Media Curmudgeon

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December 14, 2007

Posted by Charles Warner at 02:45 PM | Comments (0) | Print |

December 13, 2007

AOL’s New Platform-A

Curt Viebranz, president of AOL’s Platform-A, announced the new structure of its Marketing Solutions group, and it’s a winner.

In an October 22 blog post, I wrote: “I know nothing about Viebranz’s qualifications to run one of the world’s biggest and most complex online sales organizations. In reality he might be just the right person. However, the perception internally and externally is because Viebranz is an old pal/colleague of Bewkes from their HBO days and that the appointment is a political one—a decision that smacks of White-House-like cronyism and one that also emasculates Falco.”

From the looks of the re-org announcement, I shouldn’t have been concerned. The new Platform-A structure will have three sales forces: The Marketing Solutions group will consist of a combination of the best of the old AOL Media Network sales force and some of the best of the behavior-targeting TACODA salespeople. This group will sell large (over $1 million), complex, solutions-based deals. Here’s what Viebranz wrote:

“Our first priority for next year will be to drive more money from the largest advertisers, including some that have not traditionally spent a great deal with us. And we must capture a significant share of the advertising dollars as they’re shifted from traditional to digital media. In order to accomplish this, Platform-A will need to take a unified approach, including a coordinated and consistent set of products, to our partnerships with these top advertisers and prospects.

“Going forward, Platform-A’s success will depend on developing deep and enduring relationships with these accounts, leveraging all of the considerable assets that we can bring to bear. We need to demonstrate our ability to work with agencies and advertisers to help them more easily harness the full power of digital media. Thus, we will provide large brand customers with coordinated access to the full Platform-A product suite, including the offerings of AOL, Advertising.com and TACODA. There’s a good reason for this approach: our top 75 advertisers account for nearly two-thirds of our revenues.”

The Advertising.com sales force will continue to sell remnant inventory from a huge network of sites and the newly named Ignite sales force will sell smaller, shorter-term, RFP-type business (under $1 million), primarily to agencies.

This is the right strategy, clearly stated. As new media people like to say, it’s clear that Viebranz “gets it.”

Some estimates suggest that the Ignite group should bring in revenue of about $100 million in 2008, the Advertising.com group about $300 million, and the Marketing Solutions group about $300 million. Add to these numbers the search revenue from the lucrative Google partnership, and AOL should meet its ad revenue targets for 2008.

However, AOL’s overall traffic is going down, even as it is trying desperately to upgrade and improve its content, which it is doing, and doing well and inventively. But the reality is that as AOL is an uncool Web 1.0 dinosaur whose traffic is steadily and irreversibly declining as dial-up subscribers defect to broadband. No amount or type of new content can reverse this audience downtrend.

The only way AOL can maintain or increase advertising revenue in the long run is to become a sales representative company that sells a network of sites in addition to the AOL brands. I do not mean selling the unused, remnant inventory like Advertising.com does, but selling integrated, highly targeted content like the Platform-A Marketing Solutions group does. Few websites can afford to have the type of experienced, knowledgeable, solutions-oriented, behavior-targeting savvy salespeople that AOL now has, so the vast majority of websites that have sales staffs would be much better off to fire or reassign their sales staffs and give AOL a generous commission to sell advertising on their sites.

Sites that make such a decision would save money on personnel (way too many of them are paying way too much for inexperienced, inadequate salespeople) and would get significantly higher prices for their inventory sold by a sales staff that can bundle their inventory with other compatible inventory on similarly targeted sites and serve behaviorally targeted ads.

I recommend that Curtis Viebranz take this approach, and the first website I would recommend approaching would be The Huffington Post, which currently has a sales representative deal with Barry Dillers’s IAC. ICA’s sales force doesn’t know how to sell the Huff Post’s inventory. In fact, the only thing IAC knows how to do is pay Diller an unconscionable amount of money.

I wish AOL well, but no matter how meticulously or strategically it rearranges the deck chairs, it won’t save the boat, which was floated on an old business model. It needs a new boat—a new business model. It might not be too late.

Posted by Charles Warner at 05:24 PM | Comments (1) | Print |

adambroitman at December 13, 2007 05:38 PM writes:

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December 08, 2007

The New Pricing Model For Media Content?

The popular band Radiohead put its new album “In the Rainbow” online in October and asked people to pay whatever they wanted to download in an MP3 format. Anything from zero to £99.99 ($212) was fine with the band. Is “pay what you want” a new pricing model for media content?

Jon Parales wrote in his December 9 The New York Times article, “Sixteen years and seven albums into the career that has made Radiohead the most widely pondered band in rock, it is taking chances with its commerce as well as its art. For the beleaguered recording business Radiohead has put in motion the most audacious experiment in years.”

In the article, Parales indicates that the experiment has paid of financially, although Radiohead won’t release the numbers. He writes, “A statement from the band rejected estimates by the online survey company ComScore that during October about three-fifths of worldwide downloaders took the album free, while the rest paid an average of $6.

“Factoring in free downloads, ComScore said the average price per download was $2.26. But it did not specify a total number of downloads, saying only that a ‘significant percentage’ of the 1.2 million people who visited the Radiohead Web site, inrainbows.com, in October downloaded the album. Under a typical recording contract, a band receives royalties of about 15 percent of an album’s wholesale price after expenses are recovered. Without middlemen, and with zero material costs for a download, $2.26 per album would work out to Radiohead’s advantage — not to mention the worldwide publicity.”

NPR-affiliated non-commercial radio stations, such as WNYC–AM/FM in New York, use a similar pay-what-you-want model during their annual fund-raising drives. Not all listeners pay, but enough do to keep the station going—and going quite well, thank you.

This pay-what-you-want pricing tactic is known in the negotiating and sales world as a crunch (see Chapter 12, “Negotiating and Closing” of my Media Selling textbook). If you are negotiating, when the other side mentions a price, you say “that’s too much,” without mentioning a price. The other side is likely to come back with a price that is lower than you might have had in mind. Or, when negotiating with people who are not informed about your cost structure or market demand, instead of opening a negotiation with a price, you would say, “what are you willing to pay,” because the chances are good that they will pay more than an informed buyer.

This tactic works if you have a well-known product or brand for which there is strong demand because it will be worth a great deal to some and perhaps nothing to others, but on average it will work out to your advantage, as it has with Radiohead.

Perhaps Rupert Murdoch read this article and will reconsider his plan to charge nothing for the Wall Street Journal online. Maybe he should use the pay-what-you-want model, which might be a win-win situation. He’d get some revenue for his content that people thought was valuable and he would increase traffic to the site with people who are not willing to pay.

Going forward, newspapers and magazines that are migrating their content online should consider this radical new pricing model. I think it might work. Think about it—what would you pay to get The New York Times, the Wall Street Journal, Slate, the Huffington Post, or the Media Curmudgeon online? I know the answer to the last item, but for the others how much?

Posted by Charles Warner at 12:02 PM | Comments (2) | Print |

Media Curmudgeon at December 9, 2007 05:06 PM writes:

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Media Curmudgeon at December 9, 2007 10:02 AM writes:

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December 06, 2007

Murdoch + Freston = ?

My wife and I went to dinner with another couple last night on the Upper East Side of New York and saw Rupert Murdoch (natty in a black suit and black turtleneck) dining with a group of people that included Tom Freston, ex-CEO of Viacom.

Of course, I immediately asked myself, “What does this mean?”, because I assumed Murdoch is too old (76) to waste time just socializing, especially with Freston, who is not a barrel of laughs (he’s not glum, just not effervescently funny) and Murdoch doesn’t seem ever to stop at merely buying dinner. What’s he up to now?

Well, the possibilities are delicious to speculate about, which, after all, is why blogs are better at this sort of thing than fact-driven journalism. We speculate and opine, therefore we exist.

Freston was CEO of Viacom when it made the deal to invest in DreamWorks. DreamWorks is now unhappy with Freston’s successor, Philip Dauman, who had the gall to suggest that DreamWorks principal Steven Spielberg was not God, which enraged the other two DreamWorks principlals, David Geffen and Jeffrey Katzenberg, who accused Dauman of being un-American because Spielberg was a “national treasure.” It’s been widely rumored that DreamWorks is looking for another home; the most likely one being NBCUniversal because Spielberg still has his office at Universal, for one reason.

It’s also known that the DreamWorks triumvirate like Freston, so… Perhaps the Murdoch-Freston tete-à-tete signals a new home for DreamWorks, which makes sense considering Murdoch’s lust for iconic brand names—today the Wall Street Journal, tomorrow Spielberg.

The prospect of such a match is delicious to think about. Can you imagine being a fly on the wall and watching a negotiating session between the filthy-rich, brilliant, strategic, conservative Murdoch and the filthy-rich, brilliant, bitchy, liberal David Geffen?

Politics and movies make strange bedfellows, often a continent-sized bed that can hold the egos of those who believe that image-making trumps substance or truth.

Posted by Charles Warner at 09:50 AM | Comments (1) | Print |

Media Curmudgeon at December 6, 2007 12:28 PM writes:

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