Content Matters

GigaOm Acquires PaidContent Creating Premier Digital Media Brand

Tech blog GigaOm has acquired Content Next Media, parent of PaidContent and related blogs.

Content Next, first acquired by Guardian Media in 2008, has been on the shopping block in recent months, as GMG looks to focus its operations. 

Of all the rumored buyers (including AOL, Vox Media, WebMediaBrands, Dow Jones, SAY Media) this is likely the best possible result, both for readers and the Content Next team.

From the outside, it looks as though the two companies have very similar cultures. Both founded around the same time as independent blogs (by Om Malik and Rafat Ali), GigaOm has been able to remain solo, taking venture funding along the way.

The combined GigaOm - Content Next will be an impressive media company:

• Great editorial - from editors and writers like Staci Kramer, Ernie Sander, Mathew Ingram, Nicole Solis, Om Malik, Erica Ogg and others - will yield great coverage of the digital media and technology space.
• Both companies have great events - including Structure, Structure: Data, Mobilize, PaidContent, PaidContent Entertainment, and more.
• GigaOm has experimented with paid research, led by VP research Michael Wolf, which has the potential to grow further.

With a modest cost structure, the combined company should retain the flexibility and nimbleness to test and adapt in an ever-changing digital media environment. 

Congratulations to both companies. I look forward to seeing what comes next.

Why AOL – HuffPo is a Smart Deal

The big media news this morning was the AOL (AOL) acquisition of the Huffington Post. HuffPo had long been considered the diamond of the alternative media world. The only online newspaper site with more traffic than HuffPo is NYTimes.com.

Many argue that it may be too little, too late for AOL, but I’m not so sure. Content may not be King (platforms like Facebook, Google and Twitter have proven that), but traffic can still be monetized.  By adding HuffPo, along with Engadget and TechCrunch, AOL positions itself strongly in the upper and middle segments in terms of quality content, while it already covers the lower end with its Seed platform.

The acquisition strengthens their position in local news, augmenting their existing Patch platform. And, HuffPo gives AOL much greater potential reach for Wow, it’s daily deal/Groupon clone. And the large AOL  sales force should be able to generate much higher revenues from the Huffington Post.

Key to the deal is Arianna, who will bring a clear voice to their disparate content properties. As Felix Salmon writes:

It’s smart, and bold, to put Arianna in charge of all AOL’s editorial content, since she is one of the precious few people who has managed to create a mass-market general-interest online publication which isn’t bland and which has an instantly identifiable personality. That’s a rare skill and one which AOL desperately needs to apply to its broad yet inchoate suite of websites.

Meanwhile, Jeff Jarvis notes:

Content alone isn’t enough for Aol. It has content. Lots. What HuffPo and Arianna bring is a new cultural understanding of media that is built around the value of curation, the power of peers, the link economy, passion as an asset, and celebrity as a currency.

Yet analysts remain cautious about AOL. Macquarie’s Ben Schachter advises clients to “wait on the sidelines”, while Clayton Moran at the Benchmark Company notes that the $315m price tag is “more than 40% of the $802 million in cash that AOL had on hand at the end of last year. The acquisition price is a bit of a stretch.”

There are really only two major online content companies left – AOL and Yahoo. With this acquisition, AOL takes a big step forward.  As Keith Rabois points out, with this acquisition, AOL becomes a more attractive acquirer for startups and entrepreneurs than Yahoo.

As newspapers experiment with moving content behind the paywall, it creates additional opportunity for free news sites. With a mix of topical, political and local content, AOL is positioning itself to fill any void. Of course, the proof will come in the months that follow. Will authors look to be paid? Will Patch integrate nicely with HuffPo? Lots of questions yet to be resolved, but this is a smart deal and it has a good chance for success.

 

Seeking Alpha to Pay Contributors, Share Usage Statistics

Seeking Alpha this weekend announced three new initiatives relating to its contributors.

The initiative that has gotten the most attention is that they will begin to share revenue with contributors, at a rate of $10 per thousand page views. The revenue share comes at a cost, however. Only posts that are exclusive to Seeking Alpha are eligible for the revenue share, and contributors must grant Seeking Alpha an exclusive license to use that content in perpetuity in any way that it wishes. Reuters blogger Felix Salmon addresses that issue in great detail on his blog, so I won't dig into it in great depth here, only to say that for most professional bloggers, who syndicate their content via Seeking Alpha, this will not be an attractive option.

Second, they've announced a revamp in their "leader boards", now providing more granular rankings, showing the most popular bloggers by category, rather than the old leader board which provided overall rankings by number of followers.

Third, and perhaps most significant for most contributors, is that they have begun to post actual page view counts for their contributors. For example, in the Internet category, the Alacra Pulse Check blog was the 4th most viewed source for the past 90 days, generating 33,100 page views.

While the revenue share will likely appeal only to a small subset of Seeking Alpha bloggers (primarily those who post only on SAI today), gaining some visibility into usage is important to all of us. Unlike some aggregators, who post only a snippet from a story (our own Alacra Pulse, for example), Seeking Alpha includes the full text of each post on its site. That's good for Seeking Alpha (and probably for the reader) but it leaves publishers in the dark as to how their content is being used.

Publishers and bloggers typically syndicate their content to Seeking Alpha to drive brand awareness, since there's little reason for users to click back to the native site. By providing usage stats, Seeking Alpha has begun to quantify for publishers the value of that brand awareness.

While providing exclusive content to Seeking Alpha doesn't make sense for Alacra today, gaining visibility into usage is a big improvement on the site and the most important of the new features in my opinion.

TheFlyontheWall.com barred from republishing analyst recommendations in real-time

In a court ruling yesterday, US district judge Denise Cote ruled against financial content aggregator TheFlyontheWall.com, barring them from distributing analyst recommendations from three key banks in near-real time.

The suit was brought by BarCap, BofA Merrill Lynch and Morgan Stanley, which argued that the service should not be allowed to republish their upgrades and downgrades until at least four hours have passed from publication and not before noon each day.

Under the judge’s ruling, theFlyontheWall will be barred from publishing such recommendations before 10am for reports published prior to the market open (9:30am) and within 2 hours of publication for those issued during market hours.

The ruling could have serious implications for news services and blogs which often write about analyst recommendations soon after publication. The judge’s ruling did leave a bit of a window, saying that reporting the analyst changes in the context of market movement would be ok (for example, to report that PALM stock was down 20% on Canaccord Adams downgrade). Specifically:

Theflyonthewall.com won’t violate the injunction if it refers to the banks’ recommendations “in the context of independent analytical reporting” of a significant market movement on the same day, the judge wrote.

Unsurprisingly, the ruling has caught the attention of financial bloggers.

Barron’s Tiernan Ray writes “The question for myself and others, such as my friend and colleague Eric Savitz, over at the Tech Trader Daily Blog, is how much room the ruling gives bloggers and reporters to write about what’s already moving stocks pre-market or throughout the day.”

He asks the logical follow-up question:

So, does that mean that before 9:30 am, Eastern, I and others should refrain from even referencing analysts’ equity research reports regarding stocks?

The Globe & Mail's Streetwise blog points out that while BarCap, Merrill and Morgan may have sued, many firms actively seek the exposure provided by having their recommendations published:

The banking industry is pretty split on the practice. Some firms send research immediately to media organizations (including this one), while others still try to protect analyst reports so that they have more value to select clients - the ones who pay the bills by generating trading commissions.

For those that encourage media reports, the tradeoff is a little free publicity, and in general the pendulum has been swinging that way.

The ZeroHedge blog, whose servers host TheFlyontheWall service, responds in their typically snarky way in a post with a title too long for Twitter:

Banks Stifle First Amendment, Attempt To Create A Tiered Market Of "Clients" And "Everyone Else" As Theflyonthewall.com Is Blocked From Instant Stock Research Reporting

This is merely a case of picking on the weakest: the next ones to lose their First Amendment right will be, in order of importance, StreetAccount, Thomson Street Events, Briefing, and, ultimately Bloomberg. The reason: keep the market as two-tiered as possible so that clients of the above three banks (which list will likely expand promptly as more banks join in) have an upper hand over all the slower retail and algo operations. With this forced lag in information (which is a joke because anyone who cares, knows the second a research report goes public anyway), and with the ever increasing transaction times courtesy of nanosecond collocation facilities, soon the self-cannibalizing market will only rely on stealing money from those accounts who are still willing to participate in a market that is now split into two distinct groups: those who make money, and are clients of MS, ML and Lehman (and the rest of Wall Street), and everyone else.

For those interested in reading the full ruling, you can read the complete injunction here.

Morningstar Acquires Footnoted.org blog

Morningstar (NASD:MORN) has acquired Footnoted.org, the blog-based financial research service that reads through footnotes of SEC filings, spotlighting the items that companies prefer investors not see.

Footnoted also posts its "worst footnote of the year" each year - for 2009, the "winner" was Chesapeake Energy (NYSE:CHK) which spent more than $12 million to purchase its CEO's antique map collection.

Last year, Footnoted introduced Footnoted Pro, a service geared towards hedge funds and institutional investors.

Congratulations to Footnoted.org founder Michelle Leder, who has tirelessly read through more filings in the past seven years than most analysts do in a lifetime. Following the acquisition, Michelle will continue to run Footnoted under its new parent.

Update: Some insights from Michelle on the acquisition, posted at Footnoted.org.

Professional Blogs Turn to Research for Added Revenue

In recent years, the line between blogger and industry analyst has been continually narrowing. For technology professionals in particular, much of the product and industry analysis that came from IT analyst shops has largely been replaced by blogs. That's not surprising. Many IT analysts now blog and others who have left the big shops like Gartner or Forrester have started independent blogs.

What's interesting is that now, as the online advertising market has dried up, a number of professional bloggers are now turning to paid research as an additional driver of revenues.

Today GigaOM announced the launch of GigaOM Pro, a subscription-based syndicated research site, that will be available at the modest price of $79 per year. GigaOM Pro will focus on a handful of tech sectors - Green IT, Mobile, Infrastructure and Connected Consumer - and will use both internal resources (newly hired Research Director Michael Wolf, formerly of ABI) and freelance analysts.

Last year, ContentNext, publisher of PaidContent, MocoNews and ContentSutra, hired ex-Merrill Lynch analyst Lauren Rich Fine to head up a proprietary research effort. They've released a few detailed reports, most recently a social media report called Following the Money.

Earlier this month, ReadWriteWeb released their first premium report - ReadWriteWeb's Guide to Online Community Management, a combination of case studies, best practices and an online component which aggregates relevant stories on the topic.

And, it's not just technology companies. Financial blogs are exploring the same paths. Footnoted.org recently launched Footnoted Pro, a subscription-only online newsletter which provides actionable research, augmenting the basic information on the free site.

Meanwhile, StockTwits (while not a blog) has announced StockTwits Premium, an a-la-carte offering of research and tools for its active trader community.

Blogs are morphing into traditional b2b media companies, with three revenue streams: advertising, paid research and conferences. And that's going to raise the bar on the traditional analyst research firms to deliver greater value.

Five Questions for Lauren Rich Fine

Lauren Rich Fine has a fairly unique perspective on two industries which are in the midst of transformational change: news and financial services. For nearly twenty years, she followed the newspaper industry as a sell-side analyst at Merrill Lynch. When she stepped down from that role two years ago, the subprime crisis was still considered an isolated problem and private equity firms were paying a premium for newspaper companies. What a difference twenty four months makes.

More recently, Lauren has moved to the alternative media space, serving as Research Director for Content Next Media, publisher of PaidContent and related news blogs. Her latest report for Content Next is Playing a New Tune: The Music Industry's D-I-Y Era. Fine also serves as Practitioner in Residence at Kent State University's College of Communication and Information.

Content Matters: The world of investment research has changed dramatically since the Spitzer settlement. This has contributed to the emergence of the independent analyst and the professional blogger. What do you see ahead for investment research?

Lauren Rich Fine: I think you will see more well known analysts hanging up their own shingle, lilke Ivy Zelman and Meredith Whitney. I have chosen to do the part of the job I really loved, which was forward looking industry research; I was less interested in picking stocks so the position as Research Director for ContentNext was perfect.

CM: In an interview shortly after you left Merrill, you were asked what you might want to do next. You suggested that you’d love to help Sam Zell with his then just-acquired Tribune business. A lot has changed since then, particularly the end of cheap credit. But, credit aside, what might you have done to make Tribune a sustainable business?

LRF: I would have made changes a lot faster. I would have communicated more directly with my readers and explained the changing landscape for newspapers. Online, I would have had the editors use quality Internet content for nonlocal content, and even use it in print, and focus my dwindling resources on local news, particularly investigative reporting. I would have really tried to energize my sales force, both for print and online. There are many other things, but overall, experimenting and moving more rapidly could have helped.

CM: Gordon Crovitz recently suggested users should pay for news with micropayments. Newsday has announced plans to make their news available only to paying subscribers, while US News is publishing a paid PDF magazine. But the genie has been out of the bottle for ten years. Can publishers (other than perhaps the FT and WSJ) really get consumers to pay for news?

I don't think so. The WSJ is providing information that is required to do a job, v. the average metropolitan papers which is read to be an informed citizen. One produces a return on investment, and by the way, is frequently paid for by an employer. The comparison to iTunes is flawed as a purchase of a song can be heard over and over again v. news which becomes stale very quickly.

CM: We’ve seen a handful of blog acquisitions by traditional media in the past year (including ContentNext, Ars Technical, etc), but not as many as some of us anticipated. Why do you think that is and do you see that changing as the ad market comes back?

LRF: It is hard to maintain a site that is proprietary and dominant market share. The barriers to entry are so low that when one does the build v. buy, frequently, build wins out. It is getting harder to break through the clutter and have a site with enough traffic to really attract advertisers.

CM: While there’s a lot of gloom and doom about, there are always bright spots. Weak economies bring transformation and change. What are you optimistic about in 2009 (professionally or personally)?

LRF: Well, I for one am happy to say goodbye to the era of excess and lack of accountability. While I am deeply concerned about the rising unemployment rate, I don't mind that my 5 teenagers will really learn to work hard to get what they want. Personally, I have an amazing family that I enjoy watching mature and a few jobs (I am also a practitioner in residence at Kent State University) that keep me fulfilled and bring me into contact with smart, innovative people.

Why full-text RSS matters (hint: mobile)

I've cut down on my RSS reading over the past 12-18 months. A lot of feeds that I might have read periodically, I have now dropped, replaced in part by what I see on Twitter.
But there are still around 15-20 RSS feeds that I like to read on a daily basis. I no longer read them on my desktop, however. I just don't have time. Instead, I like to read RSS feeds on my iPhone (using NetNewsWire, a great reader from Newsgator).

I read the feeds when I have dead time - on the subway, standing on line at the Indian takeout joint, etc. It lets me keep up with the info I need without being yet another distraction from getting work done. And, when I find something compelling, I can email it to myself with a couple of clicks.

That's why getting the full text of an RSS feed is so important to me. As a mobile user, I want to consume content on the mobile device and don't want to have to click through to a browser. That's why I was disappointed this morning to see that one of my favorite blogs, 24/7 Wall Street, has switched their feed to show just a snippet with a message telling me the full text is available on the website.
 
The snippet-based feeds have long been used by newspapers and that might make sense, particularly for those with content behind the pay wall. But blogs typically have full text in their feeds.

I understand the desire to monetize all your readers through your website, but for me, if it doesn't fit my workflow, I just won't read it anymore. That means that I'll miss content that I find valuable and stuff I might otherwise link to on this blog or share via Twitter or Delicious. In the long run, blogs that only provide snippets in their RSS will hurt themselves as they will lose readers and, more importantly, the buzz that comes from their content being shared to new users.

As content consumption moves to the smaller screen, more and more users will be using their smartphones as their primary means of reading information. Content providers should optimize the user experience for smartphones and other mobile devices if they want to maximize their readership.

Henry Blodget and the rise of online journalism

While the tweets flowed throughout the conference, I'm a couple of days late in posting my day two notes. The second day seemed to have a faster pace than the first. The day got off to a great start with the opening keynote by Henry Blodget, the best presentation of the conference IMO.

Henry's presentation focused on "the rise of online journalism". He opened with a discussion of why online journalism was different than traditional journalism:

• Aggregation: there are so many thousands of good, quality sources that the mere act of aggregation can be very valuable, esp if you add a layer of why we’re bringing this to you
• High velocity production: newspapers have greatest teams spend most of the day creating their story, which goes up at 10pm for the next morning; for online publishers, if you can put up new content all day, when people are at work…  much more like broadcast news than like print. Stories evolve and change.
• Conversational, interactive: as soon as they publish something big, they get strafed by half their readers. 
• Snackable: people want short articles they can read in 3 mins after getting off a call, etc.
• Real-time
• Omnimedia

He noted the challenges facing online media:

• Online readers think everything should be free
• Online ads have barely innovated since 1995
• Advertisers only care about “clicks”; even though brand can get out there on the banners
• Massive glut of inventory = prices plummeting

Then he summed up the problems with old media in two words: It's Over.
The debate over whether online media is better than traditional media is irrelevant. As with any disruptive technology, it's not necessarily better, but it's cheaper, more convenient and it's good enough.  Online revenue cannot cover the print cost structure and print revenue is disappearing. But, he noted, some traditional media are doing fine, highlighting Bloomberg and Dow Jones as examples. Blodget also outlined his view on how the New York Times could be saved: cut costs 40%, raise the price of the print paper and charge for online subscription, buying time for their transition to fully online.

Henry also pointed out that journalism isn't dying, it's just old-line newspapers which aren't adapting. In the new model, with 1 billion potential fact-checkers, if Watergate were to occur today, the underlying documents would have been posted to smokinggun.com.

So, where's it headed? Looking forward, Henry projects:

• More newspapers sold, folded or bankrupt
• Online journalism grows, gets professionalized
• Some old media companies adapt
• Some old media journalists adapt (Krugman)
• Creative destruction leads to new, better future: over time, talent comes to Gawker, HuffPo, Politico, etc and they will improve their quality going forward. Eventually, the new media companies will acquire what’s left of old media

2009 Content Industry Outlook, Part II

In part I of this post, I laid out some of the reasons why 2009 will be a difficult year for most content companies. But that doesn’t mean we should all just crawl up in the fetal position until the recession passes. In fact, for many companies, the next 12-18 months can be a critical opportunity to position themselves strongly for the eventual market recovery.  So, which companies will fail, which will survive and which might thrive?

Even during the darkest times, there will be market forces that favor certain companies and industries. Will government stimulus efforts favor your market? In my Part I post I spoke of the incredible challenges facing trade publishers. Yet some may thrive. As hundreds of billions of dollars are funneled toward municipal infrastructure, a trade magazine like American City & County is well-positioned to benefit. Similarly, a b2b online service like INPUT, which matches prime and sub-contractors for government contracts, should do well in the coming year.

Similarly, in the wake of Bernie Madoff and the bank failures, you can expect new regulations for financial compliance. Just as the Patriot Act brought a greater focus on anti-money laundering laws, the financial failures will lead to legislative action on risk, leverage and transparency.

While the recent drop in energy prices combined with the deepening recession may have moved green technology off the front page, alternative fuels and clean tech will be a major part of an Obama presidency, even if some actions may be deferred for a year or two. These industry trends will create new markets for publishers who stake out early positions.

But what if your markets are in difficult times? How will you survive?
For b2b information publishers, much of that depends upon your relationships with clients. In every industry, companies will be cutting their content budgets. Will your deal be cancelled or downsized or will you be able to retain your current relationship? That will be largely determined by two major factors:
The first factor is the strength of your value proposition. Can you clearly quantify the value that your clients get from your products? More importantly, can your clients quantify that? And, if so, does their view match yours?

The second factor is the relationship that you have with your clients, and their perception of your company. Do they believe you have their best interests at heart? How did they feel about the last negotiation you had with them? Did they feel you treated them fairly? Are your licensing policies designed to fit their needs? If not, it’s too late to do much about it now, but those who treated their customers well during the good times can expect to be treated fairly during the downturn.

So, what else should companies be doing now?
While things look bleak right now, eventually the markets will come back. And when they do, there’s likely to be a growth spurt. History shows that the boom that follows a recession is often where transformational change occurs. For small, nimble companies, that means that there is a tremendous opportunity to position yourself to take market share away from your larger competitors.

What are the big companies doing right now? Most of them have begun a period of deep retrenchment. Multiple rounds of layoffs have most employees hiding under their desks and growth engines like product development have been slowed to a crawl. This creates a great opportunity for innovation from upstarts.

For companies with cash in hand, this can be an exceptional time to make modest acquisitions. One area to explore is acquisition of blogs, which can provide a big bump in website traffic at a modest cost. Recent acquisitions such as Consumers Union's purchase of the Consumerist and the Guardian's acquisition of PaidContent are great examples of traditional publishers acquiring a compelling online brand at a reasonable price.

This is also a great time for companies to increase market share at a reduced cost. Trade media continue to keep their content locked behind subscriber walls. Many have no RSS feeds and for those who do, the feeds are often headline-only. Breaking down those barriers will allow trade enable trade publishers to gain new subscribers and increase brand awareness. 

While focusing on your core customers should be your top priority, publishers looking for incremental revenues should explore additional sales channels and sales models. Publishers of high-end subscription content may be able to reach new markets with transactional sales. While some publishers are hesitant to embrace the transactional model for fear of cannibalizing existing subscriptions, that can be controlled through appropriate pricing. Priced right, transactional sales can generate incremental revenue and can provide a conversion path to new subscription clients. We have seen this model work effectively with our Alacra Premium and Alacra Store transactional platforms.

So, there’s no doubt that 2009 will be a challenging year. But nimble publishers can use this period to solidify their customer base and prepare to steal market share during an eventual recovery by:
•    Identifying market segments with growth potential even in a down market;
•    Focusing on customer needs and delivering exceptional service;
•    Explore acquisitions while prices are low;
•    Developing innovative new products in preparation for the turnaround; and
•    Exploring new sales channels and sales models