I just got done reading this interesting article “Media execs are asleep at their own wheel” over on the Go Big Always blog written by Sam Lawrence. Sam’s observations about how the long-time tech media companies are way behind in adopting social media - and in the way that they adopt social media once they make the decision to do so - are right on. To quote the post:

“Yes, I get their business model: serve as many pages as possible so they can have enough media “inventory” to sell lots of ads. And then there is subscription. That’s when you collect names through registration forms so you can market the lists and/or prove your readership demographics to advertisers. This is basically the old print media model online. And it, like other old-fart models, is stuck a decade behind.”

I completely agree with Sam - traditional tech publishing companies don’t get it and haven’t adjusted to the online business models. But although I agree with Sam, I actually have a bit more tolerance for their slow transition because I understand what motivates them and what’s holding them back.

Here are four reasons why I think that traditional media companies are so far behind in adopting social media:

1) They are still trying to support a print circulation model. Historically, in the tech trade publication world of IDG, what was formerly CMP Media, and Ziff Davis Enterprise, it has been all about getting a qualified audience to support a print magazine. The subscribers to these companies’ various print titles don’t pay to receive copies of the print publications, instead, they trade detailed demographic data to prove that they are worthy of receiving the magazine. The publications, in turn, provide the demographic data to advertisers to demonstrate that they have the “qualified audience” to warrant the vendor spending $50k+ on print advertisements.

The secret is this - it’s incredibly expensive to qualify this audience. Every year, magazines lose thousands of subscribers who don’t re-qualify. So circulation managers are constantly trying to recruit new, qualified readers for their magazines. This is costly - and traditional media companies have started to use every online audience touchpoint that they can to try to continue to qualify audiences, including social media registration forms.

2) It takes a long time to make the necessary infrastructure changes. One issue that the tech publishing companies have is that they are stuck with legacy systems that were created before the term “social media” even existed. While blogs that are newcomers on the scene were built from the ground-up to support social media, the big publishers are struggling to make the smallest changes to their massive publishing systems that will allow them to play in the social media space. These companies have millions of pages of content - all stuck in ancient content management systems that they adopted in the 1990s. This digging out of legacy technology and making the transition to Web 2.0 technologies is not going to happen quickly, easily or at a low cost for these companies.

3) The leadership doesn’t even know what social media is and/or doesn’t have time to stay on top of the latest developments. There are a lot of really smart people working in big media companies - and there are also a lot of really outdated people working in these companies. Much of the leadership in the tech media industry reached the level at which they are at by mastering print readership models - very few of today’s leaders are visionaries promoted to the top because of their success online. There are of course exceptions; but if you were to discuss social media with the majority of the executives at traditional tech media companies, they would mention blogs and message boards - and that’s about it. And with the precarious state of many of the tech publishers at the moment, few have time to stay on top of the day-to-day changes and developments in social media - most are trying to just stay afloat.

4) They are afraid of social media. Although these tech media companies will talk about the “separation of church and state” - meaning the fact that their writers are in no way influenced by their advertisers - the truth is that the media companies are terrified of what will be said by users about their advertisers once the barriers are opened up. Media companies know that they will not be able to control the conversation with a heavy hand, but they still want to maintain some semblance of control so as to not completely alienate advertisers. Until media execs feel comfortable with this fine-line, they will not be able to whole-heartedly embrace social media.

(Disclosure: I was formerly an employee for IDG’s Network World and Ziff Davis Media; and am currently a consultant to Ziff Davis Enterprise.)

Photo by Cappellmeister

I have been a fan of The Industry Standard for a long-time - I have written about them before, and many of you will remember the magazine version of The Industry Standard as being the fastest growing magazine of all time before the bubble burst, taking The Standard down in its wake. Now The Standard is back, with an online-only site that focuses on a prediction marketplace.

And I’m the newest writer/contributor to the site.

My first article is up now - Five reasons why a recession is a good time to start a company. Go read it, comment on it, let everyone know what you think about it. And then come back to 16thletter and let me know what you think.

Guy Kawasaki just formally released his latest project. It’s called Alltop and it’s getting widely panned across the Internet. Michael Arrington doesn’t like it, and neither do these people. (Although some people like it.)

Alltop basically is simply lists of blogs and publications, organized by category. Kawasaki calls it an “online magazine rack.” The most popular criticisms of the project are that it’s a redo (of popurls and Original Signal) and that the format neglects all the benefits of RSS.

Eliminating a discussion of whether the site is good or useful or worthy of attention, I find this launch particularly interesting because I just started reading Guy’s book, The Art of the Start: The Time-Tested, Battle-Hardened Guide for Anyone Starting Anything. And it’s not often that you get to read a book about starting companies while the person who wrote the book is starting a company. So here’s my take on that aspect of the launch.

(Major Disclaimer: I am only on page 31, so my analysis of the book is going to be weak, and is not the point anyway!)

Guy says: “Make meaning - create a product or service that makes the world a better place.”

Does he do it?  I would say yes. According to the official announcement of the release, the “goal is to satisfy the information needs of the 99% of Internet users who will never use an RSS feed reader or create a custom page.” This is a pretty meaningful purpose, and one that I can really relate to as most of the people I know in my non-work life do not use RSS or even know what it is.

Guy says: “Make Mantra. Forget mission statements…instead, take your meaning and make a mantra out of it.”

Does he do it? Heck yeah. Check out this catchy mantra - “aggregation without the aggravation.”

Guy says: “Get going. Start creating and delivering your product or service….Don’t wait to develop the perfect product or service. Good enough is good enough. There will be plenty of time for refinement later. It’s not how great you start - it’s how great you end up…The wisest corse of action is to take your best shot with a prototype, immediately get it to market, and iterate quickly.”

Does he do it? YES! And I think that this is the No. 1 best thing about this launch. Guy didn’t wait until the product was perfect, refined, pretty and loved-by-all to launch. It was “good enough” and he let it fly. Now, he’s getting unbelievable feedback and commentary by everyone who is watching the launch. Love it or hate it, the feedback is real and immediate, and I bet that tomorrow he’ll be working on version 2.

Verdict: Guy Kawasaki practices what he preaches - at least what he preaches in the first chapter of his book.

I just read the news that Ziff Davis Media is filing for Chapter 11 bankruptcy protection. I worked at Ziff Davis until July 2007, but on the Ziff Davis Enterprise side of the company, as opposed to the Ziff Davis Media side of the business, a distinction that I’m sure the enterprise folks will be working hard to make in the next few weeks.

Ziff Davis Enterprise - which was spun off from Ziff Davis proper at the end of July 07 when it was sold to Insight Venture Partners - is made up of the Web Buyer’ s Guide, eWeek and the eSeminars groups. Ziff Davis Media is comprised of the Consumer (PCMag.com, ExtremeTech) and Gaming (1Up) sides of the business.

It’s too bad that this day came, but I doubt that many people at the company (or in the industry) are surprised. Ziff Davis Media has had trouble with its debt for a few years now, and the selling of the Enterprise group was seen by many as the last chance for Willis Stein to salvage some money it invested when it bought the company for about $780 million in 1999. As the consumer and enterprise groups were splitting, those of us on the enterprise side of the company almost had the feeling of abandoning a sinking ship, that the Enterprise Group was taking the one opportunity it had to get off the boat before it went down for good.

I just got an email with the subject line: “Thanks from the Industry Standard.” Here’s what the message had to say:

“You were one of the first in line to ask to see the brand-new Industry Standard. To show our appreciation for your interest, you are being notified of today’s official launch!

“The site is not only designed to give readers insights into technology and the Internet economy, but also provides a unique community feature — a predictive market.”

I’ve written about the Industry Standard in the past, related to the fall of the mighty business (print) publications that I used to follow. But today the site (as a Web-only property) is relaunching.

The site is positioning itself as a “prediction market,” offering analysis and opinion from writers and experts, and then giving its readers the opportunity to agree or disagree - and hopefully use the “power of collective intelligence” to predict the correct outcome.

From the site:

“The prediction market articulates the same emphasis on community knowledge and networking that is perhaps the Web 2.0 era’s most important contribution — the power of collective intelligence. Prediction markets have proven to be remarkably powerful tools for gauging events and trends, and we think that the addition of this technology to the site will provide a very special type of meaningful interaction.”

From my first look at the site, it is debatable whether it will have much of an impact. The contributors and analysis are good, but nothing to truly distinguish it from the content on any other site. The predicition market stuff is vaguely interesting at first glance, but who has time to vote on more news stories? Even so, my prediction is that the Industry Standard brand and the IDG parent company (with the top tech brands in its arsenal of sponsors - Intel is the “launch sponsor”) will be enough to guarentee a revenue-generating future.

Looks like I may be betting against TechCrunch on this one.

Everywhere I turn it seems that there is a story about the demise or revolution of the music industry (depending on your perspective), sparked by two huge music-related stories that broke last week.

The first was the report that music sales were down 9.5% in 2007. The bright note from that report was that the sale of digital music tracks was up 45%, but even that huge leap didn’t help the industry overall. The second was the announcement that Sony BMG will be joining the other three major labels in offering DRM-free songs.

The music industry is scrambling to deal with the impact of the Internet on its traditional business models.

In this October 2007 post, Michael Arrington of TechCrunch sums up nicely the issues that are facing the music industry, and ReadWriteWeb echoes some of the same sentiments. Basically, sales of CDs and digital downloads are not going to make huge amounts of money for anyone going forward. Both argue that the real money will be made from ticket sales for live performances, merchandising, and special limited-edition physical copies of the music.

But there is money being made from digital downloads - it’s just not of the scale that the major record labels are used to. In 2007, there were 844.2 million digital tracks sold. Radiohead’s recent experiment, in which the band released an album online for free download and asked listeners to pay what they wanted, made them more money from the digital distribution then they made from the digital distribution of all the rest of their albums combined. If this seems strange, there is a simple reason - Radiohead was released from their contract with their record label, a contract that in the past excluded them from any royalties from the digital distribution of their music (remind anyone of the current writer’s strike?) Many signed bands and musicians are currently stuck in contracts like these, the relics of an era when digital distribution didn’t really matter.

Of course, there is still money being made in the music industry, but as fewer people are buying CDs (that are costly to produce and distribute) and as more people are downloading digital music (that is practically free to reproduce and distribute), less money is being made. And, the money is being spread among more musicians. The Long Tail is in full force in the music industry, allowing more people to make money as consumers spend their dollars on a wider variety of music and musicians.

So this puts the music industry in this strange position. The indie artists, who are making some money on their small but loyal audiences and the Long Tail, but often not enough money to live off of, would be psyched to get a record contract because the record companies have the marketing and distribution capabilities that they don’t have access to. The big (and already famous) bands, are trying to get out of their contracts in favor of the freedom that the indie artists enjoy. And the record companies are panicking. This is creating a weird, wild situation where everything is about to totally implode if change doesn’t happen quickly.

The really big question is: What online business model is going to work for the music industry going forward? Any successful model will have to support both the record labels and the artists who are producing music. And it will have to be one that consumers will spend their money on.

Here are my predictions:

1. The new model will be all about the audience.In the past, bands knew how many records or songs they sold, but not the name of the individual that bought them. Digital download and distribution, as well as social networking sites like MySpace, now let musicians know much more intimately who their audience is. By collecting the name of the individual who downloads their song (whether they pay for it or get the download for free), musicians will be able to have a much more personal relationship with their audience - and they will be able to re-market to them in the future. As musicians begin to realize that having the name of their fan is worth more money than the $0.70 they get from iTunes, they will either begin  offering all their songs for free, or Apple will have to adjust their business model and begin sharing data with the artists. Radiohead may have been the first major label to try offering free downloads, but many others are following suit. Trent Reznor (of Nine Inch Nails fame), just produced a Saul Williams album and released it online the same way that Radiohead did - and he has told everyone about the data that they collected. Reznor is bemoaning the fact that only 18.3% of the people who downloaded the album paid $5 for it. He thinks that this stinks (and it might) but he is neglecting the really exciting fact that 154,449 people downloaded Williams’ album! That is an audience of 154,449 if you at least collected an email address. That is a significant fan base - and in my opinion, it is going to be the primary model of the future.
2. Musicians will begin releasing songs more frequently, as well as more versions of each song. When digital downloads become the norm (and that day is close), there will be no need to stick with the CD format where musicians release all their fully produced songs in one giant lump. Instead, they’ll release things as they are done, there will be more live performance and acoustic versions of songs, and more interesting bits, more looks into the recording studios, more evidence that songwriters and musicians are humans and that every version that they play isn’t perfect. (UPDATE: Looks like Mark Cuban agrees with this prediction.)
3. Record labels will try to hold onto their business models. They will succeed only until current contracts run out, but they will eventually fail. They will do this not because they don’t see the writing on the wall, but because they can’t figure out how to change.
4. A new type of record label will emerge. The new label will serve more as a helper to the artist than an owner of the artist. This new label will assist with marketing, bookings, networking and the other promotional aspects of the music business. But instead of owning all the rights to the artist, musicians will PAY their labels for their help, and the musicians will retain their rights. The new labels that will be successful will be the ones that know how to do SEO, online marketing and social networking. These types of labels will become the norm. (And they probably wont’ be called record labels.) (UPDATE: Looks like CNET agrees with this prediction: “If we end up ridding the world of labels, we’ll only have to re-create them–in some other, probably more nimble form.”)
5. Apple will be one of the new “record labels.”
6. Many new online and digital services will rise and fall. In 2-3 years, we’ll be left with the winners. At least three of the winners will be companies that no one has even heard of yet.
7. There will be new ways to buy music. Walking through Target, no longer will you head to the music section to buy music. Instead, as you hear a song piped over the airways, or walk past a TV that is playing a music video and decide you like the song, you will be able to use your phone or mp3 player to purchase and and download the song instantly.
8. The stuff inside the CD case will still be valuable in digital format, but it will look completely different. People still buy CDs for the lyrics and the liner notes inside - as well as for the artwork and the experience of opening the case and looking through the packaging. This won’t change, there will always be a market (although a smaller one) for the special edition hardcopy CDs. And it won’t be long until someone comes up with a way to sell that stuff in digital format, as well. But although the digital information will be the same, it won’t look the same as the CDs of today. This will be a huge money-maker, much bigger than anyone expects.

UPDATE: This Music Lessons post by Seth Godin is an awesome add-on to this article. Go read it.

Photo by SqueakyMarmot

I have been thinking about this post from Robert Scoble since I read it yesterday. (Go read it now.) In the post, Scoble makes three pretty strong points:

First,

“In the past few years I’ve had some success building audiences, but I found that that’s not really what’s important. It’s not what advertisers REALLY care about.”

He goes on to ask “What do they really care about?” and answers his own question by saying that advertisers care about content: that you get content that no one else does, that it causes conversations to happen, that your content gets noticed in the niche that you’re covering, and that it gets the most authoritative links back to it.

His second point:

“It’s not the size of your audience that matters. It’s WHO is in the audience that matters.”

And his third point:

“I never talk…about how large my audience will be. No, instead, we’re talking about who we want on the show for the first week. How can we make the quality better? Who is out there who is doing innovative stuff that we can learn from?…How can we take our art further? How come bloggers never obsess about THAT?”

There is a lot going on in this article, but first and foremost I have to disagree that advertisers don’t care about audience size. All you have to do is look at how advertising is sold online to know that they do, in fact, care very much about audience size. CPM (cost per thousand) is the standard measurement for online media sales. Just check out the advertising pages for CNET or PCMag.com  or CMP (all technology publishing companies). What is the first statistic that’s listed? Unique visitors per month. Second statistic? Unique page views per month.

Having worked for both Ziff Davis and IDG, two of the biggest technology publishers in the world, I know that when technology marketers are buying online advertising packages, the easiest question to ask - and the first one out of their mouths - is size of audience. They always want to know traffic stats and reach. In that market, advertisers do care about how big the audience is. And I think that this is only magnified in the consumer markets (with audiences like the one that Perez Hilton reaches), where there is no way to measure audience except by size.

And (this is still hard for me to swallow even though I’ve believed it for a long time), most advertisers do NOT care about how good the content is. I am just being honest here. Most technology marketers and advertisers do not pay attention to the content, or know how good or not good it is in and of itself. Instead, they measure content “goodness” quantitatively - by how big the audience is that is reading the content, and by who that audience is.

Which leads me to the part of Scoble’s article in which he was dead on accurate - advertisers do care about how targeted the audience is, WHO is in the audience. I believe that this is actually the statistic that matters the most to online advertisers.

Take another look at those advertising pages that I linked to earlier. There are some pretty strong arguments made by the publications that they have the specific audiences that advertisers are looking for. I believe that this trend of advertisers trying to reach the specific individual - with the right title, job function, industry and size of company - instead of reaching just a whole lot of people and hoping that the message has an impact, will continue. This desire to reach the RIGHT audience is why new models of online advertising are emerging, such as lead generation, in which a company will pay $100 PER LEAD as long as they are targeting the right person with their message. Scoble is reaching the audience that his advertisers want to reach - so the size of his audience isn’t as important. And this is why sites like Perez Hilton, which have to rely on audience size (because they are reaching a disparate consumer market) are going to have a hard time selling advertising by any measurement except audience size.

As far as content is concerned, I have already made the point that I don’t believe that advertisers care as much about quality content as Scoble claims that they do. I wish that they did, but I’ve been in this industry long enough to realize that they really just don’t. They like the latest and greatest thing - because it’s good for their brand to be associated with that innovative content - but advertisers aren’t content specialists and just really don’t have a good understanding of quality content.

HOWEVER - and this is a really big however - I think that Scoble is writing from the perspective of a content producer, not an advertiser. And his point is RIGHT ON that content producers MUST CARE MORE about their content than their audience size. Because without good, innovative, cutting-edge content, content producers will never draw the type of audience that they need to get advertisers. Scoble says that the right question is “how can we take our art further?” And I agree that is the right question for a content producer.

After years of claiming that it most definitely is not a publishing company, yesterday Google announced that it is going to be a publishing company after all. 

The company is launching a new tool called “Knol” (in private beta). With it, Google’s “goal is to encourage people who know a particular subject to write an authoritative article about it,” said Udi Manber, Google’s VP of Engineering in a blog post about the new project. From all accounts, Knol will eventually work something like Wikipedia. Google will provide a technology platform that will allow authors to contribute content. If the author decides to make some money on the entry, Google will split the advertising revenue.

Google didn’t come right out and say that it’s becoming a publishing company; in fact, it seems to be taking pains to try to prove that it isn’t one. Manber was careful to include this bit in his post:

“Google will not serve as an editor in any way, and will not bless any content. All editorial responsibilities and control will rest with the authors. We hope that knols will include the opinions and points of view of the authors who will put their reputation on the line. Anyone will be free to write.”

Does Google think that this means that they aren’t becoming a publisher? They aren’t convincing me.

The business model with publishing companies is that they have a group of writers (staff writers or freelance writers, it doesn’t really matter) who write content for the publishers. The publishers then have the ability to sell advertising around that content to monetize it, and often pay the writers for their efforts. Google may argue that it isn’t writing the content, and that it is leaving ownership of the content with the authors, but Google is in essence paying writers to contribute content to a giant database of information - that Google will own. And monetize. And Google is incentivizing writers by offering a revenue split. This looks like publishing to me. As Duncan Riley from TechCrunch writes, “Google is moving away from simply indexing the worlds content to being a content provider itself.”

Aside from the content/publisher issue, there is also a potentially tricky conflict having to do with Knol content showing up in Google’s “independent” search results. As Danny Sullivan at Search Engine Land put it: “Does hosting content turn it into a competitor with other content providers and set up an unfair advantage in gaining traffic that might otherwise flow to them?”

I am not surprised by this move by Google. But I think it’s now time for Google execs to give up their claim that Google is not a publishing company. Claims like these:

June 12, 2006 - Eric Schmidt, Google founder - LA Times article

“It’s better to think of Google as a technology company. Google is run by three computer scientists, and Google is an innovator in technology in our space. We’re in the advertising business — 99% of our revenue is advertising-related. But that doesn’t make us a media company. We don’t do our own content. We get you to someone else’s content faster.” (emphasis mine)

May 15, 2007 - Marissa Mayer, Google VP - at the 41st Annual Carlos Kelly McClatchy Memorial Symposium “Pressing Times: Can Newspapers Survive in the New World of Journalism” at Stanford  

“We’re computer scientists; we’re not journalists. For us, it’s really about partnering with content providers and ultimately finding distribution and monetization channels for them.”

And this article about the same event:

Mayer didn’t add anything more than confirm that Google is not a publishing company, but aggregating, data mining and filtering of information.

Web 2.0 is a term that has existed since 2004. The phrase is now widely used by anyone who works on or with the Internet, but Web 2.0 is one of those expressions that many business people outside the Internet industry only “sort-of” understand.

To understand Web 2.0, you first have to be familiar with Web 1.0. Web 1.0 is the Web as it existed up to and immediately after the Internet bubble burst in 2000. Web 1.0 followed the “broadcast model,” meaning that any content that existed on the Web was one-way - the content was written and published by the author (a company or an individual) for the reader. The best way of understanding the broadcast model is: “We talk, you listen.” There are still many sites that are Web 1.0, including most corporate and informational Web sites. Examples include Weather.com and GM.

Web 2.0 was born when the broadcast model started to change to a conversational model.

The hallmarks of Web 2.0 are conversations and user-generated content. Sites that provide technology platforms that allow users to interact and to contribute content are Web 2.0 sites. Examples include Facebook, MySpace, Flickr, YouTube and blogs - these sites provide the technology that lets users submit content and interact with each other in various ways, such as by submitting photos and videos, chatting or by commenting on on each others content.

Today, many Web 1.0 sites are moving toward Web 2.0 by launching Web 2.0 features. These sites publish content, but solicit a response from users to further enhance the conversation. For example, retail sites such as Walmart and Target now allow visitors to post reviews of products. Traditional publishing companies like the NY Times have opened up their articles for comments and have discussion areas to facilitate reader interactions.

The following are some of the most useful articles you can read to find out more about Web 2.0:

• What is Web 2.0- This article by Tim O’Reilly is often sourced as the definitive treatise on Web 2.0.
• Web 2.0 - This 2005 article was written by Paul Graham, and is a very good explanation of Web 2.0.
• What is Web 2.0- This 2006 documentary from TechCrunch features Editor Michael Arrington’s interviews with start-up CEOs about Web 2.0. (24 Minutes). The CEO’s definitions of Web 2.0 really illustrate why this term is so difficult to pin down and how everyone defines it a little differently (around minute 5).
• Web 2.0- The Wikipedia entry about Web 2.0.
• Web 1.0 vs. Web 2.0 - This post will help you understand the differences between 1.0 and 2.0.

I just saw a pointer to this over at Boing Boing. The Webby Awards site has posted a list of the 12 most influential online videos of all time. Included are classics such as 2000’s All Your Base Are Belong To Us and JibJab’s “This Land” (Chris made me watch this one more than once). Enjoy!