The New York Times (NYTimes) has a powerful news brand — love it or hate it, the organization is one of the top US media properties. Unfortunately, the company has struggled for years to find a viable digital subscription policy. First access was free; then there was a semi-paid version (notably editorial access costed extra); now, the newspaper announced that a broad new digital subscription plan would roll out in the US as of March 28. The problem? The company isn’t thinking like a consumer, and revenue and readership are bound to suffer.

Struggling for a business model in the digital age

Papers have traditionally relied on multiple sources of income. In the pre- and early-Internet days, revenue was generated from a combination of sources, such as home delivery subscriptions/newsstand purchases, advertising, and classified ads. But as more consumers get their news online, and since craigslist and others have taken the lucrative classifieds business over, papers are left trying to fill their revenue gap. And that gap is growing. According to Pew Research, newspapers were the only media segment that saw a decline of revenue in 2010.

Faced with this challenge, newspapers see digital subscriptions as key to filling the gap. The poster child of successful digital subscriptions is the Wall Street Journal (WSJ), but while that paper’s unique and well-heeled readership is willing to pay for Web and device access, other newspapers have struggled. Can the NYTimes follow in the digital footsteps of the WSJ? To answer the question, let’s look at the NYTimes‘ new digital subscriptions strategy (see here for complete details):

• Three digital subscription packages. All payments will be based off of a four week billing cycle: $15 for Web and smart phone access; $20 for Web and tablet access; and $35 for Web, smart phone, and tablet access. There is no Web-only subscription plan.
• A 20 article per month article limit for non-subscribers. This cap can be overcome somewhat, as links from social media sites and blogs will not be blocked even after a reader goes over the limit. Google searches have a 5-limit cap, though.
• Archive and “premium” content restrictions. Even top end digital subscribers face a 100-limit cap on archived articles in any four-week period. Also, “premium” content, such as Premium Crosswords or the crossword puzzle apps for tablets and smart phones, are not included in any plan.
• Physical paper subscribers get the best digital plan for no added cost. Whether by direct or third-party service, physical paper subscribers will be given an automatic All Digital Access subscription. That includes Web, smart phone, and tablets content access. [So much for reducing paper use, production, and delivery costs!]

Likely readership, revenue, and brand impact

The editor of the NYTimes told current readers and potential digital subscribers — in an open letter – that the new strategy is “an important step that we hope you will see as an investment in The Times.” While the “investment” can never be quantified, one can make an informed call on the impact of this move.

• Article/page views will drop as the “paywall” comes into force. Most likely, the initial free 20 articles will keep readers coming to the site for a month or so; but as the paywall cuts off access, expect consumers to learn to find unencumbered news stories elsewhere (versus coming back at the beginning of each month).
• Readers will be confused and not understand the difference between digital delivery platforms — and they will blame the NYTimes for the confusion. Why is the tablet subscription more than the smart phone plan? Why not one low cost plan? Do 5″, 7″, and 10″ tablets all get the same price, even as phone screens creep up in size? “Why” will be a central question, and the answer will most likely be in the form of frustration and a belief that the NYTimes just doesn’t get the modern digital device world.
• A weak market reception will diminish the overall brand. Unlike the WSJ, the NYTimes is a broad-appeal paper. It needs to grow its readership beyond today’s numbers, not reduce them from current levels. Limit caps and the seemingly arbitrary distinction between digital devices will lead to people reading fewer articles, linking to less stories, and eventually paying less attention to the NYTimes overall. Digital-friendly papers like the USA Today and other free sources will benefit.

Many struggle for viable models in the multi-device age

Like many industries, most of the newspaper segment has not figured out how to fit into the digital world. Past history and usefulness won’t matter. Some changes just can’t be stopped. For example, will libraries thrive in the eBook era? Unlikely, especially as publishers limit “lending” (see this article on Harper Collins). The music industry fought digital distribution and still isn’t sure how to deal with iTunes, and the movie industry struggles to find its place in the post-DVD world. TV is in the line of fire now, with companies like Netflix adding original content and cable comapnies like Time Warner allowing tablet access to channels. Examples of issues in other, non-content markets include cell phone carriers that are dealing with phone, data, and messaging pricing and how to deal with multi-device access.

The reality is that if companies are not in the forefront of re-defining their business model and value proposition in the multi-device age (many devices, diminishing distinctions between devices with overlapping capabilities, such as game consoles, cell phones, PCs, TVs, etc.), a newcomer will come in and steal market share. It could be a start up, or it could be a company with an interest in the market for ancillary reasons, such as Google or Apple. Either way, companies like the NYTimes will have to embrace the change and get over their needs for (non-existing) distinctions or find themselves slipping in relevance. Just ask AOL or MySpace how hard it is to play catch up.

According to a fascinating New York Times article, retailer JCPenney (JCP) — via a third-party SEO consultant — managed to game Google’s top-secret search algorithm so that JCP’s site appeared as the top result in many diverse product categories for much of the past holiday season. The result? High traffic for jcpenney.com and increased online sales, but also outrage in the pundit and technology peanut gallery that JCP used black hat tactics (through its paid consultant) to improve organic search rankings.

The real world fallout for JCP? As the article notes, Google, has “manually” reduced JCP’s search rankings as punishment. So, the question is: Is JCP a black hatted villain or a smart marketer? Does Google get to set the rules, or do marketers get to do what they need to do (within the law) to gain a competitive advantage?

Nick and Tom of innerbridge debate the topic.

Tom: Sure, must marketers avoid so-called black hat SEO tactics, but who made Google the arbitrator of what is “right? What JCP’s consultant did was not illegal — it is simply not allowed by Google. Since when does one company, with no legal basis, get to decide what marketing activities are OK?

Nick: As long as consumers use Google to search for products and services and advertisers market their services with the company, we are all in the Google sandbox and must play by its rules. In this case, JCP engaged with an SEO vendor that operated outside of the rules. A crime, then punishment. Case closed.

Tom: But Google is more than just a company — it has a unique position in eCommerce that is not currently regulated. We have already seen others claim that Google may be pushing its services with higher organic results. In the EU, they are investigating Google for fairness. Perhaps the anger over this incident is not justified. Maybe JCP was simply good at marketing. After all, we wouldn’t want to tell companies they couldn’t claim their products weren’t magical because it isn’t true — assuming magic is not real.

Nick: Outside of any formal regulation, every company is responsible for maintaining its own brand. In this case, JCP has tarnished its brand. It takes an incredible amount of bravery or stupidity to suggest to a major brand that they engage in what is roundly viewed as a subversive, underhanded, or sneaky (or any combination of the above) method of juicing search results. The lesson for marketers, not just Fortune 500 brand keepers, is that black hat techniques may work well for a short period of time, but ultimately they will backfire.

Tom: Tarnished the JCP brand? How? By having a great holiday quarter? By satisfying customers? We haven’t heard consumers complain about what they bought. The brand is only tarnished if you hold the Google view and you follow the Google rules — rules set up by a for-profit company that is so far beholden to no one for how it behaves. You could argue its market clout gives it a right, but that does not make its actions right or good. “Don’t be evil” is Google’s unofficial motto. Yet they get to define “evil.” Remember, the scandal with the scraping of personal wireless data from the Google vehicles? How about former Google CEO Eric Schmidt’s comments about privacy? Google often appears to have a slippery definition of what is right and wrong.

Nick: Let’s focus on how JCP may have tarnished their brand. Instead of investing in deciding what market to sell into during the holiday season, JCP bet on all of them. It was an unfocused strategy that resulted in one strong holiday season. The article suggests that all of JCPs sales — including the fabled catalog — are on the decline. Selling a million dollars worth of dresses during the holidays will not save the company. This black mark on the brand — in a story picked up by countless mainstream and industry media sites — is not a good thing. It was a desperate attempt, and now consumers are even more confused about what JCP stands for. “We sell everything to everyone but mess with search results to make you think we are No. 1 …”

Tom: It’s only a failed strategy if it doesn’t stick. Perhaps many of those “duped” buyers will now choose to shop at JCP’s site in the future. In that case, the strategy might be validated. What I think this really illustrates is a severe lack of competition in the search market. This would not be an issue if Microsoft’s Bing or another search engine was as powerful as Google. In a balanced search environment, competition would settle this issue. Consumers would choose an engine based off the personal results –the complete shopping experience, from search to product delivery. If consumers didn’t like the gaming of a retailer or that Google wasn’t smart enough to catch SEO tricks until it was too late, then shoppers could avoid both in the future.

Nick: I agree with the idea that it would be good to have a competitive search market, but at this point the idea of another search engine with enough power to challenege Google or a dedicated shopping search engine is a stretch. Consider Google’s recent accusation that Bing copies its search results. Also, remember the article about the obnoxious online eyeglass merchant who thrived on bad reviews that actually improved his company’s search rank? The search engine game is hard. Google has learned more than anyone about white, black, blue, or any color hat techniques. What this story clearly identifies is the complexity of the Google search algorithm and the continuous struggle to refine it.

Tom: All good points. There may be no clear cut answer — certainly not a legal answer. However, I think it’s safe to say in the current Google-dominated environment we all operate in that going against the search giant’s explicit guidance is not a smart move. I would certainly not advise clients to take this approach unless they needed short-term gain and could weather the Google backlash … and they felt comfortable being ostracized by much of the tech and marketing industry. In short, I would not recommend it, and we certainly wouldn’t ever do the work. For now, like it or not, we have to play by Google’s rules and accept its punishment.

Nick: Agreed. Wrestling with Google is like beating IBM’s Watson at Jeopardy. You might beat it on a few questions, but you will assuredly lose in the end.

**

Note: This post is in response to the February 13th, 2011 New York Times article, “The Dirty Little Secrets of Search.” For a related story, see the November 26, 2010 New York Times article, “A Bully Finds a Pulpit on the Web.”

With the Super Bowl this weekend (Go Packers!), there’s lots of attention on the ads during the telecast. In the tech world, one of the to-be-aired spots that is garnering lots of attention will be from Motorola. That company is pitching it’s Android-based tablet, called the Xoom, against the current run-away market leader, Apple‘s iPad. What is striking about the teasers so far available is that Motorola hopes to get attention using a version of Apple’s own iconic “1984“ (of the George Orwell book) advertising concept. Drones of white, iPod earbud-wearing people are portrayed against a lone individual sporting a Xoom. Effective? Not likely.

Attacking future customers

The anti-user angle is very similar to what Microsoft did with its initial Windows Phone 7 (WP7) advertising … attack the very customers and their behaviors that you hope to attract (see our previous post). You could argue that the market is plenty big enough to support anti-current user tactics, but that argument is weak at best. Cutting-edge technology users, and increasingly the next wave of less technology-versed people, have adopted smart phones and tablets — they mostly paid for the devices themselves, they are buying in the tens of millions, and they are most likely recommending them to friends and family. This is not a segment to call stupid. Yet Microsoft and Motorola appear to have both adopted the same approach. That approach says:

• Consumers doing things they enjoy are actually being foolish, inconsiderate, or aren’t thinking.
• Even though we just called you stupid, we think you should buy our similar product.
• Our product offers almost exactly what the ones we just mocked you for owning, but we have some new visuals, some technical edges, or some content freedoms to show you.

Here are the obvious and not so obvious issues with this approach:

• Consumers voted with their wallets for their current devices. People with free will and their own money bought Apple iStuff (the informal term for iPods, iPhones, and iPads) — no gun was held to their head. They invested in Android-powered smart phones. Unlike in the original Apple “1984″ commercial, the target isn’t workers that have to use what they are given by shadowy bosses. These are consumers — volunteer spenders. You might as well call the buyers of Wisk, the voters for McCain, or the drivers of a Hyundai stupid. Hint: They won’t appreciate it, and that approach won’t change their minds (it will probably do the opposite).
• Consumers like doing what they are doing. Calling smart phone behavior poor is a bit like Clint Eastwood yelling, “Get off my lawn” in Gran Torino. Anti-Facebook or Twitter people might as well call all those happy users and their posts dumb, too … but it will only make the name callers look out of touch and elitist. Smart phone users bought the phones to do smart phone things. Apple iPod users — those with the white earbuds in the Motorola teaser — bought their music player to listen to music. Most of these users like what their product does and they use them how they are meant to be used. Calling their behavior out is not a way to convert them.
• Promoting subtle user interface (UI) changes or technical specs only appeals to the small subset of techies. Microsoft’s active tiles are the center of its attempt to redefine smart phone use, but the main ad message seems misplaced since the tiles all lead to all the smart phone behavior the WP7 ads make fun of. Earlier Motorola Xoom teases have talked about technical specs — something very few outside of the techy crowd care about. Again, consumers bought competing products for their own reasons — focusing on a company-defined differentiation won’t help sell WP7 phones or Zoom tablets. It sounds obvious, but focus on the buyers and what they want (or will want; see below).

Focusing on creating consumer demand for better products

So, what should companies like Microsoft and Motorola do when facing an uphill battle — trying to enter a market of established products with similar capabilities pushed by competitors with powerful brands? They need to stop mocking their potential customers. They need to tell a consumer why their solution is better than what’s out there and selling well today (note: This advice will also be useful for Hewlett Packard with its webOS products and Research in Motion with its Blackberry and PlayBook offerings). Here are some things to do:

• Focus on visually, easy-to-see aspects (the things consumers like, not engineers). Apple ads tend to be pretty basic but are very effective — in most cases, they show a simple but fun iStuff device and lots of apps that appeal to a wide range of people. Microsoft and Motorola need to focus on why it’s fun or cool or useful to invest in their products, not just bash existing behaviors or competitive offerings. Focusing on the new UI in Wp7 made sense — knocking consumer behavior didn’t. Sure, it sounds like you are appealing to the “cool” or “gee whiz” factors. That’s because you are and should be. Those factors sell, or at least have a lot of influence.
• Find away to create uniqueness (despite being made of commodity parts). Apple’s iStuff has brand appeal and is based off in-house technology (both hardware and software) that leverages third-party content. The problem for both Microsoft and Motorola is that their product use me-too technology components, and people often know that (mainly, they learn from the other competition). In Microsoft’s case, the company relies on hardware partners like HTC and Samsung to deliver the physical devices (thus the hardware looks similar to Android-based phones). In Motorola’s case, it relies on the Google-shepherded Android software (“Honeycomb” flavor for tablets) to power the Xoom. The problem? So does almost every other tablet manufacturer. Honeycomb will be on tens to hundreds of tablets, so there is simply little differentiation. A brand can’t thrive without competitive differentiation.
• Define next-generation features (even though everyone will have them soon). Microsoft should take a page from it’s own Xbox success. Rather than offering a PlayStation knockoff, Microsoft’s Xbox 360 redefined what a high-end game console should offer, most notably with its Xbox LIVE subscription service. For smart phones and tablets, Microsoft and Motorola need to think about what they can do that is  different. For WP7, that means having all the iPhone and Android features and more. For Xoom, that means having all the same iPad and Andorid (Honeycomb) features and more. The more, in both cases, has to come from those two companies, otherwise it is just a generic offering. Sure, everyone else will eventually copy  what was created, but differentiation is always a “moving the goal posts” game. Just ask Apple.
• Know when to build a separate brand (even though you love your primary brand). Apple makes the iPhone, but most people say they have an iPhone. Microsoft makes the Xbox 360, but must people call it an Xbox. Google is behind Android, but few people call Android-powered smart phones Google phones. Some brands need to go away. For example, Microsoft needs to get rid of Windows in Windows Phone 7 and promote a single phone brand devoid of legacy PC terminology (Unfortunately, the company often can’t resist slapping similar brands on everything … think Windows, .NET, LIVE, etc.). Motorola needs to lose its proud, but consumer-irrelevant company name when marketing the Xoom. A great example of a recent failure in the tech industry to separate brands is Dell and its premium Adamo notebook line (designed to compete primarily with the MacBook Air). The problem is the Dell brand does not connote a premium product, so the combo (or diluted ) branding does not work. A positive example of how separated brands work well can be found in the auto world. Honda makes Acura, but you don’t hear people say they drive a Honda Acura TL. It’s an Acura, and while some people know it’s really a high-end Honda, most don’t.