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November 23, 2005

Yahoo Bot Eats Dick

PRESS RELEASE
SANTA MONICA, Calif.--(BUSINESS WIRE)--Nov. 16, 2005--Yahoo! Inc. (Nasdaq:YHOO - News) today added content from the popular suite of Gawker Media websites to its growing portfolio of news and entertainment content. Launching on Yahoo! News with stories from five of Gawker Media's most well-known websites, the relationship will soon expand to include content from other Gawker Media outlets which will be featured on additional Yahoo! properties, such as Entertainment.

Yahoo! will post dozens of stories per day from Gawker Media's stable of popular websites, which range from political intrigue to celebrity gossip. Sites to be featured on Yahoo! initially include:
• Gawker -- the daily source for Manhattan news media and gossip
• Wonkette -- an irreverent web magazine covering the latest political news and scandals
• Gizmodo -- a technology weblog dedicated to everything related to gadgets, gizmos, and cutting-edge consumer electronics
• Defamer -- an insider's guide to Hollywood gossip and news
• Lifehacker -- a review of product downloads, websites, and shortcuts to help people save time.

"Our audience comes to Yahoo! for the most compelling media experience on the Internet, and Gawker Media offers some of the most well-known and interesting commentary today," said Scott Moore, head of news and finance, Yahoo!. "Gawker Media content expands Yahoo!'s non-traditional media library with unique perspectives that provide intelligent, funny and sometimes controversial views of the news events of the day."

"A group of edgy blog titles might not seem a particularly obvious fit with one of the big Internet companies, but Yahoo!'s developed a measure of geek chic, which makes them the right media partner for Gawker," said Nick Denton, publisher, Gawker Media."
- END -

Yahoo's newly developed "geek chic" apparently was not programmed into its bots that edit and attempt to sanitize the often snarky and raunchy Gawker Media postings. The day after the announcement, a Yahoo bot ate up "Dick" from Vice President Dick Cheney's name in Gawker Media's Wonkette blog and vomited out "****" Cheney. Of course, Gawker caught the silly mistake and was righteously indignant in it own bright, bitchy way. Yahoo did carry Gawker's Friday comments in which Gawker wrote the following:

"How did Yahoo treat our commentary on this bowdlerization? Like this: (Yahoo allowed Gawker's comment that editing out the "Dick" in Dick Cheney's name "really sucked dick.")

"Moral: At Yahoo, Dick as in Richard is problem, while dick as in penis is just fine. Which, in fairness, is basically our feeling, too."

Gawker and Wonkette are two of the best reads on the Web, and the incident with Yahoo points out the difficulty of editing content with bots, because context, not just words, is what is important to consider. Computer programs can't think like good human editors yet and can't edit fun-to-read, biting, raunchy copy.

However, we'll have to wait and see how Yahoo advertisers deal with Gawker Media's snarkier content. In the past year Gawker lost one advertiser (that I know of) because of a fellatio picture it ran, but will Yahoo advertisers be as forgiving? Yahoo's audience has a much wider age spread and more mass appeal than the New York centric Gawker does. Because the Supreme Court decision about pornography includes a phrase which indicates that what is defined as pornographic is determined by community standards, what goes in Gawker's New York might be seen as pornographic in Yahoo's wider world. So training bots to be raunchy or advertisers to accept New York raunchy might be difficult.

Personally, I hope Yahoo, its bots, and advertisers loosen up, which they will have to if they want to attract and keep younger consumers.

Posted by Charles Warner at 05:04 PM | Comments (1) | Print | Mail this entry

Ted Doyle [TypeKey Profile Page] at November 27, 2005 04:30 PM writes:

Charlie:

Corporate attempts to become cool or edgy almost always end up looking silly...it is ironic, though, that in this instance we're talking about Yahoo!, which not too long ago (this morning?) was considered pretty cutting edge...

They grow up so fast...

Cheers,

Ted


Disintermediation

I wrote in a previous blog that television and cable networks, major national magazines, and large advertising agencies would fight to the death to avoid adopting Google's online auction model for selling advertising. Among the reasons for their dismissal of the computerized auction model were because major media and agencies couldn't package low value inventory with high-demand inventory, because they would have to sell on a measurable, accountable cost-per-click (CPC) basis instead of a less measurable and less accountable cost-per-thousand (CPM) basis, and because agencies couldn't get paid high fees for their creativity, as expressed in television commercials. Also, online auctions would disintermediate big-media sales forces and traditional advertising agencies, which the big media don't want because their salespeople are the main drivers for creating additional value for their brands.

On the other hand, Google's online ad system will attract more and more small national and local advertisers and will eventually disintermediate smaller traditional agencies and salespeople for smaller traditional media.

For example, a radio station in a medium-sized market typically gets well over 80 percent of its revenue from local advertisers and has six salespeople selling about 10 commercial minutes and hour, or about 1,700 commercial minutes a week, of which about 70 percent, or about 1,200, are realistically saleable. On the average, a salesperson can handle an account list of approximately 50 accounts, five of which are probably active (on the air) in an average week during the year. Doing the math, six salespeople times 50 accounts equals 300 potential accounts, 30 of which are on the air in an average week.

If the salespeople sell enough of the 1,200 salable spots at high enough rates, the radio station can make a profit. If a salesperson sells a commercial schedule to a local retailer, the salesperson has to administer and service the account. The salesperson has to write up the order, submit it to the station's traffic department, either pick up the copy from the account or write it and subsequently submit it to the traffic department, call the account and tell it when its sports are running, and follow up and ask, "How did it go?" after the schedule ran.

The retailer doesn't rally know how it went, because even if business is up, the retailer isn't sure if it came from the radio schedule or a couple of newspaper ads or from increased street traffic. If the retailer asks a customer the retailer hasn't seen before, "How did you hear about my store?", the answer is likely to be, "I saw your ad on TV," even though the retailer didn't run a TV schedule. Up until a couple of years ago everyone assumed they learned everything from TV, certainly all advertising came from TV regardless of where they saw it. So, the retailer probably would tell the salesperson, "Oh, it was OK, business up a little but I'm not sure it was the radio."

The salesperson replies, "OK, I'll rework the schedule--put it in different time periods--and rewrite the copy. It'll help if you give me a special offer just for the radio--something that is truly special that will motivate people to come in--that way if you sell the special items, you know the sales came from the radio." So a cycle of re-scheduling and rewriting and special discount offers begins, which is very time consuming for both the retailer and the salesperson.

Enter Google's Ad Sense program. To see how it works, I signed up Media Curmudgeon for Ad Sense. I went to the Google website, scrolled down to the bottom of the page and clicked on Advertising Programs, had two choices and clicked on Ad Sense, clicked to apply, filled out a form with the name of my Web site, submitted it, and got a notice that I would be notified in a few days if my site qualified. This process took me less than three minutes. Two days later I got an email that my site had been accepted and was given a link to sign on to. I went to the site, created an account, picked whether I wanted ad units or link units, selected my preferred ad layout from several options, chose a color palette for my ad, skipped a couple of options, and went to a box where code appeared. I was instructed to copy the code and paste in my website. This process took me about six minutes.

I went to my Movable Type site from which I manage this blog, clicked on the Main Index template, located the spot where I wanted a Google ad to appear, and pasted the code. I then saved and rebuilt my blog site (two clicks). This process took me about three minutes. As soon as the site had been rebuilt, I clicked on a View Site link--clicking on the View Site link and my blog opening up took about three seconds. I checked my blog, which was about how I had been wrong about Jack Welsh's book Winning hitting the top of the non-fiction best seller list, and to my complete awe an amazement, a Google ad was on my blog and the ad was selling a two-day seminar with Jack Welsh! I was astonished with the speed with which Google had indexed my blog site, found the Jack Welsh tag, and served a relevant ad. I can also go to an Google site and evaluate the performacne of my Google ads, as can advertisers as well.

Getting a relevant ad on my blog took less than fifteen minutes. I got the size and color ad I wanted--all automated. This automated process of placing, buying, and evaluating the performance of advertising has allowed Google to handle about 200,000 different advertisers, most of them small businesses, and will allow it to have revenue this year of about $6 billion. Google had transferred the work to me and automated it, so as a publisher, I don't need a sales force to sell my content. Google has transformed the way advertising is sold and is bought. Google is a disrupting technology that will change the way a lot of advertising is bought and sold in the future. One thing is certain--selling media will never be the same.

One thing that is not as certain is Google's continued stock price of over $400. But after experiencing first hand its awesome, transformative technology in action, I might buy a few shares.

Posted by Charles Warner at 06:31 AM | Comments (0) | Print | Mail this entry

November 17, 2005

I Was Wrong

I was wrong in my April 14 blog titled "Winning" in which I predicted that Jack Welsh's book "Winning will soon go to the top of the non-fiction best-seller list and stay there longer than Good to Great, the current champ."

Winning has been doing pretty well on the best seller list, but it isn't #1 in the latest New York Times monthly Business Hard Cover Best Seller list. Welsh's book is #10, down from #6 the previous week, but it is one ahead of Good to Great, which moved up to #11 from #12 the previous week. So it looks as though Winning is slipping and Good to Great is holding up, contrary to what I predicted.

I still think Winning is an indispensable management book that is very how-to and hands-on, but it might not have as many long-lasting lessons as Good Great. Therefore, I'm putting up a link to Jim Collins's classic book below and recommending that you add it to your management bookshelf.

Posted by Charles Warner at 10:26 PM | Comments (2) | Print | Mail this entry

Media Curmudgeon [TypeKey Profile Page] at November 21, 2005 10:22 PM writes:

Disclosure: I hired Bill Grimes at CBS in 1968, mentored him, and promoted him to succeed me at CBS Radio Spot Sales in 1970. Bill went on to become one of the most successful executives in the media industry as CEO of ESPN, Univision, Multimedia, and the managing partner in a successful media investment fund. In those media jobs he hired me as a sales and management trainer and consultant. We have been close friends since 1968 and he was the best man at my wedding (like Jack Welsh, my third).

Bill and I agree on only three things I can think of: (1) That we really like each other, (2) that we respect each other personally and intellectually, and (3) that my wife is wonderful in all ways. We clash on most other issues.

Jack Welsh and his latest book Winning is one issue on which we disagree. Bill is correct, however, on one thing, that I have been a devoted fan of Peter Drucker's for many years. When I first became a manager in 1996 at WTOP-AM in Washington, DC, and later, in 1967, at CBS, where I used to get Drucker books from the CBS News Library.

I have on my bookshelf almost all of the books Drucker has written, and in my book, Broadcast and Cable Selling, I began each chapter with a brief Drucker quote, for which I received permission in a gracious letter from the master.

I met Drucker twice, about a decade apart, at conferences where he conducted seminars for about a small group of people. In a group session he was difficult to understand with his thick German accent and in person he was cold, aloof, and arrogant, as far from warm, friendly, and inclusive as you would expect a Viennese Ph.D. to be. He was a brilliant thinker but he wasn't very likable.

But neither I, nor The Economist article Bill Grimes refers to, judged Peter Drucker on whether or not we liked him or thought he was a good person, we judged him, not on his behavior, but on his ideas, accomplishments, and contribution to management theory and practice.

To use another analogy in the field of art, most art experts and critics judge Picasso on the body of his work, his creative accomplishments, not on his behavior, which was often appallingly misogynistic and cruel--not the least bit admirable, but, oh, that art.

All of which leads to the point of basic disagreement between Bill Grimes and myself on the issue of Jack Welsh--whether to judge him on the basis of his overall job performance and on the management principles he espouses or whether to judge him based on his behavior, his outrageous perks, his marriages, or his egomania. I submit that his eventual legacy will be his performance at GE and the implementation and execution of many excellent management principles, some of which may have been originated by Drucker, not on his personal behavior or his narcissism.

Furthermore, I'm disappointed in Bill for criticizing Winning without having read the book, without knowing what ideas Welsh was proposing. I believe Drucker would have approved of many of Welsh's concepts such as corporate budgeting is often an exercise in minimalization, that candor is vital in an organization, and Welsh's people management principles. And, by the way, I know Bill was a superb executive adn that he would agree with many of Welsh's precepts.

No one is perfect, certainly not Jack Welsh or Peter Drucker. The Economist article Bill linked to has a section about Drucker titled "What he got wrong" which was imbedded in an article lionizing Drucker as the father of management, or as the
BusinessWeek cover headlined, "the man who invented management."

So, I would like to give Bill the same advice about Winning that The Economist give its readers in the last paragraph of its Peter Drucker story: "Asked which management books he paid attention to, Bill Gates once replied, “Well, Drucker of course,” before citing a few lesser mortals. Management theory has not evolved into the world's most rigorous or enticing intellectual discipline. But in Peter Drucker it at least found a champion whom every educated person should take the trouble to read."


Media Curmudgeon [TypeKey Profile Page] at November 21, 2005 06:27 PM writes:

Bill Grimes writes:

"I was disappointed that you focused on a book written by (for?) Jack Welch and have not applied your insight and intellect on the life and the many intellectual contributions that Peter Drucker (who died last week) has made to corporations worldwide.

First, on "Winning" the reason I was not at all surprised by the meager sales (relative to expectations by you and his publisher but not to many who have followed his behavior over the last several years) is threefold:

(1) Welch became an imperial King in his last years at GE and drank too deeply of the well of monarchial praise produced in business pubs by his personal PR agent. This self-promoting behavior alienated many who had previously fawned lavishly with each and every successs the company had.

But what really angered a broader public was Welch's greedy "pick-pocket" move when he retired. Neither he nor the company disclosed at his retirment the bucket of perks that he persuaded the Board of GE to provide for his pricey comforts. Before I review those goodies keep in mind that Welch's net worth probably exceeds $1 billion--all generated at GE. His pension retirement, I beleive, was $1 million a year for life and he was provided a consulting gig at $10,000 an hour, as I recall.

This package was not enough for this King. No, Welch need more--he knew he deserved more--so he convinced the board of directors to provide him with a company-paid NYC apartment, season tix to Madison Square Garden events and other delicious and completely unwarranted perks. Later when these came to light in the small print of SEC docs that company had to file, the broader public came to know the real King, the same King who was known to many others who worked closely with him.

The response of this outraged audience: we don't need to pay $20 to read another Welch book about the old story (by now) of all the "magic" he performed at GE.

Lots of people said, "enough already" and "Winning" became "Losing" rather quickly.

(2) The King's second wife, who had him removed from their $12 million Southport mansion when she learned what others already knew--that her husband was romping around with the married editor of the Harvard Business Review --and who was (is) a highly respected partner of a Wall Street white-shoe law firm. She was liked by many of the King's friends and a large cadre of hangers-on. This constituency was not pleased that Number Two was given the same shabby treatment that Number One had experienced some fifteen years earlier. No, they thought it a bit tawdry that old Jack in another life crisis with an outsized and still-growing ego had dumped another wife. The result was that the negative buzz this behavior of our hero produced was, among other things, a call for action, and that call was to "Let the book sit on the shelf." And it did sit there. No surpise to anyone clued in to the King.

(3) A number of close followers of GE's tremendous success over the years noticed something that could not be easily ascertained by the casual headline reader of the business press. And the revelation was that almost all the GE operating businesses from early 90's until the King's retirement were NOT growing in double digits like the company was. What was happening was that one business, GE Capital, was growing immensely and quickly. Profit increases of 25%+ annually nicely disguised the fact that many other GE businesses were slumping along. (How many were losing marke tshare is an intersting question.) But this news was not trumpeted by the company nor its King.

Now, the executive running GE Capital, Gary Wendt, was becoming well-known by Wall Street, and the publicity of his success began to increase and increase. Wendt's face appeared in the Wall Street Journal and, as I recall, on a BusinessWeek cover. One must only assume that this development was neither expected or appreciated by the King, because after about 10 years at the helm of GECapital, the division contributing about 50% of the parent company's profits, Wendt was forced out by an angry King in 1998 or 99, as I recall.

Subordinates (Princes? Rivals?) whose performance led to a high profile at GE were not the King's idea of management by succession.

This act displayed a new and different side of Welch--a side not seen before. Oh, yes, "Nuetron Jack" had closed some non-performing plants but never had a high ranking executive been fired and never had there been an executive at GE whose division made as much money as Wendt's GE Capital. Many people who had associations with the company did not like this side of Welch and this large and growing group--natural prospects to buy "Winning" did not do so.

Finally, Welch publicy communicated successfully that one of his (many) skills/strategies for producing these winning financial results at GE was his decision to own businesses that ranked first or second within their markets. This concept was initiated years earlier by Peter Drucker but the King was not fond of attributions and I only learned that in the article on Drucker's life in the ECONOMIST (see below).

Nonetheless, casual followers of GE thought this was great stuff. "Wow, all our companies are first or second in their business segments". Great stuff but, unfortunately, not true. For example, NBC headed by Welch buddy, Bob Wright, who had performed sourly as head of GE Capital before Wendt created miracles there, was never in the top two positions in even Network TV--defining their business segment as narrowly (giving the King evey benefit of doubt) as possible during Wright's first 5 years there (87-92). If you define NBC business as Television or Entertainment there is not a possible way of the King's spinners making this dog hunt.

Again, close observers began to notice a growing hype in the carefully managed legend of King Welch and they likely found it not attractive, as I didn't. The result? Among other things--and a small thing--they did not buy the losing "Winning".

Like many stories spun so well to a public seeking heroes and finding few, the Legend of King Welch has diminshed significantly now. The book's sales is but one example. I saw him on TV recently with Number Three on his side talking about "Values" to a small group of colleges students somewhere--not Harvard--and he seemed small, too, and hollow. Have you noticed how ordinary and common Legends look when removed from office?

Did someone once say that the Emporer has no--was it clothes--or should it be shame?

Now why not opine, Media Curmudgeon, about a man who eschewd publicty mostly. An intellectual who beleived that businesses managed well produced better jobs for more people and enhanced society by doing so. Peter Drucker is that man you introduced to me many years ago. Give us your insight into a man that really made a difference. Not an Emperor was Docter Drucker, but he wore a grey suit and had nothing to be ashamed of.

ECONOMIST links:
www.economist.com/business/displaystory.cfm?story_id=5165460


Dream On, Google

Google has changed the world of business and advertising and wants to continue doing so. Google recently announced that it was planning to sell newspaper advertising through its vaunted online auction system and was considering selling television advertising the same way. It might sell some newspaper advertising via auction, but I predict it will be decades before it sells television, magazine, or radio advertising this way, if ever. So, dream on, Google, it's not going to happen.

John Batelle's fascinating, insightful book, The Search: How Google and Its Rivals Rewrote the Rules of Business and Transformed Our Culture reads like a good novel and tells the quintessential Silicon Valley garage-to-goldmine story of Google's ascent from a hair-brained idea of two Stanford graduate student geeks to a company that has Microsoft quivering in its boots. This afternoon, November 17, Google's stock price hit $400 to the wonderment and awe of dopes like me who didn't get into the Dutch auction Google used for its IPO because I thought the $85 share price was too high.

But, like Microsoft, Google is generating a horde of bashers and worriers who are afraid that Google will not only change the world, but take it over--at least take over their business world. Joining the horde yesterday were advertising agencies, television networks and stations, major brands, and all media salespeople, and that's a pretty big horde for Google to overcome.

Advertising agencies are terrified that Google's online Vickery-auction, cost-per-click, popularity-placement model will be come the standard method of buying advertising. Agencies make their money by creating and placing advertising. They make the most money creating expensive television advertising. Top creative people can make up to seven figures annually and their most valuable asset is their reel of award-winning TV commercials, which their agencies use to pitch new accounts. What creative director or copywriter wants to show how many two-line, 66-character search links on Google they wrote? Writing two-line sponsored links isn't any fun and agencies can't mark up production costs 17.65% for writing sponsored links. Television is a goldmine--the average television commercial cost about $400,000, about $70,000 of which goes to an agency.

Agency media departments don't want Google's online auction to take over their buying function. Agencies make money by having the fewest people possible spend the most money possible, which is why agencies love network television--two savvy, experienced negotiators can spend $100 million in the upfront market in a week or ten days in May. It would take a media department of 50 all year to spend half that in other media, especially online, thus devastating the bottom line.

And what about Google's notion that all advertising should be measurable and accountable? Fuggitaboutit. Agencies will argue to the death (and it could well come to that and they know it) that you can't measure creativity or the brand image that great advertising creates.

Television networks (terrestrial and cable) and stations don't want Google's online auction to become the standard because the auction method makes an unbundled commodity out of each keyword. "A commodity is a product that is interchangeable with other products, widely available, and, thus, differentiated only by price." (Media Selling, 2004, page 103). Up to now television salespeople have believed they are selling a commodity and selling television has largely been a matter of negotiating prices, based on demand, and not much selling--not creating value by differentiating their products like magazine and radio salespeople do. But what TV salespeople are good at is bundling or packaging--making buyers purchase a bunch of low rated, relatively undesirable spots in order to get desirable spots--to get one "Desperate Housewives," buy five or six "Dancing With the Stars" spots.

Furthermore, television networks sell based on a cost-per-thousand (CPM) model, and magazines, newspapers, and radio sell on some version of a CPM model instead of on a cost-per-click (CPC) basis because there is no way to click and thus measure the sales effect of seeing or hearing an ad. Large Web sites such as Yahoo, AOL, and MSN also sell on a CPM basis because the CPC model gives no value for branding and because of a number of other valid reasons supported by extensive and credible research. These media will join advertising agencies in resisting Google's auction model.

Major brand advertisers won't go for Google's auction model either because, as Battelle explains in The Search, there are two types of Web advertising, intent based and content based. Google's intent-based model is fine for small business that live on selling products and services that people are searching for and, thus, intend to buy. Major brands such as Coke and Pepsi don't want you to buy their drinks online based on price (you can't even do that yet). They want you to have some emotional connection to their brands and pay more for them than you would a generic, unknown brand. Major brands want you to see 15-second, rich media ads online that make you love the product, not two-line links. Dream on, Google.

To better understand Google, its business model, and its ambitions, I urge you to buy and read The Search by clicking on the Amazon.com ad below.

Posted by Charles Warner at 04:33 PM | Comments (3) | Print | Mail this entry

Media Curmudgeon [TypeKey Profile Page] at November 18, 2005 04:58 PM writes:

Chris Warner writes:

"A long and costly study determined that the then titan of commerce-GE-under Jack Welsh was almost as efficient as the US government is."


Media Curmudgeon [TypeKey Profile Page] at November 18, 2005 04:56 PM writes:

Chris Warner writes:

"Television, radio and print ads should be eliminated or severely restricted."


Media Curmudgeon [TypeKey Profile Page] at November 17, 2005 09:09 PM writes:

Media salespeople aren't too thrilled about the propsects of Google selling their products, either, because the Google auction model disintermediates salespeople-- advertisers by via an online auction, not from salespeople. Bye bye commissions.


November 13, 2005

TimesSelect Isn't Fun for Joe Nocera

I posted my blog about the unintended consequences of TimesSelect on November 11 and the next day the business columnist of the NY Times, Joseph Nocera, wrote a coulmn behind the TimesSelect firewall titled "Trying to Wean Internet Users From Free." Nocera writes that he's "discouraged" about the Times trying to generate enough money from its Web site to continue paying for serious journalism.

Nocera writes: "As a business journalist, I've tended not to worry a lot about music executives trying to salvage their broken business model. My general view has been that if they can't adapt to disruptive technologies, then they probably deserve their fate. But in the six months I've been in the newspaper business, I've learned to have some sympathy for those who are staring down the barrel of the Internet.

It's not fun."

I'm sure it's not fun for a coumnist to lose millions of readers because he's behind a firewall. I'm sure it's not fun for him to quote the influential blogger Jay Rosen, who writes PressThink and who has written in the past couple of months that he no longer thinks the Times is the best newspaper in the country, that the Washington Post is. Do you think Nocera quoted Rosen to tweak his Times editors?

Nocera also writes tentatively that putting the Op-Ed columninsts (and I suppose he means himself also) behind the firewall makes a "reasonable amount of sense"--damning with faint praise if I've ever read it. He also writes that the "...ruthless efficiency of the Internet, for instance, is changing the way ads are paid for. In print, an advertiser places an ad and pays for it - end of story. Online, most ads generate revenue only when readers click on them. And the rates are much lower."

The Times website, where Nocera's column appeared, uses the old-fashioned pricing method of charging for ads by placement--on a cost-per-thousand basis--not on a per-click basis the way Google does. Thus, Nocera, probably unintentionally, points out that the Times is not only following a dangerous business model dominated by old-fashioned newspaper circulation thinking but is also following an outmoded pricing model. No wonder he's not having fun--he's losing millions of readers by being behind the firewall and the Times is not going to gain significant revenue for charging for its columnists, so his loss in readers will probably be in vain.

One reason there won't continue to be big revenue increases for Times Select is because a lot of TimesSelect subscribers, like me, will do what I'm doing and cut and paste Nocera's column into an email and send it to a few friends.

Posted by Charles Warner at 02:34 AM | Comments (0) | Print | Mail this entry

November 11, 2005

Unintended Consequences

I have watched in fascination as the Pinch and Judy show has been unveiling at the New York Times. So fascinated, in fact, that it almost cured my blogging addiction, and I haven't posted in over a week. But today it was over--Judy is gone and she is sadder, the Times is hurting from the messiness, and Maureen Dowd is the toast of New York.

New York magazine featured a foxy Dowd on its cover and the true arbiter of cognoscenti taste, Gawker.com, couldn't stop posting about Judith Miller and Maureen Dowd's sharp elbows. And Editor & Publisher ran a photo of Dowd in its story about the Times' announcement that 135,000 people had subscribed to TimesSelect in less than two months. In order to get behind the Times' firewall and get popular Times columnists such as Maureen Dowd, Frank Rich, Paul Krugman, and David Brooks non-subscribers have to pay $7.95 a month or $49.95 a year.

The Times' Senior Vice President for digital operations, Martin Nisenholtz, said with chest-thumping pride in a Times press release, "We're delighted with the enthusiastic response to TimesSelect. Clearly, we've put together a product that appeals to a wide range of readers."

The precious New York Times simply doesn't get it. Smart writers who understand the web are calling TimesSelect a stupid move, and I agree. It has the unintended consequences of sending the message that the columnists are much more valuable brands than the news is. The Times has signaled to its readers that news is a commodity--free on the web like Yahoo News, Google News, CNN.com, and MSNBC.com is.

The 135,000 people who signed up are more than likely already Times readers and fans of the columnists and are not Internet-savvy enough to know how to get the columnists from other sources (or are too lazy or to rich to bother). By putting Dowd and the other columnists behind a firewall and charging extra to read them, the Times is increasing the columnists brand value and recognition.

Therefore, current Times subscribers will soon recognize that they don't need to buy or subscribe the dead-tree version of the Times to get the news because they can read it online free and pay only $49.95 a year for the valuable, branded columnists. Paid circulation will go down (even though it went up very slightly in the third quarter), ad rates will go down, and the Times' profits will decline because the online increases in readership and revenue cannot make up the revenue from overpriced ads in the paper.

Posted by Charles Warner at 01:42 AM | Comments (2) | Print | Mail this entry

Media Curmudgeon [TypeKey Profile Page] at November 13, 2005 07:38 PM writes:

Pulitzer-Prize-winning reporter and author Nick Kotz writes:

"This NY Times mess is a textbook case of many things that can go wrong when news organizations, editors, and reporters don't follow certain prudent rules:

1. Journalists should not only not get too close to and dependent on their sources---they should not become "partners" with their sources in sharing a common interest or agenda to the point that they and their news organization loses its independence.

2. News organizations--editors--cannot let reporters become independent actors responsible to no one.

In both of these obvious cases you mention, the NY Times management saw the problems, knew they should do something about them, and didn't for a whole variety of reasons from bureaucratic inertia to reluctance to mess with the publisher's friend.

I'm very sensitive to all of this because I have violated both rules 1 and 2 in my younger, high- flying self-righteous days, and am just relieved that no great harm flowed from my excesses."

Nicks' latest book is Judgment Days: Lyndon Baines Johnson, Martin Luther King, Jr., and the Laws That Changed America, about which Publisher's Weekly wrote: "It is a fascinating portrait of two leaders working at a time when the low skullduggery of politics really was infused with the highest moral values."


Media Curmudgeon [TypeKey Profile Page] at November 13, 2005 07:24 PM writes:

Bill Grimes writes:

"I disagree with your conclusion that the NYTimes is risking a loss of readership by charging a fee for its online columns. Further, I believe that the NYT's timidity and tardiness in charging for its online content has been a strategic error which has cost them reveues and profits resulting in a share price that has lagged virtually all of its public company media counterparts..

The message that TimesSelect is sending to its readers is that its premium content is exactly that--premium content that for a price can be disaggregated from the other online content of the paper. There is no reason to expect that readers of the physical papers will discontinue purchasing it, because there is much more content besides the columns and the "news" that is available every day. None of the content in The Times daily Sections is "commoditized". Whether the article is about travel, food, personal finance, science, style or art, the newspaper's large and talented editorial staff creates and publishes every day a plethora of unique, proprietary content that is highly valuable, so much so to its readers that I would contend that if the price of the paper was increased from $1 to $2 a day virtually no circulation would be lost. And that is to a large degree because of the uniquness and quality of the "non-news" articles and because of the upscale demographics of its readers (here I might also add that their loyalty is also driven by the Times' strongly liberal editorial leanings.)

Also, one could argue that even the paper's news is not a commodity. Very little AP or UPI stories are present in the Times. Its world-wide news bureaus write virtually all of its news articles.
Therefore, charging for the columns in TimesSelect is a good, albeit late, decision, that will create additional profits from the same content with a minimum of risk to the newspaper's circulation revenues.

But, equally important, is that NYT management has tiptoed into the charging-for-online content business by charging a fee only for the columns. As a result of this fear that subscribers to the physical paper will be lost, the NYT Company has squandered significant revenue and profit opportuniites. Two alternatives to charging for TimesSelect columns-only, not chosen by NYT managemnent, could produce significantly more revenues and profits. First, the Gimes could charge an annual subscription fee for the paper online. The WSJ has, I believe, well over 700,000 subscribers paying $90 (on average) annually for its online content. And the Journal's paid circulation for the physical paper remains at about 1.3 million daily, about the same number before it began charging for its online product about four years ago. What would someone pay for an online subscription to the Times--keep in mind the tremendous value of its archival capabilities--is unknown, but I would think at least as much as the WSJ.

The second alternative pricing scheme the NYT could have implemented would have been to add additional online sections for a fee. The Sports for $X per year; Business for $Y, etc. The disintermediation of content--chapters from books, programs from networks--is here and will only increase because the ubiquity of digitalization and broadband enable people to get the content they want in the form they want.

A key point here is that NYT content in each or either form--paper or electronically--is of value to its readers. Those who purchase the paper in its physical form like it that way. It is portable, has long life and is tactile. They will not abandon this form of consumiong the paper's content. Those who like it electronically have their reasons, but I see no reason to believe that the upscale audience of the Times will make a choice between one of the two forms when the cost/value proposition of the content is so appealing.

Only the timidity of NYT senior management has prevented the company from tapping into online subscription revenue and profits for its highly unique, quality content. The cost of this bad decision is incalculable, but one only need to look at the Times' share price over the last three years to see that its shareholders have suffered considerably for poor management decisions. The company's share price in this period has lagged far below its media competitors. This missed opportunity to repurpose their very valuable content online and produce new revenues and profits from it is just the latest example."