State of the Media

Wisdom and ignorance, Part 8: Hang together of hang separately.

It's rough out there. I'm not telling you anything you don't already know. But waiting for everything to come back the way it was is certain catastrophe.

Let me remind you of the way it was as little as 10 years ago. Media was in the ascendancy with the popularity of the web, investment money flowing, Big Business doing the heavy lifting in subsidizing the market and getting the benefit of start-ups doing the R&D. Everyone was getting rich.

Then Big Business believed it's own press and said: why do we need the media or even these annoying little start-ups? Some smart people started asking when was the internet actually going to make money? Not so smart people started looking for subprime loans to refinance their over valuated homes. Media companies started laying off staff as ad revenue dried up.

As magazines and website media went out of business. Investors no longer had an objective, third-party view of the start-ups and stopped investing in whole segments. Big Business started pricing out the start-ups, driving down evaluations and buying the small companies at pennies on the dollar.

That's where we are today. The economic ecology is unraveled and most everyone is waiting for someone to put it back the way it was…. except for some smart people.

There is a nascent "re-understanding" of the symbiotic, though sometimes combative relationship between business and media, but that relationship can only be reborn outside of the realm of Big Business. Small business, especially the technology start-ups, have the most to gain and lose in both the short and long term in supporting, i.e. subsidizing media.

Bottom Line: Small business needs to subsidize free journalism to keep valuations high and to compete in the market against big business. If there is regular discussion in the media of the relative merits of new technologies or innovative approaches to current technology, the investment community and the customer has better reason to invest and try with small business has to offer. That increases sales, attracts potential employees and eases the path to investment.

Earlier this week I recommended the idea of a large group of small companies taking out a single one-page ad in any publication they choose as a way of increasing editorial space and hiring journalists. That's an in-the-box idea. In an out-of-the-box mindset, my corporation has been working for several months to bootstrap a new type of publication that offers direct sponsorship of articles that are shared through a media network. The latter idea is finally gaining some traction thanks to the absolute dearth of mid range news coverage in B2B media.

Embracing either or both of those ideas is a leadership position, but for those who are reluctant to take the plunge, there are other options. TechInsights (the former CMP) has a wide variety of sponsorship and subscription programs that provide support for the media. TechInsights' CEO Paul Miller has spoken of these possibilities in several venues. Extension Media, IB Systems, SOC Central and the RTC Group all have similar outreaches beyond just advertising and all of them support the media for various technical markets.

But partnership is a two-way street. It is not just sending money into media houses that solves the problem. The media houses themselves have to recognize the potential of working with small companies with small budgets and they need to create programs and packages that work within very different constraints than Big Business budgets.

Big Business has retreated into walled fortresses, running audience-captive trade shows, user groups and internal media programs. The B2B media needs to recognize that they now have a major, antagonistic competitor that once was their largest customer. The opportunity to partner with the small businesses in the tech community has the potential for greater profit, growth and innovation.

There is one more issue to be discussed that will open up the future of media and the growth of technology companies. And it rests on the shoulders of the media. But that is the next, and last part of this series.

A glimmer of hope

We've talked for a while about the misconceptions, actions and process that has brought us to our current state of the media and it's been pretty damn depressing. But something is happening out there and I've struggled with how to transition from the doom and gloom of the previous posts to what is happening now. Amazingly enough, it happened at a meeting last night of the Electronic Design Automation Consortium (EDAC). And I have to thank Georgia Marzsalek of Valley PR for insisting that I go.

I've used the EDA industry as an example of bonehead marketing practices that take down an entire industry and the evidence of that was plenteous at this meeting. This is supposed to be the big meeting when the board gets elected for two year. In past meetings, this has been an SRO event with multiple CEO vying for a spot on the board. This year, EDAC was scrambling as late as 24 hours prior to the meeting to get enough CEOs to fill the 9 spots, and three of them came from companies that historically haven't even been considered part of the industry. There were so few people attending you could have tossed a live grenade into the room and had minimal injuries. But two of the board members made "acceptance" speeches that ignited hope in my mind for this faltering industry.

Sanjay Srivastava, president and CEO of Denali Software , got up and said, "We are in a unique moment. The fundamental structure of our industry where large companies have funded trade shows and media, and small companies benefitting from it, is changing. The emerging companies are going to have to step forward and take leadership." Sanjay is the sponsor of the emerging companies committee for EDAC. It was a stunning moment for me to have my words quoted back to me from an industry leader. And it was the beginning of hope that someone would figure this out.

Then Rajeev Madhavan, CEO of Magma stood at the podium and said that the industry "needs to learn communicate better to prove our value to Wall Street." Rajeev sponsors the communications committee and has put Milan Lazich (who I have called one of the last real marketers in the EDA industry) as the committee chair.

I had lunch today with Brian Fuller and shared my thoughts with him. His response:

"Halle-freaking-lujah."

Folks, not only is someone getting it, but they are putting their money where their mouth is.

I'm working on Part 8 this evening and hope to have it posted before you leave work tomorrow. It's a brave new world and it is actually looking pretty good.

Pete Singer jumps to PennWell

Less than a week after leaving his post as EiC at Reed's Semiconductor International, Pete Singer has emerged in the same position at the venerable Solid State Technology at PennWell.

Hooray! We didn't lose a good tech journalist!

Yes, no, maybe.

There were a couple of good comments yesterday that bear discussion. My "partner in crime" Peter V in the UK asked if the reader were partly to blame for the demise of media in the world, and Loring Wirbel points out that part of the problem is bean counters and greet.
We could blame readers for not being willing to pay for media, because the income from the audience has always been inconsequential. But that was, historically, the point of advertising-supported media: The common man could not afford to bear the cost of media.
Up to the late 1700s, print could only be afforded by the wealthy. In fact, even into the mid 1800s a personal library was considered a significant asset that could be borrowed against. Both John Adams and Thomas Jefferson bought themselves out of debt by selling off portions or all of the libraries. Advertising made it possible for common man to afford newspapers.
Fast forward to today. There are lots of magazines that are delivered for free to "qualified" readers. I get about 50 a month and read just about all of them. If they were to start charging me for the honor, I would be down to 5 pretty quickly because I could not afford more. And they probably would not be B2B pubs either. Without large circulation you can't sell the advertising. Without qualified circulation you can't sell advertising.
But the fact is, readers DO support the media because readership and viewership has never been higher. The audience WANTs the content, but lacks the resources to get it. The problem is advertisers WANT to reach the audience but doesn't want to PAY for it. It's a culture of entitlement we're dealing with: I want what I want and I want someone else to pay for what I want.
Could readers pony up? Yes. Would it be enough? Nope. Is there another way? Maybe. But that's another story.
Meanwhile we have Loring pointing out that the VON collapse was a combination of hubris and greed. He points out that VON had 12 conferences worldwide and that was excessive. Yes, voice over network is a killer app, but there are only so many engineers in the world working on it and they can't all be jetting around the world to attend all of them. Either the conference venues had to be cut down or the sheer number of them should have been. A good marketer would have been able to point that out.
But Pulver Media was being run by bean counters who pushed the concept that if one conference was wildly successful then 12 would have been obscenely profitable. Jeff Pulver bought the encouragement and overreached the market.
But technical conferences can be profitable as long as you understand the audience and the limitations. That's why United Business Media continues to pursue them and why Reed isn't planning on selling off their exhibition business.
So can you make money putting on conferences? Yes if you understand marketing. Is the potential profit unlimited? No, all budgets are finite and under assault so do your homework. Is it the best way to reach a technical audience? Maybe, we're all just searching for answers right now.

Wisdom and Ignorance, Part 7: Taking it to the streets

Over the weekend, a surprise announcement in GigaOm.com provided a great example of what we've been talking about. The VON conference and it parent sponsor, Pulver Media (publisher of VON magazine) got the financial rug pulled out from under it as the conference was going on. The investors seized all the accounts and assets after the founder, Jeff Pulver, admitted earlier that the revenue forecasts for his venture were not good at all.

Let's break this down. When Pulver says revenue, that means sponsorship for the publication and conference, which had quickly become the leading conversation point for the Voice over Network/Voice over IP industry.

Think about it. VON/VOIP is supposed to be one of the killer apps of the internet. It's not just about making international phone calls. It also includes video, conference calling, virtual trade shows and seminars. And it didn't pull enough sponsorship to make the effort to report on this industry a profitable exercise.

We're not only seeing the death of B2B media for lack of sponsors, but trade shows as well. Lots of people are reading the publications, and lots of people are still going to trade shows and conferences, but the industry that benefits from this market conversation are not supporting it. Why is that?

I think its because our companies no longer believe in the benefit of free competition. If small and medium businesses have a level playing field to work from, then Big Business has a significant barrier to success in the short term. Even if other companies can take single-digit market share from them, it's a problem to the bottom line.

In past years, Big Business player had three choices in dealing with this pressure. First, make better products and services and obsolete even your technology (this is the path Intel has traditionally chosen). Second, you undersell your smaller competitors and drive them out, which hurts short-term numbers. Third, you buy your competitors out and either bury their technology or replace internal offerings.

But in the last 10 years, Big Business discovered something. They realized that they were the primary source of revenue for the media. When they cut back on the external marketing expenditure, print, broadcast and internet publications cut back editorial staff. Publications got smaller. Editors, columnists and analysts still had the same amount of information to disseminate but not time and resources to publish it. The internet became a place where poorly written news releases were published as the primary form of marketing. That's where we are today. Medium and small business followed the leaders over the past decade and now we have whole publishing companies going under, not just staff reductions.

This is hurting the marketing efforts of large companies, so they are starting to increase external marketing budgets, right? Nope. They are starting a new trend of building up internal marketing with private conferences and publications that they can control… and keep their competitors in their place.

The result is exactly what Big Business wants. Small and medium business competitors are being driven out of business and often taking much lower buy-out evaluations.

But something else has occurred that Big Business didn't anticipate. Whole industries are being devalued in the market because the market is not longer freely discussing or evaluating the product and services. Whole industries are being ignored by the press because, well, no one seems to have anything valuable to say. Plus they aren't advertising.

Industry is in a consolidation phase because they have taken actions that have significantly shrunk the market. Innovation comes from small business. Innovation keeps interest in industries alive. Big business benefits from small business innovation when they can acquire innovation without funding it in total, and by being in vibrant industries that are discussed in the marketplace of ideas… media. By cutting advertising budgets, Big Business has curtailed the innovation engine that keeps their market growing. Companies focusing on their in-house publications and events only talk to people on their own mailing lists; lists that grow ever shorter as their own customers consolidate and lay off staff.

Should Big Business change their practices? I'd rather they didn't. I'd rather they stay in the current state of blissful ignorance while the rest of us get busy changing the playing field. I'd rather an open market revolt against Big Business.

Startups and small business are more fun because they have new ideas. The media actually like talking to innovators, even if they aren't real leaders. But small business has lived off the marketing largess of Big Business far too long. I'm of the opinion that small business needs to replace big business as the support of the media. Small business can't afford large media buys, nor can they afford to put on their own large-scale events, but increasing marketing budgets by a narrow percentage would be enough enough to make a huge unfair competitive advantage over Big Business.

For example, there are approximately 250 EDA companies below the $50 million annual revenue line. If each company bought one page of advertising a year, publications would be able to add around another 250 pages of editorial copy. Spread that around EDN, Electronic Design and EE Times and you have a pretty compelling reason for those publications to increase coverage of the industry. And there is no way that the market leaders in that industry could compete against that kind of coverage.

But that's just one example. Next, we're going to get really radical.