Over the last several months, I’ve been out talking with leading media industry executives about the challenge we face in making digital media as successful as its analog predecessor.  We can all name the roots of the challenge:  the explosion of supply online, and the ease with which consumers can move from one property to another.  We are now living with the results, including an extraordinary number of websites for users to choose from, and a challenge for publishers in getting and holding consumers’ attention and advertisers’ dollars.

While I’ve been on the road, 35 smart and talented people at Wetpaint have been working to address these challenges head-on:  by inventing a new business model for digital media.  A new model that uses technology in the most disruptive way at the core of the publishing business. Beyond just taking friction out of the workflow, my team has designed new advantages  that can reduce the costs of content creation and audience recruitment by a factor of 5-10X vs. benchmark publishers, all while offering greater appeal to consumers and advertisers alike.

This weekend, we  launched the first version of our publishing platform, with our first media property built on it: Wetpaint Entertainment.  For consumers, it’s a breakthrough user experience – full of glossy photos, fun and interactive, and social to the core.  For advertisers, it’s a rich, engaging, and premium context in which to reach core target audiences – the same audiences, in fact, that they already target with network TV buys.

But for the 35 of us at Wetpaint, it is far more:  it is our first milestone in our mission to revolutionize media.

An audacious goal, isn’t it? Let me explain.

What Will Leading Media Properties Look Like?

In the four years since we launched Wetpaint, we’ve seen plenty of innovation in digital media.  User-generated content, video, and social media have all risen from small fancies to widespread prominence. Meanwhile, we’ve experienced the rise of content distributors, such as Google, Facebook, and Huffington Post, to unexpected levels of audience and influence.  But all the while, the precious core segments of the publishing industry – news and magazine publishing – have been suffering layoffs, closures, and an increasing sense of irrelevance under the pressures of the new digital playing field and amidst dwindling audience and advertiser interest in their brands.  And with the specter of doom around the corner, no one has come up with a true replacement for their withering business model.

The question for us as an industry is (with a nod to Tim Armstrong, the CEO of Aol, for phrasing it):  Who is going to be the Time Inc. or Conde Nast of the digital future?   And, more importantly, how?

The answer is not so-called content farms, such as Associated Content or Demand Media.  Content farms may be a valuable tactical business, but they do not produce leadership, loyalty, or destinations – much less brand premiums.  Nor is the answer Facebook or Flipboard or Twitter. They are great conduits for content and attention, but they rely on content creation happening elsewhere – with few exceptions, the best they can do is surface what’s created on other platforms.

The answer is that the next generation of publishers must still create quality content – but they have to create it far more cheaply, or their business model won’t work. The editor-intensive newsrooms of The New York Times and Time Inc. are not models for a digital future; but neither is the Huffington Post, with its heavy reliance on an unpaid squad of volunteers in far-flung places.

The new leader will be defined by three key advantages:

• By creating consistently outstanding content (as judged by the audience) – without the burden of producing content the audience doesn’t value, thrown like so much spaghetti against a wall.
• By distributing content conveniently wherever and whenever consumers want it - taking full advantage of mobile, video, SMS, Facebook, email, Google, and more to meet the consumer on the consumer’s terms, not the publisher’s.
• By creating user experiences that are so compelling that they build destination brand value – realizing that most content is now a mere commodity just seconds after being published, while experiences are ownable.

When these three strategies perform in tandem, one can uniquely publish with high velocity, low cost, outstanding reach, and most importantly, earning huge consumer loyalty – all of which accrues not only to the metrics on a spreadsheet that indicate a healthy business, but more importantly to a brand premium that builds results year after year.

A Platform With Which To Create Leading Titles

And if a publisher were to possess a platform that can repeatably produce such titles, they would have golden egg after golden egg in the form of media titles that can serve one audience after the next.

Today we launch the new Wetpaint Entertainment, operating on our first iteration of such a platform.  Our new platform is built on the idea that we can use technology and data from this morning to influence what we write this afternoon.  That the editorial art can be informed by data science.  And that with the fundamental changes of the last five years, we now have an environment abundant in data to inform what content will suit an audience – and empower publishers to write the content that audiences love, without chasing the red herring of ideas that sound good but won’t produce results.

While all that horsepower is brewing under the hood, what our audience will see is far simpler: whether on Facebook, on the web, or on an iPad, they’ll experience a beautiful site that entices them with rich visual imagery, fun experiences, and the most appealing content that completes their relationship with their favorite TV shows.

Today is the first milestone for Wetpaint toward a vision of revolutionizing media – for consumers and for the industry. Please, come visit and enjoy.

Earlier this month, John Donahoe, CEO of eBay (NSDQ: EBAY) and its subsidiary Paypal, was interviewed at the D8 conference. It was a flashback to see him speak:  I had worked under him 15 years ago when I was a freshly minted undergrad just hired into the San Francisco office he ran for Bain & Company. A strapping and charismatic up-and-comer, John was known for his bold visionary talks and his strident walk.

But at D8, I didn’t see that confidence. He spoke of eBay’s connections between buyers and sellers as though he hoped we’d believe it was a new trend; meanwhile far from his Santa Clara headquarters, Gilt Groupe and Groupon are reinventing e-commerce. On Paypal, he looked backwards to the innovation of getting financial services online, rather than forward to the app revolution. Overall he looked staid, the way eBay and Paypal now look to me – entangled by their legacy, unable to cut the cords to freely enjoy the new boom around them.

With that in mind, I’d like to offer Paypal the chance to get ahead in an area that still has room for wild success. Media desperately needs help to become financially viable – and consumers will need to foot part of the bill to make it so. It’s clear that others see the opportunity here: Facebook surely wants to spread its Facebook Credits currency to take over the world the way ‘Like’ has; and now word comes that Google (NSDQ: GOOG) is readying Newspass in its bid to capture consumer payments for media. But more than these other companies, Paypal, with its huge footprint of consumer accounts and years of web experience, is in the catbird seat to be media’s savior.

I wrote recently that there is an easy formula for consumer spend on media:

Desire + Relationship + Ease = Spend

With ad revenues going less far to foot the bill for published content, making media profitable will increasingly mean turning to consumers to pay for content and experiences. And consumers open their wallets in proportion to how badly they want it (desire); how well they know the other parties (relationship); and how little work it takes (ease). This is why there is such a strong future in bite-size media consumption: for all the talk about paywalls and subscriptions, it is far easier to get payments of a buck or two. Apple (NSDQ: AAPL) demonstrates the value of bite-size with hundreds of millions of dollars of revenues from apps alone, far exceeding any leading online publisher’s subscription programs.

But while Apple is the king of creating platforms for desirable experience, its eminence is limited to its domain of devices, just as Facebook is confined to the social network. And publishers need to up the desire, relationship and ease for their whole online audience. Enter Paypal.  Paypal works across the wide open web. With 219 million registered accounts and trust among users and merchants alike, Paypal has an outstanding position to work from. And so Paypal’s great opportunity is to enable quick consumer payments for media with fast, easy, lightweight universal payments.

What Will It Take: The Impulse Click

Media doesn’t rank highly in terms of the necessities on Mazlov’s pyramid. And so the essence of consumer-paid media is impulse, and the critical enabler of paid digital media is the “impulse click.” That click starts the brief moments/long window of consumer intent. For Paypal that means, it needs a button that completes the sale before the impulse fades – and needs to spread that button throughout media. If it delivers on that, Paypal can play as critical a role in the fast-growing digital media economy as it did in the person-to-person commerce revolution of Web 1.0.

To do so, it will take five key upgrades in ease and structure. Here’s what they are:

1)    Lighter authentication: For a $50 e-commerce transaction (from which the merchant earns just a few dollars of gross margin), a transfer to the Paypal website and fresh login and password entry may be called for, but that won’t do for a $0.99 purchase of media bits, where the lack of ease would be a deal-killer. Recognize the user automatically for most bite-size purchases, as Facebook does for sites using its new open graph technologies. For a transaction of less than a buck, and considering Paypal’s preeminent capability in fraud prevention, it should be able to manage risk to make this effective.

2)    One-step confirmation: Apple has set the bar for how easy it is to transact:  on my iPad, I tap the “buy” price and then supply my password. That’s all that’s needed or appropriate for this transaction.  And no one has done this on the web at large.  If Paypal does, it will lead the industry in ease – and help media publishers in the process. The current process usually requires three or more pages and requires not only login with password, but confirmation of accounts to fund the transaction with; backup funding options; and often classifying the transaction. The interface is slow and kludgy, vintage 1990s, while the web (and user’s expectations) have had massive upgrades since then.  It’s time for an experience overhaul, Paypal!

3)   Simple billing: Offer fewer options to make it simple. Instead of bank cards, credit cards and different guarantees, keep one default payment method on file and just bill to it without asking for anything less than $5. For impulse purchases, the consumer needs to complete the transaction before the impulse fades.

4)    Use the phone: For universal payments and quick setup, bank and credit cards are too cumbersome. But consumers young and old with good credit and poor alike have one thing in common:  mobile phones. Paypal should acquire Zong, which would contribute an instant way to bill cellphones with minimal hassle that smart sites like Facebook are already taking advantage of. With this simplified experience, Paypal then is ready to offer its payment system on every device possible.  As consumers are increasingly consuming content from their mobile phones, Paypal needs to be where the consumer is – available to apps on every platform possible.

5)    Offer attractive revenue share: Platforms like Apple’s require that publishers give up 30% of revenues or more; Paypal’s heritage in banking and payment processing comes at it from a much lower pricing level of 5% plus $0.05 per transaction. For its bite-size payment system, Paypal should get adoption from every major publisher by holding to this structure for its most profitable transactions, and taking no more than 15% of other transactions; while using its massive scale to negotiate fees with credit/debit and cellphone providers on the back end. By competing on price to win adoption by publishers, Paypal will be expand its footprint to get more cost leverage.

If Paypal does these five things, it can supply a payment system that is so good that it will enable digital-media companies to charge and collect frequently for premium experiences and content. For Paypal, this will enhance its offering and help it win a huge share of the emerging paid digital media category. But more importantly, this will hasten our progress toward a profitable future for the digital-media industry. And I think that sort of change-the-world accomplishment is exactly what is missing to get John Donahoe as charged up again as I remember him.

For this new analysis for Digital Quarters, we measured audience and visits (from comScore) for sites across the major media categories, comparing the metrics of sites operated under old media brands (e.g. ABC, Entertainment Weekly) in each category to those of new upstarts.  Over the past year old media brands lost share of online audience to new media in nearly all of the traditional magazine categories (TV, entertainment, business, fashion, tech, and teens), while the offline brands in the News category grew share during that same period.    Although total visits were up 5% for old media, new media visits grew far faster — 10% — from April 2009 to April 2010, leading to share loss for old media in six out of the eight categories that we tracked.

Overall visit growth was positive in all media categories other than TV, but despite this, old media brands experienced an absolute visit decline in Entertainment News and Teens which are rapidly shifting towards new media sources.

Conventional wisdom has held that building a brand is a momentous challenge in developed spaces such as media; and that disproportionate returns accrue to the most established brands. But my new analysis shows that legacy brands are on the defensive, far more threatened by new entrants than the other way around.  The upshot appears to be that upstarts’ execution is earning new audiences (and building their new brands), drawing audience on average away from more established players.

The reason for this shift, and the dominance of new media in categories such as Tech News is simply that the old media magazine model is ill equipped to compete with more nimble online competitors.  For the most part, weekly and monthly publications are struggling to keep up with the new pace of information exchange and social interaction demanded on the web.  Understandably, the value to consumers of days, weeks, or months-old “news” on fashion trends, celebrity gossip, and technology is far lower in the presence of up-to-the-minute coverage from new sites.

However, the success of offline brands in the News category offers hope for other old media brands.  Companies such as The New York Times, BBC, and ABCNews have grown their online presence and are clearly investing in digital as core to their business.    They are actively experimenting with rich media, social marketing, and engaging their audience.    But while news outlets have always operated on a fast pace, magazines are at a particular disadvantage in that they are not structured to turn information around quickly.  For old media magazine brands to maintain or grow share, they’ll need to go further by transforming their organizations, incentives, and sources and embracing the new definitions of publishing quality to provide the experiences that consumers are now seeking online.  With online share falling — in some cases dramatically — now is the time for offline legacy publishers to take action and get their brands working harder before it’s too late.

Methodology

Source: comScore panel-only visit data for April 2009, July 2009, September 2009 (panel only was unavailable for October), January 2010, and April 2010, including only properties with more than 500,000 monthly unique users.   Properties were manually categorized into old media if they originated offline, and new media if they are entirely online or originated online (e.g. TMZ and MSNBC are considered new media).  comScore category names: Business News/Research (Bus News); Entertainment – News (Ent News); Beauty/Fashion/Style (Fashion); Lifestyles;  News/Information (News); and Technology – News (Tech News); Teens; Entertainment  TV (TV).

]]> http://digitalquarters.net/2010/06/magazines-losing-to-new-media-online-while-newspapers-hold-their-ground/feed/ 9 http://digitalquarters.net/2010/06/magazines-losing-to-new-media-online-while-newspapers-hold-their-ground/ http://feedproxy.google.com/~r/DigitalQuartersbyBenElowitz/~3/Yw5l_8Nybv0/ http://digitalquarters.net/2010/06/missed-opportunity-new-york-times-pulse/#comments Fri, 11 Jun 2010 22:25:36 +0000 Ben Elowitz http://digitalquarters.net/?p=639 It’s been a week of dancing for Apple and The New York Times as they played hokey pokey with an app that offers a new, fun way for consumers to experience media:  First, Steve Jobs put the acclaimed Pulse News app into his Worldwide Developers Conference talk, then took it out of  the app store, and then put it back in again, but only after the developers took The New York Times out of it.

But as fun as it is to watch them dance, I can’t help but notice that The New York Times missed the opportunity right in front of Sr. VP Martin Nisenholtz’s eyes:  the Pulse team is exactly the kind of talent that the company should be acquiring, not shunting.  The Pulse founders made an app with a great consumer experience for media,  did it in just a few weeks,  managed to get the attention of the premier technology tastemaker in the world, Steve Jobs, and even made some money.

Message to Martin:  Instead of cutting them down and pushing them into someone else’s arms, make nice and go hire (or acquire) the Pulse team. Or, as my mother once said to my older brother when he was dating someone she actually liked, “There are better men out there than you:  You better marry her before someone else does!”

Now, over this last weekend, Erick Schonfeld wrote at TechCrunch that deal discussions between these two publishers are underway for a content partnership or outright acquisition. Though Arianna Huffington denies it, other sources indicate that HuffPo has been on Yahoo’s short list, and I wouldn’t be surprised if conversations have been ongoing.

While  Yahoo had previously announced intentions to compete in news by hiring brand-name reporters, that direction is fraught for the big portal:  the news category is difficult to lead with a heavy demand on consistently breaking  news — and it would take years for Yahoo to build the credibility in original reporting to become a true audience magnet.   And the prize for winning even if they do?  It could be losses, not profits, as has been born out by the experience of myriad old media outlets who are now making over their businesses.

What Huffington Post represents is a far better road for Yahoo to go from portal to destination in a realistic way.  HuffPo can draw audiences not by competing with the news outlets on reporting but with great access and point of view – both of which are within Yahoo’s brand and execution reach.  It would serve as an anchor property with true destination draw.

Indeed, Huffington Post may be unique among the news-oriented sites of the portals, curators, and aggregators in having earned true premium positioning.  They did so by emphasizing a strong and reliable point of view along with affiliation with notable brands (such as regulars Arianna Huffington herself, Bill Maher, Harry Shearer, and Rosie O’Donnell, along with guest posts from a robust range of influentials).  Along the way, the site has also earned an outstanding brand and destination audience of 22 million (comScore), consistently garnering visits from both search engine referrals (14% of traffic from Google according to compete.com) and social networks (16% from Facebook).

This destination draw is critical for Yahoo.  At Yahoo’s home page, 73% of monthly viewers are there to get their mail – and that usage is shrinking at (2%) per year (comscore April 2010 vs. April 2009) vs. a US internet universe which grew at 10%.  As Yahoo commits to a media-company destiny, its strategy must be to create high-end destination titles that will draw premium advertising – not just keep mail users on-network longer.

For those in charge of Yahoo’s media properties, David Ko and Jimmy Pitaro, they would get two other benefits to leverage:  HuffPo gives Yahoo a premium curation model prototype for it to replicate; and a DNA transplant to bring in the talent and experience to scale that model.

As far as the first, Huffington Post has shown itself to be the best of the curators, establishing a strong point of view that draws a huge audience with near-zero cost for original content.  And the model – the fame and traffic of Huffington Post beget contribution from interesting people, which drives more fame and traffic for Huffington Post’s brand – is replicable in other categories, as HuffPo has shown with its entertainment category rumored to already reach an audience of 10 million monthly, according to internal measurements.  This is the sort of model that Yahoo should be banking on, as commodity content alone will never make Yahoo a premier media company.

Perhaps more importantly, there is nothing to catalyze the adoption of a new direction like bringing on a talented and effective crew.  An acquisition of Huffington Post brings not just a branded destination, but a whole crew of operators with a scarce and effective set of skill, approach, and attitudes.  Those genetic elements are exactly what Yahoo needs to quickly set a new approach to existing properties with large audiences, such as entertainment, shine, and omg!, as well as to each new title launched.

All in all, an acquisition of Huffington Post would form the perfect foundation for Yahoo’s new ambitions as a premier media destination – and would be well worth the several hundred million dollars it would surely cost to set a bold and profitable strategy for Yahoo to be a premier media company.

But these sorts of licensing and line extension deals have been more scarce in publishing.  And it’s great to see that change.

According to reports from Russell Adams at The Wall Street Journal, bucking its historical resistance, Glamour has decided to seek more revenue by leveraging its brand into new product lines by partnering with IAC’s Match.com for the Glamour Matchmaker dating site, with IAC’s HSN on a new jewelry line, and with Like.com for an “Ask The Stylist“ app.

This is great news, and it bucks the recent countertrend in publishing of focusing on reducing costs.  While others have been seduced by the allure of commodity content, Conde Nast is instead increasing its commitment to its premium brand.  That’s the right move.  For the leaders in digital media, their future success will be far better served by increasing the value of their premium brands and destinations — and by leveraging that value into new territory.  Smart partnerships not only create more revenues, but also create broader reach for their brands and the opportunity to move beyond serving as just titles of published properties into more meaningful sector or lifestyle brands.  And that means developing long-term deep relationships with consumers — which will be even more valuable in then feeding back into premium advertising rates based on increased reach and goodwill.  It’s a formula that companies like Disney have mastered, with original content, experiences, and licensed products virtuously cycling to create more and more value.

For publishers like Conde Nast, now is a great time to set their brands free to do more.  As a premium publisher, they invest in creating outstanding, differentiating content and experiences for their audiences.  And they are doing a benefit to their consumers by extending their credentials to other categories.

My bet:  Over the next 12 months, we’ll see other publishers following Conde Nast’s lead.

With all those black marks that make it both especially difficult and especially rewarding, it’s refreshing to see MSNBC take up the experience revolution challenge:  According to Mike Shields at Media Week, MSNBC is talking with BermanBraun about launching a new politics site with an out-of-the-box concept.

Based on the innovative work they’ve done for MSN’s Glo and Wonderwall, it’s a safe bet that if BermanBraun takes on the case, politics won’t look the same after this makeover as it did before.

And that’s a good thing.  We know the old model is increasingly challenged to stay afloat.  So we need someone in the industry to take some big risks and try their hand at a new approach to the category – which will hopefully not only increase engagement, but monetization.

While I don’t expect that this will significantly replace any of the existing and valuable political coverage out there today, it does have the potential to inspire other news publishers to revolutionize their own experience for consumers – which is exactly what’s necessary to improve the health of their business.

For most of us, particularly in the media business, the word “entertainment,” is synonymous with content: movies, television programs, music, books, and the like.  The better the content, the more “entertaining” it is.  However, a new study released today highlights that the majority of consumers now have a different definition of entertainment, one that extends beyond content to include interactions that they have via social networking sites.  Given this, publishers need to reevaluate the business they are in.   In a world of Publishing 2.0, we are in the audience business, not the content business.

Today, Edelman released summary findings of its fourth annual Trust in the Entertainment Industry study.  The notable highlight is that over 70% of people 18-34 in the U.S. consider social networking to be a form of entertainment.  Over the past year, Edelman found a significant rise in the number of people who consider the web a source of entertainment; in 2010 the Internet surpassed movies and is now second only to TV.  Additionally, out of all of the entertainment categories, social networking scored the highest in perceived value, with 40% of U.S.  respondents saying that it offers excellent or very good value.

This highlights how the entertainment sector is undergoing an experience revolution, with consumers revealing that not only is social networking displacing traditional media as a significant mode of entertainment; but that they appreciate that social networking provides better value than other options.

The implications for publishers are clear:  by creating compelling, interactive experiences for consumers, we not only get them more deeply engaged but can also increase their perception of our value.

Let’s explore what Yahoo gets from AC first, and then cover what Yahoo must do from here if it is serious about winning in media.

1. Yahoo gets commodity content at commodity cost. With Associated Content’s marketplace, first and foremost Yahoo can source commodity content – i.e. the kind of content that doesn’t need a particularly differentiated author, original reporting, or other hard-to-find talent – cost effectively.

2. Yahoo can improve time (and value) on network. In this age of deteriorating portal power, users come to portals primarily for one reason:  mail.  (According to data from comScore, 73% of Yahoo’s viewers of its most valuable real estate – the home page – are Yahoo Mail users.)  Once they arrive, however, there is far more money to be made by vectoring them to networked media properties like Yahoo Finance, Sports, and Entertainment than by serving additional pages of poorly-monetizing email.  So, by beefing up the available content in the network, Yahoo receives the benefit of extending visits at low cost.

3. Yahoo increases its audience by drawing traffic from Google. Yahoo’s made the strategic decision to move its focus out of the search game and onto media.  And so rather than just feeding them from mail and search, Yahoo needs its content properties to draw audience on their own.   The AC content marketplace can produce thousands of pages per day of content – each one baiting more search engine traffic, and all produced at modest cost.  A recent EConsultancy interview with CEO Patrick Keane revealed that the bulk-buy strategy works:  “80-90% of our audience is driven through natural search,” and according to comScore data, nearly 50% of the traffic that AC’s content sees each month is incremental to Yahoo’s core audience that comes for mail most days.

All three of these improvements have financial benefits to Yahoo – both in increasing revenues with greater reach and traffic; and in bringing down average cost of content. But they miss out on the strategic positioning that Yahoo absolutely must own if it wants to ensure a leader as a top digital media company:

Yahoo needs to be a premium destination; and the AC acquisition message undermines that positioning. Yahoo Media VP Jimmy Pitaro indicates the desire for premium positioning in an interview with Staci Kramer at PaidContent, claiming it allows Yahoo to extend content offerings to niche audiences:  “This really is about adding quality content to Yahoo.”  That positioning is essential for Yahoo to maintain its CPMs as a top media property.  Yahoo’s strategic opportunity is in scalably growing its portfolio and audience of  premium media properties. But the quality level of Associated Content – under any definitions, old or new – isn’t good enough to earn premium positioning.  For example, a quick search at AC for “Carol Bartz” turned up as its number one result an article from January 2009 about her appointment as Yahoo’s CEO.  An outdated story like that is off-track for a premium property; and what’s worse, while top news outlets cautioned at the time that Carol’s software background might lend poorly to Yahoo’s media model, AC misses as its top article claims “she has quite a lot of experience in the field of technologies such as this. … It seems like the perfect match on paper at least.”  Commodity content executed poorly will undermine the premium positioning Yahoo needs.

So what must Yahoo do from here if they want to be a winner in the future of digital media?  Yahoo should set an agenda to do three things following on this acquisition:

1. Apply commodity content selectively. To establish premium positioning, Yahoo must moderate where it uses crowdsourced content.  Evergreen topics are a great match; but putting anything less than premium content on the home page would degrade consumers’ experience and Yahoo’s brand.  For Yahoo Entertainment, celebrity bios might be a great opportunity:  they need to be written; are relatively easy to source and write; and are undifferentiated to consumers.  But keep the leading stories in-house and branded – that’s where consumers and advertisers alike had better have a predictable top-shelf experience.

2.  Develop new destination properties. Yahoo’s efforts here have been gaining, but more is needed. Properties like Yahoo Sports Minute, Shine and omg! are great starts; but they get the bulk of their traffic from the Yahoo network – and all have less than 25% of their audience coming independent of Yahoo Mail.  Internally, each new product should be tracked based on its contribution of new uniques (unduplicated vs. mail) to Yahoo’s network, and on the number of direct and social network visit referrals, to measure success at creating self-sustaining premium branded media properties that draw their own loyal audience.

3.  Most importantly, acquire key destination properties. As yesterday’s news shows, nothing demonstrates a company’s strategic direction like an acquisition.  Yesterday’s message said that content is important, but that Yahoo considers commodity content the priority.  That needs a sharp correction, and quick.  The best way Yahoo can clarify the importance of premium content is to acquire a leading premium content network, like Sugar Inc., Huffington Post, or IGN.  Sugar is reaching millions of women per month with unique content and an authentic angle that Yahoo has yet to duplicate; while Huffington Post crowdsources content but applies a strong point of view and features premier branded names, lifting it above the commodity fold.  And IGN (housed in Fox’s digital media group, which has already divested properties like Photobucket, Rotten Tomatoes, and more) has a strong branded destination for consumers and has become a must-buy venue for entertainment advertisers looking to reach a male audience.  Each one of these acquisitions would demonstrate a clear commitment to building a premium media network.

These three steps are the ones that Yahoo will need to take to keep its pricing and positioning high, and ultimately to succeed in digital media.

Each week, we hear of major publications and traditional broadcasters who are struggling to stay afloat in a digital age with new economics and new expectations.  Despite the promise of interactivity made with the internet revolution over the last 15 years, most publishers have done little more than replicate dead trees online, with zero innovation beyond the hyperlink, the slideshow, and an embedded video now and then.

And yet we can see from the rising successes of the last decade like Facebook, Google, Zynga, YouTube, and others that what catches audience attention is interactivity.

To earn loyal audiences today, publishers need to go beyond content creation:  they need to produce compelling experiences that distinguish them and get the consumer coming back for more.  The Pew Internet & American Life Project concluded that “when asked whether they have a favorite online news source, the majority of online news users (65%) say they do not.”  In an era where the consumer’s cost to switch is the flick of a click, publishers must offer compelling, differentiated experiences to earn loyalty.  Choices abound consumers:  there are scads of publishers online in every category; content suggestions offered constantly via social networks; and blue links proffered by search engines dozens of times per day per reader.  In an environment of choice, as brand experts have known for years, nothing builds loyalty like a great experience.

And now is the perfect time to create those breakthrough experiences.  The enabling technologies for the digital customer experience have improved considerably in recent years: we now have ubiquitous broadband, flash and other streaming video, plus HTML5 and maturing mobile application platforms.   Add to that personalization, targeting and social graph access, and there are some amazing opportunities to innovate.

It’s not just consumers that are thirsty for upgraded experiences.  Advertisers are showing that they will pay more for immersive interaction over basic display ads next to text.   Video ads during full TV episodes on ABC.com, Hulu, and others, or mid-day live sporting broadcasts command many times the CPM of typical display ads. Indeed, according to Michael Learmonth at AdAge, The Wall Street Journal’s online video content is bringing in envy-inspiring CPMs at $75 – $100.

But video is not the only way to create an immersive customer experience online.  Online sites of traditional publishers like Better Homes and Gardens are experience train wrecks (to be fair, they’re not alone in that regard).   Contrast that with the much more successful (certainly from an ad rate perspective) MarthaStewart.com which has many of the same elements – a top stories slideshow, cross-promotions for the print magazine, etc., and it’s a substantially better experience due to the focus on design and usability that is expected of the Martha Stewart Omnimedia (MSO) brand.

Even still, much more can be done with today’s technology to put the consumer’s needs and interests first.  The latest example I’ve seen of true creativity in user experience design is Microsoft’s (MSFT) Glo.    There are additional signs of greatness in the tablet demo that Time Warner (TWX) built for its Sports Illustrated brand.   And The New York Times (NYT) continues to excel in their applications and interactive graphics which enjoy significant pass around (bit.ly shows over 5,000 social media clicks to a recent budget infographic and today’s “A Moment in Time” project has already generated over 100 tweets in the first 15 hours).  But too few companies are making similar efforts to distinguish themselves.  The opportunities are there, and we need to step up.

Consumers will decide which brands deserve their loyalty and content alone won’t cut it.  We are on the brink of a total revolution of experience.  For publishers, it’s reinvent or fail.

Do you know additional examples of publishers innovating?