Where Bartz Blew It, and What Yahoo! Needs To Do Now

Carol Bartz was unceremoniously fired as CEO by Yahoo’s Board last week.  Fearing their decision might leak, the Chairman called Ms. Bartz and fired her over the phone.  Expeditious, but not too tactful.  Ms. Bartz then informed the company employees of this action via an email from her smartphone – and the next day called the Board of Directors a bunch of doofusses in a media interview.  Salacious fodder for the news media, but a distraction from fixing the real problems affecting Yahoo!

Unfortunately, the Yahoo Board seems to have no idea what to do now.  A small executive committee is running the company – which assures no bold actions.  And a pair of investment banks have been hired to provide advice – which can only lead to recommendations for selling all, or pieces, of the company.  Most people seem to think Yahoo’s value is worth more sold off in chunks than it is as an operating company.  Wow – what went so wrong?  Can Yahoo not be “fixed”?

There was a time, a decade or so back, when Yahoo was the #1 home page for browsers.  Yahoo! was the #1 internet location for reading news, and for doing internet searches.  And, it pioneered the model of selling internet ads to support the content aggregation and search functions.  Yahoo was early in the market, and was a tremendous success.

Like most companies, Yahoo kept doing more of the same as its market shifted.  Alta Vista, Microsoft and others made runs at Yahoo’s business, but it was Google primarily that changed the game on Yahoo!  Google invested heavily in technology to create superior searches, offered a superior user experience for visitors, gave unique content (Google Maps as an example) and created a tremendously superior engine for advertisers to place their ads on searches – or web pages. 

Google was run by technologists who used technology to dramatically improve what Yahoo started – seeing a future which would take advantage of an explosion in users and advertisers as well as web pages and internet use.  Yahoo had been run by advertising folks who missed the technology upgrades.  Yahoo’s leadership was locked-in to what it new (advertising) and they were slow with new solutions and products, falling further behind Google every year.

In an effort to turn the tide, Yahoo hired what they thought was a technologist in Carol Bartz to run the company.  She had previously led AutoCad, which famously ran companies like IBM, Intergraph, DEC (Digital Equipment) and General Electric owned CALMA out of the CAD/CAM (computer aided design and manufacturing) business.  She had been the CEO of a big technology winner – so she looked to many like the salvation for Yahoo!

But Ms. Bartz really wasn’t familiar with how to turn an ad agency into a tech company – nor was she particularly skilled at new product development.  Her skills were mostly in operations, and developing next generation software.  AutoCad was one of the first PC-based CAD products, and over 2 decades AutoCad leveraged the increasing power of PCs to make its products better, faster and relatively cheaper.  This constant improvement, and close attention to cost control, made it possible for AutoCad on a PC to come closer and closer to doing what the $250,000 workstations had done.  Users switched to the cheaper AutoCad not because it suddenly changed the game, but because PC enhancements made the older, more costly technology obsolete.

Ms. Bartz was stuck on her success formula.  Constantly trying to improve.  At Yahoo she implemented cost controls, like at AutoCad.  But she didn’t create anything significantly new.  She didn’t pioneer any new platforms (software or hardware) nor any dramatically new advertising or search products.  She tried to do deals, such as with Bing, to somehow partner into better competitiveness, but each year Yahoo fell further behind Google.  In a real way, Ms. Bartz fell victim to Google just as DEC had fallen victim to AutoCad.  Trying to Defend & Extend Yahoo was insufficient to compete with the game changing Google.

The Board was right to fire Ms. Bartz.  She simply did what she knew how to do, and what she had done at AutoCad.  But it was not what Yahoo needed – nor what Yahoo needs now.  Cost cutting and improvements are not going to catch the ad markets now driven by Google (search and adwords) and Facebook (display ads.)  Yahoo is now out of the rapidly growing market – social media – that is driving the next big advertising wave.

Breaking up Yahoo is the easy answer.  If the Board can get enough money for the pieces, it fulfills its fiduciary responsibility.  The stock has traded near $15/share for 3 years, and the Board can likely obtain the $18B market value for investors.  But “another one bites the dust” as the song lyrics go – and Yahoo will follow DEC, Atari, Cray, Compaq, Silicon Graphics and Sun Microsystems into the technology history on Wikipedia.  And those Yahoo employees will have to find jobs elsewhere (oh yeah, that pesky jobs problem leading to 9%+ U.S. unemployment comes up again.)

A better answer would be to turn around Yahoo!  Yahoo isn’t in any worse condition than Apple was when Steve Jobs took over as CEO.  It’s in no worse condition than IBM was when Louis Gerstner took over as its CEO.  It can be done.  If done, as those examples have shown, the return for shareholders could be far higher than breaking Yahoo apart.  

So here’s what Yahoo needs to do now if it really wants to create shareholder value:

  1. Put in place a CEO that is future oriented.  Yahoo doesn’t need a superb cost-cutter.  It doesn’t need a hatchet wielder, like the old “Chainsaw Al Dunlap” that tore up Scott Paper.  Yahoo needs a leader that can understand trends, develop future scenarios and direct resources into developing new products that people want and need.  A CEO who knows that investing in innovation is critical.
  2. Quit trying to win the last war with Google.  That one is lost, and Google isn’t going to give up its position.  Specifically, the just announced Yahoo+AOL+Microsoft venture to sell ad remnants is NOT where Yahoo needs to spend its resources.  Every one of these 3 companies has its own problems dealing with market shifts (AOL with content management as dial-up revenues die, Microsoft with PC market declines and mobile device growth.)  None is good at competing against Google, and together its a bit like asking 3 losers in a 100 meter dash if they think by forming a relay team they could somehow suddenly become a “world class” group.  This project is doomed to failure, and a diversion Yahoo cannot afford now.
  3. In that same vein, quit trying to figure out if AOL or Microsoft will buy Yahoo.  Microsoft could probably afford it – but like I said – Microsoft has its hands full trying to deal with the shift from PCs to tablets and smartphones.  Buying Yahoo would be a resource sink that could possibly kill Microsoft – and it’s assured Microsoft would end up shutting down the company piecemeal (as it does all acquisitions.)  AOL has seen its value plummet because investors are unsure if it will turn the corner before it runs out of cash.  While there are new signs of life since buying Huffington Post, ongoing struggles like firing the head of TechCrunch keep AOL fully occupied fighting to find its future.  Any deal with either company should send investors quickly to the sell post, and probably escalate the Yahoo demise with the lowest possible value.
  4. Give business heads the permission to develop markets as they see fit.  Ms. Bartz was far too controlling of the business units, and many good ideas were not implemented.  Specifically, for example, Right Media should be given permission to really advance its technology base and go after customers unencumbered by the Yahoo brand and organization.  Right Media has a chance of being really valuable – that’s why people would ostensibly buy it – so give the leaders the chance to make it successful.  Maybe then the revolving door of execs at Right (and other Yahoo business units) would stop and something good would happen.  
  5. Hold existing business units “feet to the fire” on results.  Yahoo has notoriously not delivered on new ad platforms and other products – missing development targets and revenue goals.  Innovation does not succeed if those in leadership are not compelled to achieve results.  Being lax on performance has killed new product development – and those things that aren’t achieving results need to stop.  Specifically, it’s probably time to stop the APT platform that is now years behind, and because it’s targeted against Google unlikely to ever succeed.
  6. Invest in new solutions.  Take all that wonderful trend data that Yahoo has (maybe not as much as Google – but a lot more than most companies) and figure out what Yahoo needs to do next.  Rip off a page from Apple, which flattened spending on the Mac in order to invest in the iPod.  Learn from Amazon, which followed the trends in retail to new storefronts, expanded offerings, a mobile interface and Kindle launch.  Yahoo needs to quit trying to gladiator fight with Google – where it can’t win – and identify new markets and solutions where it can.  Yahoo must quit being a hostage to its history, and go do the next big thing! Create some white space in the company to invest in new solutions on the trends!

Of course, this is harder than just giving up and selling the company.  But the potential returns are much, much higher.  Yahoo’s predicament is tough, but it’s been a management failure that got it here.  If management changes course, and focuses on the future, Yahoo can once again become a market leading company.  Sure would like to see that kind of leadership.  It’s how America creates jobs.

How Harry Potter predicts Success for AOL

Evolution doesn’t happen like we think.  It’s not slow and gradual (like line A, below.)  Things don’t go from one level of performance slowly to the next level in a nice continuous way.  Rather, evolutionary change happens brutally fast.  Usually the potential for change is building for a long time, but then there is some event – some environmental shift (visually depcted as B, below) – and the old is made obsolete while the new grows aggressively.  Economists call this “punctuated equilibrium.”  Everyone was on an old equilibrium, then they quickly shift to something new establishing a new equilibrium.

Punctuated EquilibriumMomentum has been building for change in publishing for several years.  Books are heavy, a pain to carry and often a pain to buy.  Now eReaders, tablets and web downloads have changed the environment.  And in June  J.K. Rowling, author of those famous Harry Potter books, opened her new web site as the location to exclusively sell Harry Potter e-books (see TheWeek.comHow Pottermore Will Revolutionized Publishing.”) 

Ms. Rowling has realized that the market has shifted, the old equilibrium is gone, and she can be part of the new one.  She’ll let the dinosaur-ish publisher handle physical books, especially since Amazon has already shown us that physical books are a smaller market than ebooks.  Going forward she doesn’t need the publisher, or the bookstore (not even Amazon) to capture the value of her series.  She’s jumping to the new equilibrium.

And that’s why I’m encouraged about AOL these days.  Since acquiring The Huffington Post company, things are changing at AOL.  According to Forbes writer Jeff Bercovici, in “AOL After the Honeymoon,” AOL’s big slide down in users has begun to reverse direction.  Many were surprised to learn, as the FinancialPost.com recently headlined, “Huffington Post Outstrips NYT Web Traffic in May.” Huffpo beats NYT views june 2011
Source: BusinessInsider.com

The old equilibrium in news publishing is obsolete.  Those trying to maintain it keep failing, as recently headlined on PaidContent.orgCiting Weak Economy, Gannett Turns to Job Cuts, Furloughs.” Nobody should own a traditional publisher, that business is not viable.

But Forbes reports that Ms. Huffington has been given real White Space at AOL.  She has permission to do what she needs to do to succeed, unbridled by past AOL business practices.  That has included hiring a stable of the best talent in editing, at high pay packages, during this time when everyone else is cutting jobs and pay for journalists.  This sort of behavior is anethema to the historically metric-driven “AOL Way,” which was very industrial management.  That sort of permission is rarely given to an acquisition, but key to making it an engine for turn-around. 

And HuffPo is being given the resources to implement a new model.  Where HuffPo was something like 70 journalists, AOL is now cranking out content from some 2,000 journalists and editors!  More than The Washington Post or The Wall Street Journal.  Ms. Huffington, as the new leader, is less about “managing for results” looking at history, and more about identifying market needs then filling them.  By giving people what they want Huffington Post is accumulating readers – which leads to display ad revenue.  Which, as my last blog reported, is the fastest growing area in on-line advertising

Where the people are, you can find advertsing.  As people are shift away from newspapers, toward the web, advertising dollars are following.  Internet now trails only television for ad dollars – and is likely to be #1 soon:

US Adv rev by market
Chart source: Business Insider

So now we can see a route for AOL to succeed.  As traditional AOL subscribers disappear – which is likely to accelerate – AOL is building out an on-line publishing environment which can generate ad revenue.  And that’s how AOL can survive the market shift.  To use an old marketing term, AOL can “jump the curve” from its declining business to a growing one.

This is by no means a given to succeed.  AOL has to move very quickly to create the new revenues.  Subscribers and traditional AOL ad revenues are falling precipitously.

AOL earnings

Source: Forbes.com

But, HuffPo is the engine that can take AOL from its dying business to a new one.  Just like we want Harry Potter digitally, and are happy to obtain it from Ms. Rowlings directly, we want information digitally – and free – and from someone who can get it to us.  HuffPo is now winning the battle for on-line readers against traditional media companies. And it is expanding, announced just this week on MediaPost.comHuffPo Debuts in the UK.”  Just as the News Corp UK tabloid, News of the World,  dies (The Guardian – “James Murdoch’s News of the World Closure is the Shrewdest of Surrenders.“)

News Corp. once had a shot at jumping the curve with its big investment in MySpace.  But leadership wouldn’t give MySpace permission and resources to do whatever it needed to do to grow.  Instead, by applying “professional management” it limited MySpace’s future and allowed Facebook to end-run it.  Too much energy was spent on maintaining old practices – which led to disaster.  And that’s the risk at AOL – will it really keep giving HuffPo permission to do what it needs to do, and the resources to make it happen?  Will it stick to letting Ms. Huffington build her empire, and focus on the product and its market fit rather than short-term revenues?  If so, this really could be a great story for investors. 

So far, it’s looking very good indeed. 




Can AOL Resurrect Itself with HuffPo Acquisition?


  • Start-ups that flourish give themselves permission to do whatever is necessary to succeed
  • Most acquisitions kill that kind of permssion, forcing the acquired company to adopt the acquirers legacy
  • AOL’s legacy business has been dying for several years
  • AOL’s history of acquisitions has been horrible, because it doesn’t learn from the acquisitions. 
  • AOL’s acquisition, and announced integration, of Huffington Post will likely do nothing to turn around AOL, and probably leave HuffPo about as well off as AOL’s acquisition of  Bebo

After the Super Bowl Sunday Night AOL announced it’s acquisition of The Huffington Post for $350M.  Given that you can’t give away a newspaper company these days, the acquisition shows there is still value in “news” if you understand the right way to deliver it.  HuffPo’s team of bloggers has shown that it’s possible to build a profitable news organization today – if you do it right.  Something the folks at Tribune Corporation still don’t understand.

BusinessInsider.com headlined “AOL’s Huffington Post Acquisition Makes Sense for Both Sides.”  For Arianna Huffington and her investors the big cash payout shows a clear win.  They are receiving a pretty penny for their start-up.  Beyond them, it’s less clear.  AOL’s been losing subscribers, and site vistors for years.  They’ve made a number of acquisitions to spark up interest including blogs Engadget, Joystiq, ad network Tacoda and social networking site Bebo.  None of those have flourished – in fact the opposite has happened.  AOL investors lost almost all the $850M spent on Bebo as Facebook crushed it. So far, the AOL track record has been horrible!

AOL clearly hopes HuffPo will bring it new visitors – but whether that works, and whether HuffPo continues growing, is now an open question. MediaPost.com reports “AOL Starts Mapping Plans for Huffington Post.”  Unfortunately, it sounds much more as if AOL is trying to integrate HuffPo into its traditional organization – which will most likely do for HuffPo what integrating at News Corp did for MySpace – namely, layering it with “professional management,” additional systems, more overhead and rules for operating.  Or, in other words, bury it in company legacy that strangles its abilitiy to innovate and shift with rapidly emerging market needs.  The company that’s actually growing, winning in the marketplace, isn’t AOL.  It’s HuffPo.  If there’s any “integrating” needed it should be figuring out how to push AOL into HuffPo – not vice-versa.

As the New York Times headlined, this acquisition is “AOL’s Bet on Another Makeover.”  And that’s what’s wrong.  The acquisitions AOL made were pre-purchase successful because they were White Space endeavors that had close connection to the market.  The founders gave their organization permission to do whatever it took to be successful, without artificial constraints based upon legacy.  Their acquisitions have not used by AOL to create White Space with better market receptors – to teach AOL where growth lies.  Rather, AOL has hoped they can use the acquisition to defend and extend their old success formula.  AOL has hoped the acquisitions would allow them to slow the market shift, and preserve legacy operations. 

As we’ve seen, that simply does not work.  Markets shift for good reason, and the only way a business can thrive is to shift with them.  At AOL the smart move would be to let Arianna run the show!  A few months ago AOL purchased TechCrunch and ever since Michael Arrington, the founder, has been villifying AOL management for its bureaucracy and inability to adapt.  What Mr. Armstrong, the relatively new CEO at AOL misses is that AOL’s business is dead.  AOL needs to find an entirely new way of operating – and that’s what these acquisitions bring.  AOL needs to get out of the way, let the acquisitions flourish, and learn something from them.  AOL management needs to accept that the old AOL business model is rubbish, and what it must do is allow the acquisitions to operate in White Space, then learn from them!  But that’s not been the history of AOL’s purchases, and doesn’t look like the case this time.

Mr. Armstrong could learn a lot from Sir Richard Branson.  Virgin has made many acquisitions, and developed several new companies.  He doesn’t try to integrate them, or drive them toward any particular business model  From Virgin Airways to Virgin Money to Virgin Health Bank to Virgin Games (and all the other businesses) the requirement is that the business be tightly linked to market needs, operate in new ways and find out how to grow profitably.  Virgin moves toward the new markets and businesses, it doesn’t expect the businesses to conform to the Virgin model. 

I’d like to think AOL could learn from HuffPo and dramatically change.  But from the announcements this week, it doesn’t look likely.  AOL still looks like a management team desperately trying to save its old business, but without a clue how to do so.  Too bad for AOL.  Could be even worse for those who read HuffPo. 

Get aboard, or risk getting run over – Huffington Post, Tribune Corp., Forbes.com


  • Traditional news formats – such as magazines and newspapers – are faltering
  • On-line editions of traditional formats are not faring well
  • Important journalists are transitioning to blogger roles to better provide news consumers what they want
  • Important journalists from Newsweek and the New York Times have joined HuffingtonPost.com as bloggers
  • Forbes.com is transitioning from traditional publishing to bloggers in its effort to meet market needs
  • The new era of journalism will be nothing like the last

In early 2006, before it completed the leveraged buyout (LBO) that added piles of debt onto Tribune Corporation I was talking with several former Chicago Tribune executives who had been placed in senior positions at the acquired Los Angeles Times.  Their challenge was figuring out how they would ever improve cash flow enough to justify the huge premium paid for the newspaper.  Unfortunately, 90% or more of their energy was focused on cost cutting and outsourcing, with almost none looking at revenue generation.

In the face of a declining subscriber base,  intense competitiion from smaller, targeted newspapers in the area, and a lousy ad market I asked both the publisher and the General Manager what they were going to do to drive revenue growth.  They, quite literally, had no ideas.  There was a fledgling effort, dramatically underfunded for the scale of the country’s largest local newspaper, to post part of the LATimes content on-line.  But the entire team was only 30 people, they were restricted to re-treading newspaper content, and mostly they focused on local sports reports (pages which drew the largest number of hits).  About a third of the staff were technical folks (IT), and half were sales – leaving very few bodies (or brains) to put energy into making a really world-class news environment worthy of the LATimes.com name.   The group head was trying to find internet ad buyers who would pay a premium to be on a well-named but woefully content-weak web-site.

Lacking any plans to drive growth, in old or new markets, it was no surprise that lay-offs and draconian cost cutting continued.  Several floors in the famous newspaper building right in downtown Los Angeles, like the Tribune Tower in Chicago, became empty.  By 2008 as much of the building was used as a movie set as used by editors or reporters! Eventually Tribune Corp. filed bankruptcy – where it has remained going on 3 years now.

When asked if the newspaper would consider adding bloggers to the on-line journal, the entire management team was horrified.  “Bloggers are not journalists,” was the first concern, “so quality would be unacceptable. You cannot expect a major journalistic enterprise to consider blogging to have any correlation with professional journalism.”  I asked what they thought about the then-fledgling HuffingtonPost.com, to which they retorted “that is not a legitimate news company.  The product is not comparable to our newspaper.  It has nothing to do with the business we’re in.”  And with that simple attack, the executives promptly dismissed the fledgling, fringe competition.

How things have changed in news publishing.  Four years later newspapers are dramatically smaller, in both ad dollars and staff.  Many major journals – magazines as well as newspapers – have discontinued print editions as subscriptions have declined.  Print formats (physical size) are substantially smaller.  While millions of internet news sites attract readers hourly, print readership has only gone down.  Major journals, unable to maintain their cash flow, have been acquired at low prices by newcomers hopeful of developing a new business model, and many well known and formerly influential news journalists have been laid off, or moved to on-line environments in order to maintain employment.

About a week ago the Wall Street Journal reported “Newsweek’s Howard Fineman to Join Huffington Post.”  This week Mediapost.com headlined “The HuffPo’s Hiring of NYT’s Peter Goodman Is More Significant Than You Think.” Rather rapidly, in just a few years, HuffingtonPost.com has become a major force in the news industry.  Well known journalists from Newsweek and the New York Times add considerable credibility to a new media which traditional publishers far too often ignored.  Much to the chagrin, to be sure, of Sam Zell and the leadership at Tribune Corporation.

Today people want not only sterile reporting, but some insight.  “What does this mean? Why do you think this happened?  Is this event important, or not, longer term? What am I supposed to do with this information?”  People want some analysis, as well as news.  And readers want the input NOW – immediately – not at some later time that meets an arbitrary news cycle. Increasingly news consumers want Bill O’Reilly or Keith Olberman (depending upon your point of view) rather than Walter Cronkite – and they’d like that input as soon as possible.

Bloggers provide this insight.  They provide not only information, but make some sense of it.  They utlize past experience and insight to bring together relevant, if disparate, facts coupled with some ideas as to what it means.  Where 4 year ago publishers scoffed at HuffingtonPost.com, nobody is scoffing any longer. 

And it’s with great pleasure, and a pretty hefty dose of humility, that I’ve become a blogger at Forbes.com (http://blogs.forbes.com/adamhartung/).  Hand it to the publisher and editors at Forbes that they are moving Forbes.com from an on-line magazine to a bi-directional, real-time site for information and insight to the world of business and economic news.  Writers aren’t limited to a set schedule, a set word length or even set topics.  Readers will now be able to visit Forbes.com 24×7 and acquire up-to-the-minute news and insight on relevant topics. 

Forbes.com is transitioning to be much more like HuffingtonPost.com – a change that aligns with the market shift.  For readers, employees and advertisers this is a very, very good thing.  Because nobody wants the end of journalism – just a transition to the market needs of 2010.  I look forward to joining you at Forbes.com blogs, and hearing your comments to my take on business and economic news.

Journalism 2020 Revisited – Amazon, Apple, NewsCorp, Newspapers, Books

Things are tough for the printed word these days.  Not for writing, or demand for information.  That is doing great – with more volume than ever!  But the issue is “printed” material.  Clearly, the format is changing.  But are business leaders changing with it?

The Los Angeles Times reported “Amazon.com Says It’s Selling 80% More Downloaded Books Than Hardcovers.”  This is a big switch.  Clearly Kindles are making a big difference as people are buying a lot less paper, and reading a lot more bits.  Do you remember when your colleagues all said “I want a book, I don’t want to read looking at a screen?”  Do you remember when businesspeople actually printed their emails?  Clearly a sentiment gone by the wayside. 

Accuracy in Media reported “U.S. Newspaper Circulation Dropped 30% Since ’07.” And it’s a global phenomenon, with the U.K. down 25%, Greece 20%, Italy 18% and Canada 17%. Fully 2/3 of major countries are seeing newspaper demand decline.  No wonder Tribune Corporation, publisher of The Chicago Tribune, Los Angeles Times and Baltimore Sun, as well as others, is having such a hard time emerging from bankruptcy.  Every month this looks more like the buggy whip business.  Can you really expect the company to survive?

Amidst this backdrop, magazines have a dire future.  I can remember when browsing magazines was the norm, and trade magazines arrived in my inbox daily.  Often 60 or 100 page affairs.  No longer.  Magazines have disappeared like rain in the Sahara.  Their savior is supposedly to go digital, but according to TwistedImage.com magazine leaders are at a loss how to proceed.  In “The Media Disruption Within” Mitch Joel describes how a panel of magazine publishers are approaching the industry change mostly with despair that the internet is here – and no concerted effort to define a new model.  Lock-in was prevalent as they kept hoping for a return to the good old days for print publishers, which we know is never going to happen.

So today the New York Post reported “Mag Publishers, Apple in Subscription App Scrap.”  Most of us can acquire newspapers for an iPad issue by issue – but subscriptions aren’t possible.  The magazine fears it will be the big loser – and rightfully so.  If Apple controls the subscription and delivery, why couldn’t it repackage?  Where would Apple stop, and what value would the magazine actually deliver?  Since iTunes changed music buying, how many people buy albums?  It would require the editors and publishers be really sharp to know their market – something most gave up a long time ago when they turned to focusing on narrow content for their “core product” and trying to maintain their “core competency.”  Neither of which are very “core” any more. 

We all want news that’s exactly what we want, and we’ll simply go to Google to get it.  Who published it isn’t nearly as important to readers any more.  Nor is the packaging.  Pretty soon Amazon via Kindle, Apple via iPad, and we can expect a Google tablet to do the same, can start packaging up the chapters of various books for readers giving them just what they want.  And with that they can link off to source articles from newspapers and magazine archives – or to current events.  The role of publisher will get a lot less clear, as writers and editors can go directly to the electronic distributor with content.

Into this fray is an interesting new approach reported by CNBC.com, “Rupert Murdoch’s New Digital Game Changer?”  The claim is that News Corp. is preparing an all-new interactive product designed just for on-line and mobile users.  It wouldn’t be a re-treaded newspaper.  Text, photo and video designed just for the medium.  Now that would be the right way to go about preparing for 2020.  Unfortunately, the way News Corp. handled MySpace.com doesn’t give us a lot of comfort this will be a truly White Space project.  But if it is, it might just be the start of toward the product which will be journalism in 2020.

If you’re in publishing you have no choice but to get White Space going.  The intermediaries – from the tech companies to new-age publishers like HuffingtonPost.com – are moving forward.  The business as it used to be is gone.  But the demand for news – for content – is bigger than ever.  It will require a new business model.  A new Success Formula. And this is clearly a case of change or die.  The world will never again be as it previously was.

Even if you don’t think of yourself as a publisher – you probably are.  Do you put out customer literature – like user or repair manuals?  Do you put out sales literature? Do you communicate with investors or industry analysts?  If so, how do you “publish” your material?  Paper?  Packaged pdf?  In today’s world, an advantage can be created by moving quickly to what’s new. 

Today there are a plethora of luxury automobiles on the market.  These beautifully high tech luxury machines have manuals that can run 500+ pages!   It is impossible to figure out how anything works by trying the manual!  Why don’t manufacturers of $60,000+ cars have a Kindle (or iPad) built into the console?  Those cost less than a set of brake pads today, they can be updated automatically, and are interactive. 

Are you thinking about how you could use a $100 device to make life easier for your customers and supply chain partners?  Or are you printing?  If you’re printing, what’s your budget?  How much would you save if your salespeople, customers, etc. were given a Kindle?  Or iPad?  Can you afford not to be thinking differently about your future?

Journalism in 2020 – YouTube, Google

Will YouTube be the USAToday or Wall Street Journal or New York Times of 2015 or 2020?  According to Mediapost.com "YouTubes Secret Citizen Journalism Plot Exposed."  Referring to a SFWeekly article by Eve Batey "YouTube Explains Top Secret 'News Experiment' to Local Media, But Doesn't Really" the reporting is that YouTube plans to hire groups of citizens in major cities, starting in San Francisco, to report news events via YouTube.  Could this replace the local newspaper?  Or maybe even the local evening news?

Americans are so used to freedom of speech that it's easy to forget what the concept launched in the USA.  200 years ago anybody who could access a printing press, of any size, could produce a newspaper.  That as revolutionary.  "Citizen journalism" was the norm, and there were literally thousands of newspapers.  That situation remained very true well into the 1900s.  Eventually acquisitions led to consolidation and a dramatic reduction in the number of newspapers. 

The decline in the number of newspapers was aided by consumer journalism preferences shifting, in part, to radio and television.  As radio and television journalism was born the limitation was "bandwidth" and therefore access.  Thus, from the beginning there was government control over the number of stations. That scenario very different from the founding of newspapers, as there were limited channels from the beginning.  But that didn't mean that the desire for video journalism was lower.

What will journalism be in 2020?  We know that most major city newspapers are on the brink of failure, with bankruptcies (such as Tribune Corporation, owner of The Chicago Tribune and The Los Angeles Tkimes as well as others) not uncommon.  As newspaper pages have shrunk, the internet has allowed the return of "citizen journalism" as bloggers and reporters have emerged able to tell a story, and with very low cost access to potential readers.  Having internet access is possibly cheaper, and certainly easier, than operating a printing press in the era of Benjamin Franklin, or even a local newspaper of 1900.  By numbers there is no doubt many more "citizen journalists" than "professional journalists" working at American newspapers today.

So why couldn't YouTube take advantage of a preference for video, and link together the armies of independent "journalists?"

I can't help but recall the television program Max Headroom from 20 years ago – where it was perceived that real-time information on practically all topics would be reported on millions of televisions everywhere – televisions which could not be turned off by law.  Wasn't Max simply an avatar, running around what we could now consider the web, popping up on computer – rather than television – screens?  Today I can create my own Max Headroom avatar to search the web for real-time content – mostly text.  Why couldn't YouTube give me a tool to do the same thing with video?

Many people are bemoaning the decline of traditional journalism.  But is this a bad thing?  Given all the screaming about today's "media bias" it would seem that citizen journalism could become a great equalizer.  If YouTube and Google can help give me the tools to search for what's interesting to me that would seem to be a very good thing.  And if in the process they sell some ads so that the content can grow, that doesn't seem like a bad thing either.

In the movie Network, made some 30 years ago, the thesis was put forward that news would become entertainment – and less "news".  With the growth of Fox News, MSNBC News and the number of broadcast minutes given to television news magazines like Nightline, one could reasonably claim that the movie was surprisingly foretelling.  Today, getting up to the minute news is even hard on a channel like CNN.  It's not at all unclear that providing a platform for citizen journalists, via YouTube and Google searches of the web, is a bad thing at all. 

Are you prepared?  Are you learning how to use these new tools?  Are you prepared to change your learning behavior?  Your advertising programs? Could you be a citizen journalist?   It certainly looks clearer every year that journalism in 2020 will look substantially different than it does in 2010.

Cry or Take Action – Huffington Post, Wall Street Journal, LA Times, NY Times, Washington Post

Do you lament "the way things used to be?"  I remember my parents using that phrase.  Now I often hear my peers.  And it really worries me.  Success requires constant growth, and when I hear business leaders talking about "the way things used to be" I fear they are unwilling to advance with market shifts.

For 5 years newspaper publishers have been lamenting the good old days, when advertisers had little choice but to pay high rates for display or classified ads.  Newspaper publishers complain that on-line ads are too inexpensive, and thus unable to cover the costs of "legitimate" journalism.  While they've watched revenues decline, almost none have done anything to effectively develop robust on-line businesses that can offer quality journalism for the future.  Instead, most are cutting costs, reducing output and using bankruptcy protection to stay alive (such as Tribune Corporation.)  Even as more and more readers shift toward the digital environment.

Huffington Post site visits 2007-2010
Source:  Business Insider 5/18/10

While most of the "major" newspapers (including Tribune owned LA Times) have been trying to preserve their print business (Defend & Extend it) HuffingtonPost.com has gone out and built a following.  There's little doubt that with the last 3 years trajectory, HuffingtonPost will soon be the largest site.  And reports are that HuffingtonPost.com is profitable.

In 2006 the CFO at LATimes told me he couldn't divert more resources to his web department.  He felt it would be jeopardize to the print business. "After all," he said "you don't think that the future of news will be bloggers do you?"  Clearly, he was unprepared for the kind of model Arianna Huffington was building – and the kind of readership HuffingtonPost.com could create.

On Tuesday I presented the keynote address at the Innovation and Energy Summit in Grand Rapids, MI – and as reported in West Michigan Business "Energy & Innovation Summit Speakers Urge Business Leaders to Seek New Businesses, Not Protect Old Ones."  Defend & Extend management always "feels" right.  It seems like the smart thing to try and preserve the old Success Formula, usually by cutting costs and increasing focus on primary revenue sources.  But in reality, this further blinds the organization to market shifts and makes it more vulnerable to disaster.  While NewsCorp and others are busy trying to think like newspapers, emerging news market competitors are developing entirely different models that attract customers – and make a profit. 

That's why it is so important to use future scenarios to drive planning (not old products and customers) while passionately studying competitors.  Talking to advertisers gave these publishers no insight as to how to compete, however had they spent more time watching HuffingtonPost.com, and other on-line sites, they might well have used Disruptions to change their investment models – pushing more resources to the web business.  And had they set up dedicated White Space teams not constrained by old Lock-ins to traditional revenue models and goals of "avoiding advertiser cannibalization" they might very well have evolved to a more effective Success Formula necessary for competing on the internet into 2020.

Lost in the Swamp – Publishing – Random House, Tribune Corporation, News Corp.

Do you read more today, or less than you did 10 years ago?  For most of us, the answer is more.  Our ever present access to email and texting means we watch less TV, and pick up more from reading.  Of course, we read a lot less paper than we used to – books are falling more out of favor every year – and the plight of newspapers and magazines is rocky.  For traditional book publishers like Random House, Pearson, et.al. as well as periodical publishers like Tribune Corporation or News Corp. there is a lot of concern about survivability.  But it's not because we're reading less.  It's because the market has shifted, and people are reading differently.

What should a publisher focus upon?  Words.  Content.  A recent Harvard Business School web discussion "HBS Cases: iPads, Kindles, and the Close of a chapter in Book Publishing" highlights that the role of a publisher is to find really good stuff that people want to read.  The author, former CEO of Random House, points out that a publisher's job is to edit content into the format which makes it easiest to understand and digest.  A good publisher aids us in our seeking knowledge, or enjoyment.  But most publishers have completely lost sight of that goal, instead focusing on printing.  Books, magazines and newspapers.  Keep the presses busy, and the old supply chain filled.

In the business lifecycle we start with the Wellspring of ideas.  When something catches hold, we enter the Rapids of growth.  That's great, because growth is a fun place to be.  But when markets start shifting then things go flat.  We think slowness is our fault, so we work harder at what we've always done – but the cause is a market shift so the hard work makes little difference.  We drift into the Swamp, where we are so overwhelmed with all the problems from no to negative growth that we forget what our original purpose was (we get so busy fighting alligators and killing mosquitoes that we forget the mission was to drain the swamp!)  Eventually resources are depleted and we slide into the Whirlpool of failure.

Publishers are now in the Swamp.  Cutting costs, focusing on "big deals" (like bidding wars to publish a book by a celebrity like Sarah Palin), and spending all kinds of time dealing with the supply chain.  As the HBS article explains, while iPad and Kindle represent an opportunity for incremental growth – and new revenue – by feeding people content when they want it where they want it and how they want it – the publishers are in a pitched battle to slow electronic publishing.  The publishers are trying to Defend & Extend their old process of printing, and distributing, paper.  They want to defend their old Success Formula.  And in doing so, they've completely lost sight of the opportunity digital publishing offers!

A paper published on the University of Missouri web site "What Happens When Newspapers Cut Back on Marketing Investments? An Empirical Analysis" is extremely enlightening.  With ad spending down, in an effort to "save" the business, they are cutting editorial. Yet, this is creating a vicious cycle of decline (a Whirlpool is emerging.)

  1. Newsroom cuts are the most costly on revenue.  More than cutting sales or distribution, cutting content led to the greatest loss.  Duh!  Of course.  Readers are there for content – not for ads or distribution!  Talk about forgetting your purpose.
  2. The bigger the cuts, the impact on revenues gets progressively worse!  Remember what I said about creating a whirlpool?  When you cut what people want, you hasten demise.
  3. Newsroom cuts are most costly on profit.  Not only does revenue decline, but of all cost cuts the content cutting not only takes away readers – but quickly advertisers as well.  Advertisers depend on content to draw people to their ads.  Otherwise all you have is an ad tabloid – remember? 

My book publisher is Pearson.  Eighteen months ago I proposed that we take Create Marketplace Disruption and turn it into 16 short stand-alone mini-books.  People could then buy just part of the book, as it suits their needs.  Sell these for $1 or $2 each strictly as electronic downloads.  That idea flew about as far as the famed dodo.  Financial Times Press sells books I was reminded.  No interest in this other wacky idea I proposed. 

But I'm confident that for most of you, the idea of nice short readings – like say a blog – is a lot more appealing than digesting a 225 page bookPeople don't want less words, they just want things differently.  That's why I do public speaking and workshops – because many of us don't want all the detail of the book and appreciate receiving the content in another format.

So, do you know what direction your market is headed?  Are you moving forward to meet emerging needs and preferences?  Or are you trying to defend & extend the way you've historically done business?  For most publishers, the current direction spells disaster – failure.  Learn from their mistakes, Disrupt your approach and find some White Space to learn how you can make money and grow!

Do you Facebook?

Let's see, would you rather spend $4million to reach 100 million people once – say via a Super Bowl ad – or spend almost nothing to reach 400million people every day?  Seems obvious economics.  Yet, how good is your Facebook presence?  Because that is the route to all those people who are on-line daily.

Most of today's business leaders grew up in the world of one-way advertising.  They watched TV, listened to the radio, read magazines and newspapers.  They were taught that to get a message into potential buyer heads, unfiltered by journalists, you had to advertise.  And for a long time, that was pretty true.  So they Locked-in on advertising and traditional PR as the route to name awareness and brand image.  But that was before the market shift which is dampening enthusiasm for traditional media while social media (broadly – including YouTube) is exploding.

Now your customers, and potential customers, are most likely using Twitter, Facebook, Linked-In and other social media every day.  And when they search on your products, they get Google responses from social media.  If you aren't putting some effort into the media, your image and message could be far removed from your goal! 

I remember talking to the CEO of Rolex in 1997.  Rolex did not have a web site.  His point of view was that as a luxury good, the internet was "below" his company's standards for communicating.  If there was to be a web site, he thought Tourneau – the world's largest retailer of luxury watches – would build it.  In 10 minutes I demonstrated to him how a simple search on "Rolex" turned up gobs of used dealers, unauthorized dealers, unauthorized repair shops, and outright fakes!  Several near the top of the list!  He was shocked.  His brand was rapidly being marginalized via a channel he had never even considered.  His worst fears about how the brand would be stolen, manipulated and value minimized were happening – and he was blithely ignorant.  Of course, Rolex got involved quickly to protect its brand.

So when was the last time you reviewed your brand, or image, or message across social media channels?  Are you possibly, blithely letting someone else manipulate your image?

At MediaPost.com in "Ensuring A Successful Corporate Facebook Presence" the authors outline a 4 step approach for doing a good job.  My biggest fear is that Lock-in to old approaches to sales and marketing mean too few companies are paying even a shred of interest in social media.  Over and over I hear marketers of large, established companies saying that social media access is blocked at work – and nothing is being done to leverage the channel!  In some instances, I've heard of Chief Marketing Officers making a "command decision" to avoid social media, because they can't "control" it. 

Secondly, the competition that is going to ruin your day just might do it via social media!  An existing company may have an image, advertising and effective PR.  So how would a Disruptive new competitor go after you?  Why, using the very low cost channel of social media.  We've all heard about disgruntled customers that have used songs, videos and other clever tools to spread extremely negative information like wildfire through a customer base.  Yet, by ignoring the channel – by ignoring the opportunity to develop a strong and effective presence that ties to customers – we encourage competitors to use this channel to our detriment.

Don't let Lock-in cause you to ignore this powerful, and shockingly low cost, communication tool.  Realize that social media is here to stay, and incorporate it into your future scenarios.  Additionally, social media is where your competition – especially fringe competitors – are likely to target you.  Why not study them, learn from them, and use the tool to grow instead of being a target?  And when it's time to implement, Disrupt your old decision-making and spending patterns so you allocate some resources to build out your social media campaign.  Then put together a White Space team with Permission to really go for success using the resources you've now dedicated to the project.

Applying the Phoenix Principle can result in a rapid improvement in social media marketing – and it just might save you a huge amount of spending on your traditional marketing communications plans.  While bringing in new customers and markets!

A problem of riches – Apple

Apple's shareholder meeting was last week.  In an era where shareholders are most worried about the survivability of the companies where they are invested, the biggest issue at Apple is what to do with all its cash!  Reuters.com reported "Apple's Jobs says must think 'big' on cash hoard."  In 2009, when most companies saw their market value decline, Apple's value doubled.  Yet, it's cash is fully 1/5 (20%) of its current market capitalization!  Clearly the company is generating cash faster than it has found investment opportunities.  Even after launching the iPad with expectations of selling 2 to 5 million units in 2010!

We all should be so lucky, to have this problem of riches.  Apple has enough cash that it could buy all the equity of Dell.  Of course, why do that?  It just goes to show that the company that built its market cap in the 1990s on Defend & Extend behavior – focusing on execution in a growing PC marketplace – has seen its valuation multiple shredded as buyers have shifted to other solutions.  Meanwhile, Apple's value has skyrocketed because it entered new markets and created new solutions.   Yet, it's cash flow has skyrocketed even faster!

It is possible for all companies to follow Apple's lead, increasing revenues and valuation.  Last week I was interviewed by Zane Safrit for his radio program and highlights are on his blog, and the full interview is available for listening at the BlogTalkRadio site. In the interview Zane brings out how so many business leaders are stuck defending and extending broken Success Formulas that cannot produce better returns, and waiting for a "better economy" to "save" them.  What Zane also cleverly brings out is how The Phoenix Principle can be applied to any business, with results that can be as stunning as Apple's.  If leaders will start focusing on the future, obsessing about competitors, utillize Disruptions and White Space.

Of course, these are amplified in the "10 Ways to Stay Ahead of the Competition" I posted in yesterday's blog.  I've received comments that the links to the deeper discussion on both the Business Insider web site and the IBM Open Forum weren't working, so I'm reproducing them here again.

10 Ways to Stay Ahead of the Competition – Business Insider

How to Stay Ahead of the Competition – IBM Open Forum

All companies can grow like Apple.  But it takes a different way of approaching management.  I hope you can find time to listen to the interview and explore how your organization can become like a Phoenix, forever growing through constant rebirth.