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June 10, 2010, 11 a.m.

The Newsonomics of tablet ad readiness

[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.]

Are you ready to receive? That’s the question news company should be asking themselves this month, as the second half of the year — with its unexpected flow in mobile ad dollars — beckons.

The numbers are mostly anecdotal at this point, though as some of us forecast, tablets promise a new, significant source of revenue for the companies that are ready to play the tablet game, and play it well.

Among the early evidence, reported by AP’s Andrew Vanacore, are:

  • $50 CPMs ($50 per each one thousand views) for USA Today’s iPad ad, as compared to maybe $10 for its web ads.
  • Irrational exuberance! Brian Quinn, WSJ’s VP/general manager for digital ad sales, says overall ad spend is increasing because of the iPad version, not just switching dollars from one platform to another. “Out of the gate, there was an exuberance about this,” he says.
  • Chase Sapphire, which is a New York Times iPad sponsor,  says its ads are getting a remarkable 15 percent clickthrough rate. That’s 150 times the rate of an average web ad.

Add to that the July 1 launch of Apple’s iAds, which will introduce ads within iPhone and iPod Touch (but not yet iPad) apps, and which will begin with $60 million in sales, with such companies as Disney, AT&T, and Best Buy participating. You can bet that when the program launches on the iPad, a vastly superior ad medium given the screen size, it will do well. Even just on the “phone” side of the business, the iAds launch should give Apple — and, importantly, apps — almost half of the mobile ad spend in the U.S.

Want a little flavor to understand advertiser enthusiasm? Check out this Steve Henn Marketplace report featuring a VP for The Gap. She’s near-ecstatic in describing her enthusiasm for the iPad/tablet as a way of selling stuff and gaining customer knowledge.

So, yes, maybe the iPad ad euphoria should come with a few grains of salt. But, still, the “multi-touch” immersive future, painted by Steve Jobs and talked up by the big digital ad agencies (themselves looking for new reasons to be in the supply chain) is upon us.

So, are publishers ready?

I had a conversation recently with someone who runs a digital division for a major newspaper group — smart guy, a pioneer in the field. I asked: “So are you working on an iPad app?” Answer: “We’ve looked at our logs, and we’re seeing increasing traffic from the Kindle, but not much yet from the iPad, so we’ll wait awhile.”

I felt a rant coming up, but suppressed it then and will channel it now: If not now, then when?

We can look at each of the major revolutions in digital news and commerce, and see how news companies responded.

Search. Late.

Paid search. Way too late.

Video. Late.

Social. Too late.

Mobile. Largely too late.

News companies have used old yardsticks to measure new technologies, and the results have been, predictably and disastrously, too little, too late.

Now with the iPad, the advent of tablets generally, and the invention of the app metaphor as a way of navigating the digital life, news companies have another chance. The newsonomics of tablet ad revenue are uncertain — will iAds simply flood the ad market with more low-cost ads, as developers happy to get any ad revenue price their ads low? — but the tablet offers the biggest do-over potential for engaging readers anew and re-engaging advertisers, at rates somewhere between the laughably low of the web and the near-impossible-to-sustain-long-term highs of print.

The digital division head told me that the logs told him that there was insufficient customer demand to justify investment in an iPad app. This, I think, is like managing by rearview mirror.

The whole metaphor of the iPad is the app; ask anyone who uses it, and they’ll tell you they are surprised how little they use the browser and use search. So if you are counting browser views of your website coming through the iPad browser, you have no idea how a reader might use your product if it were built to take full advantage of the tablet’s abilities. In addition, consider that the sale of iAds require an app — not a browser-available site.

If this sentiment were uncommon, fine, but I fear it’s too commonly held. Wait and see. Wait — until it’s too late. That’s what I generally see happening among regional and local newspaper companies. They talk about early adopters and the high cost of a state-of-the-art iPad app, and most are waiting.

The big guys — what I’ve called the Digital Dozen — aren’t waiting. The Wall Street Journal, The New York Times, Thomson Reuters, The Guardian, BBC, and AP are in the game — some with better apps than others — and all planning the next generation of products. We’re seeing impressive sales in the thousands for the WSJ paid app and can wonder about the applicability of Wired’s impressive sales of 73,000 (which are on a trajectory to beat print newsstand sales) to news and newspaper companies.

We’ve already seen a great separation in product development, audience engagement, and ad revenues between the nation’s and world’s biggest news companies — each with struggles of its own — and the other guys. Yet as they struggle, they’ve gotten most of the ad revenue smartphones have so far generated, as local news media has failed to get any revenue of scale. At this point, the iPad era looks like it the opening of an even greater divide among the largest media — and the rest.

[Ken will be on vacation the next few weeks, but back in July. —Josh]

POSTED     June 10, 2010, 11 a.m.
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