Content Matters

Many of us have been saying for a long while that print is on its deathbed. But, then again, most of us don't have the soapbox that Microsoft's Steve Ballmer has. So, it was interesting to see Ballmer's interview with the Washington Post earlier this week.

So, for those whose heads remain buried deeply in the sand (you know who you are), here's the killer quote (pun sort of intended) from the interview:

There will be no media consumption left in 10 years that is not delivered over an IP network. There will be no newspapers, no magazines that are delivered in paper form. Everything gets delivered in an electronic form.

Note: the text was probably printed in the Wednesday edition of the newspaper for those of you who prefer to consume news via paper.

Google (NASD:GOOG) and Amazon (NASD:AMZN) are the two big winners in the Internet race, while Yahoo and IAC/Interactive Corp are also-rans. That’s the conclusion of the new Sanford Bernstein Black Book, U.S. Internet: the End of the Beginning.

The report looks at the ultimate winners and losers during this next phase of the Internet, as well as the potential impact of the current economic slowdown on the online segment.



Bernstein suggests that the Internet is somewhat recession resistant.  Compared to the burst of the bubble in 2001, they feel the sector is strongly positioned. Online advertising accounts for 8% of all U.S. advertising and is growing at a 20% annual rate.  In fact, as the economy sours, they expect more offline advertising to move online, where metrics allow advertisers to quantify the ROI on their investment.  With Bernstein estimating offline advertising revenues in the US of $299 billion in 2008, each 1% that moves online is roughly $3 billion. On a global basis, Bernstein forecasts online advertising, estimated at $55 billion for 2008, to grow to $97 billion in 2012, at which time it will account for 13.1% of all advertising spend.

Breaking down the individual components of online advertising, they remain most bullish on paid search (CPC), continuing to strengthen Google’s dominance.  Paid search should generate $19.1 billion in 2008, according to their model, growing to more than $36 billion in 2012, a 20% annual growth rate.

Bernstein projects hyper growth for the nascent IP video and mobile advertising markets, with mobile growing from $4.7 billion in 2008 to $17.5 billion in 2012 while video grows from $2.8 billion to $10 billion over the same period.

At greatest risk from economic pressures is CPM-based display advertising, used more for brand awareness than driving specific actions. Brand advertising online is likely to behave similarly to traditional media advertising, with advertisers pulling back during difficult markets. That won’t be comforting to Yahoo nor to the ad networks that were the target of last year’s M&A frenzy, such as DoubleClick, Right Media and aQuantive.

Meanwhile, consumer comfort with eCommerce is strong, and Bernstein expects etailers to be the beneficiary of consumers moving more of their retail spend online. For 2008, Bernstein projects online retail revenues of $362 billion, less than 3% of the total retail spending of $13.2 trillion. They project the online spend growing to $692 billion in 2012, more than 4.2% of their $16 trillion global retail forecast.

The report explores other factors, such as whether U.S.-based internet players will be able to penetrate Asia, the impact of regulatory issues (online sales tax, net neutrality) and the future for video and mobile.

So, how will it all shake out?
No real surprises here. Bernstein views Google and Amazon as the big winners. They also see eBay as a bit of a comeback story, while projecting it’s eventual acquisition. The losers in the segment – Yahoo (NASD:YHOO), which they still believe may be acquired by Microsoft, and IAC/Interactive Corp (NASD:IACI), though they seem optimistic that the restructuring and divestitures could give IAC the kick it needs to get back on track.

 Starting 12:01am today, Amazon (NASD:AMZN) is forced to collect and remit sales tax from buyers in New York State.

I previously blogged about how ridiculous this affiliate tax is and how NYS should repeal it. If we, as a society, want to enforce sales tax on the Internet, we should do it on a national level (by Congress) and not use some arbitrary data point, such as suggesting an affiliate program should constitute a tax nexus. Amazon and other eCommerce sites aren't using the local services that sales taxes are supposed to fund.

The tax won't stop me from using Amazon - I probably order from Amazon at least 5-6 times per month, and it's the excellent service and competitive pricing that keeps me coming back. But seeing that sales tax line item during checkout will annoy me each time I see it. Overstock has filed a lawsuit challenging the law, as has Amazon, so let's hope they're successful in getting this thrown out.

Barry Ritholtz shares an email response from Missouri realtor and builder Ron Stenger to a post on mortgage delinquencies rising, from his blog The Big Picture.
Apparently, Stenger is none too pleased with the state of the real estate market. Certainly, he's not pleased with Barry Ritholtz' suggestion that the market has not yet neared a bottom. So displeased that he replied to the Big Picture post with a two-word email (and the two words weren't happy birthday).

Ritholtz then did the simplest thing for a blogger to do - he wrote a post and shared Stenger's note. And, of course, since the Big Picture has a great Google page rank, that post now shows up 4th in the Google SERP when you search for the name Ron Stenger. So, Mr. Stenger now has a permanent link to his response, which anyone Googling him or his companies in the future will no doubt see. Good way to promote your business, Mr. Stenger.

I'm fascinated by the people who pick fights with bloggers. Haven't they ever heard the Mark Twain quote "never pick a fight with a man who buys ink by the barrel"? Today's bloggers are yesterday's newspapers, but with less editorial oversight. Mr. Stenger, I hope your market comes back faster than your reputation will.

To much fanfare, struggling bookseller Borders (NYSE:BGP) launched the new Borders.com website this week. Borders ended its seven-year partnership with Amazon, which was born after it shelved its original site, and has now launched its own ecommerce site at www.borders.com.

Visually, the site is rich yet a bit overwhelming. Borders has created what it calls the "magic shelf", which tries to capture the essence of a bookstore bookshelf. The bookshelf aims to provide improved personalization, but as a new user, it just shows me the basic shelves of new fiction, new nonfiction and new DVDs. Since what I buy is typically not on the bestseller lists, those shelves do little for me. Their search is powered by Endeca, whose guided navigation is definitely a step up from typical ecommerce search.

Other than the Magic Shelf, the main benefit that Borders is pitching here is the integration with its brick & mortar stores. Users can order from the website then pick up at a local store. Unless you live somewhere you can't accept deliveries, I don't see that combination of online+bricks as a huge benefit. Certainly less so than Blockbuster's ability to return rented DVDs at the store (which has hardly been the Netflix killer they thought it would be).

So, the main question for me becomes "what will drive the typical Amazon customer to instead visit Borders.com"? To start, let's look at the three things that typically drive users to Amazon:
1. Selection: their search tools are strong and their recommendation engine is compelling
2. Reviews: they have the biggest audience and the most reviews.
3. Price: their prices are consistently among the least expensive on the web (though not necessarily THE cheapest).

I don't see how Borders can beat them on either selection or reviews, so it comes down to price.  I did a quick (unscientific) sample of two books, checking Borders.com and Amazon. Here's what I found:

The hardcover edition of The Big Switch by Nicholas Carr has a list price of $25.95. Amazon sells it for $17.13, while the new Borders.com has it at $20.76.

Scott McClellan's new book, What Happened, will be released on Tuesday. The cover price is $27.95, while Amazon has a presale price of $15.37. Borders.com presale price is $27.95 - full boat retail. Interestingly, when I searched on Borders.com for "what happened", the new McClellan book was about the 10th entry listed, while it was #1 in Amazon. I like Endeca's guided navigation but clearly Borders has some more tuning to do if it can't showcase the presale of a book likely to be near the top of the bestseller list next week.

While I'm an atypical shopper (probably more than 90% of my durable good purchases are made online), I'm a reasonable candidate for Borders, primarily because the ground floor of my office building (100 Broadway in NYC) houses a Borders store. At various times, I've gone to Borders to buy a book only to find that it's selling for 20-30% more than via Amazon. If Borders can't be competitive on price, it doesn't matter what neat features they can add. No one will be there to find out. And that's why I believe that the new Borders.com will fail.

I've spent most of my career with startups and small companies, so I've never had a big enough marketing budget to do major events. But that doesn't stop me from appreciating the work of others.
Earlier today I got to watch a real pro - Peter Shankman - pull together a very successful promotional effort for Harrah's Atlantic City hotels. Harrah's has gone through a makeover and Shankman's promotional efforts were designed to give away a couple of hundred one-night stays at the hotel, all on June 5.

The campaign centered around a single event which took place during lunch hour today at the corner of Wall Street and Broadway. Shankman arranged for four gorgeous models to be body-painted, complete with Harrah's logos. They gave out "keys" each with a URL and code to get your free room.

Four body-painted gorgeous models will get attention anywhere, particularly in the testosterone-filled Wall Street area. You can see the crowds below and even New York's finest getting into the act.

What made the campaign most interesting to me is that I got to follow the early stages of it through Peter's emails and Twitter tweets. You see, Peter has an intra-day email for the PR community called HARO - "Help a Reporter Out". The emails list specific editorial queries sent to Peter by various journalists. Subscribers (there are now several thousands) respond to those inquiries for which they can provide a relevant response. The service is free and all that Peter asks is that any responses remain on target.  I'd also been following Peter (or as I knew him, @skydiver) on Twitter for a while. Finally at today's event I got to put the face to the tweet, so to speak.

For more details and images, visit Peter Shankman's website.

The morning's buzz was all about two acquisitions - CBS (NYSE:CBS) acquiring the downtrodden CNET (NASD:CNET) and Comcast (NASD:CMCSA) acquiring Plaxo.

Looking at the CNET deal, I guess my initial reaction is that if I had $1.8 billion to spend, it certainly wouldn't be at the top of my list. While traffic stats are unreliable, it was fairly well documented last year that CNET had lost about 50% of its traffic, as compared to 2006. The stock, which peaked around $70 during the dot-com boom has been stuck in the $8-14 band for the past five years. Revenue last quarter was $91 million, up a paltry 3% from the same quarter in the prior  year.

About a week ago, I wrote a post suggesting there should be more M&A in the blog space. I think an acquirer would be much better served acquiring a series of blogs to get into this space. The obvious start would be TechCrunch, followed by gadget blog Boing Boing, and I'm sure that Nick Denton would part with Gizmodo for the right price. Heck, you could buy all of Gawker for about a tenth of the price of CNET, according to Doug McIntyre's estimates.

While none of these blogs have the current traffic of CNET, they all have two features that make them much more attractive (IMO) than CNET: growth and a low cost structure.

It makes sense that during down markets, companies fish around for acquisitions at discount prices. What doesn't make sense to me though is bottom-fishing in this space. Rather than buying underperforming assets for bargain basement prices, why not leverage the bad market to buy growth businesses at a (albeit lower) discount?

This is just another case of an old media company buying another dying media business. Hey, CBS - why not go acquire a few newspapers while you're at it?

The Comcast/Plaxo deal is a little harder for me to get my arms around. The deal is rumored to be for $170 million. The two companies have partnered for the past year, with Plaxo serving as the address book for Comcast's data subscribers.
Plaxo is a great utility for keeping address books current. That was its initial purpose and I've always thought that it would be a great add-on for Gmail, Hotmail or Yahoo. Recently, it's tried to leverage its user base to form a social network, Plaxo Pulse. I've joined and have gotten a bunch of invites, but have yet to find any value in it as a YASS ("yet another social network"). PaidContent, via the Washington Post, notes that the companies see the future as leveraging Plaxo Pulse's social networking capabilities via the Comcast set top box. Sounds OK in theory, but I don't see any real value there in practice.

Business & Legal Reports ("BLR") is seeking a Director of Product & Market Management. BLR is a leading publisher of HR, safety and environmental content. Much of their traditional business has been in print but their growth is coming from their online segments and they're looking for someone to help drive the growth in that area.

BLR recently hired content industry pro Kathy Greenler Sexton as Chief Marketing Officer. Kathy held a similar role at Highbeam Research and also worked for a number of  Internet content leaders such as Inlumen and Individual.com. With Kathy heading their market strategy, BLR should be an interesting place to be in the next few years.

Serious candidates should have 7+ years experience in online publishing, technology and/or product management and a solid understanding of marketing and ecommerce. The full job spec is available on the BLR careers page or on this LinkedIn job profile. The position is based in BLR's Old Saybrook, Connecticut headquarters.

(feel free to mention Content Matters if you apply - can't promise it will help but it couldn't hurt)

Maybe it wasn't the dollars that kept Yahoo (NASD:YHOO) from accepting the Microsoft offer. Perhaps it wasn't even the corporate culture gap between Sunnyvale and Redmond. Maybe it was simply a personality style clash between Jerry and Steve.

Just as Jerry Yang and crew were high-fiving each other and heading back to the foosball table to celebrate their victory over the evil empire from Redmond (NASD:MSFT), Carl Icahn comes along and drops word that he's purchased 50 million shares.

The blogs are all warning that if Jerry thought Steve Ballmer was a tough guy, just wait until a shark like Carl Icahn gets hold of him. But Carl's got a soft side as well, as shown here in this stand up comedy routine from Caroline's Comedy Club via the Livermore Report. Perhaps Jerry Yang just needs to get a sense of humor.

Via PaidContent comes word that private equity firm Avista has written down 75% of its original investment in the Minneapolis Star-Tribune. The firm acquired the Star-Tribune in late 2006 for $530 million.

In a letter to shareholders, Avista states "In the past year, the newspaper industry has suffered greater than expected declines in circulation and advertising revenue, particularly in print classified advertising."

Greater than expected? Expected by whom? There were a lot of people (including this blog) who have made strong arguments for some time now that the newspaper industry is dead.

During the past 18 months there have been a number of newspaper acquisitions, many by supposedly smart people. Private equity firms boldly entered the market, thinking they could work the same magic they'd worked in manufacturing companies. But turning around a broken company is one thing; turning around a broken industry and a broken business model is something else altogether.

The excuse du jour is that the newspapers didn't anticipate the impact that Craigslist would have on their classified advertising. Again, that "anticipation" problem could have been easily solved had they read this blog, Ken Doctor, John Blossom or any of a dozen others. Or, perhaps attended any of the many conferences like Information Industry Summit, BSeC or PaidContent events where this has been flogged (like a dead horse) for the past few years.

But speaking to executives at the Argyle Forum (via Silicon Alley Investor), former Time and WsJ editor Norm Pearlstine says that much of the problem is the lack of innovation by newspapers during the 1980's when they had huge margins.

The last game-changing innovation by a major newspaper chain was the launch of USA Today, in 1980.

Pearlstine suggests that we are headed back to a highly fragmented news market, like we had at the end of the 19th century when each city had dozens of small newspapers. He feels that newspapers cannot afford to support the type of investigative journalism that we've had in recent years.

That would be a big loss as investigative reporting is needed to balance the powers of government and business. I hope that some major newspapers can maintain that level of reporting (perhaps funded by benefactors not looking for profits) but it's pretty clear that there will be a lot fewer that will offer substantive reporting in the future.

UPDATE: It turns out that there's one more critical news source who is ahead of the private equity firms in figuring out that the newspaper industry is broken. Here's a new article from a great source of investigative reporting themselves - The Onion: Dying Newspaper Trend Buys Nation's Newspapers Three More Weeks. Killer pseudo-quote:

It's nice to see that the printed word is still, at least for now, the most powerful medium for reporting on the death of the printed word.