” utility that you could still use it.

Truth be told, publishers see RSS as something they should do while at the same time not really embrace it because while providing a convenient syndication mechanism the fact remains that it strips branding elements out, is notoriously difficult to monetize, and has stagnated as a technology because in the absence of branding and monetization there really isn’t much of a movement behind RSS to evolve the standard(s). Even microformats, something that should be obvious good stuff for publishers, have not been widely adopted for the same reasons, it provides utility for end users but not much benefit for publishers and content owners.

Something interesting happened along the way, Twitter achieved critical mass and bloggers and mainstream media alike adopted it to promote content. Every post I write is automatically tweeted out with the post title and link to source, not unlike what other sites do, and over the last year I have noticed a steady increase in referral traffic from Twitter as my followers grew and links to my posts were clicked on… in essence people are following me much like they subscribe to my RSS feed. I like it because the traffic returns to my site rather than be consumed in a RSS client that I can’t apply integrated analytics to, which has the effect of presenting a complete picture of site traffic without having to guess what my traffic actually is when I add in what I believe is bled off through my full text RSS feed.

In my own usage behaviors I noticed something starting when I followed ZDNetBlogs quite a while back, I stopped reading their RSS feed and started getting my story links through their twitter updates. Today I use the much improved Twitter search function to find profiles for the publications I like to read, following them and getting their content via links in tweets. For bloggers, the ability to follow provides not only the content updates in most cases but also the opportunity to interact with the authors and catch all their other updates that wouldn’t even show up in RSS.

Twitter provides publishers with several key advantages over RSS, namely the ability to control brand and force traffic back to their monetized site. Of course none of this precludes them from also using RSS to distribute content and there are equally compelling reasons for doing so but if I were to make a prediction it would be that publishers increasingly find primary utility for RSS in the backoffice while de-empathizing RSS for audience acquisition, in the process embracing Twitter as a mechanism for engaging an audience and promoting content at the same time.

Stacking the Deck

I fully appreciate the severity of the economic retraction we are currently working through, in fact having written much about it myself here and on my twitter stream. Having said that, I find myself shaking my head in disbelief at the degree to which the media continues to talk down the economy in anticipation, almost hope, that it gets worse.

Case in point, today Good Morning America (I like watching in on Sunday morning) had a segment about declining consumer confidence and they interviewed a husband and wife from a single family, in the kitchen of their very nice McMansion in name-your-favorite-suburb, about their new family budget in light of their economic sentiment. The money quote was when the wife said “we’re absolutely terrified!”.

Tucked in the report was the fact that “the couple both work for the family auto dealership”. Crikey, that’s like asking a homeless person about the state of housing.

The only reason GMA featured this couple is that the producer wanted an interview subject that would present the worst possible forecast on the economy and someone who was taking truly draconian actions in light of current economic condition… yep, someone who works in a “family auto dealership” would certainly fit that bill.


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Reuters and NewsGator Partner on Election Coverage

I was remiss in not writing about another announcement we made yesterday. Reuters and NewsGator have teamed up to offer U.S. election coverage widgets for individuals and publishers.

The idea of doing widgets with specific event coverage is nothing new, but what makes this program unique is that we are offering full text Reuters coverage and video in a branded widget that can be co-branded and customized for a specific publisher.

When content in the widget is clicked on, the click brings you back not to Reuters site but to the partner site that is cobranding the widget, as is the case here with Joe the Plumber on the Denver Post site. Pretty cool, huh?

Reuters deserves a lot of credit for offering publishers the ability to take advantage of their content in a manner that benefits both the publisher and of course Reuters. With the AP struggling to maintain their customer list of newspapers, it is no surprise that other information service providers are jumping at the opportunity to disrupt the marketplace with innovative syndication offerings.

RSS technologies when combined with widget syndication offer the ideal vehicle for aggregating and distributing content in a manner that retains the integrity of the brand and ensures that monetization flows exactly where it should, to content owners and publishers.

Branded iPhone Apps From NewsGator

We have experienced a lot of success with our NetNewsWire application on the iPhone, and like all good things in business it lent itself to a series of “what if” discussions internally, the result of which was what I am writing about today.

With NewsGator’s native iPhone Apps your brand and content are just a fingertip away from over 7M iPhone users. Launched in July 2008, Apple’s new 3G iPhone and App Store have experienced tremendous success with over 1M iPhones sold and more than 10M App downloads in the first three days after launch! You can reach this large and growing audience with NewsGator iPhone Apps. Our Apps enable you to deliver a branded media experience directly to the iPhone – providing users with one touch, anytime access to your content.

[From Branded iPhone Apps - NewsGator Widgets]

We realized that we could take the very popular NetNewsWire application for the iPhone and strip off the NewsGator branding to make it a dedicated media reader app for our media clients. We also had to detune it from being a general purpose mobile RSS client to a media specific reader apps. All of this stacks up to be an exciting offering for media companies who wish to have an iPhone app that can be used to increase their audience and more fully engage them at the same time.

There are two reasons why this is an exciting development. First and foremost, media brands have an absolute requirement to extend their presence to the places where people are consuming content and mobile is just one of those places. Building a better website is by itself no longer a strategy for expanding audience and advertising revenue, moving out to mobile is a compelling option for any media site, large or small. The iPhone has dramatically reshaped the mobile marketplace and it’s because of iTunes more than any other factor, we now have a merchandising mechanism for moving apps down the pipe to end users and this is hugely important.

The second reason this is exciting is that developing iPhone apps, or any mobile app for that matter, is complex and expensive. Go out and try to hire iPhone app developers today, good ones are very difficult to find and the market is super competitive, all of which conspire to make iPhone app development a steep hill to climb for media companies. They will invariably end up going with custom development that gives them little in the way of content control and then carries with it the risk of alienating their audience with a less than compelling application that they also have to support.

Our branded iPhone application program not only overcomes the challenges that media companies face with mobile app development, but we also host it for them and that removes a big operational challenge from their equation. We host it, provide our proven content management capabilities and all for a reasonable cost of a one time setup fee and a monthly hosting fee based on the number of downloads per month. We also handle insertion into iTunes App Store and have a best practices approach that clients can follow for predictable success.

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Zillow Syndicates Content to Newspaper Consortium

Last week I wrote about how Gannett’s move to increase it’s stake in CareerBuilder seemed to be a logical move with regard to their interest in a consortium of newspapers and a shared ad network. The content syndication topic is gaining steam as these companies are moving beyond job listings to the bread-and-butter category of real estate content.

This is a huge deal that will be as transformative to the newspaper industry as going digital was a decade ago. The Zillow piece is just one element, the transformative part is how newspapers are fundamentally rethinking their online business strategy having recognized that doing online what you do offline simply doesn’t work.

Lastly, this is a direct assault on Yahoo Newspaper Consortium by 11 very big media companies.

Under the Zillow Advertising Network agreement, the consortium’s advertisers can tap into Zillow’s user base of more than 5 million unique monthly visitors, while Zillow’s advertisers will have access to readers of the newspapers’ online real-estate content.

[From Zillow, newspaper consortium launch ad network | News - Digital Media - CNET News]

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