E-Readers: Publishing's Digital Life Preserver?

Viewpoint: Al DiGuido, CEO Of Zeta Interactive

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Al DiGuido
Al DiGuido
Hardly a day goes by without an announcement about the release of a new digital-reader gadget or some publisher hanging its hopes on such a device. Just this month, Sports Illustrated announced it is developing an embellished digital version of its magazine designed to be displayed on portable tablet computers. And Hearst is placing its bets on e-reader technology as well, planning to launch its own device optimized for showcasing ads.

It's refreshing, actually, to see heavy-hitters from an industry beset with record-breaking circulation declines and sliding advertising revenue taking a new, hard look at their value proposition. There's little doubt that we all understand the dire circumstances these businesses are facing. In just the last 24 months, more than 700 magazines have shut down in the U.S. and Canada, according to Oxbridge Communications' MediaFinder.com, as consumers migrate online and the costs of printing, paper and postage continue to climb in direct reciprocal proportion to audience and revenue losses. Advertising sales, the true life support of the industry, have taken a nosedive as well, and online revenues, while growing, have not been nearly enough to stem the bleeding.

It's no wonder that publishers today are desperately searching for a lifeline. And with the recent success of the Kindle and its growing number of successors, e-readers represent what could be a bright spot in an otherwise grim future. With sales projected to reach 3 million units this year, according to Forrester, these devices provide a reading experience that rivals -- and perhaps, sometime soon, will surpass -- the print equivalent, but without the astronomical costs of printing, paper and distribution.

But for all the hopes publishers are placing in e-reader technology, will these devices be enough to change the destiny of a withering industry, or will they go the way of the VCR and 8-track tape player? The answer: It depends.

The missing link
Despite all the optimism surrounding the future of e-readers and their promise for magazine publishers, there are clear shortcomings that have already been fodder for discussion. An obvious hurdle is the cost for the devices that, while declining, are still too high to convert many buyers. And, in the case of the Kindle, the lion's share of subscription revenue -- 70% -- goes directly into Amazon's pockets, leaving only one-third for publishers. But the real sticking point for magazine publishers? E-readers fail to solve the crux of the problem: the decline in advertising revenue, which, if it continues at its current pace, can only lead to the industry's ultimate demise.

Much of the discussion in this regard has been surrounding the devices' screens, which currently display no color or video, critical for displaying advertising. However, this will clearly change soon. What is rarely, if ever, discussed is how these devices can solve the advertising dilemma by leveraging the real value of web-based digital technology: analytics.

Been there, done that
As publishers consider and craft their e-book strategies, it will be imperative to build them around deep reader engagement analytics. Providing advertisers only simple reach metrics -- how many readers viewed an ad, for instance -- will be akin to the early days of the web when publishers made a mad dash to create their websites, then sell their space based on "box car" numbers, or impressions. With publishers making their content freely available on the web, the focus back then quickly turned to how inexpensively an advertiser could purchase 100,000 impressions. The brands that publishers spent millions to create, the quality editorial and reader affinity cultivated for years, were suddenly being hawked as commodity. All relegated to a spreadsheet analysis of audience reach -- and then inevitably marked down, a critical blunder that has changed the course of the industry, and which has opened the doors for a new business model in which Google harvests much of the profit from the publishers' now-free content.

I know. I was there. At the height of my career in publishing, I found myself at the helm of Computer Shopper, the world's largest print magazine. We routinely folio'd our monthly publication at nearly 1,000 pages, more than other magazine in the world for many years. The rise of the internet and comparison shopping engines undermined our core business; consumers could now find our content online and be directed to venues in which they could actually purchase products. Truth be told, we saw this coming and created our own e-commerce engine, computershopper.com, offering advertising space at bargain-basement pricing. In the end, this served to accelerate our demise. Today, this once great magazine is gone.

It's the analytics, stupid
With e-readers providing a glimmer of hope in reigniting reader interest in paid content, the more important opportunity lies in reader-engagement analytics, which will provide the proof for advertisers of the value of their campaign and better enable them to engage their audiences.

Imagine the wealth of real-time information publishers could provide their advertisers on reader engagement with their brand -- what ads did readers view, for how long, what action did they take, what did they buy, what product categories are they interested in, what sections of the magazine perform best for individual customer segments, what creative resonates with different segments, within which editorial sections, etc., etc. Advertisers could not only easily understand the true value of their dollars spent and clear ROI, but could leverage such analytics to better target different audiences and deliver more relevant, customized information to drive even better results over time.

The deeper we can document reader engagement in this new publishing paradigm, the better chance we have in crafting rate programs to that are commensurate to this level of reader engagement. We have a chance to reestablish the power of quality editorial content to draw quality readers to a venue that can provide meaningful data about this interaction between the two. We can once again prove that readers who spend time with quality content are more likely to not only observe advertising, but take action on those ads. When we prove all of this, the value of advertising within these editorial environments will grow in price and kick-start a new, more profitable era within the publishing industry.

Unfortunately, it seems the book merchants selling Kindles, Nooks, etc., don't care a bit about reader engagement. They want to sell books into this new platform and their devices reflect that. None of the devices on the market provide the analytics necessary to win the advertising battle -- the only battle that really matters to magazine publishers. Until those analytics are built into the technology, e-readers will remain one-trick ponies.

Al DiGuido brings more than 30 years of marketing and advertising experience to his role as CEO, Zeta Interactive. In just two years since forming the company, he has built the agency into a leading force within the digital-marketing industry, with more than 300 employees worldwide and serving more than 200 clients, including Time Inc., Sony Electronics and Century 21.
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