Hot or Not Changes Business Model

Katie Fehrenbacher from GigaOM has the story:

Hot or Not, the online dating and rating site, is about to end its main revenue stream — subscriptions — and focus instead on online ads and transactions, like selling virtual flowers. Hot or Not founder James Hong, who has gotten rich off of the subscriptions of his cash-cow, emailed us to say that the company plans to soon make its subscription-based ($6 per month) “meeting” section free to users. (…)

Hong says the online dating industry is reaching a “strategic inflection point” as the growth of the amount of paying subscribers for these sites becomes saturated and are forced to generate more revenue from existing subscribers. Over the long run, the result is fewer new subscribers, and a disappearing userbase, Hong says.

It’s not necessarily a new idea. While subscription-based online dating is still the dominant business model, we have covered free online dating sites PlentyofFish, OkCupid, and Iminlikewithyou.com. And Hong admits that they are a little late into the free ad-based game, but that “we are optimistic that it is not too late for us to change, as long as we have the courage (or insanity) to do so.” (…)

What it means: it usually takes large “cojones” to make such a move, i.e. reinventing yourself as you see your industry reach a ceiling and possibly a declining point. Reminds me of the BCG Matrix, where eventually you have to take your cash cows and either transform them into a new rising star or they become dogs. Makes me thing of Kodak, who did not see the inflection point. Makes me think of traditional media as well. TV, Radio, Newspapers, print directories. How do you know when you’ve reached a ceiling and face a declining future in one of your core products? And have you invested enough to be prepared for that moment? Many questions, but no easy answers. James Hong offers some perspective in his blog on why he can “afford” to do this move.

Is Hyperlocal Dangerous for News Organizations?

(via the Los Angeles Times)

News organizations confronted with declining revenue and increased competition are entering an era of more limited ambition in which they will drop a broad worldview for more narrowly focused reporting, according to an annual review of the news business being released today by a watchdog group.

The Project for Excellence in Journalism reports that the struggle to create sustainable media brands is driving “hyper-local” coverage in newspapers; encouraging citizen journalism on the Internet; and giving rise to opinion-driven television personalities like CNN’s Lou Dobbs and Fox News’ Bill O’Reilly. “The consequences of this narrowing of focus involve more risk than we sense the business has considered,” said the report from the project, an arm of the Washington-based Pew Research Center. “Concepts like hyper-localism, pursued in the most literal sense, can be marketing speak for simply doing less.”

The review describes print, radio and television news operations as weathering “epochal” changes — with audiences splintering so radically that is has become difficult to accurately measure new viewing and reading habits. Daily newspaper circulation declined 3% in 2006, for instance, but the increase in online readership is more difficult to quantify. The three television networks collectively lost an additional 1 million viewers — about the average in each of the last 25 years — but YouTube and other online services created a new delivery vehicle for the networks’ content.

Traditional newsrooms remain the primary source for information, and the report suggests that news organizations need to be more aggressive about mining revenue for their work. The old-line media may have to form consortiums to force Internet “aggregators,” which compile content from other sources, to pay licensing fees for news and information, the report says.

Tom Rosenstiel, director of the Project for Excellence in Journalism, said that most news organizations would have to shrink their staffs but that much more thought needed to go into how the reductions are made. “The current thinking, hyper-localism, seems problematic,” he said in an e-mail response to a question. “In an era of globalism, how can you suggest that the L.A. or Boston market does not need its own specialized foreign reporting that informs the local economy, the local culture and more, in a way that is different than what generic wires would cover?”

Respected newspapers such as the New York Times and Washington Post have placed high hopes in replacing declining print advertising with ads on their websites. Indeed, as audiences online have expanded, newspapers have seen their online revenue grow by more than 30% a year. But the Project for Excellence report suggests that the boom in online news audiences and income has begun to wane. A Pew Research Center study cited in the report found that the number of Americans who said they went online for news every day declined to 27% in June 2006, compared with 34% in June 2005. (…)

Today’s report says that the loss of about 4,000 newspaper journalists since 2000, combined with the smaller number of pages devoted to news, “suggest that American newspapers have reduced their ambitions.” Newspapers have traditionally served a “complete diet” of news to the public and alerted television, radio and other media to stories, the report found, suggesting that more study is needed to determine “what is lost and what is left uncovered.” (…)

The Project for Excellence report says that the ethnic media sector is one of the few experiencing solid growth. Spanish-language newspaper circulation, for example, jumped 900,000 to 17.6 million in 2005. That was the most recent year with available data. (…)

What it means: is hyperlocal all about reduced ambitions or increased relevancy and differentiation? I think it’s all about the latter. I personally believe that we will see a polarization between what I now call hypernational news sources (very credible news organizations that cross borders like the ones I mentioned here) and hyperlocal ones (very relevant local news and content sources). Those in between will possibly lose a lot of their former luster. Smart news organizations will own one or two hypernational brands and a multitude of smaller hyperlocal brands. Hypernational content will flow into hyperlocal vehicles.

Reports on Newspapers’ Death Are Greatly Exagerated

The World Association of Newspapers has just released global circulation data to try to debunk the myth that newspapers are dying.

Highlights:

  • Global newspaper circulation up 9.95 percent over five years and 2.36 percent over twelve months
  • Daily newspaper titles surpass 10,000 for first time in history with more than 450 million copies sold daily
  • In excess of 1.4 billion paid-newspaper readers
  • Total free daily circulation more than doubles in five years from 12 million copies in 2001 to 28 million in 2005, an increase of 137 percent
  • Combined paid-for and free newspaper circulation increased globally 9.95 percent over five years, and 2.36 percent over one year, in 2005, the most recent period for which full-year figures are available
  • North America showed a five-year circulation increase of 0.70 percent and was virtually stable over one year
  • Europe showed a 2.12 percent increase over five years and a one-year increase of 4.18 percent

Via the Center for Media Research

What it means: while the chairman of the New York Times Company is looking at how to best manage the transition from print to Internet, the World Association of Newspapers releases data showing some growth on the print newspaper’s side. What I find interesting is the data about free newspaper growth. On the Web, it’s very rare that the user ends up paying for content. TV, radio, business directories are also subsidized by advertisers. Does this mean that part of the problem is on the consumer pricing side (i.e. what would happened if all newspapers dropped their prices)? Or is this just a new consumer segment? I’d be curious to hear from newspaper experts.

Local TV Online Revenues Up 41%

A new survey by the Television Bureau of Advertising reveals interesting elements about local TV online revenues.

Highlights:

  • Local television’s online advertising revenues were up 41% in 2006 to $399 million (2007: $618 million).
  • Many stations are using the Web as a publishing platform by also offering classified and directory advertising.
  • Seven categories comprised half of all online ad spending (in particular, Real Estate, Health, High-Tech and Automotive).
  • TV station share of the local online ad market was 7% in 2006, up from 6% (+17%) in 2005 and 4% (+75%) in 2004.
  • Local newspaper and radio websites share of local ad revenue declined in 2006. Newspaper sites went from 43% in 2005 to 36% in 2006 (-16%). Radio websites went from 4% of local ad spend in 2005 to 2% in 2006 (-50%).
  • A key driver of growth was video advertising. In 2006, 72% of TV station websites sold video ads, and 80% plan to in 2007.

The report recommends that local broadcasters:

  • rethink the mass-media mentality with an eye toward viewing the Internet as a mass of niches
  • hire a dedicated online sales force
  • give strong consideration to launching a real estate section
  • consider spin-off sites that may not be branded to the station (new verticals)

You can read the 31-page .pdf report here.

(via Broadcasting & Cable and the Television Bureau web site)

What it means: online revenues are starting to be more substantial in local TV but they are still much smaller than what you find in local directories or newspapers. I wonder if it wouldn’t be more efficient for local TV to partner with local radio, newspapers and/or directories to leverage each other’s strengths instead of competing. The critical mass of multimedia content attached to a mashed-up TV/Radio/Newspaper/Directory site might make this a very interesting destination in a hyperlocal context.

Praized-Worthy Today: Instant Messenging & Teens, YouTube’s Potential Local Strategy, Google Starts Selling Radio Ads

  • Instant messenging usage by teens in Mediapost: “…72% of teen respondents send IMs more than e-mails. In addition, 20% of teens who use instant messaging say they can’t imagine doing without the service. What do teens use IM for? More than half (56%) of teen respondents use IM services to share photos, while 33% share music and video
    via IM”

What it means: IM is still a key element of teenager’s lives, even with the rise of social networks. Interesting what they use it for: share photos, music and videos. I’m surprised it’s not better leveraged at this point as a tool to reach teenagers and young adults.

  • 2007 potential YouTube strategy in Fool.com: “I predict that within the year, YouTube will prominently sort videos geographically. It will help give the site more of the localized social-networking flair it currently (and surprisingly) lacks. It will also help inspire more local-minded e-commerce. Why aren’t folks generating leads on YouTube to sell their homes or cars? Yes,
    searches for “cars for sale” and “homes for sale” generate about 300 entries apiece but many of those videos are several months old. That’s chump change for a site that’s growing by 65,000 uploads a day. Paying for listings or going through Craigslist is so 2005.”

What it means: good speculation on how YouTube could play in local search space but I think it takes more than uploaded videos to become a good local search engine. I think YouTube would be better off partnering with players in the local space to get them to use YouTube as a video hosting service. I am a strong believer in local video content though.

  • Google radio ads test in News.com: “AdWords customers selected to participate in the beta will see a new “audio ads” tag when they log into the AdWords system. Similar to the AdWords auction-based system for online ads, advertisers can bid on air spots and target their ads by geography, station type, listener demographics and time of day. The test is limited to just
    over 20 Google AdWords customers and more than 730 stations, including XM Satellite radio. Google is also testing a program that will link up inexperienced radio marketers with professionals who can help them create a radio ad.”

What it means: I think the key element is the program to help inexperienced radio marketers advertise on radio. Some people are speculating that this might actually increase radio stations’ revenues as the medium starts benefiting from Google’s pull effect. Google would become an enabler and a platform for radio advertising where everyone would win.

Praized-Worthy Today: Instant Messenging & Teens, YouTube’s Potential Local Strategy, Google Starts Selling Radio Ads

  • Instant messenging usage by teens in Mediapost: “…72% of teen respondents send IMs more than e-mails. In addition, 20% of teens who use instant messaging say they can’t imagine doing without the service. What do teens use IM for? More than half (56%) of teen respondents use IM services to share photos, while 33% share music and video
    via IM”

What it means: IM is still a key element of teenager’s lives, even with the rise of social networks. Interesting what they use it for: share photos, music and videos. I’m surprised it’s not better leveraged at this point as a tool to reach teenagers and young adults.

  • 2007 potential YouTube strategy in Fool.com: “I predict that within the year, YouTube will prominently sort videos geographically. It will help give the site more of the localized social-networking flair it currently (and surprisingly) lacks. It will also help inspire more local-minded e-commerce. Why aren’t folks generating leads on YouTube to sell their homes or cars? Yes,
    searches for “cars for sale” and “homes for sale” generate about 300 entries apiece but many of those videos are several months old. That’s chump change for a site that’s growing by 65,000 uploads a day. Paying for listings or going through Craigslist is so 2005.”

What it means: good speculation on how YouTube could play in local search space but I think it takes more than uploaded videos to become a good local search engine. I think YouTube would be better off partnering with players in the local space to get them to use YouTube as a video hosting service. I am a strong believer in local video content though.

  • Google radio ads test in News.com: “AdWords customers selected to participate in the beta will see a new “audio ads” tag when they log into the AdWords system. Similar to the AdWords auction-based system for online ads, advertisers can bid on air spots and target their ads by geography, station type, listener demographics and time of day. The test is limited to just
    over 20 Google AdWords customers and more than 730 stations, including XM Satellite radio. Google is also testing a program that will link up inexperienced radio marketers with professionals who can help them create a radio ad.”

What it means: I think the key element is the program to help inexperienced radio marketers advertise on radio. Some people are speculating that this might actually increase radio stations’ revenues as the medium starts benefiting from Google’s pull effect. Google would become an enabler and a platform for radio advertising where everyone would win.

Podcasting Offers a Great Opportunity for Traditional Media

pew_logo_2.jpgBusiness Week is reporting on a Pew Internet & American Life Project podcast downloading survey and gives readers a pretty good summary of the podcast landscape. Highlights from the Business Week article include:

  • “Roughly 12% of Internet users have downloaded podcasts in order to listen in at a later time” (up from 7% early this year)
  • “Most tuning into podcasts are sampling shows available, rather than subscribing and regularly listening to particular programs”
  • “Only 1% of Internet users reported downloading podcasts on a typical day”
  • “Estimates of the number of podcasts range from 30,000 to more than 60,000”
  • “Researchers at the Diffusion Group forecast that 11.4 million Americans will tune into podcasts by the end of 2006″ (21.7 million in 2007)
  • “Analysts point out that it’s still hard for many Internet users to find satisfying podcasts, much less ones that you want to hear on a regular basis”
  • 75% of the podcast traffic is driven through Apple iTunes
  • “Many of the most popular podcasts are produced by traditional media outlets (about half of iTunes’ top 100 podcasts are from existing media companies)”.
  • “A Forrester study found that the content many respondents were most interested in receiving via podcast was produced by traditional media outlets.”
    • 23% of respondents were interested in radio news programs
    • 20% wanted broadcast radio shows
    • 20% wanted to listen to recorded books
    • 18% wanted television news programs
    • 10% wanted recorded news or magazine articles
    • 8% wanted audio content from bloggers.

What it means: even though podcasting (and listening to podcasts) is growing, volume usage is still limited to traditional media consumption. Is podcasting a way for traditional radio broadcasters to offer time displacement like Tivo or PVRs are doing for TV? This clearly seems like a great opportunity from a traditional media point of view, an opportunity to extend the reach and frequency of radio and TV shows (via video
podcasts
).

Harry says: Public broadcasters have already embraced podcasts as a way to timeshift; many NPR, CBC and BBC programs are available within hours of their original radio broadcast. As for traditional media outlets having the upper hand, they do have the talent, technology and promotion machines to stake out the top positions. The world’s most popular non-traditional media podcast, This Week in Tech (reportedly with hundreds of thousands of weekly listeners), features media personalities that produce the show on the side, in addition to their ongoing mainstream media jobs. Reminds me of the adage, giving someone a paintbrush doesn’t make them a painter.