Google’s Display Advertising Strategy Revealed!

The search market isn’t growing like it used to, and Google needs to convince the world display advertising can be its new growth engine.

Today, Google gave it a shot, hosting a conference call to explain a three-pronged display advertising strategy.

Google said it will…

• Simplify ad-buying and ad-selling.
• Increase display ad peformance with better, more measurable units.
• Open display advertising to new types of business.

The big challenge for Google (GOOG) is that its search revenues will surpass $25 billion this year, so for shareholders, any new business’s revenues will look tiny in comparison.

Power through a CliffNotes version of the presentation

Via Silicon Alley

The Future of Newspapers in an Era of ‘Unprecedented Plenty’

Mr. Knee’s article in Barron’s is entitled “This Dying Medium Has Plenty of Life”. In the article, he points out that newspapers are still more profitable than other types of consumer media. Although profit margins have fallen from levels exceeding 30% to the mid-teens today, this still exceeds margins for movies, music, and books which have often struggled to reach 10%. Ultimately, he believes that “news junkies should anticipate an era of unprecedented plenty”.

Inappropriate Capital Structures

One of the main arguments presented in the article is the idea that newspapers remain good businesses but many are encumbered with high levels of debt that are no longer appropriate based on lower levels of profitability:

Even good businesses can have bad capital structures. Many newspaper companies took on debt that could have been easily supported if profitability had been maintained. The problem is that current earnings, even if superior relative to those of other media businesses, are far below what anyone had anticipated.

Mr. Knee goes on to discuss how companies such as McClatchy MNI still had margins of 20% in 2008 but debt service consumed all profits. During earlier times when margins were 30%, this debt was serviceable but ceased to be appropriate as profitability fell. Eventually, the capital structure issues will be worked out one way or another:

One way or another, the capital structure crises at newspaper companies will be resolved, by paying back the debt over time, negotiating with creditors, or by bankruptcy.

Via Seeking Alpha

MediaPost Publications Newspapers Rally Stock Prices, Will It Hold? 10/07/2009

The last few years have had precious little good news for the newspaper business, but there may be some positive trends at last.

After hitting all-time lows earlier this year, newspaper stocks are rebounding — slightly. While these small gains are no cause for celebration, they do confirm that the precipitous drop over the last couple of years was partly an effect of the cyclical economic downturn, rather than investors writing off newspaper stocks forever. The question is: how far will the rebound go?

There’s no question that big newspaper publishers suffered a spectacular fall from grace beginning in the middle part of this decade. Between the second quarter of 2006 and the second quarter of 2009, total industry ad revenues fell 45%, from $12.36 billion to $6.82 billion.

Meanwhile, between April 2004 and April 2009, the New York Times Co.’s stock price fell from over $47 to under $7 — and this was a relatively strong performance. Over the same period, Gannett Co.’s stock fell from $91 to under $4, McClatchy tumbled from almost $74 to under $1, and Media General fell from over $72 to just over $2.50.

Via Mediapost

Newspaper stocks surge as their own news improves

SAN FRANCISCO — Newspapers may have finally stopped — or at least slowed — their harrowing descent into a financial abyss after three years of plunging revenues, crumbling stock prices and shrinking staffs.

The latest glimmer of hope came Tuesday when Gannett Co., the largest U.S. newspaper publisher, announced that its third-quarter earnings will be substantially above analysts’ forecasts.

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But Gannett’s modest progress suggests newspapers might at least be able to recover some of the revenue lost since 2006. Analysts suspect a rebound could begin soon and accelerate next year, particularly if advertising for homes, cars and jobs picks up.

If that happens, newspaper profits should surge because publishers have lowered their costs dramatically by jettisoning thousands of workers, slashing wages and closing offices. Less advertising also means smaller print editions, reducing the need for newsprint — the industry’s second-highest expense after labor.

Via AP

FT.com / Media – Murdoch hails electronic reading devices

Murdoch:

“Almost in every property at the moment [there is] a slight lift,” Mr Murdoch said. “It’s very much better than it was a couple of months ago. It’s everywhere,” he added, highlighting an 8 per cent fall in revenues at News Corp’s television stations in September, compared with an expected 20 per cent decline for the year to date.Mr Zucker was more cautious, but said: “There’s no question – advertising feels better.”

Via FT.com

Content Bridges: Advance Partnership Signals Greater Microsoft/Newspaper Connection

MSNBC.com just paid several million to buy Everyblock, the much-watched Adrian Holovaty start-up, around local city data. Smart local interactive data should be a strong core of every local news(paper) site; it drives traffic and screams utility. The fact that MSNBC.com — co-owned by Microsoft and NBC — understands that opportunity better than newspaper companies speaks volumes. The deal also reinforces the notion, noted in the post below, that Microsoft will once again become a more dominant local, news-oriented player in the years ahead.

Advance Internet is announcing its new partnership with Microsoft. The new partnership — already launched in part — parallels the Yahoo Newspaper Consortium, but differs from it in one important respect.

What’s the same:

• Advance Internet’s own salespeople, and then the vanguard of its newspaper sales reps, will sell into the Microsoft Media Network, encompassing all the Microsoft sites. So, in essence, Advance will greatly expand what its sales teams can offer local advertisers. The idea and the centerpiece of the deal for Advance: the ability to offer local businesses additional marketing solutions, multiplying Advance’s sales.
• Advance Internet will use the capabilities of the Microsoft ad technologies — among them behavioral targeting (BT) and re-messaging (following would-be customers as they move about the web)
• The deal connects Advance and Microsoft directly on paid search products. Microsoft will deliver its text ads both through its paid search and contextual-reading ad products. Microsoft paid search ads will replace Google paid search on Advance sites.

The main difference: Advance Internet is maintaining its own ad platform, currently powered by 24/7 RealMedia, and integrating with Microsoft. Yahoo Newspaper Consortium members have fully adopted the Yahoo APT platform for their ad serving businesses, creating a closer, more exclusive relationship.

First, Microsoft is really coming back — to the newspaper world. After Sidewalk, after all kinds of attempted relationships, Microsoft — soon to be half of the Google/Microsoft search duopoly — is once again seeing the benefits of the newspaper company local connection. Advance Internet is the first major local news company reselling display ads into the Microsoft Media Network, Peter MacDonald, who is Microsoft’s PubCenter Director of Business Development, Advertiser and Publisher solutions, told me. Haven’t heard of the Microsoft Media Network?  It was formed in February, rolled up from various Microsoft businesses, well-described here by ClickZ. Among the other big media companies named as collaborating on the new underlying PubCenter platform are IAC, Dow Jones Online, The New York Times Co., Time Inc., and Viacom.

With the Advance deal, it gets good local sales potential — those feet-on-the-street that are the envy of companies that are cubicle-bound and technology-centered. Recall that in the Microsoft/Yahoo deal, Microsoft’s Bing and paid search businesses will power not only Yahoo, but apparently all the newspapers sites in the consortium. That will mean that the majority of newspaper sites (with the big exceptions of Gannett, Tribune, the New York Times and the Washington Post, among others) will see critical parts of their business powered by Microsoft.

The solutions, here and in the Yahoo consortium: 1) sell more products, in addition to display; and 2) sell Other People’s Inventory and networks; in Advance’s case, Microsoft’s.

As I’ve noted, this new math is compelling — many smaller advertisers never could afford print. They can afford online, and that means the potential of hundreds and thousands of new customers in every metro marketplace.

According to Borrell Associates, roughly half of the $14 billion local online ad market is going to the pure plays — Google, Yahoo, Microsoft, AOL and smaller sites without legacy media businesses. Only a quarter of it is going to newspaper companies. Newspapers’ strength is in non-targeted display advertising; they’re minor players in the fastest-growing online ad segments of paid search and direct marketing.

Broadcasters see the new markets opening as well — all those small businesses that used to be “too small to sell”, businesses that have gotten a taste of self-service keyword advertising, but would like some help in putting together better, smarter campaigns. Both YP and broadcast companies are part of the Microsoft reseller program that Advance just joined, in fact. Conversely, Weinberger notes that with the new programs “we can go after broadcast dollars.”

So it’s a race, a “consultative” sales race. As I talk to newspaper publishers, broadcast execs, YP honchos, all will tell war stories of how hard it is to transform their legacy sales forces. How do you re-train “order-takers” for the new world order of selling targeting, networks and re-messaging? It’s a race of turtles to some degree.

The new world order of hyper-targeted, sold and serviced both by (self-serve) computers and flexible, innovative human salespeople is certainly not here yet. Whoever gets there first stands to build sizable new businesses. Yes, the buy-our-site-plus approach makes sense, and may offer initial advantage, but ultimately, whoever can bring results by best harnessing the diverse marketing environment wins.

What makes sense to me, conceptually at least, is that Advance is trying to remain at the solid center of its business. Here, it is leveraging Microsoft technology and network assets, but is not bound to its platform.

Via Ken Doctor of Content Bridges

News Corp. Newsrooms Worldwide To Share Content Through New Service NWS

News Corp. NWS is launching a global service to make its news content available to its entire network of TV, print and online news outlets across the world, Guardian UK reports.

The service, called NewsCore, will scan News Corp.’s story queues, satellite feeds, and Web sites, and make the content available in real-time to the company’s newsrooms worldwide. The company first announced the project in April.

Guardian: “When Sky News reports that Gordon Brown has called an election, everyone in the NWS family can run with it. When TG24 learns that Vesuvius has blown its top again, everyone in NewsCorp will have it. Immediately. And from a source we can trust – us,” said an internal briefing obtained by MediaGuardian.co.uk.

NewsCore will distribute text, video, audio and citizen journalism around the world in real time.No word on when the service will launch.The internal newswire, NewsCore, is also good way to consolidate resources and save costs.

Google CEO keen on M&A to extend cloud computing lead

Google Inc. is ready to seize any opportunity to grow its cloud computing business, Chief Executive Officer Eric Schmidt said, The Nikkei reported in its Wednesday morning edition.

Schmidt said that Google has “begun seriously looking at acquisitions again” in an interview Monday at the company’s headquarters in Mountain View, California. The Internet giant is training its sights mainly on venture-stage firms poised for growth.

A pioneer in cloud computing, Google is hurrying to further strengthen its capabilities. It decided last month to acquire On2 Technologies Inc., a manufacturer of video compression software. Similar deals may be on the way as Google scans the horizon for firms with key technologies or promising Web services.

Microsoft announced last month that it will form an alliance with Yahoo! Inc. Schmidt said Google will counter by focusing on innovation and seeking its own tie-ups with other firms on Web searching and advertising.

Can Anyone Actually Tap the $100 Billion Potential of Hyperlocal News? | Fast Company

Hyperlocal sites — covering cities, towns, or just a neighborhood — can deliver precision-targeted advertising to local and global businesses. As the once-exponential growth rate for most Internet advertising in the United States grinds to a halt, the online local-advertising market is projected to grow 5.4% in 2009 to $13.3 billion, according to media research firm Borrell Associates.

…

Boosters routinely note that more than $100 billion is spent annually on local ads — TV, radio, print, outdoor, direct mail, and online. Although the stat’s origins are fuzzy, what’s clear is how aggressively folks believe those ad dollars are migrating to the Web. Borrell Associates projects an online local-ad market worth $15.5 billion by 2013, fueled mostly by small businesses ditching the Yellow Pages and local newspapers.

…

A Hyperlocal Pyramid

The Times’ executives behind the Local, to their credit, aren’t fooling themselves that they will succeed based solely on advertising — though targeted local and national ads are two parts of the Local’s three-pronged business model. “We’re talking about several hundred thousand dollars a year in personnel costs,” says Jim Schachter, editor of digital initiatives at the paper. “I don’t think the local digital-advertising market anywhere — not Maplewood; not Fort Greene, Brooklyn; not Dubai — would cover those costs.”

The third aspect of the Local’s strategy reveals where the Times sees the most opportunity. If the Local’s test run proves to be successful — meaning that it creates a vibrant content site with an engaged audience — the Times would look to license the Local’s platform to bloggers in other towns as a prepackaged tool kit. “Our hypothesis,” Schachter explains, “is that there is a swath of people — experts of various sorts, journalists, self-trained bloggers — who would want our assistance in professionalizing their work and who would love to be associated with the Times. We could help those people mobilize their communities and gather local-advertising dollars in extremely low-cost ways. That could work, economically, for these local journalism entrepreneurs, and, at scale, it might work for us.”

Internet be damned, newspapers to stop their slide? – InternetNews:The Blog – Kenneth Corbin

Borrell and Associates, a market research firm based in Williamsburg, Va., that focuses on media and advertising, is forecasting that newspaper revenues from print advertising will not only level off over the next few years, but actually increase.Not all ad revenues print and Web. Just print.

“With news stories of bankruptcies, reduced distribution, and outright closures, it is easy to see why some observers think the newspaper is an endangered medium,” writes Borrell President Colby Atwood. “But amateur pundits often make the error of forecasting with a ruler, extrapolating current trends straight into the ground.

“Borrell looks for the precipitous decline in ad revenues to end this year, projecting that newspapers will post a 2.4 percent increase in print-ad sales next year. By 2014, Borrell estimates that newspaper income will have climbed 8.7 percent from this year’s mark, which it’s pegging at $35.9 billion.

That’s a steep drop-off from the halcyon days of 2001, when newspapers hit their high-water mark of $53.4 billion in print-ad revenues, a point the firm’s CEO Gordon Borrell says the industry will never see again. Borrell convincingly describes his firm’s prediction as a “dead-cat bounce,” but it’s still a hopeful sign for a print medium that is routinely written off as being on life support, a leaky boat, a dinosaur, etc.

What gives the analysts their optimism? Newspapers will reinvent themselves with more of a niche focus, transitioning to something resembling a magazine-style format (longer articles, more graphics, less frequent publication schedule) that caters to a well-educated, high-income demographic, Atwood said.

Also, the industry is hardly a monolith. Borrell notes that the largest 150 or 200 papers, from the New York Times on down, have been hit the hardest by the drop-off in classified and retail advertising. But suburban and community publications have fared considerably better, and Borrell expects that their ad sales are headed into a period of growth as local advertisers look for the “de facto geographical targeting” opportunities those papers afford.

Via Internet News