Tag: advertising

Squandering a reprieve

How did media companies miss the opportunities of the tech wreck?

ABC Radio National’s Background Briefing has a terrific story on the struggles of the Fairfax newspaper empire during the early days of the Internet.

One of the major themes that jumps out is how Fairfax, like many media and retail organisations, squandered the opportunity presented by the tech wreck.

The tech wreck was an opportunity for incumbents to claim their spaces in the online world, instead they saw the failure of many of the dot com boom’s over-hyped online businesses as vindication of their view the Internet was all hype.

As former Sydney Morning Herald editor Peter Fray said “In florid moments you could even think this internet webby thing would go away”.

For Fairfax the profits from the traditional print based business were compelling. According to Greg Hywood the current CEO, for every dollar earned by the company, 70c were profits – a profit margin of 233%.

The Internet threatened those “rivers of gold” and media companies, understandably, did nothing to jeopardise those returns.

Another problem for Fairfax was the massive investment in digital printing presses in the 1990s. These behemoths revolutionised the way newspapers were printed as pages could be laid out on computer screens and sent directly from the newsroom to the press itself which printed out pages in glorious colour rather than with smudgy black and white images.

Moreover these machines were fantastic for printing glossy coloured supplements and the advertising revenue from those high end inserts kept the dollars rolling in.

When the tech wreck happened, the massive investments in printing presses were vindicated as the rivers of gold continued to flow while the smart Internet kids went broke.

Fairfax’s management weren’t alone in this hubris – most media companies around the world made the same missteps while retail companies continued to build stores catering for the last echos of the 20th Century consumer boom.

In 2008, the hubris caught up with the retailers and newspapers. As the great credit boom came to an end, the wheels fell off the established business models and the cost of not experimenting with online models is costing them dearly.

Value still lies in those mastheads though as more people are reading Fairfax’s publications than ever before.

Readers still want to read these publications, one loyal reader is quoted in the story that Sydney Morning Herald should aspire to “being a serious international paper.”

That isn’t going to happen while management is focused on cutting costs to their core business instead of focusing on new revenue streams.

Somebody will find that model, had the incumbent retail and media organisations explored and invested in online businesses a decade ago they may well have found that secret sauce.

Now many of them won’t survive with their horse and buggy ways of doing business.

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Nightlife Computers: Sockpuppets, trolls and fakes

Can you trust what is written on Facebook or online review sites and what are the responsibilities for business on social media sites?

Paul Wallbank joined Tony Delroy for the 6 September 2012 ABC Nightlife technology spot to discuss sock puppets, what they mean on review sites and what this means for businesses using social media as a marketing tool.

If you missed the program, you can listen to the podcast from the Tony Delroy’s Nightlife page.

This week’s sock puppet scandal puts the light on authors’ book reviews on sites like Amazon while other review services like TripAdvisor, Yelp and Urbanspoon continue to struggle with figuring out which reviews are real.

Businesses also have to worry about what people are posting in light of the recent Advertising Standards and ACCC rulings making businesses more accountable with what’s posted on Facebook.

Some of the questions we’ll look at include;

Join us from 10pm, Australian Eastern Time on Thursday September 5 on your local ABC radio station or listen online through their streaming service at www.abc.net.au/nightlife.

We’d love to hear your views so join the conversation with your on-air questions, ideas or comments; phone in on the night on 1300 800 222 within Australia or +61 2 8333 1000 from outside Australia.

You can SMS Nightlife’s talkback on 19922702, or through twitter to @paulwallbank using the #abcnightlife hashtag or visit the Nightlife Facebook page.

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Reliving the Hong Kong Handover syndrome

Scaring customers away is rarely a good idea

After Margaret Thatcher 1984 agreement to hand Hong Kong over the People’s Republic of China, the hoteliers of the British Colony sent out the message “book now, or pay dearly for rooms at the time of the handover.”

It became perceived wisdom that the territory would be booked out for years in advance and any rooms available would cost a fortune. So people made other plans.

As a result, Hong Kong’s hotel occupancy rate during the handover was only 45%. The “buy now or you’ll miss out” message backfired as people decided they’d rather miss out.

In the second week of the London 2012 Olympics the same thing is happening – the regular tourist trade has been scared away and even the locals who haven’t left town are staying home to avoid the transport and other hassles.

For London, the Olympics have backfired.

This is what is always missed when cities or governments make bids for big events, they displace existing trade and the benefits, if any, are short lived.

At least the Olympics do attract millions of visitors and the eyes of the world are on the host city for two weeks.

Far worst are the pointless heads of government meetings that pop up with monotonous regularity, for a few days of fleeting notoriety a city is locked down and its citizen corralled as Presidents and Prime Ministers meet to discuss something that will be forgotten in weeks.

The Sydney APEC meeting of 2007 was case in point, nothing was achieved for the weeks of disruption to normal business except for the spectacle of the so called leaders of the Asia Pacific region scuttling between hotels like frightened cockroaches in their armour plated motorcades.

Governments around the world keep falling for the myth that these major events generate some sort of economic benefits when it’s clear to the population who aren’t invited to the VIP cocktails parties that their money isn’t being well spent.

For businesses, the lesson is not to make too many “buy now or miss out” claims. If customers take you at your word then you may find your shop is half empty, just as Hong Kong did in 1997.

 

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The Olympian quest for control

The control freakery of the Olympics marks an organisation struggling with threats.

“Blogs or tweets must be in a first-person, diary-type format and should not be in the role of a journalist,” state the International Olympic Committee’s social media guidelines.

The London Olympics Committee betrays how their ignorance of how the Internet works with an unrealistic and unenforceable linking policy.

More worryingly, an army of ‘brand police’ are scouring Britain for renegade cake decorators or knitting clubs breaching Olympic copyrights. Council trading inspectors have been redeployed from their main role of protecting the community to guarding the sponsorship values of the IOC and the world’s biggest corporations.

All of this is about control – a country that bids to host the Olympics agrees to draconian rules and regulations on free speech and commerce. Athletes too find themselves subject to harsh, and sometimes arbitrary, controls.

The purpose of these controls is to enhance the commercial value of sponsorships – this is why only McDonalds can serve fries, except with fish, at Olympic venues and only Visa credit cards can be used to buy a souvenir t-shirt.

Like all major sporting organizations, the value of Olympic rights exploded with the growth of advertising and broadcasting rights from the 1960s onwards.

We’ve reached the logical end of that growth as broadcasters struggle under the load of funding massive rights payments and advertisers find campaigns based on what worked in the 1960s or 1980s have less resonance with the debt addled consumers of the 2010s.

None of this will stop the IOC and other sports administrators from enacting iron fisted controls on participants, sponsors, spectators and any one else they can bully, but their power is waning.

Just like the Soviet Union tried to control fax machines as their economy crumbled around them, the same thing is happening with the Olympics and other big ticket sports.

Top level sports administrators are very good at currying favours from the corporate Bourbons and political princelings who love to spend other people’s money to build their own egos which will allow the facade to continue for a few more years.

Eventually though the money will run out as shareholders question the value of billion dollar sponsorships coupled with executive gold passes to the VIP marquee and taxpayers will ask why governments have money to spend on stadiums or elite sports programs when their local school, hospital and police stations are being closed.

History shows that threatened leaders tighten controls when they are threatened. We can expect the next couple of Olympics to have even more draconian rules than London’s.

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Rivers of gold

Can there be a downside to Google’s massive profits?

Google’s announcement that their revenues have increased by 24% over the last year shows the search engine juggernaut keeps rolling on.

It’s tempting to think that Google is untouchable and that’s certainly how it appears when you’re on track to earn forty billion dollars a year and book close to 40% of that income as profits.

On the same day, Sony announced a massive restructure including with 10,000 redundancies and the company’s CEO, Kazuo Hirai, spoke of a sense of urgency to address the once dominant corporation’s drift into irrelevance.

Twenty years the thought of Sony – one of the world’s innovators in consumer electronics – would be wallowing in the wake of companies like Apple and unknown upstarts like Google was unthinkable.

Fortunes are won and quickly lost in a time of great change and this is something we should keep in mind about Google when we look at their rivers of gold.

“Rivers Of Gold” was a term coined to describe the advertising riches of the newspaper industry in the 1980’s. Google’s online advertising is partly responsible for destroying that business.

Today Google is a search engine business that makes its money from the advertising that deserted print media and went online.

It may be that manufacturing mobile phones, running “identity services” disguised as social media platforms or augmented reality spectacles are the future of Google but right now they it’s search and advertising that pays the bills and books the massive profits.

The challenge for Google is not to lose sight of its current core business while building the future rivers of gold.

If Google’s leaders can’t manage this, then they risk following the newspaper industry that they themselves disrupted.

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Consumer surplus?

Inventing euphemisms for your dead business model

Last week I came across the term “consumer surplus”, the Boston Consulting Group claimed the gap between the cost of producing media content and what customers are prepared to pay creates a “consumer surplus”.

That consumers of media want it but aren’t prepared to pay for it is a basic truth; the 20th Century media model is based upon advertising subsiding journalism and entertainment.

For all forms of media this was true; from TV and radio stations being fully funded by advertising to newspapers and magazines’ cover prices barely covering distribution costs.

Take out advertising and all these models are dead. The only alternative is government funding.

Losing the advertising rivers of gold to web services is what’s killing the established business model. It appears that TV and radio will hang on, for now, but newspapers and magazines are in serious difficulties.

Simply put, there has rarely been a market for journalism; readers and viewers aren’t prepared to pay. Journalism’s golden years of the 20th Century were based upon having a relatively captive market for advertisers; now advertisers can go elsewhere, they have.

Putting a sophisticated  label on a basic concept is something consulting companies are very good at and Boston Consulting Group has done an excellent job with this report.

The fundamental truth is that it doesn’t matter how good your product is, if you can’t find a way to make someone pay you for it then you don’t have a market or a business.

Which is what the real challenge is for online content creators, finding the model that pays. The first person to do that becomes the 21st Century’s Randolph Hearst.

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Magazines 2020

Content Providers, curators or experience makers?

As hundreds queued around the world for the latest Apple iPad an Australian media tycoon told a business breakfast that newspapers were a sunset industry. Where does this leave magazines and other print media?

The last decade for magazines has been tough, as readers drifted to largely free websites with the advertisers following. The challenge for publishers is how do they follow their markets onto the web while still making money.

Magazines aren’t unique in this challenge – the media industries, like many others, have been affected by the rise of the web. Magazines themselves sit somewhere between the recording and newspaper industries with news stand sales and subscriptions being a bigger proportion of incom while not having the same newspaper classified income which has collapsed so dramatically in recent years.

The Shift Online

We’ve seen a massive shift to the web over the last decade and that movement is only accelerating as advertisers start to follow consumers and the public embraces social media and online gaming.

PriceWaterhouseCooper’s Entertainment and Media Outlook forecasts the magazine industry to lose 1% of advertising market share – from 5 to 4% of the overall spend – over the 2010 to 14 period with all the losses going online.

While the magazine industry looks at losing 20% of its advertising revenue to the Internet, figures are similar for newspapers, radio and free to air television with online advertising moving from 18% to 26% of the market. The advertisers are, quite rightly, following the customers.

Following readers online is the great challenge for the magazine industry, the question is how do they do it and continue to be profitable.

The Internet Challenge

The greatest problem on the Internet is making money, businesses have trained web surfers to expect online products – particularly news and entertainment – for free. Even physical goods have become increasingly commoditised as deal of the day and group buying sites have used “cheap” as the main hook for buyers.

Today’s reader and consumer expects goods they find online to be cheap and any content they discover to be free.

That isn’t fatal for a business as the broadcast television industry has shown us you can provide free content paid for by advertisers and make a good living while there’s no shortage of merchants who’ve built empires on the fast moving consumer good model of “stack ’em high, sell ’em cheap”.

Part of the online magazine industry’s response to the challenge of adapting to these models has been to use free labour. The rise of the Digital Sharecroppers, where writers provide content for free, has been the result.

People have been prepared to provide content for free for all manner of reasons. The problem for publishers, and readers, is quality writing is not sustainable under this model and we’re beginning to see the end result where writers are forced to drive buses and the free content is being increasingly sourced from PR agencies, their tame blogger bunny friends or from content farms more concerned about gaming Google through SEO keywords.

Free content also reduces the barriers to entry, which are already extremely low in online given a geek with a WordPress site or YouTube account can have a site up and running in a couple of hours for less than a hundred dollars. If content is low quality, there’s little reason for readers to have any loyalty or to stick to any one site.

There is the other type of free content though, User Generated Content (UCG) consisting of the comments, forum posts and free articles submitted by readers. Many of these followers are fans and this is perhaps where salvation for the magazine industry lies.

What formats can we expect

The old magazine format isn’t going to go away, it’s just going to decline as part of the overall distribution. We’re going to see more short and long format online content complimenting the magazines along with a lot of user content in the comments and forums sections.

We’ll also see more cross platform selling like we currently see with magazines like Better Homes and Gardens though with a much bigger online and interactive component than the present TV-magazine tie ups.

Content though will be more important than format. The SEO driven plays and content farms are a transition effect and as both search engines and readers become more savvy,  the influence of sites like eHow and The Huffington Post drop away.

Probably the biggest sleeper though are the electronic readers such as the iPad and Kindle, it is just possible these devices might resurrect the fortunes of the publishing industry in a similar way to the Compact Disk did for the music industry in the 1990s. Certainly Rupert Murdoch is hoping this.

How will magazines engage with consumers in 2020?

Successful magazines are going to find the niches where readers and advertisers will pay to be engaged and identified with key groups, demographics and markets. Adding value to readers is going to be the key to revenue on an Internet that is full of noise of movement but with increasingly fewer nuggets of wisdom.

It’s those nuggets of wisdom, useful analysis and unique worthy content that will be what time poor and somewhat information addled consumers are going to be looking for.

They are also going to be looking for a platform to get their views heard. So it’s going to be critical that magazines make that platform available through comments, forums, reader blogs and giving loyal and knowledgeable readers the opportunity to write for the publication.

Engagement is going to mean allowing site visitors some ownership of the content. The more you can build conversations and contributions around content, the more likely it is that readers will come back and the more likely they are to pay for add ons and read advertisements.

Where will the revenue come from?

The great challenge in the Internet era is making money online. We’ve trained the market to expect news and information to be free and that genie is now out of the bottle, and despite the paywalls we try to put up, we’re going to struggle to convince readers of our value.

As writers, journalists, editors and publishers, we’re going to have to demonstrate our worth to the people who are prepared to pay for content. Right now there aren’t many of who will pay for relevance and quality, but things may be changing as readers realise much of what they currently find on content farms is unsatisfactory.

Subscriptions and advertising are still going to be critical while events, merchandise and other revenue streams are going to be useful revenue centres but it’s hard to see how they will contribute to the bottom line any more than they currently do. It’s also important to remember that successful staging events is an expensive task involving skills many publishers simply don’t have.

Hyperlocal is a fascinating area for magazines. While much of the focus has been on adopting local search to the newspaper industry it could be that specialist magazines can deliver effective localised products through directories and mobile phone applications.

For instance let’s say we have an offal magazine for those who like to offal. A Brisbane businessman visiting Adelaide feels like a plate devilled kidneys for dinner. It could be that Offal Eaters Monthly magazine has a paid app or a subscriber site that allows him to find what he wants in a strange city.

What is the role of the publisher/editor?

More than ever the publisher and editor are going to have to know their market intimately. At a time when audiences are going to be widely fragmented it’s going to be essential to understand what the readers want.

User generated content provides an opportunity for publishers and their editors to understand the market and monitoring what is being said by the target audience is going to be a key role of the modern editor.

Moderating and controlling what’s being said on the platform will also be a key role for an editor. We all know the Internet is God’s gift to opinionated idiots and the risks of defamation, piracy and other brand damaging activity on websites are very real. The editor’s job will increasingly be to filter out the lunatics while encouraging interesting discussion.

Most people though don’t want to create content, beyond having a quick comment on a post or sometimes joining a discussion. Another important role of the editor is to balance the higher quality, paid content with user generated material to ensure the publication’s site doesn’t dissolve into just another web forum.

Publishers too are going to be challenged by this and their task is to find the deep niches where these models can succeed then convince advertisers and subscribers that their sites are worth signing up to.

Given the ease of launching new sites, the key to success is being the trusted leader in your segment. If your content can be easily replicated or bought from another source then the survival odds are firmly against you.

The next nine years

We should also keep in mind change isn’t new, broadcast television gave a death sentence to news magazines like Life or the Bulletin a generation ago, and these publications only survived because of indulgent owners.  The magazine industry met those challenges, evolved and survived albeit with great change and a few casualties.

The same is happening now, the industry is evolving and adapting to the new mediums and the changed behaviour of advertisers and readers. It’s not pretty or easy but the rewards are going to be there for those who figure it out.

Had we been around when Gutenberg invented the printing press we would have wondered what will happen to all the monks who up until then had spent their lives manually copying religious texts and important documents. Change came to the monks, but not in the ways they expected.

The web only recently turned 20 and in 2020 it will still be less than thirty years since its invention.  All of us will still be learning, making mistakes and discovering where the opportunities are.

It’s a time of challenge and the rewards for those who get it right are great. The key for magazines, like all of us, lies in understanding our markets and audiences.

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