Content providers could do this through direct payments to carriers, Stephenson said, but according to Fierce, he also said they could subsidize data costs through some kind of advertising revenue share. The end result, though, would be the same: content providers who pay would see their traffic exempted from customers’ mobile data caps.

Randall Stephenson

Stephenson comments come a week after reports that arch-competitor Verizon Wireless is in discussions with ESPN for just such a toll-free data deal. What seemed like a crazy suggestion from AT&T and other carriers last year, now looks like it might become reality. But is it a reality we really want?

A content provider-subsidized internet would be appealing to many consumers, especially those on AT&T and Verizon since carriers have hunted the unlimited data plan to the point of extinction. Imagine streaming Netflix movies and ESPN games to your heart’s content without ever worrying about exceeding your data cap or incurring overage fees.

But as I pointed out last week there could be some major unintended — or if carriers are being really cynical, intended — consequences to adopting these kinds of subsidy models. Legally mobile operators aren’t subject to the same net neutrality guidelines as the wireline broadband providers, but if mobile carriers created two separate classes of mobile data traffic they could upset the delicate balance that makes the mobile internet the mobile internet:

… there are enormous consequences to such a deal. The biggest and most obvious consequence is that it favors one provider’s content over another. If all access is created equal, then no content has an inherent advantage over another — which is the whole idea behind the wireline network neutrality rules the FCC established in 2010. But if consumers know they can get ESPN’s content without incurring any additional charge, they’ll naturally gravitate toward that content.

There’s an even bigger risk that ESPN’s competitors won’t just get penalized in the eyes of the consumer. Their traffic flow could be penalized as well. Embedded deep within Verizon’s network are policy servers that can distinguish an ESPN packet from any other packet. Not only could Verizon use that technology to exempt ESPN traffic form data plans, it also could use that technology to prioritize ESPN’s traffic from all others. The  [Wall Street] Journal’s story didn’t mention anything about traffic shaping, but you can bet its high on the list in any negotiation.

What’s particularly noteworthy about Stephenson’s comments, though, is the mention of using advertising as a former of subsidy currency. Stephenson could just be talking about inserting carrier-generated advertising into their app ad engines as compensation for their free ride on the network. But the other implication is that AT&T wants a true revenue share, taking a cut off the top of any revenue generated from YouTube ads or any Netflix subscription used on mobile.

This is an old idea the mobile industry first proposed way before the advent of the smartphone – in an age when the mobile internet was still a walled garden and carriers its gatekeepers. The idea was that operators would become equal partners with content providers, and that’s a scary proposition. I doubt that content providers want to give the gate keys back to the carriers.

According to eMarketer, Twitter will pull in $528 million this year and $950 million in 2014 with 53 percent of that money coming from mobile ads. The firm had earlier pegged the 2014 number at $800 million.

There are two takeaways from these figures. One is the obvious observation that Twitter is killing it, and fulfilling predictions that it will become a media and advertising behemoth. The other is that Twitter is one of the only companies to crack the mobile morass — the problem, faced by many websites, in which users are moving to mobile devices but ad dollars are not.

Twitter is sitting pretty here because its mobile experience is highly conducive to so-called “native ad units” (sponsored or promoted tweets) that drop easily into its regular story flow. Twitter’s surging mobile numbers could also bode well for Facebook which is ramping up its own advertising efforts, and will likely expand options for marketers to drop “sponsored stories” (another type of native ad unit) into its mobile News Feed.

The other figure that jumps out from the eMarketer report is how much of Twitter’s ad money still comes from the U.S. The firm says that the figure was 90% in 2012 and predicts it will be 83% in 2013.

Twitter continues to hire high profile figures to drive advertising ambitions; in February, it announced the hiring of Jeffrey Graham, a Googler and former New York Times executive.

Since the “democratization of content” that was created by both blogs and social media is fairly well established now, both Svbtle and Medium seem to be focused on the process of curation and design rather than simply giving writers a new place to publish their content. How they are going to monetize this new form of curated blogging remains a mystery, however.

Svbtle was born last March, when designer and developer Dustin Curtis decided to create what he thought was a more elegant and simple way of posting content (interestingly enough, this is almost exactly the same motivation that David Karp has said was behind his creation of the Tumblr network in 2007). And while Svbtle seemed at first like a personal project involving Curtis and some of his writer and designer friends, it has grown fairly substantially, with more than 200 bloggers generating what Svbtle says in its blog post are “millions upon millions of pageviews” a month.

Svbtle admits it doesn’t know how it will make money

Curtis told TechCrunch that he raised the unspecified amount of funding from a group that includes SV Angel, the CrunchFund and New York-based incubator Betaworks (the startup also got some earlier funding through the Y Combinator program) because he wanted to hire developers, but also because he needed a “cushion for experimentation.” Among other things, the Svbtle founder admitted he doesn’t really have any idea how the company is going to monetize the content it is curating on the network.

As Curtis put it in the TechCrunch interview: “Monetizing content, especially written content, is extremely difficult. I think Svbtle’s biggest innovation will be in this area, but I don’t know what it is yet.” But he provided some clues in a response on Twitter on Tuesday:

You can't make money in publishing by monetizing the content. You have to monetize the delivery system.

—
dustin curtis (@dcurtis) November 21, 2012

Medium is also focusing on curation and design

In many ways, Svbtle seems to be aimed at the same kind of market niche as Medium, the startup that Evan Williams founded last fall after leaving active duty at Twitter — where he was a co-founder and CEO — along with Biz Stone and Jason Goldman, both of whom were co-founders and/or early staffers at Twitter and Blogger. Reinventing blogging seems like a particularly fitting task for Williams, since Blogger (which was acquired by Google in 2003) was one of the early success stories in what was then a brand-new way of publishing and distributing content online.

And like the Svbtle network, Medium seems to be focusing on the curation process as a way of adding value to the blog market: it is invitation-only, although the company has said it plans to open up to more contributors in the future. And Medium recently hired a content editor, former literary agent Kate Lee, whose job appears to be finding new writers and encouraging them to blog on Medium — as well as perhaps finding ways of distributing that content in other forms such as ebooks. But much like Svbtle, the company hasn’t given many hints about how it plans to monetize its network.

Blog networks like Pajamas Media and others were a staple of the early days of blogging too, but most failed to achieve any kind of actual business success — although some managed to earn advertising revenue through ad networks like The Deck and Federated Media, which was an early backer of blogs like TechCrunch and Laughing Squid. The Huffington Post arguably started in the same way, with a core of unpaid bloggers that eventually became a business, and so did Talking Points Memo.

Can Svbtle or Medium find an alternate route to success, possibly by imitating the “artisanal” approach taken by entities like Marco Arment’s The Magazine, which is iOS-only? That remains to be seen. But one thing seems clear: just when you thought blogging was dead, someone comes along to reinvent it.

Post and thumbnail images courtesy of Flickr user Wesley Fryer

Advertisers are expected to chase the eyeballs to mobile, though to what extent and how quickly is unclear. Mobile presents particular challenges for advertisers because they don’t have the same retargeting tools (like cookies) that they have online, the screens are smaller, and ads have the potential to be more intrusive than on the desktop. For now, marketers are spending more on ads for smartphones than for tablets, because more people own the former than the latter. But some of the metrics suggest that tablets may have better monetization potential. Click-through rates for the iPad, for example, are twice that of the iPhone, according to Inneractive, a mobile ad exchange, and thus the ad rates are also higher for the iPad.

Whether mobile ads ever catch up to online advertising in revenue will have huge ramifiations for big companies like Facebook, Twitter and Pandora whose audiences are rapidly shifting to mobile devices. Currently, the sectors that spend the most on mobile advertising are telecommunications, retail and restaurants, automotive, finance and education, according to Millennial Media. Many brands, however, are still just experimenting with mobile and are spending a very small percentage of their ad budget there.

Here’s a look at the main categories of mobile advertising, as well as some emerging strategies that publishers and developers are banking on to help close the monetization gap.

Search advertising

Still the big dog in mobile advertising, bringing in about half of all mobile ad spending. That is likely to continue as consumers turn to their smartphones as a research tool while on the go. As Google pointed out, the smartphone is often the first step in a longer research process that continues on a tablet or computer. Mobile search is also valuable for advertisers because most consumers are very intent-driven when they search on a mobile phone and are likely to complete a task after searching.

Google said that 9 out of 10 mobile searches by users have resulted in an action such as a purchase or a visit to a business. While Google, which pretty much owns this category, can obviously benefit from growing mobile search, local search engines like AroundMe and location-based services like Foursquare may also see a lift. The rise of mobile apps may also threaten Google as more consumers get their mobile queries answered through a dedicated application.

• Amount forecast to be spent in the U.S. in 2012: $1.28 billion*
• Companies with the most revenue: Google (95 percent of the market).

Rich media and video ads

These offer advertisers an often pricey way to take over a screen and give consumers what can be a more immersive experience. Advertisers can use video, animation, photo galleries and interactive elements, which can make mobile advertising more akin to a TV commercial or a slick magazine. Opera Software, the mobile browser company, reported in July that users who clicked on a rich media ad spent an average of 52 seconds viewing a video and 1 min and 25 seconds interacting with photos. Opera noted that advertisers have started using rich media and video ads more frequently this year than traditional banner ads.

• Amount forecast to be spent in the U.S. in 2012: $647.1 million*
• Companies with the most revenue: Apple iAd, Medialets, Crisp, Celtra

Banner display ads

Some of the most popular ad units in mobile are banner display adds, but in terms of ad spending, they were eclipsed by search ads last year. Display ads are still very prominent, in part because advertisers can buy in standard formats, like they’re used to doing online. But the units are problematic on small screens because they can trigger more accidental clicks.

And if advertisers keep the banners small to avoid turning off users, then they can run into another problem — namely that they’re harder to make engaging and thus easier for readers to ignore. A traditional online banner ad may fetch $3 to $5 for every thousand impressions, which is still a lot more than mobile banner ads, which receive $1 or less on a smartphone, the New York Times reported. Banner ads won’t fade overnight but they are losing favor with advertisers. Opera Software said that static and expandable banners went from 66 percent of ads in January of this year to 36 percent in June.

• Amount forecast to be spent in the U.S. in 2012: $457.5 million*
• Companies with the most revenue: Pandora, Google, Twitter, Millennial Media, Apple and Facebook

Those are the major mobile ad types that are growing. Below, are some other formats where the spending is smaller but that publishers and developers have high hopes for.

Location-based advertising 

One of the most promising parts of mobile advertising because it leverages the mobility of smartphones and tablets. But the early efforts have been slower to take off, in part because ads delivered via geo-fencing or proximity don’t necessarily catch people at a time when they want to act or don’t factor in a person’s preferences. Providers like Sense, JiWire and WHERE are getting smarter about mixing location data with behavioral profiles to deliver more relevant ads to people.

Companies like Waze, a crowd-sourced navigation app, and Roximity, which hooks into in-car entertainment systems, are showing how drivers can also be targeted with location-based ads in their car. There is a danger in being too pushy with location-based ads, and creeping out users who don’t know their location is being tracked. BIA/Kelsey forecast that U.S. mobile local ads, based on a user’s location, will grow from $664 million in 2011 to $5.8 billion in 2016.

• Early leaders: JiWire, WHERE, Sense Networks

Native advertising

The latest rage for companies like Facebook, Twitter and Tumblr. Unlike with standard ad units, publishers help advertisers create messages and content that work within the flow of their platforms. By using the existing units of content, like a tweet or update, advertisers have an organic way to advertise through mobile that is harder to ignore.

Facebook said it now gets 14 percent of all of its revenue via mobile sponsored stories and install ads, which appear right in the news steam of its mobile apps and website. EMarketer estimated that Twitter would make $129.7 million in mobile advertising this year, more than Facebook. The challenge with native advertising is that it can be hard to replicate across different publications and often requires more work to cater to each platform.

• Early leaders: Facebook, Twitter, Tumblr

Other

There are some other approaches that show that it’s not just about placing a basic ad somewhere in an app or website. Kiip (see disclosure below) rewards people after achievements and milestones during games and apps. Pontiflex lets people sign up to receive ads and offers from brands they select. Appssavvy allows advertisers to place ads alongside activities inside apps and websites. Tapjoy helps people earn in-app rewards for watching videos, installing apps or subscribing to services. Conduit is creating lock-screens for Android devices that can be branded and potentially carry advertising.

*figures from eMarketer

Disclosure: True Ventures is an investor in Kiip and the parent company of this blog, Giga Omni Media. Om Malik, founder of Giga Omni Media, is also a venture partner at True.

In a Thursday report, the industry association said online ad revenue in 2012 climbed 14 percent, from $14.9 billion in the first six months of 2011. But between the first half 2010 and the first half of 2011, revenue increased 23 percent, indicating softening growth.

When asked about the slowdown, research executives at the IAB and PwC (which conducted the study for the association) mostly attributed it to the overall macroeconomic picture. In 2010, the economy was particularly weak, making growth in 2011 look especially strong. And uncertainty in the current economy could be dragging down spending this year.

David Silverman, a partner at PwC US, also said the appearance of a declining rate of growth could be a function of the growing industry.

“As your base gets bigger, your dollar growth can be higher but as a percentage it looks smaller. That’s just going to be a natural phenomenon that will happen over time as the base continues to grow,” he said.

According to the report, mobile continues to be a big gainer, with spending nearly doubling from $636 million in the first half of 2011 to $1.2 billion in the same period this year.  But though it’s seen as a new revenue source and diver of overall growth it remains a relatively small piece (7 percent) of the overall online ad spending pie. Among all categories of online advertising, search leads with 48 percent of the spending ($8.1 billion), followed by display with 33 percent ($5.6 billion).

Rich media saw a 32 percent decrease, the researchers said, but explained that spending in that category is moving to digital video, which rose 18 percent but remained flat year over year.

Another interesting finding from the IAB report was that brand dollars are moving online at a slightly slower pace compared to previous half-year reports. But Sherill Mane, the IAB’s SVP for research, analytics and measurement, said that while performance-based advertising (in which payment is based on a direct response) seems to be currently outpacing brand advertising (which is based on impressions), dollars for the latter type of advertising are continuing to come online.

While the IAB continues to tout the health of the online ad market – and cite the strength of its growth relative to that of other mediums – the majority of ad dollars are still spent offline. Online publishers and platforms are making headway with new ad formats that deliver increasingly premium experiences, but they’re just beginning to show that they can offer measurable results.

As for advertiser categories, the report said spending by pharma and healthcare was up 81 percent to $1.1 billion in 2012 and automotive climbed 29 percent. Consumer packaged goods grew by just 4 percent but though that number seems small relative to the big gains in other categories, the researchers said it’s a solid number for a tough economy.

Image by  Tribalium via Shutterstock.

Flite’s Desktop Ad Studio has helped publishers such as Conde Nast, Forbes, BuzzFeed and others create dynamic ads that can be updated in real-time and can incorporate third-party apps such as Facebook, Twitter, YouTube, PayPal and others. Now, with Touch Ad Studio, publishers already working with Flite on premium web ads can access very similar tools to make engaging mobile ads optimized for touch screens. Touch Ad Studio is launching Tuesday on iOS and is being used by a handful of clients including Forbes and Conde Nast, which is also an investor.

CEO Will Price told me that some publishers are seeing 30 percent of their traffic come from smartphones and tablets. But the CPMs for mobile ads can be a fraction of what they get on the web. With ad networks and retargeting technology, it puts even more pressure on publishers to prevent their ads from being commoditized. He said Flite has helped publishers create unique and differentiated ads that have native elements for their publications. That allows them to command higher CPMs, which he believes can carry over to mobile.

“Having an audience isn’t sufficient, you have to come up with an ad format that is not available for ad networks or retargeting media buyers,” Price said. “Right now, publishers are recognizing that without some differentiation at the editorial level and what they offer brands, they’re not going to be able to be successful over time.”

With Touch Ad Studio, publishers can easily create ads that respond to all kinds of gestures and can be updated in real-time so the content is never stale. The ads can include photo carousels, videos and can use apps from Flite Hub, Flite’s collection of third-party applications. The studio, which will be available for Android soon, operates like Photoshop and can be used by designers without any programming skills. It also includes reporting tools to see how ads are performing.

Flite first launched as Widgetbox, making content widgets before transitioning into building mobile apps. It then renamed itself Flite as it pursued its rich media ad technology. The company has raised a total of $27 million to date including $12 million raised last year from General Catalyst Partners, Sequoia Capital, Hummer Winblad and NCD Investors.

The response came at an Advertising Week event in New York where Google’s head of mobile, Tim Reis, and other execs pranced on a Broadway stage adorned with marketing messages.

The event was fluff which is a shame because publishers face a real pickle: how can they reclaim lost desktop dollars as readers move to mobile? For now, the problem is that many ad buyers think that mobile screens are too small for effective advertising while, at the same time, consumers find mobile ads invasive.

If any these publishers came to hear Reis and other Googlers explain “how should I invest in mobile” (as the program promised), they were likely disappointed.

Reis did little more than recite familiar facts about consumers using “multi-screen touchpoints” for shopping, and spout platitudes like “a sociological shift” and “small screen, big opportunities.”

Reis’ nostrums, however, sounded like the Book of Proverbs compared to what came next.

The rest of the presentation featured over-caffeinated marketing cheerleaders who explained that Google had consulted honest-to-goodness anthropologists (with PhD’s!) who believe in the “power symbolism of small.” Just look, they said, at Tchaikovsky’s Nutcracker or little toy trucks – they’re small portals into worlds of imagination!

It descended from there. Background screens flashed images of swimming fish and tribal drummers while one of the amped-up Googlers cited the movie Grease to explain how “we want to be this quicksilver, protean self.”

What any of this has to do with the small screen marketing dilemma is anyone’s guess. I suspect the audience member who had asked how ad buyers should respond to 7-inch tablets didn’t give a fig about quicksilver, protean anything.

The only interesting part of the whole episode is why Google gave such a clunker in the first place. Perhaps the company read Peter Kafka’s story about how its search advertising business is becoming less dominant in the age of mobile. Or, maybe like the rest of us, Google is still figuring out the mobile riddle too.

(Image by Chepko Danil Vitalevich via Shutterstock)

Advertisers in the mobile space need to catch up with advances in mobile technology. Let me explain. If you have played your share of Angry Birds (either on Android or the ad-supported version on iOS), you were surely disappointed and confused when old-fashioned and unattractive display banners appeared right in the middle of such a well-designed and thought-out game. In the mobile context, display text-based banners just don’t cut it anymore.

From what I’ve seen during my time working at inneractive, a company that specializes in mobile app monetization, the discrepancy between the predictions of mobile advertising and the facts on the ground can actually be explained quite simply.

You see, the Web, generally speaking, has not fundamentally changed since its birth. True, it has evolved to a more visual platform that is less text-based, and user-generated content has become increasingly dominant. But in terms of ads, what worked early on still seems to be somewhat effective.

In the mobile world, developers need rich media advertising, and the advertisements need to be aligned with the type of apps people are using. This includes HTML5 ads and even full video advertising within apps. The point is, ads need to be just as engaging as the apps in which they appear. Developers can no longer serve some generic ad and expect to get the engagement they need to monetize an app.

And hyper-local mobile advertising is no longer a luxury, it is a necessity. Displaying an ad to a user in their local language about a venue they are passing by at that very moment will generate more engagement than a traditional display ad can ever dream of.

The problem is that rich media, hyper-local and other “newer” forms of mobile advertising are still not used by most app monetization solutions. As soon as that changes and the monetization space catches up with the smartphone and all its embedded technologies, we will see all the analyst predictions come to fruition. That is the day on which mobile advertising and app monetization in general, will explode.

Won’t be long now…

Hillel Fuld is a tech blogger and marketing expert. Fuld is also a senior evangelist at inneractive, a company that specializes in monetizing mobile apps. He blogs at Tech N’ Marketing and you can follow him on Twitter at @HilzFuld.

Image courtesy of Flickr user FamZoo.

We’ll be talking more about mobile monetization strategies at GigaOM’s Mobilize conference on Sept. 20-21.

This is noteworthy because it’s the first time that mobile users will see ads in their feed that are not triggered by their actions or those of their friends. It opens up the news feed as an advertising space that any developer can target, whether or not they have a relationship to a user or not. That may encourage investors who have been worried about Facebook’s revenue plans, especially as more traffic moves to mobile where ad space is limited. And it will likely cheer developers, who continue to look for ways to distribute and market their apps. Developers can sign up here.

Facebook has a huge audience and its mobile users are growing rapidly with more than 543 million users accessing the service from a mobile device each month. With some basic targeting by interests, demographics and platform, Facebook can serve up a pretty good mobile audience to developers willing to pay. This builds upon the work Facebook has done with App Center, which helps recommend apps to users.

But it also raises the question of how much advertising users will accept. Facebook has shunned display ads and instead pushed for sponsored stories that appear in a mobile user’s news feed. But the initial idea was to let advertisers better reach their existing fans through these sponsored stories that were engaging and interesting for users. Now, users will get hit up by developers who they don’t have any relationship with.

The new ads come on the heels of Facebook’s first quarterly earnings report, in which it generally met expectations but didn’t impress. On the earnings call, company leaders stressed the importance of a mobile and said the sponsored stories were generating $1 million a day, half of which was coming from mobile. Now, Facebook has a better shot at improving its revenue picture but the challenge will be to ensure that it can generate more money without turning off its millions of mobile users.

We do — that was that state of digital media when paidContent launched in 2002. Other weird things were happening back then too: People still got much of their news from television and newspapers, and they learned about major events after they had already happened.

There have been some huge shifts since 2002: Tablets and smartphones are now ubiquitous, lots of people read on their digital devices, and just about everyone is part of a social network or three. This summer is the tenth anniversary of our launch. In an effort to gain some perspective on the past decade in digital media, I’ve been reading back through paidContent’s archives — a collection of over 80,000 posts.

Since I was only a freshman in college when paidContent came to life, I often didn’t know, as I read through the stories from the early days, how things had begun or how they turned out. As I watched them unfold, I wanted to grab our readers’ arms and give them advice (“Don’t buy that Zune!” “Invest in Facebook!” “Go for the good Twitter handle now!”). But I also realized how difficult it is to predict success.

Some takeaways from my trip through the archives:  Some companies — AOL and Yahoo come to mind — have been consistently bad at predicting what consumers want. And a couple of companies, namely Apple and Amazon, have been very good at it. Also, being a native digital company helps, but it’s no guarantee of success (what up, MySpace?). And after all these years, it’s still not clear what content customers will pay for, or how much they’ll pay.

Streaming and Moviebeaming

What do analysts, CEOs and bloggers have in common? None of us can predict the future. Roger Ebert joked in 2002 that “on-demand streaming movies on the Web, like HDTV, are five years in the future — and will be for at least another 10 years.”

If Disney’s Moviebeam had been the only game in town, Ebert probably would have been right. When it launched in three cities in 2003, customers paid $6.99 a month to use a device that could hold 100 movies and plugged into the back of a TV set. They also had to pay for each movie they watched– billing was done via the phone line. The company went through various unsuccessful iterations before India’s Valuable Group bought it in 2008. It was never heard from again.

Netflix almost went down the same road. It had a plan to release a Moviebeam-like “proprietary set-top box with an Internet connection that could download movies overnight.” But instead, it decided to forge ahead with streaming — starting with a complicated “quota hours” system in 2007 and moving to unlimited streaming in 2008. By 2010, the majority of subscribers were streaming something, and the company began offering streaming-only subscriptions, though CEO Reed Hastings said that same year that the company would keep shipping DVDs until 2030. (We’ll see about that.)

ABC was the first network to sell episodes of its shows on iTunes, back in 2006, and to stream shows free with ads on ABC.com — and later on AOL. But by the time premium subscription service Hulu Plus launched in 2010, the platforms getting the attention were devices with built-in access, like Internet-enabled TVs, Blu-ray players, and tablets.

Return of the living dead

Speaking of AOL: It’s something of a miracle that the company still exists. In 2000, when it merged with Time Warner, it was valued at $350 billion, and the next year, more than 24 million people in the U.S. were paying for its Internet access service. By the end of last year, that number had dwindled to just 3.3 million subscribers. Here’s a quick recap of some of AOL’s miscues over the years:

• AOL Voicemail ($5.95 per month)
• A teen service called Red (featuring “a talking head—using the image of an actual employee—that uses software to answer users’ questions”)
• A digital music partnership with Burger King
• A reality show called “Gold Rush”
• Social networking site AIM Pages
• Going free
• The hyperlocal Patch blogs

Though AOL was once a high flier, no other company ever liked it quite enough to buy it. Google bought a five-percent, $1 billion stake in AOL in 2005, leading analysts to wonder if Microsoft missed out. That resulted in a $726 million writedown in 2009. Time Warner bought back Google’s stake and finally spun off “the albatross” in December 2009.  AOL is still promising a bounceback. “The executive team expects a profitable content business by next year,” CEO Tim Armstrong said in May 2011.

Yahoo hasn’t fared much better. The company launched Yahoo Platinum in 2003; for $9.95 a month, subscribers got access to audio and videos.  The program was dead by October of that same year. It later tried a Twitter-wannabe microblogging service (“Meme…where you share everything that you find that’s interesting,”). Perhaps the smartest move Yahoo ever made was not buying AOL.

Where did these companies go wrong? In 2010, former Time Warner CEO Gerald Levin pondered that question in an interview with the New York Times . The AOL-Time Warner deal was “undone by the Internet itself,” he said. “I think it’s something that no one could have foreseen, and to this day, whether Apple is going to dominate entertainment or whether Amazon is going to dominate publishing, all the old business plans are out the window. How do you get paid for content?”

Know what’s cool? A billion dollars

In 2006, an RBC Capital analyst estimated that a certain social networking company would be worth $15 billion in a few years, based on “raw, unprecedented user/usage growth.”

Six years later, Facebook went public with a valuation of $104 billion. Too bad the analyst wasn’t talking about Facebook but about MySpace. The social networking company that Rupert Murdoch acquired for $580 million in 2005 sold for just $35 million in 2011.

Why did Facebook soar while MySpace — and other social networking services like Friendster — sank? It allowed people to build real connections using their actual personal information, and rolled out a product that was ready to scale and had good technology. Other companies realized sharing was important too — in 2005, Yahoo SVP Jeff Weiner called sharing “the next chapter of the World Wide Web” — but Facebook was able to implement it in a way that kept users coming back. The site surpassed Yahoo and AOL for “stickiness” in 2009, when Nielsen found users spending an average of four hours and thirty-nine minutes a month on Facebook.

Social has already disrupted some industries — witness the rise of Twitter and the way it has changed the way news is reported, with stories like Osama Bin Laden’s assassination breaking there first. In a sign of the importance of these emerging platforms, newspapers like the Wall Street Journal and New York Times are launching “Everywhere” initiatives to deliver news to readers where they are already hanging out.

Fast food and music don’t mix

Hard to believe it now, but there was real skepticism that iTunes’ 99-cent songs would be able to compete with peer-to-peer file-sharing services. “According to academics who’ve studied the economics of digital music distribution,” we wrote in 2003, the year iTunes launched, “the cost still seems too high to attract users of peer-to-peer file trading services.” The piece cited an economist who believed “the appropriate price of a downloaded song is 18 cents.” In fact, Real Networks dropped its song prices to $0.49 in an attempt to compete against Apple.

In the end, consumers choose selection and convenience over P2P networks. We called iTunes “a kickstart for the micropayments industry.” Was it? While Steve Jobs said in 2004 that Apple wouldn’t hit its one-year, 100 million songs downloaded goal, global digital music sales crossed $1.1 billion in 2006. In April 2008, Apple surpassed Walmart  as the largest music seller in the United States.

The company that arguably started the digital music revolution — Napster — didn’t survive. Once it no longer offered “free,” it was done, though it tried to reincarnate itself: launching a mobile music service, “Napster To Go,” with AT&T in 2004 (the one smartphone that supported it could hold up to 6 songs), partnering with Circuit City on a digital music store, getting itself acquired by Best Buy in 2008 ,and then being bought back by Rhapsody in 2011. Unfortunately, Rhapsody was already losing out to newer (and free) streaming services like Pandora and Spotify.

The partnerships with Circuit City and Best Buy, though, were probably the kiss of death. One of the big trends of the past 10 years has been brick-and-mortar retail stores’ consistent failure to compete effectively against digital-native companies. Best Buy wasn’t the only retailer to try to crack the digital-content business — and fail: Target and Sears both took a shot. And McDonald’s sold digital content over its WiFi network and even tried DVD rentals in its restaurants.

Do you like the feel of paper?

Just as digital music didn’t really take off until Apple introduced the iPod, the ebook revolution didn’t take place until the arrival of the Kindle. In paidContent’s early years, ebooks were written off as a failure in part because publishers couldn’t figure out what to do with DRM. (In 2003, “temporary electronic ink” that would disappear after a few months was floated as a possible solution.) Barnes & Noble decided to stop selling ebooks in 2003, and Yahoo stopped selling them in 2004.

Meanwhile, Amazon and Google were pushing forward. Google launched Google Print – now called Google Book Search, and still besieged by lawsuits seven years later. Amazon tested two now-defunct programs: Amazon Pages, which allowed customers to buy access to digital copies of select pages from books, and Amazon Upgrade, which bundled print books with online access to the complete work.

Customers weren’t biting. Then Amazon came out with the Kindle in 2007 for $399. Less than two years later, Amazon was selling more Kindle books than print books, and ebooks now make up over 20 percent of some big-six publishers’ sales. Barnes & Noble has had some success with its Nook e-reader and digital bookstore, but bankrupt Borders shuttered all its stores in 2011. Meanwhile, the Department of Justice suit against Apple and five big publishers for allegedly colluding to set e-book prices drags on.

Good thing Steve Jobs looked beyond ringtones

A Forbes survey back in 2002 found that “business professionals” would be willing to pay for “news content to be delivered to their cellular devices,” and some media companies tried early mobile experiments. Verizon offered a cell phone version of the Yellow Pages — which, at $19.95 per year, gained 15,000 subscribers in three months. But starting in 2004, everyone decided the future was in ringtones. A $4 billion global business by the end of the year, one company projected.

So, so many ringtones. You could buy them from Rolling Stone or from an ATM-like device called E2Go. A fall 2004 marketing campaign let you mix your own ringtones on Levi’s website. Billboard launched a top ringtones chart.

Could ringtones “prove to be a passing fad”? we wondered late in 2004. Luckily, yes — a new technology came along to shake up the mobile market. No, it wasn’t the $500 ESPN phone, but the iPhone, which came out in 2007. And by opening its platform up to third-party app developers, Apple got users ready for its next ecosystem-changing device, the iPad, in 2010.

Monetizing mobile

Advertising has always been a fuzzy business — how exactly do you measure engagement and success? Well, that’s still the big debate about advertising in the digital era.  ”If here’s anything that’s really holding back ad spending on the web, it’s the lack of good measurements,” Tim Armstrong, then Google’s VP of national sales, said in 2007.

Mobile advertising has also faced obstacles. In 2006, mobile carriers began allowing advertising despite fears of annoying customers. Customers were indeed annoyed – 79 percent of them found mobile advertising annoying, according to a 2007 Forrester study — but they could “see the potential benefits of mobile advertising and marketing to themselves,” particularly if they could get a useful special offer or coupon.

Further complicating matters for advertisers: The smartphone market is fragmented among different brands — marketers don’t want to spend the money to create different ads for Android and iOS — and there are two mobile ad universes: mobile browser and apps.

Nevertheless, mobile advertising has gained ground, crossing  $1 billion in the U.S. for the first time in 2011, according to the Interactive Advertising Bureau, totaling $1.6 billion for the year.

The next opportunity is social media advertising. And once again, it will be a challenge to figure out some standardized metrics. What’s a retweet worth, anyways?

Back to where we all began

Though micropayments worked well for music when Apple launched iTunes, the path to payments for written content has been rockier. In 2004, we wrote that “micropayments today are still characterized by a large number of competing transaction types” – including direct-to-bill, merchant aggregation, prepaid accounts and direct transfer – and “each of these face the current incumbent in digital content distribution: the flat-fee subscription model.”

Eight years later, it appears that the subscription model has won out. The iPad opened the door for magazine and newspaper publishers to create new revenue selling content on that platform, but the results have been mixed. When Rupert Murdoch’s “The Daily” iPad newspaper launched in early 2011, the company called it “the model for how stories are told and consumed.” We wrote, “The bet here is that while consumers are less and less likely to reach into their pocket for a few quarters to buy a newspaper, they might not care about the 14 cents on their credit card for a copy of an e-newspaper.” A year and a half later, The Daily has over 100,000 paying subscribers — but it’s living on borrowed time and may not get through the five years its publisher has said it needs to break even.

Writing for the web, of course, has been around for awhile. At the beginning of the decade, blogging was called “nanopublishing,” and the question was how blogs could support themselves doing it. All sorts of models have arisen. For example, Gawker tried a licensing deal with Yahoo, but that relationship ended a year later. The deal “garnered way more attention than we expected, but less traffic,” Gawker CEO Nick Denton said in 2006.

Some bloggers have stayed independent and make a living from advertising (or from their day job); others write their blogs under a newspaper, website or larger magazine’s umbrella — see the Dish’s Andrew Sullivan, FiveThirtyEight’s Nate Silver, WaPo’s Ezra Klein. Or, they go to work for the Huffington Post!

Magazine companies have grappled with whether to bundle digital editions with print subscriptions or charge for them separately. Time Inc. — which first put digital editions of its magazines behind AOL’s paywall in 2003 — started out charging separately, but today Time Inc. and Condé Nast print subscribers get the digital edition free. Hearst, meanwhile, is charging separately, and it said its digital business in the U.S. became “solidly profitable” for the first time in 2011.

Could there ever be a Netflix for magazines? Time tried it for print versions with its 2008 Maghound service. It failed, due to a lack of marketing and reader interest. Magazine publishers are trying again with joint venture Next Issue Media.

Many newspaper publishers, most notably the New York Times, tried paywalls at the start of the decade and then abandoned them – only to return to the model in the past couple years.  In its most recent earnings report, the NYT said it has 454,000 digital subscribers. Is that enough to sustain the newspaper in its 21st-century transition?  Probably the best answer to that came from  Vivian Schiller. But it was in response not to the NYT’s recent digital subscriber numbers, but to the NYT’s decision in 2004 to close the paper’s first paywall, known as TimesSelect. Schiller, then the SVP and general manager of NYTimes.com, was asked whether TimesSelect had worked.  “It did work,” she said. “It’s just a matter of as compared to what.”

Birthday cake photo courtesy of Shutterstock user [Robyn Mackenzie].

TV photo courtesy of Shutterstock user [Somchai Buddha].

Zombie hand photo courtesy of Shutterstock user [lineartestpilot].

Piggybank photo courtesy of Shutterstock user [cardiae]

Fast food photo courtesy of Shutterstock user [Sergio Martinez].

Book photo courtesy of Shutterstock user [TrotzOlga].

Ringtones and apps photo courtesy of Shutterstock user [violetkaipa].

Cash register photo courtesy of Shutterstock user [titelio].

Magazines photo courtesy of Shutterstock user [bernashafo].