Friday, March 26, 2010

AP’s ethnographic studies look for solutions to news and ad “fatigue”

A new study by the Associated Press has come to the conclusion that consumers are “tired, even annoyed, by the current experience of advertising,” and that, as a result, they don’t trust very much of it. But at the same time, AP found, consumers do want information relevant to their needs, as well as ways to socialize that information.

Although it tends to move cautiously and deliberately, AP has been subtly and quietly introducing tools aimed at improving relevance and socialization, and may have plans for an ad-supported aggregation business that applies what it has been learning.

I spoke about the study with Jim Kennedy, AP’s vice-president for strategic planning, about how the study’s findings will impact AP’s strategic thinking. “The future of information delivery needs to be quite different from current practices and quite different from the old packaged practices that we’ve had offline and online so far,” Kennedy said. “That’s the big deal for us now. You can’t figure all that out in a minute or even a year.”

Continue reading this post at Nieman Journalism Lab.

Wednesday, March 24, 2010

"Velocity of ad decline is moderating," NAA chief says of Q4 losses

The Newspaper Association of America has quietly updated the "trends and numbers" section of its site with 4th quarter 2009 revenue, showing a 14th consecutive quarter of overall revenue loss and only a few indications of slowdown or reversal in the downtrend.

Counting online revenue, the industry's total revenue came in 23.73 percent below Q4 of 2008. In the first 3 quarters of 2009, the losses were 28.28 percent, 29.00 percent and 27.94 percent. While the lower loss rate in the Q4 results could be considered an improvement, the only category with a significant improvement was online advertising, which lost just 1.00 percent in Q4, compared to drops of 13.40 percent, 15.90 percent and 16.92 percent in the first three quarters. (For the full year, total revenue came in at $27.564 billion, which is a mere $64 million over my prediction made back on September 22.)

Putting the best possible spin on the situation, NAA President and CEO John F. Sturm said in a statement: "The velocity of the advertising decline for print classifieds continued to moderate, and adverse trends for national advertising and newspaper Web sites lessened considerably as last year came to a close." He added that he had been hearing "buzz" that this "ad trend improvement" was continuing in the first quarter of 2010.

Indications from a few of the firms for the first quarter of 2010 do point to a smaller loss, perhaps in the low teens. Since the downtrend began in 2006, the industry has lost more than 44 percent percent of its revenue, including nearly 48 percent of print revenue.

In most categories, Q4 provided no particular relief from the downtrend. Details:

Online revenue, as noted, was down just 1.00 percent, perhaps an indication of better days ahead. Part of the problem for online has been that for many, if not most publishers, a good fraction of online revenue is directly tied to printed advertising, with the online component sold as an "upsell" or added value proposition. This means online volume drops right along with print, even if there's growth in ads sold on an online-only basis. As I mentioned a few weeks ago, at E.W. Scripps, this linkage of online and print covers about half of all online advertising, and I'm finding similar levels at other firms.

Retail revenue (the largest category) was down 24.33 percent, continuing precisely the track it was on for the first three quarters (which were off 23.68 percent, 24.92 percent and 23.98 percent, consecutively). And keep in mind that while retail sales have not rebounded much, we've had GDP growth since mid-2009. Every retail category measured by NAA showed a decline, which has been the case all year. Not surprisingly, the worst drop was in the building materials category, which fell 36.58 percent, a tad better than losses in the 50 percent ballpark for the first three quarters.

Classifed revenue was down 31.72%, falling less than the first three quarters (42.34 percent, 40.42 percent and 37.90 percent), but that may be because there's just not much left to lose. In Q4, total classified revenue was $1.757 billion, compared with $5.243 billion in Q4 of 2005, the best quarter ever in classified volume. In other words, in four years, more than 66 percent of classified revenue has evaporated.

As in retail, every classified category (automotive, real estate, recruitment and other) was down in every quarter of 2009. The slight reduction in the rate of decline can be attributed to slowdowns in the loss rates in automotive (down just 37.0 percent in Q4 versus losses in the low 40s during the first three quarters), and "other," which was off just 8.0 percent (versus 16.1 percent, 11.7 percent and 8.8 percent earlier in the year), but that "improvement" is probably due to the growth in foreclosure notices, which are generally counted in this category.

National revenue fell 19.80 percent, compared with losses of 25.87 percent, 29.61 percent and 29.84 percent in the first three quarters. National saw small upticks in automotive (based on spending by manufacturers to support the cash for clunkers incentives), food, household furniture and furnishings (which almost doubled), and medical and toiletries. While most categories were down, at least there is evidence of a few actual trend reversals in spending by national brands.

Tuesday, March 9, 2010

Google’s Hal Varian to newspapers at FTC confab: “Experiment, experiment, experiment!"

Google’s economist-in-chief, Hal Varian, was the keynote speaker this morning at the Federal Trade Commission’s second round of hearings on the future of journalism. (The study is entitled “How will journalism survive the internet age?” Round 1 was held in December; transcripts and other material are linked here — scroll down. Not to be outdone, the Federal Communications Commission also has a project studying pretty much the same thing.

Here’s the slide deck from Varian’s presentation, entitled “Newspaper Economics, Online and Offline”:

Click through to slide deck and full post at Harvard's Nieman Journalism Lab.

Sunday, March 7, 2010

iPad strategies for publishers

This is a white paper based on and expanded from my earlier post on the same topic, prepared for the Digital Publishing Alliance meeting at the Reynolds Journalism Institute at the University of Missouri, Columbia, Missouri on March 7-9, 2010

iPad is not a linear, incremental development. It’s not a simple next step after everything that has preceded it (even iPhone); it’s a new direction that will have unpredictable impacts on digital behavior. One potential impact:

iPad will bring a huge increase in mobile shopping (assuming we consider iPad to be a “mobile” device). There was only $396 million in U.S. mobile shopping in 2008; only $1.2 billion in 2009. Before Apple’s introduction of iPad, predictions for mobile shopping were for growth to $119 billion by 2015.

But iPad has the potential to greatly accelerate this trend, because iPad will showcase merchandise and services far better than smartphones, and iPad will claim more leisure time than deskbound computers or smartphones. Consumers with iPads will be connected to the Web in far more places, with far more engagement (relative to smartphones), presenting far more opportunities for direct marketing and sales than any previous interface.

Direct mailers are already nervous, asking “Will the iPad be the nemesis of direct mail?” “Robert Wong, chief executive of Catalogue Central [Australia], which digitises traditional print catalogues for some of the nation's biggest retailers, says the iPad, and an expected flood of copy-cat rivals, will find a place residing on the coffee tables of consumers in a way traditional laptops have failed to do. And he predicts that within five years iPad devices will have proliferated so much that many retailers will eschew letterbox delivery of catalogues for digital.”

Similarly, newspaper preprint revenue is in jeopardy. Preprinted inserts (which amount to half of all retail advertising) are the last newspaper ad category where publishers still have some semblance of monopolistic pricing power, because the supermarkets and big box stores have not found a more efficient way to push their weekly promotions. But the category, already vulnerable because of printing cost, distribution complexity, falling household reach, and even “green” issues, will now be further challenged by mobile digital alternatives.

In considering their strategies for iPad, publishers should assume:
  1. Mobile will be everywhere. Upward of 70 percent of adults will be connected to the Web on mobile platforms virtually all of their waking hours.
  2. All forms of media consumption will increasingly shift to mobile devices, especially to iPad and other tablets.
  3. Marketing budgets will increasingly shift to mobile platforms and out of printed newspapers, magazines and direct mail. (It is hard to imagine many marketers looking for ways to increase their print spending these days, but clearly they're looking for ways to do more online and especially in mobile.)
  4. Consumers will respond strongly to mobile pitches in the form of ads, video, social recommendations, online catalogues, deals-of-the-day and channels yet to be invented. Spurred also by new options for digital payments, both the ability and the inclination to make mobile purchases goods and services will explode.
  5. The genie will not go back in the bottle. The Web has atomized content; consumers have learned to surf and explore; new tools will connect them with more content from more sources than ever before. Therefore, selling content in packaged, dated “issues” that emulate the old print product won’t work. Consumers want a hyperpersonalized stream assembled from atomized content.
  6. We’re only at the beginning of understanding what’s possible on iPad et al. Early concepts like the Sports Illustrated demo are heavily rooted in print, lacking hyperlinks or social functionality. At some point, we should expect a new kind browser created especially for tablets, significantly different from standard browsers, that enables easy touch navigation to let people move around not only from page to page as they have been for 15 years, but more easily from topic to topic, person to person, place to place, idea to idea.
To succeed in this radically changing digital landscape, publishers must adopt a number of new strategies:
  1. Embrace the mobile Web and the iPad. As Ken Doctor wrote about Next Issue Media, the tablet publishing consortium, publishers still have a chance to get this one right (“a digital do-over,” Doctor called it), after having misread signals and failed for the last two decades to catch the online waves consumers were riding. The opportunity for publishers here is to lead their audience, rather than belatedly to follow it.
  2. Reinvent content for the mobile Web and iPad. As Doctor also notes, this is easier for magazines, with their stronger visual orientation and design resources, than it will be for newspapers, which will need to invest in new, innovative design capabilities.
  3. Challenge journalists to develop new streams of content, in new formats and with new kinds of interactivity and connectivity that will attract new readers and built new relationships of trust with them.
  4. Work with Apple and other mobile platform entities to enable content and advertising personalization. This means pushing Apple for a more open platform and for access to at least some of their customer data. If publishers are to be players in the mobile marketing game, they must be able to deliver individually targeted marketing messages, and that means having some ability to identify readers and to respond (with their permission) to their profiles and preferences.
  5. Work with marketers to invent new ways to interact with customers: to facilitate conversations, to blend news, social media and brand messages, to actually sell stuff and facilitate transaction — in short, to leverage those new relationships of trust into brand new streams of revenue.
  6. Be ready to shift gears often. The job is not just to create a presence on iPad, but to adapt to the new mobile landscape as it develops and changes. Like the saying about the weather in various localities, if you think you have your iPad strategy figured out, wait five minutes.

Tuesday, March 2, 2010

Earnings season, Part 2: Intel from the quarterly filings of Scripps, Belo, WaPo, and Journal Communications

As a followup to my report on fourth-quarter 2009 earnings reports from most of the major public newspaper firms, we now have earnings releases from E. W. Scripps, A. H. Belo, the Washington Post Co. and Journal Communications (leaving only Gatehouse Media without a report).

The releases from this group followed the script set by the earlier reports: Newspaper ad revenue and total revenue were down (as noted, for the 14th quarter in a row), online revenue was a mixed bag, and quarterly profits were up due to repeated rounds of aggressive cost-cutting during the year.

Here are the particulars by company: