iMedia: You've taken a contrarian and very pessimistic approach to next year's online ad picture.
Denton: I've been a skeptic for a good long while -- it's not like this is a sudden discovery.
iMedia: You recently pulled the plug on some sites and before that, you eliminated writer bonuses for page views. Are these the kind of hard-nosed decisions more publishers should be making?
Denton: We've been culling sites for nearly three years now; we've (thankfully) been conservative for a long while. It's rather late for publishers to be rationalizing now; they should have been evaluating their properties even during the good times.
iMedia: Many blog sites seem to be expanding, with the Huffington Post pulling in a new round of financing. Any publishers you think do a good job of managing properties?
Denton: AOL, actually, has focused most of its attention on Engadget and a few other properties -- and abandoned the no-hope titles it bought from Jason Calacanis. As a reader, I'm glad that sites such as the Huffington Post and Politico are taking up the cause of political reporting -- but we pulled out of that category because it's toxic to advertisers. What's good? Our video game site, Kotaku, seems to be doing particularly well with both audience and advertisers right now.
iMedia: Games seem like the perfect topic: need for reviews, need for tips and locus for advertisers, right? Plus, there are lots and lots of game and hardware companies.
Denton: Yes, audience and advertiser interests overlap relatively rarely. Video games, entertainment and consumer electronics are among the doubly blessed. And that's why we put most of our energy against those categories.
iMedia: When Google is asked how it will monetize new services, it always says, "We'll figure that out later." And hundreds of other internet companies have followed suit. Do you think we'll see a shift away from the internet wisdom of "We'll monetize it somehow?"
Denton: The only outfit I know that still takes that attitude is Barry Diller's IAC, which is pouring an extraordinary amount of money into Tina Brown's Daily Beast. Lucky her!
iMedia: Well, when you're a diva ... While the online ad industry is patting itself on the back, saying they'll get more ad dollars from traditional media next year, you're predicting a 30 to 40 percent spending decrease in all media. You based that on Mary Meeker's regression analysis of ad spending vs. GDP and then plugged in what happened in Japan, Sweden and Indonesia in the 1990s. Can you also give us the non-math-whiz version?
Denton: Everybody accepts that advertising is highly sensitive to changes in overall consumer spending and economic output. But the advertising analysts haven't caught up with the economists, and the economists haven't anticipated next year's plunge. The economy will perform much worse than people think and, because advertising is so volatile, it's reasonable to assume it will perform much, much worse. But you should know that I'm a congenital pessimist. I was predicting doom three years ago. Someday I might be right.
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