Content Matters

Who is your customer?  Is it the consumer or the advertiser?

Ad-supported content products must continously ask themselves this question. Is their primary focus creating a great user experience or in creating content optimized for advertising? 
Saul Hansell at the New York Times (via Michael Parekh ) takes a look at this issue in a blog post about Zillow. Hansell is disillusioned by the typical pattern that occurs with new sites. Initially, they focus on the customer, then over time become more and more advertiser-driven, reducing the quality of the customer experience. Or, as he put it:

There has been a sadly predictable transition as idealism morphs into the cruel realities of running a business. The comparison shopping engines, like ComputerESP (bought by CNet’s Shopper.com) and BizRate (now part of ShopZilla), stopped displaying things in the order that most favored consumers with the lowest prices or whatever else the consumer wanted first. Instead, they tried to find ways to favor advertisers, like listing paying customers first or simply ignoring sites that didn’t pay for access.

This balance between the needs of consumers and the needs of advertisers is not something that newly emerged on the web. It's been there for decades in trade press, directories (where a logo or preferred positioning is sold to listees) and even in the conference industry.

Zillow, is trying to break that pattern, by keeping their products consumer-focused. Other mortgage shopping sites, such as Lending Tree, are lead-generation engines.  You can get quotes from multiple sources, but only by agreeing to have your contact details shared with lenders, who follow up with various levels of aggressive sales efforts. In the Zillow system, consumers remain anonymous. You can get quotes from multiple lenders who receive the key information needed to provide a quote (zip code, rough credit score, etc) but without the need to provide their identity. Consumers can send questions back to lenders, with Zillow as the intermediary, thereby remaining anonymous until they decide they wish to contact the lender directly.

I've always believe that if you create a great user experience, you'll attract consumers and make your site attractive to advertisers. At the same time, I know of many products - websites, magazines, conferences and more, which started by focusing on the needs of their target consumer, but later compromised the  user experience by letting the advertiser drive all of their decisions.  Zillow's Rich Barton seems to understand the need to avoid the temptation; let's hope they keep that approach even if they're missing their revenue targets.

Lost in yesterday's announcement of the EU approval of Google's acquisition of DoubleClick was the news that the post-merger integration process will come with something associated with old media mergers: layoffs.

Posted to the official Google Blog were Eric Schmidt's comments:

As with most mergers, there may be reductions in headcount. We expect these to take place in the U.S. and possibly in other regions as well. We know that DoubleClick is built on the strength of its people. For this reason we’ll strive to minimize the impact of this process on all of our clients and employees.

At one level this comes as no surprise. This was not a small bolt-on acquisition. DoubleClick has more than 800 employees and there is bound to be some overlap between the two companies. At the same time, it's another signal that Google is no longer on the same growth curve that it was a few years ago. As they integrate this acquisition and with pressure on their stock price, it will be interesting to see if the Google corporate culture begins to change.

It’s been a busy January.  Most years, I’ve posted my themes & predictions by New Year’s day.  This year, it’s almost February and I’m just getting this out. 

First, a quick look back at my predictions for 2007:

1. Growth in vertical search – didn’t really happen
2. Changes in web advertising models and metrics as page views become less important due to AJAX and UGC.  This one was a big issue and Nielsen/NetRatings dropped use of page view by mid-year.
3. Further consolidation in the industry/heavy M&A: record-setting year.
4. Rollup of blogging tools: Most of the companies I mentioned in this paragraph (Feedburner, MyBlogLog, Last.fm) were acquired; just not by the same company.
5. MySpace jumps the shark: While Facebook had the stronger growth during 2007, MySpace continued with steady growth.  The predicted slowdown didn’t happen.
6. RSS Gains Adoption: sort of, but not really
7. Widgets gain prominence: Thanks to Facebook, widgets skyrocketed in 2007.
8. Drop in newspaper readership accelerates: OK, sort of like predicting that the sky will be blue, so I’m not taking too much credit for this one.

I score that five out of eight, slightly better than my usual 50%. 

Let’s take a look at what 2008 might have in store.

The economy will hang heavily over all business, especially during the first half of the year.
Both b2b and b2c content businesses are likely to see revenue declines.  On the b2b side, the first thing that goes in a week economy is the peripheral user.  When asked, most business leaders will tell you that the bulk of their customers are “core users”.  In reality, for most businesses, it’s probably half that.  So, half of your users have been paying for subscriptions but can’t quantify the value you provide.  2008 may be the year that many of those casual users choose not to renew.

That creates opportunity, of course, for new business models.  Advertising-supported or freemium businesses may be well-positioned to take users away from long-established paid content providers.  Providers like ZoomInfo may not be as good as the incumbents they replace, but for free, they may be good enough.

Slowdown in M&A
The second economic impact will likely be a slowdown in M&A.  2007 was a record-setting year for M&A in the content industry.  According to Jordan, Edmiston, there were 838 transactions worth nearly $108 billion, nearly the sum of the prior two years combined.

With lending tight, at least for the first half of the year, it will be harder to do large acquisitions.  On top of this, some of the more active strategic buyers in the past, such as Thomson, Reuters and Dow Jones, will be busy digesting their 2007 deals and may have a lower appetite for new deals. That said, this could finally be the year that Yahoo gets acquired, either by Microsoft or perhaps by private equity.

Yet 2008 will not be all bad for M&A.  For European and Asian acquirers, the weak US dollar makes it seem like everything’s on sale.  While private equity deals may be down a bit this year, cross-border strategic acquisitions will keep the deal flow alive.

A great time for startups
The weak economy could be a good time for startups, however.

It’s never been less expensive to get a content or technology startup off the ground than now.  Hosted technology solutions mean you can buy an off-the-shelf technology infrastructure at a fraction of what it would cost to build it out yourself.  Meanwhile, as legacy businesses see their revenues erode, they’re less likely to test out new revenue models or launch new products.  For nimble startups with low cost structures, this can be a great time to gain a foothold into a market.

The financial markets may also yield opportunities for startups.  Thomson and Reuters will be distracted by the internal politics of combining their two businesses.  At the same time, financial institutions often require multiple sources for key databases.  The consolidation of Reuters and Thomson may leave only a single source, creating opportunities for others to become the alternative supplier.

The other big issue for 2008 will be the Elections.
The hot races in both parties have helped take the sting out of the writers’ strike for the networks.  So far, little election spending has made its way online, but I think that will begin to change as the campaigns move from the retail politics of New Hampshire and Iowa to the broader media campaigns of the national election.  Lehman forecasts that $110 million will be spent by candidates in online advertising.  More important than the advertising dollars could be the continued large roles of blogs and user-generated content as primary sources for political knowledge. 

The elections also create an interesting opportunity for startups.  Mashing up campaign contributions with legislative records or voting results with census data could generate really great websites that the media and public will eat up.  Lots of this information is publicly available, so it’s there for the picking.

Revenue models emerge for social networks
As users spend more and more of their time online using social networks, it’s inevitable that viable business models will emerge.  While 2007 was definitely the year of Facebook, I think it’s likely that the Google-led OpenSocial will be a big player during the second half of 2008.  I had truly expected Facebook to position itself as a solid b2b platform by now, but they’ve shown little interest in doing so.  That should leave a void that can be filled by LinkedIn, who are already the dominant player for business social networking.  If they embrace the “open” aspect of OpenSocial, they could entrench themselves as the players to beat.

The emergence of widgets was one of my themes for 2007.  In 2008, widgets will become more important as users look to get your content "their way".  Visits to traditional destination sites will be down and content providers who don't widgetize their information will see usage drop accordingly.

Video hits b2b
Until now, video has largely been a consumer play.  While some markets will be slow adopters (for multiple reasons I don't see it playing on the financial trading floor), video will start to penetrate the corporate market this year.

So, there they are.  Trends & predictions for 2008.

As always, I welcome your thoughts in the comments.

The big news out of Davos on Thursday was Rupert Murdoch's pronouncement that the Journal would continue to keep at least some content behind the pay wall.  According to Rupert:

The really special things will still be a subscription service, and, sorry to tell you, probably more expensive.

The arguments in favor of doing so are twofold: first, you've got $70 million in subscriber revenue to replace if you kill it; second, that the pay wall creates a higher demographic for selling advertising.

I'm not sure what's driven him in this direction, as all signs pointed to tearing down the pay wall and making the Journal free.  While it's possible they could move forward with a hybrid model, I think that it's already been shown that model does not work.  The Times killed Select and I have tremendous doubts about the FT's current approach where users can get 30 page views per month for free, but must subscribe if they use it more frequently.

I am a current WSJ Online subscriber.  I also get the NY Times delivered in print (I need something to read on the train platform).  A few times a week I will read an FT article.  Of the three, the Times gets the bulk of my page views and it's the only one of the three that I will typically link to. If the Journal keeps large chunks of their content behind the subscription wall, they'll continue to limit the growth of their brand.

So I don't think that's what they're going to do.  If you parse out Murdoch's quote, he doesn't say that the Wall Street Journal will remain a subscription product.  Instead, he says that "the really special things" will be a pay service.  So, what's really special?  Not the business and financial news, most of which is a commodity.  There's no chance that he will put their editorial page commentary behind the pay wall as the Times tried.  Clearly, Murdoch views the Journal editorial page as a means of projecting his views, not bottling them up for a select audience.  So, in re-reading his comments, I think that we're likely to see the majority of the Wall Street Journal become free.  At the same time, I expect them to build out some new capabilities - perhaps tools and data-driven applications, and put a premium price on those. 

What do you think?

Despite improvements in contextual and behavioral internet advertising, for many sites, the typical ads that are served are not very relevant.  This is particularly the case with blogs and websites offering financial commentary and business information.

The challenge is that most internet advertising is product-focused.  So, if I'm writing a blog post about the company Motorola, contextual ad engines will most likely serve up an ad prompting the user to buy a  mobile phone.  But when a user reads a post on this blog, she's not looking to buy a phone; she's more likely trying to learn more about the company and research its stock.

Introducing the Premium Content Ad Network.

That's why Alacra has launched the Premium Content Ad Network ("PCAN").  PCAN has been developed to help publishers of business and financial information better monetize their websites.

For a blog or website covering stocks, PCAN will serve up contextually relevant ads which contain links to premium business information on the company being written about.  Leveraging the content in the Alacra data warehouse, PCAN automatically generates ads consisting of selected premium business information based upon the content of the page the visitor is viewing,   In the above example, a user landing on a page for Motorola (MOT) might see a list of recent credit or investment research, conference call transcripts, company profiles or other content about Motorola the company.

For web publishers, PCAN is complementary to existing advertising programs.  Publishers can continue to run display ads and use ad networks such as Google AdSense for text ads.  PCAN is a pay-per-action network; leveraging the Alacra affiliate program, participating websites will receive a share of revenue on any content sales.

The initial Alacra partners for PCAN are EDGAR Online and blog the Livermore Report.  You can view PCAN ads, for example, on the following pages:

• EDGAR Online page for Citigroup
• Livermore Reports page for IBM

For more coverage of the PCAN launch, read Silicon Alley Insider, Fred Wilson's A VC, MediaPost and the Alacra Blog. 

Publishers interested in learning more about the Premium Content Ad Network should contact Ron-dot-Waksman at Alacra-dot-com or visit here.

Via PaidContent comes a summary of the political ads so far during the early primary season.  While the leading candidates in the two parties have already burned through nearly $400
million, little of that has made its way into the coffers of online publishers.

The post sources Evan Tracey of TNS Media Intelligence indicating that most of the political advertisements thus far have been relatively inexpensive buys on partisan blogs.

Most of the money from political ad spend that’s making its way onto the internet have been issue-oriented ads. And that’s going to the political blogs, which don’t rack up a lot of money.

Yet Lehman analyst Doug Anmuth projects roughly $110 million in political ads in 2008 with more than a third coming from the presidential race.  Of course, that's a drop in the bucket when compared to the nearly $1 billion dollars that will be spent by the presidential candidates overall in 2008.  While the candidates may be far ahead of where they were, internet-wise, four years ago, they are still fairly apprehensive.  Mitt Romney's recent experience where his banner ads ran on some gay and lesbian sites have made the campaigns a bit gun-shy.  And, for all the Internet hype around Ron Paul, that's been driven by grass-roots activities, not advertising.  Yet, I expect that once each party has their nominee, we're likely to see a more aggressive online advertising effort. 

In a quarterly shareholder update, held in Australia, Rupert Murdoch confirmed the plan to make the online Wall Street Journal free.

"We are studying it and we expect to make that free, and instead of having one million, having at least 10 million-15 million in every corner of the earth."

The plan to make the online Journal free had been expected since the deal was first announced.  They will be able to monetize the traffic of an open site to generate significantly greater revenues than their subscription model provides today.

While I'm not a particular fan of Murdoch and News Corp, he certainly will shake things up a bit at the Journal.  More timid players like the Financial Times will have to move more aggressively or else they will lose market share in the coming years.

With nine-figure investments and multi-billion dollar valuations comes the expectation that Facebook can effectively monetize the pages in its rapidly growing social network.  So, it was no surprise that Facebook yesterday announced Facebook Ads, a new advertising network.

Facebook Ads will be focused on brand advertising.  They are positioning the ads as "socially aware" advertising, leveraging a user's social network, akin to personal referrals.  There are three components to Facebook Ads:

1. Social Ads: ads which are targeted to Facebook users based upon demographics compiled from their profile information, such as age, sex, relationship status, employment history and indicated interests.
2. Facebook Pages: Corporate ad widgets (formerly project Beacon) where corporations will be able to create corporate Facebook pages, placing an ad widget on the page which can be grabbed by users, in essence becoming endorsers of that product; and
3. Insight: Analytics and usage metrics fed back to advertisers providing aggregated demographic profile information of the types of users who are clicking on their ads.

These ads will be managed directly by Facebook; this is not part of the deal announced with Microsoft, which is focused on the sale of banner ads.

The profile-aware social ads make sense to me, though it depends how effective Facebook is at mining the interest data and matching that to potential advertisers.  While age, sex and relationship status can easily trigger some demographic ads such as dating services, that's pretty limited.  But if they can mine the interests, for example, to serve Prius ads to people who focus on the environment, that could be more compelling.

The corporate ad widgets could be effective, but will require advertisers to become much more creative than they've been until now.  Paul Kedrosky sarcastically envisions receiving a Coke Wants to Be Your Friend message, thinking "ooh I can't wait".  I think there are a limited number of products for which users may be openly willing to act as an endorser.  Apple would have little problem getting iPhone endorsers, as could Nintendo for the Wii.  Entertainment companies could effectively find endorsers for movies, bands and television shows and auto manufacturers have shown that they can drum up enthusiasm for at least some of their offerings.  The (Red) campaign, as featured in the Facebook sample to the right, would certainly attract users.  But most traditional industries will struggle in this regard.  I can't see too many endorsers for CPG products "boy, this new Tide detergent really cleans my clothes well".

In the early stages, products will either need to have a sense of "coolness" about them or perhaps be tied to social issues.  For example, environmentally friendly products could quickly find support among green-focused Facebook users.  These ads will work for enthusiasts, but finding passionate users won't be easy for many segments.  Users may be willing to refer their friends to products that seem cool or where they are viewed as an expert because of the endorsement, but they are likely to resist if they come across as a corporate shill.

Lots more details and analysis are available on the Facebook blog, Valleywag, Mashable, Read/Write/Web and Scoble,  while Om Malik asks if Beacon is a privacy nightmare.