@ Ad:tech: Jon Miller: People Will Pay For Premium Content—Kindle Is A Good Example

A day after News Corp (NYSE: NWS) posted higher Q3 losses in its Digital Media Group (fka Fox Interactive Media) resulting from lower search revenue and restructuring costs, Jon Miller, chief digital officer/chairman and CEO of the company’s interactive unit, opened day two of Ad:tech NY saying that display advertising is not getting its due. “Only 3 percent of ad dollars make it into display, while 30 percent of consumers time with media is spent online,” Miller said in a conversation with Drew Ianni, Advisory Board Chairman, Programming, ad:tech expositions.

Turning to the pay vs. free argument, Miller began by saying that unless you have premium content, you don’t have a place to start. One venue of premium content is the Kindle and consumers appear to have responded positively, at least initially. “People are willing to pay for Kindle. For example, I pay for my Journal on the Kindle. But I don’t think people are going to pay for scores or to learn that the Yankees won the World Series last night. I envision a day when most news consumption is through mobile readers. The same for TV and movies.”

There’s definitely a role for networks and exchanges, Miller said, after discussing the deals between the Fox Audience Network, which represents 700 (mostly) third-party sites, and ad agencies such as Omnicom and the just-announced arrangement with WPP. But he believes that ad nets will be eclipsed by ad exchanges. “The industry is moving to exchanges now. Going forward, we’re going to a real-time bidding situation. But it’s not there yet, there are some issues. If you’re on the buy side, you could be in the arbitrage business. But it potentially puts you into conflict with your clients. It’s not been an accepted model here. Dentsu, in Japan, buys inventory from networks in Japan and sells it to its clients. So they can do it.”

Ianni interjected a point about Dentsu, noting that they can do that because they have practically a monopoly in that country. Miller: “I don’t think I want to get into that issue.”

Then, switching gears to MySpace and the attempts to rebuild that brand, Miller talked about it in contrast to Facebook. “To win in social media, you have to build a site that is interest-based—you focus on what people into. Facebook is about what people are up to. MySpace is about what people are in to. That sets the stage for more premium content.”
As for the next big thing, Miller said something will come along and it might not turn out to be a very popular micro-blogging tool. “If you look at the last month, Twitter’s numbers have started to flatten. It could be a hiccup. It’s not a youth phenomenon. It’s adult. And the changes of Facebook could have affected Twitter. That’s a real possibility.”

I caught up briefly with Miller after his presentation and he offered an elaboration on his views about Kindle and the problem News Corp. and others have voiced about Amazon’s revenue split, which is generally 70/30 percent in the e-commerce company’s favor: “We don’t think there’s a fair valuation in the split with Amazon (NSDQ: AMZN), but we think the service is great.” As for whether there are any existing revenue share models that would appeal to newspapers like the WSJ, Miller gave a plug to Hulu, which News Corp. shares with NBC Universal (NYSE: GE) and ABC. “We want to look for something closer to Hulu’s revenue share, which we feel values the content.” Asked to cite the specific revenue share Hulu offers its content suppliers, Miller turned away and said, “Check with [Hulu CEO] Jason Kilar.”

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