I suppose dinosaurs were pretty disoriented in their final years roaming the earth so maybe we shouldn’t be too critical of the newspaper industry today.

Still the fact that the WSJ publisher is lashing out at Google as the cause of the newspaper death spiral is unsettling. Sure, Google has been a prominent player in the online world and has helped attract both eyeballs and advertisers away from the newspaper industry. But even if Google had never come into being, the newspaper industry was still going the way of the typewriter.

Lots of websites and online advertising suppliers have played a role in pulling viewers from physical newspapers - increasing the supply of online advertising inventory, driving down advertising rates, and luring advertisers to cheaper and more effective online channels. All this was set in motion by the development of the Internet and Web technologies and would have happened without Google. The newspaper industry got caught in a technological disruption. Rather than lashing out at Google they should be either figuring out new business models (tough, but not impossible, and we’ve made some suggestions) or just recognizing that it is time to rationally wind down a lot of newspaper properties.

Current thinking in the newspaper biz is that the cure to what ails them is to figure out how to get some of the people to pay for some of the content. In other words, keep some stuff for free, but charge for the stuff that people really want. Not a bad strategy, and not a new one either. On demand programming on cable offers some free (but not so good stuff) stuff but keeps the new releases and top picks behind a pay wall. And, notably, the Wall Street Journal and Barrons, have succeeded in erecting a pretty big (and expensive) pay wall, such that almost nothing is free. Hearst Publishing has taken a different track, driving people to the print edition of their magazines by not offering all of their “good” content online.

But, as with all good strategies, the devil is in the details of the implementation. The biggest problem that newspapers have isn’t with people like me who grew up having newsprint on my fingers every morning and who have remained loyal in spite of the blackberry and iPhone apps and free digital versions of the paper. It’s the fact that the younger generation doesn’t feel compelled to read the paper – on or offline. Their news comes from a variety of niche sources that are all available to them for free (at least for now). The solution may not be as simple as trying to figure out how to erect a pay wall, but stepping back and evaluating the core product and what will make it attractive to a new audience. Barrons and the WSJ have survived (and thrive) in spite of their paywalls because they offer information and analysis that is “need to know” for anyone in business or finance – regardless of your age or demographic. The same doesn’t hold true for the New York Times, or my hometown paper which is on the verge of extinction, The Boston Globe.

What most people miss, I think, in this whole discussion is how interwoven print and online content production has become. The same teams that produce articles for print, also have those pieces posted online. Is it reasonable to expect the same quality of online content if the journalists who produce the print content that is also viewed online are “retired” because there is no longer the revenue on or offline to support them? Not so clear. Here’s a scenario to consider. My 26 year old colleague probably doesn’t buy the New York Times, but chances are that she pops on line to read it a few times a week. Would she miss it if it disappeared entirely and more importantly, does she value its content enough to pay a modest subscription fee to get its content online, knowing that if she didn’t, it would disappear entirely? Also not so clear.

So, I totally agree that it is about time that the industry is now talking seriously about new business models. Whether or not it’s too late, remains to be seen. A lot will depend upon how much independent soul searching these guys are willing to do. And, how much change they are willing to embrace.

According to this blogger, GMOOT is the battle cry heard across marketing departments everywhere with respect to social networking. GMOOT is the acronym for “get me one of those” which this blogger characterizes as what’s fueling the interest in social networking activities. She goes on to say that the end result is that most organizations put up a Facebook page and a Twitter account – dust off their hands and congratulate themselves on having checked the social networking box for executive management.

She has a point. The frenzy over getting “social” reminds me of the frenzy in the late 1990’s over “ebusiness.” I remember the mad rush over how to ebusiness-ize business but not always because it was the right thing to do, but out of fear of being left behind if something wasn’t done immediately. We sort of know how that story ended, lots of ebusiness initiatives were tubed after massive infusions of cash and many more e-only companies crashed and burned.

Today’s experience with social networking strategies doesn’t have to end the same way, even though many marketers are privately anguished over the lackluster results of their “social” initiatives. One reason for that anguish is the lack of distinction made between social and digital strategies. They aren’t the same, even though social may use digital means to create engagement among groups. Another is that many of the social initiatives are driven by marcom, which is frankly only the tip of the social iceberg, if you will. Social strategies often deliver the most impact when they involve the development of social products or to innovate other aspects of the enterprise value chain such as customer service. Still another is the assumption that people are dying to organize and socialize around your products. Most marcom folks think product first then community – and our experience tells us that it is very much the other way around.

The anecdote to this corporate heartburn is viewing social as a way to drive the business strategy of an organization. We’ve seen how social strategy can be a powerful mechanism for creating strong relationships with customers and brands and products and, what we call, barriers to exit. Social strategy should be integrated into the overall business objectives of an organization in much the same way as ebusiness/ecommerce is today. We would argue that unless and until social strategy is viewed as more than a marketing tactic, brands will fail to monetize their investments in social programs and worse, will lose ground to those who get there first.

So, in other words, give GMOOT the boot.

Here’s my take on Chris Anderson’s forthcoming Future of Free.

First, the notion that businesses can make money by giving something away for free isn’t new by any stroke of the imagination. It is also a pretty well studied phenomenon by economists. I think the earliest mathematical treatment I saw was in R.G.D. Allen’s excellent book on mathematical economics which was published in 1938. He showed that if a firm is selling complements (think razors and blades) it can be profit maximizing to give away the razor and sell the blades. Then of course there’s a post-2000 work on two-sided markets—or multi-sided platforms—which Dick Schmalensee and I have described in detail in Catalyst Code and others have in a recent HBR article, Strategies for Two-Sided Markets. Lots of businesses—from ancient ones like the village matchmaker to new ones like Facebook—create value by getting multiple customer groups who need each other on the same platform. For these businesses it is often profit maximizing to charge one group of the customers little or nothing or maybe even pay them to join the platform. The negative price is actually not uncommon. People who pay off their credit card balances at the end of the month probably make money (if you include the rewards) on the card. And people are paid with content to come to advertising supported sites where their eyeballs are sold to advertisers. The content is only there as bait.

Second, the notion is positively dangerous in the hands of amateurs. As far as I can tell from the write ups—I don’t have the book yet—Anderson has a pretty simplistic view of free. I work with a lot of new platform businesses and the biggest problem they have is figuring out which customers if anyone to charge low, zero, or negative prices to and doing this in a way to make money. The social networking sites have adopted free to users, free to app developers, and not free to advertisers. The jury is really out on whether that model will work in the long run—especially as the expansion of advertising inventory online drives down rates. The other point here is that who gets it for free is often obvious only after the fact. When the charge card industry started in 1950 it was obvious that to be successful one needed people to have the card and merchants to take it; was it obvious that cardholders should get it for free and merchants should pay—only in retrospect.

Third, Anderson is wrong to throw in the free music etc. into this mix. There’s a big difference between Google deciding not to charge searchers, Internet sites showing copyrighted content that they don’t have permission to show and haven’t paid for. One can debate whether copyright protection has gone too far or not, and what the boundaries of fair use are, but an awful lot of stuff is free because it has been stolen. Maybe musicians will need to develop a different business model based on “free” if they can’t prevent people from ripping off their songs. But that’s different than the case of complementary goods and two-sided platforms where there’s an economic rationale for businesses to voluntarily give things away for free.

“Free” could be the next “just build share” which entrepreneurs followed like lemmings in the late 1990s. Remember—just get a lot of users and figure out the business model later.

By the way, you can read this blog for free. You might think from Anderson’s book that this is something new. In fact people have been writing and speaking for free for many millennia. It would be hard to find a worse candidate for the claim that a business model is new and revolutionary.

This is the first of several posts I’ll do on the Consumer Financial Protection Agency that the Obama Administration has proposed to protect consumers and investors from financial abuse.

The Administration released an 88 page white paper on financial services reform on June 17th. The CFPA is a major new proposed agency and accounts for a significant portion of the text. Here is a synopsis based on my reading.

1. It covers all financial products but for investment products and services that the SEC and CFTC already regulate.
2. It has broad jurisdiction to make sure consumers have information they need; to protect consumers from abuse, unfairness, deception or discrimination; to make sure financial services markets operate fairly and efficiently; and to make sure traditionally
under served consumers have access to lending and other financial services.
3. It relieves the FTC of its primary role in consumer protection for financial services products.
4. Its regulations provide a floor on regulation for the states. States can adopt tougher laws if they want.
5. It can restrict or ban mandatory arbitration clauses.

The proposed CFPA would have wide authority to determine what financial services products could be marketed. This comes in two provisions.

1. It is authorized to define “plain vanilla” products which financial institutions would have to market alongside other products. That is a bank would have to offer a plain vanilla mortgage designed by the new agency.
2. It has a certain degree of pre-approval authority over the marketing and design of financial services products. Financial service providers would have to obtain a “no action” letter for a new product unless the CFPA took too long to respond.

The CFPA has far reaching powers that I don’t have space to go into here. One discussion I’ve had with other experts is whether the CFPA is closer to the Consumer Product Safety Commission which deals with problems after the fact, pulls bad products, and punishes wrongdoers; or whether it is closer to the Food and Drug Administration which doesn’t let pharmaceutical companies do much of anything that hasn’t been approved. It goes too far to say that the proposed CFPA is like an FDA for the financial services industry. But for better or for worse it is more intrusive in product design and marketing decisions that is the Consumer Product Safety Commission.

Congress will have to go along with this for the CFPA to come into being. It is sure to be subject to considerable debate.

My next blogs will discuss the pros and cons of this new agency.

Well, depends on who you ask. The New York Times seems to think it has a shot at drawing eyeballs away from traditional television. But, I am not so sure. So, in service to all you readers of the Catalyst Code Blog, I took time out of my busy afternoon to check out nextnewnetwork.

I got a cup of coffee and cozied up to my computer to watch several of their many channels. I have to admit, it’s a neat site. There are a bunch of “channels” like BarelyPolitical.com which brought you the Obama Girl, VOD Cars which they say is the #1 Broadband Car Network, and Pulp Secret which is the “first network dedicated to comic book news and culture.” I checked the car channel naturally and amused myself with an Elliot Spitzer video on Barelypolitical.

I think the site raises some interesting questions on the future of IPTV. One possible direction is that people—especially as those who grew up with traditional television go to the great yuppie ranch in the sky—will drift towards consuming videos like they do now on YouTube and on the likes of nextnewnetwork: they will browse around, watch a few minutes here, a few minutes there. If that’s the case, then there’s a real future for aggregators of interesting content like nextnewnetwork.

The other possible direction is that the coach potato culture will live on and people will continue to sack out on their sofas and watch a few hours of television with as little physical exertion as possible. Now that’s a world in which the frenetic pace of these new kinds of shows don’t really work. If people really want to vegetate for an hour we’re back to something more like the usual stuff on television.

My guess is that people will continue to sack out in front of the television. But the television will have an internet connection. That internet connection will bring the online advertising technology to the traditional television set, and maybe it will give people some choice to see some of the sorts of stuff that’s on nextnewnetwork.

I’m hardly a representative member of the public though. Better ask your teenager what they’ll want to do a decade from now.

If you’d like to participate in a live webcast about Obama’s proposed financial regulation plan, register here, you’ll have a chance to ask questions to subject matter experts on Thursday, June 25 at 2 pm EDT. The webcast is “The Good, the Bad and the Ugly of Obama’s Proposed Financial Regulation Plan” and is moderated by FinReg21.com’s Editor-in-Chief David S. Evans. The discussion will feature Arnold Kling, independent scholar and member of the Financial Working Group of the Mercatus Center and Daniel Kauffman, Senior Fellow at Brookings Institution and Former Director of World Bank Institute. We’ll discuss: What’s going to survive and what’s going to get killed on Capitol Hill? Would we be in this mess if the plan was implemented in 2001? Good idea or bad idea – giving the Fed more responsibility?

Register HERE.

The NYTimes had an article yesterday about how investors are pouring (and have poured) tens of millions of dollars into payments on mobile phones since that is the next payments frontier. It talks about turning phones into “virtual credit cards” that enable “click and buy” commerce. Then it proceeds to describe the complexity of getting carriers, merchants and payment companies on board and several start ups that are focused on things like using your mobile phone number as a substitute for a credit card.

The article is right, getting two massively complex ecosystems – payments and mobile - to play nicely together is an undertaking that has resulted in the situation we have today – not much to report, at least here in the US. Sure, there has been talk for the last 5 years about the promise of NFC payments, but that has gone nowhere given the lack of a merchant business case for it. And, given the current economic state, it is likely to continue as wishful thinking for some time to come.

Then there are the P2P solutions, which for the life of me, I can’t figure out. I get the fact that it is technically feasible since it relies on a text-based process which is handset and carrier independent, but the use case, well, I don’t see it. Maybe the every now and again mom who wants to pay the babysitter, or dad wants to send money to junior at camp (whoops, most camps don’t allow cell phones, so scratch that), but that doesn’t strike me as the mobile payments nirvana. Ditto the notion that carriers will become lenders, allowing us to buy stuff and charge it to our phone bill. Any chance of that happening now in this current regulatory environment is slim to none – for a whole bunch of reasons. Of course, no discussion of mobile payments is complete without talking about the 2D bar code, another gee-whiz solution that lacks a merchant business model now.

So, where does that leave us besides lots of investment dollars without a ROI?

Well, there are, in fact, real viable solutions that drive commerce via the mobile right under our noses.

The iPhone and smart phones with better browsers enable commerce via the mobile by making it increasingly easy to shop online with the phone, in much the same way as we do now on the PC. And solutions like that which Intuit recently launched that turn the phone into a POS system – opening up commerce via the mobile for many smaller businesses.

A real interesting play to watch is the opportunity to enable commerce without either the carriers or the payment providers having to say yes. Enter text-based commerce. The majority of mobile phones can text, and adding short codes to ads and in store signage and even loyalty card integration is all possible now, with minimal technical integration, minimal upfront investment and minimal time hurdles. I know it isn’t as “sexy” as tapping with the mobile, but it works. And, interestingly, it is one of the only solutions that does not really require either the carrier or the payment company to “get on board.” Merchants can append short codes to their products, and market to consumers – consumers can choose how to pay, and like the iTunes model, whatever card is downloaded on that first purchase is likely to remain the default payment device for future purchases.

In the spirit of transparency, one of our ventures, ShopText, offers this solution today, and where it has been implemented, it has surprised even its own merchant customers. A national retailer was able to hawk $299 trenchcoats and $199 handbags and $40 sunglasses (and 8 other pages of items) by appending short codes to those items and hook their inventory systems to the solution in real time to determine availability. 90% of the customers who bought, bought again. These merchants also get to offer customers membership into their mobile club, append loyalty program offers to them that work at the physical point of sale, and capture important data about the other behaviors of those customers. Is text-based commerce THE solution for the mobile phone? Who knows. But it is an important bridge to the future of mobile and available to a large number of people who don’t have smart phones but use their phones (and text a lot). It may not be perceived as “cutting edge” but you don’t have to invest or lose a fortune to get results.

Perhaps the bigger question for all of the investors out there is how long it will take for mobile commerce to account for an acceptable percentage of retail sales. Today, roughly 10 years after the birth of eCommerce, online shopping is projected to account for roughly 7% of retail sales in 2009. It’s growing, but the majority of sales still happen in stores. Will commerce via mobile accelerate the growth of online sales numbers given the blurry lines between shopping online via a PC and the mobile browser? Or, do we think that the mobile will cannibalize the plastic card and become an acceptance device at physical stores? To date, investors have been betting on the latter, with marginal results.

A lot of those close to Twitter are now saying that their monetization scheme is to capitalize on its WOM power and make it easy for people to buy the products that their followers talk about. Couple of comments about that.

First, people tend not to mind adverts on Twitter. Maybe it’s because they are forced to ‘sell’ in 140 characters or less and short and snappy ads are less annoying than the more traditional online display ads. Maybe it is because it’s more of an impersonal broadcast medium, where the expectations are that adverts are acceptable (like they are on any other broadcast platform), whereas on Facebook and some of the more friend-centric social platforms, ads are regarded as an intrusion. And, since most people don’t have a lot of followers on Twitter and don’t Tweet all that much anyway, the volume of adverts that people get isn’t overwhelming.

But then again, that could be the double edge. If there aren’t a lot of people with a lot of followers, it may be hard to predict how lucrative a buy platform might be.

But, for now, it is a good story. And let’s hope that they’re serious about recognizing the need for a biz model that moves beyond advertising – and that their focus is on cold hard cash and not the “virtual” currencies that the other networks seem enamored with. Now, wouldn’t it be funny if Twitter actually scooped the networks on a payment solution? That might be something to Tweet and reTweet…

I figured I’d take the Twitter plunge despite my skepticism. I’ve been at it a week to help promote FinReg21.com our new media property on financial services regulation and its reform. Here’s a preliminary report. The good news is that it is fun and easy. Knocking out 140 character comments is pretty easy and the platform is easy to work with. And I quickly got followers. It was amazing. All of a sudden I’m getting notifications of random people I’ve never heard of following me. It all happened very quickly.

The bad news so far is that most of the people who are following me seem to be advertisers (Barclay’s Wealth–sure I’m going to give my money to them) and people, who based on their tweets, couldn’t possibly have any interest in financial services or my thoughts on it. My conjecture is that people are looking for followers just to say they have them and are contacting me because they hope I will follow them. If that’s a lot of what’s happening on Twitter I don’t see it as being very interesting as a real communication method. But I have an open mind. The power of Twitter in Iran has impressed me with its power as a broadcast medium. So I’m going to keep tweeting—for now.