In my recent trip to San Francisco to speak about Content Nation I headed down U.S. Highway 101 from San Francisco with Shore's John Buckman to a string of appointments that moved towards the bottom of San Francisco Bay in Santa Clara and worked up 101 towards San Francisco again. As you may know this stretch of Highway 101 is the main artery of the bay area's tech industry, dotted with office parks that house many familiar tech brand names. I think of it also sometimes as a horizontal shopping mall for the content industry, with many of the companies that are driving the new value propositions for publishing flanking this highway as much as the hardware and software vendors that drove "big iron" used to dominate its multi-lane landscape.

At the end of our day's appointments, Rand Schulman, Chief Marketing Officer for InsideView, offered us an excellent dinner in the hills of San Francisco's residential neighborhoods during which he noted that there was another angle to Highway 101's linear relationship to content and technology. Rand observed that the bottom end of the bay was historically home to many of the companies that specialized in the lower-level aspects of the information industry such as hardware and operating systems, and that as one drove up the bay on 101 towards San Francisco you passed by the headquarters of companies that moved further up the technology "stack" towards the media-centric companies in and close to San Francisco itself. While it's easy enough to find exceptions to this rule, in broad concept it makes strong sense. If you're working for company "A" and decide to strike out on your own or to join another company, chances are you're going to choose a spot that has people who have sets and professional interests similar to your own. You see this also in the general design of places such as New York City, which traditionally had warehouses for raw materials lining the streets next to the cargo docks along the Hudson River, with the next tier of blocks dedicated to functions such as garment fabrication and the next tier of blocks inward from the river dedicated to the stores selling those garments.

Rand's model is particularly telling in relation to the content industry when you look at what happens in the middle stretch of Silicon Valley along 101. You have companies such as Google in or near Mountain View, rather on the southern-middle end of 101, that perhaps seemed to some like low-level technology plays when they were first launched that today have an enormous influence over the content industry as a whole. When Google's executives say again and again "We're not a content company" it is perhaps as much an affirmation of their south-Bay roots and culture deep in the technology stack as much as anything else. To some degree "content" to these folks means "those people at the top of the Bay." Looking at Oracle's recent acquisition of Sun Microsystems, it makes perfect sense that a company in Redwood Shores, much further up the bay from Sunnyvale, would be far more in tune with the need to move more towards serving up content solutions rather than just hardware and systems software?

In the dead center of this stretch in San Mateo you find the headquarters of Mark Logic, a company specializing in XML server technologies that enable publishers and enterprises to create content services from multiple content sources. At our meeting with the team of Mark Logic CEO Dave Kellogg we heard how Mark Logic is enjoying prosperous times, in part because they've honed much of their infrastructure for delivering their services to a highly operable and scalable level and in part because they're looking up the highway, you might say, towards opportunities that service the content end of Silicon Valley more effectively. In a sense much of the center of gravity in the content industry is heading towards such technology companies that used to be thought of as "middleware," rather industrious but supposedly dull bits of this and that that helped to glue diverse information systems together. With source-agnostic content aggregation the focus of much of the value in the content industry these days, you can hardly call companies like Mark Logic dull, much less similarly focused companies such as Google, MuseGlobal and Really Strategies.

Then at the top end of the valley you have companies like Rand Schulman's InsideView, which specializes in providing value-add context to content from multiple sources for sales force automation platforms. InsideView's "secret sauce" is its ability to parse content from both traditional and social media sources through semantic filters which identify events that are likely to be triggers for specific kinds of sales and marketing activity. That description may not sound like a traditional "top of the stack" publishing company, but in fact that's where the top end of value is in the content industry these days - not in delivering content from a single source but in adding value to content regardless of its source. So what better place to find InsideView than in the hills of San Fran itself?

Based on this new "stack" for the content industry I have to say that I was a bit confused when John Battelle noted in a recent blog that Google was going to "act like a publisher" because it may be in the process of matching display ads with news content from premium sources in its news offering. Truth be told, in the new content stack Google's been thinking - and acting - like a publisher all along. If the middle of the technology industry's stack is driving much of the value in today's publishing, then Google's contextual ad-matching capabilities are a perfect match for placing ads against the highest point in the content value chain. This is why we're seeing many major media companies such as Time, Inc. becoming more aggressive in marketing their own contextual ad matching networks - and why Battelle himself continues to operate his own Federated Media contextual ad network.

Battelle notes in his blog post "Supply means branding, and branding happens in the magical world of publishing." Well, John, the magic means something different these days - a fact that many marketers are still having a hard time grasping. The magic happens wherever people find good content, a concept that's no longer restricted to a narrow group of denizens on the top of the old content "stack." Any good content produced or contexualized by anyone can have value - either for advertisements, subscriptions or high-value enterprise services. Traders at investment banks figured this out years ago when they started parking themselves in front of computer screens connected to hundreds of information sources from around the world. That same style of content value now reaches well over a billion people in the world today. The supply that people need is the most valuable contexts for good content, not just the content itself.

There are any number of reasons why the traditional publishing industry is struggling these days, but certainly one has to look at the "stack" concept carefully to realize that the enormous technology changes over the past decade-plus of Web development rewrote what publishers assumed was their value points in the traditional publishing stack. Some still struggle valiantly to redefine technologies that will set everthing "aright" again, but who's to say that it was really right in the first place? Technology changes, and with those changes value propositions change inevitably. Here's three cheers for any and all companies who can figure out how to deliver value in the content industry - on whatever street or highway may lead to them.

Labels: advertising, content, enterprise, insideview, john battelle, mark logic, museglobal, Rand Schulman, San Francisco Bay Area, San Francisco Publishing, SiliconValley, Sun Microsystems

CNET News chronicles Microsoft CEO Steve Ballmer's assertion that the software and services giant would be making a big noise in online advertising - an assertion that's been backed up by two short-term deals and likely to be followed by other major announcements. Forbes covers Microsoft's deal with social media portal Digg to use Microsoft for most of their online advertising, a deal that displaces John Battelle's FM publishing in large part for now - though based on John Battelle's upbeat assessment of the deal FM is gaining some inroads into Microsoft. Such a deal would be good for both partners: FM has done well with a number of major social media properties but has lacked the ability to fill available ad inventories effectively oftentimes, whereas Microsoft, ever late to the game, needs to start finding some leverage in social media as soon as possible. Both deals could presage exit plans that result in Microsoft acquisitions, but Microsoft may be learning from Google that it's more important to own the context than the content.

The other deal announced by Microsoft is the acquisition of ad auctioning technology from AdECN, a capability that should enable Microsoft to succeed more effectively against self-service ad placement services such as AdSense. AdECN is modeled after stock exchanges used in financial securities markets, requiring matching sellers' inventories against offers from advertisers, dealing only with existing ad networks as its members. So in effect demand for advertising coming in from one ad network could flow over to match inventory on another ad network, with each network receiving a portion of the buyer's ad fee proportionate to their role in the brokered transaction for the end publisher's sold inventory. AdECN takes a proportionately small piece of each transaction as a processing fee, in addition to up-front membership fees to cover basic infrastructure costs.

One can see how AdECN can be used by Microsoft to match inventory from ad networks such as FM Publishing to a greater universe of advertisers being glued together by Microsoft, giving FM-affiliated properties a broader universe of buyers without having to expand its direct sales presence. One can also see how this will enable Microsoft to enable traditional publishers and advertising agencies to gain access to a wider array of online properties without having to resort to the legwork required to cut deals with an ever-expanding universe of online niche market players and advertising networks. This will become increasingly important as more micropublishers begin to service niche markets more effectively online in B2B and consumer markets. So Microsoft can play "middle man" now with any number of media players, making easy money in the process and developing more direct sales and marketing relationships where it is most profitable for them to do so.

Given Microsoft's relatively late moves into trying to dominate online advertising a brokered market approach is a good strategic move. It enables Microsoft to gain the benefits of broad market penetration while enabling advertisers and publishers to work directly with the ad networks that make the most sense for their industry profiles. Given the increasingly niche-oriented nature of online advertising this may offer Microsoft more flexibility than a one-size-fits-all network like Google's AdSense network or its potential acquisition DoubleClick. The main weakness in this strategy is that it doesn't help Microsoft reach the "long tail" of advertisers as effectively as Google and Yahoo straight off, but in time Microsoft is likely to make inroads there as well. As its software revenues from tools that create content weaken Microsoft has little choice but to seek revenue from the content that's created by publishing tools. It's early days but expect Microsoft to develop some increasingly savvy solutions for ad buyers and sellers in search of the most premium online content markets.

Labels: adecn, advertising, Deals Partnerships and Sales, fm publishing, john battelle, Microsoft, steve ballmer