Tech Boom, Media Bust

Tech Boom, Media Bust
BY Brian Caulfield
http://www.forbes.com/business/media/2007/07/16/redherring-print-blogs-tech-media-cx_bc_0716techmedia.html

It was a slow Friday at Red Herring magazine. The receptionist at the Silicon Valley tech title had stepped away from her desk. So a messenger strolls in from the summer sunshine, finds a 20-something reporter on her first real job and hits her with an eviction notice. Red Herring has three days to pay the rent or get out. Word got around, fast. Then someone looked outside. There, driving up in a rented silver Mazda minivan is a correspondent with gossip blog Valleywag. Aaaaaaand she's got a camera.

Silicon Valley is booming again. But if you work in tech media, there's blood on the floor. Take Red Herring. It hung onto its offices after getting the eviction notice earlier this month. But gossip site Valleywag is breaking story after story not just on its beat--but about its woes. Meanwhile, bigger publications are hurting too: Time Warner's Business 2.0 saw ad pages drop 21.8% through March from the same period a year ago; PC Magazine's editor in chief walked out the door after ad pages fell 38.8% over the same period; and one-time online powerhouse CNET is reporting growing losses even as the companies it covers flourish. It may be happening in tech first, but there's no reason the same thing won't happen, eventually, in every media niche.

Things couldn't be much more different than the last boom. While online upstarts such as HotWired struggled to make money--they had to invent the banner ad--print titles flourished. The Industry Standard, founded in 1997, set ad sales records. Business 2.0 came out of nowhere to scoop up gobs of ads against articles detailing how to succeed in the new economy. And one-time venture capital bible Red Herring ballooned to hundreds of pages. Then the tech downturn hit. The Industry Standard closed. The assets of Red Herring and Business 2.0 were sold to new owners.

But while the good times are back--the tech-heavy Nasdaq hit a six-and-a-half-year high last week--tech trade and new-economy publications have not bounced back. The first problem: online keyword advertising. Media insiders say search engines such as Google have snarfed up the product-driven ads. Rather than running product listings in trade publications and newspapers, media insiders say tech companies prefer to buy keyword ads so they can send buyers straight to the gear they want. "Search is what ignited everything," says Geoff Ramsey, Chief Executive of eMarketer, a firm which aggregates and analyzes online marketing statistics.

Meanwhile, Industry Standard founder John Battelle is keeping the bonfire of the print titles burning. His Federated Media Publishing is selling ads on more than 100 blogs, giving ad buyers the ability to spend big money on a collection of highly specialized sites--many of them focused on tech--that suit their needs. "If Cisco has to spend, I don't know, a couple of million dollars on a trade campaign, they are not spending it with Red Herring or Business 2.0. They are spending it with Federated Media, with bloggers who cover the sector," says Rafat Ali, editor and publisher of online media tracker PaidContent.org.

And while blog networks are quickly gaining scale, even their most coveted offerings are cost-competitive. To make a back-of-the-napkin comparison based on rate cards: A start-up looking to get attention will grab a third-of-a-page color ad in a magazine with a rate base of 600,000 and might pay $27,300; or it can pay $21,000 for 600,000 impressions for its ads on TechCrunch--a site covering start-ups represented by Battelle's Federated Media--assuming they take the priciest ad slot on one of tech's hottest sites.

That's no surprise, given that it takes fewer resources for blogs to crank out content than it does print titles. Web sites such as GigaOm, TechCrunch and Valleywag--with a few laptops, a web server and some hustle--are crowding into beats once dominated by trade publications and enthusiast magazines who rely on printing presses and full-time writers and editors. Bottom line: A successful blog can simply grab more readers, per employee, than more traditional media.

Talk to blogger Matt Marshall. He walked away from covering venture capital at one of California's biggest newspapers, the San Jose Mercury News, to run a venture capital Web site from the second bedroom of his Fremont, Calif., home. He has no employees. Federated Media handles the ad sales for a 40% cut. And Marshall says he now makes more than he did as a reporter. Meanwhile, the Mercury News laid off 31 of his former colleagues this month. "Where they can actually succeed is by taking a particular vertical and absolutely nailing it," eMarketer's Ramsey says of bloggers like Marshall.

Of course, blogging is not the express lane to riches its more exuberant backers would have you believe. The anonymous satirist who runs "The Secret Diary of Fake Steve Jobs" started hitting up his readers for money-making ideas just weeks after being named to Business 2.0's list of "50 Who Matter Now," even while, in character as Apple Chief Steve Jobs, he boasted about Apple's huge stock gains. And while Marshall says he's making a living, he's still living lean: he says he works until 3 a.m. many nights. "I can go under any day, and that's what brings the passion to this," Marshall says.

The truth is, the vast majority of bloggers will never garner more than a few dozen readers. Then again, most of today's print-heavy news outlets are scaling back in the face of the relentless online competition. Marshall's father, Tyler Marshall, walked away from journalism after winning a Pulitzer Prize at The Los Angeles Times, bought out in a round of downsizing at the venerable newspaper. When Marshall told his father about his plan to launch his own publication, the older Marshall didn't discourage him. After all, what did he have to lose?