Category: Analysis

There’s a must-read conversation about media synergy between Anne Kreamer and Kurt Andersen at Fast Company. Andersen, who will always be known as the founding editor of Spy, is probably the most insightful observer of the media business. Some highlights:

AK: At a dinner with a few senior AOL Time Warner executives this past summer, just before Bob Pittman left, I asked good-naturedly, What was the mission of the company? The best answer was, “Well, we have to be more aggressive about our marketing and ad-sales packages.”
KA: What’s incredible to me is that most moguls still believe in size as the ultimate imperative. … When I had dinner with Rupert Murdoch at the TED conference earlier this year, I was flabbergasted when he sincerely fretted that News Corp. wasn’t big enough to compete effectively.

The conversation concludes with a comparison of media ecology to urban planning: a media culture should be like a vibrant downtown, with unique, unplanned, unstructured choices within easy walking distance. As much as I love Jane Jacobs, A Pattern Language, and The Geography of Nowhere, I never made this analogy, which is dead-on and extremely useful.

Fortune, unchastened in its shameless sucking up to CEO’s, is running a puff piece about Terry Semel at Yahoo. The story suggests that he’s really shaking things up by doing a deal with Overture and buying HotJobs.

By early this summer the partnership was responsible for an estimated 10% of Yahoo’s $226 million in second-quarter revenues–all with Yahoo’s barely lifting a finger or spending a dime.
So it’s no surprise why Yahoo did the deal: The listings are a rare bright spot in another year of advertising malaise. One question: Why didn’t Yahoo do this earlier?
The answer, says Yahoo CEO Terry Semel, has a lot to do with Yahoo’s vision of itself during the bubble. “In addition to doing a lot of great things, Yahoo had a sense of arrogance, of we-invented-this,” he says, fiddling with his silver-rimmed glasses. “If we are going to succeed, we have to have people with different attitudes.”

It’s not clear how the Overture deal is bolder than Yahoo’s original search deal with Altavista, or how buying HotJobs is different from buying Geocities or 411.
And in a more thoughtful article in the Wall Street Journal (subscription required), the advertising market is dismissed by (also unchastened) Wall Street analysts hungry for breakthrough services. Supposedly, Yahoo’s stock is supposedly suffering as a result. But it has outperformed the S&P 500, AOL/TW, the AMEX Internet Index, and DoubleClick this year.
Both articles highlight Yahoo’s upcoming broadband ISP deal with SBC as an important test of Semel’s leadership and Yahoo’s viability. But SBC is the ISP in this relationship. Yahoo is providing some (generic) services — a Yahoo browser a 125 megabytes of e-mail storage — and its (unique) brand to the deal. At its heart this kind of licensing deal is the equivalent of looking for change in your sofa cushions.
Until Yahoo recognizes that

• “Yahoo” one of the most important brands on the Net.
• Paid consumer services and brand-licensing deals are only going to provide marginal revenue, and only if Yahoo maintains its brand.
• Its core businesses are its portal, advertising, and online services and they are badly in need of a makeover.
• Broadband is a distraction from its core business.

… the full, extraordinary value of the Yahoo brand will never be realized.

During the Internet bubble, I talked to a lot of silly companies who claimed a million or two users. I think PointCast reached around a million users before churn stalled their growth.
Interestingly, this is roughly the number of people who speak Esperanto.
Apparently, you can get a couple of million people to do just about anything, but that doesn’t make it a business.

Unless the news industry is willing to stand up for the first amendment rights of the porn business, we’re all going to suffer in the long run.
For nearly a decade the censors have used pornography and terrorism as an excuse to impose filtering on us all and to occupy the Internet’s choke-points. Even the sleaziest news corporations decry porn on the Net, rather than defend the first amendment rights of pornographers and their customers.
Declan MacCullagh’s outstanding Politech site is essential for anyone who cares about what our government is doing to the first amendment in the name of protecting us from ourselves. Declan recently posted a excellent roundup of civil liberties issues and an Internet, pornography, and law update.

The Open-Source Content Management Conference looks worthwhile for those considering (or considering considering) buying or replacing a content management system.
A lot of innovative publishing activity taking place among hackers and the hacker-oriented, and mainstream publishers will continue to learn from them how to use this medium. It seems likely that by the end of the decade all but the most specialized applications will migrate to open-source solutions. Everyone knows the real money is in consulting and not software, and open source has already produced some outstanding publishing platforms and tools.
I’ll be returning to this theme in the future.

I can’t help it. To me, Overture will always be GoTo.com. It will take more than a pretentious name to dress up a lame and venal search engine.
However, despite their deceptive business practices and silly patent on paid searches, Overture points the way to one future for online advertising, particularly as it has been refined by Google.
Users hate and ignore banners, and the industry has been trying to go “beyond the banner” since the beginnings of online advertising. The usual formula is to make the banner bigger, add animation, add sound, and add interactivity. The result is a product ill-suited to even the kind of branding ads that will never work on the Web.
Ecommerce has always been the engine that drives online advertising. With the death of the dot-com economy, ecommerce sites are now split into the very biggest sites (Amazon.com, Dell, Expedia, etc.) and millions of smaller businesses
Sites like CNET’s shopper.com serve big ecommerce sites by providing opportunities to buy when consumers are ready to pull the trigger.
Small (and large) sellers are served well by Google and Overture’s text ads because they:

• reach people who are looking for something.
• are cheap to create, so you don’t need an ad agency to create them or manage your “compaigns”.
• are fast and unanimated, so they don’t annoy the pickiest netizen.
• can be sold on a web page directly and cheaply, so they meet the needs of millions of individuals and small businesses who are doing business on the net.
• are so cheap, they can be sold on a cost-per-click basis.
• work for big companies as well as small. Dell, Gateway and HP show up on an Overture search for “digital cameras”.

A significant part of the future of online advertising belongs to text advertising that is designed to be cheap, fast, and contextually correct. However, it’s unclear that Overture can defend its patent and maintain its lead by providing a service that it’s customers can create for themselves.
Furthermore, advertising-supported sites must follow Google’s example in this (as in other things) and be honest about who’s paying for what.

AOL is in a state of crisis. Actually, AOL has been in a state of crisis ever since its founding. But the company has always managed to make a lot of money out of each new crisis. But things are different this time around.

• AOLers are starting to wonder why Steve Case is still around now that the other culprits in the AOL/TW merger have fled the scene of the crime.
• Most of the executives now running the company are for TW’s traditional media businesses.
• AOL has discovered $49 million in phoney advertising revenue from the last few years.
• AOL has begun to realize that it needs to cut back on the number of impossibly irritating pop-up ads it serves to its customers.
• AOL/TW chief executive Richard D. Parsons says that AOL should be more like HBO, selling premium services, if it’s going to survive. But it’s not clear what he meant. I always get suspicious when an executive says “We can save this troubled property by grafting on the business model of this other, more successful, business we own.”
• AOL’s software hasn’t had a real update in a long time and it’s beginning to show its age, and Netscape’s share of the browser market has declined until it is now insignificant. Look for AOL/TW to close Netscape soon.
• AOL’s content strategy is too-heavily focused on promoting other TW properties.
• AOL’s dominance of instant messaging continues to erode.
• AOL has struck deals with cable companies that look like cable-channel contracts, providing cable co’s with nearly $40 per month per subscriber, letting the cable co’s provide the billing, and sharing each customer’s ecommerce revenue with the cable co’s. AOL is giving up virtually all of its revenue to cut these deals.
• Broadband is making AOL’s core dial-up business look very risky, while AOL is still trying to establish its own broadband offering.

AOL is still a great company, with a terrific brand, loyal users, unique features, enormous cash flow, and dominant share of users and advertising. But it is (and always has been) easier to wreck AOL than to keep it going.
AOL already commands a premium price for what is looking less like a premium service. Its software desperately needs a overhaul and it needs to add some features that take advantage of its proprietary network.
The only way to generate AOL-only content is to give it a premium price to compensate content providers for foregoing the broader distribution of the Web. The good news is that AOL has the infrastructure the Web lacks to make premium content practical. But so far no one has found content consumer will pay for, and AOL’s predictable monthly subscription is a core strategic asset. One possibility: AOL has the end-to-end system to create a premium music service. This won’t be easy, but it’s a lot easier than creating a premium service based on print properties.
It’s about time that AOL reconsidered popups and restructured its advertising offerings. But it would be a mistake for the company to abandon its dominance of the online advertising market while the recession is killing off their competitors. They have the ability to emerge even more dominant in when the online advertising market returns.
AOL’s broadband strategy is an enigma. To make money in broadband, you need to own the pipe. AOL/TW owns a lot of pipe. But they’re not going to make much as a solutions provider to Comcast et al, because they’re in no position to add value to their networks.
My recommendation: AOL is one of a handful of companies who are in a position to make money from wireless access. It’s a challenging market because of the capital needed to build a network, but AOL has the financial and technical resources, the brand, the customer base, and the marketing ability to create such a network. It’s the only strategy that will give AOL/TW the growth it needs and rescue AOL before cable and DSL eat their lunch. But it’s going to require more guts than the merged corporation has shown in its brief life. Perhaps they should give the job to Ted Turner.

The phenomenon of linkrot is well-known. The URL’s of pages can change when a owner changes content management systems. The pages themselves can be taken down and (sometimes) put in for-pay archives. The effect is the same: broken links and diminishment of the value of the Web.
I have a folder on my desktop where I store the URL’s of stories that I found useful or thought-provoking. Today, I double-clicked a link to the Atlanta Journal-Constitution (it could have been just about any paper) and I got a message that the story is no longer on the site and that I can search their archives and pay them to see the story.
While I think that newspaper would be better off making their archives free, I’ll defend to the death their right to charge for old news. However, I wish that the old link had yielded a headline, summary and a chance to pay for the full text. This ought to be easy enough to program.
As it is, I have no idea what provoked my interest and the AJC lost a revenue opportunity.

The FCC is “considering” changing broadcast ownership rules. In addition to covering how many radio and TV stations a company can own in a particular market or nationwide, these rules currently limit ownership of broadcast licenses and newpapers in the same city to a few grandfathered cases.
This is already a done deal (after decent interval of sham public comment). Newspaper publishers would love to buy broadcast licenses in their home markets, but are more likely to be targets of acquisition by broadcast companies with acquisition-oriented cultures.s
The resulting companies will have to pay huge amounts for newspapers, which have lots of capital and vast cash flows. The resulting “synergies” will have to be significant to justify the prices paid for these slow-growing and potentially-troubled enterprises.
After the inevitable advertising price hike, about the only synergies left are (a) cutting “unnecessary” newsgathering expenses (b) merging news operations and (c) using the newspaper to promote the broadcast properties. Remember, big radio companies have already made a core competence of presenting canned content as a local product and ruthlessly (perhaps illegally) using their dominant positions to muscle advertisers and listeners.
UPDATE: Bill Densmore posted an excellent report on this and other issues from a family newspaper conference that was happening as this announcement was made.

China is blocking Google and the issues could be bigger than they appear at first glance.
Yahoo has already capitulated to pressure from China to censor the database it presents to Chinese citizens. NewsCorp has suppressed books it planned to publish in the US in order to do business in satellites with China. Has China already asked Google to join the team?
This goes beyond French and German objections to Nazi paraphernalia, and Scientology tracking down every reference to its sacred nonsense. This is about participation in tyranny.
Ultimately, every online publisher, web host, backbone operator, isp, and software company will have to come to terms with the moral dimension of its business.
This is not an issue of cultural sensitivity, or loyalty to shareholders. Eventually, Google may have to ask itself the questions that Yahoo has already answered for itself: What value do you place on your humanity? How can you demand the protections of democracy while conspiring to deprive a billion people of their human rights?