Content Matters

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.

Five Questions for David Meerman Scott

This week, Content Matters caught up with e-marketing thought leader David Meerman Scott. David is a highly sought-after speaker and is author of the "The New Rules of Marketing and PR" and "Cashing In With Content". His newest book, World Wide Rave: Creating Triggers that Get Millions of People to Spread Your Ideas and Share Your Stories was published last week and is quickly moving up the marketing and e-commerce charts on Amazon. David can also be found @dmscott.

David is one of my favorite marketers to read or hear because he eats his own dog food. His speaking career was jump-started to some extent by the "world wide rave" started by his earlier eBook on the New Rules of PR (which he later turned into a full-length hardbound book). The ebook, which suggested that in the web environment, companies should target their PR efforts directly to end-users rather than to traditional media channels, was quite provocative at the time and set off a bit of a flame war on the PR and media blogs. That led to several hundred thousand downloads of the ebook and lay the groundwork for much of his subsequent work. So, when David speaks (or writes), I pay attention.

Content Matters: Your new book, World Wide Rave, discusses ways in which marketers can trigger the type of web buzz that typically happens only virally. Can you share a couple of examples of companies who’ve done that well?

David Meerman Scott: A World Wide Rave is when masses of people around the world can’t stop talking about you, your company, and your products. Whether you’re located in San Francisco, Dubai, or Reykjavík, it’s when global communities eagerly link to your stuff on the Web. It’s when online buzz drives buyers to your virtual doorstep. And it’s when tons of fans visit your Web site and your blog because they genuinely want to be there.

One of my favorite stories is Erin Weed, founder of Girls Fight Back!, uses her Web site, MySpace and Facebook groups, blog, and YouTube videos as a way to promote women's safety and self-defense issues.

Girls Fight Back makes safety education accessible, especially to young women in their teens and twenties, through her education Web site and live seminars conducted all over the United States. She teaches girls and young women why they are their own best protectors, and then shows them how to reduce the risk of violence and fight back if necessary. Amazingly, Erin has trained over a half million girls and women to fight back.

Anywhere from 200 to 1,000 people attend each hour-and-a-half-long seminar. Erin was having a hard time getting the teen and college girls to log on to her website after speaking gigs and paper sign-up forms to gather email addresses for 500 or more girls at a time was impractical. She realized she had to somehow get to them (as opposed to the other way around). So she gets all the girls to text message their email addresses from their mobile phones, which automatically load to a web page.

Get this... nearly 100% of the girls volunteer their email addresses. Clearly, Erin's understanding about how girls and young women communicate (with mobile phones) is critical. Yet how many organizations fail to understand this? All I have to do is look in my home mailbox and see all the junk mail that colleges, camps, and the like are sending to my teenage daughter.

Another favorite example is Lisa Genova. After her novel, Still Alice was rejected by publishers, she decided to self-publish her novel and received a stamp of approval from the Alzheimer's Association. Her blogs developed a huge platform and the book sold briskly.

As a result of Lisa's World Wide Rave plus the measurable sales success on Amazon.com and other online booksellers, Lisa generated buzz in the book world too. An agent contacted her and sold the book at auction in June 2008 for just over half a million dollars to Simon & Schuster. The book, that the publishing world initiall ignored, was a World Wide Rave and when the new edition was released in January 2009, it made the New York Times Bestseller list.

CM: You encourage companies to “Lose Control”, asking them whether they’re more like the Grateful Dead (encouraging sharing) or Led Zeppelin (total control). Publishers have been having this debate for 20 years. What are some simple steps that publishers, locked into a control mindset, might take to get outside their comfort zone? How can they go from being "Trampled Underfoot" to creating a "Ripple"?

DMS: If you step back and look at the ways musicians make money besides the recordings—concerts, endorsement deals, merchandise (such as $35 t-shirts), and “souvenir” packaging of the music (booklets included in a CD case, for example), not to mention royalties for the use of music in television, movies, and advertising—you start to suspect that clamping down with rigid controls may not be the best strategy. Think about that: the music industry is trying to prevent the spread of their product!

If I were a music executive (or musician), I’d make much of my music available for free online, and I’d encourage people to share it. I would have the confidence that providing music for free would drive sales of my other products. Many unsigned bands are prospering with this strategy through their own MySpace pages or Web sites, and some are finding absolutely tremendous success.

CM: You recently wrote about Century 21 real estate shifting its national television advertising budget to online. With current economic conditions, do you see more of this in 2009? Are there specific sectors or market segments where this seems more likely to occur?

DMS: Marketing on the Web can be free. It costs nothing to put up a YouTube video. It costs nothing to create a blog. It costs nothing to create a presence on Facebook. Yes, with the economic downturn, smart companies are looking to leverage the Web in new ways.
We’re living in a time when we can reach the world directly, without having to spend enormous amounts of money on advertising and without investing in huge public relations efforts to convince the media to write (or broadcast) about our products and services. There is a tremendous opportunity right now to reach buyers in a better way: by publishing great content online, content people want to consume and that they are eager to share with their friends, family, and colleagues.

CM: As marketing budgets get slashed, what are a couple of things that nimble marketers might focus on to maximize their marketing ROI?

DMS: Yes, you can harness that power and virtually anybody, if they're smart about creating something interesting, can generate something that will spread. Now, that's not to say that everybody can generate a million views of a YouTube video, or that if you do something, everyone in the world will know about it.

Within your marketplace, among the people you're trying to reach, if you have a niche product, it's still absolutely possible to reach a large number of your potential customers online with something very interesting. It could be a video, an e-book, some kind of chart or graphic, a photograph, some data or metrics, or an interesting way of looking at what's going on in the marketplace. It's possible to spread any one of those things. Yet most companies haven't been creating information with the idea that it's going to spread. Instead they've been creating information with the idea that they have to ram it down people's throats. It's a very, very different technique to create something that is primed to be shared.

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

DMS: I'm very optimistic. So are all of my smart friends. When there is chaos and fear, there is also a tremendous opportunity.

 

Five Questions for Ken Doctor

Newspapers had a dreadful year in 2008. So, have they hit rock bottom or are they just beginning their decline? To find out, I caught up with Ken Doctor earlier this week.

Ken Doctor is author of the Content Bridges blog and is a leading authority on the newspaper industry. Ken had a 21-year career with Knight Ridder, serving as vp/content services, vp/strategy and vp/editorial for Knight Ridder Digital. He led the development of Pioneer Planet, the Saint Paul Pioneer Press' online service, which debuted in 1995. Today, Ken focuses on the emerging world of alternative media journalism both through his blog and as lead news analyst for industry consultants Outsell.

Content Matters: 2008 was a pretty painful year for the newspaper industry; what do you see for 2009?

Ken Doctor: No end in sight, unfortunately. Advertising makes up 80% of US newspaper revenues and ad spend tracks GDP, so the best anyone can hope for is some light for the holiday season. That means year-over-year ad revenue will be down 15-20% this year – and that’s against a bad 2008. Glimmer of hope: The stimulus package helps jump start car-buying, house-purchasing and job-getting – all bringing some renewed life to “classifieds.” So, overall, we’ll see the newspaper industry follow the theme of Steve Martin’s first album, “Let’s Get Small.”

CM: We’ve already seen the Detroit Free Press stop selling printed newspapers on slower weekdays, while the Seattle Post Intelligencer looks to go online-only or shutter its doors. Is a hybrid-model like Freep’s sustainable? In what markets might an online-only model work (if any)?

KD: Here’s the rub. On average, US newspaper companies only get 10% of their overall revenues from digital sources. So, the paradox: They can get legacy print costs (production, printing, physical distribution) by slimming the print product or delivering it fewer days, but the more they accelerate their readers and advertisers move to the web, the faster they lose high-value print dollars. Yes, the math of online-only works – but will only support a newsroom of maybe 20% the current size. So instead of 150 people in small city newsroom, online-only might support 30.
Strip away all the legacy costs of a print operation, and strip away heavy debt (which pushed the Tribune Company and the Star Tribune into bankruptcy and has put several other companies at its door) and you have online-only startups. These Knight Foundation-funded operations – MinnPost, Voice of San Diego, Chi-Town News, The Beacon (in St. Louis) – are good examples of how online-only can be built. They typically have staffs of 6 -12 people and lots of stringers. Dailies of course could support larger operations – they’ve got a lot of traffic already in place – but the model isn’t that dissimilar.

CM: If we start with the assumption that few news organizations will be able to adequately fund investigative reporting and international reporting, what’s the solution? Will it be a shared services model, funding from wealthy patrons or something else?

KD: It’s not just investigative and international reporting that’s at stake – it’s reporting overall.  That’s the gap – local newspaper reporting. We depend on 1500 or so local dailies to tell us much of what’s going on in our communities. We’ve already lost a lot of reporting – at least 10-15% over the past two years – but it’s hard to point out ….what’s not there.
Who and what will bridge the gap? We’re seeing all kinds of efforts. We see NPR-like member-supported pushes. We see national and increasingly community foundations, foundations that are beginning to see local journalism like they used to see local arts – a community good that can’t stand on their own as “businesses.” We see angels, like the Sandler family that funded investigative site ProPublica.
They are all fine, but small potatoes for now. I’d like to see a major push to bridge the gap, even as it grows.  Maybe a further tax on broadband service (where do the current taxes go anyway?) that would go into a pot to fund journalism.

CM: While newspapers may have limited control over macro issues, many of their actions (or inactions) have hastened their demise. Which newspapers do you feel have done a reasonably good job, all things considered, of navigating the changing landscape?

KD: The sad truth is that the top achievers in traffic, duration and digital revenue aren’t doing that much better than their low-achieving peers. So the New York Times and Washington Post are at the top of the heap for digital revenue – 12-13% of their overall revenue. Low achievers are doing 5 or 6%. The problem is that whether you are the top end of that or bottom end, you’ve failed to make the digital transition.
That said, both the Times and Post are clear leaders in innovation. Hearst and Scripps have both shown some impressive life in implementing the Yahoo Consortium behavioral targeting platform. McClatchy now tops 50% in the amount of online revenue that is “online-only,” a critical milestone.

CM: While newspapers are struggling, users are consuming more news content than ever before. What are the positive signs you see in the news industry?

KD: Ironically, within this creative destruction, we see the great promise of the Internet being fulfilled. Never before in human history can we get to so much news so easily from so many diverse sources and voices. Within newspapers, we see some good innovations in niching (Gannett’s Moms Like Me network of sites) and some smart adoption of blogging actually replacing “story-writing,” providing greater immediacy, greater interaction – and more content. Outside of newspapers, we’re seeing a wealth of start-ups from Politico to Global Post to the new city sites. Once the recovery begins, we’ll see lots more of the new efforts.

Five Questions for Steve Arnold

Earlier this week I had the chance to catch up with Steve Arnold, author of the influential Beyond Search blog. He is the author of two major studies about Google and six other monographs, including Enterprise Search Report, 1st, 2nd, and 3rd editions, and Beyond Search, a study of 24 content processing vendors for The Gilbane Group. Information about Mr. Arnold is available at ArnoldIT. He can be contacted at seaky2000 at yahoo dot com.

Content Matters: 2009 will certainly have its share of challenges. What do you see for search in 2009?

Stephen Arnold: The challenges to search depends upon where one stands to view the industry. For licensees or customers, 2009 is going to be focused on cost control and balancing user demands with resources. I expect fee push back and probably more interest in the lower cost, less complex systems driven by the customer's chief financial officer and budget realities.

For small vendors, the challenge will be to find niches and make compelling use cases in order to win sales. I think that some smaller vendors will resort to marketing and PR tricks, not solutions. This means more confusion in the marketplace.

For the larger vendors, the world is breaking into two camps, and the contention between Microsoft's complexity and Google's simplicity will make it harder for the second tier players to get "easy" client wins. Microsoft and Google have significant clout, and it is not at all clear how Microsoft will handle its "low cost" and bundled search offerings. Google, on the other hand, chugs along with its simple, easy, cost predictable approach.

In short, 2009 is going to winnow the buyers, the vendors, and the pundits. Who knows what will unfold in the present financial climate.

CM: Twitter adoption continues to grow. Has Google missed the boat on real-time search?

SA: Real time search is useful for certain types of information retrieval. Google and Microsoft have not "missed the boat" because neither company is an early adopter of new technology. I think Microsoft may be forced to take a stake in Twitter as the company did with Facebook. Google, on the other hand, has the pieces available to deploy a real time search within its present infrastructure. My thought is that Twitter and other real time systems are providing useful information to the Google and Microsoft teams. This market remains attractive and, so far, somewhat fluid.

CM: Semantic technology has been long-hyped, but remains a niche application; do you think semantic search will ever become mainstream?

SA: I am on record as a strong advocate of semantic technology in any of its manifestations. The technology, however, is somewhat old hat. Google, for example, has had semantic components operating within its infrastructure for some time. Microsoft has a history of research in this field. The current buzz is one of those interesting characteristics of information retrieval. Search in many organizations is miserable and a supposedly "new "silver bullet comes along. Everyone says, "This will address problem X and problem Y." Semantic technology is not something that the casual user needs to worry about. Semantics will play an increasingly important role in the plumbing. Users will click on topics, see related topics, and have certain queries reformed on the fly. Google, in my opinion, is now in a position to become the "Semantic Web", which as you might imagine makes some people bristle.

CM: Amazon, Google and Apple are starting to stake out their positions for ebooks and book search. Do you think one company will take a dominant position in ebooks the way Apple has for music?

SA: eBooks are one component of what I call the "digital Gutenberg", which is the title of my forthcoming study of Google and other online services. The general user, including some online outfits, now realize that their systems are capable of end to end content operations. There will be other information services flowing from the Amazons, Googles, and Apples of the world. Infrastructure, reach, and comprehensive platforms make these eBooks and other products possible. The key point is that traditional publishing companies and small information outfits will have to rethink their business processes and business models to thrive and survive. Information about my new study is here.

CM: Historically, as the economy comes out of recession, it creates transformation and change. Which tech segments have the potential for transformation in an eventual recovery?

SA: I have been working in online for more than 35 years. The factors driving change are economics and demographics. The too expensive methods can't work in some business operations the way these methods did a year or two ago. Demographics means that those resistant to change will be pushed aside by the younger cohorts bubbling up in the workforce.  The shift will be painful to many organizations who have the chains of their existing methods and business models around their ankles. Many organizations will die, unable to adapt to the present ecosystem.

Five Questions for Laura Fitton

Where is social media headed in 2009? Content Matters caught up with Laura Fitton of Pistachio Consulting to gain her insights on social media.

For those who don't know her, Laura is a social media guru who has been leading the charge on use of Twitter for microsharing. She can be found @pistachio and also runs the Touchbase Blog and authors her own Pistachio Blog. A mother of two lovely girls, Laura also plays competitive ice hockey.

Content Matters readers will recognize Laura from my earlier posts tracking the progress of her WellWishes project, using microdonations to raise funds for Charity:Water (details below). Laura is dynamic, creative and truly inspirational.

Content Matters: 2009 will certainly have its share of challenges. What do you see for social media in 2009?

Laura Fitton: Social media needs to grow up and get outside of the fishbowl. As practitioners we need to spend more time and energy engaging new hearts and minds and "teaching them to fish" and less time obsessing amongst ourselves over rules and rankings and the finer niceties of "how to do it."

While there certainly are many hucksters coming to the table and selling "social media snakeoil," serious practitioners just shouldn't get caught up in calling them out and decrying their practices. Every trade has professionals achieving at different levels. Make things great for your clients, hold their business value above all else, and don't waste time and energy criticizing others. When people obsess about the plethora of self-declared "experts" I always say "expert is as expert does."

CM: Facebook was all the rage in 2007, while Twitter took center stage in 2008. Do you think Twitter has staying power? If so, what's different about Twitter?

LF: I do. There's a lot that's different, and it's best exemplified by the culture and results coming out of Twitter. It's become the most sensitive news detection system anyone's seen. It's become a tremendously fertile forum of spreading ideas, keeping apprised of events, finding resources and interesting people to connect with. It's mobile. It's publish-subscribe. It's a social network. It can be consumed via hundreds of different interfaces, to truly "use it where you think best." It lets busy executives spread ideas and information on-the-go, from the midst of their demanding schedules, in a way that blogging never could. We see social movements and adhoc groups form every day on Twitter. Its ability to connect people is incredibly powerful, and we're only just sorting out precisely why that is.

Twitter - or the general class of "microsharing" because I believe there will eventually be other Twitter-compatible versions - may go every bit as mainstream as email and search. Of note, it's going mainstream much faster than email did. People love to point to Facebook and say but *that's* mainstream, Twitter is niche. True today, but it won't be true forever. There's a different culture and dynamic on Twitter, and while much simpler it's MUCH more versatile. Information and ideas do not spread on Facebook the way they do on Twitter, that's for sure.

When I conducted a survey to find out "What does Twitter disrupt?" Facebook and email were right up there. But surprisingly, so was "isolation." Twitter changes lives - both personally and professionally. There are millions that LOVE Facebook, yes, but there's an energy and richness of infromation flow to Twitter that doesn't happen there.

CM: In many ways, the most promising use of Twitter this year came in Q4 by combining Twitter with micro-donations to nonprofits. Can you share with us some of the details of your Well Wishes project for Charity:Water?

LF: What an incredible and humbling experience that was. I wanted to see if I could move the needle somewhat substantially by asking very  very little from very many people. I asked for $2 each, or $25,000 since I had 12,500 readers at the time. Between the Twitter community and some corporate matching sponsors, my wishes somehow came true. It was truly a "stone soup" project, with many coming together. These are tough times, and we need low-cost ways to pull together as a community and help one another through them.

It was also the first large-scale deployment and use of direct currency right on Twitter. About $20,000 (including the matching funds) was exchanged on Twitter using a new tool called @tipjoy. I only vaguely knew about @tipjoy before the campaign, but for months I had been looking and waiting for someone to become "the PayPal of Twitter." Now they've asked me to be an advisor, because we enjoyed working on the campaign so much.

CM: Much of the corporate success of Twitter has been in the customer service area, with companies like Comcast and Dell monitoring Twitter for customer problems. While "listening" on Twitter has succeeded, brands seeking to broadcast their message on Twitter have largely failed, due to the opt-in nature of the platform. Beyond customer care, where do you see companies succeeding with Twitter going forward?

LF: Not true. Broadcasting USEFUL information totally works on Twitter. You just can't be selfish. You hear a lot about Twitter being personality and conversationally driven, and it is, but it does not have to be. That's not the only way. Look at @delloutlet, which sold over a $million worth of computers by offering something truly useful and valuable to the community -- signficant time-limited discounts.

The true nature of the listening opportunity on Twitter is not well understood either. We show our clients how they can do better, and instant, market and innovation research, we show them ways to run internal and external meetings better, and for their executives to be better leaders. It even percolates down to HR, mentoring, professional development and a full range of core business processes. You have to know the territory. You have to gain Twitter literacy, not just run out there and try to coopt it along the lines of your existing marketing and communications beliefs and objectives.

Which brings up another VERY important point. Social media is NOT merely a marketing or even communications channel. Social media can be (and should) be infused throughout the entire business. I love what Peter Kim has been writing lately about "Social business." The business case for social media is to master the fundamentals and apply them to becoming - to borrow from SAP - a better run business.

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

LF: #pinkslipparty, @wellwishes and Twitter in general have showed me a LOT about what individuals can accomplish when we network together in fluid, dynamic (and yes, passionate) ways. I have a ton of hope for the world, and I've personally been through some pretty difficult spots in the past four years. It sounds pollyanna, but it's sincere. Tough times are great times to toughen your resolve and boost your hope. Being frustrated, afraid, bitter or anxious isn't going to materially improve a bad situation. Quite the opposite. Why bother?

 

Five Questions for Fred Wilson

I thought today I'd bring an optimist's view to the Five Questions... series.  Fred Wilson is a VC, serving as managing partner of Union Square Ventures and Flatiron Partners (author's note: Flatiron is an investor in Alacra). Fred invests in technology companies and has successfully identified trends, investing in successful early stage companies like Twitter and Etsy, among others. His blog, A VC, is widely read by both the tech and investor community.  He's an avid tweeter and can be followed @fredwilson.  Fred was atop Silicon Alley Insider's SA100 for 2008, which ranks entrepreneurs, investors and other leaders who impact the New York digital media market. And, he's a big fan of late 70's and early 80's bands like the Replacements, which gives him bonus points in my book.
Having survived (and thrived) in both the Web 1.0 and Web 2.0 bubbles, Fred has a valuable perspective on where we are today and what that means for technology and media companies.

Content Matters: 2009 will certainly have its share of challenges. What do you see for the Tech industry in 2009?

Fred Wilson: In 2009, the strong tech companies like Apple, Google, Salesforce, etc will get stronger and the weak companies will get weaker and some will go out of business. It’s going to be a flight to quality all around, by employees, vendors, customers, investors, and everyone else in the tech business.

CM: Facebook was all the rage in 2007, while Twitter took center stage in 2008. Do you think Twitter has staying power? If so, what’s different about Twitter?

FW: Facebook is having a fantastic year in 2009 already. I think it’s having a second wind, driven by serious adoption (as opposed to just setting up a profile) by the over 40 generation and by significant international adoption. Twitter is different from Facebook and highly complimentary. The two big differences are Twitter is public like blogging and Facebook is private (friends only). Also the relationship models are different. On Twitter you can follow me even though I don’t follow you. On Facebook, the following/friendship has to be mutual. This leads to different use cases and I think we’ll see many people use both services for different purposes.

CM: With generally lower startup costs and more limited “end-games” for successful startups, how does that change the role of venture capital in the tech space?

FW: I think venture capital has to learn how to generate appropriate levels of returns (3x over 7-10 years) on lower investment and lower exits. We decided in 2003 to limit our fund sizes to $100mm to $150mm and that has worked out really well for us. We can return the entire fund on one investment if we own 20% of the company and it sells for $500mm to $750mm. I think it’s very reasonable to expect at least one of our 20-25 companies per fund to do that.

CM: Historically, as the economy comes out of recession, it creates transformation and change. Which segments have the potential for transformation in an eventual recovery?

FW: Every industry that is based on knowledge or information or some other form of non-physical matter (atoms vs bits) is going to fundamentally transform and this downturn will be the darwinian forcing function. Think about energy and power systems, banking, media, education. They all have that aspect to them.

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

FW: I am optimistic that we now have an administration that is pro-technology and gets the internet and the power of tech/web to create new ways of doing things. I am optimistic that our culture in this country is starting to change its orientation away from borrowing and living beyond its means to saving and investment. I am optimistic that many parts of the rest of the world are adopting more open and free governments and economies and developing quickly. I could go on and on. There is a lot to be optimistic about right now.

Thanks, Fred. And for those who missed the Mats in the early 80's, here's a quick clip:

Five Questions for Felix Salmon

To start the week for Five Questions, I've asked Felix Salmon to weigh in with his thoughts on where we are, how we got here and where we might be heading.

Felix is author of the Market Movers blog on Conde Nast Portfolio.com. He previously created the Economonitor blog for noted bear Nouriel Roubini (perhaps contributing to his acerbic wit).

A graduate of the University of Glasgow, Felix has been the United States since 1997, holding various roles with Euromoney, Bridge News and other financial news and commentary sites. Felix is also author of Ben Stein Watch, a periodic series on Market Movers, where he points out the inevitable weaknesses and fallacies in Stein's New York Times column.

Five Questions for Felix Salmon

What shoes have yet to drop? Which less obvious industries or companies might be facing troubles in 2009?

Municipal, state, and sovereign defaults.

We’ve nationalized large parts of the economy with little discussion or oversight. What do you think has been the most underreported aspects of the events of the past year?

There was definitely a wave of huge European bank nationalizations which the US press barely bothered to report because there was so much craziness here. In general, I don't think that Americans appreciate just how greatly leveraged the European financial system was compared to the banking sector in the US
-- and how that has caused global systemic risk.

With the end of the trading culture that dominated the past 20+ years, what do you think Wall Street will look like when the dust settles?

Smaller, humbler, lower-paid. And it would be nice if they got rid of all those fugly street barriers, too.

Historically, as the economy comes out of recession, it creates transformation and change. Which industries or segments might see an earlier recovery than the economy as a whole?

I suspect that the creative industries might do well -- they often do, in times of turmoil. But of course they aren't judged on the basis of profitability.

Where do you think the Dow Jones Industrial Average will close on 12/31/2009? What might the employment rate be? What will the price be for a barrel of oil?

Somewhere in the 5,000 to 12,000 range. Somewhere in the 5% to 12% range. Somewhere in the $5 to $120 range. And I might be wrong. My point is that the future is radically uncertain, and that the best way to approach it is with great humility as to just how far ahead we can usefully see.

Five Questions for Ed Keating

Ed Keating is Vice President of the Content Division for the Software & Information Industry Association (SIIA). Keating has over 15 years of experience in the information industry as both an internal manager and a consultant. He has led marketing, product management and sales organizations at both startup and established information companies. His work to enhance product processes and organizational effectiveness has helped numerous companies enter unfamiliar markets and launch new products.
From his vantage point at SIIA, Ed has a unique view into the operations of hundreds of content companies. Ed is also author of the ContentEd blog.

Content Matters: 2009 will certainly have its share of challenges. What do you see for the Content industry in 2009?

Ed Keating: In looking at the four vectors of social change (Economic, Technology, Sociocultural,  Political/ Regulatory) I think the biggest challenges will be on the economic and socio-cultural front.  With so many jobs being lost in some key information industry markets like finance and pharma, there will be economic impacts.  This will ripple through companies in a myriad of ways.  As an extension, there are sociocultural impacts as the information industry workforce contends with the economic uncertainty that accompanies the drumbeat of layoffs.

While I don’t see much in the way of technological challenges, there may be some threats to the industry if the government tries to become a prominent publisher and competes with industry companies.

CM: What shoes have yet to drop? Which less obvious sectors might be facing troubles in 2009?

EK: The ease of creating businesses and products, coupled with the simplicity of building social networks could create new entrants into the professional publishing space.  What would happen if a group of scientists decided to come up with their own naming conventions for chemicals or if a financial team tried to usurp the CUSIP system?  Neither is an easy feat but the building blocks are becoming easier to stack up.

CM: Other than the economy, what macro issues do you think will have an impact next year?

EK: The biggest change will be the shifting of nexus from Wall Street to Washington DC.  With an estimated $3-4 trillion to be spent, DC is seen by some as the new Wall Street. On the plus side, new regulations have historically been great for professional publishers. It has always been a reason to “fire up the printing presses” as professionals have always relied on regulatory publishers to explain the new world in Washington.

There is also the challenge of our industry having some conflicts with the new administration.  With a “wired White House”, there may be challenges to publishers if the government tries to become a premium publisher.  As the old adage advises, never pick a fight with someone who buys ink by the barrel.  If you do, be sure to be an SIIA member!

CM: In 2007, Facebook was all the rage, while in 2008 it was clearly Twitter. Yet neither has shown the ability to make money yet.  Do you see social media making a breakthrough impact for business in 2009? Or, is that window closing?

EK: These products were certainly the rage of the cognoscenti but in 2007 Facebook was still largely populated by students with student-level purchasing power and Twitter is still only used by a narrow band of early adopters.

I don’t think 2009 will be the year of a big breakthrough, but I believe we’ll continue to see incremental breakthroughs. For example, now that Twitter is internationally recognized for breaking the USAIR Hudson River crash, more companies may try and build unique alerting/warning products.  Maybe some will even charge for these services!

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

EK: Having worked through a number of recessions in the last 20+ years, these down times can help businesses focus on what is important and let go of marginal people, products and services.  It may also build in some perspective in the workforce so that we are all a bit more skeptical when the next bubble begins to emerge.

CM Note: Ed - the annual Information Industry Summit is to be held next week. I couldn't let you go without a quick plug.

EK: During the past seven years, the SIIA Information Industry Summit has earned its reputation as the digital information industry’s flagship conference. This annual Summit of industry leaders is one of very few forums providing strategic guidance to senior business leaders representing publishers, content technology companies, bankers, analysts, bloggers and press.

Corporate and business development executives interested in sourcing new technology or vetting deals, and venture capitalists and other bankers, should attend the 3rd annual pre-conference event, SIIA Previews, taking place January 26. CEOs of young innovative publishers, aggregators, and content technology companies will provide 5-minute presentations followed by Q&A.

Registration for the SIIA Information Industry Summit includes registration to attend SIIA Previews, or you may also choose to attend just SIIA Previews.

For more details, please visit: www.siia.net/iis/2009/

Thanks, Ed, for your insights. And to those attending IIS next week, I look forward to seeing you there!

Five Questions for Russell Perkins

Next up in the Five Questions for... series is Russell Perkins, Founder and Managing Director of the InfoCommerce Group. Russell has more than twenty years experience in all facets of the database publishing industry. He has worked with numerous directory and data publishers in advertising and premium content businesses.

Content Matters: 2009 will certainly have its share of challenges. What do you see for the Content industry in 2009?

Russell Perkins:
We’ve spent the last six months watching the newspaper industry implode before our eyes. Hot on its heels is the yellow pages industry, which is crumbling rapidly. The consumer magazine industry just reported a huge drop in advertising pages, and we all know what’s happening with B2B magazines. Recent reports on some “household name” blogs with huge traffic suggest that even these new media players are struggling from a revenue perspective. On the surface, content doesn’t seem like a great place to be these days. But look for commonality among all these different media, however, and you see one thing: high dependence on advertising revenue. What we’ll see in 2009 is the beginning of a profound re-examination, particularly by advertising-based publishers, of their revenue models. The problem lies not with our content, but with our monetization.

CM: So how do you see this re-examination playing out?

RP: As an industry, we’ve pushed ourselves into a tight corner. We’ve trained the marketplace not to want to pay for content at the same time we’ve let advertisers dictate the terms of their relationship with us. You can argue whether or not we needed to do either or both of these things, but the fact remains, we did them. If you can’t sell subscriptions and you can’t sell advertising, something has got to give. My belief is that publishers are going to have to draw the line and re-define their relationship with their customers (advertisers and users) in a way that lets them make money. It will be ugly for a while, but those publishers who are truly delivering value will find they can charge for it.

CM: You have written about changes in the lead generation space, shifting more risk to the publishers. What might we expect to see in that area in 2009?

RP: Lead generation is a hot area right now. Some are even calling it salvation for some advertising-based publishers. Yet the trends in lead generation are anything but positive, and support my previous contention: as an industry we are being pushed by advertisers to assume more risk and do more work, all for less reward. Pay-per-click is rapidly becoming a fond memory as advertisers are now starting to push for “pay-per-sale.” I contend than publishers can’t allow themselves to be commission sales reps for their advertisers, even if the commission is a percentage of the sale amount. With this kind of arrangement, publishers take all the risk and have no control. Necessary checks and balances cease to exist.

CM: Who’s doing it well? Can you share an example or two of data publishers succeeding in this market?

RP: We’re constantly surveying the industry, and while there are no shortage of glitzy and exciting companies with interesting new business and monetization models, one company I would hold out as having gotten things right in so many ways is Lexis-Nexis Martindale Hubbell. Here’s an example of a 100-year old B2B print directory that not only moved online in innovative ways, but also spawned a B2C sister website that leverages the same database. It’s a gutsy but intelligent ground-up re-positioning of the product as a client development service for lawyers. In every respect it’s sophisticated, elegant and powerful and a great place to look for fresh ideas and best practices.

CM: Historically, the period coming out of recession is often one of transformation and change. Where might the opportunities lie for publishers when this economy recovers?

RP: I think this recession is likely to bring one key benefit that came out of the dot com bust: a clearing out of silly, trendy and inherently flawed products and companies that will yield added importance and strength for those that survive. The last few years looked to me like a quiet replay of the dot com era: a profusion of venture-backed start-ups with unpronounceable names, impenetrable business models, and an emphasis on giving away free content and services to quickly build a user base or audience. One of the most succinct quotes I ever heard on this subject was, “free is not a business model.” A stable and prosperous online content industry – whether advertising or subscription-based – demands that we stop doing business in a fearful and reactive manner, and start charging fairly for the value we deliver. Interestingly, I think subscription-based publishers have figured this out. Advertising-based publishers still have a way to go.

Five Questions for Paul Kedrosky

Kicking off the "Five questions for..." series on Content Matters is Dr. Paul Kedrosky.

Paul is an investor, writer, and entrepreneur. He is a senior fellow at the Kauffman Foundation, a strategist with Ten Asset Management and the author of the Infectious Greed blog. A frequent analyst on CNBC, Paul was formerly a technology analyst at HSBC James Capel.

Content Matters: What shoes have yet to drop? Which less obvious companies or sectors might be facing troubles in 2009?

Paul Kedrosky: Sovereign defaults. Ecuador doesn't count, as it was largely a recreational default. Now, however, we're onto the biggies, with countries like Ireland, Greece, Turkey, Italy, Ukraine, and even the U.K., to some extent under immense pressure. While they won't all default, many will require bailouts, and there is a high likelihood that the U.K. ends up adopting the Euro.

CM: We've privatized large parts of the economy with little discussion or oversight. What do you think has been the most underreported aspects of the events of the past year?

PK: How bank lending was never the right measure to judge the success of these programs. We were trying to prevent the system from seizing up, not trying to turn the go-go easy-money clock back to 2:25pm on June 25, 2005. Confusing people on this point has been life much tougher for Treasury, the Fed, etc.

Second worst-reported story is the idea of the "new normal". What does a post-leverage world look like? How much are stocks worth? How fast does GDP grow? How big are corporate profits? What percentage of GDP is profits? These things will all chance, and yet we act as if we will just return to trend at some point.

CM: Historically, as the economy comes out of recession, it creates transformation and change. Which industries/segments might see an earlier recovery than the economy as a whole?

PK: Banking, strangely enough. Judging from the Depression, banking saw the most wrenching dislocations, but became productive sooner than many thought. Not necessarily the same names, but the sector did come back in unexpected ways. Following that, I expect energy, agriculture, and some selected commodities to ride the reflation wave that is breaking on pretty much every shore in the world.

CM: With the end of the trading culture that dominated the past 20+ years, what do you think Wall Street will look like when the dust settles?

PK: It blow it up into a million shiny pieces -- or at least three. We will see proprietary trading shops, which are really just hedge funds.
We will see pure agency traders, which are really just providers of liquidity for specialized trades. And we will see deposit-taking consumer-centric banks with business accounts. The days of banking hypermarts are over, as are the days of being a hedge fund with a loss-leader brokerage operation (read: Goldman Sachs).

CM: Finally, some predictions. Where do you think the Dow Jones Industrial Average will close on 12/31/2009? What might the unemployment rate be? What will the price be for a barrel of oil?

PK:
    DJIA: 6700
    Oil: $30
    Unemployment: 10%

CM: Thanks, Paul, for your time and your insights (and your somewhat frightening predictions).