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Saturday, August 14, 2010

 
Google's Schmidt on Targeted Ads, Monetization & the Future of News
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Wall Street Journal columnist Holman Jenkins has a terrific, wide-ranging interview with Google CEO Eric Schmidt in today's paper that is well worth reading. One thing worth highlighting is Schmidt's comments on the "economic disaster that is the American newspaper." He argues that, "The only way the problem [of insufficient revenue for news gathering] is going to be solved is by increasing monetization, and the only way I know of to increase monetization is through targeted ads."

Absolutely correct. It's a point that Berin Szoka, Ken Ferree and I tried to make in PFF's mega-filing in the FCC's "Future of Media" proceeding in early May, and Berin and I stressed it in even more detail in our piece on"Chairman Leibowitz's Disconnect on Privacy Regulation & the Future of News." The key takeaway: If Washington goes to war against advertising -- and targeted advertising in particular -- then there will be no future for private news. As we stated there:

The reason for the indispensability of advertising is simple: Information (including news and other forms of "content") has "public good" characteristics that make it is very difficult (and occasionally impossible) for information-publishers to recoup their investments. Simply put, they quite literally lack pricing power: Whatever they charge, someone else will charge less for a close substitute, inevitably leading to "free" distribution of the content, even though the content is anything but free to produce. Advertising is the one business model that has traditionally saved the day by rewarding publishers for attracting the attention of an audience.

Thus an attack on advertising is an attack on media / news itself. And yet Washington is currently engaged in an all-out assault on advertising, marketing, and data collection efforts / business models.

Incidentally, Google recently submitted comments with the Federal Trade Commission in reaction to its Staff Discussion Draft about the future of journalism and laid out their views on many of these issues. More importantly, as summarized on pg. 30 (of the pdf) of this Newspaper Association of America filing to the FTC, Google has proposed an interesting monetization model that utilizes Google Search, Google Checkout and DoubleClick ad server, "to build a premium content system for newspapers." Worth checking out. Kudos to Google for taking these steps and to Schmidt for again stressing the importance of targeted advertising for the future of media.

posted by Adam Thierer @ 1:30 PM | Advertising & Marketing , Mass Media , Media Regulation

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There is a profitable, long-term business model for newspapers, but only if they quit the "pity me" whining and take a realistic look at the opportunities in the marketplace.
Opportunities, you blithely ask?
"Why, yes, Virginia there is an Opportunity."
Newspapers must take over the ISP marketplace, become the portal to News, entertainment, Information, Education and "everything that's fit to read" through their Home Page.
How will it work?
Newspapers should initially agree to buy per-subscriber Internet Infrastructure Access for their subscribers on Cable and Telco's existing backbones, at reasonable and competitive pricing, which must be directed by FCC Licensing and Audits to assure compliance.
At the same time newspapers are-and this is a long term key-persuading the FCC and Congress that Free Speech requires reasonable and competitive access to Internet Infrastructure through separation of Content from Infrastructure. Cable, Telco and others accomplish this goal through direct sale or spin-offs, to the effect that Cable and Telco management have no control over Content providers, and must compete for Content on a level playing field.
As Infrastructure providers perform the necessary restructuring of their business to provide more Infrastructure, and greater bandwidth to deliver Content, the technology available will allow the Infrastructure providers to accomplish their mission, yet still make a profit deserving of attention by investors, just not the monopoly profits heretofore gouged from captive U.S. Consumers and businesses.
This leads to more Services. More Entertainment, more Content of every type. Content at higher bandwidth and quality, Content of greater choice, Content that meets the definition of AnyThing, AnyTime, AnyWhere (AAA) which can only happen in a free and competitive marketplace.
(The FCC, also is now being pushed by the FTC, and is considering these issues in 2010-write your Senators and Congresspersons).
Depending on who is measuring, somewhere between 13-18 other countries have better Content choices, and more bandwidth to deliver Content, with higher Broadband speeds, and available for less cost than the U.S. We really have to deal with the Cable and Telco monopolies, the primary cause of reduced Content choice and availability and much higher costs in the U.S.
This all ties in with the new business model for newspapers in that by becoming Internet Service Providers (ISP) they provide a needed service-access to the Internet and all that offers, while realizing the opportunity to offer more Content for less cost; more News, more entertainment, more everything. In effect, their Subscriber's Home Page becomes their Front Page and Table of Contents-everything from Search to Online Education, Cloud Commuting to Cloud Health; all types Content with which they must compete against others.
By becoming the ISP Portal, they can compete with Cable and Telco for the News, Entertainment (New First Run Movie Releases at $10.00 per household, 20 million households guaranteed), and many choices between Tiered Services of Email only, to Pay-Per-View Content, to packaged baskets of Services like Home (Cloud)Security, Home (Cloud) Health, Home Education (see Cloud Education) the new Charter School of Phoenix University potential (400,000 Online Learners), multiplied by 100.
The potential is limitless, but the existing monopolistic structure enjoyed by Cable and Telco has robbed the U.S. consumer of many, many chances for Service and product choices that Newspaper ISP's could begin to offer right away.
The Content Infrastructure of current newspapers now under rapid demolition, could be preserved, even improved greatly. Bloomberg, WS Journal, Associated Press and others, some that would develop to serve the new opportunities, could offer packages of Content that they now control, and new Content to be developed, to newspapers with a potential subscriber base of 125,000,000 households and up to 25,000,000 small businesses, encompassing up to another 70-80,000,000 accounts through the business base. (Half of all workers have a workplace computer).
The many complementary tie-ins to Education, Community, Government and Health are very obvious, and desirable.
You can be sure that Cable and Telco will resist to their last lobbying dollar any attempt to remove their monopolies.
But, we can do this.
In the '70's the FCC required Television to separate their exclusive production of Content and opened up the marketplace to the thousands of choices we have today, which would be even more, absent Cable and Telco's ability to control access.
Requiring Cable and Telco to spin off or sell to unaffiliated companies their Content could only open up the marketplace to the hundreds, if not thousands, of creative Content choices that Newspapers could provide.
For the good of the American public, the need for Free Speech and all it's importance to America, separating Content from Infrastructure, driven by the new Newspaper Business Model, is the way to save the industry, while at the same time providing Americans with more Content Choices at competitive prices.
The new model would also generate revenues necessary-think of it, half of American households subscribe to Newspapers, some 60 Million or so.
At even $30.00 per month for the very highest level of Broadband Services, the Newspaper Revenue stream would be 18 Billion a month! Enough to pay for News Syndicates, web designers, Local-Local-Local Content and a host of other services.
Add to that Premium Content that could be sourced competitively for re-offer to Consumers -"Mission Impossible Six-the new Generation, Meet the Focker's Grandchildren, Star Wars 20- Universe Core." So many more choices to satisfy every need; for Entertainment, Information, and Communication. And nothing would stop other competitive Content providers from becoming ISPs or delivering Content, we might even get back to multi-newspaper towns, with the desired different viewpoints that this offers.
How about Cloud Commuting-Billion of hours and gallons of fuel saved, millions of tons of pollution saved; millions of square feet of Office space, utilities, air conditioning, concrete jungles, all saved.
How about Cloud Charter School at Home-the Next Generation of Education? (This opportunity may be facilitated by Cloud Commuting, since needed Mentoring and Coaching will be available through whichever stay and work-at-home parent(s) are available).
How about Cloud Health. "Mr. Jones please stand in front of your Scanner for your daily checkup."
Newspapers can lead the way to the new generation of Content and Internet.
The future of Newspapers and Cable/Telco are tied together, but not in the ways each perform their duty to the public today. Today's business models have to change to ones that work for the Consumer-the very reason for the existence of the industries.
The FCC and FTC must realize that America's future competitiveness, and the continuing evolution of opportunities for American consumers and business requires this new model.
Their "charter" from the American Public requires it.

Posted by: Barry Dennis at September 6, 2010 4:08 PM

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