"How Joe the Plumber and Google saved News"

Posted on 29. Oct, 2008 by in Business Summit, Coverage, Groups, Money, Revenue, Where Are They Now?

A Readout from the Revenue Group by Scott Meyer
The august Revenue group came out feeling that there are opportunities, but no single solution to the revenue puzzle.  Fred Wilson, moderator, led off by polling the group for potential new revenue models.  We came up with quite a long list (see end of post).  From there we dove into some that seemed to hold the most promise, and identified opportunities with less upside.

Opportunities:

1.  Local – While we didn’t get to the local discussion until the end, this was clearly seen as the biggest opportunity.  And not just because we want to help Google’s Eric Stein hit his numbers.  The reselling of AdSense by news brands who have local salesforces is a substantial opportunity.  Businesses like Reach Local are ready to cut out local newspaper salesforces.  And, there’s an opportunity even if you don’t have a salesforce to work through businesses like Clickable to help Joe the Plumber reach the local audience through the newspaper’s site.

2.  Data Sales.  It’s already a vibrant business for many publishers.  Whether it is through selling data to providers like Tacoda or Ascerno, using other data services to create B2B or local services, news publishers are sitting on top of a meaningful amount of data that can drive revenue.

3.  Ad Networks, when managed right, are also an opportunity.  When tied in with data, ad networks can unlock value that publisher otherwise can’t sell.  Whether this is good or bad over the long term is still a question.  Should sites follow the Washington Post and ESPN and cut out Ad Networks entirely?  Many in the room felt that Ad Networks allow the best news brands to focus on selling their high-value inventory themselves while delivering extra monetization for unsold inventory.   The other side of the argument – that Ad Networks create channel conflict and undermine brands – carries merit.  Success comes from managing what inventory is given to Ad Networks and what isn’t.

4.  The technology to create a totally effecient market exists today.  While online ads are now part of a big distributed network where frequently the seller of the ad isn’t the publisher of the conent, the market is still inefficient.  Only reselling AdSense has delivered on this promise.  The other parts of the chain, including Ad Exchanges, are starting to gain acceptance, but are not yet easy for publishers to scale.  In the future this will change and create more opportunities.

5.  Smaller scale opportunities include:  Subscriptions for specific high-value content, but not for general news; Branded content, but more of a niche solution; In Germany, Focus is directly selling products as well as doing lead generation; Virtual currencies may present an opportunity down the road; Video is an opportunity, but it’s comparatively small.

So, why isn’t this working?

Measurement.  The lack of reliable metrics are holding growth back (note, this is a challenge for everyone in online advertising, not just news).  This is an issue that lacks short-term solutions.  But, incremental progress keeps being made and eventually a solution should emerge.

The challenge of creating a growth business inside of a mature business.  For instance, objectively, reselling ad sense makes sense.  But implementation has been tied up with internally slow decisionmaking and technical implementation.

The mindset of replacing print losses with digital presents a fundamental challenge.  It doesn’t align with where consumer behavior is going to be.  And, the timeline for building digital value doesn’t line up with the realities of the declining print business.  Competitors by contrast, are able to focus on just scaling their digital businesses at their natural pace.  News brands that solve this problem will be the big winners.

And now the list of ideas we came up with for further discussion:  AdSense, Display, Online Video, Lead Generation, Direct Transactions/Retail, Conferences, Co-branded content, Subscriptions, Syndication, Data Mining, Product placement, Auction Model, Market Research, Licensing, Republishing web to print, Sponsored Feeds, Virtual Goods, Email.

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5 Responses to “"How Joe the Plumber and Google saved News"”

  1. Dave Chase

    31. Oct, 2008

    Since I know the local space best, let me make an observation about it. As we saw at the summit, the spirit of experimentation, testing & innovation is great on the production/cost side. I don’t see 10% of the level of innovation on the revenue side.

    At NextNewsNet/SunValleyOnline, I joke that our motto is “we make mistakes faster than anyone else…” (just don’t repeat them). While we are also trying to be innovators on the production side, I’m 100% convinced that addressing revenue will be the only way to the promised land.

    One example relates to the obstacle mentioned above around Measurement. We just completed a research project that fit into a bootstrapped startup’s budget. What we believe is that local sites have done a horrendous job of quantifying the value of their audience to advertisers (e.g., we now can tell our advertisers that there $x of opportunity in the next 12 months in their category just amongst our users). Next week will be critical for us as we take that to advertisers and see how that affects their buying behavior. My gut tells me that they’ll find it compelling but if we’re wrong, we’ll course correct as needed.

    A word about AdSense and mass ad networks. I have great respect for what Google has built but there’s no way I’d put that stuff on our sites. The biggest reason is money. Why would I put something up where I get $0.50-$1.00 CPMs when I’m successfully selling at $35-40 CPMs (actually higher on our e-newsletters). Secondly, I think it hurts the site aesthetic. We don’t want to be like most overly cluttered local news sites. We are selling to authentic, local businesses and having the text dense or schlocky ads that are on most ad networks hurts our ability to sell $40 CPMs. To me, it’s criminal that local sites are undervaluing their audiences by taking the low-ball CPMs.

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  2. Rick Waghorn

    03. Nov, 2008

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  3. Joel Kramer

    26. Nov, 2008

    Echoing Dave Chase, MinnPost.com is averaging more than $15 CPM, and that’s because we provide local advertisers with a quality audience, a quality site (not cluttered with commodity and/or intrusive advertising)and quality journalism. Even with our rates, we could not provide high-quality journalism without substantial support from donors to our nonprofit enterprise. If Google is the answer, with $1 CPM or less, there IS no future for content that costs real money to create.

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  4. Ben Moreno

    08. Dec, 2008

    Ya, it is tough to measure how legit things are online but you can usually tell god things from everyone talking about them.

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