Wednesday, January 20, 2010

What publishers could learn from Google, Apple, Microsoft, and the growing mobile ad wars

Do a search for Google, Microsoft and Apple -- use your favorite search engine, I bet it's Google -- and you will find hundreds of stories on the rumor that Apple is in negotiations with Microsoft to make its Bing search engine the default search engine on the iPhone.

What does this have to do with my business you might ask? A lot.

Publishers continue to struggle to get the hang of New Media publishing and now the ground is shifting yet again as the major players in technology line up to do battle in markets traditional publishers are not even been in. All these dollars in advertising have to be coming from some place, and that place is your pocket.

First point, for the those in the dark, this is the big news of the day: BusinessWeek is reporting that Apple is in discussions with Microsoft to make its search engine, Bing, the default search engine on the iPhone. There are also rumors that Apple may get into the search game themselves, but these are more sketchy.

The impact of this move can only be seen when one realizes the enormous market shift this may represent. Google makes billions in advertising through its search products (Google is expected to show huge revenue gains for the 4th quarter). Apple signed its iPhone deal with Google a few years ago because 1) Google and Apple were making nice back in 2007, and 2) because Google's search engine is the clear leader in the space. Of course, back in 2007, no one could guess that the iPhone would be a huge success and that the device would bring millions more people into the mobile media market.

But now it's 2010 and things have changed: Eric Schmidt, CEO of Google resigned from the Apple board last year; Google has launched its own mobile phone OS (Android) and its own branded cell phone (Nexus One); Google has purchased Admob (though it awaits FTC approval), a mobile advertising network; Apple announces the purchase of Quattro Wireless, a mobile advertising network; Opera Software announces the purchase of AdMarvel, a mobile advertising network (get the picture?); Microsoft launched Bing; Apple is about to launch a revolutionary (maybe) new tablet that runs off a new version of the iPhone OS (maybe), and will be yet another must have mobile device (again, maybe).

Things are moving very, very fast indeed. And all of it, in one way or another, has to do with capturing ad dollars -- ad dollars that used to go to . . . well, traditional media.

The speed of events in the mobile market may be alarming to publishers (who are paying attention) but this is nothing new. Years ago, Google's entry into the advertising world seemed like just another tech company dabbling in the space until people woke up and realized the market was huge. But still, how many understood that this new competitor was/is eroding their market for local advertising?

Second point, so what are publishers to do?

1. Understand that the market for brand advertising in print is shrinking. The economy is masking a major shift away from brand advertising for traditional print. Yes, when the economy improves the numbers will improve, as well. But only for the leaders in print. Don't take those predictions about 2010 prospects for print seriously -- instead, talk to your reps. Many of the January print issues I have seen so far look anemic. Some are showing flat or small gains on last year. Big deal -- last year was a disaster. Some of those magazines that didn't fair too badly are now down big in pages.

Brand advertising is not decreasing, it is migrating: it is on store shelves and store floors, it is on retailer web sites, it is on your phone. Fragmentation is the real cause of traditional media's woes, not a crisis in journalism, or the financial woes of PE/VC backed media companies.

2. Your circulation no longer equates to penetration. When your reps went into a client to brag about your 20,000 widget makers, that number seemed to represent the market. But publishers hid a deep dark secret for too long: many of those readers were worthless, they were on the circ lists simply because they renewed their subscriptions by either sending it their checks or by they signing those bingo cards that circulation directors love so much. The real market was out there somewhere -- at trade shows, in the show rooms, in cyberspace -- and as long as no one else was claiming to reach the market things were OK for trade publishers, and local newspapers and shoppers. But the minute alternatives arose the model collapsed.

The competition arose from many areas: companies that utilized their own lists, from direct mailers and newsletters, from trade associations; from the New Media competitors that at first didn't seem like competitors, forums and blogs.

So publishers must increase the penetration of their markets to once again begin to dominate them. They can't do it in print unless they are willing to absorb the costs. So the answer is expanding the reach of their brands by launching mobile products, online products, ancillary products . . . by partnering.

3. Start cooperating. If Apple can sign a deal with Microsoft (actually, nothing is signed yet as far as we know) then why can't publishers sign strategic deals to expand their brands and add penetration.  Rather than folding that magazine or going web only, why not test the anti-trust limits. Do publishers really think the government is going to crack down on money losing operations working to better educate their markets?

4. Contextual advertising is where the game is being played -- and you've know this for years. Trade magazine reps have been using contextual advertising as part of their pitch for years -- for some reps, its the only sales tool they employ.  We're running a story on widgets and you make widgets, so you should run a full page ad in our widgets section. Or: We're running a special section on homecoming, you rent tuxedos, run a quarter page ad.

But traditional publishers have been slow to move towards selling this way in a meaningful manner online: the same way Google does, ono category at a time, using high volume, with specially trained sales staffs immersed in the selling AdWords, etc.

It's time to raid online and mobile ad networks for staff openings. You'll still need your industry/local ad vets -- they are as vital today as your industry/local savvy editors. But incremental gains in online advertising from your print reps is not going to keep the wolves from the door -- especially if print revenue is not returning to 2006/7 levels.