Newspapers and Disruptive Technology, Circa 2005

Shareholder cries to break up or sell Knight Ridder begs the question, once again, of where newspapers are in Clayton Christensen’s “disruptive technology” cycle. Are they still facing the beginning of disruption, where newcomers are focused on new audiences that newspapers don’t care to reach? Or are they in the middle of disruption, where those newcomers have begun to repackage their products so they compete more directly with newspapers? Or more disastrously, are they at the end of disruption, where newspapers are much on the defensive that they cannot win, even in their traditional markets?

Harvard Business School Professor Clark Gilbert worked under Christensen at Harvard, and has made media disruption a specialty of his own. In a Nov. 8 Manager’s Journal Column in The Wall Street Journal, written with Innosight’s Scott Anthony, the suggestion is that newspapers are probably in the middle of disruption – a stage in which it is not too late to remake themselves for the future. Gilbert and Anthony also suggest that newspapers have been moving in the right direction with a stream of acquisitions that specifically address new audiences, including Careerbuilder, About.com, Slate, MarketWatch, MySpace.com and Topix.

Gilbert and Anthony say it is too early to definitively assert how successful newspapers will be in their efforts not just to turn back the clock, but reach new audiences. But the acquisitions that newspapers have made “appear promising. Not only do these companies have large audiences. They provide newspapers with new business models and access to segments where online brokers are actively participating.”

Broadcast Interactive Evangelizes for TV Websites

It’s no surprise that TV station websites remain underwhelming in most markets. They still think of the Web as a promotional platform. But since 2003, a number of stations have begun to remake themselves, leveraging their local presence with content and advertising. Some are making a dent in the local advertising market, with earnings running from $300,000 to over $1 million in larger markets.

Station groups like Clear Channel are doing it on their own. Most, however, have signed partnerships with TV website specialists, whose ranks include WorldNow, with 147 stations; Internet Broadcasting Systems, which has 70 stations, including many top markets; and relative newcomer Broadcast Interactive Media. Broadcast Interactive will have 70 stations by the end of the year, but mostly in smaller markets – the disadvantage, perhaps, of starting after WorldNow and IBS.

BIM Chief Timur Yarnall shared his sense of where the marketplace is going with The Local Onliner. The best situations for TV Websites are when they go local and create new revenues from new customers, rather than bundling in existing contracts with car dealers and other traditional TV advertisers, says Yarnall. Homebuilders, real estate brokers and mortgage advertisers are examples of new customers who haven’t previously worked with TV stations. “The website clinches it. Otherwise, these guys would not have gone near TV.” More from our discussion is below.

Shareholders to Knight Ridder: Sell or Else!

Knight Ridder may not be the best managed company, or a great place to work. But can another media company do a better job of leveraging its 29 newspapers? This is the assumption behind a challenge by two major shareholders, who want to get rid of 65-year-old Chairman Tony Ridder and either sell the company off to the highest bidder, or break it up.

Legg Mason’s Private Capital Management (PCM), which owns 19 percent of the company, complains in a letter to the board that Knight Ridder is underperforming, even compared to the rest of the newspaper industry. According to PCM, the company has failed to deal with “continuing consolidation among traditional sources of print advertising revenue; the redirection of advertising dollars to other media; its unexceptional operating margins; and its lack of a nationally read paper capable of being leveraged in the online market.” PCM’s complaint has been joined by Harris Associates, which owns 9 percent. Tony Ridder, meanwhile, holds just 1.9 percent.

The specter of a possible bidding war for Knight Ridder has caused the company’s battered stock to do a quick jump. But one assumes that PCM and Harris’ complaints are about more than just a short-term stock boost. The question is why PCM thinks that other newspaper companies would achieve better results.

Gannett Unveils ‘PaperBoy’ Online Circular

Retailers are sick of being lost amidst the clutter of newspaper print circulars. They haven’t seen much usage from their online circulars, either. But they’ll look on with interest come January, when Gannett, Knight Ridder and Tribune begin testing an online circular that allows a banner ad to be “moused over” to provide advertiser specials, store locations and other information.

At least 217 of the 245 newspapers in the Gannett, Knight Ridder and Tribune consortium have given a green light to the test, as well as Yahoo. Additional joiners from Knight Ridder’s Real Cities network are likely.

The mouse-over circular technology, branded as”PaperBoy,” is being provided by PointRoll, which was purchased by Gannett earlier this year for the heady sum of $100 million. Conceptually, PaperBoy might be seen as the other side of iPix AdMission’s SpotLight ads, which enable users to open searchable libraries of real estate or auto photos when banners are moused over.

TorStar Goes With LiveDeal for Local Auctions

For a short time, eBay experimented with a Local Trading unit, which specialized in autos, sofas and other things “too heavy to ship.” But in 2001, it closed down the unit, which didn’t fit into its plans for eBay Autos, greater transaction fees, etc. By doing so, eBay took the chance that it would be left vulnerable to competitors filling the void.

Sure enough, jump to 2005, and a flurry of companies are ready to take advantage of the increasingly clear relationship between local auctions, classifieds and transactions. One of them is Santa Clara-based LiveDeal.

Launched by a former eBay engineer in 2003, the 25-person company lists 200,000 items for sale every day, and gets about 500,000 unique viewers a month. LiveDeal’s big news this month is that it has landed $4.8 million in financing, including $3 million from TorStar, the progressive publisher of The Toronto Star and dozens of smaller community and daily papers in Ontario. Other investors in this round include Draper Richards, a VC firm, and individual Silicon Valley investors.

We had the opportunity to talk with Vice President of Development Steve Harmon about the company’s progress. Details from the conversation, and more background, continues below.

Cox Search Launches Kudzu

Cox Enterprises has been largely silent on the local front since the high profile failure of Cox Interactive Media and its city guides in 2001. But the local media giant is quietly re-entering the local waters with the creation of a new “Cox Search LLC” division, described as “a strategy and development group created to develop interactive products.”

Cox Search’s first product is an Internet Yellow Pages/social network named “Kudzu,” after the invasive vine spreading over the southeast. Kudzu was set in motion in October 2003 and formally launched in August 2005, after months of delays. Kudzu’s pilot is set in Atlanta, Cox’s home base, and covers the entire Atlanta metropolitan area, rather than just focusing on the urban center, as Craig’s List tends to do.

A quick look at the site reveals a full-featured, highly searchable product, with 100,000 + local service listings and more than 13,000 user reviews (some motivated by the promise of a $10 gas card in return for 10 reviews). Like a good IYP, users can search by keyword or category, as well by distance or review. The site also features a number of “how to choose” guides.

We had an email exchange with Cox Search Vice President and General Manager Tom Bates. Highlights of the exchange, and additional background, are below.

Alternative Weekly Giants Merge

Alternative Weeklies have seen better days, but the two largest companies, New Times Media and Village Voice Media, will try to rescue what’s left and combine forces in a move that will give them entry into 16 key markets, and 25 percent of the country’s 7.6 million alternative weekly readers. A key rationale behind the merger is the chance to supercharge Backpage.com, the Craigs List-like, free classifieds service from New Times.

Village Voice Media brings six markets to the table, including New York, Los Angeles, Orange County, Seattle, Minneapolis/St. Paul and Nashville. New Times publishes in 11 markets, including Phoenix, Cleveland, Houston, San Francisco, Miami and Dallas.

Tellingly, online’s a key driver of the deal. Voice CEO David Schneiderman is slated to take charge of the company’s online operations, with a focus on backpage.com, New Times’ Craig’s list-like free classifieds service. The service may be rebranded as “The Village Voice” or some aspect of the title.

To a kultur meister, The Village Voice no longer “matters.” And The Voice, and similar alternative papers around the country, can hardly promise a lock on its traditional “alternative” readers, including college, college grad, gay and minority readers. Still, the alternative weeklies retain large readerships in key markets. Someone is surely picking up the 250,000 copies a week that The Voice puts out.