Rupert Murdoch’s serious Internet strategy

It’s not all sour grapes that has Rupert Murdoch suggesting News Corp will eventually pull its content out of Google once it converts users to a paying basis. Listening to the interview with Sky News political editor, David Speers, in which Murdoch laid-out his plan to withdraw News Corp content to within paying boundaries, Murdoch makes clear that it’s all about getting serious online.

Murdoch observes that very few (actually, he says, “no web sites anywhere in the world”) make serious money. Likewise, he observes that “search people” – i.e., visitors to News Corp content that arrive by search engine – are not loyal readers of content. Ergo, they are not serious.

Therein may lay the calculation Murdoch and News Corp are doing in connection with their strategy to get consumers to pay for content and, then, deny access to all the non-paying transient onlookers who come courtesy of Google. The strategy advocates a retreat to defensible, higher value positions. As everyone has freely (no pun) pointed out it means much smaller audiences. But Murdoch’s comments suggest that News Corp has taken this into account and it doesn’t care. What have big audiences and an over-abundance of inventory given to the world but ad networks and lower prices? It’s time to get serious. It’s time to get back to business.

The issue of “serious money” is an important one. It has confounded traditional media companies online since the beginning. Plenty of money flows through plenty of big web sites, but the end results in terms of profitability have been underwhelming, certainly in Murdoch’s view. For many of the Internet’s largest players it has been equally disheartening to ponder a future full of exertions to grow traffic by relying on competitive third-parties, while struggling to raise advertising prices in an ocean of inventory. As Murdoch asserts, there is not enough advertising to go around for any web site to make serious money.

There are two ways to chase after serious money as a publisher, however, and one of them is to be small. Having tried big, Murdoch may be coming to terms with the alternative.

The media world has been addicted to “big” for years. Big has meant serious money thanks to advertising. But, that hasn’t translated online where smaller, independent publishers capable of generating $1 million per year in revenue out of a spare office thrive, while large publishers huffing and puffing to do 50x – 75x that amount feel unfulfilled.

Online there is, in fact, plenty of advertising to go around allowing many, many publishers to feel like they are making serious money. The Internet landscape is dominated by those publishers, and collectively they are changing the rules, agreeing to work for lower prices and agreeing to be positively delighted with sales results that wouldn’t keep News Corp in corporate jet fuel for a week.

At the same time the advertising community is slowly, but surely, shedding its own dependence on big. Ad networks have left one positive impression, which is that it is possible to aggregate many sites online for less and see results that are equal to or better than what $30 CPMs on big sites may have delivered. The taste left by some ad network experiences was bitter, but the implications of a freer, more open, and more targeted market have broken-through.

Most publishers couldn’t survive without Google and other search engines to direct people to their web sites; nor could most Internet users, which should assure the market of free and open access to search engines of one sort or another for many years to come. News Corp, however, has considerable resources of its own to drive traffic to it web properties. It may not be the sort of traffic that earns it a top 10 or even top 20 position among its peers, but perhaps they’ve stopped caring. Perhaps big isn’t quite so important in their calculations anymore. Having experienced the tiresome affects of being big online perhaps Murdoch is getting serious about Internet strategy.

And he may be right. Seriously.

Aggregation aggravation

MediaPost’s ”Around the Net in online media” picked-up Mark Cuban’s open letter (blog?) to Rupert Murdoch with advice on how to sell content online. His advice has two parts: 1) create editorial scarcity by blocking the aggregators that point to News Corp content and, then, 2) reassemble and repackage News Corp content from around the world into useful bundles that might appeal to news junkies or sports freaks, etc. Essentially, Cuban says to Murdoch, aggregate your own content on your own terms; put the fact that you own a media empire to work for you and make the people pay for that value.

Mark Cuban’s unsolicited advice was presumably inspired by Murdoch’s assertion to the markets last week that News Corp will start charging for content in July 2010. He has that long to figure out how. If he heeds Cuban’s advice the time between now and then will go to weaning his media empire off its addiction to the aggregators in order to create the scarcity value for News Corp content. I’ve relied on a few aggregators just to get this far in this blog post – “Around the Net”, of course, plus Media Bistro (which led me to Time.com). As a drug, they are wonderful alternative to the real thing. The danger to News Corp and others, of course, is that without them reality may bite.

But there is something fundamentally positive in the talk about value and value creation online. The whole third-party aggregation thing is being scrutinized not just on the content side, but on the advertising sales side with the thought that it’s time to start kicking some of these habits. I don’t think many companies are going to be successful charging for content. Cuban talks about the Wall Street Journal as an exception and that may be true. But if companies can’t charge for their content they may want at least to ensure their exclusive rights to sell advertising against it.  

In that regard, we live in the ad network space here at Burst Media where there has been much gnashing of teeth over the last year among web publishers – principally branded publishers such as any of those in the News Corp stable – who are trying to cut down their reliance on third-party ad networks. We have mostly stayed out of the fray by avoiding relationships with publishers that aren’t willing to work with us transparently - meaning, fundamentally, all the brand publishers with their own sales forces. If today those publishers are plotting their escape from unwanted third-parties, we won’t have a dog in the fight and we can choose to root for the value the publishers may win back as result. (And why not root for value?)

Advertisers – mostly ad agencies – are also strung-out on the whole third-party aggregation thing and are devising 12 step programs of their own to get back in charge. At a glance, their goals appear different than the publishers that are engaged in cleansing their systems, but who should be surprised? It has always been thus. The torment affecting everyone online has been a lack of differentiation, and it is that demon causing all the aggravation over aggregation.

Rupert Murdoch engages in a bit of portal-speak

The Wall Street Journal reports that Rupert Murdoch said MySpace “needs to be refocused as an entertainment portal.” I have mostly stopped reading stories about MySpace, or other social networking companies or initiatives because I just can’t take it anymore. Social networking has been clubbed to death. It needs to stop. We need to let the poor animal escape off the beach and prosper as it might, or might not, in nature.

But Mr. Murdoch’s comments stopped me because I haven’t seen anyone reportedly aspire to build a portal in years. To double-check I went to HULU to see if they use the word portal given that HULU seems to be a well-adjusted, functioning portal.  There is nothing obvious that I could find. The mission statement says:

“Hulu’s mission is to help people find and enjoy the world’s premium video content when, where and how they want it. As we pursue this mission, we aspire to create a service that users, advertisers, and content owners unabashedly love.”

The explicit use of the word “where” in the mission is anti-portal. In the section about distribution, HULU goes further, saying:

“We take a lot of pride in making it easy for Hulu.com users to find and enjoy great video, but we also realize that one website is not enough. It’s just as important to make it simple to find premium videos at millions of other places around the web. Wherever people spend their daily lives on the web, we want hit shows, movies, and clips to be just a mouse-click away.”

HULU may be comfortable as a video portal, therefore, because it has no plans to remain one; it envisions a media world with millions of other places that may matter equally in the eyes of consumers. This is well-adjusted thinking.

According to the Journal, Mr. Murdoch is thinking of MySpace as a place where “people are looking for common interests.” This is portal-speak, and we should pay attention to it. It is really very important in regards to what it says about the challenges we keep having retro-fitting offline media to online media. If a place is about people with common interests, those places, on balance, are going to be small(er). But, this is not likely what Rupert Murdoch is thinking. No, indeed, when media industrialists such as Rupert Murdoch talk about places where people are looking for common interests they are thinking BIG – so big as to equal all common interests.

All common interests describes the Internet. It is a place of near infinite common interests. Given that, a place of common interests inside the Internet is superfluous. It is unnecessary. Hence the history of AOL, the on-going identity crisis at Yahoo!, and the fact that we don’t hear much talk of portals anymore - because they failed the value test.

Offline we talk about “general interest” media, such as general interest magazines, which have been among the biggest players in the traditional media world. No surprise that we should seek to emulate them online. But, we don’t need general interest online. The common interest is so accessible that aggregating enough of what enough people are commonly interested in is - again - unnecessary. 

The Internet is the place for common interests and no other places need apply.