The death of conversational marketing

An unproar in the world of tech blogs is uncovering a broader fault line between writers and advertisers. Om Malik's GigaOm and his other blogs have dropped their outside ad-sales firm, Federated Media, a startup run by John Battelle. Federated isn't just another ad network, nor is Battelle just another entrepreneur; he helped start Wired and The Industry Standard and an author of a book about Google, thinks that the future of marketing is conversations. And he launched Federated around that notion. Rather than shouting at readers with ads, marketers will use blogs to engage with their readers — and pay handsomely for the privilege. That's his theory, at any rate, which he is expounding in a forthcoming book.

The reality: Battelle's dream of conversational marketing has turned into something more like the schlocky endorsements radio hosts get paid to do. By falling so short of his rhetoric, Federated's experiments have mostly ended in embarrassment, both for him and the bloggers he represents. Last year, he roped Malik and other writers into a scheme to have them recite a Microsoft slogan. And though Battelle apologized for that advertising campaign, he's conducting a similar campaign for Intel — though he has wisely picked so-called "social media marketers" with less journalistic credibility to lose; most already willingly shill for products on Twitter, Digg, and the like.

That's the insult. But Battelle's company has also delivered an injury, in the form of an abrupt slashing of advertising rates. GigaOm, TechCrunch, Silicon Alley Insider, and a host of other tech blogs represented by Federated have had their official rates cut 35 percent; deals negotiated with large advertisers are presumably being struck at even steeper discounts.

So Malik has taken his business elsewhere, to IDG, the publisher of PC World and several other large technology trades. As with Federated, IDG will sell ads, keep a large portion, and share the rest with Malik's company; 30 to 40 percent is a typical commission in the business. IDG has a vast army of salespeople to serve its print publications; as the print business vanishes, it makes sense to busy them with selling online advertising. Federated, meanwhile, has had to assemble its sales team from scratch.

Federated's slogan is that it is "author-driven." What does it say that an author has been driven from its ranks? Malik and Battelle are both savvy businessmen who know each other well. (I have known both for a long time, too, and edited their columns at the late Business 2.0 magazine.) IDG simply cut Malik a better deal, I believe — and no amount of rhetoric about "serving authors" from Federated could make up for the financial shortfall. In every negotiation, the time arrives to wrap up the conversation and strike a deal.

(Photo by Scott Beale/Laughing Squid)

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