Or, perhaps $600 million. Depends on which estimate you want to use for T-Mobile’s annual marketing outlay.

The first, which doesn’t include Internet advertising, comes from Nielsen. The second, which presumably does, comes from WPP’s Kantar Media.

In any case, T-Mobile and parent Deutsche Telekom spend a lot on advertising each year, but not nearly as much as their peers. Nielsen pegs AT&T’s annual spend–just for wireless ads–at $896 milllion; Sprint at $616 million and Verizon at $979 million.

It’s important to note that AT&T will end up replacing some of T-Mobile’s ad spend, but not all of it. As Shira Ovide notes, cutting down on duplicative advertising is part of the rationale for the deal.

Nielsen provided me with a detailed estimate which breaks down how much of each of the carriers spend per year, on every category but Web spending and “spot” TV buying (ads bought ad hoc instead of in advance).

You can see the whole thing at the bottom of this post but if you’re impatient: Not surprisingly, the carriers spend the most, by far, on broadcast TV, followed by cable TV, Spanish-language TV, and then local newspapers.

As far as Web ad spend goes: The carriers spend a lot online, too. But tracking for that stuff is much more hit and miss. Nielsen used to provide a guesstimate for display ads, but doesn’t right now. When they did, though, AT&T and Verizon were frequently in their top 10 lists.

One other note: Lots of people are passionate about Carly Foulkes, the T-Mobile spokesmodel who wore a pink and white dress in all those ads. But I’m the kind of guy who was always more interested in the “AT&T”/John Hodgman guy. Go figure.

It turns out the actor’s name is Dan Bakkedahl, and he used to be on the “The Daily Show”, and I was wondering what he thought about this. Alas, “T-Mobile would like Dan to wait to do any interviews,” his manager informs me via e-mail.

OK. But as soon as he’s ready, he’s got an open forum here…

Wireless Carrier Ad Spend July09-June10

Back? OK. For extra credit, here’s a condensed and edited–but still very long!–version of a chat I had yesterday with Times digital czar Martin Nisenholtz. I’m not convinced Nisenholtz is convinced that the plan the Times rolled out yesterday is the best possible plan. But if that’s the case, he certainly didn’t let on.

The big takeaways:

• The Times is limiting referrals from Google because it can. Specifically, it’s taking advantage of Google’s “first click free” program. (Worth noting that the 5-a-day limit gives you another 150 articles or so a month above the initial 20-per-month cut off. So it’s not particularly punitive.)
• The Times is charging more for access to its iPad app than for smartphone apps, because it thinks it can. iPad users spend more time with the paper, and the Times thinks people who spend more time with the paper will pay more for it.
• The Times only expects a small sliver of its Web readers to become paying users. Niseholtz doesn’t exactly say this out loud, but if you piece together his commentary, that’s what he’s saying. He doesn’t expect the “vast majority” of readers to ever see the paywall, so what he’s really trying to do is convert a percentage of the remaining minority. But if you’ve read Doctor’s piece, then you already know this.
• The Times isn’t trying to price its digital subscriptions in a way that protects its print subscription business. On the one hand, this makes sense–after all, the subscription plans are aimed at converting heavy users of its Web site who aren’t already print subscribers. On the other hand, given that print subscribers remain the Times’ most valuable asset, this one seems hard to reconcile.

Peter Kafka: Just to be clear, when the Times says non-subscribers can read stories above their 20-per-month limit if they come from referring links, you’re not just talking about Twitter and Facebook, but any link from any site, right?

Martin Nisenholtz: That’s correct.

Kafka: It could be the Journal. It could be a blog, it could be the Financial Times, anything on the Web, right?

Nisenholtz: Yes. The only other thing is that Google has a methodology where they can limit the number of inbound links per day, and we intend to take them up on it.

Kafka: So that’s Google doing the actual gating, not you?

Nisenholtz: Right. They had made this feature available prior to us going pay, so it’s not like it was inspired by us per se. We’re just taking advantage of it.

Kafka: Why limit Google’s links, but not any other site’s?

Nisenholtz: I think the majority of people are honest and care about great journalism and the New York Times. When you look at the research that we’ve done, tons of people actually say, “Jeez, we’ve felt sort of guilty getting this for free all these years. We actually want to step up and pay, because we know we’re supporting a valuable institution.” At the same time we want to make sure that we’re not being gamed, to the extent that we can be.

Kafka: But if you really do want to game the wall, you’ll be able to do it. You could could go through Microsoft’s Bing, for instance.

Nisenholtz: We’re obviously going to be vigilant over the next couple of months, in looking at the ways that people are doing that.

Kafka: I’m surprised to hear you say you’re going to spend calories trying to make sure that people don’t abuse the system. I would think you have other things to do.

Nisenholtz: I don’t think we’re going to spend enormous resources to go tracking people down. But at the same time, we’re going to obviously work to see where the source of these workarounds are, and work to close them off, if they become substantive enough.

But in looking at the research that we did, we expect [paywall jumpers] to be a very significant minority, a small, small number of people. When you look at your Twitter feed, based on the people you follow, it probably seems like it’s looming very large. But in the scheme of things, among people who don’t live in Silicon Valley or don’t cover it, the vast majority of people do not have this on their minds.

Kafka: What does research say about the total number of subscribers you can expect?

Nisenholtz: Obviously we haven’t released that. We are very, very confident, based on three rounds of research with three separate groups of loyalists, three separate vendors, over three separate time periods, that the conversion rates among that group are going to be sufficiently high to layer in the second revenue stream.

But I’d just remind you that we’re still very much in the advertising busienss. It’s our core business. We don’t expect the vast majority of our users to see the paywall, and we expect to remain a very very large player on the web. The conversion rates are built off of folks who are fairly heavy users.

Kafka: Why charge different prices depending on the screen–laptop, smartphone, iPad, etc–your subscribers use to read the Times? Netflix charges one price and that seems to work well for them.

Nisenholtz: We built the pricing architecture off of the research as well. We basically found a greater willingness to pay among iPad users. We see iPad app users spending much much more time with our brand than either Web users or smartphone users. So the more you use it, the more you value it.

This pricing research was very clear from a consumer perspective. It was not built off of what we charge for the paper, or what we think we desrve, or anything like that. It’s what our loyal users said they would be willing to pay.

Kafka: For first-time subscribers, at least, you can get more for your money by buying a print subscription than a digital-only offer. I assume that’s intentional.

Nisenholtz: Not really, no. I don’t think anybody ever had a discussion of favoring print over the Web. This research was done on digital loyalists. Obviously, the print subscribers are very, very valuable to the franchise, but I can’t remember a single disucssion where we linked the digital price point to our print subscriptions.

Kafka: You announced this in January of 2010, and now you’re going to launch it in March 2011. I know you spent time researching your customers, but what else have you been doing?

Nisenholtz: If we were just rolling out a web-only digital subscription to the Times website it would have been a 3-month project. But you have to remember that we were very intent on trying to create the kind of customer view that took customers in one setting–for whatever they had–across platforms.

What that means is we had to tie in a legacy circulation management system, as well as a digital system, as well as our legacy customer systems. You have these big iron legacy systems that have to be joined with web systems.

For us, the 14 months didn’t feel like a particularly long time. We were starting from a standing start.

Kafka: When Apple announced its subscription plans last month, you guys said, essentially, that it wasn’t going to affect your plans. And now you’re working within Apple’s new rules. Did you know about them in advance?

Nisenholtz: No. We had heard the same rumors that you had, so we knew what the rumors were. But we heard about Apple’s plans pretty much at the same time as everyone else.

———-

Again, the Q&A above is an edited excerpt of our chat. As an experiment, I’m embedding our entire 21-minute conversation here, just to see if anyone derives any value out of it. I can’t advise listening to it, as the sound quality is sub-optimal (it’s recorded via a BlackBerry’s speaker phone onto a digital recorder) and it’s also, um, rambling. But if you’ve got a weird desire to see/hear some Web content sausage being made, have at it.

[UPDATE: The Times argues, gently and politely, that it would have been nice had I told Nisenholtz in advance that I intended to publish the audio of our conversation. I think they're right, so I've taken down the track.]

“I killed newspapers.”

– Eric Schmidt’s suggested epitaph, via Washington Post legend Bob Woodward. It’s not accurate, of course–real culprits range from an overabundance of commodity news, to the evaporation of classified ads and monopoly ad pricing to an over-reliance on debt markets–but it is pithy.

Or at the very least, they’ve gotten better in the past year. Here’s a chart from the Pew Research Center’s “Project For Excellence In Journalism” 2011 report that shows revenue by sector:

And yes, 2009 comps are off a very low base, because most of the media world spent that year reeling from the Lehman collapse of 2008. But it’s still an increase. Except, of course, for the newspaper industry, which may never recover.

And here’s the chart that should worry almost everyone in the chart above. Except, of course, that they already know this–traditional outlets’ audiences are shrinking, because they’re headed online.

To be technical about it, TimesLimited is really more of a Gilt City clone. Like that site, a spin-off from the Gilt Groupe private sale juggernaut, TimesLimited offers won’t require a minimum number of buyers for any particular offer, but the offers will be limited to a certain time limit.

But big picture is that the Times is trying to hop on the group-buying craze that everyone else wants a piece of. And there’s no reason they shouldn’t: The paper already has the crucial assets you need to make these things work — an ad sales force and a pool of potential customers.

The latter will come from current Times subscribers, as well as registered users of the paper’s Web site. But ad sales chief Denise Warren says the service will be available to anyone who wants to opt in.

What kind of stuff will the Times be selling? “We’re going for a more experienced-based version, more of a curated, upscale offer,” Warren says, without getting specific. But based on the art the Times is using to illustrate its landing page, TimesLimited will appeal to people who like sail boats, lamb chops, and expensive-looking dresses.

And how will TimesLimited be tied into the paper’s move to put up a pay wall, which it it says will launch “shortly”? It won’t, Warren says.

(Thanks to Google’s Chris Messina for spotting.)

By providing us with an easy, intuitive way of viewing and editing documents, tablets are reducing printing demand in the consumer and enterprise markets. And by increasing demand for e-books and digital magazines and newspapers, they’re doing the same thing in the commercial printing market as well. In fact, Morgan Stanley expects a decline of up to two percent in printer supplies revenue in 2011 and a two percent to five percent decline in 2012.

“CIOs in the enterprise space already expect to cut spending on printer supplies in 2011,” the research outfit said in a vast new report on the tablet market. “As the installed base of tablets–a digital document viewer that reduces the need to print both standard black and white documents and expensive color presentations–grows, we expect printed page volumes to shrink. What?’s more, 90% of iPad users already believe they would print less with access to work documents on their tablets.”

Given that, it’s no wonder HP is putting so much effort into the TouchPad. If tablets are reducing printing demand across all market strata, its printing business is clearly going to take a hit. What better way to ease that blow than to sell a tablet of its own?

Apple’s iPad success and the imminent release of new application distribution platforms from Google and other software companies threaten another seismic shift for publishers that may have far greater impact on their business models than the growth of free media on the web. Devices like the iPad offer consumers a rich reading experience and offer publishers even more targeted advertising, but the revenue tradeoff as publishers navigate the path from print to this new world is lopsided–and not in a good way.

While we all enjoy browsing publications at newsstands, over 90 percent of the circulation of U.S. magazines is delivered directly to consumers through the mail. The data and cross-marketing opportunities that these direct customer relationships provide to publishers is the fundamental underpinning of their business model.

Data informs advertising in magazines and allows for better targeting. It provides for the sale of ancillary products like books, videos and special issues. It allows multi-title publishers to solicit new readers across their enterprise. Even competitors agree to exchange lists because it benefits the industry by building more magazine readers from a pool of customers who already enjoy receiving their publications through subscription rather than by single copy purchase.

Without direct access to customers, publisher revenue will decline sharply and the publications that we depend on for in-depth reporting, news and entertainment will risk a final digital Armageddon.

Should we care? Why can’t the publishing industry just leave the world of messy ink and rural route delivery? Can’t it pivot to a less costly distribution model where customer ownership isn’t as critical?

Unfortunately, even if we assume that publishers retain their customers, there are extraordinary business challenges in transforming today’s print consumers into exclusively digital readers. And publishers can’t afford to relinquish their direct connection to readers without a more attractive economic model than the digital publishing world presents today.

Here’s why:

1. The Advertising Model Won’t Pay.

   Magazines are a wonderful advertising medium. Among the top fifty publications ranked by advertising revenues, each copy of paid circulation generates a pass-along audience that averages seven readers. Those seven readers factor heavily into advertising rates, and provide a significant revenue multiple to be weighed against the editorial, marketing, printing and distribution costs of delivering a copy to the consumer.

   What happens to this audience with a digital magazine? If a publisher wishes to be paid for its distribution, it will likely set entitlement requirements that discourage free circulation of its products. Even with integration of social networking tools to enable article sharing, publishers won’t generate more than 1.5 or two readers per copy. So the advertising revenue per circulation unit will fall due to the fact that fewer people see the ads. Even to remain constant, advertising effectiveness per copy would have to increase over four times to make up for the audience decline from seven to 1.5 readers per copy.

   Of course, most publishers believe these new digital magazines will have wonderful consumer engagement qualities that will result in a higher value being placed on their advertising. They believe digital ads will be better targeted and more efficient than print at delivering the right message to the right reader. But will that value be four times the value of print today? Not likely.

   Some argue publishers must cast their lot with free content and endeavor to survive with an exclusively ad driven model. But we need to remember the lessons of the web for most publishers. Even with the powerful reach the web provides, The Economist, The New York Times, The Wall Street Journal, Sports Illustrated and Vanity Fair would fail without the significant vote their consumers make every month by making a direct payment to the publisher.

   So editors and consumer marketers will bear a larger burden in this new mobile reading world. They’ll need to increase the revenue from consumers. And one could argue that this is a good thing, redressing the imbalance of an industry that has been too highly leveraged on advertising. But for the consumer stream to become more valuable, one of two things must happen: either the demand for magazines must rise, or the cost of distribution must fall.

2. A 30 percent Cut to the Store Isn’t a Great Deal.

   Isn’t selling your magazine through an app store and receiving 70 percent of the revenues a great deal? After all, magazine subscription agents and newsstands don’t return anywhere near that amount to publishers. But this is argument misses an important point. In iTunes and the Android Marketplace, there’s virtually no merchandising of magazine products. A magazine app must swim to the top of several hundred thousand other applications. And even in the context of a dedicated magazine store, the publisher won’t control featuring. The value of the brand must pull the consumer through to the purchase. And brands are expensive to build and nurture. So the publisher will continue to bear a high marketing cost to ensure enough sales for a stable level of circulation, just as they do today in the offline world. These marketing costs would certainly erase any advantage that a 70 percent cut would provide over the conventional agent model, particularly if the publisher cannot capture information on the customer and determine an effective ROI against their marketing expenditures.

3. Margin Must Come Before Marginal Cost.

   What about the fact that there is virtually zero distribution cost? Well despite the problems of the U.S. Postal Service, the cost of printing and distribution represents a relatively low percentage of publisher expenses–somewhere on the order of 20 to 25 percent today. Of course there are significant creative and technical costs in publishing a beautiful new magazine in tablet form. Just adapting to the variety of screen sizes, screen resolutions and operating systems requires significant new investments. These costs, together with the aforementioned ad revenue decline, more than eclipse the savings from eliminating paper and postage.

So where will this margin come from if not from the consumer?

Tablets provide publishers a wonderful opportunity to rethink their products and add more value. But no manner of reinvention will be possible if they can’t mine their customer relationships to merchandise these new products. If the relationship between the magazine publisher and customer is broken, the industry will end up like music and book publishers–removed from customers, wedded to old habits and powerless as digital delivery inevitably overtakes and diminishes the value of their physical distribution.

Lastly, let’s consider the argument from a consumer’s perspective. Nearly one out of every two Americans subscribes to a magazine today. Many will purchase iPads and other tablets over the next year. When they do, Apple and others suggest that 150 million consumers ignore their existing relationships with publishers.

In this battle over ownership consumers are the losers. They will not be able to direct publishers as they wish, choose to get both a print and digital version of the magazine, or move to digital only delivery. They won’t be afforded the opportunity to get a better value by bundling their print and digital delivery together. They won’t be able to align their print and digital purchases so that expirations synchronize and billing is simplified. They won’t be able to move their experience to the device that suits them–irrespective of the platform–and read on phones, laptops, tablets or anywhere they like. Nothing in the transition will remove friction or frustration. Is this an experience we will be proud of?

There will be a transition from print to digital delivery that publishers and software providers must manage for consumers, and not solely for the advantage of their business interests. A print magazine is informative, beautiful, portable and easy to navigate. It’s also inexpensive. There will certainly be a long period when consumers will wish to try out new forms of reading on tablets but not give up their trusted print brands.

Businesses that make these transitions easy for consumers will flourish. Consider the long path to electronic billing for the banking industry, the Netflix shift from DVDs to video streaming, or even Apple’s introduction of Macs that run Windows software. In each case, the transition strategy provided for significant long-term advantage. And most would agree that there’s a significant long-term advantage for the software industry to make friends with 150 million magazine consumers.

Here’s how they do it:

1. Allow the customer to buy access to print, digital or bundle both together with one-click convenience.
2. Create simple APIs that connect the handful of major print fulfillment houses to application storefronts so existing print accounts can be harmonized with digital access.
3. Provide for critical customer data to flow to publishers so they can refine their products and find new ways to merchandise them to consumers.
4. Build opportunities for publishers to cross-merchandise products from within their applications and utilize one-click checkout.
5. Don’t thwart retailers like Amazon and Barnes and Noble who have existing relationships with publishers. They know how to merchandize magazines and will be a positive force for competitive pricing and product development.

With these measures I think very few publishers would object to the 30 percent cut these stores wish to collect or have any significant concerns about the stores retaining the direct billing relationship with their customers. In the end, publishers would build more unique magazine products, sell more related products and encourage their consumers to buy more devices.

Of course, without such cooperation publishers will always have a choice where to play. Tablets are not made of stone and publishers are not called upon by a higher power to work with distribution platforms that are fundamentally destructive to their consumer relationships and business interests.

John Squires is a former EVP of Time Inc., and founder of Next Issue Media

The move could have major implications for a number of vendors that live on iTunes but route customers through their own billing systems. By circumventing Apple’s payment platform, those vendors avoid having to share 30% of sales with Apple.

Read the rest of this post on the original site »

Verve said the acquisition will help monetize mobile media at the local level by leveraging Deconstruct’s self-serve ad network, which allows advertisers to buy ad campaigns with a credit card.

Terms of the deal were not disclosed, and not much else is known about the company, other than its platform was built by product and engineering executives from Advertising.com, which is now apart of AOL Advertising.

Otherwise, information on the company’s Web site is fairly sparse, with a lot of its pages saying they are still in the works. Brent Halliburton, founder and CEO of Deconstruct, will join Verve as VP of product management. Prior to founding Deconstruct, Halliburton was senior director of new product development at Advertising.com. He and the rest of the team will be based out of Verve’s Washington, D.C., office.

Verve serves hundreds of media companies, and had the goal of serving 2.2 billion pages in 2010. It works with McClatchy and Belo Interactive, and has raised almost $10 million in capital from investors, including the Associated Press.

The price tag was likely small, but in the past year, mobile advertising and marketing companies have been a hot commodity (luckily, there’s still plenty to go around).

Last week, we broke the news that Facebook acquired Rel8tion, a mobile advertising company out of stealth mode for an undisclosed sum, and earlier this week Motricity said it had purchased Adenyo for up to $150 million.

Of course, these more recent deals pale in comparison with Google’s purchase of AdMob last year, and Apple’s purchase of Quattro Wireless to create iAd.