Content Matters

Michael Kinsley, of Slate, wrote an interesting article this week on the future of newspapers.

The core theme was that the newspapers have some strong assets, in particular, their brand, their ability to create massive amounts of content, and their reputation (Jason Blair aside) as a “trusted source”.  At the same time, their manufacturing process, delivery methods and end-user usability have hardly evolved since the early days of the printing press.

From a customer experience standpoint, newspapers are clearly diminishing in value.  When I talk to people to find out whether they still read a print version, I find it’s highly dependent upon their commute.  I still have the New York Times delivered each morning, but that’s largely because I have a commute that’s over an hour, on a combination of railroad and subway.  Those with a short commute, or who drive, don’t seem to find a printed newspaper that valuable.  In essence, the printed newspaper has become like an iPod – it’s a means of killing time, as opposed to a primary source of information.

Kinsley’s take is that “The trouble even an established customer will take to obtain a newspaper continues to shrink, as well. Once, I would drive across town if necessary. Today, I open the front door and if the paper isn't within about 10 feet I retreat to my computer and read it online. Only six months ago, that figure was 20 feet. Extrapolating, they will have to bring it to me in bed by the end of the year and read it to me out loud by the second quarter of 2007.”

Kinsley’s conclusion is that the traditional way of manufacturing and delivering newspapers cannot last.  The bright side, for Kinsley, is that if newspapers can eliminate their printed versions, they will be more profitable (assuming they can retain their advertising base), as the cost to print and deliver a paper is higher than the price.  Of course, only those newspapers willing to aggressively “eat their young” will be able to recreate themselves in a more useful way, while remaining profitable. 

I hope that some of these trusted sources can make that leap.  The quality of investigative journalism that you get from the Washington Post, the NY Times or the Wall Street Journal is not something you'll find on a blog or in a regurgitated press release positioned as news.  The cheap way out will be for papers to simply syndicate more of their content, as many smaller papers already do today.  But, those who try that approach will find that by adding no value, they'll no longer be relevant.  Instead, I hope that the major papers will invest more, not less, in those areas where they create value, and that local papers take a similar approach to creating content relevant to their community.  I expect that in the next few years we will see more newspapers fail and fewer trees getting cut down.

Bankrate, a company with a 25-year heritage, has effectively transformed itself from a traditional newsletter publisher to a strong online media property.  Today, Bankrate is among the leading destination sites on the web for financial information, receiving more visits per day than the Wall Street Journal Online, Hoover's or the Motley Fool, despite its modest marketing spend.  Its recent acquisitions have positioned it to become a greater force in lead generation, diversifying its revenue stream.

Bankrate started out as a simple print-based newsletter, providing interest rate data from financial institutions.  During the early days of the dot-com boom, Bankrate moved into a number of different directions, among them launching consejero.com, a Hispanic market financial portal, and Garzarelli.com, a portal for market strategist Elaine Garzarelli, all under a new iLife brand.  In 2000, it hired Elisabeth Demarse as CEO, who restored the Bankrate name, killed off unproductive assets, and began to focus on exploiting the potential of the core brand.

Bankrate revenue and profitability grew substantially in subsequent years.  The company went from losing $16.9M on revenue of $15.2M in 2000, to making $12.1M on a topline of $36.6M in 2003.  During that same period, investors saw Bankrate stock climb from a low of $0.30 per share to more than $18 per share.  In 2004, Tom Evans took over as CEO.  He previously led GeoCities and Official Payments.  More recently, Bankrate has launched two new channels, college loans and subprime lending, to help reduce its dependency on the mortgage and refinancing markets.  About 90% of Bankrate's revenues come from its online publishing business, with the remaining 10% licensing and print revenue. 

This past November, Bankrate made two acquisitions.  It acquired Interest.com for $30M, to strengthen its hold on its core mortgage market, and FastFind, a lead aggregator for the mortgage industry, for an estimated $10M.  While the Interest.com acquisition will eliminate a direct competitor and provide Bankrate with more page views for its inventory, I find the FastFind acquisition the more interesting of the two.  Through this acquisition, Bankrate will play a more significant role as an intermediary between buyers and sellers, which should allow it to capture more of the economic value of a mortgage transaction.  This will allow Bankrate to increase its revenue per lead generated from that which it obtains from its partnerships with other lead aggregators. 

During the past five years, Bankrate has transformed itself into the key online site for interest rate information, and has begun to improve its position in the personal finance value chain through lead generation activities.  It has diversified its revenues, reducing its dependency on traditional refinance advertising and seems well-positioned for continued growth.  As such, Bankrate is clearly one of the 50 Content Companies that Matter.

Reports this past week about Google refusing to comply with a U.S. Justice Department subpoena for search records were top stories in newspapers, on blogs and probably contributed to an 8% drop in the price of Google stock.

Unfortunately, most of those media outlets got the story wrong, positioning it as a privacy issue.  In reality, the issue was not about privacy, but (from Google’s standpoint), protecting trade secrets.

The Justice Department, in an effort to understand what sites might be delivering illegal pornography to users, apparently subpoenaed search and results data from Google, Yahoo, MSN and AOL.  While the other three complied, Google refused.  The purpose of the request was to document typical profiles of Internet use, to defend the need for the Child Online Protection Act, passed in1998.

What the Justice Department requested, though, were not records of individual users.  Instead, they were merely looking at aggregate records of a week’s worth of search queries and of one million URL’s from the Google index. 

Whether or not the Justice Department should have access to that is not my area of concern.  Taking the “slippery slope” argument, particularly in light of how this Justice Department has viewed Executive powers vs. rights of privacy, it’s legitimate to make the argument that these subpoenas are inappropriate.  My concern is more how this news has been portrayed through the media.  If you skim articles in the NY Times, Washington Post and elsewhere, a reader would get the impression that it was a privacy issue.  In other words, that Google would be disclosing the identity of its users, along with what they searched for and the sites they visited.  A Washington Post article began "Google Inc. is rebuffing the Bush administration's demand for a peek at what millions of people have been looking up on the Internet's leading search engine _ a request that underscores the potential for online databases to become tools for government surveillance."  That’s simply not accurate reporting.

The reporting is very similar to the articles a few weeks ago, that the NSA (or No Such Agency, as it was historically known as) was violating privacy rights by using cookies on their site.  To read these articles, you’d think that the NSA was tracking the activities of users, then matching that to identities (and possibly to phone intercepts which are one of the things NSA is renowned for).  Again, that’s not the case.  Using cookies, they could know that “a user” had returned, and would be able to track their click patterns, but users don’t register at the NSA site.  There’s no authentication.  Cookies could not help the NSA identify individual users in any shape or form.

These two stories demonstrate a tremendous gap in the technical knowledge of the media.  I don’t expect political or business writers to understand the nuances of cookies nor of search engine indexes.  But, I do expect them to do the due diligence to understand the key aspects of the story.  And, from the articles I’ve read, that’s just not happening.

We see similar problems when politicians jump on the bandwagon creating legislation to “solve” problems that don’t exist.  The fax-ban, postponed in 2005, was a good example of legislation that could impact many businesses, but which served almost no purpose.

Technological changes are impacting our lives in significant ways, and will be sure to raise many new ethical and legal issues in the years to come.  Somehow, our political and media leaders must take steps to understand the impact of those changes before they speak or write about them.

BTW - kudos to Danny Sullivan and Search Engine Watch, who were one of the few to get this story right from the start. 

This headline, Netflix names ex-US postmaster as COO, landed in my newsreader this afternoon.  While it might strike many people as odd (after all, the postal service isn't where most of us think of tapping the best content industry talent), it really reinforces the reasons why Netflix is winning the DVD rental wars.

When I added Netflix to my list of 50 Content Companies that Matter, one of the key differentiators was that "Netflix focused its efforts on building the logistics infrastructure to scale its business".  Early on, Netflix understood that developing an infrastructure that would make it simple and painless for its users to use the service was the key to success.  No one ever felt that Blockbuster provided a good user experience, and it will be a while before the efforts of Yahoo, Google and Microsoft begin to pay off.  In the meantime, Netflix continues to create raving fans among their users, with loyalty comparable to that of Tivo.

Hiring former US postmaster William Henderson as COO will help them continue to execute at a high level.  While the postal service may not win accolades for its customer service, they excel at consistently delivering mail and small packages on time. 

According to CEO Reed Hastings, "Bill Henderson is about the only person on the planet who looks at our volume of mail as a trickle". 

It seems like the perfect hire to ensure that the Netflix infrastructure can support their goal of 20 million subscribers by the year 2012.

 

Sometimes, to find the innovators you have to look at the simple applications that just deliver what they promise.  For more than 25 years, Zagat has been delivering just what their users need.

Founded in 1979, by husband and wife attorneys Tim and Nina Zagat, the Zagat Surveys have become the staple of diners in virtually every major city.  The ubiquitous burgundy books sit on bookshelves in every major office and household.

Early on, the Zagats caught on to the magic of customer feedback, in this case restaurant reviews.  Ratings you could rely upon, combined with anecdotal feedback, made users confident in their choices.  Keeping it light, they would infuse local flavor and humor in the listings (my all-time favorite review was for the former Triplets Roumanian Restaurant in Brooklyn and opened with “Like a Yiddish themepark…”).  For better usability, Zagat provided various indices in the book (cuisine, location and special features) and also provided a set of rankings up front (top food, top by location, best value, etc.).

During the dot.com boom, many thought Zagat would be replaced by one of the many web-based city sites, such as CitySearch.  It would not have been surprising to see Zagat shy away from the web, seeing it as a threat to their business.  Instead, Zagat embraced electronic delivery, creating applications for PDAs as well as the web.  They have effectively balanced free content vs. subscription content, periodically moving more and more content behind the subscriber wall.  All the while, they have seen their print sales continue to rise.

In 2000, Zagat raised an estimated $31M in outside capital, led by General Atlantic Partners, Allen & Company and Kleiner Perkins.  Funds were used to revamp the web applications and dramatically expand the geographic coverage of the Zagat Restaurant Surveys to more than 70 markets globally.  More recently, Zagat has leveraged their brand to do ratings of hotels, golf courses, nightlife and more.

Over the years, I’ve seen countless business plans describe their model as being the “Zagat of (insert market here)”.  There can be no higher praise than to see your trademark brand become a generic noun.  Revenues for privately held Zagat were estimated to be $27M at year-end 2003, according to CorpTech, while Zagat employs about 110 people.  It's estimated that more than 650,000 copies of the Zagat New York City Restaurants Survey are sold at retail each year, with hundreds of thousands more custom imprints.

As an early pioneer in ratings and rankings, who has navigated the changing publishing market successfully, all the while strengthening its core brand, Zagat is clearly one of the 50 Content Companies that Matter.

P.S. To resolve the age-old question, the correct pronunciation is “Zuh-GAT”, not Zagg-it or Zay-git.  Then again, when Tim Zagat was asked that question on CNN a few years ago, his answer was simply “it doesn’t matter; just buy the book”.

Though we're not even at the halfway point in January, two new blogs have launched this month with a focus on the content space.

Clare Hart, the innovative CEO of Factiva, has just launched From the Hart, a CEO blog focused on the world of business information.  Under her leadership, Factiva has reshaped the world of business news, delivering workflow-based solutions for CRM, reputation monitoring and other business needs. 

The Bloom Group is a leader in professional services marketing.  I had the pleasure of working with them on a research study, in combination with business guru Michael Treacy, on behalf of the U.S. Chamber.  Ed Hastings of the Bloom Group has just launched a personal blog, That We Know, focusing on IT, content and the world of professional services.

Welcome to the blogosphere Clare and Ed.

One of the trends discussed in my Themes for 2006 post was the potential growth for lead generation sites.  In essence, this is shifting the web from being simply a tool for e-commerce and marketing communications, to one that can drive new opportunities for traditional sales organizations.

One market where this is clearly taking hold is the enterprise software market.  The enterprise software market tends to follow the adoption life cycle outlined by Geoffrey Moore in his classic, Crossing the Chasm.  Companies find technology innovators, willing to deal with alpha-quality versions.  Through word of mouth, they then land early adopters, whom they leverage to refine their product, then if they can “cross the chasm”, they land the early majority (pragmatist) users.  Many successful software companies have reached that level, but few get to the next level, which Moore refers to as the Tornado in his sequel, Inside the Tornado.  For those in the tornado, lead generation is not an issue.  The market frenzy for a hot product means that you have more leads than you can handle, so it’s sell-sell-sell as much as you can produce.

Unfortunately, most of us never get to live inside the Tornado (and those who have often take an early retirement afterwards).  The rest of us, once our product has reached the viability stage of early majority, are continuously striving to generate more leads for the pipeline so we can hit our numbers.

KnowledgeStorm has created a strong and growing business focused on that opportunity. 

KnowledgeStorm is a portal designed to deliver white papers and supporting collateral for hardware, software and related technologies.  What’s made KnowledgeStorm successful is their understanding of “both sides” of the purchasing equation.  First, from the buyer’s perspective, they chose a market, technology, where buyers like to do their own research and read white papers.  In other markets, for example, insurance, this might be a horrible solution.  For technologists, it’s a treasure trove.

Secondly, and more importantly, KnowledgeStorm set out to be more than just a source of leads.  They focused on the lead generation process and provide their customers with a methodology to ensure that leads are followed up. According to Kelly Gay, KnowledgeStorm CEO, “79% of all leads generated by marketing are not followed up by sales in a typical technology company.  Of the remaining 21%, 70% are discarded by sales as not being qualified.  So, less than 10% of all leads are actually followed up.”  Her reasons for that are a combination of poor target market definition, a lack of integration and ownership between sales and marketing, and a lack of tracking and measurement on lead conversion.  So, KnowledgeStorm focuses not simply on lead generation, but on quality lead generation and management.  By working with their clients to implement their methodology for lead generation and management, KnowledgeStorm helps its clients develop, manage and measure their results. 

KnowledgeStorm, founded in 1998, was ranked #168 in the 2005 Inc. 500 list, with their $10M in revenues representing a 3-year growth rate of more than 600%.

KnowledgeStorm has also done all the critical things to make their portal a success, through top-notch SEO and SEM efforts.  If you search a typical technology term, they will inevitably show up near the top of the results.  However, by helping their clients maximize the value of leads that they are already getting, as well as those new leads generated through the portal, KnowledgeStorm delivers compelling results.  And for that, they are clearly one of the 50 Content Companies that Matter.

Here's your chance to tell the rest of the world which blogs you like to read.

The 6th annual Bloggies enable you to nominate your favorite blogs by regions of the world, by topical area (politics, tech, etc.), your favorite blogging tools and more.  So, if you're interested, take a minute and cast your votes.  There's even a category called "best-kept secret" weblog for blogs like Content Matters (not so subtle hint) that don't have the readership of DailyKOS or Engadget. 

The past week’s Consumer Electronics Show was filled with many big announcements.  The GYM trio rolled out their big guns in an effort to claim space in the personal entertainment market.

After reading a few dozen press releases and blog posts, all I could think was “is this it”?  Microsoft showcased its portable Windows Media Center, Yahoo launched an online reality show, while Google launched a new proprietary video player software, along with its premium video store.  So, what’s available in the premium video store?  NBA games, 24 hours after they’ve been played, some Sony BMG videos, and a slew of CBS content including Mannix, MacGyver, the Brady Bunch and I Love Lucy.  Hmmm.  Sounds like what I used to find on television at 2am when my daughter was a baby and wouldn’t fall asleep. 

Video on Demand is interesting.  Allowing users to download videos to an iPOD is cool (assuming the DRM systems allow that) and I would guess we’ll start seeing some users watching video during their morning commute, instead of just listening to music.  But these steps are hardly changing the way that consumers interact with content.  I think these announcements added together have less of an impact than Tivo or Netflix.

If we want to change the way that consumers use entertainment content, the content owners are going to have to change their models.  When we see first run movies being made available on DVD or via download the same day they open in the theaters, that will begin to impact user behavior. 

I also wonder how Google will fair in this market.  Their technology driven approach works well for text-based content, where the better algorithms can equal a better solution.  Video’s different.  I don’t think search is the key for video.  Instead, learning behaviors are more interesting.  Use of AI or similar models, in the mode of Amazon’s recommendations, combined with Tivo-like auto-recording of things it believes you might like would seem more relevant to me.  In the meantime, creating a portal to sell ninety-nine cent repeats of network TV just doesn’t get me very excited and could be a distraction for Google in the near-term.

   

Consumer Electronics – impact in 2006

The big news this week comes from the Consumer Electronics Show (“CES”) in Las Vegas.

All the big names – Microsoft, Google, Yahoo and others are touting new solutions for video on demand and the ability to download music to your cellphone. Google even announced their (yet another) digital rights management system, sure to provide users with more frustration as they try to legally deploy their purchased music on multiple systems. But, most of this doesn’t impact anyone until 2007-2008.

The one announcement so far that I think will have a 2006 impact is the launch of new devices for XM radio.  Satellite radio is in the spotlight this month with Howard Stern’s imminent launch of his Sirius program. Meanwhile, at CES, XM partners Samsung and Pioneer have each launched new devices, the Helix and the Inno, respectively, which begin to change the value proposition for satellite radio. Each device can receive XM satellite radio programming and also storing MP3s. The pocket-sized devices also include time-shifting capabilities, enabling users to “Tivo” their XM content. From a user perspective, the ability to record programming and listen to satellite radio, while also providing basic MP3 player capabilities is highly attractive.

 
While video remains the hot topic for discussion and should have bigger impact in the long-term, I think that satellite radio is going to reap the rewards in 2006.