Make Money Online

Apparently, the newspaper industry has finally had enough – or at least the New York Times has. Word came out on Wednesday that the New York Times would start charging for its online content.
The Times has tweaked its model from all-everything or all-free with a model that will only charge its most avid users. But that’s significant, given the fact that the media as a whole tends to follow the lead of the Times in how business is done.
For the past few years, the newspaper business has tried to stop its collective bleeding. Blaming everyone from unpaid bloggers to Google, much of the consternation stemmed from regret over not charging for access from the early days of the Web.
With the Times moving ahead and pulling the trigger, look for many other newspapers to follow suit. The media has argued that it wants to benefit financially from the giant traffic stream that Google brings to its sites, but that argument may be flawed.
While it’s true that readers are going to search engines as their first place for news, they might not be biting on the hook that newspaper web sites are offering. According to a new study, 44 percent of people who scan headlines on Google don’t click through to newspaper Web sites.
When the paywall slams down around the Web there’s going to be a much tighter atmosphere for the information that fuels aggregating sites and search engines. If The Huffington Post can’t excerpt the Times as often, how does that impact the value of HuffPost?
The year of the paywall will cause ripples across the Web and force users to answer the question of whether they are willing to pay for information just like they pay for apps and music.

Originally posted here:
2010: The Year The Paywall Comes Down

In October I wrote a post about the fact that the majority of newspaper and magazine publishers were entertaining the idea of charging for online content. The biggest problem for all publishers of online content is finding a magic bullet, not yet identified, to get consumers to pay for access to that content. The latest reports by the New York Times, in what ironically are subscription required articles, indicate that 2010 may be the year of big change.

But what kind of change will it be? It seems less likely that it will be a year of paid content, and more likely to be a year of moving in a different technological direction.

Newspaper and magazine closings in 2009 continued to shrink the traditional print category. The double whammy for such publications has been the simultaneous loss of print subscribers and advertising revenue. Book publishers are starting to panic, too, as they saw the beginnings of a stronger movement to e-books, fueled by Amazon’s Kindle and Barnes & Noble’s Nook e-book readers.

That’s why it is likely that some kind of significant change for print publications will occur in 2010. They simply cannot survive current business conditions much longer.

Interestingly, magazines, newspapers and books are only representative of a larger media revolution that all of us have been living for quite some time. Look what digital media has done to the music business. First records and now CDs are becoming obsolete as digital downloads spread. We have become the iTunes generation.

Movies and television are not far behind. The entertainment industry is currently looking at ways to prevent itself from a similar digital death. Ben Weinberger’s recent Video Insider blog gives us a taste of things to come in 2010:

• Disney’s “Keychest” will enable consumers to “unlock” digital content across media formats
• Best Buy in partnership with CinemaNow will provide customers with the ability to download premium content and watch it on multiple screens
• Time Warner, Comcast, and other cable providers will offer “TV Everywhere” multi-platform access to their cable programming.

Will 2010 be the year of paid content – or will it be the year we see magazines and newspapers producing interactive digital editions? Magazines like Esquire and GQ already offer iPhone versions of their magazines. Esquire’s iPhone version, available next month for a $2.99 monthly subscription, offers scrollable articles and video.

Will 2010 be the year of the Apple tablet, rumored to be named “iSlate”? Essentially a touchscreen that’s standard page size, a tablet computer may offer print publications a new lease on life. Publication executives have supposedly met with Apple, and the result is that several magazines are creating tablet versions that allow readers to interact with articles, rearrange content, and access content unavailable in print versions. The tablet could provide a hybrid platform that brings together the best of computer and online technology. And publishers swoon to think that tablets can also provide data capture that makes ads measurable.

Whatever 2010 will bring for print publishers, it will be a year in which they will undoubtedly begin to reinvent themselves.

See more here:
What will 2010 Bring for Print Publishers?

I’ve periodically written about the plight of print publishers and their reluctant move to the digital world. One of the looming issues for these publishers when they make the transition to online content is how to get consumers to pay for it.

This all may be coming to a head in 2010. According to a study just released by the American Press Institute and reported on by eMarketer, close to sixty percent of member publishers are considering charging for content that is currently free. Twenty-five percent of them said they’ll have a paid strategy in place within six months.

Whatever plans publishers are concocting to charge for content may be worth little more than the paper their newspapers and magazines are printed on. According to a new report from research firm Forrester,  eighty percent of consumers say they are not interested in newspaper and magazine online content if it is not free. Only three percent say they would pay individually for each article read. This is a major blow to all those publishers (and there are a lot of them) who are toying with a “micropayment” strategy.

Forrester also asked the question: “If the publications you read were no longer available in print, how would you prefer to access that content?” Thirty-seven percent of consumers picked online access via a website. Fourteen percent preferred access via portable devices like mobile phones. Remarkably, ten percent wanted a relatively old-tech solution: to receive PDFs by email. Only three percent wanted to use eReaders such as the Amazon Kindle. Hmmm, that kind of puts a damper on the hoopla around eReaders, doesn’t it?

Forrester analyst Sarah Rotman Epps makes this point in reporting the results: “…one size won’t fit all – consumers want choice. There’s no one delivery platform, and no one pricing model, that will satisfy all consumers.”

The biggest problem for publishers of online content, then, is finding a magic bullet (not yet identified) to get consumers to pay for that content.

But there may not be one; in fact, advertising-supported content may continue to be the safest route for publishers. Let’s face it, Pandora’s box is already open. Consumers now get unlimited, free access, just by paying an Internet Service Provider, to virtually all the information they need. They’ve lived and breathed in an online world where a free Google search reveals just about everything worth knowing.

That’s why Rupert Murdoch, publisher of The Wall Street Journal and other newspapers, just weeks ago threatened to remove his publications from Google’s search index. Despite the fact that The Wall Street Journal has successfully implemented a paid online subscription service, a specific story can be accessed for free by non-subscribers via a link posted on Google.

While I’m not a big fan of Murdoch, I like The Wall Street Journal model for paid content. The subscriber has three different choices (per Rotman Epps’ point above): the daily newspaper in hard copy, the paid online version of the newspaper, or a combination paper/online subscription. The price difference is only about $15 between the newspaper and online version, which keeps the value of the online version high. The online version does offers some free content to a non-subscriber, but a subscription is required to continue reading most stories in full and get exclusive online extras.

One of the reasons it works is because the Journal’s audience is business people who are willing to pay for valuable information – but the paid content strategy is working, since the subscriber base for both the online version and the newspaper is growing. In fact, The Wall Street Journal is one of only two hard copy newspapers with positive circulation growth (the other is USA TODAY). Other publishers need to figure out how to offer information that is so highly valued that people want to pay for it.

It’s crunch time for publishers. As they wrestle with getting themselves out of the print world and into the digital world, they will face this challenge of finding a way to convince consumers to pay for online content. As the Forrester report suggests, however, there will be no single easy solution. If they want to survive, content publishers will need to do a better job of listening to what the consumer wants.

Read the original:
Listen to What the Consumer Wants

On the face of it, developments in digital publishing have signaled a decisive victory for aspiring and professional authors in recent months, judging by recent announcements:

Amazon recently declared that it’s Kindle e-book reader was its overall bestseller by number of units shipped and total revenue generated. According to a MarketWatch article, Amazon CEO Jeff Bezos recently mentioned during the company’s Q3 financial results (ended Sept 30, 2009) call that the Kindle is now the most popular product on its site by unit sales and dollar value across all product categories. Analysts expect that the e-book reader and ebooks will fuel the online retailer’s next stage of growth.

Google announced details of its upcoming Editions service, to be launched next year, which will allow ubiquitous access to books on web browsers and other devices. In a recent announcement,   Google Book Search’s publisher partnership program head Tom Turvey said the new Editions service would kick off with between 400,000 and 600,000 books in the first half of 2010.

Consumer electronics giant Sony has judged the e-book reader segment important enough to take some focus off its television and Playstation projects to develop it’s Reader product. According to the Wall Street Journal’s WSJ.com, Sony had sold about 300,000 units of the product from its October 2006 launch till end 2008. (The WSJ.com post is currently unavailable online)

With e-book readers experiencing a boom, writers might be looking forward to a boom for their wallets.

Whether you’ve already had a few published books under your belt, or you’re working on your first book, you will be wondering: What’s not to like especially with Google Editions’ payout model?

With Google Editions, the revenue split of 55% to Google and its distribution partners and the balance 45% going to your pocket is more than just making about half the revenue from your sales, it breaks the historical monotony long held by publishing houses. Most published authors receive a fraction of the value of books sold. It’s not uncommon for an author to receive a $0.50 to $1 royalty fee for each copy of a book sold. If you’re a superstar author such as JK Rowling, author of the Harry Potter series of wizardry books, or king of horror, Stephen King, you’ll have more room to maneuver.

In fact, the 45% royalty that Google Editions looks set to payout looks like the perfect out for many budding authors to quit their day job and do the “writing thing”.

Before you fire your boss, take note of a couple of big holes in the new business model.

#1 Quality, quality and quality

Someone investing a couple of hours reading a book would prefer a good book, over a poorly-written book in most circumstances (a fetish for spending reading kitschy/trashy romance/potboiler novels notwithstanding).

Yes, the possibility of self-publishing will break the hegemony/monopoly of the publishing houses, especially since manuscript acceptance rates of 1 in 10,000 are not uncommon. But just because you get to publish what’s in your mind, i.e. the “great American novel”, doesn’t mean that anyone else is going to like, or buy it. If your book meet Joe Public’s quality standards, you’ll have the consumer telling you “No”, rather than the publishing house.

The refund policies aren’t out for Google Editions yet, but judging by Sony’s ebookstore policy on refunds: “Please confirm all purchases before you complete them as all sales are final. There are no refunds for digital content.” It sounds like you can’t give a refund for a poorly-written book, but if everyone and his brother is blogging and tweeting about how badly your book sucks, you can expect sales to suffer.

#2 But I only like to write…

Assuming you’re going the self-publishing route and making the decision to avoid giving the publishing houses your fat writer’s paycheck, means having to ensure quality on your own.

There’s a myriad of service providers online to find proofreaders, book editors, designers and other specialists to make sure your novel looks like more than just a Microsoft Word document converted to Adobe PDF. Hint: the lack of a cover and extensive use of Times New Roman size 12 font throughout the book are dead giveaways…

Being able to post an accurate job description, screen service providers, screen competitive bids, and manage the team you’ve hired, will require more project management skills, than just being a dang good writer.

#3 Traffic Generation and The Lesson from Satellite TV

With the launch of satellite TV a couple of years ago, the complaint shifted from “There’s nothing to watch on network TV”, to “I’ve got 500 channels on satellite now, but there’s nothing to watch”. The lesson? Having lots of choice is always a good thing, but being able to stand out from the pack will play a direct impact on your sales.

Remember back in the early 1990s when there were just 20 websites in your niche? And you would make bank even if you had a garish bright yellow website and a couple of typos liberally sprinkled across your site? Google Editions may be that way too…for the first week or two.

Being able to market your book successfully means being able to put together the elements of a cohesive and integrated marketing plan. Almost every blogger or twitter user will be able to publish some content and generate a few random sales, but if you’re planning to make writing a full time gig, you’ll need a whole lot more marketing mojo in your corner.

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E-Books: The Bottomline
Here’s what e-book have going for them:
* More money in your pocket: The technology has eliminated the brokers and middlemen from the traditional book publishing ecosystem.
* Write what you like: You’re not constrained and restricted like you would have been if you had signed on with a major imprint.

But like Peter Parker’s Uncle Ben would say “With great power there must also come – – great responsibility!”

The balance of power and more importantly, profit, comes with the writer’s responsibility for viral/guerilla marketing skills. If you decide to DIY everything, you’d need to have decent editing, project management and marketing skills (the majority of which most writers lack). If you’re not represented by a publishing house, which invests heavily in a publicity campaign, you’ll have to find alternatives since most bookstores will probably not arrange “e-book signings” (especially if it’s a product which they don’t sell), unlike an author with a published paperback or hardcover novel.

In my opinion, unless self-published writers have the whole package, including management and social marketing skills up their sleeves, they might end up being the biggest losers in the new e-book paradigm.

Source:

A few short years ago, who could have imagined how precarious business conditions would be for traditional newspapers and magazines. As 2009 comes to a close, it marks the end of another dismal year for print media. Symbolic of the plight of magazines was the October 5 announced shutdown of the 70-year old Gourmet by embattled publisher Condé Nast.

While a rebirth of print magazines is unlikely, these publications are still fighting for their collective lives. But now the battle is being waged largely on the Internet. Magazine publishing companies that compete with one another “are discussing the creation of an ad network that would sell targeted space across many of the industry’s websites,” says an October 6 Ad Age article. One magazine executive told Ad Age: “We’re getting killed by ad networks. …if we could just create some scale on our own and sell across it, we can get a lot better ad rates.”

Clearly, desperate times require desperate measures. While the industry has discussed such a possibility before, it seems to be a more compelling need today. “Now there are maybe 500 ad networks,” another magazine executive told Ad Age. “Last time the conversation started, there were maybe only 200 ad networks.”

Variations of a magazine ad network already exist. Time, for example, has a network for its own print and online properties. Other magazine publishers have created topic-specific networks, such as Martha Stewart Living Omnimedia’s “Martha’s Circle,” according to Ad Age.

A home-grown magazine-controlled ad network is just one strategy for survival. Another may be publishing electronic versions of newspapers and magazines. True, some already exist, but not in any formalized paid form. So it’s interesting to hear the latest rumor, previously reported by Ad Age, that a group of magazine executives supposedly held talks with Apple about digital editions of magazines to be sold via iTunes. Apple is also said to be in talks with The New York Times about producing a digital edition, says Wired.The discussions center around Apple’s new “tablet,” a product yet to be officially announced, that could provide a platform for reading digital magazines.

The Apple tablet in itself is significant new – it could very well catapult Apple into a brand new arena, competing directly with Amazon’s e-book device, Kindle.

But the real message behind Apple’s tablet, Amazon’s Kindle, Sony’s eReader, and similar devices is their ultimate purpose: to replace traditional print versions of newspapers, magazines, and books with electronic versions. And the message behind a potential online ad network created by magazines is pretty clear: We’re raising the white flag on print and surrendering to the digital world.

Read more from the original source:

By cloudvertising, I don’t mean logos in the sky. Rather, I mean social media  completely changing how online ads are targeted. In a word, users are going to target advertisers, not vice versa.

It’s no secret that CPMs and CTRs aren’t what they used to be. And while part of this is banner blindness, and part of it is the economy, I think the biggest contributor is the habits of end-users plus basic human psychology.

You see, the nature of the web is that it gives us on-demand content, so we end up not noticing the content we’re not looking for. But more importantly, we distrust online ads because they run counter to the experience that draws us online in the first place. I go online to get what I want when I want it, and I never really want advertising. As Douglas Haddow put it:

“Unlike the television viewer, the Internet user has been conditioned to distrust online advertising from the beginning, due to its association with viruses and overall desktop dysfunction.”

And this is even truer with social media, where users log-on to interact with other users, and where a lot of the content consumed is user-generated — by their personal network.

Right now, there aren’t many options for targeting ads. You target them according to either a user’s search query, keywords on a page, or based on what you think a site’s audience might be. All of these methods share the assumption that third-party content can be used to accurately target a user. And the problem with such an assumption is that third-party content doesn’t say anything about the audience; it can only tell you about the publisher.

And publishers have a different mandate than advertisers. Their mandate is to keep their audience happy, and advertising doesn’t do that. But as long as they keep getting page views, they can sell ad space and stay in business.

The result is that ad spots sell for less than they could because advertisers never know when an impression or click is going to be a dud. So the only way to sell that space is to price it at a low enough rate that it offsets the advertiser’s uncertainty. The result is that publishers make less money than they could, and advertisers get fewer results.

This is where cloudvertising comes in. Cloudvertising is an extension of cloud computing, and social media is a big part of what makes up the cloud. What social media contributes to the cloud is data — data about users, by users.

And rather than leaving advertiser to guess what demographic might be interested in their product and who it is they actually end up targeting, this user-generated-data can used to turn things around and let users target them.

You see, user activity “in the cloud” all comes down to user-generated-content: they’re uploading and sharing content continuously, whether it’s vacation slides, bookmarks, or conversations. And this content tells us more about a user than any demographic analysis. It tells us about their actual interests and even what happens to be on their mind.

So user-generated-content becomes user-generated-data, and that data is much more personalized than any other data-set available. Cloudvertising is about indexing and mining all this user-generated-data, and then using that data to target users with ads that will actually appeal to them, and then convert.

So what would a cloudvertising platform do, exactly?

Well, it would do four important things:

• First, it would support all popular online ad models (CPM, CPC, and CPA)
• Second, it would be integrated with social media APIs (Tweet this, Digg this, etc.)
• Third, it would refer back to all your social networking content (wall posts, tweets, etc.), indexed it, determine your interests, and profile you.
• Then, it would show you ads that you might actually (1) be interested in and (2) act on.

If there happens to be no CPM advertisers in the system that fit your profile it might show you a CPA offer that appeals to you. So the advertiser doesn’t squander an impression, and the publisher still has a chance of making a commission from an ad that has a high likelihood of converting.
The root problem facing publishers isn’t so much falling ad revenues, but that ad technology hasn’t yet caught up with content technology. Once it does, both publishers and advertisers will be better off because there’ll be less uncertainty, fewer inefficiencies, and market ad rates will actually reflect full potential value of the ad space.

The resources for a new ad technology are there: they’re social media and all the user-generated-data produced through it. It’s really just a matter of time before one of the big guys, like Google or Facebook, rolls out something like it. Such technology may be the life preserver many publishers today need to stay afloat.

The question is with the advent of such new technology will overcome the filters the target audience has developed or whether human psyche will simply adapt more advanced forms of banner blindness?

View original post here:
Cloudvertising: Social Media and Online Ad Targeting

Remember part 1 and part 2 of my interview with Gordon Magee of Drs. Foster Smith? It’s been a while and I’m back to wrap up sharing what I was able to learn from this pioneer of e-commerce video.  I probed Gordon for details on the strategic, long-term approach he’s using to drive multi-channel sales with video.  In all honesty I did NOT learn of the rigid, measured direct-response strategy that I had expected. What I did uncover was how important trust is to a company that is, yes, financially precise and metrics-driven.  Trust, as it turns out, appears to be the main driver in the company’s early, yet large, investment in video.

Uh oh, is this “branded entertainment”?

Now as many of you know I’m not a big fan of traditional, mass media “branding” advertising.   In fact, I view most of it as a poorly executed, glorified art form — not a science.   It thrives on waste.  How many times have you been in a meeting and fallen back on the comfortable excuse of, “well… it did help brand us.”  Unfortunately, many marketing failures are labeled “branding wins” when, in fact, the man or woman running the show (CEO, CMO, COO/CFO) knows better.

In many cases, a campaign’s tactics failed to produce a tangible, strategic business output.  It failed.  You can call it a win but they won’t when you leave the room.

I mention it because most use of video on the Web has been rather gratuitous.  They call it “branded entertainment.”  It has a tendency to be aimless eye-candy that marketers hope gets passed around and… and… and well… create attention/awareness, interest, desire and action (with the action piece being completely un-tracked and rather blindly assumed).

In this tough economy we need new, improved (ie. trackable, reliable, PROVEN) strategies not glorified tactics.  Some call it marketing science and it’s time has arrived.

Now I’m not suggesting Gordon was or is wasting his marketing budget.  What I AM suggesting is that the direct response metrics were left unclear to me and, perhaps, with good reason.  Maybe DrsFosterSmith.com is too early on to really use them or — heck — reveal them to the world.

Increased trust as a valid goal

Let’s assume “better trust” or “more trust” among customers (new and old) is a valid business output.  How tangible is it?  How measurable is it?  Heck, should it even be measured at all?  Now we’re getting into dangerous guru territory where some believe ROI to be a silly pipe dream.  But what if we could assign some tangible behaviors that customers demonstrate to “increased trust?”

Even more wild — what if we just assumed that part of a holistic marketing strategy was a foundation that must be built without expectation of measurement?

Gordon says…

“… we probably have more articles on pet care and more veterinary articles online than anybody in the country. So to go into video and do the same thing was just a natural outgrowth of what we have been doing for 25 years really.”

Why so much content?  Trust.  When it comes to pets and doctors (veterinarians) it’s not about price.  It’s not about color, flavor, speed, accuracy or anything that would be desirable (aspirational).  It’s about TRUSTING someone to help you take care of your pet’s health, well-being or a disease.  Trust matters — in this case perhaps more than anything else.

Measurement: The details

Says Gordon, the future is all about…

“… a blending of a branding relationship development type strategy along with an ROI measurement.  The ROI will be much more difficult to measure in some respects. Certainly we can use analytics tools to find out what people are clicking through on and if they have watched a video and what they did and so on. But frankly some of that gets so granular, you can have data overload, that you’re better off looking at the larger picture to determine what’s going on.”

Now typically these kinds of comments fly red flags with me… but I’m starting to wonder at this point.  Gordon continues as I push him for details on WHAT he measures, why and what it proves…

“Are our sales moving up? Are people spending more time on the site? What’s actually happening? If we then try to drill down to every little item — at some point it becomes impractical apart from what some speakers will tell you at the Internet Retailer or show.

The first thing I study when I want to find out how we are doing is… what did we sell yesterday? What were our overall sales? What products were selling?”

Now at this point I was really starting to wonder, I’ll admit.  This sounds like a BRANDING campaign and perhaps so… one aimed at creating or fostering trust.  Gordon continues…

“Yes, we will look at email returns. Did this email do well? etc. Are people clicking through? What’s our click through rate? Those high level metrics are important so you have got a clue. But at the end of the day, if you have got all kinds of clever little analytical measurements that are telling you what people are clicking through and where they are going… well if you’re not selling anything that doesn’t matter.”

So I think you work from the other end of the pyramid, the sharp point of the pyramid being, ‘Did we sell stuff?’ Then drill down as far as you need to, to find out how you got there. Then stop before you drive yourself crazy.”

Ok… Gordon seemed to come back to measurement as being a worthwhile strategy at the end but it left me scratching my head a bit — but in fairness to Gordon and the company that’s just fine.  It sets us up to ask more questions later

User / customer generated video

And what about user generated content (UGC) — specifically video?  It would seem ripe for opportunity in the pet realm with all those cute cuddly little creatures of all sorts out there.  To my surprise Gordon said no.  His reasoning was remarkably sound and, not surprisingly, all about TRUST.

“Jeff, we will likely not get too much involved in that.. and part of the reason has to do with us being owned by veterinarians and people having that trust relationship with us regarding the information that they get.

We want to make sure that there are no misunderstandings about the veterinary pet care information that we provide. A misunderstanding could happen if we would have, let’s say, a customer quote something that isn’t the latest veterinary information from research and so on… have another customer read that and go, ‘Oh yeah, I should feed my dog X because customer Y said that’s the right thing to do,’ and maybe they didn’t read three entries later our analysis of, you know, ‘That’s actually not a good idea,’ kind of a thing.

I’ll give you just a quick example of something simple. We were on television here a few weeks ago. We brought pets down to Chicago’s In the Loop with iVillage. Had our veterinarians on, the question came up, ‘Is it OK to give milk to my cat?’  Of course, I’m from Iowa.  We grew up doing that. And one of the vets said, ‘Actually, you know, it’s really not a good idea because they can have digestive problems. It’s really not what you should be feeding them.’

So little things like that that seem to be so common knowledge but incorrect are the kinds of things that we would not want to have on the website.

So we probably won’t do that. Our goal is to brand us… and not the other customers. We may at some point have a forum… where people can interact with us, but the scale of that, at times, it becomes so huge that management becomes a challenge. We just started a photo contest this past week. Right now we’ve got 5000 photo entries already in one week, and we’ve got to manage those and determine the winners, and so on.  And I think ditto would happen with a forum.

Now, sounds like a really good marketing message to say, ‘Gordon, did you just hear yourself? If you can bring that many people to your site, wouldn’t you want to do that?’

Well, we do want to have them come but we want to have them be provided accurate information and not just have a cool Web 2.0 interaction with them . We want them to interact with information. At some point we might do the forum so they can interact with each other — I would say there’s some merit to that — but management’s part of the issue for us.

Candidly I think DrsFosterSmith.com’s approach is either a little from the hip or he is just holding back a bit.  In either case I hope Gordon might share more details with us in months ahead.  We marketers are living in historically difficult times where new tools are needed for marketing in the new economy.  As my loyal followers know, I have a decent nose for sniffing out marketing waste and I’ll continue to share my research moving forward.

Still not got your fill of Gordon?  Check out this short interview he was good enough to give me recently while in Chicago.

Excerpted from:
Using Video to Drive Sales in a Down Market

You’ll recall part 1 of my interview with Gordon Magee of Drs. Foster Smith.  I’m back to continue learning of his strategic, long-term approach to using video to drive multi-channel sales — and answering your specfic cost questions. After reading part 1 a good number of you wrote to me privately expressing hunger for information on cost.  Gordon didn’t get into the specific cost numbers with me but I can share some of his early struggles and “production / cost migration path” with you.  I wasn’t planning on it so thanks for asking.  I need to know what YOU need to know so keep comments coming please.

I’ll return to the overall measurement and “user generated content”  (use of video supplied by customers) questions in a few days.

Let’s first start by understanding the company’s multi-channel approach to advertising…

Gordon Magee: “This past year we decided we would go into television in a larger way. The owners decided to work on a broader campaign strategy for advertising. We have always done print media and that kind of thing as well but we kind of bundled print media and radio advertising. We haven’t done a lot of radio, but television as well.

So we created a television program. Then about a year ago or so I put in a proposal for us to get video on our website and create our own video studio. That got approved and we started building the studio this fall.”

It may be helpful for you to compare this kind of environment to your own when considering approaching cost and budgeting for ecommerce-focused video.  Next, Gordon shared the evolution of his company’s approach to Web video — specific to how they decided to build (invest internally) rather than lease (outsource).  It’s interesting to note that they were already “in video” by creating TV ads.

Gordon Magee: “We outsource in the sense that we use the production company, one in Los Angeles, one in the Twin Cities when we made the last, more recent commercials. We have used a California production company in the past. But the internal decision to create the video studio was definitely Web related as opposed to TV commercial related.

So they really were separate entities in terms of the business case. I think with the advent of higher speed Internet connections for most people these days – there are a smaller and smaller number that are still on dial-up – and then the infrastructure capabilities that the Internet has that’s going to make video just very, very common, even more so than it is now.

It seemed to be that it was the right thing to do. Our company’s ethos, Jeff has always been to do things internally and develop the expertise internally so that we are not dependent on outside sourcing whenever that’s possible. Because we are a catalog company and have essentially a pretty huge creative department, doing our own photography and that kind of thing forever since the advent of the company, the idea to move into video wasn’t a hard decision.”

So as it turns out Gordon’s approach was driven by the company’s traditional, long-standing belief in “owning” the creative production process and a realization that the distribution channel (the Web) WAS going to explode opportunity.

Gordon Magee: “Script development of course was helped greatly by our creative department who wrote script and art direction terms and then we tweaked those. So we had the internal expertise to try it and not be afraid to do it. So we just decided that we were going to go ahead with that.

I think it (the decision to outsource versus build your own competency) really has to do with people’s expectations. As you know, being in the Internet business, expectations on the Internet continue to rise for the consumer. I think the average consumer probably doesn’t realize the effort that goes into making a website very easy for people to use and all of the other things that are on there, ancillary things like video and articles and so on.

But I think with those expectations arising, we know that video is going to be huge. And certainly with things like YouTube and other sites like that, people are going to those sites. We wanted to be part of that for the educational side of the company.”

Yet there’s more to the company’s history that plays into it’s decision to invest in a PUBLISHING company within their direct response/ecommerce selling infrastructure…

Gordon Magee: “When the company started 25 years ago – this is our 25th anniversary literally this year – when they started we were owned by two veterinarians, Dr. Ray Foster and Dr. Marty Smith. When the company started, one of the things they wanted to do was educate pet owners to be able to use products better and to care well for their pet. That came out of their veterinary background.

Certainly that’s a good marketing strategy as well. But the primary thing was let’s make sure pet owners know what they are doing. They can make better buying decisions and so on.

When they started their catalog they went to catalog conferences. They were new at all this. The catalog experts said, ‘You know you guys are devoting way too much space to education in your catalog. You can’t do that on a square inch analysis basis and have it come out in a cost-effective way.’

They decided very early on to ignore that advice. They dedicated I think 10 to 15% of every catalog to educational articles. That really became our niche for the customer. It also provided a good marketing tool in that people kept the catalogs because the articles were in them.

Over time, that trust relationship developed with the customer. So we probably have more articles on pet care and more veterinary articles online than anybody in the country. So to go into video and do the same thing was just a natural outgrowth of what we have been doing for 25 years really.”

Like many pioneers, the founders were told “don’t do THAT!” when it came to innovating.  Much like Buy.com cut against the grain with its approach (proven successful by now?!) to mixing “media company” with “lowest price e-commerce company.”

What say you, Revenews readers?  I hope this may help clear up questions regarding costs and how to approach them in strategic terms.  I’ll return shortly to wrap up with final thoughts on Gordon’s measurement approach and use of user generated video content.

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Case Study: Video Publishing to Drive Sales (PART II)

What is an acceptable payoff in terms of time investment put IN and the return taken OUT (actual sales) of social marketing?  What’s reasonable to expect and how soon?  I’ve begun to crack the nut that is this question by talking with people who have direct experience. 

Let’s be honest — when people start talking about marketers becoming publishers in a ’social marketing’ context it can quickly begin to smell like Web marketing snake oil or ‘branded entertainment’ hogwash.  One way of fighting this is to get, as Sam Decker of Bazaarvoice said to me, “operational, not conceptual” — consider less and do more.  But before we start doing it’s critical to justify and plan investments in what amounts to online publishing-with-a-purpose.

Picking up from my prior story, Rok Hrastnik of Direct TV marketer, Studio Moderna (and speaker at the next eComxpo) believes that “the content is your way in … your bargaining chip to win consumers’ attention.”

He says it’s the first step in a relationship (with prospective customers) that, someday, may result in profitable sales.

“The emphasis being on ’some day.”

To me this was beginning to sound a lot like branded entertainment.  Someday?  Yet these are big questions and I knew Rok to be an experienced guy so I pressed him for more.  In fact, I’ll share a couple of examples — focusing on Studio Moderna’s Dormeo.com brand (mattresses and bedding) and Wisconsin pet goods purveyor, DrsFosterSmith.com.  Both companies report steady sales streaming in as a direct result of publishing efforts.

Setting Expectations

How fast have each of these companies managed to track back sales to efforts?  In a matter of months — and make no mistake these are direct response marketing companies that have been around for a good while.  They know how to get things done on the Web (built for direct response).

Ok — so I’ll make quick work of how this gets done. First, this “marketing as publishing” model is not a short-term vehicle as evidenced by companies like Drs. Foster Smith who’s PetEducation.com site produces audio-visual content internally (they don’t outsource).  That takes time to build and get good at (production value) yet Drs Foster Smith have decades of content creation to lean on (they pioneered “magalogs” — content-heavy magazines).

On the other side, the Dormeo brand leverages outside writers to create e-mail newsletter content that establishes continuous, often viral relationships with ’someday customers.’  When I say ‘viral’ (another voodoo word) I’m referring to customers who love to pass Dormeo’s content to family and friends under promotional incentive.

“Content creation and publishing is the long term thing you do to gradually convert your prospects into customers in ways they may actually welcome,” says Hrastnik who’s busy selling products that consumers don’t exactly purchase frequently or on impluse — mattresses!

Yes, “It Depends”

Sure how fast you’ll see results and what those results look like will vary… but be assured the metrics are not “videos viewed” and/or “e-mail open rates.”  They’re far more serious — metrics that please CFOs and CEOs.  No, they’re not always focused on the immediate sales transaction.  Think “actions taken” that involve interaction with the brand itself (sign-ups, registrations, downloads etc.).  Things you’re doing that help prospects move forward along their “chronology of purchase intent” — toward purchase.

Nobody expects immediate results these days.  They just expect you to have a plan that can be measured and adjusted as you execute it.

Don’t forget the most important aspect — making *occasional* calls to action.  Pitching content-lovin’ prospects what you’ve got to sell.  What’s the proper mix of content + sales pitching?  Again, that depends on what you’re pitching to a degree and Hrastnik only tends to talk about it “offline”

Talk Talk

What to talk about?  Stated plainly, Hrastnik suggests if you’re selling things like mattresses, don’t limit yourself to talking with customers about sleeping or your brand — “talk about sex, relationships, health, productivity, motivation, success and other things that people actually care about.”

How do you say it?

Although Bazaarvoices’ Decker is invested in the concept of customer-generated content, he admits, “Customers won’t create content in all the places you need to reach the market and at the times you need to hit your goals.”

“The key is to leverage their voices, either in the creation of your marketing or by using their words directly, to make your ‘talking-at-them’ more authentic, credible and relevant,” says Decker who recommends a listen-and-react model to creating content that could be published as text/email or video.

Aagin, Hrastnik outsources to a team of external writers and graphic artists to get the job done but holds on to the promotional and database marketing aspects.

Just Do It

“Get operational, not conceptual,” says Decker who worries that too many marketers invest time planning and not executing.

He also suggests creating an internal “council” focused on forward-thinking ideas — working to drive them forward across multiple functions and make them happen.  This, he says, fosters the required cultural shift that crosses multiple departments.  Essentially, “it takes a company” to plan and execute a content-driven lead or sales generation strategy.

In the end all of this can be a little scary.  Yet by tying even the smallest of “baby step” trials to their impact on sales — and ultimately profit and loss — progress can be made.  Marketers simply must take a little risk and definately take a note from the book of direct response marketing.

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Justifying Social Marketing: From Publishing to Sales

After all the thunder here’s the lightning: Euro-eCommerce rock star Rok Hrastnik.  I dared ask the Web business leader of Europe’s infomercial powerhouse, Studio Moderna, “is interruptive marketing dead?… because all this social — and for that matter online — marketing stuff seems big-time disruptive to traditional media like TV.”  Boy did he surprise me and set me straight!

“I’m working in the most interruptive ad industry of them all.  My idea of ‘cool’ marketing would be injecting the latest infomercial directly into the consumers’ vein,” jokes Hrastnik.

Actually.  He wasn’t joking — I was soon to find out.  He’s fairly hard core!

“Seriously… I can tell you that direct response TV advertising it not only alive but kicking, thriving more and more every month.”

While newspapers and broadcast media trail behind various forms of word-of-mouth (in terms of the customer trust factor) traditional forms of interruptive media are no where near dead yet says Rok who, bye the way, sleeps about 4 hours a day and is author of Unleash the Marketing Power of RSS.  (in addition to being Director of Internet for Studio Moderna)

Ok… I let go for a minute and assumed his statement to be true.  But if it is, what does that leave for the Web other than being a subservient channel to TV — as it drives people to the search box and browser bars?  Where’s the glory for Rok and his international Web marketing team?  I began to wonder if his team was all about pop-ups and banner buys… and to what degree he was doing anything original or creative on the Web side.  I suspected he was given his working for a direct response TV company!

Social Marketing: Fad or ‘Must Do’ Relative to Traditional Ads?

Rok and I both tend to question the validity of what most call “successful social marketing.”  (BTW “social marketing” is not a term either of us much care for but we’re forced to use it for the most part)

Yet it’s dangerous to ignore what’s going on behind the scenes — even in these early stages.  The fact is you’ve really got to look hard to find the success stories out there but when you do they’re startling in two ways:  1) how retro they are (what’s old is new again!) and 2) how simply they can be executed on minimal resources.

Hrastnik admits that infomercials are interruptive but the reason they work is — get this… “because they interrupt consumers in ways they welcome … entertaining them, educating them, thrilling them and just simply giving them a great story… which then actually goes on to sell something.”

“Yes, we interrupt but we also provide value with that interruption.”

That, says Hrastnik, is how marketing should be.  Humph.  Nuf said and THAT is precisely the opportunity represented by “social marketing” if you think about it.

“Look, Jeff… most of us will always depend on interrupting consumers and pushing our message in their face. No way around that. But if we want lasting attention we need to interrupt in a valuable manner. For most businesses, that value may come in the form of relevant editorial content.”

And that, in my eyes, sets up a good bit of discussion.

Marketers as Publishers

Here’s where it gets both dicey and exciting.  Hrastnik and others believe that marketers must start becoming publishers of information and entertainment…  they’ve got to be storytellers.  Yikes!  Church and State issues.

Rok argues for marketers becoming actual publishers — providing relevant content that people want to consume.  Customers trust it for what it is (that’s key).  And no this is not “branded entertainment” where the ad is inherently a lie — an ad masquerading as something else.  That is, in his eyes (and I agree) nearly worthless.  It should be, very clearly, an ad.  Think informercials.  Now things began to click for me — Rok was up to something cool.  I was sure of it.

“Contract publishers have been teaching people this for decades,” says Revenews founder and GMD Studio’s Brian Clark.  “Advertising tries to make a point, marketing tries to induce an action and experience design tries to shift perceptions.”

Experts like Clark and Hrastnik suggest that content does not necessarily need be product related — may only be loosely related or not at all.  Essentially, marketers aren’t depending on that content to sell so much as they’re using it as… well… bait.

“The content is your way in … your bargaining chip to win the consumers’ attention, the first step to a relationship which someday may result in profitable sales.  The emphasis being on ’some day,’” says Hrastnik.

Ok.  So now it’s beginning to sound a lot like branded entertainment.  Someday?  I’m getting lost… but Rok brings me back on track through telling a story.  It’s one that I tell often at conferences and with clients and one I’ll share with Revenews readers next!

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Social Marketing Best Practice: Marketers are Publishers

Yes, opportunities presented by social technologies are exciting but the task of shifting gears (staffing, allocating budget, re-training, prioritizing tactics) is daunting for most marketers.  So what can be done today?  How can “believers” in social media/networking/marketing work within the confines of corporate bureaucracies and convince superiors to begin experimentation under a sense of urgency?  Where is the low hanging Acquisition 2.0 fruit?

While researching this column, I decided to pose the following question to experts who are truly in the trenches:

“In the end, mass communications, ‘talk-at-them marketing’ is falling out of fashion.  ‘Engage and talk-with-them marketing’ is becoming the rage… and slowly bearing fruit for some.  Is traditional, interruptive marketing dying?”

I asked each colleague to respond to this (I admit!) rather inflammatory question in a way that yields tips on convincing disbelievers to begin taking baby steps forward.  So here’s some ammunition to take to your CEOs and CMOs…

We Aren’t In Searchville Any Longer, Toto
First, social / experiential marketing doubters must be given the chance to appreciate how the Web is radically shifting power away from them and toward customers.  As a result, customers actively ignore and distrust advertising… and the marketers that push it.  Think about it — how many times do we hear about the latest trend in advertising which involves disguising ads to look less like ads?  In fact many believe that’s what social technologies should be used for (they call this aimless tactic that insults customers’ intelligence “branded entertainment”).

Media firms like Nielsen and Consumer Reports cite growing distrust of advertisements and marketing ploys among customers over the years.  In 2007, Nielsen noted that over two-thirds of survey respondents from across the globe cited “recommendations from others” as the most helpful, trusted form of advertising.  Surprised?  Well to be fair I was lecturing in Monte Carlo last year and a search marketing entrepreneur did point out that recommendations are hardly ads (why would they be considered in the same classification as a TV, radio or Web ad??!!).  Point taken.

His retort was prompted by my pointing out that search engine marketing — now widely practiced by most Web marketers — is taking a hit.  Nielsen says only 34% of customers ranked their experience with search engine ads as trustworthy, reliable.  I think you can see why he stood up and said something

Yet another study from the University of Southern California cites a growing number of people characterizing search results as unreliable and inaccurate.  Only 51% of people trust information provided by search engines, down dramatically from 62% in 2006.  Even Almighty Google isn’t trusted by nearly half (49%) of people who use it.  What’s the point?  Customers realize that Web advertising is beyond interruptive – it’s pervasive, obstructive.  Separating ads from information is a chore and people don’t like chores!

I’ll stop there and not get all Eric Clemons on you but I hope Revenews readers will hear me out a bit.

The Low Hanging Fruit
Beyond sharing articles related to customer empowerment and pointing to competitors practicing new principles, Sam Decker recommends bringing in speakers.  The CMO of customer review solution provider, Bazaarvoice also recommends marketers send negative reviews/blog posts to customer service — making them both accountable and actionable!

“Create ‘lunch and learn’ sessions with management to show them social networking tools, and show how people are talking about your products online already,” says Decker who cut his social marketing teeth at Dell Inc.

“The low hanging fruit is to bring user-generated content (UGC) into your site, right next to your brand.  This could be reviews, community Q&A, stories, polls or other forms of UGC.”

Decker gives three reasons to do this:

1. Customers put more trust in brands when they invite real customers to talk openly in their midst.
2. UGC meets the needs of visitors are already coming to your site. Visitors seeking product information, reviews and answers from customers who have experienced your products are more relevant and credible than marketing copy.
3. By bringing “customer voice” into your site, you raise the visibility and impact of this strategy to cross-functional teams and senior management.

Decker says while others in the company know word-of-mouth is occurring on the Web putting it on your site raises the cultural awareness of the “customer voice.”

I took time out to interview Sam at a conference recently and will be publishing that interview soon… stay tuned.  In days ahead, I’ll also be back with more from Sam, comments from automotive lead generation expert Joe Loll of RockMeJoe, Revenews founder Brian Clark of GMD Studios and Studio Moderna’s Rok Hrastnik — who takes serious issue with my suggesting that interruptive advertising is unwanted  let along dying on the vine.

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Experiment with Social Marketing Fire Without Getting Burned

Online advertising/marketing practices tend to evolve according to a very specific life-cycle. This pattern applies to markets in general (i.e. regions), verticals within those markets, and even particular products within those verticals. Understanding where on the evolutionary scale your target market lies is essential to managing a successful online marketing campaign. In fact, the recent fall in average CPMs can be partly chalked up to how publishers have failed evolve with the times and reinvent their revenue model.

Adapting Through Evolution

The online advertising life-cycle basically unfolds as advertisers and publishers amass information as the market matures. When either party fails to capitalize on new information and adapt their marketing practices to it, their conversions suffer. And depending on the market and/or vertical, evolution can mean either a new model displacing a previous one, or simply being added to the arsenal of online marketing methods.

In Phase 1, the market is new and uncertain, and marketing is geared toward branding and impressions-based advertising (CPM). Then in Phase 2, reliable sources of traffic emerge, and a desire for quantitative results causes cost-per-click (CPC) to replace CPM. Finally, in Phase 3, relationships develop between advertisers and publishers, and they focus on actually converting visitors through a cost-per-action (CPA) model.

Phase 1: First Impressions

When a new market opens up (by region or product), relative uncertainty looms for two reason. First, the demand for a completely new product offer is still untested and, therefore, unknown. Secondly, everyone is a perfect stranger. Consumers don’t yet know the advertisers, and advertisers don’t yet know where their best acquisition channels lay.

Consequently, CPM emerges as the most viable marketing method. Advertisers need to introduce their branding into the marketplace, and while CPM lets them be certain of what they’re paying for (i.e. an eyeball), it allows publishers to promote an unfamiliar brand without any risks.

For instance, advertisers introduce their branding into the marketplace by purchasing a pre-determined number of eyeballs, and need not bother with more costly considerations such as fraud control. Similarly, publishers place a banner on their site that will render as many times as the pages load, and they need not worry about whether or not their traffic is targeted.

Phase 2: Cost per Click

As consumers become familiar with various brands and their products offers, and advertisers begin to carve out their own market share, CPMs lose their appeal. Advertisers have begun to establish a brand presence and begin to want quantitative results. Rather than paying for mere brand exposure, advertisers begin to focus on having consumers actually visit their site, and so CPC is introduced.

Similarly, publishers have also begun to understand the nature of their traffic (how to both generate and sustain it), and begin to feel confident of where they can refer it to. Consequently, a CPC model also begins to look appealing for them, because as long as they can sustain their traffic, they can monetize it by referring consumers on a per-visit basis. And as far as publishers are concerned, converting that consumer remains entirely the responsibility of the advertiser.

Phase 3: Converting Visitors

As a market continues to mature, it becomes more competitive, and getting consumers onto a site is no longer sufficient. After all, these consumers already know where to shop, and they’re much less likely to make a purchase just because they’ve clicked through to an advertiser’s site. So advertisers start looking for publishers who can refer traffic that actually converts, and the CPA model is introduced into the market.

At this point, it is worth noting that certain advertisers and publishers have both established reputations with consumers, and relationships within their respective industries. While advertisers have determined which publishers have the most targeted traffic, publishers have determined which brands are most appealing to their audiences. Similarly, consumers have figured out which publishers have the most reliable content and active communities.

Across the board, the market has begun to stabilize, and all parties are beginning to understand where their best partners and biggest competition are. More importantly, they are starting to understand where they stand in the marketplace because the market is beginning to stabilize and take form.

Evolutionary Theory Applied

In many ways, you can’t blame publishers for wanting to stick to CPMs. After all, it’s easy money. But what good is easy-street once it hits a dead-end? After all as AdAge recently reported, not only are average CPMs off 20%, but “the average CPMs on ad networks ranged from […] only 6% to 11% of the prices publishers could command when they sold inventory directly. And the pricing for networks appears to be getting worse not better.”

This is exactly why content networks such as b5media are having the trouble they are, and partly why newspaper revenues are expected to fall another 30%. Such organizations have pushed a strictly CPM revenue model when they should’ve started diversifying their ad revenue stream.

The evolution of online advertising does not always mean that one model complete supplants another model. Rather, oftentimes it means that a new model encroaches on the popularity of a previous one. Obviously, advertisers continue to have branding goals, so CPMs persist.

But once advertisers know the market and who has its attention, they also want quantifiable results. They want visitors and conversions, and this is why CPM-reliant publishers have to put their money where their mouth is. Their ad-sales force is telling advertisers they have targeted audiences, but they have to be willing to prove it, and insofar as they forego adopting new ad-revenue streams (i.e. adapting), they forego a huge share of the new, and ever-evolving ad-revenue market.

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The Evolution of Online Advertising

When Steven Colbert recently suggested that newspapers should just add porn sections if they were serious about competing online, it was funny and sad at the same time. Newspapers serve an important part in any healthy democracy. But if they’re going to survive, they need to address a two-fold dilemma: falling subscriptions and declining ad-revenues.

Of course, as more and more content inevitably moves online, newspapers should be focusing on increasing online ad revenues and online subscriptions. To do that, they have to increase both traffic, i.e. the number of unique visits and page views. By following the example of where the more successful web portals are now and where some of the more popular emerging portals are headed, they just might be able to that.

In a word, newspapers should be considering how to use social media and mobile technology to hyper-target both ads and content. In doing so, they’ll be able to open up their ad space to both advertisers from around the world/web, and mom & pop business that could never before afford newspaper ad space.

Localized Ads

Newspaper know more about their paying subscribers than just their IP. They have a billing address. Between the two, then, they can show ads for businesses in specific neighborhood.

This, in turn, means they can open up a variety of specialty ad rates that will make it affordable for mom & pop businesses to advertise “in the paper.” Since newspapers know exactly how many people in any given neighborhood subscribe to the paper and what content they interact with the most, they can target the audience accordingly.

A Social News Organization

Newspapers need to consider building community around their subscribers for two reasons: (1) traffic/page views, and (2) user-data — which we’ll get into below. This means integrating the usual suite of social media features such as user profiles, comments, sharing features, and leveraging APIs.

First, letting users interact through profiles and comments can help page views go up. Secondly, allowing readers to easily share content with their personal network by leveraging APIs, such as Twitter and Facebook, should also help increase engagement. Most importantly, however, will be the user data amassed through subscribers’ profiles.

Hyper-Targeted Affiliate Offers

In addition to the profile information that users would provide, newspapers will amass extensive data on its users, including content preferences and online behavior patterns. In conjunction with the data they have on subscribers’ locality and its average demographic, such information would be invaluable in identifying the specific kinds of product offers of interest to their readers.

Imagine if newspapers used this data to leveraged the eBay and Amazon APIs to show users offers they were actually interested in. Users would respond well to the ads, and instead of relying online on impressions, newspapers could monetize and CTRs and even conversions — as any other content-driven super-affiliate does.

Going Mobile

Former Financial Times journalist, Tom Foremski, recently pointed out that papers are already thinking in terms of “mobile journalists equipped with notebooks, cell phone modems, and cameras,” so the next step is to think in terms of mobile subscribers — not mobile readers, but mobile subscribers.

The first step would be sending readers mobile alerts on topics they want. Not only would this increase engagement and offer more value on subscription fees, this would also boost impressions. As mobile readers click through on an SMS to view the story, papers further increase page views, and therefore impressions.

And to build on localized ads, newspapers could leverage location based services (LBS) technology to show mobile subscribers ads that are relevant to their current location. For example, a mom & pop restaurant could reach out to a mobile user who is not from that neighborhood, but happens to be in it.

A Watchdog Business

Newspapers are in the business of (1) providing authoritative information so that they can (2) sell subscriptions and ads. But they are also much more than mere content publishers. They play an important role in a healthy democracy. There is a lot more hinging on their survival, then, than mere jobs and tradition.

Web technologies can help them better distribute their content, so they simply need to adapt their subscription and ad models to these new channels. Granted, the development of that kind of platform would be not be a simple feat; but whoever managed to pull it off well would be in a position not only to make considerable profits, but save a dying but important industry and democratic institution.

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Upgrading the Newspaper Revenue Model

Recent launches of Amazon’s Kindle 2 eBook reader and its Sony counterpart, the Reader Digital Book, have satisfied the wants and needs of bleeding edge consumers with longer battery life and enhanced text readability. But how much are they expected to disrupt traditional print-based media like books and newspaper? More importantly, will they significantly influence the way the majority of consumers consume printed media?

I’ve read a couple of analytical pieces, including a recent post Kindling an Interest in eBooks by Revenews writer Barry Silverstein  comparing the potential  revenue generated by an eBook  to a paperback and a hardcover.

The Great Paper Waste

While on a per unit basis it appears that hardcover books and their limited editions/first edition counterparts give better returns than eBooks, the writing’s on the wall that digital printing will outperform and likely supplant traditional media. The factors  are pretty overwhelming and the question is when this will happen.

According to a post by Dave Taylor in response to how much of a book’s print run remains unsold  or destroyed, the industry estimates are between “as little as possible” to about 55%. Having worked in the publishing industry before, I’ve seen as much as 90% of the print run of a book remain unsold.

Similar to how CDs,  DVDs, and other physical goods are produced, you might expect 5% of product produced to be bestsellers, going into a 5th or 10th printing, another 30-50% to break even and possibly generate marginal profit, while the balance is relegated to the bargain bin section of your bookstore or online and direct mail specialty book clearinghouses. If said stock, whether CD, DVD, book, magazine, newspaper, remains unsold, it’s either recycled or ends up in a local landfill.

What this means is  with half of all books printed not sell the  viability and bottom line  for traditional publishers is brought down. Printing a string of dud books could be financially fatal for niche and specialty publishers.

The Digital Publishing Paradigm Shift

How digital publishing disrupts the established business model is by allowing authors the option to choose to self-publish.  This is feasible if they’re confident in promoting their books themselves outside of the book catalog  and book tour avenue of publishing publicity.

Publishers  can also benefit since by being  able to avoid printing an excessive amount of inventory, reduce production and storage costs and channel their efforts more towards promotion and less on the production element of the business.

But the biggest payout for digital book readers could potentially be the environmental impact.

Step into your bookstore and imagine that half of the books you sell will be unsold and relegated to a paper mill for shredding or burning.

When you take that example and multiply it by all the bookstores in the country, the potential is there for digital publishing to supplant not just the business model for brick-and-mortar bookstores, but also positively impact the environment.

Overcoming The Final Barrier

Cost, however, remains a barrier at this point. At the current $350 to $400 price bracket, eBook readers will appeal to the tech set  and remain out of the hands of the masses for some time.

If the industry trend in MP3 players is similarly replicated in the eBook reader industry, we might eventually see these devices drop to the $100 price point or better. When that happens, we might see printing presses become a thing of the past.

Andrew Wee blogs about blogging, affiliate marketing and social traffic at Who is Andrew Wee.

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How eBooks and Digital Publishing will Disrupt Traditional Book Publishing

From an online revenue perspective, eBooks today represent a small market.

Amazon is out to change that. The e-commerce giant, doing well despite a sagging economy, recently introduced Kindle 2. This next-generation reading device comes with a library of over 240,000 books, worldwide newspapers, magazines, and blogs. It’s got 3G wireless for book downloading, an improved screen, and it’ll even read books out loud to you.

Sony offers the “Reader Digital Book,” a Kindle competitor. Both Amazon and Sony are banking on early adopters who want to read books electronically and remotely. With the Reader Digital Book priced at $400, and Kindle selling for $359, consumers will need to read a lot of eBooks to make their investment worthwhile.

But the more interesting Amazon announcement came on March 4, when the company said that iPhone and iPod users could get a new free Kindle application that gives them access to the entire Kindle library.

Just days after Amazon’s iNews, Barnes & Noble announced a $16 million purchase of eBook retailer Fictionwise. Barnes & Noble’s eBook sales sputtered in the past, but now it will try to give Amazon a run for its money.

The Amazon iPhone/iPod application and the Barnes & Noble acquisition may help ramp up eBook sales. But there’s no guarantee book publishers will be fully onboard. A recent article in Financial Times stated:

“What is perplexing for publishers is the long-term viability of the existing model. The profit margins are difficult to determine… E-books are sold at a fraction of the suggested hardcover price on the physical edition with many new Kindle titles sold at $9.99.”

The “existing model” that concerns publishers is the fact that eBooks sell for under $10, while hardcovers sell for upwards of $25. eBooks are a little more expensive than paperbacks, but paperbacks are typically published only after a hardcover edition’s selling cycle has ended. Publishers have to cover the costs of marketing and author advances, whether a book is published as a hardcover, paperback, or eBook.

Still, with book publishers facing continuing declines in profits, you’d think the industry would embrace any avenue to increase sales, especially if it actually decreases their dependency on printing and distribution. But book publishers are not known for being visionary.

Book publishers do follow consumer demand, however. So if a critical mass of consumers creates a true demand for eBooks, publishers would have to commit to publishing them. Will that really happen? Maybe the reading public will want to retain the admittedly old-fashioned but treasured tactile experience of leafing through printed books. Or maybe, as Amazon hopes, they will begin to see a book as one more searchable electronic document to be viewed on a screen.

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Barry Silverstein is a freelance writer/marketing consultant and co-author of the McGraw-Hill book, The Breakaway Brand.

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Kindling an Interest in eBooks