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The newsonomics of shop ’til you hop

A new generation of companies is seeking to inject themselves where the money gets made — in the space between customers and the products they want.
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What if an ad was e-commerce — the distance between “advertising” and “buying” suddenly shortened?

That reality, long on whiteboards, is now upon us. Three-year-old ShopAdvisor is creating a next generation of editorial/advertising links in a number of Time Inc. and Hearst magazines, with more clients on the way. Those linkages, if successful, offer a new way of reconstructing digital commerce. Potentially, billions of revenue flow — among manufacturers, retailers, etailers, advertisers, ad networks, paid search, and publishers — are at stake, as digital commerce may take some unexpected turns.

Potential is the big word there, of course. Yet, in the fledgling ShopAdvisor model, we see a new asking of a fundamental question: In the digital age, how do we want to buy stuff? As in all things digital, we’re a lot closer to the beginning of that question than the middle or the end.

Today, Amazon rules a bigger and bigger direct route. Google dominates paid search worldwide, making money when it helps us find stuff to buy. The local TV business is consolidating rapidly, trying to hold on to its on-air advertising while moving as quickly as possible to a digital future. The daily newspaper industry, still with $20 billion-plus in ad business, hasn’t quite figured out where it fits in this new world, still suffering mightily from losing its place as the dominating local marketplace (“The newsonomics of the digital mercado”).

Yet, all of the money flow, already massively redirected in the last 10 years, is based on that single question: How are we going to shop and buy, given our digitally multiplied choices in time and space? So let’s look at the newsonomics of shop ’til you hop, the modern quest to steer the digitally mobile to a purchase before they flit away so sadly unsold.

Let’s understand ShopAdvisor and how its ideas may change the landscape, and two other newer shopping alternatives, Wanderful, a newer shopping-based consortium of the newspaper industry, and The Wirecutter, a startup that dares to take a deeply editorial take on “the knowledge gap” as a route to shopping.

Within just those three examples, we can see how the current set of disruptors may see more disruption themselves, and some current realities of who gets paid along the shopping/buying continuum re-tilted.

ShopAdvisor

Flip through the pages of Cosmo’s July tablet edition — somehow between the swimming pool sex and “Get a Raise! Exactly What to Say to Your Boss” — and you’ll find “Shop This Ad” on a Sally Hansen manicure and a number of “You Can Shop This Page” touchable circles on such editorial features as “19 Things for You to Do This Month.” Buy an album, jeans, designer outfit, or some bling with a tap or two, or save your fave finds for later.

That’s the basic idea behind Boston area-based company ShopAdvisor, whose site launched three years ago. CEO Scott Cooper says his company had a notion of how do e-shopping differently, but it was the tablet that unlocked the idea. “It lined up naturally for us,” he says. “The growth in tablet reading. The natural behavior [to shop] in paper magazines. The ability to interact with the product.”

Like much of the best digital functionality, ShopAdvisor takes old-world behavior and makes it simpler. Think the dog-earing of magazine pages for articles or ads to remember. ShopAdvisor is about e-dogearing.

The tablet is already becoming a wicked shopping tool of choice. In the 18-to-34 demographic, 79 percent now buy things on the tablet, says comScore. In addition, 52 percent says they prefer tablet-shopping to desktop shopping, according to Adobe data. Scott Cooper says that tablet buyers spend about $120 on an average purchase, compared to $90 on a desktop buy.

Cosmo’s current issue is the first Hearst title to deploy the service; expect more. At Time Inc., Golf and shopping mag All You are out with it, with Essence and Health next up. Magazine aggregator Zinio has integrated ShopAdvisor in some titles as well, and other magazine publishers are signing on. (So far, no newspaper publishers.)

It’s a fairly straightforward business relationship. ShopAdvisor supplies growing product databases and attendant e-commerce functionality. Publishers do most of the sales and make money three ways:

  • Upselling advertisers, making their ads “shoppable” and working with them to pick, and test, products within their ads. Top publisher partners — a Golfsmith for Golf Magazine, a Sephora for Cosmo — also will be able to gain preference as sales outlets are noted for each available item;
  • Taking a revenue share from products mentioned in their editorial stories, which result — immediately or later — in a ShopAdvisor-mediated sale. So if a page is shoppable and an item mentioned is bought, publishers profit. So far, that database counts 200 million products offered by 16,000 merchants;
  • Offering specials to a title’s readers, through email, from a particular brand.

On sales, ShopAdvisor receives an affiliate fee — Amazon may provide 8 to 12 percent, with other e-tailers ranging widely — and then shares revenue with the publisher. So ShopAdvisor makes money both on affiliate fees when products are purchased and gets a revenue share of ShopAdvisor-related product placement when publishers do the upsell.

One key here is understanding consumer behavior. The rule of thumb in selling, says Cooper, is that 80 percent of buyers don’t buy a product the first time they see it online or in-store. Why? There’s the “knowledge gap” about a camera, for instance, compared to other cameras. Then, of course, there’s price. We all want the best price. So save-it and price-alert functionality are built into the product. Buy it immediately, or later, and ShopAdvisor shares revenue with publishers.

Through its mobile apps and desktop, it has so far generated about 1.3 million returning active users a month, with another million samplers. Those numbers will grow as the app gets distribution through big magazine titles.

That’s its consumer experience, and it’s an experience well tracked, throwing off lots of value. “We gather a ton of data,” says Cooper. That data creates the advertiser pitch, which is more nuanced than what first meets the eye.

Cooper talks about the funnel of his ShopAdvisor experience. He says 20-40 percent of consumers who now see a Shop button click it; that seems a high rate and the novelty of it may be driving initial high rates. Of those who click, 10 percent get all the way to a merchant site, after clicking on the product, and sometimes product details, including price history. Half of those 10 percent save the product for buying. The actual buying conversion rate, Cooper says, is sometimes knowable and sometimes not.

Yet, the final buying of a product is only a secondary goal, says Cooper. The number one sell: Engagement with the brand. “People who want have spent 10 seconds on a page now spend two and half minutes with it. They would have looked at the Oscar de la Renta [ad] page for 10 seconds and moved on. Oscar de la Renta’s time on with the brand makes it more likely that you buy Oscar de la Renta [at some point, somewhere].

“The point of the brand ads is to get you to me to have brand preference,” explains Cooper. “E-commerce is the by-product.”

So while it looks like e-commerce — and is, in part — it is a new form of advertising that drives this business model.

Wanderful

Wanderful builds on a similar shopping-list model, and acts on several of the same principles as ShopAdvisor. It, too, recognizes the tablet as the enabler; “The PC is not a natural place for shopping,” says Ben T. Smith IV, Wanderful’s CEO. It is list-based, save-product-oriented and believes price matters a lot to its target audience of women (which its video identifies well). It’s a market of mobile-savvy women shoppers who used to move through a thick(er) stack of Sunday preprints.

That’s the major difference: Its Find&Save product is all about offline shopping — not click and buy.

You remember offline shopping, right? It still makes up 94.5 percent of all sales in the U.S. sales, according to the U.S. Department of Commerce. Yes, online shopping may be increasing at a rate 4X physical shopping, but it’s still a smart part of the pie. The big part of the pie, of course, is in the traditional wheelhouse of the newspaper industry. That’s why 12 newspaper companies — including McClatchy, Hearst, Gannett and Lee — have invested in Wanderful. In total, 400 newspaper titles are in the network.

“Amazon is the enemy,” says Smith, noting both its the huge e-commerce footprint it offers and its fledgling same-day delivery initiative (“The newsonomics of Amazon vs. Main Street”).

“Everything we are doing is driving people into the store,” says Smith. The idea here: save the pre-print business, the part of newspaper advertising that has so far held up the best among other categories. Inevitably, price-and-item will go mainstream digital, and Wanderful hopes its build-out (adding lots more inventory, debuting iOS apps within the next year, connecting up to retailers’ own sites and lots more) will be ready for that transition.

It’s a very retailer-based site, and its notion is that shoppers will turn to it for the best aggregation of local retailers to follow. Wanderful and its newspaper partners sell “share of voice” advertising to retailers, with Macy’s, for instance, a major early tenant.

The Wirecutter

It’s worth noting one other site in the new shopping derby.

The Wirecutter is based on the simple notions that the overload of “information” on the web isn’t what consumers what. So, instead The Wirecutter aims to answer one basic question: Which one should I buy? Its 18-month-old main offering is around digital-friendly stuff — computers and their offspring and electronics. Recently, it pulled out its home content to build out a sister site, The Sweethome.

“Most sites say, ‘Here’s a new TV. Here’s a new TV. Here’s a new TV. But for most people, the best TV is the one that came out eight months ago,” says Brian Lam, who spent five years building the pageview factory that Gawker’s Gizmodo became, growing from 13 million to 180 million a month. Lam, now Oahu-based, sounds truly repentant, and his atonement is a site that aggregates, curates, and adds original research to the best of web reviews already out there. The user-friendly site now hosts about 250 in-depth pieces — oriented around that question, “Which one should I buy?” — of 3,000-5,000 words, nicely broken down in summary form. Twelve to 16 new reviews are added a month

Lam and his fellow former Gizmoid, Joel Johnson, founded the site, employing another two full-time equivalents and about 40 “veteran” freelancers around the country. Chris Mascari, another former Gawkerite, just replaced Johnson and now runs all the non-editorial business of the site. The business model includes both advertising and affiliate fees, as its 400,000 to 600,000 monthly uniques actually make purchases.

The Wirecutter is a smart curator with an attitude: Do the work for the consumer reader rather than forcing her to travel the web and make sense of the mess of so much partial information out there.

This new generation of shopping sites may change up the playing field, or become footnotes to web history.

What’s most intriguing, I believe, is that the way they each, differently, is trying to change real-world relationships. It is the disintermediators and remediators — the Googles, Yahoos, Amazons, and Microsofts — that have gotten between publishers, manufacturers, retailers, and their customers. They’ve done that by offering a superior experience — the old standbys of cheaper, faster, and/or better. Now these entrepreneurs try to become the vaunted “next generation,” establishing or re-establishing commercial relationships between content producers and those selling goods.

We’ll pick apart their models, successes and failures in the months ahead, but for now, those relationships are what we can keep our eye on. If any of these new relationships should reduce the outsized impact of the disintermediators at all, that will be a story worth telling. Any dollar, euro, pound, or yen reclaimed may be money spent paying journalists.

                                   
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Ken Doctor    
When people talk about explanatory journalism, the focus is on new players like Vox and FiveThirtyEight, or on giants like the Times and the Post. But can connecting the dots trickle down to the local level?
  • Brain Molecule Marketing

    It is predictable that this article contains pretty much nothing but hype statements from people selling stuff and no evidence, data, independent research. Everyone, including the author seems to be swapping gee whiz platitudes and baseless personal opinions.

    Does anyone actually believe that any consumer wanting to buy anything can’t do so immediately – with current resources and gadgets? Doubt cutting the pie into smaller pieces will help anyone.

    For the most part all the web-based stuff and gadgets still seem a bunch of things waiting to be shown to have any economic value. “Hope is not a strategy.” But professional skepticism is. Marketers seem to be chasing their tales – again. Ho hum….