2011-08-15 Mixed Earnings: AOL, WaPo take hits; Demand, News Corp. up

Intelligence Report - 08/15/2011
By Mark Glaser & Desiree Everts




Mixed Earnings: AOL, WaPo take hits; Demand, News Corp. up

As the stock market gyrates over the debt ceiling fallout and America's rating downgrade, media companies also had their ups and downs. Take AOL. The company launched a slick news aggregator app, Editions, for the iPad, but CEO Tim Armstrong still had his hands full trying to pump up the company's content business to analysts. During AOL's earnings call, Armstrong touted the company's gains in global advertising revenue, a first since 2008 -- but that wasn't enough to appease investors. A day after the earnings release, AOL shares tumbled as much as 30 percent. Why the investor skepticism? "AOL’s chief executive may be convinced that the company is healthier than it used to be, but investors seem to need more proof," wrote GigaOm's Matthew Ingram. "And missing revenue estimates, cutting forecasts, spending hundreds of millions on acquisitions and constantly promising a turnaround that never seems to arrive doesn’t appear to be doing the trick." In other words, AOL made some gambles on its Huffington Post acquisition and its expansion of Patch, but analysts have yet to see a big payoff. Will Editions, AOL's personalized iPad magazine, be an answer to AOL's woes? Fast Company's Austin Carr doesn't think so. "Editions is a remarkably unselfish product -- but it's unclear why it's good for AOL's business," he wrote.

Investors reacted more positively to Demand Media's earnings announcement, pushing its shares up 20 percent a day after the company gave a full-year revenue outlook, the upper end of which was above analysts' estimates, according to Reuters' Sruthi Rmakrishnan. But the big hurdle that Demand faces -- just like AOL -- is "being viewed as a provider of quality content and somehow being able to afford to pay for it," said paidContent's David Kaplan. "Naturally, advertising is key to that." And when it comes to advertising woes, the same, of course, can be said for many legacy publishers. The Washington Post posted a 50 percent decline in second-quarter earnings, as both its online and print newspaper divisions saw drops in advertising revenue. Display dollars fell 16 percent in the quarter and even slipped 4 percent during the first six months of 2011, reported paidContent's Kaplan. "The company needs to figure out a way to spread its online advertising appeal more widely, something that could be tough as the economic recovery appears to weaken further," he noted. News Corp., still embroiled in its hacking scandal, earned 35 cents per share, compared with 33 per share last year, beating analyst estimates. The company reported a $254 million loss on its sale of MySpace, but like other big media companies, it's "pointing to a bump in revenue from digital licensing deals -- read: Netflix -- for its library content," said AllThingsD's Peter Kafka.


Amazon, Tribune look outside Apple's walled garden

After Apple put its new subscription rules into effect (taking a huge 30% cut), some publishers gave in -- but other companies have been up in arms. One notable behemoth that isn't taking it in stride is Amazon. The company recently released its browser-based Kindle Cloud Reader, which will bypass the App Store so users can instantly buy books straight from Amazon without the Kindle app. Media companies should take note, said GigaOm's Matthew Ingram. Amazon has offered a "great example of how media companies should be looking beyond the world of apps to the future of the web: one in which websites behave like apps, thanks to the magic of HTML5, and publishers can get the benefits of both without having to sell their souls to one app-store provider after another." That's certainly true for companies that already have a lot of traction, said AllThingsD's Peter Kafka, but what about others? "Companies who already have lots of customers and are already in frequent communication with them, like Amazon, should do fine outside of the store," he predicted. "And companies that have lots of potential customers but little traction, like Vudu, will likely struggle."

Tribune Co. is also quietly pushing back at Apple's app rules. It's reportedly hatching plans to release an Android-based tablet for its newspaper subscribers. The tablet would either be free or offered at a highly subsidized rate for print subscribers, according to CNN's Mark Milian. paidContent's Tom Krazit was skeptical of the plans, saying it's not clear why the Tribune would want to try its hand at building an iPad rival "when companies that live and breathe consumer electronics have been having so much trouble accomplishing that themselves." CNN's Milian agreed, saying that "many media analysts say the economics of digital publishing on subsidized tablets appears to be sound given the expense of printing newspapers, especially with ever-rising ink prices. But that’s if the advertising revenues from digital platforms can match those on paper, which has not been the case so far." Meanwhile, Facebook appears to be pushing into territory that's already dominated by the likes of Apple and Amazon. The social network giant announced it's acquiring Push Pop Press, a digital publishing platform, and PC World's Ilie Mitaru believes that even though Facebook may not immediately jump into the publishing sector, that may be eventually where it's headed. "The company could easily create a digital bookstore seamlessly integrated with the social network," Mitaru speculated.

Social media plays a role in London's riots -- and cleanup

As civil unrest continues to rock London and other English cities, all eyes are on social media as a platform for both organizing violence and helping with the aftermath. BlackBerry Messenger was evidently rioters' medium of choice for planning meetups, and RIM had its site hacked after saying it planned to help authorities crack down on instigators. “We feel for those impacted by the riots in London. We have engaged with the authorities to assist in any way we can," RIM said in a tweet. The Metropolitan Police of London posted photos on Flickr of people they believed to be participants in the riots, according to the New York Times' Jenna Wortham. The initiative, called Operation Withern, asked the public to identify people they recognized from photographs captured by surveillance cameras where stores were looted, a move that TechCrunch's Sarah Perez called “a modern take on vigilante-style justice, where the torches of the angry villagers have turned into APIs and algorithms.”

Meanwhile, in response to reports of some social-networking users inciting violence, British Prime Minister David Cameron said the government is considering banning people who are suspected of criminal activity from using sites like Twitter and Facebook, according to the Guardian's Josh Halliday. Facebook responded by saying it would ensure "any credible threats of violence are removed from Facebook," according to PC Magazine's Mark Hachman. But GigaOm's Matthew Ingram blasted the idea, saying, "Fundamentally, these tools are used for what amounts to public speech. That speech can be about violence and where a mob should go next to burn something, or it can be about how to overthrow a dictator. It can be about images of disorder and calls for looting, or it can be about how to organize a cleanup crew." Plenty of Londoners are, in fact, using social-networking sites to help clean up the mess and get their city back to normalcy. As Fast Company's Nidhi Subbaraman put it, "If RIM was the choice of rioters, Twitter, Tumblr and Facebook are the tools of the clean-up crews."

Can Digg's Newswire bring a revival?

Can social news site Digg find its mojo again? The once popular site recently unveiled new features, including a social news discovery function called Newswire -- and some industry watchers are suggesting the updates could mean serious changes. Newswire is a real-time feed that lets users create their own filtered view of links that are submitted to Digg. "There's now a new level of visibility into who has voted to bury a story, when the burying is done in the Newswire," wrote ReadWriteWeb's Marshall Kirkpatrick. "Votes up and down performed in the more transparent Newswire environment now carry more weight than votes performed elsewhere on the site." Digg's blog touts Newswire as a way to give "you the tools to shape the breaking stories on Digg." As Mashable's Erica Swallow explained, the tool was "created to help alleviate the pain of sifting through a ton of subpar content to find the diamonds. Instead, users will find the most recent submissions in 'Recent' and the most popular stories in 'Trending.'"

But others were quick to point out Newswire's weak spots. GigaOm's Matthew Ingram said that despite some reviews calling the feature a "radical experiment" in social news, it's really nothing new or exciting. "Many users already get a similar blend of trending links and commentary from Twitter and related services such as Topsy and Tweetmeme that show popularity," he said, "and a number of apps like Flipboard and Zite provide a curated, real-time newswire-style experience." VentureBeat's Muhammad Saleem went even one step further, saying that Digg is simply reviving old features that had gone by the wayside. He insists that all the features previously existed on the site but were removed at some point. "These features aren’t new to longtime users of Digg and they certainly aren’t revolutionary or radical," he wrote. "They are, however, features that never should’ve been removed in the first place."


Outbrain: Content sites drive more traffic than social media

When it comes to driving traffic, the social web may not be as dominant a force as we'd like to think -- or so says a study from Outbrain. Links from content sites bring in 56 percent of referrals to news sites, according to Outbrain's Content Discovery Report. Users referred through content sites are also more engaged than those who come to a site via search or social networks, the study showed. Outbrain worked with publishers including the New York Times, AllThingsD, Mashable and the New York Post to come up with its data. What does this mean for social media sites such as Facebook and Twitter? "Quite simply, when it comes to driving traffic to your website, social media sites like Twitter and Facebook kind of suck at it," wrote WebProNews' Chris Richardson. Facebook users apparently only react to the subject line, and not the content contained within, the study showed. The study could spark a debate surrounding just how effective social media marketing campaigns are. "Sure, things are good if it's part of a current trend, but if not, no traffic for you, apparently," Richardson said.

Upstream: Personalization trumps location for mobile ads

Despite all the attention that location-based mobile advertising is getting, it might not be quite as promising as some startups -- think JiWire and Where -- would like you to believe. Mobile consumers prefer ads personalized to their interests rather than location-based advertising, according to a study conducted by Luth Research on behalf of Upstream, a mobile marketing company. The study, which surveyed 2,000 U.S. adults, found that 60 percent of smartphone users said they value ads based on their interests, compared with 17 percent who like ads based on time of day, 14 percent on location, and 10 percent based on their lifestyle. The tale was similar for feature phone users, with 59 percent ranking personalization as their preference, and 8 percent choosing location-based ads. "While location remains an important factor in delivering mobile ads, tailoring interactions via mobile to consumers' 'tastes and interests' clearly presents much greater potential for driving higher response and conversion rates," said Assaf Baciu, senior vice president of product management at Upstream.

What does this mean for location-based services such as Foursquare and Facebook? "This doesn’t mean that ad plays from location-aware companies like Foursquare, Facebook, Gowalla, and the many others looking to monetize nifty check-in services are dead in the water," observed paidContent's Ingrid Lunden. But what it does say is that these businesses could "end up with a much better chance of conversions (and content subscribers) if they try to match those ads up to individual users more closely," she said. The other hurdle those companies could have, Lunden noted, is that if location-based advertising isn't as hot as it was thought to be and advertisers instead focus on personalization, the way that an advertiser gets details about your personal interests may prove to be a thorny privacy issue.

Of Note

Why Amazon Is About to Become a Force in Online Advertising (Ad Age)
The company will help advertisers reach consumers with targeted media, using behaviorally targeted display ads to drive them to any URL

Twitter Adds an Activity Stream (Mashable)
The site introduces two new activity-centric features designed to help users more easily discover what’s happening on Twitter in relation to them

How the New York Times’ beta620 can move from evolution to news revolution (Poynter)
The New York Times unleashes beta620, a public beta site where experimental features for NYTimes.com will be proposed and tested.

Burp! Bitly Swallows Twitterfeed (AllThingsD)
The dominant URL shortener acquires Twitterfeed, which helps publishers automatically send their stuff to Twitter and other platforms

How to opt out of LinkedIn sharing your data with third parties (Los Angeles Times)
Consumers are protesting changes to account settings on the site that automatically give permission to third parties to access their information or use it in ads

Groupon Plays Down Unusual Accounting Metric in SEC Filing (WSJ)
Yielding to the SEC, the web coupon company removes an unusual measure from its IPO report

For the Plugged-In, Too Many Choices (NY Times)
Some users become a little too socialized maintaining accounts on Facebook, Twitter, LinkedIn and many other sites


openquoteI find it ironic that when the iPhone first launched in 2007, the whole idea was that mobile would help reinvent the web, but those web apps never really materialized. Four years later, that very same idea could become a drain on Apple’s booming app business as companies deploy web apps to avoid Apple’s 30-percent cut of the revenue for apps and content.closequote

Om Malik, GigaOm

Looks like HTML5 is gaining momentum (GigaOm)


The OPA Intelligence Report is a bi-weekly email summarizing and commenting on important news and research for the online publishing industry. As always, feedback is welcome at feedback@online-publishers.org.