Austin Bay Blog

It’s not quite bye bye to newspapers, though we’re obviously in a technological transition phase. One of the big issues: who does the basic investigative reporting if the newspapers fold (forgive the pun). After 75 years of radio and TV networks, the electronic outlets still feed off the AP or the major dailies and their respective investigative organizations. This Washington Post article discusses some of the problems newspaper organizations confront. Declining circulation is a sticky wicket –but so is defining circulation. (Hat tip Hugh Hewitt. Here’s Hugh’s original post.)

Tim Blair has the transcript of a radio interview with Davos blogger Rony Abovitz. The subject is Eason Jordan, the meta-subject internet journalism and the meta-meta-subject ethics and accountability. Abovitz’ answers clearly put his interviewer (an Australian radio commentator) on the defensive.

What Roger Simon cheekily dubbed “Class Struggle” (read his entire post) is at play in the Abovitz interview. Roger was commenting on the Bill Keller–Jeff Jarvis “NY Times versus blogs” exchange.

Which leads to monetizing the new media– and the NY Times certainly smells money in the “new news.” I’m refering to the Old Gray Lady’s purchase (for a healthy $410 million) of www.about.com.

Jeff Jarvis has multiple links that help put the NY Times’ purchase of about.com in context. He also links to the Washington Post article and adds an insight. Jarvis says of the newspaper industry: “It’s not dead. But it’s not growing. And in an economy that demands growth, that smells like death. ”

Does the Times’ purchase of about.com smell like desperation– as in a second dot-com bubble? Not at all, according to the John Battelle article Jarvis cites.

Battelle argues:

…The Times did not overpay by recent standards - the company was in the bidding for Marketwatch (Dow Jones won), and if I recall correctly that company went for 60 times EBITDA. And currently, most internet companies are trading at well above thirty times EBITDA.

So one could argue that the Times got a deal, but in the end, that’s not the interesting part of the news. What’s interesting is why the Times wanted About in the first place, and the role search - and the long tail - plays in the deal.

Battelle continues with:

About.com has remade itself through paid search - the site was massively optimized to rank well in search engines, Google in particular. The reason was pretty simple - About’s revenue is driven by AdSense, and the more optimized it was, the better the clickthrough. I have seen research reports comparing major search sites to About, and the result is pretty stunning - on average, 10-15% of clicks on search sites are paid. But on About, it’s over 20%. That’s a pretty big difference.

Here’s his kicker:

…And as I’ve told anyone who will listen to me, I think microcontent is key to winning in the Web 2.0 publishing world. When publishing folks from mainstream newspapers tell me that blogging is far too small to possibly impact their businesses, I often ask this question: Would you rather have scores of microsites with a combined revenue of $15 million, profits of $3-5 million, and a double digit growth rate, or a newspaper group with revenues of $50 million, profits of $5 million, but declining growth?

And here’s the new sales pitch:

About allows the Times to offer its own, non-search advertisers more opportunities to play down the tail - Now the Times can sell a national auto advertiser like GM both the main Times site, as well as About’s auto enthusiast sites. Would GM make a small About buy without a Times’ relationship? Possibly, but unlikely.

Here’s a link to an interview with NY Times VP for Digital Operations Martin Nisenholtz.

I’ll only quote the first Q&A–but read the whole thing:

One of the questions I’ve heard a lot is ‘Why didn’t they just start their own?’ ‘Why do they have to buy another company?’ Wouldn’t it be less expensive to start your own version of About.com?

Nisenholtz: You can say that about any business. I think that’s a kind of a, if you’ll forgive me, a kind of dot.com sentiment. About.com had in 2004 significant revenues and profits. It had great margins, so anybody can start any business at any time but getting it up to the point where it is right now is going to take a lot of time in my opinion. So I don’t think that that necessarily holds any water. It’s a highly complex and very profitable business and it would be time consuming and difficult to replicate it very quickly…
The risks of starting something like that from scratch are enormous. Imagine trying to attract 21 million users on the internet. But beyond that, how would you replicate the million-document database that they own? It’s the web’s largest document database.

Looks like old money is betting on new media.

UPDATE: Jeff Jarvis and Bill Keller continue their conversation, with Jarvis educating Keller. No kidding. Read it all.

UPDATE 2: BlogAds has a post discussing the unique qualities of blogs.