QuadrantONE - the silence is deafening

QuadrantONE, Tribune and Gannett's advertising network of newspapers, has been conspicuously absent from recent news from each of the companies.  Ad networks have been a strategy du jour for addressing the desire of national advertisers to reach audiences across the extraordinarily fragmented Internet.  They often have capability that individual sites can't, such as re-marketing and advanced behavioral targeting.  It can also allow a big advertiser to buy on very small sites economically.  It would seem that hundreds have launched in the last year for this or that niche. 

However QuadrantONE has been shockingly silent.  Gannett mentioned Captivate in their most recent statistical report, but not QuadrantONE.  QuadrantONE hired a new CEO, and very little has been mentioned.  Gannett hasn't updated the fact sheet they post on the home page to reflect the new CEO.  Tribune doesn't even list them as a partner on their home page, that I could find.  

This leads me to believe that QuadrantONE is not exactly meeting expectations.

The reality of the situation is that ad networks are harder than most would guess.  There's more to it than just assembling a list of sites that you can buy across.  Cox seemed to understand this when they bought adify, a technology provider that can power ad networks.  

Centro's recent purchase of RealCities is a pretty solid example of how people outside the industry can grow enough to swallow ventures newspapers try on their own.

Jay Mariotti Quits Sun-Times - Blames Newspapers

Jay Mariotti, newspaper columnist and ESPN feaure on the random Around the Horn, announced today that he is quitting the Chicago SunTimes because newspapers are dying.

The fact that newspaper are dying should surprise no one. The fact that Mariotti would do something outrageous shoud surprise no one. But the fact that the outrageous thing is to quit the vehicle that gave him his soapbox for so long should surprise everyone.

Honestly, how much can a part time gig on Around the Horn pay? Can he work full time for ESPN, when 3/4 of people who hear him think he's dead wrong and the other 1/4 think he's genius? Does he think he's enough of a brand himself that he can make up the money on his own blog? Or does he have enough money and enough fame that he can use his persona to point to the dire issue that newspapers face?

My bet is the third one - Mariotti has created a brand for himself and is proud enough to think he can go on his own. He may be right, at least in the long run. At the very least he's acknowledged that newspapers are subservient to the 24/7 world that is the web, and for that I applaud him.

According to the report his goodbye email read simply - "I quit"

If there's one thing I'm disappointed in, it's that he didn't take the chance to tell the management anything constructive in his departure.

Enjoy the brave new world that is communication when it happens, rather than over the next press cycle, Mr. Mariotti. I, for one, will be watching to see how you do on your own.

An unlikely advocate for newspaper coverage

With his sharp wit and biting satire, Jon Stewart has frequently taken on the mainstream media for all of its problems. His Daily Show frequently takes great jabs at all of the problems inherent in our 24 hour news cycle and two second attention spans.

However, Jon was quite enthusiastic about the quality of newspaper coverage when speaking at a breakfast at the Democratic Convention. He, however, didn't pull any punches with criticism of cable news.

Simply put, Jon is right. Newspapers can provide long-form, in depth coverage of numerous angles in a way few other media can match. They have also long been great at separating facts from speculation, and keeping opinion clearly delineated. Rarely do newspaper debates develop the emotional powderkeg of TV, or devolve into flamewars like comment strings on the Internet. These are some of the wonderful things about newspapers that got many of us wrapped into the business in the first place.

Unfortunately, I fear he was right about another thing. When he assessed the long term business prospects he said:

newspapers are fighting "a losing battle because they're getting overshadowed."

At least we can kind of understand why we want to win the fight against sliding revenue, newspapers can be truly important for more than getting you the latest Macy's ads.

Personal Reasons cause GateHouse CFO to resign

GateHouse's CFO has recently resigned leaving the VP of investor relations to take his place. It would be easy to speculate on some potential personal reasons:

1. Didn't personally like filing for bankruptcy
2. Personally knew when the payroll checks would start bouncing, most notably his personal one
3. Got tired of the personal strain that watching a company crumble can take upon one's personal life.

Seriously, I wish him well, and #3 is more real than I can relate.

The notable element is his replacement. Hired this March, he comes from outside the industry with a background in banking and accounting. I have a feeling his big job will be convincing creditors to renegotiate their terms in advance of default. Good luck on that.

Gannett has a brutal July

Gannett (GCI) just turned out their latest monthly progress report. Numbers like this make you understand why others in the industry have gone away from such transparency.

Publishing was down 16.7%, with classifeds down a staggering 25.2. They don't break out the digital revenue growth or decline, which I take as either faltering growth or possible decline given the others in the industry.

They did spin audience growth online, for what that's worth.

I've run out of synonyms for awful...

Morningstar - Newspapers are still overvalued

A few days ago morningstar put out a report that indicated that newspaper stocks are still overvalued. The subhead - The industry is in terminal decline.

After an 80% decline for most of them, the CEOs have been wondering how it can get worse. Morningstar's answer is two-fold, zero and eleven. As in equity that can go to zero and filing chapter eleven.

The worst of the bunch reviewed was GateHouse (GHS). Simply put - "{Morningstar} believes their equity is worthless"

It's honestly the most negative report I've read on the industry in at least a week.

Writing FOR a community vs. writing IN one

To my way of thinking one of the great flaws in newspaper thought lies in assumptions about local news. Most publishers think that the only thing that matters to a town happens in that town. They give their reporters shock collars that go off every time they dare think about anything that happens outside of the distribution radius and use wire copy to fill in the gaps. The wire copy is bland, generic versions of stories that have little relevance or insight. Sure an editor may have had the wherewithal to go through and add the little "a Kansas resident" things, but no one would take the time to contextualize the story beyond the random localization elements.

However, that is not the real way in which people view their lives. A bill passed in congress that lowers crop subsides for ethanol could have sweeping impact to farmers in Indiana and consumers in Utah. Fashions in New York could affect the styles of students returning to school in Arizona. It's not where it happens that matters, but how it affect the residents. Its not what, but why.

By restricting local coverage to things that only occur in an area, publishers miss the big picture of relevance of their residents. I'm one of the "suits" that argues they do need remote bureaus, but those people need to focus on detailed issues that can affect their local populace rather than attend the same press conference that AP, Reuters, CNN and the NYT will be covering. I'm arguing that remote news gathering operations need to be even better at digging deep and having personal contacts than their brethren closer to home.

Simply put, local is what matters to a community, and many of those things occur well outside of its boundaries.

Another potential buyer for Cox newspapers

I can't believe that I forgot about this in my prior post, but another logical suitor for the Cox papers would be Hearst. Hearst operates papers in San Antonio and Houston and these papers are working on ways to share coverage. Adding additional regional assets would further this coverage centralization.

Furthermore, as a private company, Hearst could avoid the inevitable criticism from Wall Street toward any buyer of papers not called Murdoch. AH Belo would not have the same luxury. McClatchy who owns the Fort Worth Star Telegram also has the public criticism as well as an astronomical debt load.

If I were guessing on who ends up with these papers I would use the following order, from most to least likely:

Hearst, AH Belo, Wealthy Individuals, Private Equity, Me, the US Government followed distantly by Tribune, MediaNewsGroup or Journal Register Company.

Cox to sell many papers and Valpak

Cox enterprises announced their intention to sell most of their portfolio of papers and Valpak. Given current valuation trends and the continued write downs of similar assets, its hard to imagine what these properties will be able to garner on the market, or who a likely buyer will be. AH Belo would make some sense for many of the Texas properties, but they have frequently stated their desire to neither buy nor sell newspaper assets. They also came up in relation to San Diego and denied interest there. Most of the other properties are quite small and located in North Carolina or Colorado, and might fit with other nearby publications. The rich community leader is also a frequent possibility, but that would involve selling them piecemeal rather than either through geographic clusters or as a complete package. No preference has been stated on how the transaction is likely to proceed.

More startling is the proposed sale of Valpak. Direct mail may not be sexy, but it is a very effective alternative to newspapers for the distribution of coupons. Most newspapers developed total market coverage products for advertisers which fill in their gaps in distribution with products just like this, and most were considered a lucrative way to increase revenue outside of the paper. This may be for precisely the opposite reason as the newspapers. Where newspapers are beaten down and unlikely to recover for the foreseeable future, Valpak may have excessive value unlikely to be realized any time but now. A further reason to beleive this may sell at a high valuation is the fact that different investment bank is handling the transaction from the newspaper operations.

We'll keep our eyes on this for both prospective buyers and valuation levels. Both are likely to be interesting.

How bad are newspaper valuations?

McClatchy has written down the value of its investment in Seattle to less than $10M, for a slightly less than 50% stake. It originally valued the investment at over $100M a mere 2 years ago.

What's particularly important here is these numbers are based on a projection of future cashflows and asset values, not merely on public comparables. What that means is MNI spent time projecting the future of the business, and they came to the conclusion that there's about $20M left in the old dog. There are discount factors applied here, such that $1M in future years is worth less than $1M now, like a sort of reverse interest, but even so that's not a lot for a paper in a top market...

Even more importantly, they also chose to writedown part of their investment in Classified Ventures by about 14%. This would value all of CV at around $334M, certainly nothing to shake a stick at, but I had heard people estimating cars.com alone at about $1B during the 2006 peak.

Slip in online share

The Wall Street Journal pubished an interesting article last week about the slip in share for local media relative to pure play competion. The money numbers:

Newspapers moved from a 44.1% share to 27.4% while pure play internet companies moed up from 15.3% to 53.3% in the period between 2004 and 2008.

You may be saying that newspapers have been reporting impressive growth in online revenue over the same period, and you would be right in that saying. The issue was that newspaper chose to compare themselves rather than look externally to the emerging competion. The 30-50% growth looked staggering compared to little to no growth in print. However google, local, reach local, marchex and others were growing local at twice that rate (or more)

But newspapers are LOCAL - shouldn't that give them an advantage. No.

Technology can more than make up for that. It's quite trivial to target your adsense ads to a specific community, and ad networks can do the same on the display advertisng side.

There might be some hope for newspapers as they adopt low cost sales methods like the large companies have (read: google). However, they might need to adopt more transparent and performance driven pricing as well.