Wisdom and Ignorance, Part 6: The Commies Were Right.

Here's some historical perspective.

Late 1700s. England was draining the American colonies to finance wars with France and Spain destroying the colonies' economy. Result? The colonies rebelled and formed their own country, allied with the French. Shortly after that, a similar revolution occurred in France for essentially the same reason: the wealthy depriving the poor and killing growth.

Fast forward to the early 1900s. The Romanov family sucked the very life out of the people to fund their dynasty, destroying the economy in the process. Same story, same result. The Bolsheviks didn't learn the lesson though and by the late 1900s, with some prodding from Reagan's economic boom, the little people rose up again and took down the elite.

There is something to be learned in all this.

Big Business (referring to companies with more than $100 million in revenue) has always subsidized B2B press. Small Business benefited from the free press supported by Big Business but die little to support media, and for good reason. Small business does not participate in the subsidy because it cannot compete with the advertising budgets of Big Business that the media has always courted. I've heard many times over the past decade that getting an ad sales rep to visiti was like getting an audience with the Pope. And when they did show up, there were no affordable deals to be had.

The B2B media have pretty much ignored small volume advertisers. The conventional wisdom of advertising says that for advertising to be effective you need "multiple impressions." That means you have to buy a bunch of ads, preferably once a month, at least 6 times a year. That kind of cost for something like EE Times can overrun an entire marketing budget of some start-ups. The media answers, "Well, increase the budget." But their board and investors say, "Uh, no." So in general, the media stays away from the small companies

So the media ignores small companies to go after the big advertisers, all of whom are slowly retracting their support. If the media companies could adjust their "conventional wisdom" and get 12 small companies to take out one small ad every year, it would actually provide a better return than one large company buying 12 ads in a year (no volume discounts, afterall.

But getting an advertsing manager (or an ad agency) to agree to that is next to impossible. Why, because the conventional wisdom says that you work less on one large account than you do with 12 small accounts. This is not unlike tech companies that believe there are only 5-10 customers for their business. The media industry is no different than technology companies in the way they do business.

The result of these beliefs and practices is that in this economic downturn, Big Business is turning their marketing investment inward, which downsizes the media, which chokes out competition from startups for the conversation in the market, which kills innovation, which hampers market growth. Think I'm wrong?

Sam Whitmore just finished a survey of the media about trends in coverage. What he found was more in-depth pieces by teams, not single journalists, more short pieces (news release rewrites) and blogs. The media has stopped covering regular business news because they no longer have the resources to do it. In the meantime, Big Business is building separate media worlds. In our last post, we reported that Mike Santarini (formerly of EE Times and then EDN) landed as the editor of Xilinx's in house pub, Xcell. Cisco is buying pages of Computer World and running their own content. Mentor Graphics has been doing this for years in EDA Tech Forum.

The economics of our time is slowly squeezing out the small company. Getting a B2B editor to cover the news of a small start-up is virtually impossible now. Like the Brits of 1776, The Bourbons of 1780, and the Romanovs of the 1900s, Big Business is closing the doors of the market. It is affecting the economy adversely and the media structure doesn't know what to do about it.

And we're going to need a bottom-up revolution to fix it. That's next.