About Frédéric Filloux

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2015 Digital Media: A Call For a Big Business Model Cleanup 

 

by Frédéric Filloux

Digital media are stuck with bad economics resulting in relentless deflation. It’s time to wake-up and make 2015 the year of radical — and concerted — solutions.

Trends in digital advertising feel like an endless agony to me. To sum up: there is no sign of improvement on the performance side; a growing percentage of ads are sold in bulk; click-fraud and user rejection are on the rise, all resulting in ceaseless deflation. Call it the J-Curve of digital advertising, as it will get worse before it gets better (it must – and it will).

Here is a quick summary of issues and possible solutions.

The rise of Ad Blocking system, the subject of a December 8th, 2014 Monday Note. That column was our most viewed and shared ever, which measures a growing concern for the matter. Last week, AdBlockPlus proudly announced a large scale deployment solution: with a few clicks, system administrators can now install AdBlockPlus on an entire network of machines. This yet another clue that the problem won’t go away.

There are basically three approaches to the issue.

The most obvious one is to use the court system against Eyeo GmBH, the company operating AdBlockPlus. After all, the Acceptable Ads agreement mechanism in which publishers pay to pass unimpeded through ABP filters is a form of blackmail. I don’t see how Eyeo will avoid collective action by publishers. Lawyers — especially in Europe — are loading their guns.

The second approach is to dissuade users from installing ABP on their browsers. It’s is up to browser makers (Google, Microsoft, Apple) to disable ABP’s extensions. But they don’t have necessarily much of an incentive to do so. Browser technology is about user experience quality when surfing the web or executing transactions. Performance relies on sophisticated techniques such as developing the best “virtual machines” (for a glimpse on VM technology, this 2009 FT Magazine piece, The Genius behind Google’s browser  is a must-read). Therefore, if the advertising community, in its shortsighted greed, ends up saturating the internet with sloppy ads that users massively reject, and that such excesses led a third party developer to create a piece of software to eliminate the annoyance, it should be no surprise to see the three browsers providers tempted to allow ad blocking technologies.

Google’s is in a peculiar position on this because it also operates the ad-serving system DFP (DoubleClick for Publishers). Financially speaking, Google doesn’t necessarily care if a banner is actually viewed because DFP collects its cut when the ad is served. But, taking the long view, as Google people usually do, we can be sure they will address the issue in coming months.

The best way to address the growing ad rejection is to take it at its root: It’s up to the advertising sector to wake up and work on better ads that everybody will be happy with.

But reversing this trends will take time. The perversity of ad-blocking is that everyone ends up being affected by the bad practices of a minority: Say a user installs ABP on her computer after repeated visits on a site where ads are badly implemented, chances are that she will intentionally disconnect ABP on sites that carefully manage their ads are next to zero.

As if the AdBlock challenge wasn’t not enough, the commercial internet has to deal with growing “Bot Fraud”. Ads viewed by robots generating fake — but billable — impressions become a plague as the rate of bogus clicks is said to be around 36% (see this piece in MIT’s Technology Review). This is another serious problem for the industry when advertisers are potentially defrauded with such magnitude: as an example, last year, the FT.com revealed that up to 57% of a Mercedes-Benz campaign viewers actually were robots.

In the digital advertising sector, the places to find some relief remain branded content or native ads. Depending on how deals are structured, prices are still high and such ad forms can evade blocking. Still, to durably avoid user rejection, publishers should be selective and demanding on the quality of branded content they’ll carry.

Another ingredient of the cleanup involves Internet usage metrics — fixed and mobile. More than ever, our industry calls for reliable, credible and, above all, standardized measurement systems. The usual ‘Unique Visitor’ or page views can’t remain the de rigueur metrics as both are too easily faked. The ad market and publishers need more granular metrics to reflect actual reader engagement (a more critical measure when reading in-depth contents vs. devouring listicles dotted with cheap ads). Could it be time spent on a piece of content or shares on social networks? One sure thing, though: the user needs to be counted across platforms she’s using. It is essential to reconcile the single individual who is behind a variety of devices: PC, smartphone or tablet. To understand her attention level — and to infer its monetary value, we need to know when, for how long, and in which situations she uses her devices. Wether it is anonymously or based on a real ID, retrieving actual customer data is critical.

The answer is complicated, but one thing is sure: to lift up its depleted economics, the industry needs to agree on something solid and long-lasting.

The media industry solutions to the problems we just discussed will have a significant impact on digital information. As long as the advertising market remains in today’s mess, everybody loses: Advertisers express their dissatisfaction with more pressure on the prices they’re willing to pay; intermediaries — media buying agencies — come under more scrutiny; and, in the end, publisher P&Ls suffer. The two digital world ‘mega-gatekeepers’ — Facebook and Google — could play a critical role in such normalization. Unfortunately, their interests diverge. There is not a month when we do not see competition increase between them, on topics ranging from user attention, to mobile in emerging markets, internet in the sky, and artificial intelligence… At this stage, the result of this multi-front war is hard to predict.

frederic.filloux@mondaynote.com

Fear is not an editorial option

 

by Frédéric Filloux

Anglo-saxon media that refused to publish religious caricatures should revise their position. This is the worst time to surrender to self-censorship and politically correctness. There is a too much at stake, here. 

As I’m writing this column, sharpshooters are positioned on the roofs of my neighborhood, a hundred yards away from Place de la Nation where hundreds of thousands of people will gather in the memory of the 17 people killed in last week terror attacks. France is in a state of shock, the emotion is overwhelming, and the concern is growing as everyone realizes the size and depth of French Jihad networks.

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[Place de la Nation Sunday night, photo Zoé Filloux]

While anti-semitic attacks are, unfortunately, not a novelty in France, the retaliation on news media now takes the shape of professionally executed targeted assassinations. From now on, every media publishing offensive cartoons could suffer Charlie Hebdo’s fate. This is what happened to the Hamburger Morgenpost: firebombed this Sunday at 2:00am — exactly in the same way as Charlie Hebdo was four years ago.

France is not through with terrorist attacks. Friday evening, hours after SWAT teams stormed the kosher supermarket, the Interior minister painted a grim picture of what’s ahead. ‘Over the recent months’, he said, ‘103 legal procedures have been initiated against terror cells, involving 505 people. There is not a single day in which I don’t take an operational decision regarding this issues’. More broadly, law enforcement estimates the threat at 1200 “potential jihadists”. Several hundreds of them are under surveillance.

On the investigative site Mediapart, former counter-terrorism magistrate Gilbert Thiel said this:

“Our problem, today, is that we went from 100 people to monitor in 1995 to 1000 today. Between 12 and 20 law enforcement people are needed to keep track of one single individual on a 24-hour basis. Then we discover that the individual’s friends and relatives need to be monitored as well. At some point, we’re swamped.”

To make the problem worse, counterterrorism experts quoted in Le Monde believe than 3000 to 5000 Europeans are fighting in the name of Jihad in Syria and Irak; half of them are said to be identified after their departure and 20% are coming back, most of them brainwashed and not in a sunny mood.

Unlike the September 11th era of terrorism where attacks were engineered from abroad, today, Al Qaeda and ISIS have been very good at exporting terrorism into the social fabric of Western countries, encouraging the emergence of widespread, independent micro-cells with people, usually coarse (as heard in the audio recordings of last week’s perpetrators), but quite effective at using kalashnikov rifles and explosives.

Let’s come back to the cartoons. I think news media that balk at republishing caricatures of the Prophet Mahomet are ill-advised. This is the worst time to yield to self-censorship and politically correctness.

I wasn’t personally a fan of Charlie Hebdo. Ten years ago, it published an article saying, in substance, that the newspaper I was editing at the time — 20 Minutes with its 3 million readers and a staff of 80 fine reporters and editors — didn’t deserve to exist. The Charlie Hebdo author said that he’d prefer that people read nothing rather than a free newspaper – a genre that was unanimously loathed by the “noble” paid-for news media at the time. Charlie was then under the editorship of a sectarian character, a friend of Nicolas Sarkozy’s wife Carla Bruni, a fact that helped him land a managing job at Radio France for a quickly forgotten tenure. At the time, the written part of Charlie wasn’t the paper’s best. But its cartoons were. Definitely. I deeply believe that satire and caricatures are an important component of free speech; because of this, Charlie has every right to exist and I really hope it will survive. (Frankly, I doubt it as most of its great talents have been killed.)

Among many comments I read, I spotted an editor saying that he doesn’t feel like putting his staff at risk by re-publishing Charlie’s cartoons.

I can’t disagree more. As unpleasant it is, I think it’s part of the job.

In February 1989, I was a young reporter at Libération when a fatwa was issued by Iran then leader Ayatollah Ruhollah Khomeini against the Salman Rushdie author of The Satanic Verses.  The first reaction of Libération was to publish large abstract of Rushdie’s novel. Needless to say, in the months afterward, we operated under serious police protection. To every staffer of the paper, this was obviously the right decision to make (we were actually quite proud our editors.) Later, when the Danish newspaper Jyllands Posten published 12 cartoons that trigged scores of violent demonstrations across the world, Libé republished most of the cartoons.

In his style, Charlie Hebdo went many steps further, its editor Stephane Charbonnier (“Charb”) was put on a hit-list by the Yemen-based, pro-Jihad, magazine Inspire, along with other writers and cartoonists.

In 2011, the paper a satirical issue titled “Charia Hebdo”, “guest edited” by the Prophet Mahomet with this front page:

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[“100 lashes if you don’t die laughing”]

Quickly after, the magazine was firebombed, and English and American newspapers published this pixelated image:

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And last week, The Telegraph, among many others, opted for a carefully cropped version of the photograph of “Charb” holding the controversial front page:

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Certainly not the finest hours of the Anglo-saxon press.

That’s why, I felt bad for The New York Times when I read its convoluted justification for censoring itself. (BuzzFeed and The Huffington Post did publish the drawings.)

Publishing controversial caricatures is a mandatory mission for news media.

First, because it’s newsworthy; readers must see by themselves what this is about without the filtering of virtuous editors who entitle themselves with the right to decide what their audience should or should not see.

Two, when it comes to caricatures, the line between fun, sharp and excessive treatment is blur. It is completely subjective. In 2011, Le Monde cartoonist Plantu published this drawing:

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[The handwriting says: “I must not draw Mahomet…”]

He might be seen by devout muslims as crossing a religious boundary (Plantu is one of France’s most talented and courageous cartoonist.)

Would the New York Times, The Telegraph and others, pixelize Plantu’s work as well under the pretext might find if offensive and retaliation might ensue?

Then what about real journalistic work, investigative series, video reporting, documentaries about such sensitives issues? If one day extremists decide to use rifles and explosives against journalists and documentary makers, to what extent will these cautious news organizations refrain from picking up great — but dangerously hot — stories ?

Over the last days, we’ve seen pundits stating that the millions people marching in France were the proof that extremism had failed. They are wrong. The battle has just begun, and it’s not the time to balk.

frederic.filloux@mondaynote.com

350_Pencils
[3.7 million people marched this Sunday across France. Photo: “Charlie”]

My Best Reads This Year

by Frédéric Filloux

For this year’s last Monday Note, I chose to share a few interesting topics I followed in 2014. I expect many of them will stay high in next year’s news cycle. Here are my picks, in about 40 links.

The Great Mobile Takeover…

Next year, the vast majority of media will see more than 50% of their traffic coming from mobile devices (Facebook is way ahead with 65%). We might see a new breed of mobile-only quality media, but the ecosystem still has to come up with ad formats that don’t irritate audiences, and adjusting revenue streams won’t be easy. Last October, Andreessen Horowitz’s Benedict Evans came up with his Mobile is Eating the World stack of data. It goes in the same direction as Mary Meeker’s bi-annual State of the Internet slide deck, thus reinterpreted by the Atlantic : Mobile Is Eating Global Attention: 10 Graphs on the State of the Internet.

… And How it Will Impact “The Next Billion”

Quartz coined the “Next Billion” phrase and went on to build a cluster of conferences around it (the next is May 19 in London). If 85% of the world population lives within range of a cell tower (including 2G connectivity), 4.3 billion people are still not connected to the web. They will do so by getting a smartphone. According to the GSMA trade group, the number of smartphones will increase by 3 billion by 2020 as the infrastructure is built and handset prices keep falling (they cost currently less that $75).

More in this series of links from Quartz:

Internet cafes in the developing world find out what happens when everyone gets a smartphone
How to map wealth in Africa using nothing but mobile-phone minutes
How to sell gigabytes to people who’ve never heard of them
This mobile operator wants to charge $2.50 a year for access to Facebook
Kenya’s merchants are warming up to a payment system born in a Seattle basement

Last Fall, BusinessWeek ran a special edition about tech outside Silicon Valley. I found these two pieces:
China’s Xiaomi, the World’s Fastest-Growing Phone Maker
Ten Days in Kenya With No Cash, Only a Phone in Nairobi.

Thanks to fancy technologies, 2015 will see all Internet titans competing for these billions of potential customers. In 2013, Wired came up with The Untold Story of Google’s Quest to Bring the Internet Everywhere—By Balloon, followed by this recent update, Google’s Balloon Internet Experiment, One Year Later.

Time Magazine broke all limits of “access journalism” (lots of space in exchange of an exclusive) with this cover story:

facebook-cover

It’s  a nine pages quasi-stenographed account of a press junket arranged by Facebook in India. In it, Lev Grossman “soberly” sums things up:

Over the past decade, humanity hasn’t just adopted Facebook; we’ve fallen on it like starving people who have been who have been waiting for it our entire lives as it were the last missing piece of our social infrastructure as a species.

Since it is behind a paywall I’m not providing a link for this de facto press kit (I assume you can live without it.)

The social doubters

Not everyone has been touched by grace as Lev Grossman was. Among skeptics, Alexis Madrigal from The Atlantic is one of my favorite. Last month, he wrote The Fall of Facebook, a contrarian piece in which he states that “The social network future dominance is far from assured”. He is not the only one to cast such doubt. Bloomberg, for instance, notes that Facebook’s Popularity Among Teens Dips Again while its columnist Leonid Bershidsky, in his trademark stern way, contends Google Deserves Its Valuation, Facebook Doesn’t. On the social phenomenon, this NYT’s OpEd page: The Flight From Conversation by MIT professor Sherry Turkle is a must read.

Journalism

2014 has been quite a year for journalism with endless reverberations of the Snowden affair and the subsequent release of Citizen Four. A must-read of the documentary background is this NYT story:

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The Snowden affair is sure to give a boost to investigative reporting.

I bet 2015 will see the rise of Pierre Omidyar’s media venture First Look Media. The project has been mocked for its stumbling debut (read Mathew Ingram piece First Look Media has forgotten the number one rule of startups). A few weeks ago, I spoke with Pierre and John Temple, First Look’s chief, at a conference in Phoenix, Arizona. Our discussion fell under the Chatham House Rule, meaning I’m not saying who exactly said what. To me, both men have the vision (and the funding) to build a media that could rattle the right cages. (A good read: The Pierre Omidyar Insurgency — New York Magazine). I simply hope Pierre and John will look beyond the United States, there are plenty of stories in Europe as well. Still on journalism, don’t mis Dan Gillmor’s piece about The New Editors of the Internet (The Atlantic); it raises interesting questions about who controls what we see and don’t see on the Web.

Ebola was — and remains — one of the big stories of the year.

I have two friends — two American doctors — who have been on the front line in Sierra Leone and Liberia for months. There is not a single day when I don’t think about their commitment and the risks they take to help the victims of this terrible disease.

Just to grasp the gruesomeness of the situation, watch this video from Time Magazine in which photojournalist John Moore explains his coverage of the epidemic.

Mashable also published Eyewitness to Hell: Life in Ebola-Ravaged Liberia, a horrifying photo essay. Also among the must-reads: Inside the Ebola Wars and In the Ebola Ward, both by The New Yorker’s Richard Preston, an expert on the matter and author of the famous book The Hot Zone. On the economics side, Business Week came up with this cover story: How the U.S. Screwed Up in the Fight Against Ebola

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The rise of the Islamic State was the other big story of the year

Here are my picks in the abundant coverage. First, Vice News’ subjective, but extremely effective four part videos was a revelation. For the first time, a reporter was embedded (sort of) in ISIS. (He had to obey the Rules for Journalists in Deir Ezzor compiled by Syria Deeply.)

More classical but definitely a must-read is Guardian’s Isis: the inside story by Martin Chulov, probably the best account so far. As backgrounders, read ISIS’ Harsh Brand of Islam Is Rooted in Austere Saudi Creed (NYT), The Ancestors of ISIS (NYT), How ISIS Works (NYT) and How the US Created the Islamic State  (Vice).

[miscellaneous]

Let’s conclude with subjects such as the Sony hack. First, to get an idea of the relentlessness of the cyberattacks the US faces on a permanent basis, have a look at this real-time map:

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As far as Sony is concerned, the studio’s apparent cowardice shouldn’t have surprised anyone. Still, was the stolen information legitimate news fodder? Certainly not, yells Aaron Sorkin in a New York Times OpEd : The Press Shouldn’t Help the Sony Hackers. Of course it is, retorts Los Angeles Times’ business columnist Michael Hiltzik: Why The press must report those Sony hacks.

In the Sharing Economy, Workers Find Both Freedom and Uncertainty (NYT) or the reality of a Uber/Lyft driver. Uber will remain a big story in 2015 as its ruthlessness will keep feeding the news cycle (read Uber C.E.O. Travis Kalanick’s Warpath (Vanity Fair)

The Military’s Rough Justice on Sexual Assault (NYT) by Natasha Singer who came up with extraordinary journalistic work on the women who dare to fight the institution.

And finally, another Vanity Fair feature: How Marine Salvage Master Nick Sloane Refloated Costa Concordia, and a moving reportage from The New Yorker: Weather Man, Life at a Remote Russian Weather Station served by the work of a fabulous young photographer, Evgenia Abugaeva, herself born in the Russian Arctic town of Tiksi.

Happy Holiday readings. See you next year.

frederic.filloux@mondaynote.com

The Rise of AdBlock Reveals A Serious Problem in the Advertising Ecosystem

 

By Frédéric Filloux

Seeing a threat to their ecosystem, French publishers follow their German colleagues and prepare to sue startup Eyeo GmbH, the creator of anti-advertising software AdBlock Plus. But they cannot ignore that, by using ABP, millions of users actively protest against the worst forms of advertising. 

On grounds that it represents a major economic threat to their business, two groups of French publishers are considering a lawsuit against AdBlockPlus creator Eyeo GmbH. (Les Echos, broke the news in this story, in French).
Plaintiffs are said to be the GESTE and the French Internet Advertising Bureau. The first is known for its aggressive stance against Google via its contribution to the Open Internet Project. (To be clear, GESTE said they were at a “legal consulting stage”, no formal complaint has been filed yet.) By his actions, the second plaintiff, the French branch of the Internet Advertising Bureau is in fact acknowledging its failure to tame the excesses of the digital advertising market.

Regardless of its validity, the legal action misses a critical point. By downloading the plug-in AdBlock Plus (ABP) on a massive scale, users do vote with their mice against the growing invasiveness of digital advertising. Therefore, suing Eyeo, the company that maintains ABP, is like using Aspirin to fight cancer. A different approach is required but very few seem ready to face that fact.

I use AdBlock Plus on a daily basis. I’m not especially proud of this, nor do I support anti-advertising activism, I use the ad-blocker for practical, not ideological, reasons. On too many sites, the invasion of pop-up windows and heavily animated ad “creations” has became an annoyance. A visual and a technical one. When a page loads, the HTML code “calls” all sorts of modules, sometimes 10 or 15. Each sends a request to an ad server and sometimes, for the richest content, the ad elements trigger the activation of a third-party plug-in like Adobe’s Shockwave which will work hard to render the animated ads. Most of the time, these ads are poorly optimized because creative agencies don’t waste their precious time on such trivial task as providing clean, efficient code to their clients. As a consequence, the computer’s CPU is heavily taxed, it overheats, making fans buzz loudly. Suddenly, you feel like your MacBook Pro is about to take off. That’s why, with a couple of clicks, I installed AdBlock Plus. My ABP has spared me several thousands of ad exposures. My surfing is now faster, crash-free, and web pages looks better.

I asked around and I couldn’t find a friend or a colleague not using the magic plug-in. Everyone seems to enjoy ad-free surfing. If this spreads, it could threaten the very existence of a vast majority of websites that rely on advertising.

First, a reality check. How big and dangerous is the phenomenon? PageFair, a startup-based in Dublin, Ireland, comes up with some facts. Here are key elements drawn from a 17-pages PDF document available here.

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Put another way, if your site, or your apps, are saturated with pop-up windows, screaming videos impossible to mute or skip, you are encouraging the adoption of AdBlock Plus — and once it’s installed on a browser, do not expect any turning  back. As an example of an unwitting APB advocate:

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Eyeo’s AdBlock Plus takes the advertising rejection in its own hands — but these are greedy and dirty ones. Far from being the work of a selfless white knight, Eyeo’s business model borders on racketeering. In its Acceptable Ads Manifesto, Eyeo states the virtues of what the company feels are tolerable formats:

1. Acceptable Ads are not annoying.
2. Acceptable Ads do not disrupt or distort the page content we’re trying to read.
3. Acceptable Ads are transparent with us about being an ad.
4. Acceptable Ads are effective without shouting at us.
5. Acceptable Ads are appropriate to the site that we are on.

Who could disagree? But such blandishments go with a ruthless business model that attests to the merits of straight talk:

We are being paid by some larger properties that serve non-intrusive advertisements that want to participate in the Acceptable Ads initiative.
Whitelisting is free for all small and medium-sized websites and blogs. However, managing this list requires significant effort on our side and this task cannot be completely taken over by volunteers as it happens with common filter lists.
Note that we will never whitelist any ads that don’t meet these criteria. There is no way to buy a spot in the whitelist. Also note that whitelisting is free for small- and medium-sized websites.
In addition, we received startup capital from our investors, like Tim Schumacher, who believe in Acceptable Ads and want to see the concept succeed.

Of course, there is no public rate card. Eyeo doesn’t provide any measure of what defines  “small and medium size websites” either. A 5 million monthly uniques site can be small in the English speaking market but huge in Finland. And the number of “larger properties” and the amount they had to pay to be whitelisted remains a closely guarded secret. According to some German websites, Eyeo is said to have snatched $30m from big internet players; not bad for a less than 30 people operation (depending of the recurrence of this “compliance fee” — for lack of a better term.)

There are several issues here.

One, a single private entity cannot decide what is acceptable or not for an entire sector. Especially in such an opaque fashion.

Two, we must admit that Eyeo GmbH is filling a vacuum created by the incompetence and sloppiness of the advertising community’s, namely creative agencies, media buyers and organizations that are supposed to coordinate the whole ecosystem (such as the Internet Advertising Bureau.)

Three, the rise of ad blockers is the offspring of two major trends: a continual deflation of digital ads economics, and the growing reliance on ad exchanges and Real Time Bidding, both pushing prices further down.

Even Google begins to realize that the explosion of questionable advertising formats has become a problem. Proof is its recent Contributor program that proposes ad-free navigation in exchange for a fee ranging from $1 to $3 per month (read this story on NiemanLab, and more in a future Monday Note).

The growing rejection of advertising AdBlock Plus is built upon is indeed a threat to the ecosystem and it needs to be addressed decisively. For example, by bringing at the same table publishers and advertisers to meet and design ways to clean up the ad mess. But the entity and leaders who can do the job have yet to be found.

frederic.filloux@mondaynote.com

News Heads Back to Intermediation

 

by Frédéric Filloux

Thanks to digital, news publishers thought they could build a direct relationship with their customers. Recent deals signal the opposite. 

Two recent deals between media and technology companies struck me as a new trend in the distribution of news. One involves the personal note management service Evernote and Dow Jones (publisher of the Wall Street Journal and owner of the giant database Factiva); the other involves Spotify and Uber.

The first arrangement looks symmetrical. Based on the Evernote Premium user’s profile and current activity, an automated text-mining system — “Augmented Intelligence” in Evernote’s parlance — digs up relevant articles from both the WSJ and Factiva. A helpful explanation can be found on the excellent SemanticWeb.com quoting Frank Filippo, VP for corporate products at Dow Jones:

Factiva disambiguates and extracts facts about people, companies and other entities from the content that comes into its platform. With the help of Factiva’s intelligent indexing, “as users capture their notes, we detect if a company name is mentioned and dynamically present back a Factiva company profile with related news about that company” from any of its premium news and business sources.

The deal is reciprocal: WSJ Subscribers who pay $347.88 a year (weird pricing) get one year of Evernote Premium (a $45value); and Factiva subscribers are eligible for a one-year five-login Evernote Business membership (a $600 value). This sounds like a classic value vs. volume deal: per subscriber value is high for Dow Jones while it should allow Evernote to harvest more Premium and Business accounts at smaller ARPUs. At this stage — the service starts this month and for the US only — it’s unclear which company will benefit the most.

At first, the Spotify-Uber deal doesn’t look at all related to the news business. But it breeds a broader trend in the distribution of news products. The agreement provides that Spotify Premium users will be allowed to stream their music in participating Uber vehicles. In this case, respective ARPUs differ even more than in the DowJones/Evernote arrangement. A Spotify Premium is charged $10 while, according to Business Insider, the average Uber rider spends about $50 to $60 a month. To sum up, it looks like this:

346_interm_final

In the these two deals, the advantage goes to the distributor. Without risking anything, Evernote get access to a valuable professional target group. As for The Wall Street Journal and Factiva, they push content that bears the risk of being more than rich enough for Evernote Premium users – without further need of a subscription to the Journal or Factiva. In this case, the key metric will be the conversion rate of users who are in contact with WSJ articles and opt for a trial subscription. (Based on past experience, publishers always overestimate the attractiveness of their paid-for contents.) This doesn’t mean Dow Jones should have passed on the deal; every new distribution channel needs to be explored. As for Spotify/Uber, it shouldn’t move the needle for either partner.

Except for the data issues.

This is the key point in which parties may not equally benefit. Having dinner with a business predator like Uber requires a long spoon — a strong legal one — to determine the accessibility of stats and customer data. To me, this is much more critical than the difficult to assess financial parameters of such deals.

What’s next? There is no shortage of possibilities. Among many:

346_next_distrib_model

Deciding wether it is an opportunity or a danger for the news media sector is, to say the least, chancy. One sure thing: Digital technologies have successfully reconnected news media publishers to their customers. Some media outlets such has The Financial Times have successfully removed the intermediaries in the path to their audiences– whether these are B2C or B2B.

Today, everyone is worried about the unfolding of Facebook’s ambition to become the essential news distributor (see a previous Monday Note: How Facebook and Google Now Dominate Media Distribution.) In such context, letting other tech companies control too many distribution channels might create vulnerabilities. Possible ways to prevent such hazards are: (a) bullet-proof contracts and (b) approach new distribution schemes in a collective manner. (That’s the science-fiction part of this column.)

frederic.filloux@mondaynote.com

Hard Comparison: Legacy Media vs. Digital Native

 

by Frédéric Filloux

From valuations to management cultures, the gap between legacy media companies and digital natives ones seems to widen. The chart below maps the issues and shows where efforts should focus. 

At conferences and workshops in Estonia, Spain or in the US, most discussions I recently had ended up zeroing on the cultural divide between legacy media and internet natives. About fifteen years into the digital wave, tectonic plates seems to drift more apart that ever. On one side, most media brands — the surviving ones — are still struggling with an endless transition. On the other, digital native companies, all with deeply embedded technology, expand at an incredible pace. Hence the central question: can legacy media catch up? What are the most critical levers to pull in order to accelerate change?

Once again, it’s not a matter of a caricatural opposition of fossilized media brands versus agile and creative media startups. The reality is far more complex. I come from a world in which information had price and cost; facts were verified; seasoned editors called the shots; readers were demanding and loyal — and journalists occasionally autistic. I’m coming from the culture of great stories, intense competition (now gone) and the certitude of the important role of great journalism in society.

That said, I simply had the luck to be in the right place at the right time to embrace the new culture: Small companies, starting on a blank slate with the unbreakable faith and systemic understanding that combine into a vision of growth and success, all wrapped-up in the virtues of risk-taking. I always wanted to believe that the two cultures could be compatible — in fact, I hoped the old world would be able to morph swiftly and efficiently enough to catch the wave, deal with new kinds of readers, with a wider set of technologies and a proteiform competition. I still want to believe this.

In the following chart, I list the most critical issues and pinpoint the areas of transformation that are both the most urgent and the easiest to address.

345_Divide_table

[Footnotes]

1. Funding: The main reason why newcomers are able to quickly leave the incumbent in the dust. When venture firms compete to provide $160m to Flipboard, $61m to Vox Media, or $96m to BuzzFeed, the consequences are not just staggering valuations. Abundant funds translate into the ability to hire more and better qualified people. Just one example: Netflix’s recommendation system — critical to ensure both viewer engagement and retention — can count on a $150m yearly budget, far more than the entire revenue of many mid-sized media companies. Fact is: old media companies in transition will never be able to attract such level of funding due to inherent scalability limitations (it is extremely rare to see a legacy media corporation suddenly jumping out of its ancestral business.)

2. Resource Allocation. Typically, the management team of a legacy media will assign just enough resources to launch a product or service and hope for the best. This deliberate scarcity has several consequences: From the start, the project team will be in the fight/survival mode, both internally (vs. other projects or “historical” operations); second consequence, in the (likely) case of a failure, it will be difficult to find the cause: Was the product or service inherently flawed? Or did it fail to achieve “ignition” because the approach was too cautious? The half-baked, half-supported legacy product might stagnate for ever, without making sufficient money to be seen as a success, nor significant losses to justify a termination. By contrast, a digital native corporation will go at full throttle from day one with scores of managers, engineers, marketers and sufficient development time for tests, market research, promotion, etc. The idea is to succeed — or to fail, but fast and clearly.

3. Approach to timing. The tragedy for the vast majority of legacy media is they no longer have the luxury of long term thinking. Shareholder pressure and weak P&L impose quick results. By contrast, most digital companies are built for the long term: Their management is asked to grow, conquer, secure market positions and then monetize. It can take years, as seen in many instances, form Flipboard to Amazon (which might have pushed the envelope a bit too far.)

4. Scalability vs. sustainability. Many reasons — readership structure, structurally constrained markets — explain the difficulty for legacy media to scale up. At the polar opposite, disrupters like Uber or AirBnB, or super-optimizers such as BuzzFeed or The Huffington Post are designed and built to scale — globally.

5. Customer relations. On this aspect, the digital world has reset the standard. All of a sudden, legacy media companies appeared outdated when it comes to customer satisfaction, from poor subscription handling to the virtuous circle of acquisition-engagement-retention of customers.

In the chart above, my allocation of purple dots (feasibility) illustrates the height of hurdles facing large, established media brands. Many components remain extremely hard to move – I personally experience that on a daily basis.  But there is no excuse not to take a better care of customers, not to reward the risk-taking of committed staffers, assign resources in a decisive manner or induce a better sense of competition.

frederic.filloux@mondaynote.com

Europe: The Digital Squeeze Is Coming

 

By Frédéric Filloux

A recent Bain & Co survey paints Europe’s digital future as squeezed between the explosive demand of emerging countries and the dominance of US-based internet giants.

The “Next Billion”, a phrase coined and propagated by the Quartz team, refers to the explosive internet growth in emerging countries — almost entirely fueled by mobile usage. The new phrase got its own  conference (last week in NYC, next May 19th in London) and a dedicated section on the Quartz site.

For Europe, the Next Billion will be hard: Last week, the global consulting firm Bain & Co published a survey that exposes what’s at stake. The report, titled Generation #hashtag (pdf here), was commissioned by The Forum d’Avignon, a yearly gathering of intellectuals and business people that explores cultural changes; the survey was conducted by Bain’s staff in Paris and Los Angeles over 7,000 respondents in 10 countries with the following internet status:

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Source : Internet World Stats

Bain’s key findings follow:

The next period is going to be dominated by digital natives, i.e. audiences that won’t have even known other forms of media vectors (video, communication, news or entertainment). In emerging countries, powerful forces are now in motion (emphasis mine):

Across the BRICS countries, the percentage of consumers 25 and younger—who are, on average, 40% more prevalent than in developed economies, according to Euromonitor—suggests the rapid rise of Generation #hashtag in emerging markets. (…) Over the past year, smartphone ownership rose significantly in emerging markets: from 45% to 50% in China, 14% to 21% in India, 45% to 54% in Brazil and 45% to 63% in Russia.

The chart below shows two important elements. One is the importance of the Generation #hashtag: the digital population comprised with digital “migrants” and “natives”. The second and even more interesting is the demographic distribution which, for emerging countries, clearly states the potential:

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These demographics show two major gaps: disposable income and networking infrastructure. Taking the long view, the first one could be overcome by strong growth in key areas. For the second, in many countries of Asia or Sub-Saharan Africa, land lines equipment is staying flat — and sometimes decreasing — while cellular networks are growing like weeds. A couple of weeks ago, Benedict Evans, from the Andreessen Horowitz venture firm, released his Mobile is Eating the World slide deck – from which I extracted these two charts :

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These figures might prove to be conservative as heated competition for the Next Billion has already started between tech giants. Google’s Project Loon, Facebook’s future drones network, both aimed at delivering broadband internet in developing countries, are soon to be joined by  Elon Musk’s plan to deploy 700 micro-satellites at a cost of $1bn to serve the same purpose. If we factor in Mark Zuckerberg’s idea to get a 100x improvement on internet delivery (10x reduction in cost of serving data multiplied by 10x improvement in compression and caching technologies), we can project the internet’s global availability challenge as solved within the next five years or so.

In this picture, Europe faces a huge industrial problem. The players who will benefit from the exploding demand in emerging markets are everywhere but in Europe, except maybe for Nokia Networks (not the handset division, now owned by Microsoft, but the remaining independent infrastructure business), and Sweden-based telecom maker Ericsson. Other are mostly Chinese, Taiwanese and Korean (Samsung and many others), they cover the entire field from networking infrastructure to mobile terminals. Symmetrically, most of the engineering brainpower and very large investment capabilities are concentrated in the United States with immensely rich companies such as Google or Facebook (or Musk’s Space X) thay are focused on capturing this Next Billion.

Europe’s options are limited. With no common language, no political leadership, encumbered by a gigantic bureaucracy, scattered and uneven access to capital (compared to the Keiretsu-like American venture capital system), Europe could choke, squeezed between Asian hardware markers and US-based software giants. Unfortunately, instead of organizing itself to favor the emergence of tech leaders — through decisive education programs and smarter immigration policies for instance — Europe’s main contribution to technologies has been the creation of tax havens. A textbook example of a missed opportunity.

frederic.filloux@mondaynote.com

The New York Times and Springer Are Wrong About Blendle

 

by Frédéric Filloux

With its idea of creating “iTunes for the press”, Blendle rattles the news industry’s cage. In spite of blessings from The New York Times and Axel Springer, the shiny new thing might just be a mirage.  

Last week, two young Dutch people came up with a string of magic words: “iTunes for the press”, “New York Times”, and “Axel Springer”. The founders of Blendle, Alexander Klöpping and Marten Blankesteijn, were promising a miracle cure to a sick industry: a global system for the distribution of editorial products (the iTunes reference), backed by the gold standard of digital journalism (The New York Times), and also supported by the European leader of the rebellion against Google (Axel Springer). Great casting, great promises. Like handing out Zmapp doses in an Ebola ward.

Blendle’s principle is to unbundle publications and sell stories by the slice, for €0.10 to €0.30 ($0.13 to $0.38) each. (Actually, on Blendle.nl, some articles shoot up to €0.89 or $1.11, publisher’s choice). Basically, you register and get €2.50 credit, browse a well-designed kiosk (or an equally good app), and cherry-pick what you want. Blendle added unique features such as the possibility of a refund for a story you don’t like; its founders saying its a mandatory feature for any e-commerce business (“returns” account for around 4% of transactions). Launched in April on the Dutch market, the service is a success: 135,000 subscribers so far. According to the founders, 20,000 to 30,000 are added each month. Not bad for a 16-million-people country that enjoys an internet penetration of 94%.

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This indisputable success spread beyond Netherlands when Blendle announced The New York Times Company and Axel Springer SE had invested a combined €3m ($3.8m) in the startup. (For more on the subject, see coverages by Les Echos (in French), The Guardian, Bloomberg BusinessWeek.)

I see many reasons to cast strong doubt about Blendle’s sustainability as a global business, and I see no benefit for digital media. The idea of unbundling news content is an old one. I recall a 1995 conversation with Nicholas Negroponte, at the time head of MIT’s MediaLab. Back then, he envisioned exactly what Klöpping and Blankesteijn are trying to implement now (both were 8-year old at the time.)

Negroponte’s vision never materialized and there are many reasons for this.

The first one is the hyper-abundance of free content, especially in English, a notion completely overlooked by Blendle’s advocates. Years ago, I used to tell my colleagues at Schibsted ASA in Norway that their country was so small (4.5m inhabitants) and their market position so dominant, with the huge traffic machines of their large print and digital publications, that if they put out online text in Pashto, it would still drive serious audience numbers. (Schibsted became a $2.2bn global player thanks to a strong diversification strategy served by a remarkable execution.) In the case of Blendle, the Dutch language serves as a cordon sanitaire, a kind of firewall mostly shielding publishers from the interference of free contents. In other words, it makes a relative sense for De Volkskrant, NRC, or De Telegraaf  to join Blendle since they are already well-positioned on a small market.

This cannot work for the English language and its 1.2 billion speakers spread across the world, including 350 million native speakers. Pick any subject in the news cycle — say, Blendle precisely. In a few clicks, I will get a 800 words story from the Economist, a 900 words one for the Guardian, another 700 words article for BusinessWeek and a 1600 words piece from TechCrunch. And I’m not mentioning the… 24,400 other “Blendle” references that pop-up in Google News. In this list, only The Economist intends to join the Dutch service. Hence my question: Would you pay even 20 cents to get the Economist story while a profusion of good coverage is available just one click away for free? Me neither.

Second reason for discounting the Blendle model: News media have always built their business on a “cross-subsidy” system. Quite often, high audience stories — that don’t even cost much to produce (sports as an example), support low audience but costly reporting such as foreign coverage or “enterprise journalism” (that is when editor decide to assign large  resources to go after a worthwhile subject –needless to say, this concept has become an endangered species.) Granted, a media powerhouse such as The New York Times still produces unique contents that justify paying for it (about the recent NYT economics, read Ken Doctor’s piece on NiemanLab). But I doubt that a buy-by-the-slice Blendle revenue will contribute for more than a fraction of a percentage point to the $200m a year cost of operating the Grey Lady’s 1300-staff newsroom.

Third reason: Lack of serendipity. A well-edited media — print or digital — is a clever assemblage of diversified subjects aimed a triggering readers’ curiosity for topics outside their usual range of interests. That’s not likely to work in Blendle’s model, because it relies on three entry points — Trending, Realtime and StaffPicks — that actually transfer the classical user-induced serendipity to the editors of the service. I doubt lots of media are actually willing to give up the opportunity to capture reader’s attention on the widest possible spectrum by leaving the reins in Blendle’s hands.

Fourth reason: Advertising loss. While digital ads is mostly a failure for the news industry, separating ads from content sounds like a weird idea. Today, publishers are working hard to get a more granular profile of their audiences in order to serve them with more relevant contents, tailored ads, and ancillary products. Content dissemination won’t help this process.

Why then do the NYT and Springer, both strongly attached to the value of their editorial production, jump aboard this boat? For the Times, it might have to do with the idea of diversifying revenue streams in every possible ways by extracting more dollars for its vast supply of occasional readers. Axel Springer’s motive is different. The German giant is literally obsessed with undermining Google’s de facto position in the news sector. Hence the bets it takes here and there, buying the French search engine Qwant or taking over the babbling Open Internet Project. Both choices are far from promising high potential, scalable moves.

Publishers who are tempted by the Blendle model also choose to ignore the damage suffered by the music industry. Once the user was given the opportunity to buy each song separately (for a dollar, not 20 cents), the ARPU quickly collapsed, and there was no turning back. Also, at the time, the paid-for music was not competing against free content — except for piracy — in the way that today’s paid contents have to face a profusion of free editorial, sometimes excellent.

And finally, let’s not forget that the original “iTunes model” is not as shiny as it used to be. For Apple, its ARPU went from $4.3 per user for Q1 2012, to $1.9 per user for  Q1 2014, a 56% drop. The reason: Users are massively switching to the flat-fee/no ownership model of music streaming (hence Apple bet on Beats.)
Even before it reached news media, the iconic iTunes system was already seriously damaged.

frederic.filloux@mondaynote.com

The two things that could hurt Google 

 

Google’s recent Search Box feature is but one example of the internet giant’s propensity to use weird ideas to inflict damage upon itself. This sheds light on two serious dangers for Google: Its growing disconnection from the real world and its communication shortcomings. 

At first, the improved Google search box discreetly introduced on September 5 sounded like a terrific idea: you enter the name of a retailer — say Target, Amazon — and, within Google’s search result page, shows up another, dedicated search box in which you can search inside the retailer inventory. Weirdly enough, this new feature was not mentioned in a press release, but just in a casual Google Webmaster Central Blog post aimed at the tech in-crowd.

Evidently, it was also supposed to be a serious commercial enhancer for the search engine. Here is what it looked like as recently as yesterday:

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Google wins on both ends: it keeps users on its own site (a good way to bypass the Amazon gravity well) while, in passing, cashing on ad modules purchased, in this case, both by Amazon.fr itself bidding for the keyword “perceuse” (drill) on Google.fr, and also by Amazon’s competitors offering the same appliance (and whose bids were lower.)

In due fairness, the Google Webmaster Blog explains how to bypass the second stage and how to make a search that lands directly to the site, Amazon.fr in our example. Many US e-commerce sites did so. Why Amazon didn’t is still unclear.

Needless to say, this new feature triggered outrage from many e-commerce sites, especially in Europe. (I captured these screenshots on Google.fr because no ads showed up for US retailers, most likely because I’m browsing form Paris).

For Google’s opponents, it was a welcome ammunition. Immediately, the Open Internet Project summoned a press conference (last Thursday Oct. 23), inviting journalists seen as supportive of their cause. In a previous Monday Note (see Google and the European media: Back to the Ice Age), I told the story of this advocacy group, mostly controlled by the German publishing giant Axel Springer AG, and the French media group Lagardère Active. The latter’s CEO, Denis Olivennes is well-know for his deft political maneuvers, much less so for his business acumen as he missed scores of digital trains in his long career in retail (he headed French retailer Fnac), and in the media business.

Realizing its mistake, Google quickly pulled back, removing the search box on several retailers’ sites, and announcing (though unofficially) that it was working on an opt-out system.

This incident is the perfect illustration of two major Google liabilities.

One: Google’s disconnect from the outside world keeps growing. More than ever, it looks like an insulated community, nurturing its own vision of the digital world, with less and less concern for its users who also happen to be its customers. It looks like Google lives in its own space-time (which is not completely a figure of speech since the company maintains its own set of atomic clocks to synchronize its data centers across the world independently from official time sources).

You can actually feel it when hanging around its vast campus, where large luxury buses coming from San Francisco pour out scores of young people, mostly male (70%) mostly white (61%), produced by the same set of top universities (in that order:  Stanford, UC Berkeley, Carnegie Mellon, MIT, UCLA…). They are pampered in the best possible way, with free food, on location dental care, etc. They see the world through the mirrored glass of their office, their computer screen and the reams of data that constitute their daily reality.

Google is a brainy but also messy company where the left hemisphere ignores what the other one does. Since the right one (the engineers) is particularly creative and productive, the left brain suffers a lot. In this recent case, a group of techies working at the huge search division (several thousands people) came up with this idea of an improved search box. Higher up, near the top, someone green-lighted the idea that went live early September. Many people from the left hemisphere — communication, legal, public affairs — might have been kept in the dark, not even willfully, by the engineering team, but simply by natural cockiness (or naiveté). However, I also suspect the business side of the company was in the loop (“Google” and “candor” make a solid oxymoron).

Two: Google has a chronic communication problem. The digital ecosystem is known for quickly testing and learning (as opposed to legacy media that are more into staying and sinking). In practical terms, they fire first and reflect afterwards. And sometimes retract. In the search box incident, the right attitude would have been to put up a communiqué saying basically, “Our genuine priority was to improve the user experience [the mandatory BS], but we found out that many e-retailers strongly disliked this new feature. As a result, we took the following steps, blablabla.” Instead, Google did nothing of the sort, only getting its engineering staff to quietly remove the offending search box.

There is a pattern to Google’s inability to properly communicate. You almost discover by accident that these people are doing stunning things in many fields. When the company is questioned, it almost never responds by providing solid data to make its point — that’s simply unbelievable from a company that is so obsessed with its reliance to hard facts. Recall Google’s internal adoption of W. Edwards Deming’s motto: In god we trust, all others bring data.

In parallel, the company practices access journalism, picking up the writer of its choosing, giving him/er a heads-up for a specific subject hoping for a good story. Here are two examples from Wired and The Atlantic.

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These long-read “exclusive” and timely features were reported respectively on location from New Zealand and Australia. They are actually great and balanced pieces since both Wired’s Steven Levy and Atlantic’s Alex Madrigal are fine journalists.

While it never miss a opportunity to mention its vulnerability, Google is better than anyone else at nurturing it. Like Mikhail Gorbachev used to say about the crumbling USSR: “The steering is not connected to the wheels”. We all know what happened.

frederic.filloux@mondaynote.com

How Facebook and Google Now Dominate Media Distribution

 

The news media sector has become heavily dependent on traffic from Facebook and Google. A reliance now dangerously close to addiction. Maybe it’s time to refocus on direct access. 

Digital publishers pride themselves on their ability to funnel traffic from search and social, namely Google and Facebook (we’ll see that Twitter, contrary to its large public image, is in fact a minuscule traffic source.) In ly business, we hunt for the best Search Engine Optimization specialists, social strategists, community managers to expand the reach of our precious journalistic material; we train and retrain newsroom staff; we equip them with the best tools for analytics and A/B testing to see what headlines best fit the web’s volatile mood… And yet, when a competing story gets a better Google News score, the digital marketing staff gets a stern remark from the news floor. We also compare ourselves with the super giants of the internet whose traffic numbers coming from social reach double digit percentages. In short, we do our best to tap into the social and search reservoir of readers.

hand_drawn_social_media_icons_by_rafiqelmansy-d41q4gm

Illustration by Rafiq ElMansy DeviantArt

Consequences vary. Many great news brands today see their direct traffic — that is readers accessing deliberately the URL of the site — fall well below 50%. And the younger the media company (pure players, high-performing click machines such as BuzzFeed), the lower the proportion of direct access is – to the benefit of Facebook and Google for the most part. (As I write this, another window on my screen shows the internal report of a pure player news site: In August it only collected 11% in direct access, vs. 19% from Google and 24% from Facebook — and I’m told it wants to beef up it’s Facebook pipeline.)

Fact is, the two internet giants now control most of the news traffic. Even better, they collect on both ends of the system.

Consider BuzzFeed. In this story from Marketing Land, BuzzFeed CEO Jonah Peretti claims to get 75% of its traffic from social and to not paying much attention to Google anymore. According to last Summer ComScore data, a typical BuzzFeed viewer reads on average 2.3 articles and spends slightly more than 3 minutes per visit. And when she leaves BuzzFeed, she goes back to the social nest (or to Google-controlled sites) roughly in the same proportion. As for direct access, it amounts to only 6% and Twitter’s traffic is almost no existent (less than 1%). It clearly appears that Twitter’s position as a significant traffic contributor is vastly overstated: In real terms, it’s a tiny dot in the readers’ pool. None of this is accidental. BF has built a tremendous social/traffic machine that is at the core of its business.

Whether it is 75% of traffic coming from social for BuzzFeed or 30% to 40% for Mashable or others of the same kind, the growing reliance to social and search raises several questions.

The first concerns the intrinsic valuation of a media so dependent on a single distribution provider. After all, Google has a proven record of altering its search algorithm without warning. (In due fairness, most modifications are aimed at content farms and others who try to game Google’s search mechanism.) As for Facebook, Mark Zuckerberg is unpredictable, he’s also known to do what he wants with his company, thanks to an absolute control on its Board of Directors (read this Quartz story).

None of the above is especially encouraging. Which company in the world wouldn’t be seen as fragile when depending so much on a small set of uncontrollable distributors?

The second question lies in the value of the incoming traffic. Roughly speaking, for a news, value-added type media, the number of page views by source goes like this:
Direct Access : 5 to 6 page views
Google Search: 2 to 3
Emailing: ~2
Google News: ~1
Social: ~1
These figures show how good you have to be in collecting readers from social sources to generate the same advertising ARPU as from a loyal reader coming to your brand because she likes it. Actually, you have to be at least six times better. And the situation is much, much worse if your business model relies a lot on subscriptions (for which social doesn’t bring much transformation when compared, for instance, to highly targeted emails.)

To be sure, I do not advocate we should altogether dump social media or search. Both are essential to attract new readers and expand a news brand’s footprint, to build the personal brand of writers and contributors. But when it comes to the true value of a visit, it’s a completely different story. And if we consider that the value of a single reader must be spread over several types of products and services (see my previous column Diversify or Die) then, the direct reader’s value becomes even more critical.

Taken to the extreme, some medias are doing quite well by relying solely on direct access. Netflix, for instance, entirely built its audience through its unique recommendation engine. Its size and scope are staggering. No less than 300 people are assigned to analyze, understand, and serve the preferences of the network’s 50 million subscribers (read Alex Madrigal’s excellent piece published in January in The Atlantic). Netflix’s data chief Neil Hunt, in this keynote of RecSys conference (go to time code 55:30), sums up his ambition by saying his challenge is “to create 50 million different channels“. In order to do so, he manages a €150m a year data unit. Hunt and his team concentrate their efforts on optimizing the 150 million choices Netflix offers every day to its viewers. He said that if only 10% of those choices end up better than they might have been without its recommendation system, and if just 1% of those choices are good enough to prevent the cancellation of a subscription, such efforts are worth €500m a year for the company (out of a $4.3bn revenue and a $228m operating income in 2013). While Netflix operates in a totally different area from news, such achievement is worth meditating upon.

Maybe it’s time to inject “direct” focus into the obligatory social obsession.

frederic.filloux@mondaynote.com