Modernize Newspapers

Newspapers as Local Tech Resellers

Much attention has been given to old business models as folks in the local media business struggle to figure out how to make newspapers economically viable.

I have an idea that I'd like to throw into the ring -- turn newspapers into resellers of technology products to the local market.

Newspapers have a large local sales force that understands the need of local businesses.  Sure, in some cases, the sales force at your local newspaper is nothing more than a group of semi-qualified "order takers", but if that remains the case then it would behoove each local paper to get rid of everyone on staff and outsource sales to a call center in India.  "Order takers" have to become more economically viable, or they'll be replaced or eliminated over time.

Local businesses need help navigating technology.  Even in 2009, a lot of people don't understand the value of technology and how it can (and often is) harnessed to help businesses be more productive, advertise better, or provide better products and services to customers.

Yahoo has tapped into this to some extent with their Newspaper Consortium.  But I'm thinking of something bigger with a lot more potential.  I'm thinking of something akin to Microsoft's partner channel.  Microsoft doesn't sell directly to customers as a focus of their business.  Instead, they employ a variety of resellers to serve as front-line help, sales, and support for Microsoft products.

It's a radical idea, but it makes a lot more sense to me than hanging on to an old way of doing business.

On a less radical front, I do think that newspapers could be an effective reseller of products that help local businesses reach customers.  Just about all local businesses need help advertising themselves in their local market.  Local media can help make that a reality.  That's why we're beginning to offer our products MinutesNotice to select local media families.  I think it's a model that can help newspapers and local television companies find margin where there simply wasn't any before.  More to come as we progress.  For more information, check out our recently improved web site.

How Newspapers & Local Media can "Out-Google" Google

 

Google's financial success can explained fairly simply. When people are searching for something on Google, they have a certain mindset. They are looking for something - some sort of knowledge. They are actively pursuing it, not passively consuming it. Some people, it turns out are searching for something to buy or a place to buy it.  Those people are perfect targets for the ads that appear on the right side of the screen. Google calls these ads the "Search Network" So perfect, in fact that it's not uncommon to see those ads clicked by 3-7% of all Google users.

 

Contrast that with a different situation. Google also shows ads on other websites - they call this the "Content Network". Message boards, news sites, online magazines. They're exactly the same ads that show on Google's search page, but they get click through rates closer to 0.05% than 5%. Why? Because someone passively clicking around the internet is not actively looking for anything at all. The difference in consumer behavior is striking. 100X increases in click through rate are not uncommon between the Search and Content networks.

 

So how can newspapers be more like Google's Search Network and less like the Content Network?

 

By reaching users when they are in a search mindset. No, newspapers should not, and frankly cannot, compete with Google's search functionality. But they do have something that Google does not. Local knowledge.

 

Newspapers can use that local knowledge to drive search-minded traffic to their sites. For example, you might be at the office and wondering where to go eat lunch. You know all of the places within a mile or two, and have eaten at most of them. It would be handy to know which ones had specials running today to help break the indecision. Without a lot of effort, a specialized hyperlocal site could be created with the sole purpose of aggregating lunch specials by neighborhood. People who go to that site will be actively looking for a place to eat. The local paper knows whom to approach to sell ads on the site, and can do so effectively with a knowledgeable sales force. The result? A massive increase in advertising effectiveness.

 

Another example: Here in Austin, we have two major music festivals each year. South By Southwest and Austin City Limits. You can bet there are specific industries that are just begging to get in front of the festival attendees. Many of those concert goers are from out of town and need  help with basic things. Where to eat? Where to stay?  Where are the best local bars? These are all questions that newspapers can answer - both with content and with intelligent advertising.

 

The goal is to reach a consumer who is asking a question, not a consumer who is killing time.

 

With a little imagination and planning, newspapers can find ways to drive search-minded traffic to their sites. It's not an overnight solution, but it is durable solution with lots of growth potential.

 

This is one area where newspapers can and should out-Google Google.

The Dallas Morning News' "Premium Value" Strategy

Sunday, the Dallas Morning News published an article on how they are modernizing to become a 21st Century Newspaper.  I thought I'd share some of the highlights of that plan & comment.

• increased pricing on print newspaper -- raising rates as much as 43% on home delivery,
• digital "e-EDition" -- $12.99/month for an electronic replica of the printed paper.
• niche advertising opportunities via specialty publications -- targeting high income, Spanish speakers, and young adults with new niche publications.

They've also done some interesting work with NeighborsGo, a hybrid print/online hyperlocal property.

All of these things are great moves designed for more experimentation.  Nobody has the answers, but that isn't stopping the Dallas Morning News from doing new things to see what will work.  Kudos to the team there for dealing aggressively with an ambiguous future.

A Few Interesting Articles

I thought I'd share a few interesting links from last week about the future of newspapers.  Enjoy.

Google's Eric Schmidt's commentary on newspapers -- clearly Google has taken a lot of grief for the troubles of the newspaper industry.  Certainly, Google has wrenched economic value from newspapers not to mention a lot of other types of businesses -- but local media folks would probably do a lot better listening to Google than fighting Google.

Clay Shirky pointed out that a lot of "local newspapers" don't really have a lot of truly local content.  Yep.  You'll get no argument here.  This is why I've suggested before that a lot of newspapers can get unique content through crowdsourcing and other lower cost methods than they've perhaps used for many years.  Newspaper problems are fixed if you solve both the top and bottom line, and that's going to be painful on a few levels.

Finally, Fred Wilson mentioned something that we've seen for the better part of a year -- if local media is to survive, it needs to take advantage of its current (and possibly fleeting) local advertising sales force advantage.  Local media companies may very well survive as resellers of third-party or proprietary technologies that further monetize their local news audience.  More on that later!

Innovation is Continuous

Today's blog post is from Damon Cali, Notice Technologies' VP of Operations... enjoy!

Old line newspapers will change. They will be brought into the new age of media one way or another. But only some will make it.

The good news is that the papers themselves get to choose if they want to shut down or transform into viable enterprises. The bad news is that this change will likely involve some internal conflict.

The ancient news business (and I do mean ancient) has been remarkably resilient. There are ways to do things. Some papers even own massive printing press operations. Hard capital, with huge costs and long term payback. After all, need for people to get the news is a safely assumed constant. Philosophies get shaped by these facts, and they have been for quite some time now. Slow, steady and concrete.

But it's not working anymore. The inefficient flow of information and staggering costs of distribution that have protected the newspaper industry have been ravaged, almost overnight, by the internet blinking into existence. Anyone who wants one has a voice. Distribution is controlled by the reader, not the publisher. Technicians battle for control of the information pipes and he profits they bring. Printing presses and their capital costs will soon be completely irrelevant. 

Where is the old-style newspaper in this mess? They're not!

So what's a newspaper to do?

Change, of course. Any executive worth his salt will see that newspapers have to get into the online game, and that costs will have to be realigned with the new realities of business. All a paper has to do is adopt an internet strategy, settle into the changes, and continue as before, right? No. Not at all right. Do that, and your paper will be just as dead as if you cling to paper and ink.

There is no fundamental difference between the newspaper of tomorrow and the startups and internet publishers of today. Newspapers have a nice, built in audience, but no clear advantage beyond that. They have or will become large, well-positioned internet companies. But change hits the internet industry frequently and with force. Advantages will evaporate quickly without constant innovation.

If you run an internet company, risk is a daily companion. You embrace it. You manipulate it. You harness it to generate profits and you hold on tightly because it just might leave you in the dust.

The newspapers that survive the coming years will be the ones who show that they can break out of their old perspectives and embrace risk - the ones who learn to iterate quickly, find what works, and never stop. You do this one project at a time. Take a small gamble and see how it works. Do it quickly. Run with it if it does work, and forget about it if it doesn't. That's the new way, and the sooner papers learn to embrace this fact, the more likely they will be to survive.

No, the biggest hurdle to newspapers is not their cost structure - it's their ability to recognize and embrace what they now must be.

Why Google, Microsoft, IBM, Oracle Solutions to NAA Problems All Miss the Mark

I thought I'd share a few quick thoughts today on responses to the NAA's request for information from the technology/internet industry on monetizing local media.  I've reviewed proposals from Google, Microsoft, IBM, and Oracle and a few new entrants so far in preparation for sending the NAA an unsolicited proposal of our own specifically around local advertising.

Microsoft did the best job IMO of translating "techspeak" into a workable vision for the future, although it appears to be as others have suggested somewhat of a ripoff of TweetDeck.  Interestingly enough, Microsoft's response suggested that the newspaper business utilize 15 products in unison to make their ambitious proposal a reality.

Quick sidebar -- in my 3 1/2 years at Microsoft, we occasionally ran across opportunities like this.  We similarly responded because there were two benefits for our business:  1) revenue, 2) case studies.  There is no case study quite like solving a contemporary problem (like "saving" local newspapers w/ Microsoft technology in this case.)  So when something like this would happen, we'd eagerly participate.  Granted, we really couldn't offer "true innovation"... Microsoft really doesn't innovate all that much... but we could enable things to happen with a great Web tools and technologies platform.

This effort by Rainer Kellerhals and the team at Sobees (a Swiss startup as far as I can tell) is about as good as Microsoft can do IMO without reaching out to a broader range of startups to build a truly innovative and effective solution.  Microsoft needs a handful of other "Sobees" for other parts of a solution for it to be truly effective -- more on that in a bit.

But my point is that big companies like Microsoft, IBM, Oracle, and to some extent Google have conflicting goals.  Sure they want innovation, but first and foremost they want adoption/sales/increased revenue of existing tools and technologies.  Innovation is a justification for using their offerings.  Innovation is not central to their existence or participation.

The startup community, on the other hand, is always pushing at the edges to find new ways of doing things.  This typically involves finding new opportunities, cutting costs where possible, and working with new technologies to become more efficient.  I would venture to say that the startup community has very few peers when it comes to the clever & inventive utilization of real-time, social media, and mobile technologies.

Similarly, innovators like the Huffington Post, Mashable, Craigslist, Digg, Stocktwits, Fark, and others have built very profitable businesses utilizing Internet technologies in interesting ways.

If the NAA and the newspaper business truly wants to innovate, it needs to look to the future.  Microsoft, IBM, Oracle, and Google are great companies that have done great things in the past -- and they can certainly be part of a solution.  But these companies can't do it alone.  The NAA must actively engage the startup community and new entrants, or the it will continue to create rivals with the wherewithal and motivation to compete.

ModernizeNewspapers.com

As we work more and more with local media companies and newspapers, I've decided to break out those posts into a separate blog at http://www.modernizenewspapers.com.  This will allow me to focus on our business on that blog while continuing to write occasionally about startup issues here.

Thanks for reading, and please check out the new blog!

Chris

Introducing the Modernize Newspapers Blog

Among the entrepreneur community, it has become a "fait accomplis" that newspapers are dead. Look around the blogosphere or run a newspaper search on Twitter and you'll find people reveling in the creative destruction of the media business.

I don't think newspapers and local media are dead, but clearly established newspapers have to do a lot of things differently.  Well-documented problems exist at both the top and bottom line -- so newspapers have to do more with their obvious advantages in local markets and they need to do things more efficiently.  That's what I'll cover in this blog -- interesting developments that help newspapers better monetize their existing local reach *and* technologies or tactics that newspapers can use to operate more efficiently.

We have spent the last six months or so talking with people at different newspapers about local online advertising.  Why?  We see the same trends you do -- antiquated local advertising methods like billboards, print ads, yellow pages directories, and other relics of the past no longer provide effective advertising options for a lot of local businesses.  Customers are spending more and more time on social networks and mobile devices, but newspapers have little/no way of selling products that take advantage of these trends.

All of that is why we built MinutesNotice -- MinutesNotice is a new self-serve ad platform that helps newspapers and local media companies offer social, mobile advertising to local businesses.  We are currently negotiating with several major newspaper groups to offer MinutesNotice in their local markets.  We think these deployments will be very successful.

Working with people in the newspaper business has been very interesting over the last few months.  Without getting into a lot of specific detail, allow me to generalize it this way.  Newspaper people realize they need to embrace innovation to succeed in the future.  They also remember that they have huge advantages in local markets where they operate.  Some people consider these advantages to be a lot more permanent than others -- skeptics realize that those advantages will go away if they don't modernize and embrace new innovations.  Newspapers tend to bog down when folks who believe in modernizing their business collide with stakeholders who see things differently.

If this continues, newspapers will fail to make appropriate changes until it is too late.  Time's ticking.

So here's my bias:

Newspapers have to act fast and embrace experimentation.  Embrace the golden rule of the Web -- iterate or die.  Innovators work fast and big media does not.  Big media will have to adapt or the economics of innovators will prevail.

Let's see how this all plays out.

Proposed SXSW Panel - The Future of Big Media

I have submitted a panel for SXSW Interactive to cover how big media is responding to the lightspeed changes in journalism, local news, hyperlocal, etc.  Check it out here:

The Empire Strikes Back: How Big Media is Responding to Disruption

I have lined up some top-notch panelists who understand the issues far better than you'd think.

Feel free to vote early and often ;-

My Time at Stratfor & How Journalism Has Changed Since 1999 - Part I

When I graduated high school in 1992, I thought it equally likely that I'd be either an attorney or a journalist.  Law seemed to be a natural career progression for me, but I was also very interested in journalism after a stint as sports editor of my high school newspaper.  But... I got involved with what turned out to be my first startup in 1994 and the rest is history.

That first startup, Stratfor, ironically evolved into Web journalism after I put everything on a shoddy, poorly-designed portal for the first time in 1999.  Intuitively, we knew that the content we produced on a regular basis was interesting.  So we took a chance and threw it all online.  It was a raging success -- after sending a brief announcement to a few thousand people on a slowly cultivated e-mail distribution list, our Unique Visitor traffic went from 100-60,000 in a single day.  I won't bore you with the rest of the details, but it was indeed an exciting time.

On the technical end, we grappled with a number of issues that have since been solved:

• Taking advantage of the fact that you can publish to the Web immediately (live blogging infrastructure)
• Delivering short, high-importance messages (real-time, open messaging a la Twitter)
• Cross-referencing content with different characteristics (tags/tag clouds)
• User feedback & identification (comments/social media)

Although the Stratfor story certainly had its ups & downs, I like to think we were way ahead of the curve in 1999.  The Huffington Post and others get a lot of credit for redefining journalism today in 1999, but we were pioneers in many ways at Stratfor in the late 1990s.  Stratfor ultimately created a subscription service from the portal, and has done a good job monetizing their content ever since.  The business is a (seriously underreported) success today despite the ups and downs of learning at that time.  If you think people have a hard time with the online media business models today, imagine how it was in 2001!

But enough of that... the point of my post is to talk about how things have changed since then.  My favorite example is referencing content from other news sources.  We would occasionally find an interesting story on Lexis-Nexis (remember, this is B.G. - Before Google) and want to summarize it on Stratfor.com.  We were very concerned about doing this -- whether or not the referenced newspaper or magazine would like it or not.  I remember wondering whether or not we should summarize the story, reference another news source via hyperlink, or do a ton of additional research to weave it into something greater.  It seems odd today, links to stories appear everywhere -- Google News, Fark.com, Digg.com, etc.  All of those companies are making a ton of money as aggregators.  I think I read recently that Fark.com makes ~$10m in revenue with two employees.  I'm not sure if that's true, but even if it's a 10x exaggeration... WOW!

Then look at today -- in a highly unscientific poll by Time Magazine, respondents say that they trust Jon Stewart over and above all other major media newscasters.  Here's a guy with no journalism pedigree and a background in comedy of all things.  And folks in America trust him more than decorated newscasters at major networks.

So what can we conclude from this?  A few things:

• "Just the facts" is, for better or worse, regarded as boring or uninteresting by today's viewer/reader.
• People want to hear their news from people who share a similar perspective on the world.  This is why people like Rush Limbaugh, Jon Stewart, Bill O'Reilly, Rachel Maddow, Keith Olbermann and others are media stars as recognizable as news anchors.
• Content aggregation, curation, and comment is the new journalism -- like it or not.
• The free flow of information brought about by the Web makes this a reality.  The reporting of news is more of a public dialogue than a recitation of facts.  People read this type of analysis either because it reinforces opinion or it is controversial.

In Part II, I will talk about where all of this is increasingly taking place -- the blogosphere -- and how attitudes towards bloggers have changed over the last few years.