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About the NYTimes

Lots of news about the NY Times Co. lately. The NY Post and CNBC report that former AIG Chairman Hank Greenberg  wants to buy the place and restructure it. Greenberg denies it. Meanwhile Businessweek says Chairman Arthur Sulzberger Jr. is having serious talks with buddy and investment banker Steven Rattner about  taking the Times private. I guess that even with super voting control of the stock Sulzberger understands that the court of public opinion matters too.

Frankly, I dont understand what all the fuss is about. The Internet has made the Times not only the national newspaper of the US but the national wire service. In otherwords, NY Times content is showing up - and being read - in more places than ever before. Now you can get the Times in India just as easily as the Upper East Side and you can read it all day long.

So why all the handwringing? The argument for worry is that print circulation is declining, stunting traditional ad growth. It seems impossible that online advertising will ever cover the shortfall. The Times' online generates about $100 million in revenues a year, but it costs roughly $2 billion a year to publish the Times.

There's one problem with this thinking: $2 billion a year is the wrong number to use. If the Times stopped printing the paper tomorrow, sold its presses, and decided to distribute its content only online its cost base would be a fraction of that - roughly $400 to $500 million. It needs to generate only about $200 million to pay for its newsgathering.

That's right, about 80% of newspapers' costs are in paying for the ink and paper and then printing and distributing the thing. If readers consumed the paper digitally, the Times could generate a mere $750 million in revenues and make more money than it does now.

That's not going to happen tomorrow, but with online ad rates and traffic continuing to rise, it's going to start to happen soon. Times Select, its experiment with charging a fee for its columnists and archives has attracted 200,000 paying customers in a year - or $10 million. The point is, what investors really ought to do is stop whining, lower their cost basis by going double down on the stock and wait to make a bundle.

The future of local news?

Chris Tolles, the head of marketing, for Topix, the news aggregator, may be the only guy in the Valley who speaks faster than Marc Andreessen. By the time he was done with his two hour brain dump Tuesday in Wired's dining room I was whipped.

But it's good he came by. I haven't been paying enough attention to what he and his few dozen colleagues down in Palo Alto have been doing. I thought Topix was just another news aggregator like Google News or Yahoo News, and I figured that since it was backed by Tribune, Gannett and McClatchy, I wasn't going to be impressed. Wrong.

It's become common among readers to moan about how all news is becoming commoditized. There's some truth to this when it applies to news out of Washington or Iraq. Not true of local news, however. Every publication writing about a place like Huntington Beach thinks about the news there differently. You'd have to check the Independent, the Daily Pilot, the Orange County Register, the LA Times and the Long Beach Press Telegram to really find out what was going on.

This is what is cool about Topix.  A geolocating algorithm they've developed allows you to get all the news relevant to any zip code or city from all of its 50,000 news sources. Punch in the coordinates for Surf City and you get all the stories out of all the local papers, without repeats, in one place, along with news about Huntington Beach from other locales like Santa Cruz. You can comment on any of the stories, and people do in droves. Total comments for all stories now approach 100,000.  

You can also use Topix to search 5,500 public company and industry verticals, 48,000 celebrities and musicians, 1,500 sports teams and personalities. You used to have to pay big money to do a Lexis-Nexis search to get info like this or pay a clipping service like Burrelles. Now anyone can do it for free. Something tells me this is going to be a very big deal.

This is cool

Anyone who has seen 10x10, a web site that allows you to view news headlines by looking at a 10x10 grid of photos, will recognize the concept - a 4x4 chattering video wall from Blinkx. Let your mind wander and the news and advertising possibilities seem endless. http://www.beet.tv/2006/11/post.html

Jonathan Miller is out as AOL chief

WSJ says: "In its effort to remake its AOL unit into an ad-driven Internet business, Time Warner Inc. named Randy Falco, a top executive at General Electric Co.'s NBC, to become the primary driver of that push." http://online.wsj.com/article/SB116363405396024442...

It is certainly true that Miller never returned AOL to its glory days during the 1990s. It is also standard for new bosses, like Time Warner president Jeff Bewkes, to pick their own team. Clearly both had something to do with Miller getting his walking papers.

But let's not forget what Miller did during his four year stint as AOL's CEO: Against huge odds, he took a company in dire straights and impressively turned it around.

Which begs the following question: Is this the right move? Isn't AOL's bigger problem that to survive long term, it needs to operate like an independent company but cannot as long as it is locked up inside Time Warner?

I predict Mr. Falco won't have much more than a year to solve that problem.

Internet advertising through the roof

I think this chart speaks for itself. Note that quarterly ad spending is double what it was during the bubble. How much longer will this ad boom go on? Looking at the curves of radio and television advertising adoption would help me guess, if I could find them.

Here's the link to the IAB release:

http://www.iab.net/news/pr_2006_11_14.asp

 

Quarterly Internet Ad Revenues Surpass $4 Billion

$ Millions

Cheap storage rules

More fun facts about storage. The first link is an advertisement for a 15 mb hard drive circa 1980. Guess how much. The second link is a study of the falling price of hard drives since 1980, exhaustively footnoted. Happy reading.

http://tooloasis.com/blog/?p=6

http://www.littletechshoppe.com/ns1625/winchest.html

Bubble? Not a chance.

Bill Gates said the following to a group of European journalists late last week: "We're back kind of in an Internet-bubble era in terms of people thinking: 'O.K., traffic. We want traffic. We want traffic. There are still some areas where it is unclear what's going to come out of that."

It is a tempting, but inaccurate conclusion. Sure, Google just agreed to pay nearly $1.65 billion for You Tube, a company that didn’t exist a year and a half ago. Sure, every week for the past month there has been talk about Facebook getting acquired for a similar sum.

But beneath all the hype there are some really important and fundamental changes going on in high tech. 

*PC’s are as cheap as TVs – less than $400. This means that they are truly mass market items.

*Storage is virtually free and creating its own innovation cycle. The price plunge here is even more astounding than the impact of Moore's Law. A 60 GB Ipod - retail price $350 - would have cost about $85,000 a decade ago. Storage innovation used to be shackled to chip and software innovation. Now, flash drives and hard drives are in almost every piece of electronics we use.  

*Broadband and fast wireless connections are increasingly ubiquitous. Scott McNealy has been preaching the network as the computer for 20 years. Now, thanks to fast, always on connections, it is coming true.

*Everyone wants to advertise online. Why else would Google pay so much for You Tube?  Why else would Gates have paid some $400 million for Massive earlier this year. The company has technology that will allow Microsoft to put online advertising into Xbox video games. 

*And as Rob Guth at the Wall Street Journal reminds us today www.wsj.com, the Internet browser has become a critical platform for software innovation. Google and Microsoft may debate how much of what we do will be on servers elsewhere and how much will be done on our own computers. But compared to 10 years ago, when Netscape acolytes first surfaced this idea, everyone agrees on the direction things are going.   

Essentially every business and technology trend that Valleyites have been dreaming about for the last decade is coming true at once. And I know from talking to Gates that he understands all of these things better than anyone. So why the contradiction? In my opinion, it's a head fake. Gates is one of the smartest and saviest businessmen and technologists I've ever met, and he  didn't get that way by telling his competitors what was really on his mind.

Scoble has an interesting take on it too. http://scobleizer.com/2006/11/13/bill-gates-says-w...