James Altucher
Media Need a Blog Strategy
 By James Altucher
RealMoney.com Contributor

12/3/2004 2:05 PM EST
URL: http://www.thestreet.com/p/rmoney/jamesaltucher/10197364.html
 Media BEARISH
  • The old-line media concerns need to acknowledge that blogs are a real threat.
  • Altucher suggests they buy or emulate blog aggregators, like Gawker and Weblogs.
  • Failing to adapt will lead to their ultimate demise.

    • Jerry Seinfeld said it best: "It's amazing that the amount of news that happens in the world every day just exactly fits in the newspaper."

    The print media refuses to acknowledge the news world beyond its pages, particularly in the blogs that are dominating news today. Newspapers suddenly have begun quoting blogs with attributions like "as heard in the blogosphere." As if the universe of blogs was some distant layer of the atmosphere somewhere between the infamous ozone layer and one of the lesser-known layers of the stratosphere. But if you consider what's happening to traditional media companies and trends in readership and advertising, you'll see why I think the time has come for the old media to change its stripes.

    The New York Times (NYT:NYSE) reduced guidance Thursday for the quarter and year, saying: "We believe that 2005 will be another challenging year." This led me to notice that my fingers no longer stain with black when I read the news, and that spells trouble for the Times, Dow Jones (DJ:NYSE) , Washington Post (WPO:NYSE) , Tribune Co. (TRB:NYSE) , Gannett (GCI:NYSE) and all the traditional media stocks.

    It's been clear since the advent of the Internet that the media world was going to change and be dominated by the Web. The New York Times had big dreams, actively building its Web site in 1995 when the rest of the world was still wondering if the Internet was just a stomping ground for losers and geeks. (As an aside, I was working at HBO at the time, working on their interactive TV experiment in Orlando, Fla. I suggested to my boss that the Internet was something worth exploring in terms of interactive entertainment. His response was: "The Internet is for academics. These guys in the cable business know what they are doing and I think you should just trust them.")

    Today, much later than initially expected, the impact of the Internet is starting to show up in the numbers. According to the recent TNS Media Intelligence Report on advertising, from January to September 2004 year-over-year growth in online advertising rose 25% to $5.6 billion vs. $4.4 billion in 2003. At the same time, national newspaper advertising was up 9.7% to $2.4 billion from $2.2 billion, and local newspaper advertising went to $17.7 billion from $16.6 billion, an increase of 6.6%. Radio fared even worse with spot radio advertising the only category to have a negative increase.

    There are over 3 million blogs out there currently, but less than 1 million of those are updated regularly. And, according to Jason Calacanis -- owner of Weblogs, which hosts Mark Cuban's excellent blog among others -- there are probably only 200 blogs with more than 1 million pageviews per month and 20 with 10 million pageviews a month. But that number is going to grow, and 10 million pageviews per month is certainly more than most online news sites get per month by a long shot. Now, as news events break, the bloggers provide the first and most in-depth coverage, live and opinionated. So what's left for the newspapers and TV news?

    Not to Be Yellow, but Adapt or Die

    Traditional media companies have been desperately trying to reinvent themselves of late, with Dow Jones' acquisition of Marketwatch (MKTW:Nasdaq) the most recent example of an "old media" company darting around for the latest hot flavor. The press initially existed to bring information, and hence power, to the people by informing them of the goings-on of those in charge and to give them a choice. The Internet has finally succeeded in this regard through the use of blogs, and that is going to mean the demise of almost every other source of news -- unless the traditional media firms follow the suggestions I'm about to outline.

    Traditional media shouldn't be searching for the online equivalent of itself. Rather, the companies need to enter the blog world full force before companies like Google (GOOG:Nasdaq) , which bought Blogger, and Microsoft (MSFT:Nasdaq) , which just launched its free blog service, completely dominate it.

    My advice: Follow the model (or try to acquire) Weblogs and Gawker. These companies host the blogs of 100 or so "thought leaders" on a variety of subjects and just let them go to it. The media companies can set journalists up with blogs to complement traditional news coverage and syndicate everything via RSS so that readers can pick and choose the topics they are interested in. And they should not be afraid to link to other sites and news sources.

    That's the Internet way, and it's the only way to drive significant traffic in the long term. (Yahoo! (YHOO:Nasdaq) is the best example.) Also, these companies shouldn't be afraid of people expressing their opinions in the blogs. Traditional news is filled with "hidden" biases, and the blogosphere is no longer letting them get away with it. Hence the downfall of Dan Rather, when those nasty bloggers exposed the forgery after CBS was fooled by it.

    The metric I would use now to value the old school media companies is how eagerly they are taking up the new model and admitting that the world is different than they ever thought it would be. The Times closes its earnings release by saying, "the Times Company is committed to growth. ... We hope to reward our shareholders, as well as our readers, viewers and advertisers." Yeah, good luck with that.

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    James Altucher is a managing partner at Formula Capital, an alternative asset management firm that runs several quantitative-based hedge funds as well as a fund of hedge funds. He is also the author of Trade Like a Hedge Fund and the upcoming Trade Like Warren Buffett. At the time of publication, neither Altucher nor his fund had a position in any of the securities mentioned in this column, although positions may change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Altucher appreciates your feedback and invites you to send it to james.altucher@thestreet.com.

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