Silicon Valley Watcher - conversations and observations at the intersection of technology and media

A new research study from the Society for New Communications Research (SNCR) has found that senior executives are affected by social media and that the influence on online communities on business decisions has grown over the past three years.

The research was conducted by Don Bulmer from SAP and Vanessa DiMauro.

Some of the key findings:

- Professional decision-making is becoming more social - enter the era of Social Media Peer Groups (SMPG)

• Traditional influence cycles are being disrupted by Social Media as decision makers utilize social networks to inform and validate decisions
• Professionals want to be collaborative in the decision-cycle but not be marketed or sold to online; however online marketing is a preferred activity by companies.
  

- Professional networks are emerging as decision-support tools

• Decision-makers are broadening reach to gather information especially among active users

- Professionals trust online information almost as much as information gotten from in-person

• Information obtained from offline networks still have highest levels of trust with slight advantage over online (offline: 92% - combined strongly/somewhat trust; online: 83% combined strongly/somewhat trust)

- Reliance on web-based professional networks and online communities has increased significantly over the past 3 years

• Three quarters of respondents rely on professional networks to support business decisions
• Reliance has increased for essentially all respondents over the past three years

- Social Media use patterns are not pre-determined by age or organizational affiliation

• Younger (20-35) and older professionals (55+) are more active users of social tools than middle aged professionals.
• There are more people collaborating outside their company wall than within their organizational intranet

Foremski's Take:

These are interesting findings particularly the level of trust that decision makers have towards their online communities, it is much higher than for other types of online information.

Also, the finding that age is NOT a factor in social media use is very interesting. There is a myth that younger people are heavier users or have mastered social media to a greater extent. This shows that age is not a factor and it should lead to broader adoption of social media for decision support.

There is more information here on Don Bulmer's blog: Everyday Influence: SNCR Research Reveals Social Media's Impact on Business and Decision Making

[I'm a Founding Fellow of SNCR - a Palo Alto based think tank focused on research into emerging media technologies.]

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The methodology for this study involved a mixed methods approach supported by quantitative data gathered via online survey of 356 professionals to understand their perceptions and experiences with social media in support of their decision-making. Select interviews of 12 professionals were also conducted using a semi-structured interview guide as part of the second phase of the study.
Key demographics of the research include:

• Close to a quarter (23%) of respondents identified themselves as CEO of their organization; 50% as "Director" (24%) "Manager" (24%)
• Company size ranged from less than 100 to over 50,000 full-time employees
• Age was well distributed with the greatest proportion in the 36-45 range
• 25 countries were represented, with 58% of respondents living in the US
• All respondents were either the decision makers or influenced the decision process within their company or business unit

The accepted wisdom among the Digerati has been that Rupert Murdoch's News Corp, and the entire newspaper industry, would be in deep trouble if they barred Google from indexing their content.

I dealt with one aspect of this thinking last week. [The dirty little secret about search engine traffic]

There is a second aspect. It is Google that would be in trouble and not the newspapers.

Let me explain:

- The value of Google search traffic to the newspapers is low. Its loss wouldn't make much difference to the newspapers' already poor online revenues.

- The damage to Google would be much greater. If it is locked out from being able to index a large part of the Internet, it would be very bad for business. It would create a crisis of confidence in Google.

If something like that happened, it would strike at its very core, its mission: "To index all the world's information."

Google users would question "what else is missing?"

GOOG's index is its Achilles' heel. It will do everything it needs to do to protect its ability to index content.

It doesn't care if the content is free or not, as Google's Josh Cohen recently told SearchEngineLand: "...people will say ... 'I have to make this content free or Google won't index it,' and that's not the case."

I ask again, who has the most to lose if News Corp and other large publishers block Google?

Newspaper online revenues won't be much affected at all.

But for Google its reputation as having the best index would be seriously harmed. It would have a large hole in its index.

And that hole would be made up of missing content - new content - the most valuable thing for search engines. People search for new content. That's what brings them back to Google.

Google has far more to lose than the newspaper publishers from being blocked.

And that's why it will do whatever it needs to do in order to preserve its index, including possibly paying for access.

Rupert Murdoch may very well have found the weak spot in Google's business.

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Please see part one of MediaWatch Analysis:

Murdoch Will Negotiate Payment For Access To Basket Of Content With GOOG et al

Rupert Murdoch and his senior execs at News Corp, and Wall Street Journal have been getting a lot of publicity this year for their complaints against Google and news aggregators.

Google has borne much of the brunt of the complaints even though Yahoo News is three times larger (source: Danny Sullivan at SearchEngineLand).

Foremski's Take:

But why have Mr Murdoch and others at News Corp. spent so much time criticizing Google when there is a simple solution: post a robot.txt file that tells Google and others not to search and index their content?

Because criticizing Google results in a lot more publicity. Because Mr Murdoch has another goal: he is most probably laying the groundwork to negotiate a deal with Google, Yahoo, Microsoft, and others, where they will pay to index News Corp content and also content from other publishers allied with News Corp.

Take a look at these points:

- By collecting a package of other publishers, Mr Murdoch can avoid the problem caused by what I call "first mover disadvantage" in that the first publishers with paywalls, risk losing audience to rivals that wait to build their paywalls. That's a much larger business risk than the traffic lost from blocking Google. That's a risk all news publishers face not just News Corp. Better to be in a collective.

- Mr Murdoch is emerging as a champion for other news publishers in his criticism of Google. That's an excellent opportunity to become the rallying point for the newspaper industry as a whole and to recruit publishers into a common basket of content.

- Mr Murdoch and his top executives are masters at using the media to manipulate others to get what they want -- in this case Google is the target.

- Why would competitors join with Mr Murdoch? A better question is why wouldn't they? They would all still compete on writing the news first, that wouldn't change in either scenario. The advantage would be better revenues from subscriptions using a collective approach. Mr Murdoch and his allies could offer packages consisting of local, regional, national and even foreign publications for one monthly fee. No need for micropayments by readers -- the payments could be divided up within the group transparently, the readers pay one fee.

- Would readers pay for content? They already do. Revenue from subscribers has already overtaken revenue from advertising at many publications. In its most recent financial quarter the New York Times said revenues from readers overtook advertising revenues for the first time -- a watershed moment. That's a trend that still has a ways to go and will be helped by new ways to collect subscriptions for online content.

- Would GOOG et al, pay for access to index content? Yes, GOOG already pays for content from the AP and for TV shows to show on YouTube.

- Google would pay because search engines need novelty. They need to index new content. Otherwise why do people use a search engine? To find what they already know is there, or to look for new content? It's mostly the latter.

- If users know that a search engine is blocked from new content then that is a very negative psychological strike against it -- what else doesn't it have? Google, and others need to maintain an impression that they "index all the world's content." Index is their prime goal, rather than to serve up free content.

Josh Cohen at Google News made this very point "there is still a lot of those discussions that take place where people will say ... 'I have to make this content free or Google won't index it,' and that's not the case."

- Google is open to working with publishers in a variety of ways. Danny Sullivan at SearchEngineLand interviewed Josh Cohen at Google News. He said that Google already has a large number of different programs to offer publishers and will work on custom programs too.

Here are a couple more quotes from Google's Josh Cohen:

"We want to be in a situation where the best content wins, not the best SEOed site."

"You can allow us to crawl content and show a preview to the user and label it as a subscription."

Mr Murdoch and his allies will be able to have their cake and eat it in the sense that they can have Google index their content, and also have a paywall.

Plus, they have many business levers to pull in that they can continue to make some content free; to place less content behind a paywall; and to optimize their landing pages for Google and other traffic to make for better ad conversions (as Jonathan Mendez points out in SVW comments).

And potentially get a payment from Google and other search engines in addition to everything else.

This will be one of the ways the media industry halts the decline in its fortunes. Overall, the media industry will need to adopt what I call a "Heinz 57" business model, with multiple revenue streams, there won't be just one or two magic bullets.

The challenge for publishers will be in managing multiple sources of revenue. But that's an opportunity for startups to offer the admin tools, and help aggregate the revenues streams for large publishers.

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Please see:

Analysis On Murdoch And Switching Off GOOG: The Dirty Little Secret About Search Engine Traffic...

WSJ Chief: There Are Two Types: Creators And Aggregators - Creators Carry The Burden Of Costs

Google Is Really Bad At Monetizing Content Yet CEO Schmidt Lectures Newspapers

Zachary Seward, writing at Nieman Journalism Lab reports that PR companies are using online ads to try and deal with bad press.

One example is the New Zealand Seafood Industry Council, which didn't like a New York Times article about a type of fish called hoki. [An Unlikely Star Among Seafood Causes a Row - NYTimes.com]

The council responded by buying Google Ads linked to keywords: 'new zealand hoki' and 'hoki new york times.'

The ads linked to a page that purports to set the record straight about hoki fishing and includes emails exchanged with Times science editor Laura Chang.

That was itself a feat of public-relations genius: Because the council's hoki page was originally a straightforward description of the fish and its uses, the Times had linked to it in the third paragraph of the article (at right), and 78,000 people clicked though, according to Sarah Crysell, a spokeswoman for the council. Taking advantage of that incoming traffic, the group transformed its hoki page into a rebuttal of the Times story.

I'm sure there will be others using this technique. But it's not as good as my idea for a "Right to Respond" box that could be present next to the actual story.

Companies could pay to respond to a specific story. All publications running a similar story or syndicating that story could also publish the "Right to Respond" button or link and thus its content would be automatically updated across ALL news stories carrying a Right to Respond link.

It would also provide newspaper sites with additional income rather than going to Google and and it would also act as showing the news site is "trusted" and legitimate.

- Companies would pay to use this service, individuals would have free access to make corrections.

- Web site owners/publishers/bloggers, etc would not be forced to provide a Right to Respond link next to their content. But if they did, it would show that they are a respectable and responsible site.

- The New York Times and other large publishers should offer a Right to Respond link next to every story because of their reach and influence and potential to harm reputations. It's the fair thing to do.

- Search engines should offer a right to respond link next to each search result they publish -- even if a right to respond link isn't found on the original web page of a search result.

- There is almost no monetary cost to offering a Right to Respond link, it does not cost a web site owner anything extra in servers or bandwidth.

- Publishers would be paid for offering a Right to Respond service from the fees charged to companies. Each time the page is loaded could earn the publisher a micro-payment, something that could be easily tracked by the Right to Respond widget sitting on the publisher's server.

That payment could be further qualified by the influence of a web site. The New York Times gets more money for running a Right to Respond link than less influential sites-- even if traffic volumes for both are the same.

- Only the content publishers get paid to carry a Right to Respond link and not search engines. It is the originator and not the aggregator that collects the payment.

Would some sites publish nasty things about companies or people simply to collect Right to Respond payments? They could, but constantly publishing critical and negative content would undermine their credibility, their influence, and their traffic.

- Competitors could use the Right to Respond link to publish their side of the story.

Please see:

The Right to Respond Should be a Fundamental Right of the Internet

Every time Rupert Murdoch complains about Google and says he will cut off access, a mass of Twitterati, Digerati, and Diggerati think the old newspaper tycoon has lost his marbles and doesn't "get it."

Surely, they chorus, all that traffic that Google sends to the Wall Street Journal is the equivalent of sending a fire hose of cash straight into his pocket. Why would he want to turn off such a lucrative spigot?!

The answer is that he wouldn't, if that were indeed the case. The ugly truth is that Google traffic is hard to monetize. It's not the bonanza that people think it is.

Google traffic is low quality, it is people who stumbled upon the article. Usually, about one-half is new to the site, it had never been there before. The other half already knows who you are. For well established brands this offers incremental value.

More importantly, Google traffic doesn't help the newspaper advertisers much because they are trying to buy a specific sector, a specific readership. For example, the Wall Street Journal advertisers are very business and stock trade oriented. For other newspapers, the advertisers want that particular local metro. Having random readers brought in by Google from all around the world, doesn't do much for the advertisers or the newspapers.

Yes, you can sell those extra pageviews to your newspaper advertisers but they get to see the metrics too, and it doesn't take them long to figure out that much of the Google traffic isn't the traffic they want. That, in turn, lowers the amount of money they will pay for pageviews. Google traffic thus lowers the value of all the pageviews that a newspaper pulls in.

Mr Murdoch knows his businesses. He can run the numbers and see if the revenue from subscriptions will outpace relatively weak revenues from Google traffic.

He can selectively use Google and other search engines, and aggregators to pull in traffic to "free" content then shut it off. He has lots of levers to pull in terms of figuring out an optimum for running his business.

In contrast, Google doesn't have any levers to pull. It relies heavily on access to new content. After all, why use a search engine to find what you already know?

Novelty is extremely important to Google. Yet its only answer to content producers has been "we bring you lots of traffic." The dirty little secret is that that traffic is very difficult to monetize, it has a low value. Even Google has trouble monetizing its Google News traffic.

Google is very much at the mercy of all of the Internet's content producers and whether they let it in, or leave it outside.

UPDATE: It seems my analysis was spot on. The Daily Telegraph November 13: Jonathan Miller, News Corp's chief digital officer, said:

“The traffic which comes in from Google brings a consumer who more often than not read one article and then leaves the site. That is the least valuable of traffic to us… the economic impact [of not having content indexed by Google] is not as great as you might think. You can survive without it.”

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Please see:

Rupert Murdoch to remove News Corp's content from Google ‘in months’

News Corp Wants To “Lead” The Media Industry To Its Own Demise

WSJ Chief: There Are Two Types: Creators And Aggregators - Creators Carry The Burden Of Costs

"Google Devalues Everything It Touches" - Wall Street Journal Chief

FutureWatch: The End Of The News Aggregators And The Future Of News

Adtribution Might Be A Solution For Murdoch, A.P, Et Al, Versus The News Aggregators And Bloggers

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Recent coverage:

Murdoch may block Google searches

Google may lose WSJ, News Corp sites

Has Rupert Murdoch Finally Lost His Mind?

Now it's Murdoch vs. the World as He Threatens to Sue the BBC | BNET Media Blog | BNET

There is an excellent article by Mike Arrington from Techcrunch on the subject of the duplicity of social gaming networks and social networks as fronts for advertisers that trick people into signing up for monthly "services." [Scamville: The Social Gaming Ecosystem Of Hell]

This is an issue that has been going on for some time. And it's not limited to the social gaming companies or the social networks.

I raised the problem earlier this year when I interviewed Brett Brewer, president of Adknowledge, the largest virtual goods/cash company. [Will Virtual Cash Reinvent Online Ads?]

Mr Brewer said that Adknowledge was aware of the problem and was taking steps to weed out the problem advertisers.

Mike Arrington describes how some of these scams operate:

...users are offered in game currency in exchange for filling out an IQ survey. Four simple questions are asked. The answers are irrelevant. When the user gets to the last question they are told their results will be text messaged to them. They are asked to enter in their mobile phone number, and are texted a pin code to enter on the quiz. Once they've done that, they've just subscribed to a $9.99/month subscription.

There are plenty more variations.

Here is a description of the money that can be made from a self-confessed Facebook spammer: [How To Spam Facebook Like A Pro: An Insider's Confession]

When the Facebook platform first launched, developers used Google AdSense, which was paying 10-15 cent eCPMs, meaning that developers were earning 10 to 15 cents for every 1,000 ads they shown. But soon, ad networks, such as the one I operated, stepped in to show that by using social data and some clever ad copy, we could raise this to well over $6--that's 60 times better than AdSense.

It's not just gaming and social networks where you can find these types of scams. They are everywhere on the Internet. They are distributed by large ad networks.

And there are plenty of grey areas. For example, Experian, the credit reporting firm that owns freecreditreport.com. The New York Times reports:

[The Federal Trade Commission] has long believed that the company that owns freecreditreport.com is deliberately diverting people from a government-mandated site where consumers can get free credit reports by law, and using the reports as a lure for a $14.95 monthly service that alerts subscribers to important changes in their credit status.

Foremski's Take: This deluge of scam and spam is a serious issue because it threatens the future of Internet commerce. The more people ensnared by these types of scams, the less likely they are to buy much of anything over the Internet.

Media companies, for example, are already struggling to make money from online advertising. This will make matters much worse.

The gaming companies, the social networks, the ad networks all seem to turn a blind eye to what is going on because they reap large rewards from these scams. But it is a short sighted strategy because they are selling out their users, their members.

They should be looking out for them not selling them out.

By turning a blind eye these companies are missing a unique business opportunity to offer a safe place for Internet users, to guarantee that there is no scam advertiser on their network, and to insist that their advertisers clearly spell out billing terms.

But this will take courage and it means saying no to large amounts of money. And it will also raise their costs of business because it will require monitoring of ads, and this can't easily done by machines, it requires people.

Silicon Valley media companies such as Google, Facebook, etc, like to do everything by server and software. This is potentially an Achilles' heel that other media companies could exploit.

Last Thursday I was on a panel discussing embargoes. (There will eventually be video of the event.) The moderator was Sam Whitmore, and I was sitting next to Dylan Tweeney from Wired, on my right was Damon Darlin from the New York Times, and Mark Glaser from MediaShift on my far right.

Unfortunately Mike Arrington from TechCrunch couldn't make it, which is a shame because plenty of PR people have told me TechCrunch regularly breaks embargoes and it would have been good to have heard his side of the story.

Dave Needle from InternetNews.com wrote a very good reound-up of what was said: This tech news is not embargoed - InternetNews:The Blog - David Needle

Here is an extract:

While Tweney continues to selectively agree to embargoes (as does InternetNews.com), he said he recently "punished" a PR firm by refusing to communicate with them for six weeks after a competitor was allowed to publish an embargoed story ahead of everyone else. He said the PR firm's excuse was that the vendor, a handset manufacturer, had leaked the news to a blog directly without the PR firm knowing.

The New York Times Darlin said embargoes are generally used as a tool by PR firms to co-opt the media. That said, Darlin said the Times often accept embargoes because they ensure reporters don't miss a story and they have more time to do a thorough job.

That thoroughness is limited. Once you've agreed to an embargo, you can't share that news ahead of time with the analysts and competitors you might otherwise call for comment. Vendors will sometimes provide a list of analysts that have been pre-briefed on their news.

While many took shots at the embargo process and the games PR folk sometimes play, Chris Preimesberger, an editor at eWeek, said embargoes help him get his job done.

"They give me the background information and the time to do the piece right," said Preimesberger, during a follow up Q&A session. He estimates 75 to 80 percent of the stories eWeek does are facilitated by the embargo process, the rest are breaking news.

"I have no problem with the process and don't feel like I'm being manipulated," said Preimesberger.

My proposal that holding a press conference, real or virtual, so that everyone gets the news at the same time seemed to have a fair amount of support as an alternative to embargoes. But overall, I didn't think that we made much progress in creating any new rules around embargoes.

However, I was surprised that there is such a lot of interest in this subject. Embargoes have been around since year dot and we all have our way of working with them, selectively of course. They are not going away, that's certain.

But I think it could and should lead to media outlets rethinking their editorial policy. Do we have to be first with with news? If a dozen other publications also have the news what is our value-add?

There is more to be gained from developing an unique editorial stance than there is from pressing the publish button a few minutes earlier than anyone else..

The panel discussion sparked a few blog posts. Mike Yamamoto, the founding editor of CNET's News.com wrote an interesting post. The absurdity of embargoes

What was especially interesting was his stories about the use of embargoes when he worked in the Washington D.C. bureau of the Los Angeles Times. Government agencies routinely placed embargo notices on their news releases. It's a practice that companies and PR firms have attempted to use too.

For some reason, many companies and government agencies seem to think that simply receiving so-called embargoed material automatically means you have agreed to it--even if you never knew the information existed, let alone had consented to any restrictions, before it landed in your inbox or mailroom unsolicited.

It would be the equivalent of my mass-emailing a contract to sell my house for $10 million, then holding its recipients to the provisions of the "agreement." When they rightly tell me to go pound salt, I would cry foul and claim that they broke the rules.

Mr Yamamoto rightly points out:

Because News.com did not agree to embargoes, therefore, their restrictions did not apply to us. It's impossible to "break" a contract you never agreed to.

Lastly, I feel it is up to the PR industry to police this issue. If they are working with a journalist or organization that routinely breaks their word, then they should not disclose embargoed information the next time.

Compete.com provides a rough guide to the traffic of various sites, it's usually on the low side because of the way it collects its metrics but it does provide a good indication of trends.

Over the past year Mashable has been doing very well especially compared to the tech news sector leader TechCrunch.

A year ago TechCrunch had 660,000 more monthly visitors than Mashable (1.63m versus 0.96m). The most recent figures for 09/2009 show Mashable has grown 171% and overtook TechCrunch in May.

Mashable now has 43% more monthly visitors (2.62m versus 1.83m). According to Compete, TechCrunch traffic has been declining since June, and is down by about 10%.

TechCrunch is likely making more money than Mashable, at least for now. Mashable is using the Federated Media (FM) ad network. FM takes a large cut from advertising revenues plus it is selling ads based on prior lower Mashable traffic counts.

TechCrunch dropped FM about six months ago and thus can collect a higher ad revenue. (BTW GigaOm also dropped FM and now uses IDG ad network.)

Here is a graph of Techcrunch and Mashable's performance over the past year plus a look at ReadWriteWeb, VentureBeat, and GigaOm.

This evening I'm on a panel moderated by Sam Whitmore and organized by Waggener Edstrom:

The topic is:

"Love them or hate them, embargoes are a familiar and much-discussed element of the rules of engagement with media and influentials. Clearly the old rules are not working. Is 2010 the time to re-write that rulebook?"

I'll be discussing this with Damon Darlin, New York Times, Dylan Tweney, WIRED, and Sam Whitmore from Media Survey. Mike Arrington from TechCrunch was going to join us but dropped out.

Mike Arrington has gotten a reputation for breaking embargoes and I know plenty of PR people that won't work with TechCrunch because it harms their relationships with other journalists who do agree to hold the embargo. So it's a shame that we won't be hearing Mr Arrington's side of the story.

For several years I've been writing about the need for "media engineers" part software engineer and part journalist. And others have also started to write about teaching journalism to programmers.

MediaShift . Can Programmers, Journalists Get Along in One Newsroom? | PBS

There is a lot of journalism that can be done by mining data in public databases. Some newspapers now have interactive maps, for example, Oakland Tribune has an interactive map of homicides.

A much better example of data journalism is EveryBlock, which provides a news feed for neighborhoods in all large US cities. Type in your zip code and EveryBlock will email a newsfeed that contains police reports, restaurant openings and reviews, building permits, coverage in the media, and other local data culled from public databases and other sources.

EveryBlock is run by Adrian Holovaty, based in Chicago. It was recently acquired by MSNBC.

EveryBlock was started by a grant from the Knight Foundation and part of its condition was that the EveryBlock publishing software be released under an open source license. It's available to anyone, anyone can replicate what EveryBlock has done.

Adrian Holovalty is a true media engineer, he is also one of the driving forces behind the Django project, an open-source framework for quickly developing web applications for newsroom projects.

Data journalism has had its fair share of critics. But I think it has a bright future as long it it is wrapped within the right context. The temptation is to just publish the raw data without much else and allow the readers to make sense of it depending on how the data affects them.

Data journalism combined with a fair amount of human journalism could be a potent mix, providing context to the content. It'll be interesting to see how newsrooms combine the two.

But most newsrooms lack the software engineering skills to use Django and similar technologies. And with newsroom cuts and the pressure on media business models continuing unabated, we may be running out of time to experiment with data journalism.

That would be a shame because today's media technologies make it possible to create many novel types of media formats. There's a tremendous amount of innovation that can be done with media formats. I've got a few ideas myself that I'd love to try out but unfortunately I, too, lack the resources.

The Committee for Protection of Journalists last night announced funding from Peter Thiel, head of hedge fund Clarium, for the defense of online freedom of the press.

The amount was not revealed but described as a "substantial check."

Peter Thiel told SVW, "Technology can have positive and negative aspects. I want to help the CPJ defend the rights of online journalists."

The CPJ says that 33 journalists have been killed this year, and 760 killed since 1992, of which 482 were murdered. Increasingly, it is online journalists that are being targeted.

Some details about CPJ:

How did CPJ get started?
A group of U.S. foreign correspondents created CPJ in response to the often brutal treatment of their foreign colleagues by authoritarian governments and other enemies of independent journalism.

CPJ has a full-time staff of 23 at its New York headquarters, including area specialists for each major world region. CPJ has a Washington, D.C. representative, and consultants stationed around the world. A 35-member board of prominent journalists directs CPJ's activities.

CPJ is funded solely by contributions from individuals, corporations, and foundations. CPJ does not accept government funding.

Without a free press, few other human rights are attainable. A strong press freedom environment encourages the growth of a robust civil society, which leads to stable, sustainable democracies and healthy social, political, and economic development. CPJ works in more than 120 countries, many of which suffer under repressive regimes, debilitating civil war, or other problems that harm press freedom and democracy.

By publicly revealing abuses against the press and by acting on behalf of imprisoned and threatened journalists, CPJ effectively warns journalists and news organizations where attacks on press freedom are occurring. CPJ organizes vigorous public protests and works through diplomatic channels to effect change. CPJ publishes articles and news releases; special reports; and Attacks on the Press, the most comprehensive annual survey of press freedom around the world.

Megan Taylor over at PBS' MediaShift writes about the challenges of getting programmers and journalists to work together.

MediaShift . Can Programmers, Journalists Get Along in One Newsroom? | PBS

"there's no reason why a programmer can't do journalism," said Rich Gordon, director of digital innovation at Northwestern's Medill School of Journalism. "They just need an understanding of the mission and culture of journalism and journalists."

Mr Gordon thinks that in terms of personalities, i.e programmers being introverted and anti-social, they can be similar to journalists.

But even with similar personalities, it's not easy to get programmers to think like journalists, or to get used to the chaotic environment of a newsroom.

Aron Pilhofer, editor of interactive newsroom technologies at the New York Times, has assembled a team of mostly programmers to do journalism.
..."It's not a normal corporate-y type of environment," Pilhofer said. "It's very loosey-goosey, collaborative, hectic, disorganized. It takes time to get used to that environment, and not everyone is comfortable in that environment.

Others say problems arise because of miscommunication.

Matthew Waite, news technologist at the St. Petersburg Times, weighed in on how programmers and journalists communicate, and how that communication can be improved. He said ill-will between journalists and programmers arises from miscommunication.
"I've seen a lot of cases where some piece of code did exactly what the requirements document specified, but it didn't do what anyone wanted," Waite said.

Foremski's Take: I've written on this topic many times and I think it is easier to teach journalists to become programmers. They then become "media engineers" rather than software engineers.

Today's development tools are very powerful and they make building complex software applications easier than ever before.

Every journalist should know some html, CSS, JavaScript, etc. They don't need to be proficient but they should know how all these media technologies work. Some journalists can go much further and I think we will see that happening more because there is a real need. If I were a journalism student I'd be loading up on programming courses because I'd greatly improve my chances of getting a job -- every newsroom needs strong media engineering capabilities.

Teaching a programmer journalism skills is challenging primarily because programmers have already chosen their profession. If they had wanted to be journalists they would have become journalists.

But teaching a journalist programming skills would be a lot easier and far more effective because you have to have a strong understanding of media -- that comes first. That's what a media engineer would provide, media first, engineer second.

And a media architect would be similar to a systems architect, they would design the information/publishing architecture of an organization. And by the way, today every company has to be a media company to a degree, every large company needs media engineers and media architects on staff.

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Please see:

Move Over Software Engineers It's The Era Of Media Engineers

Journalism Schools Wake Up To Need For Media Engineers

Hat tip to Danny Sullivan for pointing out the above panel at Web 2.0 Summit, which featured Robert Thomson, Wall Street Journal chief, and Marrissa Mayer head of search products at Google, plus Martin Nisenholtz, The New York Times Company, and Eric Hippeau from the Huffington Post, moderated by John Battelle. Title: "Whither Journalism."

YouTube - Web 2.0 Summit 09: "Discussion: Whither Journalism?"

The reason this discussion is interesting is because Mr Thomson is a close confidant of Rupert Murdoch, the head of News Corp and one of the leaders in trying to create new business models for online journalism. One of those ways is to create a paywall - to charge for content.

This has been criticized by many online pundits who believe content should be free and that Mr Murdoch, and others that want to charge for content won't succeed.

This is a ridiculous argument because it doesn't address the issue of how content is created and the costs in creating content. An army of citizen journalists won't be able to fill the gap caused by fewer professional journalists. We have to figure out a way to pay for professional journalism.

At the beginning of the discussion Mr Thomson gets to the point right away, when he makes the distinction between content creators and content aggregators and point out that the cost burden is being shouldered by the content creators.

Many people, like Danny Sullivan, like to point out that the Wall Street Journal, and others that complain about Google stealing their content, want the traffic that Google sends their way.

But Mr Thomson challenged Ms Mayer's view that Google is all about sending traffic to other sites. He said if that is true, why isn't the font size larger on the link to the original source? Double figure (font size) would be good, he said to laughter.

Google, and other aggregators, take the headline and first paragraph of a story, the two most important elements of a news story and try to monetize that content.

The value of the traffic Google sends is not that great, believe it or not. As a publisher I get to see my server stats, etc, and so I know first hand the value of traffic from Google, or even Techmeme, is not much.

I can appreciate the frustration that Mr Thomson feels when he sees others trying to profit from the work of his journalists.

Producing original content is very expensive. Trawling web sites and taking the headline and top paragraph of a story is dirt cheap. The difference between costs for content creators and content aggregators is very large indeed.

The Huffington Post gets a ton of content for free. The New York Times has more people moderating its comments than The Huff Post has journalists on its masthead. Yet the Huff Post couldn't exist without the content creators. Clearly there is a large mismatch here.

The tragedy is that on either side of the equation there isn't enough money to pay for the content creation.

Even if Google News and The Huff Post and all the other news aggregators gave every dollar and cent they make from other people's content to the content creators it would be unlikely that it would cover the costs of the news creators.

For example, The New York Times is laying off another 100 newsroom jobs and its most recent financial quarter showed a 29 per cent fall in revenues with print and online ad revenues continuing to plunge.

The tug of war between creators and aggregators is some degree, a red herring. We need to develop a "value recovery mechanism" for online journalism.

This is the most important problem we have related to the Internet, it is much more important than net neutrality. It is the Gordian knot of the Internet - if one person solves it we all benefit.

- - -

I was reading an interview with Bay Area philanthropist Tad Taube. He is asked what other things would he like to fund...

"There is one thing that I've been thinking about a lot, but I'm not quite sure how to do it yet. One of my principal concerns is the preservation of freedom in the United States. Now, in order to have a free country, it's necessary to have a free press. A free press is a press that is ready, willing, and able to present all the different points of view that bear on an issue. If people are not informed in an impartial and unbiased manner, if there is only one point of view that they ever hear, how can they possibly make a decision that was in the best interest of their country or their civilization?

What I would like to explore are ways to distribute and influence the body politic with much more balanced reporting. So how do you create that? I'm not sure yet. It won't be easy. It will take a lot of people--this is another area ripe for philanthropic collaboration, I would say--working together to bring balance back into the media, particularly in its political coverage. I'm sure there is more balance in terms of basic news: political turmoil in the Congo or a fire in downtown Boston, or reporting on a sporting event. But coverage of politics, economics--of ideology, of ideas--is badly unbalanced. And, ultimately, we live off of our ideology. "

Interview with Tad Taube - Interviews - Philanthropy Magazine - Philanthropy Roundtable

Please also see:

Dear WSJ: To Avoid Google Disease, Please Put A Condom On Your Content

"Google Devalues Everything It Touches" - Wall Street Journal Chief

Non-Profit News Funding - We Need A Sustainable Business Model Not Handouts

We need a Google AdSense on steroids: The Grand Challenge of Internet 2.0 - SiliconValleyWatcher

There's an East Coast tech revival underway, I'm told. The publicists for TechStartsUps.com say that Hulu and Etsy have been "overwhelmingly successful" and that is propelling New York City into "once again becoming a hot spot for creative people who make inventive and viable technologies."

I spoke with Kris Smith, the newly appointed senior editor of TechStartsUps.com. He recently moved from Chicago to New York city and says their is a vibrant startup scene and people are dusting off old business plans.

He says that there are some active investors and that large media companies have some interesting projects going on, and that they also make acquisitions of local startups. There's a lot of activity in structural data, semantic web, mobile, and more. And TechStartsUps.com hopes to become the "Techcrunch" of the east coast.

He says there is a cultural difference between Silicon Valley and New York, there is a bit more focus on money. "Freemium has been great for some companies but generally it hasn't been very good for developers."

East coasters like to poke at Silicon Valley's penchant for "build it and then figure out the revenues" attitude -- not that Mr Smith is doing that but it is certainly a cultural difference.

Interestingly, "freemium" is a term coined by New York based VC Fred Wilson.

Mr Smith likes CNN's iPhone app because it charges money. And I agree, premium is a better model than "freemium" -- if you can get the dollars.

I ask him what jokes do people tell about Silicon Valley? He says there are none and laughs when I tell him I don't believe him.

I've had friends move from here to New York over the past few years and while they love the city, they say it is difficult to find people that you can talk to about technology and business. You can have conversations here that are very difficult to find anywhere else in the world, and that's why companies continue to move here from all over the world, including the East Coast.

It's great to hear that New York might be enjoying a bit of a tech revival but I'm afraid that Silicon Valley's view on this topic is equivalent to the famous New Yorker cartoon of the New York cityscape, where the rest of the world is depicted as pimples on a distant horizon. NYC is simply a pimple -- it's not personal it just is.

On October 29 I'll be on a panel with Mike Arrington from Techcrunch and Mark Glazer from NPR's Media Shift, moderated by Sam Whitmore from Media Survey, discussing embargoes and if they have a future.

The event will be at Varnish Gallery in downtown San Francisco at 6pm and is organized by Waggener Edstrom-San Francisco.

The topic is interesting because embargoes don't seem to work anymore. Techcrunch is famous for breaking embargoes; Wall Street Journal and other publications no longer accept embargoes; while others keep embargoes but are then upset when they are broken, and that can strain relationships between PR people and journalists.

I do accept embargoes but then I end up not writing about the news because the embargo is too far out in time and I've either forgotten about the news or have gotten bored by it. And of course, the embargo is usually broken so what's the point?

But how should companies distribute important news in a fair manner, giving every media outlet a chance to interview key executives and research and write the story?

Are embargoes better suited for different types of stories? Is it possible to create a new type of rule book around embargoes?

Hopefully you can join us on October 29 for "Embargo 2010: Industry Conversation on Future Rules of Media Engagement."

For many years I've been saying that Google (GOOG) is a media company. For many years people have been telling me I'm wrong that, " Google is a tech company."

But what technology can you buy from Google? You can buy database tech from Oracle, you can buy microprocessor tech from Intel. What tech can you buy from Google? (OK, a search appliance box but that's it.)

Erik Schonfeld writes about Ken Auletta's forthcoming book: "Googled: The End Of The World As We Know It."

He quotes from a pre-publication copy in a post titled - Googled: Schmidt Wants To Build A "$100 Billion Media Company":

In 2007, Eric Schmidt told me that one day Google could become a hundred-billion-dollar media company--more than twice the size of Time Warner, the Walt Disney Company, or News Corporation.

Foremski's Take: Google, Yahoo, EBay, Facebook, and a host of Web 2.0 companies, and many more, are all media companies. They publish pages of content with advertising around it.

What's not a media company about that?

These are technology-enabled media companies. They are not tech companies.

Google uses technologies to harvest content for free and then serve up ads around that content. It doesn't want to produce content or pay for content if it can help it, although it does pay for some content on YouTube.

What is interesting about the quote from Mr Schmidt is that over the past few years Google hasn't wanted to portray itself as a media company because it hasn't wanted to appear as a competitor to media companies. Especially, when it has partnered with them using its AdSense ad network. But most media companies have figured it out by now.

- - -
Please see: "Google Devalues Everything It Touches" - Wall Street Journal Chief

Last week's announcement that philanthropist Warren Hellman is giving $5m to fund a non-profit news venture with UC Berkeley and KQED has been widely hailed as a good thing.

But I don't like it or any other non-profit approach to news journalism. The entire industry is already non-profit in that it doesn't make money.

The point it to find a new business model for news journalism -- that's what Mr Hellman's money should be used for. If we can develop new business models then everyone benefits, everyone can use the new business models.

If news journalism has to wait for handouts then it will never be a healthy industry.

There's been a fair amount of discussion lately about online advertising and its variety of forms. Most recently, Shelby Bonnie, the former CEO and co-founder of CNET, railed against the CPM form of online advertising.

... does anyone else feel like the online advertising industry is the orchestra, playing on while the Titanic is sinking?
We have a problem, folks. And I, for one, think we should start to fix it by killing off the CPM, once and for all.
I have been in the Internet media space for 16 years and will start by stating the obvious: The CPM has done more to stunt innovation and drag down quality products than any single thing on the Internet. Maybe it works in other mediums, but it sure as hell doesn't work on the Internet.

Let's Kill The CPM

A few weeks ago, Jim Spanfeller, the outgoing CEO of Forbes.com wrote an article titled: Publishers Are Killing Web Advertising's Potential With Misguided Pricing

...we now know that 16% of web users generate 80% of clicks and that this 16% represents the lower income and education segments of the total user base. Do we really want to be held accountable as an industry by metrics generated by the lowest common denominator and a minority of users to boot? I can't think of too many successful models using these types of metrics

(Please see: Forbes.com Chief Rails Against Online Advertising Metrics Because It's Low Class)

In both articles and in the comments section there is lots of discussion about the merits of different forms of advertising, whether CPC is better than CPM, or a combination of CPA and CPC is best, etc.

Foremski's Take: I'm not going to explain what all these acronyms for online advertising mean because they are all missing the point. And the point is simple: Online advertising doesn't work for publishers no matter how it is done.

The point is that we don't have a good enough "value recovery mechanism" for online news. It's a fancy way of saying publishers aren't able to get enough revenue to pay for new content. Without this virtuous cycle they are losing money.

This is the crux of why media is failing, it's nothing to do with blogging or Google. We haven't figured out a way of recovering the value of online news.

Clearly there is value in online news because millions of people read it. And newspaper and magazine web sites continue to grow in readership.

For example, Compete.com says that for August 2009, New York Times grew 9 per cent in that month to 16.7m unique visitors; Wall Street Journal is up 5 per cent 11.9 million unique visitors; Forbes is up 5 per cent to 11.3 million unique visitors; for comparison, Techcrunch dropped 4 per cent to 1.9 million unique visitors.

More readers usually means more money -- at least it did in traditional media. But more online readers doesn't add up to much at all, because the only way to recover the value of all that work is mostly through online advertising--and that's why publishers are hung up on which form of online advertising we should be using.

The problem is that none of the forms of online advertising will give the publishers what they want -- more revenue to stop the losses.

What, then, is the right "value recovery mechanism" for journalism? I don't know but this is the most important question facing the Internet today because it affects all of our futures.

- - -
Please see:

We need a Google AdSense on steroids: The Grand Challenge of Internet 2.0

Newspapers: 25 things to try before turning off the lights | Tom Foremski: IMHO | ZDNet.com

There's Real Gold In Virtual Cash - Is This A Solution For Newspapers? - SiliconValleyWatcher

DEMOFall kicks off today, a showcase of about 70 companies who pay to present at the conference.

VentureBeat is a co-producer of the show and is also covering the announcements. So is this a type of pay-per-post arrangement except in name?

It's not clear. Anthony Ha, a VentureBeat reporter writes:

. . . VentureBeat's front page is plastered with our stories about launching companies. Dean Takahashi, Kim-Mai Cutler, and I have each written in-depth posts about some of the launches, and we're going to be covering many more over the next two days of the conference (which is co-produced by VentureBeat).

This is all part of a larger trend. Last week's Techcrunch 50 conference was covered exclusively by Techcrunch getting all the launch news first. Would Techcrunch have written about all those companies if it wasn't a Techcrunch co-produced event? Would VentureBeat have written about all the Demo companies if it wasn't a co-produced event? Clearly not.

Many media companies are being forced to look for additional revenue streams because advertising alone cannot support their editorial teams. Media companies producing conferences are becoming an important revenue stream, GigaOm, for example recently hosted its Mobilize conference.

No one can blame these excellent publications from seeking additional revenues to support their work. But surely such arrangements question their editorial integrity since their coverage of companies is not dependent on an editorial decision but on a financial relationship.

Do their readers care about such things? I guess we will find out.

- - -
Please also see:

Issues When Media Companies Host Conferences

Newspaper ad revenues continue to fall and at a pace not seen since the Depression. The New York Times reports that Q3 ad revenues are expected to be 25% below the same period a year ago.

The drop in combined print and digital ad revenue last year, 16.6 percent, according to the Newspaper Association of America, was the worst since the Depression. But it looks rosy next to 2009, when revenue fell 28.3 percent in the first quarter and 29 percent in the second.
Newspapers Have Not Hit Bottom, Analysts Say - NYTimes.com

Foremski's Take: This is bad news for newspaper companies because they have already made many cuts in staff and other expenses. There isn't much more they can do.

Charging for online news is unlikely to stem losses.

And it is not just print advertising that is in decline. Newspaper companies are also reporting lower ad revenues from their online operations. Their transition from print to online offers them no hope of better times.

Although the future looks bleak for newspaper companies, the future for news journalism doesn't have to be tied to demise of newspapers.

It should be possible to build new types of news organizations that are focused on solid journalistic practices and the distribution of news through many online channels and in a variety of formats.

However, the transition period will be unpleasant and we can expect to see more large newspaper closures and thousands more layoffs.

In the meantime, top blogger Andrew Sullivan of The Atlantic has asked his readers to buy subscriptions to the print version of the magazine.

Within two days after last Monday's post, Mr. Sullivan's appeal pulled in 75 percent of the subscriptions that the Web site draws in a typical month, the magazine's publisher, Jay Lauf, said. The Atlantic expects this month's subscription orders to be double an average month's.
Atlantic Blogger Andrew Sullivan Makes Pitch for Supporting Print - NYTimes.com

Unfortunately, having bloggers pitch for print is not a sustainable business model. And it's a shame people couldn't choose to buy a subscription and not receive a print version of the magazine.

Tuesday was a very good day. I got to spend time with Sabrina Horn, head of the Horn Group, and Todd Defren, head of Shift Communications.

These are two people that I have a lot of respect for because they've been around the block a few times and they are in the midst of some big changes.

They spend a lot of time in Silicon Valley but they are based out on the East coast, which gives them a broader perspective about many of the things that are happening here.

Also, what is interesting is that we are both on different sides of the same coin. The changes that are disrupting the media industry are similar to the changes disrupting the PR industry.

And these are not pleasant times. It's especially tough when you are responsible for large numbers of staff (which I'm not). These are scary times.

But these are also fascinating times.

While many bemoan the dying of traditional media, we forget to notice that we have more media now, in more formats, than ever before in the short history of our species. What will this lead to?

This is an incredible time to be a witness to what is going on, and even better, to be involved in the dramatic changes in media and PR communications.

The way I see things developing is that our future destinies are converging. Whether we are in journalism or PR, our mission is to help our communities, companies, non-profit organizations, governments, individuals, etc, to help them tell their stories in real and authentic ways. So that the more we know about each other the less strange we will seem to each other.

Why is this important? Because in an increasingly media fragmented world it is easier than ever for people to spend time with others that look and think the same. It is easier than ever to become more segregated and distant from each other.

And the less we know about each other the more opportunities there are for xenophobia and conflict.

As journalists and PR communicators we have a unique opportunity to work to bridge these divides and that means we all benefit.

How we do it I'm not sure but that's the best part -- we all get a chance to figure these things out.

This might seem a bit of a stretch, a post about journalism and PR trends turning into a post about peace and understanding. But what can I say? That's where I see things heading. And that's what gets me out of bed each day.

For several years I've been advising that newspaper publishers should not think of themselves as newspaper publishers but as providers of news services.

But changes in self-perception take a long time. For example, it took IBM nearly ten years to transform itself from "the world's largest computer company" into "the world's largest computer services company." It was facing an ugly demise from the challenge of the microcomputer.

This is a similar transition that newspapers need to make today. Paper or electron it shouldn't have to matter how they deliver the news.

It seems that the New York Times has come to this realization and that's encouraging.

In a memo released yesterday you will find the following:

...we are a news company, not a newspaper company. We are committed to offering our consumers our content wherever and whenever they want it and even in ways they may not have envisioned - in print or online - wired or mobile - in text, graphics, audio, video or even live events.

Because of our high-quality journalism, we have very powerful and trusted brands that attract educated, affluent and influential audiences. These audiences are a true competitive advantage as we move into an increasingly digital world.

Finally, our most valuable news organization gets it. This is very encouraging for the future of quality journalism, imho.

The popular TechCrunch50 conference started this week. Organized by TechCrunch, the conference attracts many young startups.

This is part of a broad trend by media companies to host conferences in a bid to improve revenues. GigaOm, VentureBeat, also have their own conferences because the revenues from advertising alone are far from sufficient to pay for ever larger staffs.

The attraction for companies participating in these conferences is good because it guarantees that each media organization will cover its own conference. This brings up a potential issue that this is a pay-per-post scheme.

Techcrunch avoids such criticism by charging the conference audience and not the main 50 companies that are presenting. However, it does charge exhibition fees of $3,000 for each of the 100 companies in the "Demo Pit."

VentureBeat is now co-producer of the DEMO conference. It'll be interesting to see how it deals with potential conflicts of interest regarding pay-per-post because DEMO companies pay to attend (after they've been selected.)

The advantage to companies from getting media coverage from a TechCrunch, GigaOm, VentureBeat, etc is considerable. It can dramatically boost the Google pagerank for each company's website. And that translates into big bucks in savings in terms of online marketing.

Google uses pagerank to decide the importance of a website within its ranking of results for a specific topic. And pagerank is determined by the importance of sites, and the number of sites, that link to a page. A good pagerank means that companies will show up higher on a list of Google results and these types of "organic" search results are far more effective than paid search ads.

However, because each media organzation is covering its own conference, this can discourage other reporters from writing news that is announced at the event.

For example, a quick search on Techmeme reveals very little media coverage of TC50 outside of Techcrunch.

Could companies could have gained broader media coverage and therefore a higher pagerank if they hadn't taken part in a media company organized conference? Probably, but only if they have some important news to release.

This could be an issue at the upcoming DEMOFall which boasts that "each DEMO translates to over a billion media impressions worldwide." Will VentureBeat's involvement dampen media coverage?

Maybe this is why traditionally, conference and trade show organizations were always independent of the media.

It was about five years ago that I left my job as a reporter and columnist for the Financial Times in the San Francisco bureau. And it's been a tremendous journey.

I didn't realize at the time that I would become the first reporter to leave a major newspaper to make a living as a professional journalist/blogger. It puzzled a lot of people as to why I would give up one of the top jobs in my industry for an uncertain future.

I did it because I could see that there were a lot of changes happening in my industry. I could see that staying in newspapers would mean staying on the sharp, pointy, business end of the disruptive forces that were starting to be felt. I believed it would be better be on the other side of the disruption, afterall, things would not get any better for newspapers, but would gradually get better for online publishers.

I could also see that the management of newspapers, not just mine, didn't see what was going on.

(Photo by Joi Ito)

When people travel out of the country, or speak with people not from this country, they sometimes say things they might not normally say. This seems true in the interview Chris Anderson, Editor of Wired magazine, gave to Spiegel, the top German business magazine.

Take a look: Chris Anderson on the Economics of 'Free': 'Maybe Media Will Be a Hobby Rather than a Job' - SPIEGEL ONLINE - News - International

This is how it begins:

SPIEGEL: Mr. Anderson, let's talk about the future of journalism.

Anderson: This is going to be a very annoying interview. I don't use the word journalism.

SPIEGEL: Okay, how about newspapers? They are in deep trouble both in the United States and worldwide.

Anderson: Sorry, I don't use the word media. I don't use the word news. I don't think that those words mean anything anymore. They defined publishing in the 20th century. Today, they are a barrier. They are standing in our way, like 'horseless carriage'.

SPIEGEL: Which other words would you use?

Anderson: There are no other words. We're in one of those strange eras where the words of the last century don't have meaning. What does news mean to you, when the vast majority of news is created by amateurs? Is news coming from a newspaper, or a news group or a friend? I just cannot come up with a definition for those words. Here at Wired, we stopped using them.

Foremski's Take: Wow. No words for media or journalism. I'm thinking Mr Anderson wasn't having a good day when Spiegel came calling.

It's a ridiculous position. The media is dead long live the media. We have more media, in more forms than at any time ever in our history. Yet Mr Anderson decides not to use words like journalism and media within Wired. Wow.

Mr Anderson also seems to think that payment isn't necessary for creating online content:

The vast majority of people online write for free. We've tried paying some of our bloggers and they thought it was insulting. They're not doing it for the money, they're doing it for attention and reputation, or just for fun.

. . .In the past, the media was a full-time job. But maybe the media is going to be a part time job. Maybe media won't be a job at all, but will instead be a hobby.

You get what you pay for. That's an expression that still rings true in this online world. I guess Wired's journalists have now been rebranded as hobbyists and they shouldn't expect a pay rise, or payment at all.

Mr Anderson also makes some preposterous claims about the online economy:

The online economy is about the size of the German economy. And it's based on a default price of zero. Most things online are available in a free form. We have never seen an economy this big with a default price of zero.

Last time I went to Amazon, I saw free shipping but that's the only free thing I saw. An online economy where the default price is free is not an economy.

Take a look at this:

. . .Free is the force of gravity. If we decide to resist it then somebody else will compete with something that is free. The marketplace follows the underlying economics. You can be free or you can compete with free. That's the only choice there is.

Competing against something that is free means there is no competition. Businesses compete in markets and markets are defined by revenues. If Mr Anderson looks closely, he will find businesses competing for revenues, nothing has changed. Mr Anderson is so tied to the premise of his book that he is attempting to create a strange new marketplace of "free." Yet "free" is not a marketplace. There is no such marketplace.

Nothing has changed

Companies that offer "free" goods or services make it up by selling goods or services and collecting revenues. The online economy works the same as any economy.

There is no new economy of "free.".

Free is a marketing gimmick, it always has been, and it has always been used in that way. I'm sure Mr Anderson is familiar with the term "loss leader." Nothing has changed. There's no free lunch.

Software coding is becoming a much more common skill and it is a skill that is losing value. You can find coders in developing countries and contract the work for a fraction of what it used to cost.

But there is going to be a need for a new type of software engineer, or better described as a media engineer. Let me explain.

The New York Times Company reported a profit of $39.1m for its second quarter, beating Wall Street estimates forecasting a loss.

Three months ago it reported a loss of $74.5m for its first quarter.

The net income was 27 cents a share, compared with 15 cents a year earlier. Excluding special items like one-time charges and the tax adjustment, net income in the most recent quarter was 8 cents a share; analysts had forecast, on a comparable basis, a 4-cent loss.

However, this does not signal a turnaround in the newspaper sector. Profitability was achieved by severe cost cutting measures and a favorable tax adjustment.

The company trimmed operating costs 20 percent from a year earlier, or by $140.5 million; $29 million of that reduction came from the closure early this year of City and Suburban, a money-losing newspaper and magazine distribution subsidiary.

"For the full year we expect to save $450 million," (Janet) Robinson (CEO) said. "That amounts to 16 percent of our 2008 cost base."

Ad revenue plunged by nearly 32 per cent, the steepest decline since the Depression. Revenue from online operations dropped 14.3 per cent to $78.2 million.

Foremski's Take:

Clearly, the New York Times Company cannot continue to cut costs in order to make money. It's not a sustainable business strategy. And with online revenues falling it will be forced to come up with a way of charging its online readers.

Ms Robinson told analysts that the company is "undertaking quantitative and qualitative research as to how many of our readers would be willing to pay for online content, and how much they would pay. At this time, our work is centered on a metered model and a Times membership model with special offerings."

This is not a new strategy. The New York Times had to abandon an earlier attempt to charge for content.

Adknowledge, the largest online advertising network, today acquired Super Rewards, a fast growing startup that uses virtual cash to engage people with advertisers. The value of the deal was not disclosed.

"I'm very excited about the promise of virtual cash," Brett Brewer, president of Adknowledge, told SVW. " We wanted to acquire the leader in this space because we think that growth is going to be very fast. And we can scale the Super Rewards technology across our entire business. We also have offices in many countries and can bring in country specific advertisers."

Mr Brewer said that Adknowledge annual revenues are about $250 million. But display advertising is becoming less effective. "We think virtual cash is going to be very big. Instead of bombarding consumers with more ads, Super Rewards allows people to engage with advertisers, it gives people a choice."

Virtual cash is a big business in the online gaming world and it is now also being used in social networking sites.

Super Rewards pays people in virtual currencies of their choice in return for specific tasks such as if they sign up for a Netflix account or apply for an insurance quote.

Super Rewards buys the virtual currencies and in turn is paid by companies as part of regular affiliate sales commision. It makes its money on the difference between the money it earns from the affiliate sales and the cost of the virtual cash.

Affiliate marketing was initially popularized by Amazon, which pays a percentage of sales to "associates" who bring in customers. Super Rewards has affiliate sales relationships with about 4,000 companies.

Mr Brewer sees applications for virtual cash beyond gaming and social network sites. Virtual cash could be used by newspapers. "I've spoken with some newspaper groups and they are very open to exploring this market."

Mr Brewer says Adknowledge has relationships with large advertisers such as Dell, and Expedia. And that they are interested in virtual currencies.

Mr Brewer is the co-founder of Intermix Media, which created MySpace.

[Please see: There's Real Gold In Virtual Cash - Is This A Solution For Newspapers? - SiliconValleyWatcher]

Foremski's Take:

It's interesting to see the online advertising industry seeking new ways of making money. It's an admission that traditional online advertising is becoming less and less effective.

Virtual cash is one of the potential solutions and the use of virtual cash can be extended to many new markets.

Earlier this year I interviewed Jason Bailey the CEO of Super Rewards. I pointed out that virtual cash could be used by newspapers as a surrogate micro-payments system for online content. For example, local advertisers could pay readers with virtual cash in exchange for viewing ads or filling out a survey. A local furniture store might offer virtual cash to readers of the "Home" section of a newspaper.

And newspapers could use virtual cash to pay for reader generated content. Newspapers could create a real economy around trading news services and content. This is a much more engaging business model than selling an ad - a marketing message sitting inside a box - easy to ignore and increasingly ineffective.

In terms of wider advertising opportunities, the Super Rewards technology could be used by larger brands. However, it is not clear if there is a broad demographic appeal for virtual currencies.

There is also a mismatch in the motivation of people wanting to acquire virtual cash versus wanting a Netflix subscription or an insurance quote. The quality of the leads is likely to be poor and cancellation of services is probably going to be at a higher than normal level.

However, this is a rapidly growing sector and we are in the early stages of the build out of virtual economies in different market sectors.

Adknowledge has made a savvy acquisition and pulled ahead of other ad networks in pioneering a new business model. It is well positioned to discover how this virtual currency market will develop and what are the most effective advertising strategies. And its large size will help to accelerate the educational process needed within the slow-to-change advertising business.

Tuesday evening our third event that day for the Traveling Geeks (but not the last) was to take part in a media debate at The Guardian newspaper's offices in north London.

The Guardian is one of the UK's largest newspapers and its media section is superb -- anyone that is anyone in the media industry reads it, and anyone that's interested in media -- reads The Guardian's media section.

It was a very good turnout for the event despite horrid downpours. Part of our TG gang (Robert Scoble, Sarah Lacy, and JD Lasica) were on the panel discussing the future of media with the Guardian's Emily Bell, and the BBC's technology correspondent, Rory Cellan-Jones.

It was a good discussion but it felt very "2005" in terms of the subjects, which kept returning to blogger/social media versus mainstream media.

The Butcher of Fleet Street

I was sitting at the back of the room next to fellow TGer Craig Newmark of Craigslist. And inevitably, the panel's moderator couldn't resist asking him to stand up and explain himself for killing the newspaper industry.

Craig is mightily fed up with this question. And I agree. It is not his fault that the newspaper industry is in trouble. But Craig handled it all very well, throwing in a line "Nobody expects the Spanish Inquisition," which drew laughs and distracted the panel from further pursuit of a tired line of questioning and drew the discussion back to the favorite subject of the day: Twitter.

From Back To Front

It was fun publishing from the back of the room and having our Tweets projected onto a big screen in the front of the room.

Here is the evening's Twitstream.

And here are my contributions:

At the recent SDForum 2009 Visionary Awards, Vinod Khosla, one of Silicon Valley's top VCs, gave an inspiring and very humble speech.

How To Succeed In Silicon Valley By Bumbling And Failing...

Afterwards, I went over to congratulate him on his award and also say how much I enjoyed his speech. Rebecca Buckman, one of Forbe's top journalists, was also there. He then started to tell us a very interesting story, about how Silicon Valley VCs could have saved the newspaper industry--back in 1996.