Do not think “ads.” Think “jobs.”

Twice in recent weeks I’ve had conversations with fellow journalists that settled on the old advertising-versus-subscription myth: “There are just two types of revenue for news organizations – advertising and audience.”

Each time, I told them that split is too simplistic – and doesn’t match how The Bosses have historically managed the business.

I’m usually willing to cut slack on this issue – I was basically stupid about news-industry finances until I left the newsroom. But given its increasing importance, I want to elaborate on those conversations and weave in some stuff from my business-of-journalism class.

Don’t think about “advertising” or “audience” revenue. Think about why people are willing to pay you; what they are actually paying for; and how you organize to serve those customers.

(Credit-where-due note: This piece borrows heavily from the late Tom O’Malia at USC and the inestimable Clay Christensen at Harvard Business School.)

For our examples, let’s take the largest revenue category at most shops – advertising. The very notion of it as a monolith  masks the “why” and “what” questions above: The problems of, say, car dealers differ radically from those of cell-phone companies. So let’s throw out the framework of “advertisers” and instead think of separate groups of customers, and their different needs.

The “how” question? Let’s build our internal organization structure around “lines of business” – or the specialized teams (sales people, designers, product managers) who serve particular groups of customers.

Tom used to illustrate the concept like this:

The customer may seem self-explanatory: “The advertiser.” Nope. Get more granular: Used-car dealers versus human-resources recruiters. Ad buyers at Target and Best Buy seeking distribution for their Sunday sales circulars versus your neighbors publicizing their garage sale.

The benefit they receive should be similarly nuanced. This is the job the customer is hiring you to do on their behalf.

That job is not “exposure to my audience.” Remember: No one wakes up in a cold sweat at 5 a.m. thinking, “My God! I have to buy an ad in the morning!” But lots of business owners wake up in a cold sweat thinking “Where am I going to get some new customers?” – or “How am I going to find that left-handed Django engineer?” or myriad other problems.

You need to understand your customers’ problems – and how your products can help fix those problems. Those solutions can (and should) stretch far beyond mere publicity. The live-events line of business is often about making direct introductions between sponsors and certain attendees; the digital classifieds business (car sales, help-wanted postings) has evolved well beyond mere listings to using algorithms to matching specific shoppers with specific listings. A used-car dealer trying to move a lime-green Honda Civic doesn’t really care about people looking for brand-new minivans.

The sales channel is how you connect the dots – how you convince the customer that you have a product that can solve their problem – that you can deliver value to them.

In other words, don’t think of a single bucket of revenue called “advertising” – think of it as six, seven or eight different buckets, each with its own unique value to the paying customer, each requiring its own measurement and management.

Print and digital ads sold to local retailers to promote their wares? Let’s call that local display, and let’s have a dedicated team of sales reps who spent most of their days out of the office working with those clients.

The same kinds of ads sold to national cell-phone companies and really big local advertisers like the big hospitals? Let’s call that major accounts – retail, and have them work closely with our sales team in New York.

Garage sales and other general listings tucked back in the want ads? Let’s call that classifieds – other – and since most of those customers only buy a couple ads a year, let’s keep the costs way down by handling all those business over the telephone and via email.

And so on, through categories like “help wanted” and “automotive.” You could tell how seriously each line of business was being taken by The Bosses: You just looked at the quality of the managers assigned to the category. General classifieds (the garage sale and lost-pet ads) almost always had the youngest managers, and the sales teams never left the building. They sat at a phone bank with headsets on, waiting for the phone to the ring.

In theory, the best leaders and sales people got promoted over time to the biggest and toughest accounts – major local retail and the car dealers. (Theory isn’t always practice, of course: I remember flummoxing one allegedly senior rep when I kept asking why her account, the largest health-care and hospital group in town, was down 30 percent year over year in their spending with us. Have they changed their strategy? Do they have a new leader who hates our company? Are they shifting everything to radio and TV? Time after time, her only answer was “I don’t know!” until finally she yelled at me: “Look, all I know is that no insertion orders have come out of the fax machine!” No wonder that sales team had the reputation for being mere order takers, better suited to work at McDonald’s. My buddy Bill eventually fixed that.)

Thinking in terms of “lines of business” also allows you to spot new opportunities. For years, the newspaper industry treated subscriptions the way grocery stores treat milk: A loss leader. Those 99-cents-for-13-weeks circulation come-ons did not make a dime of profit. (In fact, on balance, it cost about 25 to 50 cents per copy to simply print and deliver each day’s edition; the subscription fee typically didn’t even cover those costs.) The real profits were in the advertising.

When ad revenues started plummeting in 2006-07, it took counter-intuitive thinking, and heavy-lifting analysis at The New York Times to figure out the digital-subscription puzzle: Very few people are willing to pay anything for news. But a smaller, passionate group of super-users values us so much that they will pay a lot. Hence the nearly-universal metered-wall – which a lot of people (me included) though was the height of stupidity when The Times launched it in 2009. (Tim, I apologize for all those nasty things I said.)

The point of all of this: Don’t fall into the trap of limiting your thinking to the traditional notions of “advertising” or “audience revenue.”

Instead, think of “specific jobs my organization can do to solve a problem for someone who is willing to pay us for it.” Examples? That’s another long post for another day – but here’s a hint.

If you’re able to shift your organization thinking, you – and your journalism – will be better off for it.

Got a question? Want to argue a point? Ask in the comments below.

What the students taught me this time

More musings after another session of an entrepreneurial journalism course:
Four years ago, when I first taught my AU class (with the insightful Bill Day), traditional media were reeling from a double-whammy – the secular collapse of classified revenues, driven by pure-play Internet companies and the general economic downturn.
American’s grad program was awash with students from traditional media backgrounds. As Bill and I coaxed them to think through the business potential of new ventures, many of their proposals reflected what they knew: big organizations requiring multi-million payrolls and other cost-prohibitive expenses.
Through four versions of the class, that has shifted slowly, but inexorably. Today’s students tend to be younger, much more familiar with digitally native ventures – and much more comfortable pitching small, focused ideas that can be executed with very little investment.
So instead of 40-person organizations that were attempting to re-invent the newsroom of the past, this year’s group produced compelling ideas like:
– A tiny operation that combined concert listings with Storified reviews of the show from earlier stops on the tour to help users decide whether to shell out the bucks for tickets. (Watch for a test launch soon.)
– Community-driven sites combining the power of talk boards with tight editorial focus to help nurses in North Carolina, or schools struggling to pick educational technology in Georgia.
– A hyperniche sports site – not all sports in an area, not even high-school sports there. Just high-school football in the D.C. area. (Too niche, you think? It emulates successful sites in other football hotbeds.)
In fact, only one student dared to pitch a project that needed to generate millions a year in revenue to survive. That’s a tough putt – but she made a compelling case that her idea (an extension of existing video efforts at her current organization) made both editorial and financial sense. All she needed, she said, was 20-some employees.
(Any validation she wanted came the following Monday morning. Unbeknownst to her, her company had been considering a remarkably similar idea. They announced it to the world barely 48 hours after she had finished her pitch. Except they weren’t spring for 20-some employees – they were hiring 75.)
Ideas like these are what give me hope for the future of journalism. As Clay Shirky and Jeff Jarvis suggest (and teach), the future will be smaller, nimbler, and more collaborative – dozens or hundreds of small organizations rather than two or three massive ones.
I’ve left out a description of my favorite project from the class, lest I jinx it.

Let’s just say this: The premise of the class is that students must develop a project as a thought exercise. In other words, if I were to try something like this in the real world, how would I generate revenue? What problems would I seek to solve – both for my audience, and for my paying customers.

Someone in the class must not have read the word “if.”

A lesson re-learned

I last taught my media entrepreneurship class at American University two years ago.

That group’s ideas were, in a word, transitional. Many revolved around how they could take familiar media ideas and adapt them to a digital age: let’s capture listings for my traditional newspaper in a different way. Let’s build a tool to allow sources and traditional newsrooms to collaboratively assess documents. Let’s turn the classic suburban weekly newspaper into a digital-only publication.

By contrast, this year’s class pitched more-radical rethinks. Yes, their project ideas had familiar themes – hyperlocal sites or food-and-drink blogs.

But they had a couple real head-snappers, too: A medical-information site that blended scientifically-reliable reporting with Angie’s List-style reviews of docs and hospitals. Or projects executed almost entirely as a YouTube partner channel. Or – my personal favorite – a multi-screen, API-driven site to allow users to view their favorite sport* in a new way.

(*Yes, I’m being intentionally vague to honor NDAs. In doing so, you’re losing a little of the flavor. Most of you, in fact, wouldn’t even recognize the “sport” the student is pitching – and I guarantee that heads at Comcast Sports Net would explode if they saw the usage data and dollars spent on this sector – because it’s nowhere on their radar.)

Once again, the students reinforced what is to me the dominant theme of last half-dozen years in media: Digital forces may be flaying traditional operations – but those same forces create myriad opportunities for entrepreneurs.

The most gratifying element? Well, one student is already neck deep in executing a variation of her project pitch inside her (very traditional) organization. Two more have been in touch to say they’re still tinkering to try to execute their idea. Fingers crossed for all of them.

YouTube and the coming beatdown of TV ad revenues

YouTube is becoming one of those “gradually, then all at once” phenomena – like the rise of always-on high-speed internet a decade ago, or the gradual-then-sudden collapse of newspaper ad revenues from ’05-’08.

When a colleague and I first negotiated a YouTube syndication/revenue share agreement back in 2007, most of the media world treated YouTube as a novelty, a place for keyboard cats and 14-year-olds’ rants. Certainly it would never be a venue for serious content, or for real ad dollars.

Today? Media companies are falling over themselves to expand their YT presence. Talent is flocking to its burgeoning content channels. A knowing acquaintance talks of regularly cashing $10,000-a-month revenue-share checks from YouTube for his guerrilla content operation – and of people he knows who often add a zero to that figure. (Why no link? I’m respecting a confidence, folks.)

Oh, and before my friends on the broadcast side of the media business feel too smug about their record-breaking political season?

Local TV makes strong revenues (and high rates) because of its oligopoly power over geographically targeted video ads – and because there are inherent limits on its ad inventory (only 24 hours a day, only certain hours during the day with high viewership around local content, only x minutes of ads per hour). To media companies, those both feel like protection against the sort of collapse that roiled the newspaper business.

Except:

We all know the Obama campaign in particular spent boatloads on YouTube this cycle.

And I just saw my first-ever LOCAL business running a pre-roll on YouTube. Something is afoot when local businesses in the sleepy backwater of Nielsen DMA 43 start changing their ad-buying patterns.

I’m not predicting an imminent collapse in broadcast revenues. (Ad dollars do follow the audience – but usually much more slowly than new ventures would like.) But YouTube has nearly unlimited ad inventory, and breathtaking targeting abilities. Change is coming.

 

Required reading: The birth of Red Eye

From the inestimable Owen Youngman, the sort who always says his mood has never been better in spite of whatever crisis is breaking.

Here he outlines the birth of Red Eye, the youth-focused commuter paper of The Chicago Tribune, and a classic example of disruptive and lean product innovation at work.

The great job you might not think of

Two must-read blog posts from erstwhile colleagues prodded me into finishing this entry, which I started far too long ago.

It’s for all those friends of mine – unemployed, underemployed, or just feeling dead-ended in their traditional newsroom gig.

There’s a  type of job out there you might be good at. It has a title you’d probably never think to look for. Your skills might match it anyway.

“Product manager.” (Here’s an example.)

Terrible title. (Could it be more bureaucratic?)

Great job, though — especially in terms of influence and power.

Product managers get to decide what functionality to add to a website (think commenting and audience-photo submissions for a newspaper site).

They’re at Ground Zero of the launch of new freestanding brands (think of a locally focused entertainment product), or managing the digital equivalent of an old warhouse.

At its core, the role is about representing the customers (note the plural, please) in all decisions – designing a site, deciding what functions a mobile app should have, figuring out what forms of content and advertising a new digital venture should have.

Years ago, when I first started developing new products, I was struck by the similarity of product management to  the role great section editors play – especially over how to allocate your staff and what the highest priority was at the moment.

In other words, if you’re inquisitive, smart and decisive, you can be a great product manager.

Many of the great ones I’ve known and worked with started their careers in newsrooms. They’re always asking questions. They’re voracious readers of anything related to the topic at hand. They know what the competition is up to. And they’re always, always pitching new ideas.

I’m not the only one who has latched onto that analogy. Matt Sokoloff – a long-time product manager for the Orlando Sentinel and Tribune Interactive, now a Reynolds Journalism Institute fellow at Missouri, uses it with students all the time.

“A good journalist can write a good article. But a great journalist can write a great story,” he says. In the same way, “a great product manager can build a great product.”

A couple caveats – both around the idea that you can’t simply waltz into the job and play everything by ear.

Section editors and street reporters tend to rely on experience and intuition (at least they did back in that other century, when I had those jobs).

Product managers risk disaster if that’s their main research tool. They need to use real data – and if none exists, run tests to generate some. (See Eric Ries’ excellent The Lean Startup for more.)

Second, about that plural noted above: Almost every product has multiple customers – and the ones who actually pay are highly important. For most news media, that means the advertisers, not just the audience. And even those segments have sub-segments that you must understand.

Understanding all those nuances takes enormous work. But then being good at a beat, or running the best features section in the state takes work, too.

Leftover stuff:

It’s worth noting that both of the blog posts that prompted me to finish this screed tie back to perhaps the most-brilliant piece of the year about entrepreneurial journalism: David Skok and James Allerton’s remarkably thorough three-part discussion with Harvard Prof. Clayton Christensen.

The piece takes Christensen’s groundbreaking research on disruptive technology and applies it to the business side of news. It’s a true must-read for anyone interested in the future of our business – and it’ll be required reading for the next group of students I’ll be teaching at AU.

Finally, if you want a condensed, rigorous look at those ideas, get your boss to send you to API’s upcoming session on disruptive innovation for news, part of its Transformation Tour.

Qwiki: Web video, fast, different – and free

I love tools that allow writers and producers to create digital-native content in a hurry. One of my new favorites is Qwiki – a video-generating platform that gets several things right:

* It recognizes that digital devices are non-linear, and benefit greatly from annotation.

* Unlike, say, Final Cut Pro, it is stupid easy to learn.

(I’d show you the first Qwiki I created – it took only 20 minutes – but I built it by annotating a simple speech. (Hey, the video was laying around, so I grabbed it.) Here’s a much better use case, from fashion blogger Shea Marie:

 

Play the Qwiki: 5 Easy Summer Hair Styles to Try

I just spent 45 minutes showing the tool to some colleagues from around PBS. I think it’s safe to say you’ll see some interesting tests in the coming weeks (and for once, nothing bad will happen to poor Beaker. I think).

 

(Edited to fix a typo. H/T to Dani Abraham @Qwiki for the catch. Hey, I was a line editor, and always grateful the copy editors were behind me.)

Video from PowerPoint … and other interesting tools

I’ve been having interesting conversations with a number of folks lately around a basic premise:

Webinars suck.

They seem a useful way to disseminate information to a large audience at once. But the format isn’t terribly engaging – and as a friend always reminds people, on the Internet, porn your email is just one click away.

I’ve conducted webinars that seemed engaging – yet when I looked back at the dashboard later, I’d see that at any given moment (even during my best jokes!) a third of the audience or more had some other app at the front of their screen. (Yes, the webinar system spies on you.)

So what’s better? Well, I’m playing around with that, and I’ll share results when I know more.

But along the way, a couple interesting free/low-cost tools:
– Have a PowerPoint that you really need turned into an embeddable video? Yeah, the latest versions of PPT will do that for free – but if you’re using PowerPoint 2007 or earlier, try Brainshark. (Free to try; as little as $10 a month per prezo to get rid of the nagware and open up the full feature set.)

Here’s a sample (one that happens to emphasize how cheap digital technology has democratized content):

* And speaking of video, I’m especially intrigued at how people are using overlays to add hyperlinks to video content. It reminds me of the first days of (quotes imply irony here)  “hot links.” (Or, to date myself even more, HyperCard).

Video is on the verge of becoming a non-linear, ever-extensible story-telling form … and my obsession of the moment is Qwiki. Play with it and you’ll probably see why. (And your reactions are welcomed in the comments.)

 

About the Great CMS Quest (and that AdWeek piece)

An article on AdWeek has gotten more than a little attention this week. It talks about Content Management Systems – the big hunks o’ technology that drive websites and print publications – and how most of them, well, stink.

It’s prompted some hilarious email threads, and more than a few bad memories, among some of us who’ve been at this digital-journalism thing for awhile.  But the piece misses some crucial points, I think.

First, journopreneurs should just ignore it. It focuses mostly on the difficulties in finding a single system to produce both traditional products and digital. Digital-only operations don’t have a traditional product to worry about.

So lash together a site using WordPress and a theme you like, and focus on building great content and an audience. Yes, as the piece notes, open-source systems can get creaky when put under enormous loads. Worry about that when you’re doing millions of page views a month.

(By that time, the Knight-funded Armstrong CMS might solve the problem for you. It’s already quite good, and could become the open-source solution for news if a large-enough community adopts and supports it.)

Second, I’d note that most of the legendary failures cited in the piece (and a couple others I’ve seen up close that are safely hidden in corporate files somewhere) have this in common: They start with existing print workflows and try to staple on web functionality.

That’s a huge mistake because of the differences in how consumers use the different media. The web is fluid. It requires – and benefits from – constant updating. Print is static – all efforts are aimed at a single time of publication, perhaps with some slight variations for regional editions.

Forcing one production team to adopt the other’s workflow doesn’t work. Keeping separate systems for the web and the legacy product is a pain for reporters and editors.

Hence the quest for the mythical Perfect Solution (which apparently is hiding with the unicorns, chucacabras and Super Bowl-champion Minnesota Vikings teams).

The perfect, of course, is the enemy of the practical. So I humbly suggest you dump the idea of One Perfect System. Instead, create ways for your separate print and digital systems to talk to each other.

We won’t get too geeky here (largely because I hit the limits of my technical knowledge pretty quickly). But ask your technology team if they’ve thought of breaking up the problem into a (meta)data layer, an abstraction layer and a presentation layer. If your geeks don’t know what that all means, tell them to find out – or fire them and hire people who do. (They really do exist.)*

(*And to save Scott Karp the trouble of commenting, look too at middleware solutions that can link content from your web system back to your print CMS. It’s far easier, and at least 1,000 times cheaper, than that Unicorn-designed Perfect Solution someone is trying to sell you.)

You got laid off – now what?

I can tell there was another round of layoffs at one of my old newsrooms: I’ve had a flurry of LinkedIn invites from former colleagues.

There’s been the usual grumbling about the heartless bastards at corporate, at how these cuts will only further diminish our Noble Religious Calling, etc. – but the reality is these cuts are only going to continue in traditional media.

The financial numbers are awful: Print ad revenue at publicly reporting companies keeps going down, down, down.  Revenue is off by half since the 2006 peak, and has dropped for 20 straight quarters.

And it’s not the economy, stupid (sorry, Carville). Digital ad revenues at most shops continue to grow and the overall interactive ad economy grew by an astounding 23 percent in Q1 vs. the same period in 2010. Does anyone need more proof that the long-predicted seismic shift in ad-spending patterns has happened? Does anyone really think the financial picture will automagically improve? Buehler?

So: what should my newly unemployed friends do?

My erstwhile colleague Mark Potts offered sage advice in this neatly packaged 2009 blog post: 10 Tips for Suddenly Unemployed Journalists.  Some of my former colleagues must have already read it: The LinkedIn tip is No. 5.

I would add only a couple additional thoughts:

1) Start on all of Mark’s tips now – before the Reaper comes.

2) Keep backup files of everything – beat notes, your story ideas and especially your Rolodex. I know too many people whose employers locked their access to their email accounts the moment the layoffs took effect, and who suddenly lost years of carefully organized contact information. (My bosses were kind enough to extract it from Outlook for me. As a printout. Um, thanks.)

3) Get digital. Now. To paraphrase a delicious job-interview story,* there are two kinds of journalists these days: digital ones, and unemployed ones. Start a Tumblr blog, follow Andy Carvin to see  how Twitter can be used as a reporting tool, join ONA – just get in the damn pool.

The future of new is being invented right now, and plenty of traditional journalists are part of it.

But most of them aren’t at their traditional organizations anymore.

 

*OK, so that’s far from the most-elegant line I’ve ever written. But it gives me an excuse to tell a great story.

Years ago, just before the Great Collapse, a hot-shot job candidate was interviewing with the interactive corporate staff at the place I worked. She was an articulate, high energy MBA from a seriously good business school, and she totally nailed every interview. The team wanted to hire her quite desperately.

So in one of the final meetings in the process, our uber-boss makes an effort to impress her. He looks across the table, and intones in his most sophisticated and leaderly air: “You know, we’re in the process of turning this place into a digital media company.”

The candidate, who by that time had clearly and correctly decided that we were doomed, snapped back: “That’s good – because in about five years, there are going to be only two kinds of media companies: Digital ones, and dead ones.”