Friday, March 20, 2009

Interactive vs. Static Media Spending

While the U.S. advertising market may be struggling as a whole, largely a result of the contraction in consumer spending and a reduction in advertising budgets, there are a few bright spots.  Not surprisingly, the segment expected to grow the fastest this year is highly interactive and embraces my community concept: social networking.  Interactive online advertising on social networks and videos is expected to grow by 25% this year, bucking the overall downward trend in advertising spending seen during the current economic contraction.  The eMarketer report also highlights search and video game advertising, which the research firm expects to grow by 8% and 20% respectively.  The growth in video game advertising makes good sense. Many hard-core consumers spend a decent part of their day engaged in these virtual worlds and the venues are highly interactive, contributing to a sense of immediacy with the products advertisers are promoting.  In contrast to the growing interactive media space is print journalism which is experiencing declines across the board, which is obviously part of the recession but I also believe is a secular trend away from static media.

The message is clear: media that embraces and offers relevant and immediate information to consumers in a community format is engaging consumers and the advertising dollars naturally follow.

Tuesday, March 10, 2009

The Problem for the News Media Isn't Just Revenue

While it is true that traditional sources of revenue for newspapers are drying up, the core problem affecting the news industry isn’t revenue—it is consumer choice.  The conventional wisdom about the newspaper business is that if papers could just find a new advertising model or creative way to monetize users, their problems would be solved.  While a healthy revenue stream is vital to the long run success of any venture, the problem facing news media is much greater than simply better monetizing users.  The challenge is to continue to attract a greater number of users and convince them to spend more of their scarce time and valuable personal information on the site.  Satisfying these criteria will ultimately breed innovative revenue streams.  Consumers are voting with their clicks: web users overwhelming prefer to spend their time at social networking properties like Facebook rather than on news sites.  Driving this shift in where people are spending their time are three key trends affecting both news media and the web as a whole: relevancy, immediacy, and community.

1. Relevancy—For the average web user, only a small portion of the content on major news sites is relevant or important to her daily life.  This is a fact both online and offline: news and happenings about our friends and family generally command far more of our attention than general news.

2. Immediacy—Users want content that is published in real-time.  Many news readers prefer the web because content is less dated than in print, but unfortunately for many publishers, even publishing on the web still isn’t fast enough for many users.  Services like Twitter and Facebook publish “news” (OK, it’s not really substantive news, but I will leave it up to the consumer to determine product quality) in a near real-time 
as event occur.

3. Community—News sites like the New York Times, the Wall Street Journal, and strive to create a community around the news they publish.  Features like the ability to add comments to articles and share with friends via email strive to create a sense of community, however fall miserably short.  Readers want honest and genuine interaction with both authors and each other. When was the last time you saw a NYT reporter respond to comments on her article?  It’s very rare.  In an effort to create community on its cable news programs, CNN has even begun to expose Twitter responses to topics and opinions discussed by commentators. Community matters and is a key requirement for helping people decide where to spend their time online.  Social networks by nature satisfy the community criteria very well.

How are traditional news papers and even online news sources faring in the battle for readers’ time and attention?  Web users spend over 10x the amount of time on Facebook and Myspace than on traditional online news sources.  The data below compares Yahoo News, the Wall Street Journal,, and the New York Times to social networking sites Facebook and Myspace (Source:  During February 2009, U.S. internet users spent 5.9% of their time on Facebook and only 0.7% of their time on Yahoo News, the Wall Street Journal,, and the New York Times combined.  While it is true that major news sites have increased their share of user attention on their properties by increasing the immediacy of their content (mostly through blogs) and community features, these sites will not achieve the same share of users time and attention compared to sites exclusively focused on social interactions.  What does this mean for the publishing industry and the news media business overall?  Advertising dollars are limited and marketers will allocate them toward the most productive venues, which judging by user preference, will not be traditional news media for the forseeable future.

Media News Group's I-News

As revenues slide, staffs dwindle, and traditional business models erode, the Media News Group is announcing a service that is calls “individuated news.” The news service, dubbed “I-News,” involves choosing the type of content you want to read and installing a bulky piece of hardware in your living room to print the news. I-News is a desperate solution to the news publishing industry’s wretched state. You have to give the Media News Group some credit for trying, but not much. The advent of RSS feeds and products like Netvibes and Google Reader make I-News completely irrelevant. In fact, if you’re determined to have your customized news actually look like a paper, that product already exists--it’s called Tabbloid and is from HP Labs.I am loath to offer such criticism without proposing a solution. The Media News Group is reacting to the current state of their business as if it were a cyclical downturn. While problems facing the print media industry have intensified during the current economic contraction, issues facing the Media News Group and the entire industry are part of a new reality and different set of assumptions under which they must operate. Rather than providing a service like I-News, the Media News Group would better position itself by moving entirely online and providing a hyper-local view of the news. By focusing on a specific industry, issue, or theme and having content written by participants with unique or expert perspectives, local papers could get an edge over national publishers and bloggers alike. This shift is something the San Jose Mercury News, located in the heart of Silicon Valley, was uniquely positioned to do, yet the paper ignored the opportunity and continued to print general business news syndicated from major papers.