I didn't know the Russian phrase for "Group hug, people!" So I just stood in the back and spread out my arms.

I showed them some of the very basic tools to promote your content – the simplest being the blast e-mail alert to people you’ve signed up on a subscription list.  A couple of people in the class were already up on Twitter, and I sang that particular gospel, as well as the advantages of setting up Facebook groups or using the same functionality in the Russian equivalent, which is a Classmates.com-alike.

As always, the skill level in the audience was very uneven. Some people were way out in front of the pack, others seemed to be lost. I tried to deliver a wide variety of tools to hit everyone. I got just a couple of hours to do some very basic tourism after this session.  The scale of the construction going on here is truly awe-inspiring.

It's pretty chilly here; not snowing yet, but it's thinking about it - thus the heavy clothes. Also, behind me is the new Presidential Palace.

…and yes, I know, I don’t have the excerpts and such that made the other videos interesting to watch. But I figure if you’ve gotten this far, you’re probably already pretty interested in what this guy has to say.

Curmudgeons skip directly to 7:50 or so, for the juicy bits. If you are in a crowded place, please allow at least 10 feet of safety space in all directions for when your head explodes.

This is the first part of the rather incendiary keynote speech by Jason Calacanis, founder of Mahalo.com, at the OMMA Hollywood 2009 conference. The keynote’s title is “Advertising, Riots, Twitter, Facebook and the Depression,” and in it, Calacanis cheers the death of newspapers and “Old Media,” and lauds paid search as the “most powerful advertising medium ever created.”

Not coincidentally, Mahalo is a paid search company.

Along the way, Calacanis also trashes social media advertising, showing screenshots of drunken parties to “prove” that all advertising on this platform is unwelcome, intrusive and doomed to die.

Highlights:

“Gosh, newspapers didn’t see this coming, did they? I mean, the newspapers were reporting on their own demise for a decade. And they still couldn’t change it.

It’d be as if you’re the Titanic and you haven’t even left port yet.  And they’re like, “By the way, there’s a lot of icebergs to the north.” And you’re like “OK, thanks.” A day later, it’s “Icebergs are still there.”

They’re like, “Full speed ahead! To the icebergs, as quick as possible!”

They did nothing. They deserve to die. Don’t cry for newspapers, it’s great that they go out of business, because new things can take their place that are better. Much better.

(snip)

Don’t cry for journalism.  Rejoice, because a new journalism is being built, today, as we speak. And it’s going to be better than the last one.

(snip)

“They deserve to go away. Goodby, good riddance.”

The keynote was obviously designed to provoke a reaction (more than one conference attendee muttered “linkbait” after listening), and it certainly did that, as every other session after this opened with the panel trying to refute Calacanis’ claims. I’ll post John Battelle‘s rather more measured keynote tomorrow.

I have a few reactions to this, and I’ll post some more with the other three videos in this series.  But to start with, the notion that newspapers did nothing at all about the internet is absolutely false.  The industry has tried to engage with online since before there was an internet (you’ve probably all seen those videos from San Francisco, showing the early paper over video screen tech of the 80s). The problem is, that the battlefield on which newspaper have been trying to engage has shifted radically.  First, it was the fight between portals – Prodigy vs. CompuServe vs. AOL.  Then it was Netscape vs. Internet Explorer. Yahoo vs. Google. Facebook vs. MySpace.

Newspapers are a $50 billion a year industry, with tremendously expensive production and distribution infrastructure, grown up over centuries.  If the Tribune chain had just splashed kerosene over the presses back in ’92, and declared in the flickering light that they were shifting every penny over into becoming a competitor to AOL … well, they probably still woulda wound up about where they are.  But along the way, there would have been tremendous dislocation – millions of readers not getting information.  Millions of readers turning to competitive print products that would have made billions.

So the newspaper industry has tried incremental solutions. Right up to this point, where, as we see in Seattle & Denver (despite what Jason sneers at, there are plenty of people who want to read what he dismisses as “boring” stories about local government, taxation, schools and crime) the papers are being forced to migrate to the web under conditions that are nothing short of brutal.

It’s all very well and good to talk about the exciting news products that are “being built today, as we speak.”  But I know many of the people that work at these small, struggling web news outfits. They are up against the wall, just trying to keep the broadband bill paid.  They are not going to be able to devote thousands of man-hours to digging through documents and making connections, and going out and doing original research (i.e. interviewing people to get things that are not archived on the magical, all-seeing web). Maybe this will be solved someday – but it ain’t the case today, and that’s when we need it.  We need this kind of enterprise reporting, or this country is going to implode, because society is angry at the economic collapse, and nobody’s really been able to dig deep enough to explain it. At least, not in a way that holds up & makes sense for more than a month or so…

If I sound like a bit of a curmudgeon here, well, it’s hard to watch this and not get a bit grouchy. I agree with Jason on the broad points – that Big Media has sinned, and is paying the price; that ad dollars are shifting to where the consumer eyeballs are, and that this trend is only accelerating.

But dude? Less of a gleeful grin.

But – two items this week converged (yeah, there’s that word) to illustrate one of the powerful, emerging lessons about New Media.  It’s one that I learned years ago, when I first rode a couple of dot-bombs all the way down into the crater.

Big site traffic numbers do not necessarily mean big money.

First, let’s hear from apostate blogger Dennis the Peasant, who was one of the founders of Pajamas Media until his partners chucked him overboard a couple of years ago.  The news this last week that PJM was no longer going to write fat checks to its bloggers was met with screams of rage from said suddenly unfunded right-wing bloggers (and joygasms from left-wing bloggers who had long derided the PJM checks as “wingnut welfare” – a POV now seemingly shared by said wingnuts’ former employers).

So Dennis had schadenfreude & Cassandra-vindicated moment, in which he flipped off the camera & did a Snoopy dance.  And then, he got around to some actually interesting stuff about the economics behind blogging:

The thought in everyone’s mind is If only I can get enough traffic I can make money. If I have the traffic the advertisers will pay for access to it.

Everyone assumes site traffic is the key to blogger riches.

And, everyone is wrong. It is that simple.

(snip)

… what we discovered seemed to suggest we were sitting on a goldmine: Large household incomes, very well educated, disposable
income out the blowhole… what we assumed advertisers wanted.

Well, by January of 2005 Roger and Charles had disappeared in a cloud of pure bullshit, and there I was, left waiting to hear about the
“new model”, the “new partners” and “the new” what not… Being the curious sort, I arranged for a friend of mine to introduce me to the
managing partner of a small, but prestigious, advertising firm in Columbus. I packed up our survey statistics and headed to a luncheon
engagement that I assumed was going to convince this guy I was on to something.

Well, I spent 20 minutes explaining our idea and the business model as I envisioned it, and then, as the capper, whipped out the survey
statistics and showed them to him. He looked at them for a moment, laughed, and then threw them down on the table in front of me.

“Worthless,” he said, smiling.

DtP goes on to talk about something that New Media folks take for granted, but that Traditional Media people still have problems wrapping their heads around. See, newspapers, radio, TV, billboards, direct mail, etc. etc. — they all base their ad rates on the pure numbers of eyeballs on their content.

While have a big audience is nice, in web terms it can actually be more of a hindrance than a help.

Which is where Facebook comes in. Today it celebrates its 5th birthday. And it is hemorrhaging money from every orifice, with no clear business model in site. (Here’s an interview the BBC did with founder Zuckerberg last fall)

The perennial question for Facebook has been how to monetise the site and cash in on its 150 million users who critically spend more than two hours each day on-site. Analysts Neilsen compared that figure to the 90 minutes users spend hanging out on MySpace.

As the pressure mounts on the Facebook team to make money, the job becomes harder amid the present economic downturn.

(snip)

the clock is ticking fast.

“At some time the economic model has to grow with the rest of the firm.

“Investors will want a return on their money and in this market, investing in vapour can be very difficult. Their time is up for doing this without making money.

“They need to develop a business model soon before they find their funding sources start drying up,” warned Mr Enderle.

The Facebook Advertising page, like its obvious model Google AdSense, tries to make it easy for an individual or small-biz owner to buy an ad. Contrast that with all the hoops you have to jump through to buy an ad in traditional media.

The numbers that came our recently show that Facebook has among the lowest click-through scores on the web – 400 clicks for every 1 million page impressions. This has not gone unnoticed. The pro-Facebook & social media mavens claim that the demographic information that has been amassed by Facebook, MySpace, Bebo, etc., is going to pay off with highly targeted ads that garner higher CPMs. And they have an easy-to-use frontend that is quite obviously modeled after the AdSense DIY concept.

Facebook’s experiment with tying ads to your personal information was, however, a disaster. And critics have started pointing out that maybe Facebook doesn’t know all that much about you…

And the stories are starting to come out about how desperate they’re getting – despite the impressive raw traffic numbers, time spent on site, and user engagement indices — all numbers that media companies try to pay attention to.

I can tell you from my experience with a succession of dot-bombs, big page traffic without the proper monetization scheme is actually a detriment to your survival. Especially in the video space.

While bandwidth charges are a small fraction of what they were even six years ago, they still rack up quickly.  And if you have a million people watching a 10 meg video on your site (as can happen if you get a viral hit), and your monthly service contract with your hosting service starts charging you after, say, 250 gigs … well, work the numbers.

1,000,000 users x 10,000,000 megs downloaded = 10,000,000,000,000 (10 terabytes aka 10,000 gigs) of page traffic, just for that video.

Depending on your contract, your site will either crash and you’ll have to wait a month or whatever before you can bring it back up … or they just act like a cabdriver and flip down the little flag and start the meter running.  At the end of the month, just like with a cellphone company when you go over the minutes, you get charged up the wazoo.  Say it’s a $.10 a gig, the way DreamHost does it.

10,000 – 250 = 9,750 gigs

9,750 x .10 = $975 overage charge for the month.

Now, there’s no way that Facebook is paying that much for its bandwidth – economies of scale and all that.  BUT.  The bandwidth still does cost.

DtP makes the point that 400 dedicated readers in a well-defined niche space, such as photography, beat the hell outta 40,000 drive-by users in an amorphous mob. Advertisers will want to reach those 400 people, because they know them, know what their interests are, and know that the ads served to them are going to the right people.

General interest sites, however … well, let me put it this way.  Check out the sode aisle in the supermarket next time you’re there.  Diet Coke, Diet Coke with Lime, Diet Coke with Splenda, Diet Vanilla Coke, Diet Black Cherry Coke, Coke Blak, Regular Coke, No-Caffeine Coke, Coke Zero, Diet Caffeine Free Coke, Vanilla Coke, Cherry Coke, Diet Coke with Vitamins.

Each of those products exists because there is a niche out there that wants to drink them. Why would Coke want to waste its ad dollars for health nuts that want a soda that has vitamins and that they can delude themselves into thinking that is “good for them” … on a site that has an audience of cigar-smoking red-meat-eaters?

The advertisers have had to fragment their products. Those fragmented products have to be marketed just to the people who are going to buy them, or they are not viable.  That means that the platforms that those products advertise on have to be similarly well-defined.

The root of the problems with mass media isn’t that there isn’t interest in the information – it’s that the advertising money is shifting away to places where the audience is better defined & targetable.

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