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May 27, 2010, 10 a.m.

The Newsonomics of wilting flowers

[Each week, our friend Ken Doctor — author of Newsonomics and longtime watcher of the business side of digital news — writes about the economics of the news business for the Lab.]

Ah, the Dream of the Wilting Flowers. Like many web dreams, premature, premature, premature…and then, maybe soon, pop. A sensation, with lots of dollars involved. Our best current example: Steve Jobs’ “invention” of the iPad, which of course was dreamed up in quite similar forms, decades before, in the fancies of Alan Kay and Roger Fidler, among others.

It’s all timing, right?

So it’s a good time to get a sense of what’s happening in local mobile commerce among news companies.

A friend visiting the exhibition hall at the NAA Orlando convention in April told me he’d been besieged by mobile commerce vendors. Then there’s the group (mobile commerce) grope, symbolized by the Groupon craze. Get a whopping good deal — but only if you can get enough of the crowd to go along with it as well. Of course, iAds are on the horizon, with Apple offering a sweet-smelling twist on walled-garden marketing pitches. Google’s AdMob — the leading mobile ad network — just got the thumbs-up from the FTC and has launched AdWhirl, its open-source (take that, Apple) “mediation layer” to facilitate mobile commerce. You can’t stay on top of all the mobile-marketing plays these days, no matter how much you try.

Let’s look at newspaper companies and what they’re doing with mobile commerce. Talk about timing: When Dan Finnigan ran Knight Ridder Digital a decade ago, one of his favorite mantras was the Dream of the Wilting Flowers. As in: It’s 4:30. You’re driving down the street. Your phone knows where you are, of course, and coming up, on the right is a florist…with a perishable commodity, flowers that will be worthless within 24 hours. Your “smart” phone, knowing where you are, who you are, your flower-buying habits, and maybe your spending proclivities, sends you the florist’s coupon for half-off, if you stop by within the half-hour. Satisfied merchant, satisfied customer, a perfecting of supply and demand.

It’s still a great vision, with a new generation chasing it, and getting closer. Talk to newspaper companies, though, and you’ll hear the answer is “we’re not yet there.” Closer, but not quite there.

Bill Ganon sees that wilting-flower dream, but he’s drilling down into something more basic: mobile sales training and the establishment of mobile pricing standards and analytics. Then, maybe by the end of the year, he says, the location-aware capabilities of smartphones may start to smell the daisies.

Ganon is the general manager for local market development for Verve Wireless, and Verve is the newspaper industry’s biggest mobile play. Spurred first by AP investment and partnership in summer 2008, many newspaper companies have turned to Verve for mobile content and, now, ad solutions. Verve now powers more than 400 mobile news sites for newspaper and broadcast companies including MediaNews, Hearst, Belo, McClatchy, Freedom, and Lee.

Verve is making a new ad push, after seeing its first forays fall flat locally. That push is predicated on scale. Its network — the Blackberry has just been added to the iPhone, with Android and iPad applications on the way, says Ganon — has grown dramatically. Year over year, for April, it has grown to 8.9 million uniques (from 2.9) and 130 million page views (from 51 million).

When Ganon — a veteran of old media sales at Newsweek and Sunset, as well as eight years with Qualcomm — took over local sales eight months ago, he found a ragtag group of local mobile efforts. Now, as Ganon describes his work, we can see the emerging newsonomics of local mobile pricing. As the mobile commerce world explodes, Ganon is focusing on the basics. He says Verve can now count 75 local sites beginning to make consistent sales, up from around 20 when he came on board. The basics of the push:

  • Training: Verve’s local market sales team of four is spending lots of time training newspaper and broadcast sales staffs on how to sell mobile. That’s reminiscent of the ongoing training done by Lem Lloyd‘s merry band through the Yahoo-powered Newspaper Consortium. (In fact, with all the Yahoo, Verve, and marketing-services training ongoing, I’d wager that newspaper sales people have gotten more training in the last two years than in the previous two decades.) Verve’s training focuses on taking the mystique out of mobile: “Advertisers don’t like stealth solutions. They like to know what’s behind the curtain,” says Ganon.
  • Pricing: Ganon urges a $15 CPM (cost per thousand) floor for selling mobile. With that guideline, he says Verve-powered sites are averaging $19 CPMs, which would be about twice the average of what news sites on getting on the desktop web. Says Ganon: “This is your time to define metrics.” In other words, try to establish a price, not allowing prices to fall to low single digits as inventory is sold by middlemen, as has happened in the main digital business. Right now, most newspaper companies can count no more than five percent of their digital revenue, coming from mobile. Most of that total — maybe $100 million — is going to bigger, national brands like The Wall Street Journal and The New York Times. That’s out of maybe $500 million involved in mobile advertising overall in the U.S.
  • The Pizza Sale: Salespeople are being trained to sell the crust (a banner ad), the sauce (a landing page, tailored to action off the ad), and the toppings (call-to-actions, whether “click to call” or map directions). Pricing is still impression-based, though, Verve sees cost-per-click and cost-per-acquisition offers down the road.

What’s apparent is how early we are in local mobile selling — and how far away it is today from adding appreciably to news site revenues. The deals are small, and even the best-performing sites can count no more than 20 advertisers, with most having far fewer on their sites at any one time.

And the Dream of the Wilting Flowers? Ganon says Verve should be able to add in location-aware selling, maybe by the end of the year, but he believes that it “will be a major breakthrough.” So, 2011, maybe. When that breakthrough comes, the big question is who will benefit most: the local newspaper and broadcast companies, or Apple, or Google, or Yahoo, or maybe Verizon or AT&T?

Ask Walter Sanchez, publisher of BQE Media in Brooklyn and Queens and a Verve client, and he’ll tell you it’s an uphill climb. I met Walter at a recent New York Press Association conference, and his marketing efforts were way ahead of the curve, among publishers. He’s busy selling social sites, SEO, SEM, and mobile sites, he’s proud of getting such small businesses as Beach Bum Tanning sold on mobile ($500 a year for a landing page and 3,000 short-text messages). But he’ll tell you that most local merchants are indeed still mystified by the web, and they’re slow adopters: “When those 21-, 22- and 23-year-olds start buying their own businesses, in a few years, then, we’ll see real adoption.”

POSTED     May 27, 2010, 10 a.m.
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