Yesterday, the front page of the Los Angeles Times featured the start of a four-part series on a quarter-century marriage between a well-regarded lawyer and an Aryan Brotherhood inmate (link).  Today, I read that newspaper advertising revenue has seen a stunning drop of 18% in Q3 compared to the same period in 2007 (link).  So how are these two things related and what’s a newspaper to do?

I have to confess that I did read the article, and it was an interesting read – I’m glad I read it.  But, I like print newspapers, and I want them to survive.  And despite their appeal, long-form articles like this just don’t belong in a daily newspaper anymore.

The decline in advertising revenue isn’t a result of this kind of reporting, but these narratives should be one of the first casualties as newspapers look to cut costs.  A friend of mine, familiar with such matters, recently told me that veteran L.A. Times reporters used to refer to their paper as the “velvet coffin”, because if you navigated the structure correctly, you could end up writing just a handful of plum stories for ~$200,000 a year and spend most of the year researching and writing books.  You’d have an unusually cushy job that you’d want to keep until you died (a little exaggeration never killed anyone, no pun intended).

That was all well and fine in less austere times, but with the newspaper industry losing billions in ad revenue, only the lean will survive.  These types of articles (including a recent one about a post-war LAPD gang squad) are routinely based on months of research and, in the case of the gangland story, 100+ interviews. While vastly informative, there are better vehicles for this reporting – like magazines and books.

My thought here is that in order to survive, newspapers will increasingly face challenging and unpleasant business choices.  The adage of “cut once, and cut deep” is one that is oft considered by executives facing the unfortunate prospect of layoffs, but I think it also applies here.  I’d rather see newspapers make dramatic changes one time and immediately – with an eye towards future sustainability – than witness the print newspaper undergo a slow death by a thousand cuts.

There are scores of changes that publishers will need to consider, and the elimination of the long-form, multi-part narrative is just one small recommendation (maybe pennies in the pot… but you need to start somewhere).  By no means am I an expert on such matters, but I do know business basics, and I know that no business will last long when expenditures exceed income.

With future advertising losses expected to continue, now is the time for newspapers to explore new ways of remaining viable.  I’d like to see print survive … who’s up for the challenge of ensuring that it does?

Via Preston Blog, the National Retail Association is forecasting 17% growth in 2008 for the Internet sector – with sales ranking in at $204 billion.  While the rest of the retail industry is expecting flat sales, it makes sense that growth will continue online.  As the economy depresses, more people will look to the web for the best deals, particularly on big-ticket items.  That said, 17% might be a stretch if the economy is hit worse than expected.

Seth Godin says Internet shoe retailer Zappos wants you to use their customer support services:

Zappos wants you to call their 800 number. They want you to order too many shoes. They want you to return (at their expense) the shoes that don’t fit.

This is so diametrically opposite of how many companies function today – and indeed, it is to their loss.  A few weeks ago I wrote about consumers who are greedy with customer service resources and push companies to the limits.  With the exception of that very small group, firms should in fact strive for that additional contact with the customer.

At each contact, it is another chance to exceed expectations and to solidify the relationship.  A marketing professor of mine once shared an anecdote about a study conducted by a hotel franchise.  The study looked at three groups of hotel guests:

1. Visitors who had a great stay, with no problems, whatsoever
2. Visitors who had a bad stay (unresolved issues)
3. Visitors who had a bad experience of some sort or another, but the hotel bent-over-backward and resolved the issues (they gave 110%)

I’m sure you can guess which guests were most likely to return AND refer their friends – Group 3!  That’s because the hotel not only resolved the issue, but they exceeded the customer’s expectations by offering even more.

That’s why Seth Godin says Zappos wants you to return your shoes.  They want to show you how awesome they are at taking care of you.  They want that extra contact with you so that you can come to the conclusion that “Hey, shopping with Zappos is easy and I know they will take care of me if I have a problem.”

If your company isn’t following this model, you’re literally bleeding a large portion of your customers and losing in the loyalty game.  The customers you’re leaving behind will not only shop at another company next time around, but they’ll also tell their friends how awful you are.

Seth Godin thinks it’s hard to be as good as Zappos when it comes to service.  I disagree.  I just think that the upfront costs are high and many firms are unwilling to make that sacrifice for long-term gain.

Wired is reporting on the recent AdWords CPC increases that have taken a toll on arbitragers and others. The argument in favor of these increases is that it allows Google to display fewer (but more relevant) ads, thus increasing the CTR.  On the flip side, some ad buyers are saying that it simply costs more now and the traffic isn’t converting to compensate for the difference.

I am curious if this increase also took effect across Google’s AdSense network?

Piper Jaffray added Netflix (NFLX) to its Alpha list, signaling that the stock displays potential for solid near-term appreciation [link]. To back its outlook, Piper cited Blockbuster’s weaknesses and the fact that rent-by-mail currently makes up only 20% of the movie rental market.

I totally agree, in the short term. However, in the long term, I think Netflix has its work cut out for it, if it is to continue growing in the age of bundled cable/internet/phone/whatever packages. I have no data to back this up, but it is my initial reaction that as “on demand” watching becomes more accessible with cable packages, folks will be more inclined to just click a button and watch the movies that their cable provider is offering.

I realize that NetFlix has an excellent “watch instantly” feature, but most folks aren’t going to be bothered connecting the computer to the television. And television still is the reigning champion when it comes to watching movies.

So I wonder: Will NetFlix continue to innovate its way out of a potential pickle? Or will it go the way of Napster and become irrelevant?

Disclaimer: I don’t have a position in any of the companies mentioned, though I am a NetFlix subscriber.

Matt Heaton, the founder of BlueHost (the firm that I use to host this site) wrote in his personal blog about the difficulty in balancing customer service needs of hundreds of thousands of customers [link].  He writes that the vast majority of folks contact customer service as needed, and don’t exceed the normal unspoken boundaries that a rational person would adhere to (we’re talking 50 calls/emails to customer service a month).

Then he writes about another group, I call them customer service greedy, who leap over this boundary:

These are the people that are generally new to web hosting and have expectations that are almost impossible to meet. They demand the world, don’t/won’t understand what responsibilities fall under their control (domain issues, script security, etc) and what is under our control (servers, network connectivity etc). Often they will call as many as 50 times in a single month for support and hand holding. These are the people that REFUSE to learn on their own and constantly require us to do everything for them. For their $7 a month they expect instant answers to their questions via phone, chat, and email, and tolerate no faults on our side as if they have a cluster of managed dedicated servers. These customers cost us 10-50 times what they pay us and threaten to leave when things don’t go their way.

I believe it is of the utmost urgency for businesses to provide the highest level of service to all their customers (something BlueHost does very well).  That being said, as part of my work, I’ve always been in communication with customers/clients, both on a close level and at the periphery.  And there can definitely be a *very* small core of folks who are extremely greedy with the finite customer service resources available.  These people can be a drain on the system, causing delayed service for everyone else, and not only eat into profits, but potentially resulting in price increases for everyone.

Sprint recently went so far as to terminate the contracts for thousands of these ‘bad customers’ [link].  Now, I don’t think this was a necessary step – maybe it should have been a last resort.  A more rational approach would have been to notify the greedy group that if they wish to continue to receive exorbitant service, they will have to pay a premium for it.  I think BlueHost should consider doing that.  Hire a few extra customer service reps to handle these trouble accounts, and charge them each an extra x amount per month for a premium service package.

Try to make some lemonade out of those lemons, Matt.

GS has discontinued the practice of free soda for employees.

As Valley Wag points out, this is Silicon Valley’s favorite perk. I guess Wall Street types can’t be lured in with the promise of bottomless sugar water.