Yesterday's News

According to published reports, newspaper executives at their annual conference received what was described as "startling" news from a team of McKinsey & Company executives - - their classified advertising businesses have eroded noticeably, and are poised to drop as much as 20% more by 2007. The cause of this steep decline: Internet competitors such as Monster.com, Craigslist and RealEstate.com.

I want to empathize with these newspaper folks -- we're in different wings of the same business after all -- but for people whose business is gathering and reporting news, they always seem to be the last people to know what's going on. Of course, this may be some form of denial as well. In either case, it's worth taking a closer look at one type of classified advertising, help wanted ads, because what's driving this decline isn't unique to newspapers.

In many markets, newspapers are effectively monopolies, and their pricing tends to reflect that. I've placed more than a few newspaper help wanted ads, and if you're not careful, you can easily drop close to $1,000 for a few lines of type that would generally appear only once. It's not surprising, then, that the McKinsey study quotes a newspaper executive as saying that, "Classified advertising is more profitable than printing dollar bills."

Along comes the Internet, and suddenly the reach of newspapers can be duplicated, and even expanded upon, without the infrastructure costs. It's been open season on newspaper classifieds ever since. Just as significantly, these online competitors realized that without paper, ink and delivery vans they could charge a fraction of the price and still make boatloads of money, a development that McKinsey refers to as "price destruction."

But there is more going on with these online job sites than just lower prices, and therein lies what I consider the most important point of all: these online job sites aren't just competitive businesses; they are better businesses because they've streamlined the hiring process and integrated themselves into their customer's workflow.

Consider the improvements. With newspapers, you would often wait for the big Sunday edition to advertise. Online, you're receiving responses within minutes of posting your ad. With newspapers, your ad is forced into a category, which may or may not be where people are looking (newspaper solution: buy cross-reference ads!). Online, your ad is accessible by category and by keyword, improving discoverability. Online, you reach a national if not global audience, and your ad stays visible longer. These are all what I'd call the "built in" advantages of Web information products. But there is still another level of benefit.

The job sites allow job hunters to post detailed resumes for free, and they sell access to these vast databases so that companies could search for candidates as job hunters were searching for open positions. The job sites built workflow applications for their customers to help them screen, filter and organize incoming resumes. Credit, of course, must also be given to the job boards for turning paper resumes into a digital stream that can be more easily forwarded, stored and archived. The sites offer automated screening tools to pre-qualify candidates, and will even manually screen and select candidates for an employer. On the job hunter side there has been workflow improvement as well. Job seekers can get real-time alerts of new job postings matching their criteria, and can even forward their pre-stored resume to a prospective employer with a few mouse clicks.

In short, the business of help wanted advertising hasn't just been digitized, it's been revolutionized by these new players. And now a new breed of players, companies like, ZoomInfo, Linked-In and Ziggs are bringing still another level of innovation to this business.

And newspapers? High overheads, declining circulations, slow-moving bureaucracies, and a penchant for trying to wish away uncomfortable business changes. Given that it's 2005, what should be startling to the newspaper industry isn't that their classified businesses are in decline, it's that they have any classified business left at all.

Google: Racing Toward Irrelevance?

Google's recent decision to introduce advertising options not tied to keywords is a watershed event for the company. In one fell swoop, it is moving beyond the formula that made it unique and exciting -- relevancy coupled with pay-for-performance pricing -- and crossing over into the traditional world of cost-per-thousand advertising. What's driving this move? On quick inspection, it can be dismissed as nothing more than a quick grab for cash. But to me, it's a sign that Google is poised to lose its direction. Indeed the New York Times reports that some stock analysts are now suggesting that Google's advertising network will become more important to its business than its search engine.

This belies Google's origins. Its early success was driven by a pure focus on doing search better than anyone else, and keeping far, far away from the dot-com gold rush. You may recall that in its early years, it was a point of honor with Google that it accepted no advertising at all. When it finally introduced advertising, it was in discrete ads set off to the side of search results to avoid any chance of intrusion or confusion. Now, Google plans to enter the bazaar, offering graphics, animation and other elements that will let advertisers more aggressively clamor for your attention. In short, Google plans to become just like everyone else. Relevancy, the cornerstone of all its advertising programs, is now optional. After decrying the inefficiency of cost per thousand advertising for years, Google is now embracing it.

What's perhaps most worrisome in Google’s decision to even more intensely focus on advertising is that this may well lead to a reduced emphasis on its search engine. This is the mistake Yahoo! made a few years ago when it decided its Web index was nothing more than a "site feature," and actually started licensing its index in part from Google, and in doing so, fueling Google's growth. Users (a/k/a those valuable eyeballs Google wants to expose to advertising) go to Google because it is perceived to produce more relevant results than anyone else. If Google fails to deliver on this promise, or if people even start to believe Google is no longer delivering, its users will start to move to the next, new hot thing in search engines (and there are no shortage of them out there), and Google's distinction -- and traffic -- will decline.

If Google decides that its primary business is distributing advertising to its network of publisher sites, then it becomes nothing more than one of dozens of online advertising networks, focused on delivering the highest number of impressions with only a passing nod to relevance or quality. That's a huge departure for a company that built itself on being different and better.

There have been more than a few companies that found initial fame and fortune as search engines, then repudiated their roots in the race for even bigger dollars only to find themselves in much more competitive markets with little to distinguish them. Google is now at risk of repeating history. Search will remain a good and profitable business, but only for those search engines that remain committed to it. Those that treat search as a means to an end often arrive at a dead end.

Registering Reservations

An article in today's PaidContent discusses an unusual move by the New York Post newspaper to not only impose forced site registration, but to ask for personal details including birth date, email address, zip code and income. Reportedly, the registration form was hurriedly removed after numerous complaints and highly negative press coverage from rival New York papers, although I encountered this very registration form just a few moments ago

What is the New York Post thinking? Who knows, as the Post won't comment on its move to collect a lot of information (making registration much slower), and a lot of very personal information at that.

Even at this late date, publishers remain remarkably divided about the merits of forced registration. Publishers who derive the bulk of their online revenue from advertising generally don't want to lose even a single set of eyeballs against that advertising, and generally opt for no registration at all. That maximizes traffic, but at the expense of knowing much about their online audience.

Another group of publishers believe that, since they are providing valuable content to visitors, it's not unreasonable to ask visitors for some information in return.

Complicating the registration decision is the extreme variation in results when registration is implanted. We know publishers who have seen their site traffic drop by as much as 80% after requiring registration. We also know publishers that have only experienced a 20% drop. We know two publishers whose traffic dropped briefly and then actually began to increase over pre-registration levels. Of course, many of these numbers reflect the anarchic state of Web analytics, which at the moment make it hard to predict the true impact of forced registration.

Leaving aside the tricky question of whether or not to require site registration, here are the ground rules if you go the registration route: ask as few questions as possible (the longer the registration process takes, the more visitors you will lose) and make sure you can fully justify every question you ask. Hey, we're all in the data business, and it's a natural instinct to collect more data. But we've seen more than a few publishers who have taken a traffic hit as a consequence of forced registration, and literally never bothered to look at the data they collected. So don't succumb to data excess or you'll just end up with excess data. If you don't have a known and compelling use for the information, don't collect it.

Curb Your [Upgrade] Enthusiasm

Most print database publishers have learned -- often the hard way -- that you don't mess with success, or even failure for that matter. Directory users are highly resistant to change, so even improvements come with real risk attached. What particularly fascinates me is that the it is the most poorly designed directories that have the subscribers most vocally opposed to making changes to layout, indexes and overall organization.

The explanation for this is partly that directory users are creatures of habit. Once they are comfortable with how something works, they don't want to have to re-learn the product. There's also a secret club aspect to it -- once users accustom themselves to cryptic codes, unintuitive indexing and arrangement, and non-standard abbreviations, it's as if they've cracked a code and joined a secret society that makes them a little smarter and a little more valuable in their organizations.

Not surprisingly, this passionate preference for the status quo extends to Internet-based directories as well. Unfortunately the ease of making changes to user interfaces has tempted more than one publisher to begin an endless series of "improvements" to their online products, leaving a trail of customer anger and frustration in its wake. On several occasions, I have experienced this myself, finding the online database I logged into on Friday bears no resemblance to the one I logged into on Monday. My first reaction, "why did they mess with something that worked just fine?"

In many cases, publishers have abdicated control over design of their Web products to their IT departments. Good intentions notwithstanding, IT-designed Web sites tend to favor neat and cool over functional an intuitive. This mindset even extends to colors. A professional site designer believes "less is more" in terms of color; a programmer believes that if there are 64 million available color combinations available, as many of them should be used as possible.

Publishers should monitor and discourage gratuitous "upgrades" to their Web sites. Changes to layout, navigation and functionality should be implemented slowly and only after customer testing. Familiarity with your interface is a form of subscriber "lock in," don't throw it away on a whim

A Little Knowledge Is A Dangerous Thing

I was pleasantly surprised to receive from insurance industry powerhouse A.M. Best a copy of a new publication entitled, "The Guide to Understanding the Insurance Industry." Its 84 pages offer the best plain language explanation of the insurance industry I have ever seen, along with key industry statistics. Not surprisingly, many of the statistics are drawn from various A.M. Best publications, and the text does a subtle yet solid job of showing where A.M. Best products fit in the overall industry picture, what they do and why they are important. In short, A.M. Best is working hard to educate the marketplace about the insurance industry and how its products support that industry.

Nice, but what's the point you say? I have seen several examples lately of clients whose data products are so sophisticated that their subscribers weren't tapping into their full potential, and in at least one case, actually misusing the product. And when subscribers under-use or misuse a database, they don't blame themselves. They blame the publisher -- and don't renew.

This is an interesting new challenge for the industry as publishers increasingly introduce "to die for" datasets that their markets can't fully appreciate without some guidance. The only real solution is to educate users. Don't be fooled into thinking that if subscribers don't understand how to fully use your product, they'll make support calls. Those subscribers who call for support are typically having a problem getting from point A to point B. There is a whole other class of subscriber that doesn't even know point B exists. Unless you educate them about the possibilities, this is a group at risk of drifting away from your product.

The same problem exists even when your product isn't all that sophisticated, but you are moving into new markets with it. A great example is infoUSA, which built its business selling mailing lists to companies that for the most part had never bought a list before. One thing infoUSA learned very quickly is that making the sale was only part of the challenge. It also had to teach its customers the basics of direct mail and to educate them about such things as undeliverable mail. If you have just sent out your first mailing and get 300 pieces back marked "undeliverable," it is not unreasonable to conclude you've been cheated. But if those 300 undeliverable pieces came from a mailing of 10,000 pieces, that's not a bad result -- but the customer would not know that unless educated in advance. I have long contended that infoUSA's remarkable success in the treacherous small business market was due in large part to its educational efforts.

We all take data for granted. After all, it's our business. But we should never forget it's typically not the main business of our customers, and that an investment to educate our subscribers will yield an impressive long-term return.