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The Evolution of Display: Change Is Here, For Good

By - October 31, 2012

The first banner ad to run on the web – AT&T’s “You Will” campaign. It asked “Have you ever clicked your mouse right here?” The answer turned out to be “You Will…for a while. Then, not so much.”

 

Earlier this year I wrote a long post about the “death of display,” since then, I’ve consistently been asked about it, and in particular, to expand on my thoughts around display advertising economics, and the prospects for what might broadly be termed “independent creators of content,” or what I call “the independent web.”

Now, I love this topic, as many of you know. So in this post I’ll reprise the core points from On Thneeds and the “Death of Display”, and then riff a bit about where I see things now, and where they might be heading. Spoiler: It’s not all bad. Double spoiler: This post will be written in two parts. This is just the first.

Here’s that previous post, boiled down to bulleted form:

* The model of “boxes and rectangles” – the display banner – is failing to fully support traditional “content” sites beyond a handful of exceptions. For 15 years, independent websites have “direct sold” these units on their sites, or hired someone (like Federated Media Publishing) to do it for them. But marketers increasingly are turning away from direct-sold display units. Why? Read on….

* A new generation of “native” ad units are on the rise, which live primarily on large social sites that curate and aggregate content. Examples include Twitter, Facebook, Tumblr and of course the grandaddy of them all, Google’s AdWords. Big sites like HuffPo and fast social comers like BuzzFeed are also employing native units. Pinterest is expected to roll out something similar soon.

* With the notable exception of Google’s AdSense (which is essentially a programmatic machine, see below), none of the other large “native” platforms  help independent content creators make money, other than a “quid pro quo” deal that if those content creators engage with the platform, they’ll earn traffic back to their sites.

* These publishers hope that by accepting this quid pro quo, they will drive traffic to their site that they can then monetize with display advertising. However, as I stated before, this model is breaking down. Why?

* Because even as all those “Boxes and Rectangles” morph into far larger units, they are increasingly bought and sold in real time by machines (“programmatic buying” or “Demand Side Platforms,” also known as “DSPs” – the largest include Google’s AdX, AppNexus, and Turn).

* So far, the rise of programmatic buying  has not made it possible for most independent publishers to make enough money to create content full time. Hundreds of thousands are making money using these platforms, but if you want to run an independent content brand that employs people full time, boxes and rectangles are usually not going to be enough. Some are opting out of playing in the programmatic market, but it’s quite hard to direct-sell small sites that are not at scale. Marketers and their agencies are finding they can far more efficiently find the audiences they want using machines, at a fraction of the cost of working directly with traditional web publishers.

* If we don’t figure out better models for how to get the “content creator” paid, we risk losing the oxygen that feeds the web ecosystem. After all, what would Google, Twitter, Facebook, or Pinterest be without harvesting the hundreds of thousands of pieces of great content created every day on the web? Ditto for the DSPs, which depend on inventory created by these same independent content creators.

* At the moment, the lion’s share of digital marketing dollars and equity value is flowing to either those large content-harvesting platforms, or to programmatic platforms.

* At the end of the post, I suggest a new model that attaches value to an individual piece of content, such that the piece of content is monetized as it travels around the web, getting reposted, tweeted, shared on Facebook, pinned on Pinterest, and so forth. Such a model is incredibly difficult to create, but not impossible. I promised a follow up post.

Well, this is it (at least, it’s part one).

That took a lot to summarize, but readers know I’m passionate about getting independent content creators paid. In the past five or so months since that post was written, the direct-sold display marketplace has continued to deteriorate. Yahoo, a bellweather for display advertising, has had two more quarters of flat-to-declining display revenues that have missed Wall Street targets. In its latest earnings report, the New York Times Company noted that display revenues actually declined year over year.  We’re seeing it at Federated Media Publishing, as it has both direct-sold and programmatic businesses, and I’m hearing it from folks I speak with privately – models that depend on direct-sold “quality display” are under increasing pressure.

Meanwhile, business is great for the two platforms I outlined above. Programmatic buying platforms are seeing double and triple digit increases in revenue year over year (again, we see this at Federated, because we acquired such a business more than a year ago). As more data and insights are applied to programmatic, and better inventory secured, I  see a very bright future for this part of the market. Business is way ahead of plan at Twitter, executives there have said, and Facebook’s recent earnings highlighted the growing success of that company’s “native” advertising products - promoted posts and sponsored stories.

Unfortunately, neither of these two high-performing sectors of the marketplace help most full time independent web publishers make enough money – at least not yet.

Given all this, what is a publishing business to do? Well, as much as I’d like to say my idea of “monetized content traveling around the web” is imminent, I think that’s going to take a few years.  And while programmatic is getting better each quarter, it’s also going to take time and improvements over years before that ecosystem is fully expressed. If independent web publishers are to thrive in the near term, we’ve got to change our approach to the market. Change is scary, change is hard, but change is needed – and change is good.

How do we do it? In short, we’ve got to be far smarter about how we “feed” those platforms – making sure the value we get is equal to or more than the value we’re giving. We’ve got to be smart about how we interact with both social and programmatic platforms, and align ourselves with companies that put publishers first. And lastly, we’ve got to rethink how we bring high-touch marketing onto our sites – we need to more rapidly adopt new advertising products, new architectures for our sites, and a deeper understanding of how to partner. We can no longer relegate marketing to second-class real estate. If high quality sites on the independent web are going to thrive, we will have to embrace change. That’ll be the subject of my next post.

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At Google Zeitgeist: Theoretical Physics and Astronauts, Unite!

By - October 19, 2012

Earlier in the week I traveled to the annual Google Zeitgest conference, where I’ve been honored to be a moderator for the past few years. This year I was given the challenge of tacking a 90-minute block on “The World We Dream,” which featured an extraordinary set of speakers. The session included a short interview with two impressive folks: Ron Garan, a NASA astronaut who has spent 180 days in space, and Lisa Randall, a celebrated theoretical physicist and author. I’ve never spent as much time prepping for a 20-minute interview as I did for this – in part because the Higgs Boson is not that easy for the laymen to grok, nor is the concept of floating around in space. If you are so inclined, enjoy:

 

The Facebook Ad Network Is Here

By - September 19, 2012

It’s been a pretty good year for my annual predictions, I must say. A few months ago I did my “how’ve I done so far this year” post, and found myself batting about .500. Yesterday Facebook pushed up my average with the announcement that it’s begun testing a mobile ad network. And this isn’t just an on-domain network (where you can buy ads across Facebook’s domain), but rather, it’s a true cross-domain network – just like AdMob on mobile, or Adsense on the web.

From Ad Age:

The company is working with an undisclosed number of ad exchanges to deliver the ads on iOS and Android devices for its advertisers, who can still target using Facebook’s array of options such as age, location, education and interests.

Expect Facebook to either build or buy one of these exchanges – just as Google did with the web (AdX via DoubleClick). Most observers are claiming that this step augurs a day when Facebook will launch a full-blown ad network across all platforms – video, web, and mobile. I have to agree – I wrote as much in those predictions in January. What I didn’t see was Facebook starting its ad network by launching an exchange (called FBX) and then moving into mobile before it did web.

But upon reflection, it all makes sense. FBX allows Facebook to gather data about web-based buyers’ purchasing habits. FBX is essentially a massive retargeting engine that connects web cookies to Facebook’s internal databases. That will come in quite handy when it launches an Adsense competitor. And launching its first true off-domain ad network in mobile first signals to Wall Street that the company has its priorities straight – its been dinged repeatedly for being too focused on the web. The key to this new mobile network is that Facebook is selling its data, not its inventory. If the company gets good at that, watch out.

These moves elevate Facebook into new arenas of competition with Apple, Google, Microsoft, and Amazon, all of whom employ  simliar product suites. And yes, I did include Amazon in that sentence – the company is far more engaged in the advertising business than you might have thought. More on that in another post.

 

 

 

Am I An Outlier, Or Are Apple Products No Longer Easy To Use?

By - September 13, 2012

I’ve been a Mac guy for almost my entire adult life. I wrote my first college papers on a typewriter, but by the end of my freshman year – almost 30 years ago – I was on an IBM PC. Then, in 1984, I found the Mac, and I never looked back.

Till now.

I’m not saying I’m switching, but I sure am open to a better solution. Because the past year or so has been dominated by the kind of computing nightmares that used to be the defining experience of my Windows-PC-wielding friends and colleagues. And it’s not limited to the Mac – the iPhone is also a massive fail in what was once the exclusive province of Apple: Ease of use.

I’ll caveat this post with the fact that I may be something of an outlier – I have thousands of contacts in my Apple contact database, and my iCal app is burdened with having to integrate with a multi-platform universe at work. And perhaps the fact that I love to take photographs, and have amassed more than 10,000 digital images, means that iPhoto has become mostly useless to me for anything other than as a storage vault. And that, apparently, is all my fault.

But my wife isn’t an outlier. She has about 250 contacts. She tries to use iCal, but can’t make it work. Her email breaks early and often. And she’s spent the past two months in IT hell, trying to salvage her digital life from the clutches of Apple’s self-centered, walled-garden update called the Lion operating system, which wiped out nearly all her previous settings and useful applications. Watching her struggles, and trying to help (and realizing I couldn’t without bringing in expensive professionals) made me wonder – whatever happened to ease of use?

I am certain this post will elicit all manner of Apple fanboys who claim I’m a moron, that I’ve brought upon my own demise through stupid decisions.  Well, let’s review a few, and you can judge for yourself.

Honestly, where to start. How about with the iPhone itself? I have an iPhone 4, it’s about a year or so old. The contract is for two years, and I don’t feel like paying $400 to get a new phone. I figured this one must be good enough, right? Wrong.

The phone is pretty much useless now, because all of its storage is taken up. With what, you might ask? Well, it’s a mysterious yellow substance – found, in a masterstroke of intuitive design, in iTunes – called “other.” I was alerted to this issue when I couldn’t take a photo because my storage was full. Oh, and I was also told my storage was too full to download any more mail. And I’m an inbox zero kind of guy!

WTF is all this “other” shit, I wondered to myself. Well, that’s what Apple’s self-hosted forums are good for (I’ve been there a lot lately, for any number of issues, only a few of which I’ll detail in this post). So off to Google I headed – “what is the other in iphone storage” yielded this post, among a lot of others:

 

 OK, so…should I restore the device from backup? How do you even do that? And if that doesn’t work, then what? I have to “restore as new”?

Sounds dangerous, like I might lose all my settings and apps and such. There had to be a better fix. I spent a half hour or so reading various forums, blog posts, and the like about the problem, which seems quite prevalent. Many of the suggestions are summarized in this post,  and included deleting your browser cache (that was pretty easy, I did it, no luck), deleting your entire email account and recreating it (a pretty drastic thing to do, but funnily enough, I’ve done it about ten times in the past year due to problems with our connection to work mail, and since I’d done it recently, I figured that couldn’t be it), and my favorite:

Go to /var/mobile/Media/ApplicationArchives using SSH (requires jailbroken iPhone) or DiskAid and delete everything. This folder contains partially downloaded apps which never completed nor removed and were probably interrupted at some point in the middle of downloading.

Are you frickin’ kidding me? I have to jailbreak my phone to fix this problem?

Oh wait, that blog post suggested one last thing I could do: If the above steps fail, do a full system restore :(.

Again, very drastic. But I was getting impatient. I wanted my storage space back. I found another site, one that looked pretty official, that said this:

Unfortunately, scouring available information sources and speaking with Apple hasn’t led to any type of easy resolution.

If you’re experiencing this issue under any version of iTunes, you’ll need to restore your iPhone to reclaim the space occupied by Other. That is the only known solution at this time.

Well shit. I spent a few more fruitless hours trying to find another solution on the web. There wasn’t one that didn’t require pretty significant technical know-how (such as installing a utility, running it to reveal all files on the iPhone, then deleting each file one by one, even if you weren’t sure what the file did). The only option that was relatively straightforward and seemed to work, according to many forums, was to restore the phone.

Which I did. And I lost all my apps save the ones that come preinstalled on the iPhone in the first place. And guess what? It didn’t fix the problem. 

OK, I’m going to stop on this example. Because the point isn’t to try to fix the problem (I know I’m going to have to go to an Apple store, and get a “Genius” to deal with this. And I know this “Genius” is going to tell me that my phone is old, and that I need a new one with more storage, and by the way, I should really get an iCloud account, because if I had one then I wouldn’t have a problem at all. In other words, Apple has architechted the iPhone in such a way as to insure that I spend much more money with Apple, and am committed to their cloud solution long term with my data. But that’s another rant). Oh, and the fact that Apple doesn’t respond in its forums about this (or any) issue? Ridonkulous.

My point is simply this: This. Ain’t. Easy. 

Another example: iPhoto. May I just say, and I won’t be the first, that iPhoto is A Piece of Sh*t, in particular given how image-driven the company is in its own marketing. iPhoto is about as dumb as an application can be. Just launching the things often takes up my Mac’s entire CPU,  crushing performance on anything else I have open (and no, my Macbook Pro isn’t old, it’s one of the newer models). Photos are organized by date, and there’s no easy way to change that. Album creation is utterly non-intuitive (again, I’m sure this is all my fault, Mr. Fanboy), and the “Faces” feature, which seemingly would fix a lot of these issues, is just plain useless.

Now, you Apple fanboys will scream at me: Hey Battelle, you wuss, don’t you know about Some Expert Photo Editing and Organizing Photo App That You Can Buy For Hundreds of Dollars. Or Some Bitchin’ Utility Written By A 19-Year-Old That Will Never Be Supported By Apple. Or something. Well I do, because I’ve searched high and low for help with iPhoto. Again, there are no easy solutions. I could take a class, yep. Or spend a few days manually tagging my photos. But wasn’t the point of the Mac that you SHOULDN’T HAVE TO DO THAT?!!

Another example: Nearly all of Apple’s built in “productivity” applications are terrible – email, contacts, calendaring, for starters. All of them are not ready for prime time. iCal is laughable as a shared calendar across platforms and the web – perhaps my IT department is filled with punters, but in five years, we’ve never been able to make iCal work seamlessly across pure Mac networks, not to mention with other solutions like Outlook or Google Calendar. And when we call Apple for support, it’s as if Apple really doesn’t care. Alas, we can’t seem to find anything better, so we limp along…apologizing when things “fall off the calendar” or, worse, when appointments stay on my iPhone calendar long after they’ve been moved from my main iCal on the Mac.

And dont’ get me started on Apple’s “Address Book.” As I said before, I have thousands of contacts. Is that so uncommon? Apparently it is. After months of trying to get my contacts to sync properly across my Mac, my assistant’s Mac, and both of our iPhones, my IT department finally got someone at Apple to admit that, well, the Address Book just doesn’t really work very well once you have more than about 1000 contacts. Seriously. Just – sorry, we don’t have a solution for that. We have found a fix – we use Plaxo – but now we’re dependent on Apple supporting Plaxo, which I’m not certain is a long term bet. Oh, and every time Plaxo syncs with Apple’s contacts, about one in ten of the contacts are duplicated. Why? No one knows. Is there a fix? Nope.

(And what if you want to sync to – gasp – an Android phone?! Well only way to do that is through a total hack involving Gmail. Seriously.)

Let me repeat my refrain: This. Ain’t. Easy.

Without going into detail, my little rant about Calendar, iPhoto, Address Book, et al goes for iTunes as well. I even bought a piece of software to try to fix iTunes myriad issues (Rinse). I can’t figure out whether or not Rinse has fixed anything, to be honest, and so far, all it’s managed to do is marry the wrong album art to about 100 or so songs which previously didn’t have any imagery. Which is kind of funny, but a tad annoying. And just the fact that there’s a market for something like Rinse kind of makes my point.

Oh, and then there’s the vaunted Apple Super Magical User Interface. You know, the Insanely Great Revolutionary Change the World User Experience that everyone fawns over as if it were a fact.

Are you kidding me? If Apple’s UI is magical, then I’ve got a Unicorn to sell you. Let’s start with Mac Lion. There are so many Fails in this OS, it’s hard to know where to start. You need a four-hour class just to understand all the contortions Apple seems to be doing in its attempt to make its desktop interface work the way the iPhone does. You know, pinch and swipe and app stores and mission controls and magic corners and all that. I’ve spent at least an hour figuring out how to turn most of that shit off. It just doesn’t work.

It’s really funny to watch my wife deal with all this, given she’s not exactly one to dig deep into system settings (you know, the very consumer Apple initial designed for). When she got Lion, the way her mouse, her iChat (now “iMessage” or someshit), and of course all her applications worked changed in very dramatic ways. For instance, she could no longer IM me – all of a sudden, she was on “me.com” and her IMs came to my cell phone as texts. (In other words, Apple defaulted to its own iCloud services, and wiped out her AIM-based identity). I’m sure this is all her fault, naturally.

Oh, and every time she clicks her mouse to try to move a window around, a message about “Icons and Text” appears. WTF? Little irritations like this happen all over the place, piling one upon the other until it crescendos with a long, wailing lament – WHAT AM I USING HERE – WINDOWS?!

But we all know the future is mobile, right? And the iPhone and iPad are Perfect Expressions of Beauty, Ideal Combinations of Form and Function. Except they’re Not.

 

Have you ever done a search in your iPhone contacts? You need the fingers of a poorly fed six-year-old to activate that search function. No, really, I must waste four or five minutes a day trying to make that damn thing work.

Seriously, how can an adult finger ever touch that little search icon without either hitting the “A” or the “+”????

And then there the precious internationalization feature of the keyboard (see image at right). I must turn my texts and emails into Kanji ten times a day. And this is a feature??!

There are countless other examples of irritating UI features on the iPhone. Inconsistent navigation is a primary one, but …OK. I’m going to really stop now. Because I know, learning how to use the tools of computing is MY job, and I’m clearly falling down on it. I know there are ton of tips and tricks that would make my life easier, if only I took the time to learn them. If only I spent hours a week on the Mac tips websites and such. If only I wasn’t busy…writing rants like this one.

And I know that Andriod and Windows are hard to use too. And no, I’m certainly not going to install Linux.

My point is simply this: This stuff is too complicated. There has to be a better way. And while it used to be that Apple was the brand which uncomplicated computing, for me, anyway, that’s simply no longer true. Does anyone out there have similar experiences, or am I really an outlier?

What Is Search Now? Disjoined.

By - August 31, 2012

(image shutterstock)

Today I answered a question in email for a reporter who works for Wired UK. He asked smart questions, as I would expect from a Wired writer. (Some day I’ll tell you all my personal story of Wired UK – I lived over there for the better part of a year back in 1997, trying to make that magazine work. I mostly failed – but it’s up and running strong now.)

In any case, one question in particular struck me. The writer is preparing a piece on the future of search. (I’ll link to it when it comes out). What big problems, he asked, still plague search?

That got me thinking. Here’s my answer:

The largest issue with search is that we learned about it when the web was young, when the universe was “complete” – the entire web was searchable! Now our digital lives are utterly fractured – in apps, in walled gardens like Facebook, across clunky interfaces like those in automobiles or Comcast cable boxes. Re-uniting our digital lives into one platform that is “searchable” is to me the largest problem we face today. 

It may be worth expanding on that sentiment. When it broke out in the mid 1990s, the web was society’s first at-scale digital artifact.  It spread in orders of ten, first thousands, then millions, then hundreds of millions of pages – and on it went, to the billions it now encompasses. Everybody wanted to “be” on the web – a creator class started making pages and companies and services, a consumer class started “surfing” this vast new digital object, and our collective conscience marvelled at what we had created together: millions of small pieces loosely joined. And the key and unappreciated point is this: those pieces were indeed joined.

It was that joining – through links, of course – that made search possible, that created what is unquestionably the most powerful and lasting new company of the past 20 years – Google.* But as I wrote in Why Hath Google Forsaken Us? A Meditation, Google’s core model – built on the open, linked world of the web – is under threat from the advance of the iPhone and the app, the Facebook and the Path, the automobile console, the Xbox, the cable box, and countless other “unlinked” digital artifacts.

Google knows this. Why else invest so much in Android, in Google+, in Motorola (it’s not just phones, it’s also cable boxes), in self-driving cars, for goodness sake? Google wants a foothold wherever digital information is created and shared, and man, are we creating a sh*t ton of it. Problem is, we’re not making it easy – or even possible – to link all this stuff together, should we care to.

Which takes me back to that core question the Wired reporter asked me: What’s the biggest problem plaguing search? In short, it’s that our digital world is no longer small pieces loosely joined. It’s also big chunks separate and apart. And that makes search – in its most broadest interpretation – damn near impossible.

Which leads to another question: What then, is search? Of course, the Wired reporter asked me that as well. My answer:

Search is now more than a web destination and a few words plugged into a box. Search is a mode, a method of interaction with the physical and virtual worlds. What is Siri but search? What are apps like Yelp or Foursquare, but structured search machines? Search has become embedded into everything, and has reached well beyond its web-based roots.

So we all search now, all the time, across all manner of artifacts, large and small. But our searches are not federated – we can’t search across these repositories, as we could across that wonderful, vast, loosely joined early world of the web. We’ve lost the connection.

Call me a fool, but I think the need for that connection will be so strong, that in time, we’ll sew all our digital artifacts back together again. At least, I certainly hope we will. Right now, it ain’t looking so likely – what with patent wars, wagon circling by big platforms, and the like. But I’m an optimist – and I hope you are as well.

* Sorry but Facebook isn’t there – yet. And Microsoft and Apple, well, they may make a play for that crown either 20 years ago or 20 years hence, but if you ask me for the most important company ever that launched as a native web business, the answer is indisputably Google.

 

 

 

Twitter Drops Other Shoe, Which You All Saw Coming, Right?

By - August 30, 2012

Way back in the spring of 2010, when Twitter was constantly under siege for “not having a business model,” I co-hosted “Chirp,” Twitter’s first (and I think only) developer conference. This was just two and half years ago, but it seems like a decade. But it was at that conference, in an interview with me, that then-COO (now CEO) Dick Costolo first laid out the vision for “the Interest Graph.” I wrote about this concept extensively (herehere, here), because I felt that understanding the interests of its users would be the core driver of Twitter’s long-term monetization strategy.

Fast forward to now. Twitter today announced its “promoted” suite of ad units may now be targeted by user interest, which to me is a long-expected move that should clarify to anyone confused by the company’s recent announcements (cue link to recent tempest). Twitter’s statements around its decision to sever ties with Instagram and Tumblr couldn’t be more clear:

We understand that there’s great value associated with Twitter’s follow graph data, and we can confirm that it is no longer available to (insert company here)…

In short, if you are a potential competitor, and have the resources, motivation, and potential to harvest the connections between Twitter users at scale, well, expect to get cut off. You’re a threat to Twitter’s revenue stream.

None of this should come as a surprise, if you’ve been paying attention. Back in 2010, the second autocomplete answer for the statement “I don’t get…” in Google was “I don’t get Twitter”:

Interestingly, today, the same search today shows Twitter has only managed to drop down to third, even though the company now sports 140 million active users:

And while one could argue that in 2010, it was consumers who didn’t “get” Twitter, perhaps the folks scratching their heads via Google now are developers, who of late have been concerned that building on top of Twitter’s APIs might be dangerous for their long-term livelihood.

Twitter’s announcement today clarifies things quite a bit. Twitter has already declared its distaste for any business that manages how people consume tweets. Today, the other shoe dropped: Don’t build your business leveraging Twitter if you plan to run interest-based advertising at scale. Of course, the entire traditional media business is driven by interest-based advertising, which means Twitter’s business development group has a lot of work ahead. Interesting times ahead, to be sure.

The Future Is Cloudy

By - August 29, 2012

I’ve spent a lot of time thinking about data recently. It’s not just reading books like The Information or Mirror Worlds (or Super Sad True Love Story, a science fiction novel that is both compelling and scary), it’s my day to day work, both at FM (where we deal with literally 25 billion ad calls and associated data a month), and in reporting the book (I’ve been to MIT, Yale, Amazon, Microsoft, Facebook, Google, and many other places, and the one big theme everyone is talking about is data…).

We are, as a society and as individuals, in the process of becoming data, of describing and detailing and burnishing our dataselves. And yet, we haven’t really joined the conversation about what this all means, in the main because it’s so damn abstract. We talk about privacy and fear of big brother, or big corporations. We talk about Facebook and whether we’re sharing too much. But we aren’t really talking – in any scaled, framed way – about what this means to being humans connected in a shared society, to be in relationships, to be citizens and consumers and lovers and haters….

There are so many wonderful micro conversations going on about this topic, spread out all over the place. I’m hoping that when my book appears, it might be a small step in joining some of these conversations into a larger framework. That’s the dream anyway.

Meanwhile, this report caught my eye (hat tip to the ever interesting newsletter guru Dave Pell and his NextDraft): Can’t Define “The Cloud”? Who Cares? It quotes a study that found:

….most people have no idea what the cloud is, have pretended to know what it means on first dates, and yet effectively all respondents are active cloud computing users.

It continues:

And that’s the way this stuff should work.

I get the point, but in a sense, I utterly disagree. If we as as society do not understand “the cloud,” in all its aspects – what data it holds, how it works, what the bargains are we make as we engage with it, we’ll all be the poorer for it, I believe. (For one aspect of this see my post on the Cloud Commit Conundrum). More on this as the Fall approaches, and I settle into a regular habit of writing out loud for the book.

 

A Show Of Hands Please…

By - August 28, 2012

…from those of you in the marketing business out there. How many of you would love to promote your product on the home page of Google, in this fashion?

It’s arguably the web’s most valuable ad placement, it’s not for sale, and no one knows how much traffic or conversion it drives save Google itself.

Just one more sign that the Internet Big Five are girding for a massive fight to be the platform for your life. And if you’re shocked, don’t be. Remember when Amazon launched Kindle? The first thing you saw when you went to amazon.com was….what again? But then again, the Kindle was just another product Amazon was selling, right? At least, it seemed that way.

Now, when Facebook does a home page takeover with its own hardware device, then the battle will truly be engaged. Though I’m not convinced the young company has that move in it….Regardless, here we go….

Musings On “Streams” and the Future of Magazines

By - August 17, 2012

I’ve run into a number of folks these past few days who read my piece last week: The State of Digital Media: Passion, Goat Rodeos, and Unicorn Exits…. Some of you have asked me to explain a bit more on the economic issues regarding media startups. I didn’t really go too deep into them, but as I was answering one fellow in email, I realized I didn’t really explain how complicated they really are, particularly if you want to make new forms of publications. I’ll get into that in the second part of this post, but first, I wanted to address a few articles that have touched on a portion of the issue, in particular The Pretty New Web and the Future of “Native” Advertising (by Choire Sicha) and What happens to advertising in a world of streams? (by Matthew Ingram).

Bridging the Stream

Both these posts tackle the emerging world of “stream”-driven content, painting them as opposite to the format we’ve pretty much used for the past 20 years – “page”-based content (like this page, for example). An established, at-scale business model exists for page-driven content, and it’s called display advertising. And anyone who’s been reading this site knows that display advertising is under pressure from two sides: first, the rise of massive platforms that harvest web pages and monetize them in ways that don’t pay the creators (Facebook, Twitter, Pinterest) and secondly, the dramatic growth of programmatic buying platforms that do pay creators, but the payment amounts are too low to support great content (second generation ad networks called DSPs, backed by agencies and their marketing clients).

Sicha and Ingram note that “stream”-based models – the latest to get attention is Medium, from Twitter co-founders Biz Stone and Ev Williams – eschew display advertising. Platforms like Twitter and Facebook are focused on stream-based advertising (Facebook got to its initial billions in display, but is pivoting to Sponsored Stories, Twitter has always been about its Promoted Products). Everyone expects similar in-stream products from Pinterest and Tumblr. Stream-based advertising products are “native” in nature - which is to say, advertising that acts much like the content it supports.

But as I’ve advised in the past, those platforms simply don’t work as home bases for people who want to make a living from creating great publications. Nor, to my mind, are they particularly good media experiences – the way a great site or a great print publication can be. For now, the good old-fashioned page-driven web is where folks like The Awl and GigaOm execute their product and collect their money. Display is their model, and that model is under pressure. What to do? This is a question that matters, a lot, because there are literally millions of sites that currently run on the display model, like it or not.

Well, I don’t think it’s as hard as it might seem. While folks are pretty freaked out about the decline of display, I’m a bit more patient. We’re in the middle of a shift, and it’s not as radical as some might think. We need “native advertising” for the independent web – and it turns out, we’ve already got it in the form of new, integrated content units that fit into the flow of the page-driven web (see image of FMP’s “native conversationalist suite,” above), and, of course, content and conversational marketing, which we’ve been doing since 2006. The issue we now have to tackle is scale (the ability to buy native ads across the web efficiently and in large numbers) and data (the ability to buy these ads with excellent targeting, performance metrics, and application of first- and third-party data). That’s going to take time, but it’s already underway. The technology and efficiencies of programmatic buying will, over time, marry with “native” ads, driving higher value for great content.  (More on this in another post).

And by the way, “traditional” display isn’t going to go away. It’s just going to get far more efficient and valuable as the data gets better and better, programmatic begins to climb up the value curve, and the units evolve to better complement new approaches to content presentation across all instances of the web (including apps and big platforms).

So far, I’ve been talking only about publishing on the “traditional web,” for lack of a better phrase. Nearly all web publications are driven by the display model, which is in turn driven by page views. But we all know the web is shifting, thanks to mobile devices and the walled gardens they erect. The new landscape of the web is far more complicated, and new products must emerge. To wit….

It’s A Tough Time To Launch A Magazine, Which Is Why It’s A Great Time…

Quick: Name me a digital-only publication that’s blown you away, the way the paper-based Wired did in 1992 (well, at least for some of you), or maybe Boing Boing did when you first found it online. I don’t mean a cool new website (there’s been a ton of those), but a magazine in sense of a branded package of curated, unique content, one that really speaks to you, one that is an event each time it comes out.*

As much as I love scores of wonderful sites across the web, most of them are driven by the daily grind of the display/pageview hamster wheel. They create 20, 30, 40 “content snacks” a day, and I miss far more than I consume.  My media habits when it comes to these sites are rather like a hummingbird. I can’t think of a single “publication” in the digital space that resonates the way magazines used to for me – where I stop time for a while, and really soak in the essence of the publication’s experience. (For purely selfish reasons, if you can think of one, please note it in the comments!)

I think there’s a reason there’s a paucity of digital magazines, and it has a lot to do with the current, fractured state of digital publishing. In short, if you want to create such a product, the curent ecosystem makes it nearly impossible to do so. I think this is changing, but so far, not fast enough.

Just for kicks, let’s say you want to start the equivalent of a “new publication” in the Internet space. Let’s further state that you want it to be relatively cutting edge, IE, you want it to be available everywhere your customer might be, and take advantage of the digital environment where it lives. That means  editions in the Apple iTunes store, Amazon’s Kindle/Android newsstand, and Google’s Play (Android) store, for all those Android smartphones and tablets storming the market. And of course, you want to exist on the web (with spiffy HTML5, natch). Oh, and it’d be nice if you could also have a great version of it exist on Facebook, no?

Naturally, you want to be able to give the consumer of your publication a consistent, platform-agnostic experience across all those environments. If your reader starts engaging with your publication on, say, an iPad, but moves to her work PC later in the day, your publication should be aware of what she’s been doing, the environment she’s now in, and then serves up the right content, ads, and such based on that data. Kind of the way NetFlix works (hey, they solved it for movies!), or Amazon’s Kindle readers (books!) across various platforms.**

Ready to get to work making this happen?!

OK. Well, let’s use the “old” model of magazine publishing as a starting point to model your costs.

In that model, you spent about 35% of your operating costs in “audience development” – paying for circulation and newsstand costs, as well as the costs of selling your product to advertisers (assuming you are going to both charge a sub fee, and include ads, which most “traditional” publications do).

Another 20-40% (depending on how much you care about your product) are spent on actually creating your content. You know, paying editors, designers, writers, videographers, etc.

Add in 25% of your cost to make and ship the physical product, and the remainder is “G&A” – paying for management staff.

As you can see, the variable cost here is in “creating your content,” and if you’re a passionate creator of media, you want to spend every dollar you can creating a great product, naturally.

The problem is, if you’re making digital media these days, the costs of packaging that content have skyrocketed. Imagine making a magazine that has to be natively integrated into half a dozen or more different newsstand formats. Instead of one consistent, beautiful page layout, you have to make six of them – one for each device and distributor, each native to the environment. You don’t have to pay six times over for the content, but you do have to pay a lot more for your design, production, tech, and distribution resources.  You want your content to shine everywhere it might be consumed, right?! Blam, your fixed costs of making the product just went uneconomic!

The same problem applies to marketers – they have to make not one ad, but up to six, if they want their ad to travel everywhere the publisher’s content goes, and work in ways that take advantage of each platform. Trust me, they don’t want to deal with that. No to mention, not many advertisers want to buy ads inside “digital magazines” these days. It’s an unproven medium, so far. (However, as I argued in my 2006-7 series on Conversational Media, the best magazine ads are in fact truly native.)

Which begs the other side of the ledger: Revenues. As I said before, traditional publications have two sources of revenues, in the main: subscriptions (paid circulation) and advertising.

As we all know, the industry has historically punted on getting anyone to pay for content on the Internet, but that’s changing – people pay for Netflix, the Wall St. Journal, Spotify, various apps, etc. I think folks will pay for quality content if it’s truly valuable, so let’s pretend for the purposes of this example that your new publication plans to be in the “valuable” category.

If you want to sell your publication on the Big Guys’ platforms, you have to play by their rules, which means you turn over 30% of your circulation revenues. That’s a hefty chunk of revenue to lose before you even begin to pay for other costs! You can keep all the revenues from folks who buy your publication on the web,  but if they want to enjoy it on their iPad or Kindle via a native application, well, you have to deal with Apple and Amazon. Google’s Play store takes a smaller cut, but it takes a cut nonetheless.

Just for arguments’ sake, let’s say that you cancel out that 30% tax with what you used to call “audience development costs” for traditional publications. You’re pretty much even, right? Nope. You now have cross-platform inconsistencies to work out, and those are going to cost you money to manage. What if your customer has more than one device, or wants to engage with your app on Facebook? Sorry, you’re kind of screwed. There’s no easy way to rationalize your customer experience across all those platforms and devices in a way that makes business sense. So many gatekeepers, so many business rules, so many tech platforms….

You’ll have to account for the costs of managing a data platform that keeps track of all your customers (including your advertisers) and insures they have a consistent experience across platforms. And you’ll have to build that yourself, sorry. The only folks who’ve figured that out are Very Big (Amazon, NetFlix etc), and they’re not sharing how they do it. It’s doable, but it’s gonna be expensive if you want to roll it yourself. I’ve heard that some new publishing startups are trying to do just that, and I wish them godspeed.

To cope with this particular mess, some publishers, like The Daily, have decided to go with just one platform (Apple), and cross their fingers and hope it works out. Others, like the Times, have pushed themselves across several, and expended heroic resources trying to tie it all together (without totally succeeding, in the main). But remember, we’re talking about a new publishing startup here, not the New York Times or Newscorp. If those guys are struggling to make it work, well, what’s the chances a startup media company is going to succeed?

Then there’s the revenues associated with selling advertising. As I pointed out earlier, the traditional web display model is under transitionary pressure, and anyway, you want your content to work everywhere, not just the web. If you want your advertisers to be everywhere your content is, you’ll have to figure out a way to get their ads natively into all those half dozen or so platforms (oh, and you’ll need to report performance metrics too, sorry). So far, that’s also an unsolved problem (and one your advertisers won’t pay you to solve). That’s going to limit your ability to sell ads, and increase your costs of serving them.

OK, I’m going to stop, because if you’re an aspiring publisher, I may have given you a fit of the blues.

But cheer up. Because I really do believe these issues will be solved. So far, we’ve written off magazines as dying, because we can’t figure out how to replicate their core value proposition in the digital world. But I’ve got a strong sense this is changing. Crazy publishing entrepreneurs, and even the big players in media, will sooner rather than later drive solutions that resolve our current dilemma. We’ll develop ads that travel with content, content management systems that allow us to automatically and natively drive our creations into the big platforms, and sensible business rules with the Big Guys that allow independent, groundbreaking publications to flourish again.

It’s going to take time, patience, innovation, and pressure, but we’ll get there. In fact, getting there is going to be a great journey, one we’re already well into. So tell me – what’s your favorite digital “publication” and why? Do you read “traditional magazines” on your tablet or online? And what companies do you think are innovating in this area?

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*Some have argued that the era of a branded publication created by a dedicated team of content creators is over. I utterly disagree, but that’s another post. 

**The fact that these two “old media” formats have mostly solved their digital distribution issues, whilst magazines have not, is vexing. A movie is a movie, a book is a book – you can read it or watch it online in nearly the same way that you can offline.  Movies, TV shows, and books can easily flow, with very little new formatting, into any digital space. But a magazine clearly is a different beast. We don’t want to just flip through a PDF of our favorite magazine (or do we? Do you?). Something seems off, doesn’t it? We want more…clearly, the magazine holds some magic that so far, we’ve not unlocked. What a wonderful problem to think about….

The State of Digital Media: Passion, Goat Rodeos, and Unicorn Exits….

By - August 09, 2012

Earlier in the week I was interviewed by a sharp producer from an Internet-based media company. That company, a relatively well-known startup in industry circles, will be launching a new site soon, and is making a documentary about the process. Our conversation put a fine point on scores of similar meetings and calls I’ve head with major media company execs, content startup CEOs, and product and business leaders at well known online content destinations.

When I call a producer “sharp,” I mean that he asked interesting questions that crystalized some thoughts that have been bouncing around my head recently. The main focus of our discussion was the challenges of launching new media products in the current environment, and afterwards, it struck me I might write a few words on the subject, as it has been much on my mind, and given my history as both an entrepreneur and author in this space, I very much doubt it will ever stop being on my mind. So here are a couple highlights:

* We have a false economy of valuation driving many startups in the content business. Once a year or so, an Internet media site is sold for an extraordinary amount of money, relative to traditional metrics of valuation. Examples include The Huffington Post, which sold for a reported 10X annual revenues, and, just this past week, Bleacher Report, which sold for even more than that ($200million or so on revenues, from what I understand, that were less than $20mm a year).

Such lofty multiples (typical media businesses  - yes, even Internet media businesses – trade at 1.2 to 3X revenues) can make Internet media entrepreneurs starry-eyed. They may have unrealistic expectations of their company’s value, leading to poor decision making about both product and business issues. The truth is, truly passionate media creators don’t get into the media business to make huge gains from spectacular unicorn exits. When it happens, we certainly all cheer (and perhaps secretly hope it happens to us). But the fact is, we make media because we don’t know what else to do with ourselves. It’s how we’re wired, so to speak. (There is another type of media entrepreneur who is far more mercenary in nature, but I’m not speaking of those types now).

Let me explain why HuffPo and Bleacher Report were sold for so much money: They happened to be in the right media segment, at the right time, while growing at the right rate, just as a large media-driven entity was struggling with a strategic problem that threatened a core part of its business. And that particular site happened to solve for that particular problem at that particular time. These major “strategic buys” occur quite rarely (though smaller, less pivotal strategic buys happen all the time – just for far lower multiples).

Media companies don’t like to pay more than their spreadsheets normally dictate. But if word comes from Time Warner’s CEO or its board that “ESPN is kicking our ass in sports” and “do something about it, pronto,” well, that’s when lightening might just strike. As for the Huffington Post, let’s be clear: AOL was a huge media business that faced a massive problem with audience retention, thanks to its declining dial-up business. The HuffPo brought a large and growing audience, not to mention some serious social media and content-platform chops. Right place, right time, right product, right team.

Now, both these businesses were leaders in their fields, they redefined news and sports coverage. And that’s why the acquirer with the major strategic problem bought them – they were the best at what they did. They met a large media company that had lost its way, and magic ensued. I applaud them both.

But if you’re building a content business in the hopes the same lightening is going to strike you, well, I too salute you. But that’s not really a plan for building a lasting media brand. At some point, you’re going to have to come to grips with the reality that making media is what you do for a living.  Making media companies that you hope to sell is not a lot of fun for anyone who cares deeply about making media.

*The current distribution and production landscape for media companies is an utter goat rodeo. Speaking of no fun, man, let’s talk about what we in the media business call “distribution” – IE, how we get our product to you, the consumer of our work. To illustrate what a total mess digital distribution has become, allow me to create a simple chart, based on the medium in which you might choose to create your media product. Note that I whipped this up in the past half hour, so it won’t be complete. But I think it makes my point:

And my point is this: If you are starting a digital media business today, you face a fractured, shifting, messy, business-rule-landmine-laden horrorshow. Your fantasy is that you can make one perfect version of your media product, and deliver it across all those tablets, Kindles, smart phones, PCs, Macs, and so on. The truth is, harmonizing your product (and, even more importantly, your consumer’s experience and your monetization) across all those platforms is currently impossible. Compare that to starting a website in 2002, or launching a magazine in 1992 (that’s when we launched Wired). The business rules were established, and you could focus, in the main, on one thing: producing great content. (Speaking of Wired, it had a great exit, as historians may recall. But again, it was a exit driven by the strategic need of a bigger company: the media business went for a typical multiple, despite how “hot” the brand was. What got the unicorn valuation was Wired’s Hotwired business, specifically, its search share….)

We’re in a messy transition phase right now, where the focus can’t only be on content, it also has to be on the *how* of distribution, production, and business terms. And that’s retarding growth and innovation in media businesses.

But I have hope. There’s a massive business opportunity inside this mess, one that I’m investigating, and I know others are as well. More on that as it develops. Meanwhile, a maxim: Most media businesses fail, always have, and always will. And most folks who make media already know this, which means they are close to batshit crazy anyway. But over and over and over, we keep making content, regardless of how ridiculous the landscape might be. And that, I am sure, will never change.