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The Daily Quest for Online Profits

Posted on Monday, March 21, 2011 at 5:30 PM

Part II. Success of The Daily launch is in question. The publisher is mum. Who knows if the start-up is a hit or a flop?

By William Dunkerley

The Daily, the new iPad-based multimedia publication of News Corp., is off to a quixotic start. In Part I, we covered the February 2 launch and focused on a number of possible pitfalls ahead. Now, as the publication is about to enter its third month of operation, there is very little to indicate that things are going well.

First, a free two-week trial period was extended to almost 7 weeks. PC Magazine indicated that the extension was issued as a result of "some stability issues and bugs." The original trial was credited to the sponsorship of Verizon. There's been no word on who's footing the bill for the extension.

Despite the extensively extended free trial, News Corp. has been evasive about the extent of readership. Publisher Greg Clayman told The Independent, "We're not disclosing the exact numbers (of downloads) but it's in the hundreds of thousands." He also declined telling exactly how many paid subscribers there are, except to say there are "more than one and less than 1 billion." Cute.

However, The Guardian reported "Although the Daily has been free so far, it is understood that a few thousand people have already signed up to the year-long subscription. News Corp has not released any numbers, but it is estimated that the figure is in the region of 5,000."

Meanwhile, AFP, the French news agency, reported that The Daily "has tallied hundreds of thousands of downloads since its launch a month ago its publisher has said." Beyond the ambiguous claim of "hundreds of thousands of downloads," there doesn't seem to be consistent and reliable information about readership.

It's hard to imagine that The Daily would be so tight-lipped about its audience size if the news were good. It's also hard to understand how it can be conducting a credible advertising sales effort while keeping the audience size a virtual secret.

In other advertising-related news is the puzzling absence of any information on the publication's website on how to advertise. There is no link to an advertising contact. There is no link to a media kit. Not even a rate card. It seems like quite a strange advertising sales strategy.

"Strange" may indeed be the byword for the orchestration of this launch. In addition to all the aforementioned concerns, there is the matter of what devices The Daily will work on. PC Magazine claims they were told that an application will be released for Android-based tablets within months. However, The Daily's own website claims that the publication is intended exclusively for the iPad. More apparent confusion.

Is It Even Legal?

The Daily uses the highly-controversial new Apple subscription system. It's touted as being as convenient as buying a song on iTunes. The Federal Trade Commission and the Department of Justice, however, are looking into the subscription scheme, according to Information Week. There has been a lot of speculation that it is basically unfair, if not even illegal. The Wall Street Journal ran the headline "Apple's Subscription Rules Raise Possible Antitrust Issues." What's more, Apple's demand for a 30 percent cut of revenue from subscribers who are new to the publication has raised a lot of eyebrows. Legal analysts seem to believe that the final result will depend on whether Apple is deemed to have a dominant position in the marketplace.

As a publishing issue, the 30 percent doesn't really seem problematic. Publishers are used to new subscriber costs often running several times that. What's more, Apple claims that if the publisher recruits a new subscriber, Apple will process the order at no charge. (At least that's what Apple seems to be saying.) But if Apple and the publisher are both out there selling subscriptions, that makes them competitors in that activity. And if competitors are conspiring on the subscription price, is that price fixing? Perhaps the legal analysts should be looking into that angle.

But It May Be a Moot Point

All this worry over whether The Daily's subscription arrangement with Apple is legal may be for naught. It won't really matter if the publication does not survive. Despite all the hype that the iPad is the up and coming substrate for magazines, some preliminary figures speak otherwise. They seem to be saying that the hype is -- well, just hype.

Media Post reports that, in 2010, "sales of digital magazines on the tablet computer have fallen significantly." Data cited indicates that Wired magazine's digital copies went from over 100,000 for the first iPad issue to 23,000 copies just 5 months later. Vanity Fair took a dive from selling 10,500 digital magazines down to 8,700.

While the numbers were tanking for these and other publications, the total sales of iPads jumped 565 percent through the end of the year.

I don't know what people are doing with all those iPads, but it doesn't seem to be reading magazines. Indeed, there is quite a dearth of objective data available about what iPads are really being used for. There's a lot of hype about what they might be used for. But not much hard data on actual usage.

Nonetheless, The Daily remains a pioneering effort in multimedia publishing, one worthy of our continued interest. News Corporation's Rupert Murdoch says he believes The Daily "will be the model for how stories are told and consumed in this digital age." Indeed, it may become that. But, for now, it seems to be hitting snag after snag. Unless things change, it may be the model for how not to orchestrate an innovative launch!

William Dunkerley is principal of William Dunkerley Publishing Consultants, www.publishinghelp.com.

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The iPad Daily

Posted on Thursday, February 24, 2011 at 10:56 AM

How the iPad's daily newspaper is bringing the traditional newspaper into the Digital Age.

By Meredith L. Dias

Earlier this month, Rupert Murdoch's News Corp. launched The Daily, a daily newspaper for the Apple iPad. With this digital daily, News Corp. hopes to marry the traditional concept of the daily newspaper and tablet technology. Forrester Research has forecast that tablets will overtake desktop computing by 2013. News Corp. seems poised to take advantage of that trend.

The Daily is Murdoch's appeal to a new generation of readers. Will it become the gold standard for digital newspaper publishing? Will new readers latch on to Murdoch's vision? And just what subscription model is News Corp. going to use, anyway?

An App-based Subscription

Thanks to Verizon sponsorship, The Daily will be available to iPad users for a free two-week trial. Satisfied readers can subscribe for 99 cents per week or $39.95 per year through the iTunes App Store. There is a new issue each day, with periodic updates throughout the day for breaking news content.

There are, of course, limitations. Currently, the publication is iPad-only; not even iPhone users can access it. What this means for the ultimate success of The Daily, which just debuted on February 2, remains to be seen. While the iPad is certainly popular, it stands to reason that News Corp. would get more mileage (not to mention profit) out of the daily, which will cost an estimated $56 million to run in its first year, if it were at least available to the millions of iPhone users in the United States.

Publication Features

So what does a subscription to The Daily get you? "A newspaper that's both old-fashioned and cutting edge," says Peter Kafka of MediaMemo.com. Journalistic content is beefed up with photographs, 360-degree panoramic images, streaming HD video, and links. Users can share some content with their social networks, but other content remains behind a paywall.

Interactivity plays a role in The Daily's identity, too. Users can share certain articles with their social networks, and there are both text and audio comment options for readers to sound off about stories. They can also customize their reading experience with features like local weather data.

Some early adopters of the app describe their Daily experience as "more like reading a news magazine than a traditional newspaper." Others have dismissed the newspaper as tabloidesque. Still others have lauded Murdoch's incorporation of snazzy multimedia extras into news copy.


News Corp. hopes that, eventually, subscriptions and advertising will each account for half the publication's revenues. For the time being, the newspaper will rely primarily upon its subscribers to pay the bills. However, in a recent article on RedHerring.com, newspaper analyst Ken Doctor predicts that less than one percent of iPad users will buy subscriptions to The Daily, which would necessitate a less balanced, advertising-heavy revenue model.

For the time being, the newspaper remains in a foundational phase, developing relationships and name recognition with advertisers and readers alike. CNBC reports that HBO, Land Rover, Macy's, Paramount Pictures, Pepsi, Verizon, and Virgin Atlantic are among the first advertisers.

Can The Daily Go the Distance?

The Daily has one advantage over its competitors: It is brand new and, therefore, free to explore its own potential without the burden of heavy reader expectations. Unlike the New York Times or Time, this is a new brand. It has no print or digital predecessor and, therefore, can evolve with a freedom impossible for an established publishing brand. However, with its powerful Murdoch backing, The Daily has enough resources and name recognition to become a powerful contender if it employs sound strategic planning.

There are, as mentioned earlier, limitations. With several high-profile tablet models, not to mention the perpetually expanding crop of smartphone users, it would be wise for News Corp. to reconsider its iPad-only strategy. The iPad makes for a compelling test market, but with other tablets now on the market and several more due to hit stores this year, it seems unwise to remain iPad-exclusive for long. We can't know how popular The Daily will become, but if it does meet or exceed expectations, expanding beyond the iPad could mean the difference between 50,000 and 5,000,000 subscribers.

Meredith Dias is senior editor of STRAT.

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The Daily Quest for Online Profits

Posted on Thursday, February 24, 2011 at 10:55 AM

Part I. Magazine publishers have long lamented the absence of a successful model for online profits. Will the launch of The Daily show us the way?

By William Dunkerley

News Corporation's digital start-up, The Daily, is sure to be a model for the rest of us. What's unclear is whether it will be a model for what to do -- or what not to do!

The Daily promises readers an embarrassing richness of multimedia features: audio, video, enhanced photography. I've long advocated that publishers open up to the array of channels now available for bringing content to readers. The Daily certainly seems to share that advocacy. This start-up well could be a transformative publication in the evolution of our industry.

A lot will be riding on the implementation, however. Will the publication use the multimedia tools in a way that will enhance reader satisfaction? Will the enhancements help the reader to better understand the content? Will they intensify the reader's satisfaction with the publication? Or will the multimedia features be used simply gratuitously as bells and whistles? It's hard to tell at this early date in the life of the publication.

In fact, there is a lot about the publication that is hard to discern presently. News Corp. has put out a lot of very limited information on its newborn. And, some of the early media discussion of the product contains various takes on it that don't entirely agree. We've tried to sort through those for you in our reporting, but must admit that we're dealing with a market entry that does not seem to be entirely understood by anybody.

Device Specificity

The Daily is device-specific. It's an iPad publication. It may be available on other devices in the future. But, replicating The Daily's features on other devices will likely require an additional app or program for each device. This aspect of device specificity is one of two problems that should be high on any publisher's list of things to consider before jumping in.

There are other publications that are already available as iPad apps. They range from Marvel Comics to The Wall Street Journal. These apps, however, are likewise device specific. The prospects of making your magazine available for additional devices can be daunting. According to Richard Pradley, managing director of Semantico, an online services provider, "As yet no publishing infrastructure exists that can take a given work and repurpose it automatically for all available delivery platforms and operating systems." It takes a lot of expensive human intervention, he explains.

Bob Cohn of Bonnier, a large multinational publishing group, recently told Folio magazine, "We want to be on as many devices as we can logically handle." That may be fine for gigantic operations like Bonnier. For smaller magazine publishers, the budget needed for all that development may be elusive.

The second consideration related to device specificity falls in the category of industry modus operandi. A publisher that goes device-specific is stepping into the world of computer software and hardware. There, planned obsolescence is a way of life.

As publishers, we make our money by having ever-changing content in our publications. That's what keeps customers coming back. Paper has been the stable substrate for publication content for centuries. The iPad and other PDRs (portable digital readers) represent in effect new substrates born of the computer industry. Continued sales in the computer field is different in nature from that in publishing. It comes from new models, new versions. A lot of that is driven by the development of new technologies. Some of it seems to be marketing-driven, i.e., planned obsolescence.

With that in mind, what are the chances the iPad will still be around in 10 years? In 5 years? What's more, a newer technology may come to entirely replace the entire tablet computer category. Of course, publications will need to adapt to all these new developments. My point here is just that it is in our interests that our multimedia publications be developed in a way that does not leave us at the mercy of software developers and computer manufacturers whose own interests may be at variance with ours.

Who's in Control?

That leads to the question of who is the customer and who is the vendor in this equation.

If you look for parallels back in the print-only days, publishers had basically the printer and the Postal Service to work with. The constraints they imposed on how publishers did business and what they published were relatively minimal. Where limitations did exist, alternatives were available, albeit usually at higher prices. Many will argue that the Postal Service did little to ingratiate itself with publishers. The printers certainly did a lot. They each tried to out-do each other in serving publisher needs. I guess that's the difference between dealing with a monopoly vs. competitive entities.

But even the Postal Service didn't say that if you set a price for subscriptions delivered by them, you couldn't price the subs differently for alternative delivery. But that in effect is what many allege Apple's policy on subscription apps amounts to. It's hard to know all the ramifications with certainty. As Bob Cohn remarked about Apple, "...they haven't been too transparent."

Even with fledgling competition from Google, and from others on the horizon, Apple seems to have assumed the posture of a monopoly. The fact that The Daily seems to have kowtowed to that sets a bad precedent for our whole industry. Apple is certainly not coming across as a vendor wishing to court the favor of its publisher customers and prospects.

A lot of noise has been made about Apple's demand for 30 percent of the revenue from each subscriber that it brings to the publisher. But that doesn't sound like a bad deal to me. Many publishers are glad to spend 100 percent of the first year revenue acquired from a new subscriber just to get him or her. Profits come from renewals. Traditionally the cost for getting the renewals is very low. It's not clear how Apple would handle renewals, other than taking another 30 percent each time. That would mean after a few years the publisher starts to come up on the losing side when using Apple as a new subscriber source.

That's not the worse part, though. In publishing, selling subscriptions is not at all like selling music singles (which is where much of Apple's App Store experience lies). If they sell a single, it little matters whether the buyer is in New York or LA. But, if the App Store is selling subscriptions for a New York–centered magazine with New York–based local advertisers, it certainly does matter. The advertisers won't want to pay to have their ads downloaded all over LA for viewing by people who are not likely to become customers. This concept doesn't just apply to geographic considerations. It's relevant to things like age, gender, profession, interests, etc. Certainly the magazine's title, cover, and description may ward off some of the mis-fit subscription sales. But if something in your New York magazine somehow goes viral, you suddenly could be big in LA!

Plunging iPad Magazine Sales, and More

There are a lot of other issues raised by the advent of The Daily. One is the apparent nosedive in subscription sales for iPad magazines right at the time The Daily is being promoted. What's that all about? And recently, there are a lot of questions about whether Apple's iPad subscription program is even legal! We'll cover those issues and more in Part II of our business analysis of what The Daily means to magazine publishers.

William Dunkerley is principal of William Dunkerley Publishing Consultants, www.publishinghelp.com.

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Publishing 2011: A Look Ahead

Posted on Monday, December 13, 2010 at 4:21 PM

What will magazine publishing look like next year? The worldwide response to a changing landscape.

By Meredith L. Dias

The year 2010 may only just be coming to a close, but a lot of publishers already have big plans for the upcoming year. This year has been a technological whirlwind for magazine publishing professionals. It has sparked an across-the-board sea change for some publications -- not just changes to the content itself, but recalibration thereof to make it accessible on a wide range of portable digital readers (or PDRs, as we call them here at STRAT).

STRAT and its sister publication, Editors Only, have explored many of these technological advances this year -- particularly iPads, QR codes, and smartphones and tablets. To varying degrees, publishers in all sectors are looking for ways to appeal to a growing base of PDR users. But it isn't just about digital -- print publishers, too, are looking for ways to engage their readers and bring in more revenue.

We recently surveyed a sample of STRAT readers about their plans for 2011. How are they planning to rejuvenate their publications? Are the proposed changes mostly digital, or are some publishers looking to more conventional methods to bring in more revenue?

The International Response

Our responses ran a fairly wide gamut, and publishers from all over the world shared their future plans. We heard from publishers on three continents, and the responses indicate that there is a worldwide shift toward online publishing.

Glenn Hunt, publisher of New Zealand's 1am magazine, offered us a glimpse into the state of online publishing on the Oceanic continent: "The southern hemisphere is really lagging behind the U.S. and Europe in embracing the online culture and marketing, so models that are successful there aren't working down under (i.e affiliate schemes, etc.)." However, his publication is still surging ahead with a move to Australia, where online publishing is gaining ground. "We are planning to shift operations to Sydney from Auckland, NZ, as we are finding people are really slow here in NZ to embrace the online thing." It would seem, then, that 1am finds a digital presence crucial enough to merit relocation to a better digital publishing environment.

We also heard from Russian journalist Marat Kunaev. "I had to change jobs because of the financial crisis," he tells us. "Online journalism used to be just a second job for me -- a way to earn some extra money. Now it has become my primary occupation. Here in Russia, the Internet has become much more popular. It's a source for information and connection to others in my country and worldwide. This year my partners and I came to know just how good the online opportunities are. Next year, we'll be putting that knowledge to work in our activities. We expect to become more international and gain greater audience."

Non-digital Strategy Changes

A lot of magazines are looking for ways to cash in on current online and digital trends. But there are still publications that are looking to more traditional modes of driving profit.

Marcia Passos Duffy, co-publisher and editor of Our Local Table-Monadock magazine, says, "We will be looking at ancillary products that will support our magazine's mission (to promote local farms/food), including sponsoring events related to food and farming and partnering more with local organizations." She recognizes that the very nature of a publication is changing: "Today, publishing a magazine is more than just putting out editorial with ads on a periodical basis. Running a regional magazine means getting more involved in the community."

Geoffrey Morris, president of Morris Media Group, is also looking at some tried-and-true techniques for 2011: "(1) Focus the content to be more directly in line with advertisers' goals and needs. This is an overall approach: focusing on categories and theme that we may not have addressed before that will attract more advertisers. We are still keeping editorial integrity in tact of course -- not changing to pay for play -- be merely changing overall focus based on conversation we have are will have with advertisers. (2) Sales training and strategy: re-aligning goals and incentives to be more effective. A more sophisticated tiered incentive structure for the sales force bolstered by year-long management and sales training for some of the staff." His third strategy, however, is in keeping with the online publishing boom: "Bolster Web sales efforts, in a big way."

"It's no longer a one-dimensional world," says Lee Smith, publisher and editorial director of Deli Business and Cheese Connoisseur magazines. Like Morris, he envisions a diverse strategic plan for his magazines. "We are looking to do more integrated media next year. We launched a trade show this year that was a tremendous success, far exceeding our expectations. It is expected that efforts such as the trade shows, sponsoring contests, web-based media, etc., are helping boost advertising sales in our magazines."

Planned Digital and Online Changes

Of course, many of the publishers we heard from have big plans for their online and digital presences. Keith Tosolt, managing editor of Concrete International, says, "In 2011, we'll be expanding the online version of our publication and adding an interactive product guide. The motivation for this move is to offer an add-on value for advertisers."

Barbara Oliver, associate publisher of MBE magazine, plans to enhance her magazine's digital presence in the coming year. "We are encouraging more of our subscribers to take the magazine in digital format. This will cut down on our production costs significantly." The magazine plans to revamp its sales strategy, too: "We are expanding our offerings to include advertising in our digital edition as added value, especially for those in the travel and hospitality industries. We will be using the social media networks as a marketing tool to generate interest in our editorial content."

Joe Angel, vice president and publisher of Summit Media Group, plans to incorporate some custom e-media into his publications in the form of micro-sites, e-newsletters, and e-show dailies, among others. Kent Kiser, publisher and editor-in-chief of Scrap magazine, is introducing a digital edition of his magazine next year. "The proliferation of more sophisticated wireless devices (such as the iPad) is making it more important to at least offer such options, even if the majority of your recipients may not read the digital version," he says. His magazine saw single-digit revenue growth in 2010, and he hopes to improve upon that performance in 2011.

What to Expect in 2011

As indicated by the wide array of responses, different magazines are employing different tactics to increase revenue next year. This diversity of approach is encouraging. There is no blanket solution to the publication profitability problem; magazines in different sectors will require different strategies.

What can we expect in 2011? Certainly, the responses indicate an increase in digital editions and hopes for greater online revenues. But the surge in digital publishing doesn't necessarily mean that we should abandon the sales and advertising strategies of yore.

I think Amy Lestition gets it right in the November/December 2010 issue of Signature magazine: "Association professionals need to slow down and interpret the effects of the evolving publishing industry on their organizations. Recent technological enhancements in media have forced the publishing industry to race to adapt new publishing vehicles and produce more and more content. But ask yourself: Why we are racing? Is it because we are doing more with less? Or is this the 'new normal' for association publishing?"

These questions apply not only to association publishing, but magazine publishing at large. Do consider them before charging ahead in 2011.

Meredith Dias is senior editor of STRAT and Editors Only.

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A Magazine Startup Checklist

Posted on Monday, December 13, 2010 at 4:20 PM

An analysis of key factors to consider for achieving success, print or online.

By William Dunkerley

What considerations go into starting a new magazine? Often, the most important element is left off of everyone's list.

Someone recently asked a group of experienced editors and publishers about start-up considerations. Answers included a lot of good nuts-and-bolts issues -- things like digital delivery, printing, mailing, who will be the readers, who will be the advertisers, and on and on.

One item that did not come up: Will this new magazine be able to succeed? And if you think about it, isn't that the first question that should be asked?

Who wants to start a magazine that isn't going to succeed?

History shows us that a lot of the magazines that are started don't succeed. In that respect, a new magazine has a lot in common with a new local restaurant. A lot of them don't even last three years. Someone had come up with what seemed like a good idea. But it just didn't pan out.

What Goes Wrong?

Often, the failure of a new magazine is chalked up to contemporary economic conditions. Other culprits could include too much competition, inadequate capitalization, or poor management.

Are these the real reasons? Or are they just rationales for failure? Frankly, there isn't one item on the list that couldn't have been analyzed, tested, and anticipated -- before all the money was spent and lost. Maybe we should add "poor planning" to the list.

While the economy et al may have played a role in a magazine's failure, I've found that there is a single, more fundamental issue that underlies most magazine startup failures. It is that there was no real need for the magazine. That too is something that can be analyzed and tested in advance. But rarely is it done in any thoroughgoing way.

Needed by Whom?

A startup magazine that seeks advertiser support actually has two key constituencies: the readers and the advertisers.

A preliminary understanding of reader needs can be achieved by exploratory testing of your startup idea with focus groups. Once you've translated the resultant insights into a sample table of contents, illustrative articles, and graphic identity, you can put that all to a test with subsequent focus groups. And finally, an actual market test can help quantify what kind of reception your new magazine will get from potential readers.

On the advertising side, you've got to look at what the advertisers are currently doing. Where are they advertising now? How much money are they spending in each venue? Are they getting satisfactory results? What consumers are they trying to reach? Interview key advertisers and ask them what their marketing objectives are, and where they want to go in the future. Identify how your magazine can either fill a void or be more effective for the advertisers than existing options.

Is That All There Is?

You may think that if you have identified sufficient need on the part of readers and advertisers that you're good to go. But not yet. There is something else. There has got to be a symbiosis between the readers and the advertisers. That means the readers have got to have an interest in the advertisers, and the advertisers have got to have an interest in the readers. There has to be a mutual need!

From an advertiser point of view, the purpose of your magazine is to attract good, prospective customers. If it doesn't do that, you have failed your advertisers. And if you fail them, they will abandon you.

You have two tools for getting the advertisers what they want. They are (a) marketing and (b) content. Your marketing must be successful at attracting readers who will become good buyers for your advertisers. Your content must be something that can be effectively marketed to those readers. What's more, it's got to be effective in motivating readers to look through the publication so that they will see the advertisements. Content also should inspire reader trust and loyalty. Advertising will be most effective in that kind of environment.

The Checklist

Most magazine startup checklists deal with how to start a new magazine. This one is different. This is a checklist for whether to start a new magazine. Here it is:

1. Is there a need for the magazine?

2. What's your proof?

3. Will you create a symbiosis between readers and advertisers?

4. What's your plan for doing that?

Follow this checklist, and you'll be off to a good start on your quest to launch a new magazine, print or online.

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William Dunkerley is principal of William Dunkerley Publishing Consultants, www.publishinghelp.com.

The Ethics of Digital Magazine Advertising

Posted on Tuesday, November 16, 2010 at 2:08 PM

Should the digital revolution bring a reassessment of the ad/edit divide?

By Meredith L. Dias

Advertising and editorial. Historically, the two have gone together like, to quote a dear friend, "bologna and whipped cream." The advertising department builds relationships with sponsors while the editors focus on the content. And never the twain shall meet.

Until now.

Digital Advertising Innovations

Digital publishing platforms have presented publishers with new and constantly evolving ways to connect readers and advertisers. Ads can be dynamic. They can be disruptive. They can be interactive. They can be annoying. The available technology can be dizzying, enough to disorient even the most ethical publishers -- and, sometimes, send them reeling into morally ambiguous territory.

Don't think it can't happen. It already has.

The Rules of Engagement

In April 2009, ASME responded to the digital publishing boom by publishing its "Best Practices for Digital Media." The list of standards is fairly short, and the overriding message is clear: ASME applies the same ethical standards to digital as it does print. The second item reads, "All online pages should clearly distinguish between editorial and advertising or sponsored content. If any content comes from a source other than the editors, it should be clearly labeled."

There are other items, all of which foster advertorial transparency, "so users can see that the content is credible and free of commercial influence." In the name of privacy, ASME also requires that publications offer readers the option of opting out of information collection.

Ethical Issues

The publishing crisis has led some print publishers to drink from poisoned wells. Over the last several years, readers of several major magazines have seen an invasion of advertising in their editorial content -- and not just inside the magazine. A few publishers have openly challenged ASME guidelines by featuring controversial advertising on their covers. In 2007, XXL's editor-in-chief appeared in an ad on the back cover of his magazine. The cover of ESPN's April 6, 2009, issue was half-editorial, half-advertorial.

Digital provides even more opportunities to mesh advertising with editorial. Ads can flash across an editorial page. Content can be hotlinked to sponsor sites. In a magazine, delineation between ad and editorial is generally clear-cut (though, in recent years, some print magazines have experimented with product placement and ad overlap in editorial content).

However, says Susan Currie Sivek of MediaShift, publishers need to keep their readers in mind. When advertising takes the form of "online games, advertiser participation in Web discussion forums, sponsored tweets and Facebook posts, and ads in mobile applications and the iPhone editions of their publications," it is possible that "readers' experience with these new advertising approaches may not have caught up just yet to the magazines' innovations." In other words, readers may not readily discern between sponsored and editorial content. To complicate matters, says Sivek, "clear standards for distinguishing between ad and editorial haven't yet been established for digital magazines."

The Debate

Most editors wish to safeguard their content from undue advertorial influence. After all, breaches in the ad/edit divide infringe upon their autonomy and compromise their credibility. In an April 2, 2010, article for AdvertisingAge.com, ASME chief executive Sid Holt says, "'I think most editors would agree that these kinds of ads -- ads that intentionally disrupt the reader experience -- are not very good for the reader's relationship with the magazine, and since the editor is responsible for that relationship, the editor should have some say -- a lot of say -- the final say -- about whether the magazine should take ads like these."

Not so fast, say some other industry professionals. Emerging from the recent publishing and economic crises, many magazines are pursuing unconventional modes of advertising to recoup some of their losses. Sometimes, this means enhancing content with advertorial elements. This is, under current industry guidelines, unethical. It breaches that cherished ad/edit divide and can mean expulsion from ASME and its National Magazine Awards.

"Arguably," says Susan Currie Sivek, "if readers find value in the entertainment or information offered by these interactive ads, and the ads have been clearly designated as such then the magazine experience might in fact be enhanced by ads." But this new digital advertising environment offers "unscrupulous publishers a chance to lead trusting readers to unlabeled sponsor links by way of editorial content." Therein lies the problem. Practices like this violate ASME's best digital practices, but as a November 2008 Advertising Age headline suggests, "as ASME fortifies [the] ad/edit divide, some mags flout it."

Protecting Editorial Integrity

So how should editors respond when the advertising department invades? Should ASME reconsider its digital guidelines in response to recent developments in digital publishing technology? And can true advertorial transparency exist in the digital world, where advertising content can take countless forms, some of which are not readily discernible to readers?

There are compelling arguments on both sides. Some argue that the decriminalization of ad/edit overlap could mean higher wages and more job security for editors, whose industry has been in a state of constant upheaval for several years now. But are the job security and potential windfall worth it? No, say other industry insiders, who suggest that compromises in editorial integrity could actually damage the magazine's pull with the very advertisers who sustain them.

It comes down to this: If you are willing to take a bite of a bologna and whipped cream sandwich for a quick buck, be prepared for the ensuing stomachache. Even if industry evolution transforms advertising and editorial into peanut-butter-and-jelly partners, the taste will, for many, always be a bit off.

Meredith Dias is senior research editor of STRAT and Editors Only.

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Watch Out for Big-Sounding Percentages

Posted on Tuesday, November 16, 2010 at 2:08 PM

Digital Hype Watch: Misleading numbers often have percent signs.

"Some have referred to the current marketplace as the 'golden age' of online advertising..." So proclaimed a recent Foliomag.com article. It went on, "That's the story at Hearst's Popular Mechanics." The story cited the publication's online advertising as being up 46 percent over last year! It was pointed out that online outpaced print, which was only up 25 percent.

Flying in the face of that buildup is that "print represents 89 percent of the magazine's total revenue." The reader is left to do the math that online constitutes only 11 percent of all revenue. But then again, it may be less. If print is 89 percent of "the magazine's total revenue," what about circulation and list revenue? If there's some of that, it means that online revenue would be less than 11 percent.

Confusingly, the story also states that "most advertisers take an integrated approach of using both print and online advertising." Even accepting the 11 percent online revenue postulation, it means there's a 9 to 1 ratio of ad spending, print to online. Some golden age! What's more, when we calculated out the stated online growth increment, the numbers suggest that it will take at least 15 years before online will even equal print, much less surpass it.

Now, we don't know how factual any of those numbers and resultant calculations might be. But, regardless, they seem to have very little meaning for publishers who are now planning their own online strategies. There is no doubt that online advertising is growing and that publishers need to position themselves accordingly. But the "print is dead" and "tomorrow everything will be digital" predictions found in many quarters deserve some scrutiny. Otherwise, publishers could be led astray as they make important decisions regarding their ascent into multichannel publishing.

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Breaking News: Newsweek Sold Again

Posted on Monday, November 15, 2010 at 8:20 PM

Ownership of Newsweek changes hands for the second time in three months.

By William Dunkerley

Newsweek, just sold last August, has another new owner. Now it's owned by The Newsweek Daily Beast Company, a joint venture created by Newsweek and The Daily Beast (an online news website). Sidney Harman who bought Newsweek in August is a 50 percent owner of the new company. IAC/InterActiveCorp, owner of such websites as Match.com, Excite.com, Reference.com, and founder of TheDailyBeast.com, owns the other 50 percent. Interestingly, IAC's chairman and CEO, Barry Diller, is a board member of the Washington Post Company, the outfit that sold Newsweek to Harman a few months back.

STRAT analyzed the factors of Newsweek's business strategies in our July issue. We found them flawed, but there didn't seem to be a compelling business reason for the sale. Then in our August issue, we reported on the sale to Harman, a publishing novice. We wondered what could have motivated the purchase of the money-hemorrhaging news magazine.

Now, we're left wondering what's behind joining forces with a news website. Newsweek already has a news website (Alexa rank: 1911). But reported plans are to junk Newsweek.com in favor of keeping TheDailyBeast.com (Alexa rank: 2121).

Did Harman buy Newsweek and cleverly flip the property for a nice profit? There have been no media reports of any money changing hands going into the joint venture.

Was Harman merely an intermediary for the acquisition of Newsweek by Diller who himself was afraid to ask for it? Who knows.

Are the principals assembling a print and online news organization to support a 2012-oriented political agenda? Who knows on that count, too.

Some speculate that the wisdom of the joint venture lies in efficiencies of a combined operation. Reports indicate that Newsweek is leading up to a $20 million loss for this year, $10 million for The Daily Beast. It's hard to picture wiping that away with "efficiencies." Our analysis indicates that Newsweek's losses are a result of flawed business strategies. The Daily Beast, on the other hand, is still in a start-up mode (launched in 2008). Thus, its losses are not necessarily a result of any dysfunction at all. It simply may not have had enough time to achieve profitability.

The ostensible objective of the new venture was expressed by its CEO, Stephen Colvin: "Consumers and advertisers value media distributed across multiple platforms. The merger of The Daily Beast and Newsweek audiences creates a powerful global media property for the digital age."

That seems like a sensible statement. But…

Launching a major news-oriented website like The Daily Beast was a considerable undertaking. At just 2 years into it, the job is far from done and it is too early to know if sustainable success will be achieved.

The turnaround of a major print publication like Newsweek, with a legacy of failure, too, is a monumental task with an uncertain future.

And, the merger of two organizations is yet another challenging undertaking unto itself. Merging usually creates unnecessary duplication that has to be dealt with -- a need to accommodate 2 different business cultures through carefully orchestrated process, not by decree; a refocusing of business objectives and a concomitant adjustment of work routines; and dealing with staff resistance to change.

Organizational mergers are indeed challenging enough all by themselves. But when you're dealing with a major website still in the throes of startup and a failed print publication that has yet to display a viable turnaround strategy, and try to merge the two, you have just multiplied the risks involved by an enormous factor.

There are a number of experienced and talented people involved in the Newsweek Daily Beast venture. Maybe they have a good plan and will succeed. Maybe the undertaking is just an expression of bristling egocentricity. Or, maybe there's a hidden political agenda. Time will tell. But, if they are able to produce the "powerful global media property for the digital age" of Colvin's vision, it will indeed be a noteworthy accomplishment, one that will stand as an exemplary model for the industry.

William Dunkerley is principal of William Dunkerley Publishing Consultants, www.publishinghelp.com.

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The Future of Mobile and Tablet Publishing

Posted on Thursday, October 14, 2010 at 12:22 PM

The future is bright for mobile and tablet publishing, but don't be blinded by hype.

By Meredith L. Dias

With smartphones poised to become the primary Internet browsing device within the next ten years, it seems logical to consider what a tablet edition or smartphone app might do for your publication. In all probability, at least some of your readers have already hopped aboard the portable reading bandwagon in some capacity (whether via laptops or netbooks, iPad, Android, iTouch, Kindle, iPhone, Nook, Sony Reader, etc.). Some are likely smartphone or tablet users.

Personal computing, suffice it to say, is changing. It is becoming increasingly portable -- in many cases, even pocket-sized. Consequently, magazine publishers must consider a host of devices when making content delivery and platform decisions. Should you offer an iPhone edition? An iPad edition? A mobile digest of your print content?

Our Survey

We recently surveyed publishers regarding mobile and tablet publishing. Some had already developed iPhone editions. Some had no plans to pursue mobile or tablet publishing at all. What was most noteworthy about the response, however, was the lack of response. For whatever reason, the topic didn't appear to resonate with our list of publishing executives.

With smartphone and tablet use on the rise, why is this? Perhaps the publishers were simply too swamped to respond -- with the industry changing so rapidly, this is a real possibility. Perhaps some publishers haven't given the idea much thought yet -- after all, the iPad has only been on the market six months. Either way, our response rate was quite low compared with past surveys.

What Publishers Said

There were, however, some interesting responses from our list worthy of mention. Terry O'Neill, editor of Powder and Bulk Engineering, tells us, "We do publish an email newsletter which we expect to be available soon in mobile format (for smartphones). Our regular print and digital magazines aren't considering smartphone or tablet apps at this time and probably won't for quite some time, if ever." A few other publishers told us that they have no smartphone- or tablet-friendly content at all.

There were, on the other hand, publishers charging ahead with smartphone and/or tablet editions. Lucy Collin, publisher of Marketing magazine, says, "We have developed a mobile app for our daily news and we are working on iPad now. Our daily newsletter app has two banner ad positions." About revenue, she says, "We see it as a growth area. Most indications are that mobile Internet use is going to increase over the next five years, so however important the Web has been to a given publication over the last decade, it will become doubly so when mobile sites, apps, and online video/audio content becomes a regular part of the editorial and production process."

Paul Westervelt, vice president and group publisher of Oil and Gas Journal, shares Collin's vision of mobile publishing's future: "We believe mobile devices are an essential part of our publishing future." He said that his journal will offer both smartphone and tablet apps starting on October 12.

Other publishers were just beginning to discuss smartphone and tablet publishing.

The Current Mobile/Tablet Publishing Landscape

The varied responses reflect the industry as a whole. It is only recently that mobile and tablet publishing have gained significant momentum, particularly with the release of the iPad and mounting popularity of the iPhone and Android. Some cutting-edge publications are ahead of the curve, with apps and tablet editions that already border on established. Others -- particularly association publications where print is still the hot commodity, or publications with limited online presence -- have no real use for smartphones or tablets right now. Still others, bruised and battered by the recent hard times, are approaching this new wave with caution.

A recent Harrison Group/Zinio survey forecasts that "tablet-based devices and e-readers together will exceed 20 million units in the next year and they may well be the Christmas gift of 2010."

The Harrison Group/Zinio Survey

While the survey reveals some interesting statistics about the reading habits of tablet and e-reader users, the press release about it is not without hype and causal assumptions. For instance, "Tablet and e-reader owners spend 50 percent more time reading magazines and magazines articles." This is, upon first glance, a stunning statistic. However, we must pay attention to what it actually tells us: simply that tablet/e-reader users spend more time reading magazines. It doesn't specify that they are reading the magazines on their portable devices, and it doesn't necessarily mean that they are reading more magazine content than before. It simply tells us that these device users read more than non-users.

Similarly, although the press release states that 33 percent "are spending more money on buying things to read," we don't know from the information given whether these device users are actually buying digital content or even reading what they buy.

Perhaps most important to note: According to the press release, "28 percent are now reading digital magazines or books." While this constitutes nearly one-third of the survey respondents, it means that over two-thirds are not consuming digital content. What's more, those 28 percent of digital content consumers may be reading on a desktop computer. (Note: The survey involved "1,816 Americans, ages 18-64").

Beyond the Buzz

With so many misleading statistics out there, it can be difficult to make smart decisions for your publication. Most important, as mentioned above, is to filter out the hype from the hard numbers and rational analysis. There is no question that digital reading and portable digital reader (or PDR, our blanket term for all portable devices that enable digital content consumption, including laptops/netbooks, smartphones, PDAs, e-readers, and tablets) ownership are on a meteoric rise. However, allowing ourselves to become blinded by hype could prove disastrous to our bottom line.

So be careful when doing the math, and take care not to taint your statistical analysis with unsupported assumptions. Just because something worked for your competitor or a major national magazine doesn't mean it will work for you. A splashy iPad app may seem like a foolproof idea, but if you can't get your readers to purchase it or advertisers to invest in it, all that expensive design will become an eyesore.

The technology may be changing, but the rules of engagement haven't. Never dive headfirst into new technology without the proper research and strategy, no matter what headline-worthy statistics and forecasts you've read.

Meredith L. Dias is research editor of STRAT.

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New STRAT Feature: Digital Hype Watch

Posted on Thursday, October 14, 2010 at 12:21 PM

With so much hype out there about digital, publishers need someone to cut through the spin and deliver rational analysis of digital publishing and its possibilities.

In future issues of STRAT, we will include a feature entitled "Digital Hype Watch," to help publishers make strategically sound use of digital channels to reach readers. The hype watch will examine digital magazine research and its media response, cutting through hype and statistical misinterpretation to help publishers make informed decisions.

Recently Tweeted

Posted on Thursday, October 14, 2010 at 12:21 PM

Recently tweeted from @STRATnewsletter:

WSJ: Magazine Ad Pages Rose in Third Quarter. http://bit.ly/cVDKpR

Folio: MPA changes name, tagline to reflect multi-platform publishing. http://bit.ly/aSNmP4

Follow us on Twitter: @STRATnewsletter

What Ails Publishers Most

Posted on Wednesday, September 15, 2010 at 1:40 PM

What are the top issues facing today's magazine publishers?

By Meredith L. Dias

Over the last few years, you have likely watched many publications, perhaps even some of your own, fold under the pressure of the concurrent publishing industry and economic crises. Where did those publications go wrong? What one fatal error did they all make?

The answer may trouble you: There may not have been one fatal error. As we discovered in a recent STRAT survey we conducted, there are a host of issues facing today's publishers. We asked some publishers to identify their top problems, and their lists ran a fairly wide gamut.

Here are the top ten issues reported to us:

--Advertising sales
--Monetization of content
--Postage issues
--Distribution, printing, and paper
--Social networking
--Staff cuts/issues
--Rate cuts
--Circulation and subscription
--Changing reader trends

In other words, publications have suffered over the last few years for many reasons. Many of the aforementioned issues are, of course, likely related (e.g., staff cuts and economy, advertising sales and rate cuts, etc.). Still, as indicated by our survey results, broad strokes won't paint a clear picture of the recent publishing crisis. So let's examine some of these key issues in a bit more depth.

Monetization of Content

Publishers are having trouble monetizing their content on both the print and digital platforms. Peter H. Miller, president of Restore Media LLC, lists "monetizing digital media" as his number one concern. Conversely, Bill Kinross, VP and group publisher of Meating Place, tells us that his publication is having trouble "proving the value of print when other media platforms offer such detailed metrics and print doesn't."

Perhaps the most acute comment we received was from David Drimer, associate publisher of The Forward: "An irreversible dearth of print advertising forces an accelerated focus on digital operations, and nobody has yet created a viable business model for monetizing the Web that creates as much margin as print did in its heyday."

Publishers still have not discovered a winning formula for online profitability. The surging popularity of e-reading devices and apps has provided some major rejuvenation for downtrodden publishers, but print and digital content are still learning how to coexist in a mutually profitable way.

Going Postal

Postage issues were a common complaint among our print publishers, third only to advertising and monetization issues. David Drimer says, "Postal service is very poor throughout the U.S. for periodical mail, especially on the West Coast, so timely delivery is a challenge." Doug Cooke, publisher and editorial director of JAXFAX Travel Marketing Magazine, cites "continuously escalating postal prices" as a thorn in his publication's side.

It's no secret that the United States Postal Service, dealt a hearty blow by the Web, is suffering. The USPS is currently mulling over the idea of eliminating Saturday delivery altogether. The idea must first go through Congress, but the fact remains that customers are facing planned rate increases and, likely, imminent service cuts. Unfortunately, high-volume customers like magazine publishers bear the brunt. While planned postage rate increases constitute an annoyance for the average customer, "magazine publishers would see an 8 percent price jump, according to the proposals" (according to a Washington Post blog from July). Such a steep rate hike could prove devastating to print magazines already near their breaking point.

Staff Issues

Staff cuts constitute a major concern for many publishers, but not the only one. Tim Robertson, publisher of MyMac, mentions the high turn-over rate of stable writers. Another publisher mentions high corporate expectations. Several publishers highlight the plight of their editors, who are "being stretched too thin as we do more online and through webinars and seminars," says Bill Kinross. Sara Waxman, publisher and editor-in-chief of Dine Magazine, provides a three-item list that sums up the plight of a lot of understaffed publications:

1. Sorry
2. I'm in production right now
3. No time

Peter Miller mentions another problem of particular importance in today's publishing environment: "training old media people on new media." People who have cut their teeth on print magazines must now adapt to an alien frontier, where content is up-to-the-minute and technology changes constantly. A publication's success is now contingent upon the ability to keep current with industry and tech trends. This is difficult to accomplish when staff members who spent comfortable decades in print must first learn the basics, while new media pros surge ahead with new technology and social media solutions.

Rate Cuts

A few publishers identified competitive rate cuts as a major problem. One publisher told us, "Our biggest challenge is competitors that keep cutting rates to get business, destroying the marketplace for years to come. Multiple magazines in our market are slashing rates by 50 percent or more."

This is a prime example of shortsighted publishing strategy. Just as magazines that prematurely eliminate their print editions shoot themselves in the foot, magazines that engage in competitive rate cutting do considerable long-term damage to themselves, their competitors, and their advertisers. Richard Cress, publisher of CSC Publishing, Inc., sums it up with his "Top 3" list:

1. Selling ad space.
2. At full price.
3. While the rest of the publishing world discounts to the point where they lose money on every ad!

No Catch-All Cause, No Catch-All Solution

If only there were catch-alls in the magazine industry equation. If only there were one clear problem and one clear-cut solution. But this is not calculus or grammar. The rules of magazine success aren't so rigid and, for some, this lack of structure can be intimidating. What if you make a strategic gamble and lose? What if you do everything "right" and still lose money? What if you've engaged in several rounds of trial-and-error and seen no results?

Look to other publications for inspiration, but not concrete answers. The strategy that saved one publication could ruin another, and vice-versa. Magazines A and B may share the same strategic problems, but if they serve different audiences and industries, they will require different interventions. Magazines C and D may serve the same industry, but one may have a heavy social media presence, while the other may have a more profitable print edition. There are countless possible scenarios.

Your solution may come after months of strategic meetings. It may come from a magazine consultant. Who knows? It may even come from one of your own staff members, whose revolutionary idea changes the way your publication does business.

Meredith L. Dias is research editor of STRAT and Editors Only.

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The Printable Clickable Link

Posted on Wednesday, September 15, 2010 at 1:39 PM

How QR codes and Microsoft Tags are making print publications interactive.

Print magazines are starting to offer readers clickable links to Web content. The technology for doing this relies upon capabilities of the increasingly popular smart phone genre of mobile devices. The process is simple to implement. First, the magazine prints the link in the form of a mobile tag. Here are examples of two popular formats:

A Microsoft tag.

A QR code tag.

The reader uses the camera feature of the smart phone to capture the image of the tag. Then, an application on the smart phone facilitates the connection: reader to Web content. Get Married magazine, one of the publications that has begun using the Microsoft mobile tags for both editorial and advertising content. Here is an example of one of their tagged editorial pages:

A Get Married magazine editorial page offers readers a Microsoft tag link.

QR codes have actually been in use in Japan for many years. They are used not only in print publications, but also on business cards, signs, even busses. But, the practice seems not to have migrated to the U.S. to any large extent. More recently Microsoft has begun promoting its own variety of mobile tag.

Regardless of which tag format is used, it will be necessary for the user to download an application to the smart phone. Typically, the downloads are available for free. (App for scanning QR codes: http://www.neoreader.com/download.html; Microsoft Tag reader: http://www.gettag.mobi/)

For those of you who have smart phones, we have compiled a number of links that provide additional information about the technology. Just use one of the tags above to see them. (We'll leave the list there for 60 days.)

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The Benefits of Being a Multichannel Magazine

Posted on Wednesday, August 18, 2010 at 12:59 PM

A publishing concept that will allow your publication to thrive in this period of transition and well into the future.

By William Dunkerley

Is your publication print or digital? That's a question a lot of us hear these days. And typically our answer will be: "print," "digital," or "both."

Lately, it has become fashionable to be something other than just print. Print is old.

But, if you think about it, plain digital is old, too. The ways in which consumers are now receiving information are increasing almost exponentially. Something new is coming along all the time.

Starting with the traditional website, now there's also the digital publication. Some of those are in HTML format. Others come as PDFs or the page-flip variant. Some information is text with the usual photos and illustrations. Then there're videos, podcasts, and even databases. Not to forget blogs, RSS feeds, text messages, email blasts, and tweets.

Google recently announced "Google TV." It is a platform that will merge the Internet with conventional TV. With it, viewers could seamlessly go from watching, say, a CNN news story about a Mediterranean resort, to reading a Traveler magazine article about it, to zooming in on the satellite photo on Bing maps. All on a single household TV.

Things are diverging and converging at the same time!

With all that going on, why are we still print, digital, or both?

Discordant Channels

Actually, a growing number of publications are using a lot of channels today. But typically, each channel takes on an identity of its own to some extent.

Rarely do the channels appear to be part of a unified whole, however. Often it is difficult to figure out what the relationship is between the print product and the digital presence. Sometimes one channel appears to be competing with another. Seldom do the consumers have the impression that what they're getting from the publisher is a coordinated array of information, provided via the most convenient and effective channel.

There's little synergy going on here.

What should be done? The idea isn't that you just use all these various channels in some way. It is that you use them synergistically. It is that you use the channels in a way that gives the subscriber a sense that she is getting a unified product. It is that you use them in a way that takes best advantage of each channel to convey the kind of information that is best suited to it.

The Difference Between Brand and Channel

While commenting on Google TV, Broadcast Engineering magazine recently editorialized, "Today's viewers don't know or care whether the programs come from satellite, cable, over the air, Internet or by water pipe. What viewers want is to be able to easily find the desired content and then view it in a comfortable environment."

Today's publishers would do well to have a similar perspective regarding their readers. Yet, too many publishers tend to view themselves through the prism of the channel or channels that they favor. They think of themselves as basically print or basically digital.

A few years ago, I was a speaker at the World Congress of the World Association of Newspapers. There I heard some of my fellow speakers, publishers of many of the most well-respected newspapers in the world, proclaim steadfastly, "Make no mistake about it, we are in the print business."

Think of where the beverage Coca-Cola would be today if the company's 1950s-era leaders insisted, "We are in the glass bottle business."

Today, you can get the product in a can, a plastic bottle, or a paper or plastic cup. You can buy it in a supermarket, a convenience store, at a restaurant, or from a vending machine.

The brand is the contents. The container is like the channel.

Coca-Cola carries its brand to its consumers via various channels.

It also differentiates the identity of its brand from the container used to deliver it. There's no product called "Bottled Coke" or "Coke à la Can" or "Coke in a Cup." Regardless of where you buy the beverage or what kind of container it comes in, a Coke is still a Coke.

The brand is not wedded to the channel. In fact, it is independent of it.

Those newspaper publishers at the World Congress were confused over the difference between their branded information and the channel used to deliver it, the printed page. As a result, they have been leading their publications into greater and greater irrelevancy as reader preferences have evolved. And so have a lot of magazine publishers.

It's Time for a Change

The time has come to adopt a new paradigm for magazine publishing. The objective is to decouple the channel from the brand.

It is also time to begin employing the power of the range of channels now available to magazine publishers. Coca-Cola has benefited from being a multichannel brand. And so can you.

Change doesn't mean simply going over to digital. For many publications there is still strong role for print. A lot of talk has claimed that readers are abandoning print for online. Advertisers, too. But what they're abandoning is the inappropriate use of print when publishers try to keep it as the be-all of a publication.

At the same time, a lot of digital publications are missing a bet by not having a print component.

The new paradigm for a multichannel magazine washes away these channel-specific fixations.

If the name of your magazine is XYZ, let that be the name of your brand, not of a particular channel used by you. Let XYZ be the brand name for the sum total of the experience a reader gets when subscribing. Market that brand, that sum total experience -- not a particular channel, not a disparate assortment of channels. Market a synergistic and unified whole.

What Does a Multichannel Magazine Look Like?

The multichannel magazine is part print, part digital. It is the best of both worlds. But, its essence is not in the channels through which it is expressed. It is in the content. The multichannel magazine looks like its content.

Let's use a hypothetical magazine as an example. "Clown Magazine" serves an audience of professional and advocational clowns. Its typical contents includes:

--A cover (traditional format)
--Table of contents
--An editorial
--Photo stories featuring costumes and facial make-up
--Tutorial articles on tricks and routines
--Short features and news stories of interest to clowns
    (Topics include:)
     --Relevant regulatory and legislative issues
     --Laughter therapy
     --Getting respect as a clown
     --Clowns in Washington
     --Avocational clowning
     --Rent-a-clown business tips
     --Circus update
--Classifieds (help wanted and positions sought)
--Directory of products and services
--Display advertising

Here's how the contents make use of the various channels:

The tutorial articles are lengthy, and tedious to read on an electronic display. In addition, some illustrations and diagrams are large and intricate. They also do not lend themselves to viewing on a display. Therefore, the tutorial articles appear bi-monthly in print. The bi-monthly frequency is not problematic because the content is not time sensitive.

The photo stories involve large photos and often two-page spreads. Consistency in rendering color is important. The idiosyncratic color variations among electronic displays are unacceptable. As for spreads, only the page-flip digital format seems equipped to do them. And with most current technology, reading a page-flip publication is like reading small print with a magnifying glass -- not an attractive feature. As a result, the photo stories appear bi-monthly in print.

The cover appears as the home page of the digital destination (which appears weekly). It has a horizontal format to accommodate display formats. On the first week of every second month, when the issue includes a print component, the cover does double duty, appearing on both the digital and print components.

The table of contents is the first editorial matter to follow the cover. It lists all contents, print and digital.

The editorial is a blog, and accommodates reader comments.

The short features and news stories appear in the digital component. Design for all digital content is intended to accommodate viewing on iPhone/iPad-type mobile devices. Breaking news and high interest short features are the subject of tweets. Email blasts are used occasionally for particularly compelling items. Email is also used weekly to provide subscribers with a link to each new issue

Any editorial content is subject to podcast and video treatment, as warranted.

The archive contains not only the content of the digital component, but also PDFs of the print component.

The products and services database is a full, searchable editorial feature. It also appears in categorized form. Companies listed may purchase emphasis for their listings, and add links.

Display advertisements appear in both the print and digital components. Print ad placement follows typical industry practice. Digital advertisements are large compared to typical practice (banners), since the smaller sizes are relatively ineffectual. The classified advertisements appear in categorized form.

That's the Blueprint

As publishers, if we follow this plan, we will better serve our readers and advertisers. And, we will be more successful in this rapidly-evolving period when reader preferences are shifting quickly. The plan should be far from static, however. As technological innovation opens new doors, new channels, it will be important to embrace any that will be helpful.

If you believe you're already doing all this, you may be right. But maybe not. I recommend that you conduct a fairly exhaustive analysis to assess how integrated your brand really is. What do the readers believe? Do they think they are receiving the benefit of a synergistic, multichannel magazine?

Going from a fragmented or confined use of channels to become a truly multichannel magazine is a big step. It is one that involves a lot of change. It is a new paradigm. Change is usually uncomfortable, and frequently resisted. Keep in mind, though: during this period of rapid changes in reader preferences, a magazine that fails to adapt will make itself increasingly irrelevant. Don't do that!

William Dunkerley is publisher of STRAT and principal of William Dunkerley Publishing Consultants.

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Coffee and Subscriptions: A Package Deal

Posted on Monday, July 12, 2010 at 2:58 PM

An experimental strategy for publishers.

By Kevin Roberts

In order to thrive in today's participation economy, traditional media outlets like magazines and newspapers will need transformational ideas. Especially when it comes to creating revenue in an age of free content.

Of all companies, Starbucks might have happened upon just such an idea. Next month, the coffee giant will begin offering free wi-fi in all of its American locations. No big deal in this -- but soon, Starbucks customers will also have unrestricted access to a variety of pay sites, including the Wall Street Journal.

This is an innovative way to avoid having to institute the dreaded "pay wall," without giving content away gratis. Publishers get paid for their content, they get audience for their advertisers, Starbucks gets to offer an exclusive service that will surely help sell more coffee, and customers save potentially hundreds of dollars in subscription fees.

As we've seen, the emergence of the Participation Economy has been both good and bad for the media industry.

Today, anyone with an Internet connection can access a wide array of content -- from the Washington Post to their friend's latest blog post, from the Drudge Report to the Colbert Report -- and decide for themselves what's worth their time. In fact, only 7 percent of Americans get their news from a single platform.

At the same time, technologies like blogs, Facebook, and Twitter allow every connected person to create, distribute, and comment on media without getting out of their pajamas.

The media, in all its various forms, has never been more engagingly diverse. But traditional media outlets, as we know, are in the lurch. The truth is, one way or another, high-quality content will need to be paid for.

Figuring out how to do that, without disrupting the dynamic media environment that free content has created, will require wild experimentation. If content producers are going to discover the breakthrough ideas that will keep mainstream media thriving for years to come, they need to adopt a philosophy of fail fast, learn fast, and fix fast.

Kevin Roberts is the CEO worldwide of The Lovemarks Company, Saatchi & Saatchi, www.saatchikevin.com.

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Why Newsweek Magazine Failed

Posted on Monday, July 12, 2010 at 2:58 PM

Are there lessons in what they did wrong that can benefit the rest of us?

By William Dunkerley

"We do not see a path to continuing profitability under our management." Those were the words used by Washington Post Co. chairman Donald Graham. He was announcing intentions to put the venerable newsweekly up for sale. Graham admitted, "We have reported losses in the tens of millions for the last two years."

That sounds like a stark admission of failure to me. Graham's announcement came after a well-publicized, extensive effort to turn things around.

But, a commercial magazine is supposed to be a money making machine. Investors put money in, the publication turns a profit, and investors receive a return on their investment. Apparently not so with Newsweek.

What Went Wrong?

A lot of armchair analysts are chalking up Newsweek's troubles to consumer flight to the Internet. This argument has common sense plausibility. After all, consumer reading habits are clearly
changing -- and at an accelerating pace. But common sense also told us that the earth is flat. And so, when we got into examining Newsweek's predicament more methodically, the consumer flight explanation didn't hold up.

For one thing, Newsweek voluntarily cut its own circulation. Consumers didn't fly away. They were, in effect, deliberately liquidated! The readers didn't leave Newsweek -- Newsweek left the readers.

"Newsweek Plans Makeover to Fit a Smaller Audience," reported the New York Times in early 2009. That "smaller audience" was the effect of a rate base cut. Newsweek earlier had been promising advertisers a rate base of 2.6 million. The makeover plan included dropping that to 1.5 million by January 2010.

Isn't Bigger Better?

Why cut circulation? How is that going to make more money? Was that a bad move? Actually, I believe that in principle it was a smart plan. If they had approached me at my consulting firm, I would have advised them to do exactly that. Bigger is not always better. The reality is that when a magazine over-markets circulation, it's easy to aggregate an audience segment that will have only a weak interest in the publication. They'll be poor renewers, thus making them expensive acquisitions. And, worse, they may be poor prospects for the advertisers.

Apparently, Newsweek realized that gung-ho circulation marketing had gotten them to that spot. Now, they wanted to make things right. Somewhere in that multitude of readers, there was a core group that would be the best fit for the magazine. Newsweek said it was looking to keep readers who are most interested in news, have higher levels of education, and greater affluence.

That's fine, as far as it goes. Unmentioned in that, however, is whether those particular core readers are going to be active purchasers of the particular products and services the advertisers are selling.

The First Fatal Flaw

Smart, wealthy, and educated readers are nice. They may be interesting people to rub elbows with at a social gathering. They can be influential friends. But if they're not good prospective customers for the advertisers, they're of limited strategic value as readers. The prime lever Newsweek should have had its hand on here is the link-up between the buyers and the sellers, the readers and the advertisers. Was there good synergy? Was the magazine bringing together appropriately matched buyers and sellers? There's a formula for getting this right. But it's not clear that Newsweek was using it.

The New Newsweek

Then there's the matter of redesign and repositioning. In early May 2009, Newsweek announced the impending changes. The article, entitled "Reinventing Newsweek," was written by deputy editor Kathleen Deveny. It explained at length that they would in effect be taking the news out of Newsweek. The reasoning was that consumers can find breaking news on the front page of the New York Times. At the same time, the article quoted Newsweek editor John Meacham saying, "We will always be about the news, and we will always break stories that are important to the country and to the world." That all sounds like a confused message to me.

Wouldn't it have been clearer to readers, and perhaps to Newsweek's staff itself, if they simply said they would be cutting back on breaking news and just covering those stories whose impact was the most profound?

By my count, Newsweek used about 350 words to spit out that message.

So if news is coming out of the publication, what was to go in?

Deveny's article announced "a new editorial strategy." She promised that readers will be seeing more "well argued essays." They'll also be hearing more from regular columnists on "some of the most pressing issues of our time." The intent of the new editorial strategy is apparently "to be provocative, but not partisan." Outside observers characterized the move as a shift to opinion journalism.

The final component of the new Newsweek is the graphic redesign. Its goal was to make the magazine "less daunting, more entertaining, and easier to navigate."

The Second Fatal Flaw

Newsweek set out to reinvent itself. Editorially and graphically. They did it. But their invention isn't what the situation called for. What was wrong with it? One thing is how they came to specify what needed to be done. They revealed two considerations:

a. "Some of these changes spring from what we learned from all of you during extensive market research." Does that mean that they asked their readers? They should have asked the prospective customers of the advertisers that they wanted to court. Those are the people they needed to attract as readers. Editorial content is the bait for attracting readers.

b. "Some of [the changes] reflect our own editorial goals and financial needs." I'm not sure exactly what that means. But it sounds like they're saying that some of the changes were made to satisfy themselves. That's certainly a bad strategy if you're looking for success in the marketplace. I wonder how satisfied those managers are feeling right now. I also wonder how satisfied the corporate shareholders are feeling over the self-centered shenanigans of Newsweek's managers.

I didn't specifically evaluate the graphic redesign. Certainly, it's always good to keep one's design attractive and functional. However, I'm not sure that design was an issue in the magazine's poor performance. Newsweek's managers may simply have wanted a fresh new look to signal to readers that things have changed. That's not a bad strategy. But a major redesign is a major undertaking unto itself. It is one that deserves significant management attention and involvement. As such, it also could be viewed as a diversion of management attention from the other critical and more central elements of remediating Newsweek's problems.

Unique website visitors since May 2009 to Newsweek.com (blue) and Time.com (green).

How did the market respond to the new Newsweek? The above chart plots Newsweek's website activity, compared to that of Time magazine. It shows a bump up around the time of the changes. Afterwards, things settled into a steep downward trajectory.

Make the Readers Pay

"Over time, we will increase subscription prices," wrote Deveny. It's hard for me to tell whether or not that's a smart strategy here. Lately there's been a general trend among publishers to grow the percentage of revenue coming from audience/circulation. In fact, that's been a trend in all recent recessions.

When advertising support drops off, publishers try to squeeze more revenue out of readers. Now that greater numbers of readers are online, publishers are experimenting with systems for extracting "micropayments." Our sister publication Editors Only has been running a series of articles on that topic. It seems there's still no consensus on the best way to do this.

The Third Fatal Flaw

While increased revenues from readers can be helpful, there is another side to that. Often I've seen that publishers try to extract more audience revenues, when what they really should be doing is solving the problems responsible for weakened ad sales. Is that a mistake that Newsweek made?

There's usually more to a shortfall in ad sales than just a flagging economy. Typically there are two major in-house causes of declining ad sales in a recession. The first is inadequate sales skills and strategies. They may be alright when the picking is easy and ad spending is at a normal level. But they prove to be totally inadequate when it becomes harder to convince advertisers to spend money with you.

The second cause is the fundamental business strategy of the magazine itself. Is it really efficient at gathering good, active prospects for the advertisers? When the economy is good, a magazine can be sloppy at doing this. But in a recession, when there is greater pressure for advertising expenditures to produce results for the advertisers, those publications that are weak in this regard lose advertisers quickly.

A Richness of Financial Resources

Despite the errors in Newsweek's approach to business, there existed a potentially mitigating factor -- one with the potential for breathing life amidst the assortment of fatal flaws.

That factor is the magazine's owner. Newsweek was indeed fortunate to be owned by the Washington Post Company. It possesses a richness of resources -- at least in terms of the financial resources available. According to the company's recent 10-K report, it had operating revenues of $4,569,731,000.00 for the fiscal year ending January 3, 2010.

We examined a Newsweek financial summary that was represented as coming from the "sale book" that was offered to prospective buyers. It shows that for 2007, Newsweek made about $30 million. But in 2008 and 2009, there were operating losses of $13.5 million and $28.1 million, respectively.

That all caused us to question the business imperative for putting Newsweek up for sale. Last year's $28.1 million loss is certainly nothing to sneeze at. But for a company whose annual revenues total more than $4 billion (that's $4 thousand million!), it is hardly a catastrophe. One wonders whether it is worth the embarrassment of corporate admission that they lack the ability to turn things around. Especially when one could reasonably expect a change for the better as the economy improves, even if Newsweek's business acumen didn't improve.

Adding to that puzzling conundrum is this statement by management at Washington Post Company's May 14, 2009, annual shareholders meeting: "It is not easy to reshape the economics of a magazine, but it's easier to do that than to reshape the economics of a newspaper."

Why does that add to the puzzle? It is because their newspaper operations are incurring losses that are more than 5 times higher than Newsweek's losses! (The company stays afloat with profits from its Kaplan educational services division.)

So, if it is easier to turn around a loss-making magazine than a loss-making newspaper, why wasn't the newspaper the first to go?

There seems to be more afoot here than plain and straightforward business considerations.

Is It Politics?

We were going over this analysis of Newsweek's failure in a staff meeting here at STRAT. At one point we came to the realization that, despite a number of strategic mis-steps, there was no compelling business reason for the Washington Post Company to sell Newsweek. They have the resources to carry it until the economy improves.

Could there be some political consideration compelling the divestment? Editorially, Newsweek had not been antagonistic toward the Obama administration. Nor had it been a good buddy to Bush. There didn't seem to be any obvious reason why Newsweek would be crosswise with the current political establishment. What about Clinton, we wondered? So we googled Bill Clinton and Newsweek. Not too far down the list of results we encountered the name of Michael Isikoff, Newsweek's investigative reporter who dug up the Monica Lewinsky story. Bingo. Was that it?

So for discussion, we floated the theory: When the Obama-Clinton coalition came to power, did someone tell the Newsweek folks to close up shop as revenge for the dirt Isikoff dug up on Bill? It was a highly speculative theory. But we thought to try it out on Michael Isikoff. I wrote him about the theory on June 4, a Friday afternoon. He responded on Saturday morning. He didn't flatly dismiss the theory, but said he thought it was "a stretch." Later on Saturday I explained to Isikoff our analysis that there did not seem to be a compelling business reason for Newsweek to be put up for sale. On Monday morning, Isikoff submitted his resignation to Newsweek. It's certainly interesting to muse over what influenced him.

But, just for the record, we certainly uncovered no evidence that any political considerations coerced Newsweek's sale.

A Trophy for a Billionaire?

Even if there was no apparent business need to sell Newsweek, it is intriguing to see how much interest there's been in buying it. At one point, there were reports of over 70 interested parties. That's quite astonishing when you consider that for prospective owners without Washington Post Company's multibillion dollar cash flow, the idea of losing almost $30 million year could be quite off-putting.

We asked the firm charged with managing the sale whether they were going to do a valuation to peg the nominal value of the property. They weren't. The plan seemed to be to allow the market to set the price.

But who would want this money-losing machine? For a while, Haim Saban's name was prominently mentioned. Forbes pegs his net worth at $2.8 billion. However, he's a mere piker compared to another whose interest was mostly on the q.t. That would be Leonard Blavatnik, a Russian-American businessman whose net worth Forbes puts at $7 billion. Was Newsweek to become literally a trophy for a billionaire? In the end, however, neither party apparently submitted bids.

More recent media speculation narrowed the field to just 3: businessman Sidney Harman (husband of Congresswoman Jane Harman), Avenue Capital, a global investment firm focusing on distressed securities and private equity, and businessman Fred Drasner, formerly of U.S. News and World Report.

But the Washington Post Company remains mum on who the finalists really are. That just adds to the theater of it all!

What Are the Lessons?

The high drama of secret moves to sell a real money loser, including shades of possible political intrigue, may provide us with entertainment. But are there any real lessons publishers can learn from the Newsweek episode?

I think there are.

Study the process recounted above by which Newsweek blundered its attempt to survive. Observe these three mis-steps: (1) They seem to have used a flawed process for identifying what remedial steps should be taken. (2) They may have put personal predilections ahead of business necessities. (3) They apparently diverted management attention to non-essential activities during a crisis period.

But the bottom-line issue here involves the fundamental and essential strategy for any publisher who needs significant advertising revenue to prosper: The publication has to be an efficient tool for collecting good, active prospects for a synergistically-related group of advertisers. There are proven techniques for doing this. The trick is to learn them and use them strategically.

William Dunkerley is principal of William Dunkerley Publishing Consultants, www.publishinghelp.com.

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Why We're Not Seeing More Online Ad Revenue -- Part II

Posted on Monday, June 07, 2010 at 3:18 PM

The story gets worse. More reasons why online ads just aren't working for too many advertisers.

By William Dunkerley

In Part I, I described some of the qualities of good advertising that perhaps most online ads lack. Now, let's consider some of the qualities of online ads that are actually off-putting.

The forced, repeat exposure of an unwanted ad that was discussed in Part I deserves prominent mention. You know, that's the serving of ads over and over again, sometimes on a rotating basis, sometimes in a position that interferes with reading the content.

Another thing is the placement of ads. Often online publications will try to cram as many ads as possible toward the top of their front pages. In some cases, these placements may boost the click-through numbers. However, when it comes to overall advertising effectiveness, ad position is known to have little impact. For a long time there has been a lot of misunderstanding about this. Many advertisers, for example, have valued right-hand pages in a print publication over left-hand pages. Likewise with the front of the book over the back of the book. Research has shown, however, that with few exceptions (like the back cover, for instance), position in the publication has almost negligible impact on effectiveness.

Perhaps the worst examples of online ad positioning are the in-your-face ads that you can't avoid. They include ads you have to click away in order to reach the publication in the first place. Then there are the flash ads that pop on or walk onto the page when you try to read further, as well as those ads that follow you up and down the page as you scroll. They require clicking away, too. Special mention should go to ads that emit intrusive sounds that were never invited by the reader. These ads may be clever demonstrations of the designer's technical prowess. But, they embody an enormous potential for annoying the audience of any publication. The idea that annoying your potential customers is a good way of soliciting their business seems quite counterintuitive.

Is it any wonder why online advertising doesn't work? Either the ads are too small to count, hard to find when you want to, or so intrusive that they annoy. Do you have any lingering doubts about why we're not seeing more online ad revenue?

When an Industry Does Itself In

The current predicament of online advertising may sound problematic. However, the future doesn't seem much better. In fact, there are distinct perils ahead.

To appreciate this, consider the plight of the telemarketing industry. As recently as the 1980s, it offered an up-and-coming way of soliciting business. In 1987, International Telemarketing Expos were held in New York, Los Angeles, and Chicago. Under the banner of "Plan Now For Your Future!" they featured educational seminars and exhibits to help attendees sharpen their skills for this emerging field.

Now, twenty-three years into the future, where is the telemarketing industry? It has been practically legislated out of existence! Why did that happen? It happened because it annoyed, irritated, and bamboozled its audience.

Now It's Happening to Online Advertising

I've already described for you how online advertising has annoyed and irritated its audience. But bamboozled? That brings spam to mind. The whole unremediated problem of spam, however, speaks for itself. It still cries out for a serious legislated solution. Now, though, I'm talking about what is considered by advertisers and content providers to be legitimate advertising.

To illustrate the problem with so-called legitimate online advertising, we performed a couple of experiments at STRAT. We went to Google.com and did a search on the term "ostrich diapers." We were served ads for several vendors, including the retailer Target. Proceeding to the Target website, we found no "ostrich diapers." A phone call to the retailer confirmed that they sold no "ostrich diapers."

This exaggerated example just goes to illustrate a problem. Many of the ads consumers are served online are for products that the advertisers are not selling. Sometimes, the text of the ad is even dynamically configured to contain the name of the product that the advertiser is not selling. These ads are using the words consumers are searching for. But the advertisers have no intention of supplying the "ostrich diapers," or whatever. They're just trying to get a click through by any means. Misleading consumers is not good business.

On another occasion, we went to Google.com and set up an AdWords campaign for a webinar. We included in the campaign design exposures to both Google's "Search Network" and "Content Network." The latter involves ads placed by Google on the websites of others that Google deems to be relevant. The "content" click-throughs exceeded those from "search" by three times. In analyzing the results, we looked at where the traffic came from geographically. It was surprising to find that a very disproportionate number of clicks came from Chinese addresses, even though our advertised webinar would have little utility for that audience segment. Then, we randomly sampled two website addresses on which our ad was served. When attempting to visit those sites, the first address returned the message "Directory Listing Denied," the second said in Portuguese, "under construction." These non-existent sites were locations represented to us as relevant locations from which our ad had been served and clicked upon. After bringing these problems to Google's attention, the situation still remains unresolved, now weeks later.

When a leading online provider like Google provides an advertiser with nonsensical and even misrepresented results, it does not bode well if you are trying to "Plan Now For Your Future!"

What Can You Do About This?

The spam, misleading, and potentially fraudulent advertising problems need to be addressed by a combination of industry groups, legislators, and law enforcement agencies.

However, there are things you can do now with your online publication and with your advertising sales. Here are a few recommendations:

1. Get off the metrics bandwagon and instead build a quality online audience of people who will be good prospective buyers for your advertisers. I'm not suggesting that you ignore metrics. Just subordinate them to the goal of building a readership that consists of prospective buyers.

2. Don't offer advertising modalities that will have a high probability of annoying your audience. If you do, it will work against you and your advertisers in the long run. Think how annoyed a print reader would be if he had to unstick an ad from the next page in order to continue reading. Why should we expect online readers to be any less annoyed? Avoid annoying the readers.

3. Do offer advertisement sizes that are will be perceived as significant. Consider that small banner ads will have a small impact on readers. In print, a full page ad is a full page, period. If your online publication is in PDF or one of the page-flip formats, then, a page is still a page. But, if your publication is in HTML, there is no standard page size. What a reader sees before her will depend upon the size of the monitor, the screen resolution, and the size of the browser window. However, you should be able to obtain some statistical evidence from your server to indicate what is the most prevalent monitor configuration used by your visitors. Consider whatever size fills that screen to be the equivalent of a full page ad. Figure out how many pixels that represents in order to specify the dimensions for advertisers. Encourage advertisers to use that size.

4. Give the advertisements a fixed place in your publication so that readers will be able to return to them at will. Making them impossible to find again deprives your advertisers of a very valuable form of repeat exposure.

Try implementing these four recommendations, and see if your online ad revenue doesn't take a turn for the better!

William Dunkerley is principal of William Dunkerley Publishing Consultants, www.publishinghelp.com/consultant.

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Why We're Not Seeing More Online Ad Revenue -- Part I

Posted on Wednesday, May 05, 2010 at 3:30 PM

It comes down to this: online ads just aren't working for too many advertisers.

By William Dunkerley

How many times have you heard that advertising money is migrating to online? According to Advertising Age, during 2009, print and broadcast advertising was down, but Internet advertising was up. J.P. Morgan is forecasting more growth in online advertising for this year.

According to Bill Keller, executive editor of the New York Times, "...Web audience is growing at a great clip, while print circulation is not. And online revenues are growing faster, too, albeit from a smaller base. If the trend continues, there's little doubt that -- eventually -- online becomes the main business."

At the same time, other publishing executives are throwing up their hands on online ad revenue, and looking for ways to monetize their content. Media mogul Rupert Murdoch has been especially outspoken in his belief that future prosperity for publishing will be dependent upon selling content, not ads. "The old business model based on advertising-only is dead," he resolutely proclaimed. Murdoch seems to believe that his new pay-as-you-read model will lead to salvation of the industry.

So there you have it. The future is in online ad revenue. But, then, it's not.

Who's Making Money Online?

Perhaps the most relevant question is how many fellow publishers have told you that they're making enough money from online advertising to support their operations and produce a good profit? I'm talking about money on the bottom line, not hype, expectations, or blind hope.

One answer comes from Hearst Magazines president Cathie Black. She's said that "...digital advertising revenue is still pennies on the dollar." For many publishers it seems hard to get a good price for online ads.

But think about it. If advertisers were making good money from their online ads, wouldn't they be willing to pay good money to advertise? What's wrong here?

Advertising That Bears No Fruit

Advertising Age for January 27, 2010, ran the headline, "Why Most Digital Ads Still Fail to Work." The story goes on to list seven mistakes found in today's digital ads. They include excessive complexity, ambiguity, and meaningless use of techno bells and whistles. A PEW study of online users found that "79 percent say they never or hardly ever click on advertisements." In February, Bokardo, a social media design blog, published a piece on "Why Social Ads Don't Work." The gist of it is summed up in one line that asserts it's "because people are being social, not searching for something."

The idea that online ads aren't working isn't new. Back in 2003, BBC News carried a story, "Why Online Ads Do Not Work." It quotes technology analyst Bill Thompson saying, "...when I am online, looking for information, reading the news, or simply surfing around aimlessly, the ads are in the way and I block them out."

The story told by these articles is basically that most online users don't want to see ads, they try to ignore them, but even if they took to time to read them, they'd find them confusing, intrusive, not pertinent, and pointless.

Contrast that reaction with the experience of print ad consumers. For many print readers, the ads are a desired part of the publication. For the newspaper reader, that may mean seeing ads trumpeting sales at the supermarket or the car dealership. For the specialized magazine reader, it may be ads announcing new products or just showing what's available. Some print readers even report in surveys that they read a magazine from back to font because they want to see the ads first!

But if ads can have such intrinsic value to readers, why should they lose that value online?

There's More to the Story

The business function of any advertising-driven publication, print or online, is to connect buyers and sellers. How well that is done has been the dividing line for some time between many successful and unsuccessful print publications. The same rule applies to online. However, many of the online content providers may not be operating with this concept in mind.

The fundamental strategy here is that the publication's content is used to attract readers who in turn will be attracted by the advertisements. The readers need to have a propensity and proclivity to buy.

If an online publication seeks to attract readers just to build traffic statistics, it is not fulfilling its responsibility to the advertisers. You can't blame the publication entirely, though. Advertisers clamor for more and more metrics that are by nature quantitative, not qualitative. And that's what the advertisers get: quantity, not quality. That can result in an audience made up largely of non-buyers. Regardless of whoever is to blame, this is one reason why online ads don't work. And in the end, it is both the advertiser and publisher who suffer as a result of this malfunction of strategy.

Another factor is that much online advertising ignores some of the basic principles that have been known to make advertising successful. They've been identified through extensive research with print advertising. What are they? They are color, size, and repeat exposure. They create effectiveness for an advertisement. Many online ads make ample use of color. There's no disadvantage there (except that some of the color usage may lack aesthetic appeal).

The idea that a banner ad, small as it is, can be effective, however, evades good sense based upon proven advertising practice. Indeed, effectiveness is proportionate to size.

Then there's the matter of repeat exposure. On one hand you might think that online has it all over print in this respect. Who doesn't have a recollection of seeing certain online ads over and over again, almost endlessly? Many of those ads are dynamically served on a rotating basis. That certainly offers new possibilities for targeting.

But consider this comparison: A print publication reader may see an ad as he or she reads through the publication. Moments, hours, or days later, if the reader wishes to return to that ad, it is a relatively easy task. And when the reader does, it is very valuable repeat exposure. For the advertiser, it is a repeat shot at a reader whose interest in the ad is active. Repeat exposure to consumers who lack that motivation and interest is certainly worth far less. Even worse, it can annoy and irritate the reader. What about the online ad that a reader wants to return to? Have you ever tried to return to an ad that was dynamically served? It can be an impossible quest. An ad without a specific spatial location in the publication has a serious disadvantage when it comes to a reader seeking a repeat exposure.

The Story Gets Worse

These are some of the reasons why online advertising isn't working out of deficiencies in the ads themselves -- and why publishers are failing to see the kind of ad revenue they're looking for. In addition, though, there are other qualities that are present in online advertising that are actually off-putting to consumers. In Part II, we'll describe them, along with the dark shadow that they cast across the whole online ad industry and its development. And, finally, we'll offer recommendations for concrete steps you can take to improve your online ad revenues.

William Dunkerley is principal of William Dunkerley Publishing Consultants, www.publishinghelp.com/consultant.

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