When information and advertising collide, there's money in the bank.
This article was published in April 1998
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WAKE UP AND SMELL THE COMPETITION
In the
pursuit of customers, the character and shape of businesses are changing. What’s
woken up the sleeping giants?
If Amazon.com could have got into online auctions, and
an alcohol marketer like Seagrams can get into the music business, then there’s no
telling how institutions will merge and morph to stay in the running. By the turn of the
century there may be a handful of corporations controlling our media, our communications,
our entertainment, our computers, our food supply and transportation. Like an amoeba, with
no fixed shape, the once-static organizations are changing, splitting and moving in many
directions.
Consider
Road Runner, Time Warner's high-speed data delivery business, that plans on marketing
Internet services to cable TV customers. What's a magazine publisher-turned entertainment
powerhouse doing in the Internet territory? Before you chew on that, consider who’s
first to sign up: Microsoft and Compaq Computer Corp. who will each plunk down $212.5
million. Today’s corporations are raiding each other’s territory, and it’s
hard to spot a merger or acquisition that is not driven by the promise of E-commerce. Take
the just completed computer merger of the century between Compaq and Digital Equipment
Corporation. The new Compaq behemoth intends to move away from being an equipment supplier
to a "full-fledged IT company" – which is another way of saying they will
morph into a hundred different shapes in order to dominate a territory where information,
entertainment, data transmission and telephony collide. Compaq, recognizing that small and
medium sized businesses need help with electronic commerce applications, just
launched an online services package allowing users to purchase postage online, send and
track files, and backup systems. UPS, GTE Corp. and have already signed up, giving us an
indication of how wide this playing field is going to be
NEW MEDIA MEETS OLD
Whoever has the better delivery system is in a
commanding position. While entertainment industries are rushing to become telecom
providers, AT&T just reminded us that the reverse is also true, acquiring cable
company giant Telecommunications Inc. The Internet not only simplified distribution, it
created strange bedfellows. One week before that, in a classic case of new media teaming
up with the old, Disney just bought a 43% stake in Infoseek, one of the Web’s biggest
search engines. In terms of distribution, AT&T gains 10 million new customers, and
Disney can now have access to the 13 million-a-month unique Infoseek visitors. Businesses
that seemed most unlikely to be untouched but the digital economy have been forced to
compete in this domain. Chase Manhattan and IBM, two companies once considered
buttoned-down and slow, have been processing car-loans on the Net since 1996. Today there
are so much cash transactions being made on the Web that cities are beginning to worry
about their loss of revenue from sales tax they may never recover from main-street stores.
Distribution channels, once the bottleneck between manufacturers and customers, are
suddenly fanning out, making space for newer players. The widening conduit or the
'highway' ('bandwidth' in tech-speak) is permitting a faster traffic flow.
Consider
two industries as diverse as publishing and telecommunications. Newspapers now offer
products that go beyond the scope of newsprint, and cell-phones can double up as fax and
answering machines. How was this possible? By morphing into the adjacent technology, and
not seeing it as the competition. Newspapers are now rushing to integrate their product
into the Web that's bridging the gap between their advertisers and their readers. This is
not simply uploading all your content and calling it an ‘Internet edition’. And
this is not about boring banner ads either. While it's fashionable for the Editorial side
of the business to scorn Advertising, truth is one could not exist without the other.
Readers buy newspapers for a variety of reasons, and commercial information is one of
them. Newspapers look at it this way: Its readers have three priorities in life --Where
they work, what to drive and where they live. It's no coincidence that the three big
revenue streams of a newspaper come from classified ads for (a) job vacancies (b) cars and
(c) real estate.
Yet
it took a long time for traditional newspapers to realize that unless they took hold of
help-wanted, auto, and real-estate ad revenue, somebody else would. That somebody else
turned out to be the big bad wolf we all know as Microsoft. So why would the world's
number one maker of operating systems be raiding the newspaper territory? Think eyeballs
and mouse-clicks. Where information and advertising collide, there’s money in the
bank.
ROUSING THE SLEEPING GIANTS
You have to credit the high-tech companies for
waking the sleeping giants. Newspapers, once rigid, vertically oriented hierarchies, are
learning to morph fast. Microsoft’s CarPoint is an online shopping mall for
car-buyers, irrespective of where they live. So guess where the car dealerships clamoring
to get into bed with this new medium get their ad dollars? You guessed it: Their
classified print ad budgets. Ditto for restaurants, banks and any other business you
traditionally had to open your newspapers to find the deals. Are newspapers in a panic? Is
the pope a catholic? The old media is rushing to become the ‘new media’ like
there’s no tomorrow. They figure, like most media, that if people are going to use
one dominant medium, it better be them. To their rescue, came Zip2, a new media company
that has partnered with 157 newspapers in 21 states, offering City Guides with anything
from maps and homes, to cars and restaurants. The Chicago Tribune has pumped $30 million
in 1997 on interactive offerings that allow readers to find a book, a car, a home or just
a date. USA Today has practically the same fare. In addition to beefing up the content of
their site, newspapers are finding it a new revenue stream. Bookstores, real estate
companies, auto dealers and hundreds of local and national vendors pay ‘transaction
partnership’ fees for this alliance. While all this has been happening, some
newspapers have almost accidentally stumbled on another unique feature of the Web that
integrates well with their product: Webcams. If you haven’t heard of Webcams,
it’s a voyeuristic experiment (a live camera trained on all manner of things) that
has suddenly found a noble purpose. Since readers are by definition, information-hungry
customers, a Webcam trained on a newsroom or an unfolding story, gives readers the once
prohibitive ‘back-door pass’; the uncensored journalist’s view of the story
being covered. It turns out to be perfect in times of covering disasters, where a live
picture could be broadcast from a vantage point that no camera crew would dare to remain
at.
If
fuddy-duddy newspapers can come this far, will other marketers reinvent themselves too?
The Internet age will force all businesses to swallow their pride and morph into a lot
more interesting shapes. In 1994, I remember sitting at a high-powered meeting at a radio
station, where the CEO scorned the use of newspapers for its marketing effort. His
argument: why use expensive column inches when we have plenty of airtime? Then the New
Media hadn’t quite arrived.
Today any company that arrogant or exclusive will soon have something after their name:
its obituary.
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