For the Week of May 19, 2003
For several months now I have gotten complaints from readers about the lack of Internet Content (or advertising) stories in this space.
It's a fair cop.
But nothing has happened in this space for quite some time. The field has been abandoned, turned over, and allowed to go fallow. A new crop of content has arisen, blogs driven by the passion of their authors. And we seem in many ways to be back in 1994. We have content with no business model. If this is allowed to go ripe - if bloggers don't see some money - this space will spoil just as the personal Web space and e-mail newsletter spaces did.
In working to create a business model for bloggers it helps to look back and decide what we don't want. The biggest mistake made by the "old" content industry was in loading-up their pages with lots-and-lots of ads. First, they tried a host of different banner sizes, so some pages had as many as 15 ads. Later they launched pop-ups and pop-unders to the point where customers demanded software against them.
These two mistakes are related. When sites failed to get their price on banners, they simply created more ad space. This created a downward spiral on pricing. When a magazine can't sell an ad at a price it's willing to accept, it doesn't print white pages. It prints a content-filled magazine, and eventually either the market turns around or the book goes under.
I can't sell X at a price I can afford, so I'll create 2X, 5X, 10X (against the same content) and hope to succeed that way. This drove ad rates below the floor, and left users playing "whack-a-mole" on multiple pop-ups per page. Dividing stories into multiple pages is a variation on the same theme. You're still trying to double, triple, or quadruple the ad inventory without delivering additional value to anyone, either your reader or your advertiser.
Now some, like Salon, demand attention for ads as the price of seeing any content. This is just plain stupid. Advertisers don't need forced attention, they need attention willingly given. If someone is looking at your ad with an angry expression on their face you have no hope of making a sale - and sales are what advertising is about.
So what can be done? Since we have a new content universe, in blogs, we have a new opportunity to get it right. Following are a few proposals:
- Limit your ad inventory. You offer one or (at most) two ads per page, no more. When you sell out this inventory you raise your prices, you don't create more inventory.
- Sponsorship skins. Every page on every site is surrounded by some sort of "trade dress" for the publisher. What if we took that surround and made that the ad? An outfit called iLor has been trying to do this by offering sponsorship "skins" on pop-up services, like organized hyperlinks. What if we did this on the surround of an entire blog page, and sold that sponsorship by the day or the hour? The color would carry a brand message, a single advertiser's message would surround the content, and that message would be absorbed slowly, on the user's own terms. A sponsorship with, perhaps, a secondary ad from another advertiser that links off-site, is the maximum load any story should carry.
- Shared Registration. Blogs need some sort of shared-registration scheme. No blog publisher has the money to build this, it should be done by a third party. Users should have one place where they can tell the blogosphere what their interests are, what kinds of pitches they might listen to. The ad they get on each page they go to can then be customized, based on these preferences, raising the CPM (cost per thousand) value of every ad. Registrants should be able to enter this database once, and have a cookie that can let them register at other sites with a single click.
- Pay Per Action. Once ads are going to prospects instead of just suspects, through shared registration, sites should be happy to take payment based on action (like clickthroughs, completed registration forms or sales) rather than page views. Pay per action pricing can, through analysis of server logs, yield an implied CPM, and the company handling the shared-registration scheme should be willing to share that CPM with member sites.
- E-Mail. This should be a benefit for registration, and it's critical for improving the circulation of any blog. Integration of e-mail delivery with Web ad services - true integration - is essential to increasing circulation and delivering the cash bloggers need to keep going.
These new rules spell opportunity for someone, but there's no capital to launch this thing quickly. This is something that must be built, not launched.
Start by understanding the rules. Limit your ad inventory. Concentrate the site's efforts on selling sponsorships. Register users in exchange for benefits (like e-mail) and share those registrations (through cookies) to reduce the workload on both users and sites. Draw in advertisers with pay-per-action pricing. And if you're going to increase inventory, do it with e-mail, not by piling more ads on the same pages.
In my work at Mediapost I learned that CPMs in other media - the cost per thousand to see an ad - continues to be in the mid-twenties at most print publications. Meanwhile, it's stuck at around 50 cents on the Web. No one can make money that way.
But in order to get that rate up Web sites need to deliver for their advertisers. They need to deliver customers, they need to deliver statistics, and they need to guarantee willing attention (not grudging acceptance) from their readers.
Give registrants incentives to deliver information once. Share that data through a pop-up that asks the user if they want to register for the new site. Present registrants with ads that respond to their interests and needs. This will result in actions that can finally drive Internet CPMs forward.
And for the bloggers, it's free money...beats a begging bowl anyway.
SSP (Shameless Self-Promotion)
I am no longer working at Mediapost . The work was great, I did it well, but I didn't like the bosses, and in the end the feeling was mutual.
The reviews for "The Blankenhorn Effect" are humbling. "Dana, it is GOOD," raves Pete duPont, lawyer, futurist and once a candidate for President. "This is some really powerful 'stuff.' I think you've got a winner," says Drew Kaplan (http://www.dak2000.com) of DAK Catalog fame. One result is I have begun working on a follow-up book, describing the future direction of technology, to be called "The World Of Always On." Buy "The Blankenhorn Effect" at Amazon.Com , or at least say nice things. You can use the ASIN number, 1553953673, and recommend it to readers of other, similar books. You can also save on shipping when you buy the book at Amazon, over the cost of buying it elsewhere.
If you can convince some more published reviewers to read "The Blankenhorn Effect" and recommend it to their readers, please send me a name and address. In exchange, you'll get the PDF version of my second book, The Blankenhorn Effect: Boom, Bust & Beyond. This is a collection of columns from a-clue.com, organized chronologically and by subject, with additional commentary from yours truly.
I have written recently for BtoB Boardroom and Mobile Radio Technology . You can follow the continuing story of "The Blankenhorn Effect" on my "Moore's Lore" blog . (Get my old ClickZ columns here
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Takes on the News
Bush Campaign Against Web's Underground Economy
Eric Schlosser has gotten a lot of attention lately for his book on the Underground Economy, called Reefer Madness. The Bush Administration strategy against the Web's Underground Economy has become crystal clear. Cut off their money.
This is also a key strategy in the war on terrorism and war on drugs, where international cooperation is (in most cases) demanded, expected, and certain. Yet where is Saddam's $1 billion? Are the billions in drug profits of the Mexican and Columbian cocaine cartels handed-over? Corruption and bank secrecy laws argue otherwise.
In fact law enforcement is merely a tax that, like all business taxes, is passed on to the consumer. There's another impact as well - the cost of evading law enforcement drives out small players, and favors large enterprises. Bad guys scale as good guys do, and while Adam Smith is none-too-pleased, he should have expected it.
The strategy is now being used against Internet gambling and Internet porn . The results are not only predictable, but also understated in the above paragraphs. This is because cocaine and terrorism are nominally illegal everywhere. Gambling and smut are not. And, as we all know, some of our great moral police are apt to be involved in gambling, while no less a worthy than Tom Lehrer has spoken most eloquently on smut.
All this represents a tremendous opportunity for the unscrupulous, to create something like PayPal in the Cayman Islands or some other haven of bank secrecy. That organization would serve sites where the Internet activity in question is perfectly legal - Antigua in the case of gambling, Las Vegas and Los Angeles in the case of porn. Users would have their deposits in specified accounts credited through cookies, and just to make things appear kosher, some perfectly legal and legitimate users might be signed up as well.
Crime pays because the market is amoral. The more aggressive the government is in trying to impose its morality on the people, the more crime pays. This is true online just as it's true offline. The Clue is to, as much as possible, conform what government does to the popular will as expressed by the market, not just the polling booth.
Moore's Law Trap for Wireless Broadband
Moore's Law is kinder to some standards than others.
Moore's Law is especially unkind to standards that define performance. Wireless broadband standards are an example of this.
Intel has recently been caught in this Web. Its Centrino chip set works under 802.11b, which runs at 11 Mbps in the 2.4 GHz frequency range. But most vendors have already moved to 802.11a, which runs data at 54 Mbps in the 5.5 GHz frequency range. Now there's 802.11g , which runs at the faster speed in the lower frequency range.
For Intel, this means that users are racing ahead of its standards. The market wants faster, the market is willing to pay-up for that, but the market also isn't growing (in terms of numbers) because entry costs aren't declining and there is no stability.
The way out is for standards bodies to stop specifying speeds, and to specify other performance criteria, so devices operating at different speeds can inter-operate.
The UWB standards do this already. You push signals under the noise floor, between 3.1 and 10 GHz, and what gets through, gets through. There is no specified speed mentioned.
Until wireless broadband standards get down to defining what and how, until they can forget about how much, they're going to remain in this Moore's Law trap, and users will be left with incompatible equipment.
Always On And Moore's Law
Computing's old paradigm of TV-tape recorder-typewriter carried Moore's Law well. The top end of the market always found willing buyers, despite the fact that new chips have low yields and high costs. Everyone wanted the latest-and-greatest client, then the latest-and-greatest server.
I don't think the new paradigm of Always On will work that way. It doesn't take much in terms of processing, or network speed, to tell you that the milk has gone bad, or that the grass needs watering, or that you need to take your Insulin. A measurement, a switch, a ping - even the load on your Always On home server isn't huge.
Beyond this it takes a lot of chips, in a lot of places, to create the Always On home. Even if an application costs just $50 to implement, there will literally be hundreds of them available. You need dirt-cheap hardware, dirt-cheap software and dead-simple installation of "solutions" under reliable, stable standards to grow the consumer market.
Moore's Law promises all this, but down at the end of a product life cycle. The problem is that without a front-end, without someone to pay for the early runs of a new product, you don't have a market at all. This has kept Always On from really getting going.
The answer, of course, is to start in the business market, with applications that, while initially expensive, do deliver a return on investment over time. Security is one such market, and Always On is there. But medicine should be another such market, especially with hospitals. Consider the savings on doctors and nurses if continuous monitoring, and fine adjustments, can be made automatically. Manufacturing should be another such market. If constant monitoring lets you speed production lines and increase safety simultaneously you will buy it almost regardless of cost.
Your Clue this week is to seek out other such markets, business markets where the benefits of Always On deliver a real payback. Build and sell those solutions now. The big money, in consumer solutions, will follow.
Clued-in is Japan , which launched an unmanned satellite charged with returning samples of asteroids. Cost-effective space exploration is vital, and Japan is making itself a player in space at low cost.
Clueless is NASA which should be exploring ways to cut space-lift costs with new technology, and stop fighting so hard to keep the Shuttle's 1970s technology alive. Disco is dead, fellas - get over it.
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