Last week, for instance, brought a fresh spate of news that suggest more people are treating Bitcoin as a serious form of money rather than a science fiction experiment. Here’s a roundup (if you want to meet people backing Bitcoin, come to our free meetup in San Jose on May 16):

Bitcoin is becoming more liquid

Gift card site Gyft has started accepting Bitcoin as payment. The significance here is that average consumers now have a forum to use their Bitcoins on a wide variety of familiar consumer brands. As Techcrunch noted, other merchants’ Bitcoin announcements (like that San Francisco cupcake shop) are largely marketing gimmicks; the Gyft news creates a real source of practical liquidity.

This development also coincides with the arrival of mini-machines that convert cash to Bitcoins and the first ATM for the currency in San Diego.

Real investors are starting to take Bitcoin seriously

Last month’s collapse, which saw Bitcoin fall from $266 to $105 in a single day, rattled speculators and undermined faith in the currency’s viability.

But that hasn’t deterred investors — including big and respected ones like Andreessen Horowitz — from putting more money into new BitCoin ventures. This week, the WSJ reported that Fred Wilson’s Union Square Ventures is investing $5 million in Coinbase, a service that provides an online wallet and easy conversion between BitCoin and traditional currencies.

Bitcoin is getting easier to understand

BitCoin discussions were once the province of quants, libertarians and cyber-geeks. Now, people are explaining how the currency is made and how it works in easy-to-understand stories. Last week, for instance, Forbes reporter Kash Hill kept a day to day diary of how she lived on BitCoin (albeit with difficulty) in San Francisco for a week.

Meanwhile, Wired’s Robert Macmillan offers a cogent account (including a video) of how his office now has a Bitcoin machine quietly mining away while using less power than the coffee maker.  (For an excellent general primer on BitCoin, see my colleague David Meyer’s “Yes, you should care about Bitcoin, and here’s why” from last month).

The government wants a piece of Bitcoin

Despite its newfound respectability, Bitcoin is still catnip for criminals, hackers and market manipulators. This notoriety led the financial crimes division of the Treasury Department to issue guidelines about Bitcoin and money laundering.

Now, Commissioner Bart Chilton of the CFTC — the agency that regulates futures contracts  – says he’s thinking of regulating BitCoin. Chilton cited the currency’s volatility and  said the government should make sure it’s not a “house of cards.”

Regulation will be tricky, however. As I explained last week, Bitcoin’s status as a currency, not a security, means it’s beyond the purview of the SEC. And while the CFTC might regulate some types of Bitcoin transactions, its overall power is limited.

“Only derivatives. We can regulate any Bitcoin future, option or swaps. I’ve not said we could regulate the actual currency–although for all I know some might have reported such. The currency could be regulated by Treasury or the Fed,” Chilton said in response to an email query.

Meet the engineers and entrepreneurs behind Bitcoin

On Thursday, May 16, GigaOM is hosting experts — including CEOs who use Bitcoin everyday as well as engineers from Facebook and Google — to explain where Bitcoin is going next. The meet-up, which costs exactly zero Bitcoins thanks to our friends at Ribbit Capital, is taking place at the San Jose Tech Museum from 6 to 9 — with time for cocktails and networking.

Getty Images

If I ever run into New York Times executive editor Jill Abramson (unlikely as it might be) I will sure as hell let her know that she is absolutely right to be excited about what her paper did with Snow Fall, which in my opinion was one of the first truly post-tablet storytelling experiences. At the Wired Business conference in New York earlier this week, Abramson said:

“Snow Fall” is now a verb.  “Everyone wants to snowfall now, every day, all desks,” she said. Reporters are waiting for time to “Snow Fall” their bigger story.  She said that the story originated from the sports desk — and took “months and months and months” of time —  but Snow Fall-type projects can come from anywhere.

Snow Fall, in case you missed it, was a multimedia project that included a gripping six-part story by John Branch, one of the Times’ Pulitzer Prize-winning writers who was intrigued by the growing number of skiing fatalities. The stories were presented with interactive graphics, videos and bios of various snowboarders and skiers. It is brilliance personified and was rewarded with 2.9 million visits and 3.5 million page views within the first six days after publication. (The Times doesn’t reveal the total traffic it received since its release in December 2012.)

Snow Fall (and other such attempts) represent a great opportunity and the future for news organizations like The New York Times, especially as they are right now in a losing battle for attention with upstart competitors that include everyone from BuzzFeed to The Huffington Post. If you are the New York Times management, it is time to take a gamble: spend $25 million on creating 100 Snow Fall-like projects.

Money for something and clicks for free

In fact, it is important that our media brethren at the Times think even bigger than that, eventhough it would also mean taking a more prosaic, mercantile and business-like perspective to what they do.

They need to NOT think about Snow Fall as an add-on — as something that makes traditional content more web- or mobile/tablet-friendly — and instead treat it as a brand-new kind of media product that is created especially for the multiple device/many-screen world.

I have been involved with online publishing for a very long time — 18 years to be exact. And in that time I have seen the incumbent media make the same mistake again and again. They’ve often tried to adapt the content they’ve created for newspapers and magazines to the online world. And when they did embrace online, even then the online reporters were asked to do the same thing they did for the newspapers or the magazines.  (The Times, to its credit, published Snow Fall first online, and then in print three days later, which suggests it had a pretty clear understanding of the digital potential of a project like this.)

Yes Dorothy, the Internet is different

The internet is and will always be an immersive, interactive and communal platform. Many publishers continue to treat it like the old two-dimensional medium. Every time we have some major news events, such as the recent Boston tragedy, the social web brings the consumers of content into our newsrooms and makes them part of the process. It is one of the reasons why most of the big media still don’t get blogs. Sure, some writers like David Carr or Paul Krugman are an exception, but look at some of the Times blogs and you see they are just news stories (or features) retrofitted for the blog medium.

Federal agents descend on the home of a suspect-at-large in the Boston Marathon bombing. Getty Images

Blogging is a way of editing the world and presenting it to my community, and that means everything from photos, links, tweets and videos, in addition to sharing my raw thoughts and fully packaged features, scoops and even basic news. Every act of sharing tells you what I am interested in and what I am willing to learn and talk about.

There is a failure in the media business to understand that the medium and the content are intertwined much like those lovers on the walls of Ajanta and Ellora caves. It was one of the many reasons why Rupert Murdoch’s The Daily failed to impress me. It didn’t really invent a new form of storytelling for the tablet.

Now take all of that as context and then understand why I keep harping on the point that Snow Fall-type products are a brand new media, a whole new style of storytelling and a model for 21st-century journalism — one that doesn’t sacrifice the best of our profession, but takes it by the scruff of its neck, and drags its bloated, aging body into the new world and revives it with a shot of adrenaline.

Mr. Excel meets Ms. Editor

Getty Images

However, that is only part of the story. The trick is not to get married to just the oohs-and-aahs of the Snow Fall, but to think of it as a business opportunity, much like the way Hollywood studios creatively monetize their blockbusters. My question is why can’t newspapers and magazine companies take the same approach and build a business model that actually factors in various opportunities that something like Snow Fall can offer?

So instead of starting with a newspaper story and adapting it to different formats, the Times should start with the Snow Fall. If you look at Snow Fall closely, you can see a cohesive approach to content, one that adapts and morphs to not only the medium of access, but to diverse business models — much like the movies.

From my own experience at magazines, I can tell you producing features isn’t cheap and can easily cost tens of thousand dollars, depending on the publication. The longer the lead time and higher the profile of the story, the bigger the costs. So from that perspective, spending some more on the post-tablet version of the feature shouldn’t break the bank.

The current editorial effort is to create something for a day or two of attention in the newspaper and hopefully for tens of thousands of pageviews. Why not start with the apps and e-readers (both paid), then follow up with the web version and then get to the newspaper. While apps and selling e-reader-oriented content might involve the Times learning new tricks, the company doesn’t need to change much for the latter two channels.

Blame my enteprenurial tendencies, but when I was experiencing Snow Fall, all I could see was stunning brand-advertising opportunities, that went beyond the dumb, commoditized advertising the Times is forced to put on its website. Why not embed a tasteful Land Rover ad or throw in one for Moncler? That is native advertising that actually allows organziations like the Times to live by their ethos and maintain the fidelity of their brand.

Hollywood, Baby

Now, let me explain why the Times can do it. And for that I will point to Hollywood again. One of the reasons why Hollywood studios succeed with the multi-tier approach to their “product” is because they do their best to ensure that they create an optimum experience. And they can do that with the right story, the right stars, the right production values and, most importantly, they have distribution. And gobs of money.

The Times and other big media companies have a lot of those same capabilities. They have great stars (real people, for god sake, are better stars than anything Hollywood can produce — see the Cleveland samaritan), they have great storytellers (editors and reporters, whose Pulitzers are testimony enough) and they have the ability to create the right production values (photographers, visual artists and designers). The Times also has a big audience – 35 million monthly visitors to their website in the U.S. alone, according to comScore – which means it has a lot of attention, which can be channeled effectively to promote new concepts.

Distribution Matters

Just as blockbuster movies get a lot of attention from media, Snow Fall got a lot of attention from the rest of the media community. Those millions of monthly visitors and lots of advertising space on print means distribution isn’t really a problem. And despite the financial headwinds, many of them — including the Times — still have a lot of money to try and finance a few dozen Snow Falls.

It isn’t clear how much money the Times spent on Snow Fall, but let’s just assume it was a small fortune. (Yes, I asked them and got this response: “We can’t disclose details about costs. Really, this is a newsroom effort. The business side works with the newsroom, of course, to provide the infrastructure and technology they need to tell stories in innovative ways.”)

And in exchange, it got a few million page views, but I am guessing they also built a nice backend infrastructure to create more such projects. As a result, the next Snow Fall is going to cost less, with most future spending going to the creative: words, photos, other multimedia elements and design.

So what will the Times (or someone like them) need to get it done? Simply put, a departure from the incumbent thinking, embracing today’s reality and re-imagining the work flow of a big city newspaper. In other words:

• Re-imagining its business model to factor in the reality of today’s world and forget the legacy of newsprint.
• Create a new breed of “producer” who can switch between Excel and content.
• Create a whole new breed of a journalist — one who has old-school values but also the ability to tell a story that works in many mediums of today.
• Build an editorial creative machine that works differently from a print-centric editorial group.

Now, if they can actually overcome their angst — and it hurts me to say this — they can change the conversation in the media business away from the increasingly shallow content and instead bring the focus back to quality and in-depth journalism, which is their stock in trade. If the New York Times management were feeling bold, it would put $25 million to work on creating 100 other Snow Falls and basically change the reader’s expectations of what long-form digital content and journalism are in the new century.

So if you want to fight BuzzFeed and HuffPo, there you go, Jill!

Felix Salmon, a popular and acerbic Reuters journalist, attempted to pour some cold water on the hype at paidContent Live Wednesday, where he spoke with a panel of native advertising apostles that included BuzzFeed President Jon Steinberg and Forbes COO Lewis D’Vorkin.

“So one percent of the time I’ll immerse myself in this beautiful listicle of cats?” asked Salmon, in reference to BuzzFeed’s promise to create ads that look and feel like the content surrouding them. Steinberg, who retorted that a very small percentage of BuzzFeed’s branded content contains cats, emphasized that native ads are superior because readers not only like them, but share them too. D’Vorkin offered a longer view.

“This is has been going on for 10-15 years … Marketers want to be seamlessly intergrated into a native product,” he said, adding that corporations spent lots of money to attract readers to their own websites before realizing it was more effective to integrate with famous media brands.

“Media partners give us credibility we can’t get on our own,” said Kyle Monson, the third member of the panel and chief creative at Knock Twice ad agency. He added, however, that native ads “can be shady sometimes” and said agencies should try to protect their publishing partners.

“Chef Boyardee put native ads on the Food Network. It’s a horribly bad deal … it’s way too downmarket for them.”

And what about the fear that native ads are deceptive? Nonsense, Steinberg said, noting that no reader will be confused since the ads are clearly marked and even a different color.

He also claimed the banner and programmatic ad industry has cooked up false tales of reader confusion on the fear that they are losing ground to native advertising.

Salmon had the last word in the native advertising debate.

“We’ve run out of time, so you get to talk English right now,” he joked, ending the panel.

(Update: I’ve removed an earlier sentence that said Steinberg exaggerated the problems of display advertising; you can make up your own mind based on the video below)

Check out the rest of our paidContent live 2013 coverage here, and a video embed of the session follows below:

A transcription of the video follows on the next page

Go to page 2 (of 2) on paidContent .

Churbuck, who helped create Forbes.com and later went on to work with McKinsey, was responding to a piece in the New York Times about the increase in sponsored content, and how it is being used in different ways by publishers like BuzzFeed, The Atlantic, Mashable and Forbes — a piece that includes some pointed criticism of the trend from blogger Andrew Sullivan (Note: We’ll be discussing this and other issues around publishing at paidContent Live on April 17)

As Churbuck points out, this focus on how sponsored content is being used by existing publishers ignores a much more disruptive force, which is brands using the same tools to “go direct,” as blogging pioneer Dave Winer has described it — something we at GigaOM and paidContent have been writing about for some time now. Says Churbuck:

“The Times missed the bigger trend: marketers going direct to their prospective buyers by becoming their own publishers, producing their own media and using professional editorial placements only to rent names, just as marketers have been renting circulation lists for decades to drive their direct mail campaigns.”

Cheap tools and an oversupply of talent

The former Forbes executive goes on to detail some of the examples of this broader phenomenon that have been growing and evolving for some time, including brand “newsrooms” such as the ones that Intel and Cisco manage — which in many cases consist of unbranded content about technology that looks indistinguishable from any other tech blog. Churbuck also mentions:

• Branded partner-produced content: These are sites that get produced in partnership with a media company, such as Intel’s “Creators Project,” which is a joint venture with Vice. Another brand that is producing its own Vice-style content is Red Bull.
• Brand magazines: As Churbuck notes, in the past advertisers like IBM or the Four Seasons hotel chain would hire the “custom publishing” arm of media companies like Forbes or Fortune to produce an advertorial magazine, but now they can easily create their own.
• The talent exodus: Senior writers and editors have been moving from traditional media to content-related positions at non-media companies — Churbuck mentions Fortune’s Rik Kirkland going to McKinsey to edit the McKinsey Quarterly and oversee the firm’s editorial strategy, Steve Hamm of Businessweek going to IBM, and Dan Lyons leaving Read/Write Web to join HubSpot.

Ignoring this phenomenon is not a strategy

As Churbuck notes, the driving force behind this trend is the desire to reach customers and potential customers directly and engage with them, and producing their own content allows them to “cut out the editorial middle-man.” It also allows them to be more agile and effective when crisis strikes, he says. And most importantly, he argues that trying to remain above the fray and not even experiment with sponsored content is a head-in-the-sand approach:

“They will either produce the content as a service to the corporate advertiser or see their former editors and reporters get hired away to do it under the more stable umbrella of a big organization with deep pockets. That the press is now selling the opportunity to publish corporate content next to their own reporting is a foregone conclusion. Hand wringing and saying one is ethically ‘aghast’ is the personification of the cliché, ‘pride goeth before the fall.’”

Post and thumbnail images courtesy of Shutterstock / Goodluz

If you’re unfamiliar, here’s how Ricochet works: a brand pays the New York Times for special versions of its story links in which a certain ad will always appear next to a given story. The brand can then distribute those stories on its website and on social media in the hopes of generating buzz. In practice, this might involve a blueberry seller paying for its ads to appear next to NYT stories that discuss antioxidants or healthy eating.

The ad tools appear to have proved popular as, in a Wednesday news release, the Times said that Forbes, Condé Nast, AdAge and People will begin to use Ricochet too.

For the publishers, Ricochet offers a way to make money from long-tail content. Meanwhile, the tool lets brands use content marketing to spread the word about a topic in the news or about one of their own products.

Michael Zimbalist, VP of R&D operations at the New York Times Company, told paidContent last year that Ricochet is a “very simple product” that clients will be able to use in an off-the-shelf fashion.

Content from the new titles, which also include sites like Ars Technica and Vanity Fair, will be available on Ricochet as of May 1.

As noted by my paidContent colleague Laura Owen and by Digiday, the Post has launched a program called BrandConnect, which gives advertisers the ability to create content — either by themselves or by working with the paper’s staff — that is then highlighted in a special section of the newspaper’s online front page. The content states pretty clearly that it is sponsored (although that doesn’t seem to have mollified some of the company’s critics so far).

Sponsored content is not necessarily evil

In all of the important ways, this doesn’t seem all that different from what newspapers have traditionally done with what they refer to as “advertorial” — that is, special sections or articles that are written like newspaper stories but paid for by brands. According to Digiday, no editorial staff are involved in creating the content, and the sponsored headlines appear in a small box that looks different from the rest of the page, much like Techmeme’s sponsored posts.

Critics like Andrew Sullivan — who recently left the Daily Beast to start a reader-funded site — argue that sponsored content is ethically dubious, and have raised concerns about the way that BuzzFeed handles such content. As Laura notes, The Atlantic has also come under fire for the way it has done some sponsored features, including one about Scientology (we’ll be talking about this more with Sullivan and BuzzFeed’s Jon Steinberg at paidContent Live on April 17).

While there are debates around how and when to publish sponsored content, and what kinds of content are appropriate for which media outlets, there are some good reasons why other newspapers and traditional media players might want to experiment with this new format as well:

• It’s an additional source of revenue: At this point in their evolution, newspapers and other traditional outlets can’t really afford to turn a blind eye to any potential addition to their revenue base, however distasteful it might appear at first glance.
• It’s something advertisers seem interested in: Rates for traditional display advertising are dropping because advertisers simply don’t see them as valuable enough any more — and arguably neither do readers.
• It doesn’t have to be ethically compromised: Like any kind of advertising or commercial relationship, sponsored content or “native advertising” can be handled well or it can be handled badly. That doesn’t mean it can’t be done in an ethically responsible way.
• It can be a valuable service for readers: If advertiser-created content provides something useful that readers are interested in, it’s a win-win for the editorial outlet, since they get paid and readers are satisfied.

Readers should be the judge of what is useful

The last point in this list might be the most important one of all: if it is handled properly, sponsored content can serve much the same purpose as unsponsored content — in other words, it can be informative and useful for readers. Isn’t that the ultimate purpose of much of what we call journalism? Media insiders might flinch at the phrase “brand journalism” or “native advertising,” but if content produced by an advertiser is helpful to a reader, is that such a bad thing?

In an interview with Beet.tv, MIT Technology Review editor Jason Pontin points out that while many journalists may not like it, users often find advertising-related content almost as useful and memorable as traditional editorial content. This was the breakthrough that Google has taken advantage of to build a multimillion-dollar business via AdWords: to many users, those ads aren’t just clutter, but are actually useful content worth clicking on.

The approach taken by some publications such as Forbes — which has a BrandVoice platform that is similar to what the Washington Post is launching — is that marketing or advertising-driven content from brands is given more or less equal prominence to that created by editorial staff, with the appropriate disclaimers. Corporate bloggers at Forbes have the exact same platform that a staff blogger does, with all the same tools.

In that environment, it is up to the reader to decide whether something is useful or not useful, interesting or not interesting, valuable or not valuable. Whether it is “advertising” is largely irrelevant. In a sense, it has always been this way — perhaps it is just becoming more obvious now.

Images courtesy of Shutterstock / Eldorado3D and Poynter

A key part of Christensen’s theory is that the incumbent players in a particular industry routinely fail to make the necessary changes to the way they do things, even when they can see the disruption occurring all around them. In almost every case, they see the disruptors as not worthy of their attention because they are operating at the low end of the market, and either don’t see that as important or are too committed to their existing business models.

Low-end competitors open up new markets

Existing players are often good at what the Harvard scholar calls “sustaining” innovation, but they are rarely good at disruptive innovation. The latter is the kind that transforms something that used to be complicated and expensive — and therefore available only to the wealthy or those with special skills — and makes it available to a much broader group of users.

So in telecom, he said, existing companies didn’t see the potential disruption from cheap flip-phones and ubiquitous cellular networks because they were too focused on large corporate customers, not individual users, and their businesses weren’t set up to take advantage of this new market:

“The flip-phone and wireless made it so affordable and accessible that people around the world could now have access to telecommunications, and in almost every part of the world, the people who were the pioneers were not the existing wire-line players because it didn’t fit their business models… I think you see this playing out in journalism too.”

Value is created in new places

Although Christensen didn’t mention them by name, the obvious low-end competitors in the media business are players like The Huffington Post and BuzzFeed — both of which started at the low end of the value chain but have been moving up steadily, a trend that Christensen’s theory also describes. The Harvard professor also made some positive comments about Forbes magazine, and what it has been able to do online compared with other traditional magazines such as Fortune and Newsweek.

“Compare, for example, Newsweek and Fortune on one side against Forbes on the next — the core business just got killed. McGraw-Hill sold Newsweek to Bloomberg for a dollar… but with Forbes, while the traditional magazine got commoditized, they’ve created different business models above and below that are really kind of interesting.”

(Note: Professor Christensen appears to be confusing Newsweek and BusinessWeek here — Bloomberg bought BusinessWeek, while Newsweek was sold for a dollar to the financier behind The Daily Beast).

The Forbes example reinforces another key point in Christensen’s description of disruption: as one layer of what technologists call “the stack” of processes that make up a business becomes commoditized, it creates value in other layers that can be captured by new players. So in journalism, Christensen says, the job of accumulating and distributing information about the world — something newspapers like the New York Times used to have a monopoly on — has become commoditized:

“As disruption occurs, it commoditizes a layer in the stack, so what used to be a high value-added activity that was very profitable and others couldn’t replicate, now becomes cheap and easy and anyone can do it. It used to be that news and information was one of those layers in the stack — no one could play that game like the New York Times… but now everyone has access to more information than they could possibly use.”

Find other jobs that news consumers want done

The key to managing that disruption, Christensen says, is to find those other value-added businesses or markets or functions — “jobs to be done,” as he calls them — that news or journalism consumers are looking for. One example, he suggests, might be taking in all of the information people are deluged by and telling them what is true and what isn’t (something mainstream media outlets often fail to do, as I tried to describe in a recent post):

“Are there jobs for which there have not yet emerged viable competitors? I’m awash in information, but I need someone who will tell me what is true, and it’s not clear that anyone has really done that job yet — the New York Times thinks they’ve nailed that, but it’s not clear to me that they have.”

Christensen also warned — as he has in the past, including in the report that he co-wrote last fall with Nieman Fellow David Skok, entitled “Breaking News” — that many existing players in the media business are trying to innovate within their traditional corporate structure, and that this almost always fails. In answer to a question about the Boston Globe, he said the approach of having a separate site called Boston.com run by a separate team was smart.

When an audience member said the site was now being run from within the Globe newsroom, however, Christensen changed his mind, saying: “Oh my gosh, really? Then put on your helmet, because it will force Boston.com to conform itself to the newsroom. That’s the way it always works, Sorry about that.” The full audio stream of the interview is available at the Nieman Journalism Lab.

On Monday, a number of sources discovered an article that had been published on Atlantic Media’s website about the Church of Scientology, and unlike much of what gets written about L. Ron Hubbard’s manufactured religion, it was a long and glowing piece about how well the church was doing — complete with positive comments congratulating the church (Gawker has screenshots of the original piece here). It soon became obvious that the story was sponsored content produced by the church, and Twitter and the blogosphere erupted in outrage.

“Seriously, that is ad-whoredom of a particularly egregious variety. The Atlantic is now partly sponsored by the Church of Scientology?” — former Atlantic blogger Andrew Sullivan

Are all sponsored posts bad, or just that one?

After much debate on Twitter and elsewhere over the ethics of this kind of publishing, The Atlantic eventually took the piece down, and replaced it with a statement saying that it planned to review “our policies that govern sponsor content and subsequent comment threads.” In a follow-up statement to a number of outlets, the magazine said: “We screwed up… We now realize that as we explored new forms of digital advertising, we failed to update the policies that must govern the decisions we make along the way. It’s safe to say that we are thinking a lot more about these policies after running this ad than we did beforehand.”

Nothing inherently wrong with @TheAtlantic's scientology post; it's just incredibly stupid and not worth the money they made off of it.

—
Ross Neumann (@rossneumann) January 15, 2013

So what was the Atlantic‘s offence in this case — was it that sponsored content isn’t appropriate at all, or that the magazine didn’t make it obvious enough that it was advertorial? Or is it that Scientology isn’t an appropriate subject for sponsored content, or not appropriate for The Atlantic? Depending on where you look, you can find arguments for all of those positions and more (we’re going to be talking about this topic with Justin Smith of Atlantic Media, Jon Steinberg from BuzzFeed and Lewis D’Vorkin from Forbes at our paidContent media conference in New York on April 17).

For the digital-media industry, however, “native” advertising is one of the few bright spots — or potential bright spots — in a landscape that is riddled with charts of ad revenue that are going in exactly the wrong direction. And it’s not just traditional media outlets like Forbes or The Atlantic that are experimenting: it’s also a critical part of new-media models at places like BuzzFeed, and even at social networks like Facebook and Twitter. Promoted tweets and sponsored stories are very much like “native” advertising, because they are inserted into the stream of regular content a user consumes.

The best thing about the Scientology ad is that it illustrates just show crappy and clumsy most advertorials are.

—
Peter Kafka (@pkafka) January 15, 2013

For native ads to work, they need to blend in

I think the big lesson from The Atlantic brouhaha is that — as Charlie Warzel points out at Ad Week — using sponsored content as one of the core components of your media strategy really ups the ante when it comes to figuring out whether an advertiser fits with your brand. What seemed to horrify many people (although not The New Republic) was the idea that a magazine they respected would provide a platform to what they see as a dangerous cult. In other words, there seemed to be a mismatch between the brand of the magazine and the brand of the thing it was helping to promote.

Similar complaints have been made about some of the content that appears at Forbes, where chief product officer Lewis D’Vorkin has created a sponsored-content style service called Brand Voice: in effect, Forbes provides brands and advertisers with a platform that is fundamentally identical — in both look and feel — to the one the magazine’s own bloggers get. That content lives or dies based on the same criteria as the magazine’s regular bloggers, namely whether it is relevant and useful to readers. But more traditional media players have criticized the magazine for diluting its brand in this way.

@dangillmor Agreed. I'm not against "Sponsored Content" but who you do business with gets reflected. @TheAtlantic Should be picky here too.

—
David Cohn (@Digidave) January 15, 2013

In the end, most online media and content companies will have no choice but to experiment with sponsored content and other forms of “native” advertising, because there just isn’t enough money coming from the traditional kind in our new world of unlimited supply and falling demand. But as The Atlantic‘s experience shows, it is easy to go astray, and the only way to avoid that kind of disaster is to keep your readers in mind: sponsored content has to be as useful as the kind you produce, if not more so, and it has to be aligned with your brand, or it will fail — sometimes spectacularly.

Post and thumbnail images courtesy of Flickr/Stephen Brace and Shutterstock/Gl0ck

There’s no question Business Insider has grown substantially since the last time Blodget opened up about his company’s performance: almost two years ago, he released some public numbers, and at that point the site — which was then about three years old — was pulling in 8 million unique visitors per month and had revenues of $5 million. The site even turned a minuscule profit in 2010, Blodget said, of about $2,000 (that’s not a typo).

In the latest update, the Business Insider founder says the site has boosted its traffic substantially, and now gets an average of 23 million unique visitors per month, or more than a million on the average day — growth that he says puts it ahead of giants such as Businessweek, Mashable and TechCrunch.

While that’s impressive, however, Blodget hasn’t provided us with some of the most important data a media company needs in order to prove its health: namely, revenue and/or profitability metrics. It’s probably safe to assume that revenues are higher than they were almost two years ago, or the site would have shut down by now — and they may even be dramatically higher, since pageviews and unique visitors are still popular measurements used by many advertisers to determine success.

But as Blodget himself notes in his presentation, the profitability of digital advertising has been plummeting over the past few years. The amount of advertising is still growing rapidly, and ad revenues are also increasing, but it’s a little like the Red Queen’s race in Alice in Wonderland: media companies are having to run faster and faster just to stay in the same place — every incremental pageview is worth less and less.

This is the same dilemma that almost every media entity is facing, from traditional players such as the New York Times to newer stars like BuzzFeed and The Huffington Post. Some of the newer entrants like BuzzFeed — and even the more entrepreneurial of the old guard, such as The Atlantic and Forbes — are trying to use more “native” advertising formats such as sponsored posts and marketing-related content to combat this problem.

It’s not clear from Blodget’s presentation whether Business Insider is doing much of this, although he does say that social “is not the be-all and end-all” for digital news sites, and that the importance of social as a referrer of traffic is “grossly overstated.” And it isn’t clear what the site is doing instead of social or native advertising — which makes it almost impossible to say whether the company is financially healthy or not.

Huge pageview or readership numbers are nice to have, but they are not enough for a business in and of themselves (just ask Tumblr, which has 20 billion pageviews a month and yet is still facing questions about its business model) unless of course you are planning to flip your business to someone much larger who already has a business model. Business Insider is going to have to answer those kinds of questions somehow, whether Blodget wants to tell us the answers or not.

Post and thumbnail images courtesy of Flickr / TechCrunch

As my paidContent colleague Jeff Roberts has reported, the deal has reportedly been in the works for some time, with rumors of a match-up between Turner and Bleacher Report circulating earlier this year. While the $175-million acquisition may not be as much as the startup’s venture backers were hoping for — since it has raised over $40 million in several rounds of financing — it’s still a healthy figure for a site with an estimated 10 million monthly unique visitors.

A validation of the UGC model

The purchase of Bleacher Report fills a nice hole for Turner: as Peter Kafka at All Things Digital explained in an earlier analysis of the potential fit between the two, the Time Warner subsidiary lost control of the Sports Illustrated and Golf.com websites earlier this year to another TW unit, and that meant a substantial loss of traffic — and the advertising that goes with it. Coincidentally enough, Bleacher Report has almost exactly the same number of monthly unique visitors as Sports Illustrated.

For Bleacher Report, the deal is a validation of the company’s user-generated content model, which some have criticized in the past as being one step away from a “content farm,” churning out aggregated or thinly-sourced content with as much search-engine optimization as possible in order to boost pageviews. Not that long ago, Bleacher Report was seen as a lower-quality version of SB Nation, which some argue takes a more professional approach to the generation of sports content focused around specific teams.

This is the same kind of criticism that was lobbed at The Huffington Post in its early days, before AOL acquired the company for $315 million and made it the centerpiece of the former portal’s digital-content strategy, and the same charge that has been levelled against BuzzFeed (which was founded by some early HuffPo backers such as Jonah Peretti and Ken Lerer), and at former Wall Street analyst Henry Blodget’s Business Insider empire. All have been accused of “over aggregation” to drive pageviews, or juicing their numbers by making use of other people’s content, or thinly-disguised traffic boosters like slideshows.

But like some or all of those other outlets, Bleacher Report has made a concerted effort over the past year or so to bring the quality level of its content up to a higher standard: among other things, the network hired professional sportswriter King Kaufman, and invested a lot of time and energy in efforts such as Bleacher Report University, where young writers were coached in how to produce professional-level content.

The disruption of traditional media continues

BuzzFeed has also been moving to broaden its appeal from just funny cat photos or internet “memes” to covering significant political and cultural issues, with the hiring of staffers such as Ben Smith, formerly of the political news site Politico. And The Huffington Post has been bulking up — and arguably raising the quality level of its content — with writers and editors from the New York Times and Wall Street Journal for some time now. Even one of the earliest sites to get the “content farm” label, Demand Media, has been trying hard over the past year to ensure that it has higher-quality content as opposed to just SEO-driven spam.

In part, these kinds of moves have probably been driven by Google’s crackdown on SEO gaming by content companies, which it has penalized with successive updates to its algorithms. But Demand and Huffington Post and others have also likely been forced to do so by the knowledge that the pageview-driven advertising game is an increasingly harsh mistress, since the value of that kind of content had been dropping steadily even before Google devalued it. With better-quality content, there is at least the potential to appeal to higher-value advertisers.

But more importantly, what Bleacher Report’s acquisition shows is that the model of user-generated content that it and others such as Forbes magazine and Vox and Seeking Alpha have pursued — in which non-professional writers emerge from a community and eventually become subject-matter experts for a specific market — can be an increasingly valuable alternative to the traditional media. Some smart media players like Time Warner will choose to take advantage of that evolution, and others will wind up being disrupted.

Post and thumbnail images courtesy of Flickr users Armchair Aviator and Rosaura Ochoa