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)
John Battelle has his own plan for riding out the holiday ad-buying slump. The founder of online-advertising network Federated Media, which brokers ads for sites like Boing Boing, GigaOm, and Dooce, can't fire writers, but he can cut the price of their ads. John, be careful. Your inbred network is made up of bloggers who are also endorsers, who also shill their own products. Your list of clients is months out of date — it includes Digg and Fark, who long ago dropped Federated. Cut ad rates too carelessly and your Rube Goldberg business model may backfire. I mean this as the highest compliment: If anyone can lay himself off by accident, that someone is John Battelle. Here's the spam that Federated sent to bloggers this morning:
BoomTown reporter Kara Swisher rappelled from a skylight at Jerry Yang's secret hideout to score this draft copy of an ad, in which a bunch of tech bigwigs come out in favor of gay marriage — or at least in opposition to Proposition 8, a California state ballot initiative which would ban it. No Valley company in its right mind would be seen opposing gay marriage, so why bother?Right: Because it's an awesome branding opportunity. The draft is a self-parody of corner office drama, full of Honorary Co-Chairs, Leaders, and Former CEOs. But the real story is: Who's missing? Sergey Brin and Eric Schmidt are here, but not Larry Page. Twitter's Ev Williams is here, but not Digg's Kevin Rose. Federated Media: Present. TechCrunch: Absent. Mark Zuckerberg is not here, but Sheryl Sandberg pulled a John Hancock: She's right up top, where Owen can't miss her. Oh, look, she's trying to make nice! She's going to be sorry.
Mark Frauenfelder launched bOING bOING, an ink-on-paper zine, in 1988. He did the artwork for Billy Idol's 1993 Cyberpunk album, using a Mac instead of a photo studio. Frauenfelder joined Wired when that was considered a foolish move by media professionals. Later he resurrected Boing Boing as a website, then again as a blog in 2000. He's now editor-in-chief of Make magazine. Does this guy have an unlimited supply of cool? Not unless he learns to say no to advertisers who co-opt him.When Frauenfelder appeared in an Apple TV spot a few years ago, his fans loved seeing their fringe-culture hero take over the boob tube. But today ads are jammed full of Internet hipsters. Boing Boing's "band manager," John Battelle, has turned old-fashioned host endorsements into an online art form at Federated Media, his advertising agency. He's holding a conference right now in San Francisco's Presidio, telling eager brand managers that endorsers like Mark Frauenfelder make them part of a conversation with Internet consumers. Battelle builds sites whose ads feature authors on whose blogs he also sells ads. It's a reputational Ponzi scheme far more complex than a George Foreman grill. Maybe that's why I flinch when Frauenfelder's face pops up on my screen with an Adobe logo and a button that says Grab Widget. Mark, if I want a widget, I'll open your magazine and make one myself.
Marc Santora, the New York Times reporter who appears in ads for Dell's DigitalNomads site, says he received no compensation for the ad, which came from an interview Santora did for Big Think, a website backed by Facebook investor Peter Thiel. What appears to have happened: Dell or its ad agency, Federated Media, created the ad for Dell's DigitalNomads, using a clip from Santora's Big Think video. In a comment, Big Think cofounder Peter Hopkins says that Dell is a sponsor of his site, but the ad does not mention Big Think. (The Big Think interview was also published to YouTube, and DigitalNomads' producers embedded the clip in a blog post.) From what Santora's saying, no one asked him or the Times for permission to run the endorsement. If so, Dell could be in rather big trouble — and not just with the Times.FTC rules forbid deceptive advertising — such as an ad from Dell which suggests a New York Times reporter has endorsed its vision of mobile technology, when he hasn't. The agency also has strict rules governing endorsements, not all of which seem to have been followed here. Bottom line: Santora seems to be the victim of a sleazy new Internet-enabled advertising tactic. He does offer this amusing side note: The one time he wrote about Dell was when the computer maker's "Dude, You're Getting a Dell" spokesman was arrested on pot charges. Here's his note to us:
Why is Marc Santora, a respected war correspondent for the New York Times, appearing in ads chattering about mobile technology? Click on the ad, running on sites like VentureBeat, and you're taken to a site, DigitalNomads, which appears to be a collection of blog-filler pablum about the wonders of the wireless Internet. Buried at the bottom is a tiny disclaimer: "Powered by Dell." Dig under the ad-placement code, and you'll see that the ad is sold by Federated Media, John Battelle's online-ad network. Battelle's outfit grew infamous last summer for getting some of the bloggers for whom he sells ads to recite a sponsor's slogan. That last time, it was Microsoft.At no point does Santora mention Dell's name. But his underlying message, that new technological gear helps us all do our jobs better, certainly serves Dell's purposes. I would have thought that the strict Times ethics code would forbid such an endorsement, paid or otherwise. Why bloody the reputation of someone who's taking a bullet to get stories for the newspaper? I've asked the Times what's going on, but haven't heard back yet. Update: Marc Santora has written in to let us know he had no involvement, financial or otherwise, with the ad — which just adds to the headscratching.
(Update: Earlier today, 10 Zen Monkeys reported that Sarah Palin's sister, the one involved in a baroque family scandal, was now working in Sausalito for John Battelle's online ad agency. We've confirmed that this rumor is false. The original post at 10 Zen Monkeys has been unpublished. In the interest of transparency to the 115 of you who read it on RSS, the original text is below.)I can't get anyone at Federated Media to confirm or deny the claim by 10 Zen Monkeys that Federated Media accountant Molly Johnson is formerly Molly McCann, and sister to Alaska governor Sarah Palin, now the Republican vice presidential candidate. Sausalito-based Federated is the agency that sells ads for Boing Boing, TechCrunch, and many more sites. It matters because Palin — and hence McCann, who may now be Johnson — will be heavily scrutinized over Palin's alleged ... oh, just read the whole thing on Wikipedia. Honestly, 10 Zen Monkey's report drips with a bit too much eagerness to take down Palin, so I don't trust their judgement yet. I'll believe it — or not — when permatanned Federated founder John Battelle gets back to us.
Anyone telling you that Federated Media, the online ad network which reps Boing Boing, GigaOm, TechCrunch and other blogs, has raised $50 million from investors is dead wrong. It's true, Oak Investment Partners and others paid $50 million for shares of Federated. But only half of that went to the company, we're told; the rest went to founder John Battelle and other employees. According to our source, Battelle's take was roughly 90 percent of the insider shares sold, or about $22 million.
High-Def Digest, a video enthusiast site with more traffic than Boing Boing, has been sold to Internet Brands, a domain-name speculator turned online-advertising network. That's bad news for John Battelle's Federated Media network, which up until now has repped the site; with Sphere's sale to AOL, it's the second acquisition this month to thin Federated's client list.
For once, tech publisher John Battelle has timed a bubble just right. With Wired, where he was a founding editor, he was too early; with The Industry Standard, the tech weekly which crashed and burned early in this decade, a bit too late. But with Federated Media, he's proved his dealmaking prowess. He's all but nailed what we hear is $40 million to $50 million in venture capital for the online-ad network , on a $200 million valuation. And this right before AOL bought Sphere, a blog search engine which, by a rough count, serves more than half of the pageviews Battelle sells to advertisers.
Federated Media is close to announcing it has won between $40 and $50 million in funding from Oak Investment Partners and others, including Omidyar Network, the investment vehicle of eBay founder Pierre Omidyar. The Series C round sets the value of the blog-friendly online-ad network at $200 million. Insiders have said past reports of Federated's fundraising were premature, but we hear the news is for real this time. At this point, we'll believe it when we see the term sheet. Do send us a copy? [PeHUB]
Matt Marshall's VentureBeat airs a rumor that John Battelle's online blog-ad network, Federated Media, has sold a large stake to Oak Hill Capital. There's logic to it: Oak Hill is a private-equity firm with which his bankers, GCA Savvian, has previously done business. Battelle, left, was on a conference call when I tried to reach him, but in the past he's offered no comment on investment rumors. Another source dashes cold water on the notion that a deal's been done. I'd be the first to tell you not all rumors pan out. What I find more interesting about the report is this line:
VentureBeat reports that online ad network Federated Media is close to raising a $30 million round of financing, at a valuation of $200 million. The deal is not as advanced as VentureBeat suggests, we hear. But let's assume a large investor is seriously weighing a term sheet. Awesomely tan tech-reporter-turned-salesman John Battelle must be torn.
When word leaked that John Battelle had hired San Francisco investment bank Savvian to "manage investor interest" in Federated Media, his online-ad network, the move raised a question: How interested were investors? $100 million interested, reports Erick Schonfeld at TechCrunch. That's the offer Battelle got, and turned down, from one unnamed investor. Schonfeld also points out this curiosity: At Battelle's last venture, the Industry Standard, the entrepreneur was the one pushing to sell out, not wait for a better offer.
John Battelle's online-ad rep firm, Federated Media, has hired a small investment bank, Savvian LLC, to "manage investor interest," according to a source close to the company. What does that mean? Hopefully Battelle wasn't giving interested investors his customary greeting, shown here. FM sells advertising and performs other services for blogs in specific subject areas. It's especially strong in tech, representing TechCrunch, GigaOm, and VentureBeat, among others. Online ad networks are fashionable among investors right now, so it's possible Federated could be entertaining buyout offers. But Battelle's choice of a banker is curious: Savvian is known for helping companies in dire straits. It's also known for getting smaller media companies sold to larger ones — such as BeliefNet, recently purchased by News Corp. with Savvian's help.
Along with gifts, wassailing, and bah humbugs, the holidays bring an onslaught of predictions for the new year that mostly aren't worth reading. But if you are interested, egoblogger Robert Scoble sits down with the Supremely Tanned One, Federated Media chairman John Battelle, to ask how he manages to make predictions that are remarkably accurate. The secret, replies Battelle to the fawning Scoble, after first congratulating himself for his success rate, is: "A lot of these are not that difficult to predict." It doesn't take the ambiguities of a Nostradamus quatrain to predict that Microsoft would buy its way into advertising, Yahoo would struggle, blogs would get better, and people would call Web 2.0 a bubble. So if you are preparing your own predictions for 2008 and want to achieve a high success rate, don't predict — just state the obvious.