Thursday, December 16, 2010

Groupon, iPad and Twitter: 2 much 2 hope 4?

With iPad apps, Groupon-like buying programs and Twitter campaigns topping the to-do lists at most newspapers, it’s time to place these putative publishing panaceas in proper perspective.

Recent research into consumer acceptance of these varied ways of serving readers and advertisers has found that each initiative may lead to underwhelming results, unintended consequences or, in the worst cases, both. This doesn’t mean they should be written off. It just means that publishers need to look and plan carefully before they leap.

Here are questions to consider about each:

Will iPad cannibalize print?

Publishers eager to export their print product to the iPad will be heartened to know that the device is a hit among exactly the sort of wealthy, middle-aged men who read newspapers.

The problem is that 58% of iPad users think the device is such a good substitute for print that they are “very likely” to cancel their print subscriptions in the next six months, according to a recent survey by Roger Fidler at the Reynolds Journalism Institute at the University of Missouri. More than 30% of the 1,600 iPad users polled by Fidler have not recently subscribed to a newspaper and another 11% of them already have abandoned their print subscriptions in favor of the tablet.

Although new circulation rules allow publishers to count iPad subscriptions as paid circulation, newspapers have yet to find a way to extract as much advertising revenue from the digital media as they can from the print product. In fact, many publishers complain that digital advertising turns print dollars into dimes.

Given the danger that attractive iPad renditions of the legacy product could lead to cannibalization of some of the most loyal newspaper readers, publishers have to ask themselves whether they really want to build these sorts of apps.

An alternative to porting the daily paper to the iPad is to use the platform to develop new and differentiated products to serve new audiences and advertisers.

Could Groupon flame out?

You know enthusiasm for an idea is dangerously out of control when an entrepreneur is so full of himself that he turns down $5 billion from Google to buy his company. Considering the seemingly ephemeral nature of his business model, Groupon founder Andrew Mason really ought to tell Google he was just joshing.

The problem with Groupon is simple and profound: Thirty-two percent of merchants who used Groupon to offer deep discounts to stimulate their businesses report that they lost money on their deals, according to a survey released in the fall by Utpal M. Dholakia, a professor of marketing at Rice University in Texas.

But, wait, it gets worse: Of the 150 merchants responding to the survey, 42% said they would not do another Groupon promotion. And that includes some of those who made money on their deals.

While merchants love the instant influx of cash associated with offerings through Groupon and the host of imitators that have sprung up to capitalize on the phenomenon, businesses ranging from McDonald’s to flying schools struggle to fulfill the deals. This sad story is not untypical.

Instead of attracting new long-term customers for merchants, Groupon is bringing in one-time bargain hunters who take the deals and run. “Most of the Grouponers were what we call ‘deal seekers,’” a restaurateur told the Rice researchers. “They felt entitled to special treatment, didn’t spend more than what the Groupon deal itself cost, they didn’t tip and most won’t be repeat customers.”

Some consumers feel ripped off, too, when they are unable to redeem the prepaid certificates they bought for massages, dinners, classes and other goods and services. In an online survey at HubPages.Com, 44% of consumers called Groupon a scam and 28% thought it was very good. The balance of respondents were neutral.

Even industry insiders have their complaints. “I bought a teeth-whitening treatment on Groupon that had to be redeemed within six months,” the chief executive of a competing deal service told me confidentially. “But I could never get an appointment.”

The lesson is that merchants have to be trained to thoughtfully and carefully use blitz offers to build long-term customer loyalty – not as churn-’em-and-burn ’em ATM cards.

Will tweeters turn into readers?

Although Twitter will tell you that it has 175 million registered users and investors reportedly deem it to be worth $3.7 billion, fewer than 20 million American adults actually use the service, according to new research from the Pew Internet & American Life Project.

Pew also discovered an interesting dichotomy: A quarter of users avidly check for the latest tweets several times each day but a fifth of the registered users never use their accounts after they open them.

This indicates that Twitter, at best, may be effective in reaching only the limited cohort of consumers who crave a steady diet of 140-character News McNuggets.

The good news is that Pew found those consumers, on average, to be female, under-35, well educated and urban, making them a potentially desirable audience for newspapers and their advertisers. But here’s the rub:

The abbreviated attention spans of Twitter addicts suggests that most of them could be turned off by the windy and often-dreary articles that characterize a great deal of newspaper coverage. If newspapers aim to exploit this channel, they will have to learn how to keep things short and tweet.

4 Comments:

Blogger dkiesow said...

Alan -

I think it is far too early in the RJI study to lean on it as in indication of potential audience trends. The self-selected respondents in that survey bear little resemblance to the general population or even the overall iPad-owning population.

Pardon the link but I posted some of the numbers here (poynter.org)
http://journ.us/dPhvuv

Damon Kiesow

8:14 AM  
Blogger Marc said...

As one of those in the age group, I do not think they have a choice. I have happily given up my subscription to the Economist and have paid for the Ipad version( same price). I will slowly but surely just stop reading papers and magazines that are not available on the iPad, so they have no choice they will loose me if they do not. I travel a great deal and the ability to get my subscription wherever I am is unbeatable and the ability to carry around as many issues as I wish at no cost ...

7:45 PM  
OpenID coneymedia said...

The core problem of newspaper people is that they don't "think out of the box."

The iPad "box" was handed to them, and they quickly proceed to modify their product to fit. This may be necessary and even good, but they should ALSO be developing innovative new approaches to the gathering and dissemination of news, advertising and all sort of marketing and merchandising.

Cultural changes that are impacting newspaper readership are not entirely technological, although most are technologically-driven. People, including a large percentage of die-hard newspaper readers, will ultimately prefer the iPads' expandability and interactivity, and if the content mimics print why on earth would they continue to take the paper?

Newspaper people have to — somehow — assert leadership again, they have to seek to direct their own destiny again, even though they are entering a period in which they no longer own or control their means of production and channels of distribution.

The newspaper industry's leaders have been screwing up big time for at least 20 years, so it's hard to imagine how they'll turn the trick. But here's hoping.

6:38 PM  
Blogger stephen said...

What made newspapers such a valuable medium for advertisers was not great journalism but their ability to distribute locally OR nationally , especially in the UK ,this was all driven by technology which they controlled , the ability to deliver millions of papers nationally, or thousands locally by 5.00am relied on the technology they controlled and invested in. That control/market advantage has gone .If they are to survive they need to invest in their own technology , own their own IP and work on innovative user experiences for the content they generate and stop the the likes of Amazon and Apple saying if you want to come hear you have to pay.There are many technology/hardware companies out there that have compelling technology which would enable them to compete, and when we add this to the compelling advantage of news generation,content ownership, existing audience and marketing ability they should win hands down.However as Coneymedia said they cant think outside the box , sadly !

4:31 AM  

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