Emergent Business Networks

Most Blogs are seeking attention, a modern form of PR and marketing communication. In this sense they are similar to White Papers and better in many ways:

1.  The length of a blog is a lot more flexible, anything from a quick comment on a news item to a lengthy analysis based on in-depth research.
2. Blogs invite response, which is the whole point of marketing communication.
3. Readers can be anonymous until they want to respond (as opposed to White Papers which usually require a registration, which brings on the obligatory follow-up emails and phone calls).

The latter point is important for B2B Media as publishers look for White Paper registration to act as a lead generation source. It is not yet clear how Blogs will replace this. I suspect it is part of the larger issue on how to monetize communities.

There has been talk in American Business Media circulation circles about “Zero Cost Audience Development”. This seems to mean online registration, which is at least free once R&D, traffic generation and infrastructure has been paid for. As R&D/traffic/infrastructure is not in fact a minor cost, in practice circulation managers pay subscriber agents and other third parties who have figured out how to do this. That is still less than paying for telemarketing, but the results to date indicate that telemarketing is growing as a source of subscribers and that therefore efforts to get subscribers online, while showing promise, are not delivering the volumes.

There are two ways to get more online registration and neither is easy:

1. Make it easier when the reader is on your site.
2. Get more readers on other sites who might be interested in your title.

Most publishers like to think that their online registration is easy enough. However in too many cases this is all too common:

1. I register for one webinar. I then try for another webinar. Does it have my details? Nope.
2. So I see Register with Publisher. I do that. Yet another form. Does it recognize me? Nope.
3. It then asks me if I want XYZ mag. I say yes and get into the qualification form. Does it recognize me from 1 or 2? Nope.
4. It then asks if I want ABC mag. Most of the form is the same as for XYZ. Is anything pre-populated? Nope

(This is a real example, I kept it anonymous to save embarrassment).

The ideal system enables “speed dating to a relationship”, getting whatever little bits of data somebody is willing to volunteer at the time, always building the profile and never asking for redundant information and always prompting for an intelligent cross sell.

It seems odd that this should be hard to do right. We are used to sites like Amazon that have been doing this right for ages. I think it is hard for publishers because it involves integrating technology, data and processes across multiple channels and that involves getting multiple profit centers to align to a common objective and that is always hard. (This is very different from an audience “data warehouse” that sits within the organization but is not connected online, real time to what readers are doing online).

The next challenge is getting more readers from other sites to subscribe. There are two basic techniques that work:

1. Search Engine Marketing (SEM). In effect, getting traffic from Google. Theoretically we can also put Search Engine Optimization (SEO) into this category, but that is more to do with driving traffic to your site generally and cannot be fine tuned enough (as far as I am aware) to be a useful, scalable tool for subscriber acquisition. SEM is a very precise tool in the right hands and with the right tools. I don’t know of any publisher getting any subscriber volume from SEM, but it is theoretically possible. It is definitely not Zero Cost, as you pay Google for the relevant Adwords. The question is can you create the landing page to registration process in a way that generates a high enough conversion to make the numbers work right? Lets say you target $2 per Subscriber. If you get 10% click to conversion, you cannot pay more than $0.20 per click. If you can get that up to 25%, you can pay as high as $0.50 per click (or if you can get the click for $0.10 you get a cost per subscriber of only $0.40). What this does not factor in is the cost to manage this whole process. Don’t believe any purveyor of “magic sauce” for SEM. It simply takes a lot of testing, analysis, landing page design and other labor-intensive work and there are not that many people who know how to do this well.
2. Affiliate Marketing. This is what companies like Commission Junction offer. In the controlled circulation world this is offered by specialists such as FreeBizMag, TradePub and Mecury Magazines. They do the heavy lifting of building affiliate networks (which is rather like SEM, a well-understood technique that is also labor intensive). This can be bi-directional, which has been called Co-Registration. I have seldom seen these “lets all cooperate” type deals work in practice. You still need your own affiliate program and you can pay another publisher through their affiliate program and if that nets out its OK.

Is there a way for publishers do this directly within their own infrastructure? Possibly, once the first step – the integrated online audience database – is in place. Then it would be possible to put on a Web Services interface and then add Widgets that can be syndicated out across the Web. This has broader implications than simply subscriber acquisition. Random House has an interesting widget syndication strategy that may point the way for other publishers.

In print, the separation of editorial (Church) from advertising (State) has always been pretty clear. Online it can get more blurry and that raises heated debate between guardians of editorial integrity and the folks trying to keep the revenues from tanking. I am a business guy, but my instinct is that the editorial integrity guys are right.

However, the IntelliTXT ads are relatively innocuous compared to the temptations B2B Media will be facing soon related to privacy. As a reader you are not visible to the advertiser. This anonymity is reassuring. (You can ignore those IntelliTXT ads or even get an extension to block them if it really bugs you). Anonymity is great for readers, but is also why Sam Wanamaker famously said “50% of advertising is wasted, I just don’t know which 50%”. Because he knew something worked he, like every brand-builder, kept on spending. The trouble is, Google has now made this measurable. We can tell precisely what works and what does not work and tune our spend accordingly.

At least your click is still anonymous. Or is it? The technology is making it possible to deliver the “who with the click”. This is hitting us from all directions. Look at how Google got slammed recently for their privacy policies because people who think about this stuff get seriously spooked by the amount of data Google aggregates and what they could do with it. Look at how Behavioral Targeting companies such as Tacoda aggregate click data from thousands of sites who can then target with similar precision to Google (while paying a toll to Tacoda of course). Look at TechTarget which amazed everybody in the B2B Media industry by raising $100m for a technology media play in the depths of the technology nuclear winter and are now poised for an IPO. Their simple value proposition is lead generation, not anonymous.

Why is this happening? Firstly the technology now makes this possible. We are still at the early stages of what is possible (anybody who says “don’t worry its still anonymous” is not seeing the technical trends line). More importantly it is happening because the other marketing push tools are getting closed down. Can Spam, do Not Call, Do Not Mail make it very hard to get your product to market the old-fashioned ways. At the same time social networks let individuals connect directly without an intermediary collecting a toll.

So there is a tremendous hunger to make lead generation work online from both sides. B2B Media, hemmed between declining print revenues, the hard ROI of Google and the dis-intermediation offered by social networks, will be very tempted to offer their subscribers directly to their advertisers. The advertisers/vendors, hemmed in by Do Not Contact Me Regulation, will respond eagerly to any viable lead generation channel. When both sides want to make it happen, something usually happens.

The question is, what do your audience think about this? What do you think about this when you are the audience (as opposed to the publisher or the advertiser?As the old joke goes, B2B Media can see the light (online lead generation) at the end of the tunnel (of declining print revenue) but it may be another train coming (the privacy backlash).

There is a way for B2B Media to deliver the value of their audience in a highly targeted way without hitting the privacy backlash, but it will not be easy as it will involve bringing all of their channels together and that will take some serious silo busting. The deep audience data from the print magazine controlled circulation file needs to be available online, real time so that any action that implies interest or intent can trigger an invitation to connect via an Event, probably initially an online event.

The key word is “invitation”. The user controls when they want to connect. I believe that if vendors connect the potential buyer with the right level in their company, they will want to make the connection. If I am the CIO and I can connect with the CTO of a start-up where I have already researched the material, read the CTO’s blog and I believe that their technology could make a real difference to my business, then I will want to make the connection. That is a valuable connection for which the Media company can be well paid. Would that same CIO give his details to get a White Paper to then get called by a sales guy who may not know that much? On the other hand the CTO does not want to talk to a researcher from another vendor or a junior person or from a company that they are not targeting.

This is not simple to pull off. It is technically quite complex but more importantly it requires all the parts of a B2B Media company to pull in the same direction to hit a long term strategic goal and that is hard when the day to day pressures are intense.

However unless traditional media pulls in this direction, it is possible that a start-up using the principles of Attention Trust will fundamentally change the rules of the game. Today the Attention Trust players all look rather theoretical, but the principles are totally right and some day fairly soon somebody will launch a product that has a compelling end user proposition that embodies these principles.

Google Earth Street View brought home (literally) to a lot of people the spooky power of this data. The fact that such power could be used by terrorists got a lot of people’s attention. Other people worry about a government run by people who seem less than concerned with citizen’s privacy. I saw a friend today wearing a trendy T shirt that looked like the communist hammer and sickle and I said “watch out, in Dick Cheney’s America, some kid may be poised with his finger on a predator button asking for permission to fire” and he said he was not worried because the system probably ran on Windows and would miss.

However counting on bad software to safeguard our privacy is clutching at a pretty flimsy straw.

I live in New York, run an outsourcing business based in India focussed on B2B Media and have spent most of my career bringing new software products to market. So I was intrigued to hear the CEO of Reed Business Information describe the two different content models. In New York you assemble a team with three editors and one programmer. In Silicon Valley your team is three programmers and one editor. As a service company we are agnostic. We can assemble a team of researchers to manually aggregate, structure and re-purpose existing or we can build software to do the same automatically. It all depends on the requirements.

Automated data aggregation is inexpensive and scalable but usually not quite authoritative enough. Even the best vertical search engines or community created content is usually only the starting point for research. Truly authoritative research (by which I mean it is good enough to make decisions involving real money) almost always involves human labor.

The holy grail is the top right of a magic quadrant with “automated” on one axis and “authoritative” on the other axis. I hope you have seen enough magic quadrants, as my drawing skills are weak. The bottom left – neither authoritative nor automated is clearly a waste of time and money. Oops, sorry Blogosphere . The authoritative but manual is where most traditional publishing and market research lives and despite what Silicon Valley might think will survive in some form forever. The automated but not authoritative will continue to get better and better, fueled by new investment and the inherent aggregation power of the Net but most are still in the category of “interesting and sort of useful” but not quite authoritative enough for prime time.

I tried to think of examples that were in the magic top right quadrant, both automated and authoritative and the best example I could come up with pre-dates the Internet and that I was involved with over 20 years ago. Reuters started with human editors around the world and that is still an important part of their business, but it is their Foreign Exchange pricing service that stands out as a great example. When I first heard about it in the mid-1980’s it was astounding to see a model where the data input was all free and yet people would pay a lot of money every month to get the aggregated data. It was not until EBay came along that I saw such a pure money-making machine based on the power of network economics.

The Internet makes aggregation much easier, so easy in fact that building barriers to entry becomes the issue. The automated/authoritative model involves everybody who matters in the market contributing their data, typically for free. The contributors are way more savvy about the value that they bring and any start-up that tries to build too big a toll booth will miss the network effect that comes from aggregating everybody and then others will enter the market and it will become fragmented and then it is no longer valuable.

To pull off another Reuters like automated/authoritative play, three things have to come together fast enough that other start-ups don’t get in quickly enough to ruin the game:

1. The source contributors have to be authoritative. That worked in the case of Reuters as only Forex traders could contribute and by definition every transaction was valuable data that made the market.
2. Enough contributors have to join to make it comprehensive and they have to contribute regularly.
3. The output has to become the single data point that is trusted in the market. No other research is needed. If Reuters says that one pound is worth $1.96 then that is the market fact.

This can only work in very simple taxonomies with limited need for data depth; that is the key to being authoritative. A market price is a totally simple taxonomy. Even something as simple as People Data (where there is a lot of automated aggregation going on) is way more complex and the depth of data that is possible and needed is almost limitless, so no single service can become the authoritative source other than in a very specific niche.

I see tons of niche opportunities that work on a mix of automation and manual research, where the niche is small enough to enable a company to become authoritative. These typically will fall below the radar screen of VC funded technology start-ups. I don’t see a large scale automated/authoritative opportunity. Of course if I did I would be building it and not blogging about it!