About Frédéric Filloux

Posts by Frédéric Filloux:

Beware of Airbnb entering the hyperlocal travel guide business

 

by Frédéric Filloux 

Airbnb has every reason to enter the news services sector – and to threaten a broad range of media/services such as Trip Advisor or Yelp. 

Seen through the eyes of travel information publishers, Airbnb holds a dream position: a huge base of 25 million potential readers/users, spread over 34,000 cities in 190 countries, well in tune with the brand’s core product and attributes.

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For a start, should Airbnb develop a publishing arm, this unparalleled notoriety would spare it tens of millions dollars otherwise required to promote its content services: In the travel industry, advertising and marketing demand high spending. To put things in perspective, this year, according to the trade site Skift.com, HomeAway, one of Airbnb’s key competitors, plans to spend $100m (after shelling out $60m in 2014) “To show it’s not Airbnb“. HomeAway was created in 2005 and received $504m in funding before going public in 2011 — the stock lost 18% since. Airbnb has yet to go public after raising more than $800m. Its latest confirmed round closed in October was for $50M with a $13bn valuation. Airbnb is now rumored to be raising a $1bn “war chest” at an even higher price: $20bn.

Today, Airbnb’s expansion is a matter of concern not only for its direct competitors but also for large players in the travel information segment.

Last November, Airbnb fired the first shot: Pineapple, a 128 page, ad-free, glossy quarterly magazine, mostly written by hosts and guests gently discussing their experiences. With a tiny print run of 20,000 copies, it was distributed for free in some Airbnb hotspots and sold at selected bookstores such as WH Smith in Paris, where I got my copy for €12. According to Pineapple publisher Christopher Lunekzic (interview on the FIPP site), “The idea came from a desire to capture the unique nature of traveling through Airbnb. We wanted to bring that sense of creativity, culture and connection to life”. All the talking points of an elegant PR campaign are checked, part of Airbnb recent rebranding. Nothing to freak out travel press behemoths.

Except… Now, a sizable part of Airbnb community is aware of the company’s recent push into the magazine business. Which could make a serious difference.

That said, print is certainly not a key part of Airbnb’s media future. Mobile apps are. Last year, only 20% of Airbnb traffic came from mobile. That was before last December’s app redesign. Today, the Airbnb ranks in the top 5 apps in 7 countries, and in the top 100 in… 152 countries. That’s where the real potential is. And the San Francisco-based icon of the sharing economy is betting heavily on mobile: it recently announced a partnership with Deutsche Telekom’s T-Mobile to pre-install its app on Android smartphone across 13 markets in Europe (TechCrunch story here). A decisive move for Airbnb’s mobile expansion.

Now let’s indulge in a little bit of fiction — from the perspective of an Airbnb guest.

I’m booking a flat in, say in London’s Marylebone district. I’m not familiar with the best places to go out. In the dedicated section of the new Airbnb app, I enter the host’s postal code, which is precise down to the building (likewise, the American “Zip+4″ code provides a city block location; in other cities, the Lat-Long associated to a street address does the job). My host has listed her preferred spots: organic groceries, wine bars, galleries, shopping places, movie theaters… Every place shows up on a Google map. The practical details I might need appear over my host’s comments: business hours, booking information, etc. I can also check the reviews on third party sites, but given my host’s profile, I assume our tastes will match; plus, I don’t want to get drowned into a tedious (and too often dubious) series of five-stars searches.

On my phone, I now enjoy a mini-guide of the neighborhood where I’m going to spend the next few days, filled with trusted, non-commercially-induced recommendations. Right from the app, I can make reservation via Open Table, and even call a Uber car. That’s what API’s are for: connecting applications together, in a mutually beneficial way. The third-party service provider expands its reach and the app publisher offers a wider range of services while keeping the customer “inside”. Similarly, a gallery or museum can make its program available within the app.
APIs will be a major development engine for the apps ecosystem as the number of features and services that can be added is boundless. For example, Uber has recently made its API system much more accessible and now partners with 11 companies, including Hyatt, OpenTable, Starbucks, Time Out, TripAdvisor, TripCase — curiously, not Airbnb nor Yelp.

Why would such integration threaten large travel business publishers?

Beyond developing its gigantic global footprint, Airbnb wants to build a community of users, itself structured in homogenous layers (e.g. young families looking for budget rentals, yuppies aiming at trendy places…) There’s even the growing crowd of professionals who prefer an Airbnb apartment free of the check-in/out hassles of hotels, and who will gladly trade unexciting room service for a super-fast DSL connection. (I’m told a growing number of Googlers do so for their business trips, with their employer’s blessing.) Each of these sub-communities will be far more likely to trust their peers than the usual travel guides where it’s always difficult to sort actual user opinions from bogus reviews and paid-for insertions, disguised advertorials, etc.

The beauty of this powerful combination lies in its scalability. Airbnb listings contain a broad range of properties, including high-end, luxury items. Those who might be willing to cough up €2,000 a night for a two-bedroom unit with a stunning view of the Hong Kong harbor might also want a special cicerone, a much more sophisticated one than the peer-to-peer guide described above.

Sometime ago, Louis Vuitton — the main brand of LVMH luxury conglomerate — had the idea of creating a dedicated app aimed at its rich Chinese clientèle, at those able to spend €20,000 or more in a single afternoon shopping stroll through Avenue Montaigne in Paris. This special application was to offer the services of a personal shopper, but also a personal city guide (Louis Vuitton already publishes its own collection of high-end guides) to be used from planning the trip to the actual journey. Even better, the app was to rely on the Chinese-made WeChat application (500 millions users, roughly 85% from mainland China) connected to an actual human able to guide the wealthy tourist on a real-time basis, either with messages or voice contact. In such case, relying on peer recommendations made no sense, but a highly personalized service did. A couple of selected partners were in the loop.

Regardless of the market segment, a notorious brand coupled to a set of mobile services is a potent combination. In the case of Airbnb, the “full stack” company — a concept coined by Andreesen Horowitz’ Chris Dixon —  is likely to be a master tool for securing the position of a brand in its market.

frederic.filloux@mondaynote.com

News Media Should Drop Native Apps

 

by Frédéric Filloux

When it comes to the most basic form of news delivery, facts keep piling up in a way that makes native apps more and more questionable. Here is why it’s worth considering a move back to mobile sites or web apps…  

One of the most shared statistic on mobile use is this one: Applications account for 86% of the time spend b’y users. This leaves a mere 14% for browser-based activities, i.e. sites designed for mobile, either especially coded for nomad consumption, built using responsive design techniques that adapt look and feel to screen size, or special WebApp designs such as FT.com.

This 86/14 split is completely misleading for two reasons: the weight of mobile gaming, and the importance of Facebook.

Take a look at this chart form Flurry Analytics:

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If you combine gaming, Facebook and Social Messaging, roughly 60% of time spent on mobile is swallowed by this trio. As for Facebook, it reaped the top four slots in downloads for non-gaming apps worldwide:

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Mobile consumption will concentrate even more as messaging and free direct communication (red dot in the chart) combine into the fastest growing segment by far. Mobile carriers have reason to be scared. Consequently, Facebook will tighten its grip on the mobile ecosystem as it commands the two dominant direct communication apps. If this wasn’t enough, there are two other fast-growing usages: Video streaming (+44% downloads last year) and Travel & Transportation — Uber, AirBnB, CityMapper — (+31%.)

The main characteristic of these services is they couldn’t be designed outside of a full-fledged application: They require key phone features not easily accessible through a browser such as radio modules, GPS,  image rendering (for maps, graphics), camera, etc.

By comparison, news-related applications do not requires a lot of phone resources. They collect XML feeds, some low resolution images and render those in pre-defined, non-dynamic templates. They use a tiny fraction of a modern smartphone’s processing power.

In fact, for news media, as the following matrix shows, native apps (iOS, Android and soon Windows) become a questionable proposition:

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Summing up, apps for news distribution are technically justified for speed, ability to send notifications, inApp purchases, and the hypothetical use of phone sensors. That’s much money and a lot of complications for a small number of features. (On this subject, see the previous The Future of Mobile Apps for News column.)

Unless you are fighting for the prime phone screens, say the first three swipes, or if you are determined to provide key visual or functional differentiators, going for a set of native apps must be carefully weighed. Depending on the level of sophistication and required features, developing a native application costs between $50,000 and $100,000, for each environment, plus dedicated SDKs for marketing, analytics, etc., plus a 30% fee paid to the app store if you go for a paid or subscription model, plus hassles for approval of the smallest update in the messy iOS App Store…

But if you are already big on social and SEO, a mobile site, lightweight, clearly focused on a small feature set can be quite effective. Disappointing as it may be, HTML5-based web apps are all but dead (the difficulty lies in finding good developers and in managing them.)

Among all players, Google has the ability to overhaul the mobile ecosystem. If it comes up with an SDK or a framework aimed at creating simple and effective apps, indeed with limited performance but with enough features to accommodate news delivery, this could become an industry game-changer.

frederic.filloux@mondaynote.com

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NYT vs Buzzfeed: Valuations Discrepancies – Part II

 

by Frédéric Filloux

My last column about new valuations in digital media triggered an abundance of comments. Here are my responses and additions to the discussion. 

The most revealing part of argument used by those who tweeted (800 of them), commented or emailed me, is how many wished things to remain simple and segregated: legacy vs. native media, content producers vs. service providers, ancestral performances indicators and, of course, the self-granted permission to a certain category of people to decide what is worthy. Too bad for cartesian minds and simplifiers, the digital world is blurring known boundaries, mixing company purposes of and overhauling the competitive landscape.

Let’s start with one point of contention:

Why throw LinkedIn, Facebook and old companies such as the NYTimes or the Guardian into the equation? That’s the old apples and oranges point some commenters have real trouble seeing past. Here is why, precisely, the mix is relevant.

Last Tuesday February 17, LinkedIn announced it had hired a Fortune reporter as its business editor. Caroline Fairchild is the archetypal modern, young journalist: reporter, blogger with a cause (The Broadsheet is her newsletter on powerful women), mastering all necessary tools (video editing, SEO tactics, partnerships) as she went from Bloomberg to the HuffPo, among other gigs. Here is what she says about her new job:

 LinkedIn’s been around for 11 years and today publishes more than 50,000 posts a week (that’s roughly 10 NYTs per day) — but the publishing platform is still an infant, debuting widely less than a year ago. The rules and roles are being defined and redefined daily; experimenting is a constant.

Here we are: LinkedIn intends to morph into a major business news provider and a frontal competitor to established business media. Already, scores of guest columnists publish on a regular basis on LinkedIn, enjoying audiences many times larger than their DeLuxe appearances in legacy media. (For the record, I was invited to blend the Monday Note into LinkedIn, but the conditions didn’t quite make sense to us. Jean-Louis Gassée and I preferred preserving our independent franchise.)

For a $2.2bn revenue company such as LinkedIn, creating a newsroom aimed at the business community definitely makes sense and I simply wonder why it took them so long to go full throttle in that direction — not only with an avalanche of posts but with a more selective, quality-oriented approach. If it shows an ability to display properly value-added editorial, LinkedIn could be poised to become a potent publishing platform eventually competing with The Economist, Quartz, FT.com or Les Echos. All of it with a huge data analytics staff led by world-class engineers.

That’s why I think the comparison with established media makes sense.

As for Facebook, the argument is even more straightforward. Last October, I published a column titled How Facebook and Google Now Dominate Media Distribution; it exposed our growing dependence on social media, and the need to look more closely at the virtues of direct access as a generator of quality traffic. (A visit coming from social generates less than one page view versus 4 to 6 page views for direct access.) Facebook has become a dominant channel for accessing the news. Take a look at this table from Reuters Institute Report on Digital News Report (PDF here.)

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There’s no doubt that these figures are now outdated as media’s quest to tap into the social reservoir has never been greater. (In passing, note the small delta between News Lovers and Casual Users.) It varies widely from one country to another, but about 40% of the age segment below 35 relies on social as its primary source for news… and when we say “social”, we mostly mean Facebook. Should we really ignore this behemoth when it comes to assess news economics? I don’t think so.

More than ever, Facebook deserves close monitoring. No one is eager to criticize their dope dealer, but Mark Zuckerberg’s construction is probably the most pernicious and the most unpredictable distributors the news industry ever faced.

For instance, even if you picked a given media for your FB newsfeed, the algorithm will decide how much you’ll see from it, based on your past navigation and profile. And numbers are terrible: as an example, only 16% of what the FT.com pushes on Facebook actually reaches its users, and that’s not a bad number when compared to the rest of the industry.

And still, the media sector continues to increase its dependence on social. Consider the recent change in the home page of NowThis,  a clever video provider specialized in  rapid-fire news clips:

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No more home page! Implementing a rather bold idea floated years ago by BuzzFeed’s editor Ben Smith, NowThis recently decided to get rid of the traditional web access to, instead, propagate its content only via, from left to right: Tumbler, Kik, YouTube, Facebook, Twitter, Instagram, Vine, and Snapchat. We can assume that this strategy is based on careful analytics (more on this in a future Monday Note.)

Among other questions raised by Monday Note readers: Why focus solely on the New York Times and why not include the Gannetts or McClatchys? It’s simply because, along with The Guardian or the FT.com, the NYT is substantially more likely to become predominantly a digital brand than many others in the (old) league.

To be sure, as one reader rightly pointed out, recent history shows how printed media that chose to go full digital end up losing on both vectors. Indeed, given the size of its print advertising revenue, the Times would be foolish to switch to 100% online — at least for now. However, the trends is there: a shrinking print readership, fewer points of copy sale, consequently higher cost of delivery… Giving up the idea of a daily newspaper (while preserving a revamped end-of-the-week offering) its just a matter of time — I’ll give it five years, not more. And the more decisive the shift, the better the results will be: Keep in mind that only 7 (seven!) full-time positions are assigned to the making of the Financial Times’ print edition; how many in the vast herd of money-losing, newspaper-obsessed companies?

Again, this is not a matter of advocating the disappearance of print; it is about market relevancy such as addressing niches and the most solvent readerships. The narrower the better: if your target group is perfectly identified, affluent, geographically bound — e.g. the financial or administrative district in big capital — a print product still makes sense. (And of course, some magazines will continue to thrive.)

Finally, when it comes to assessing valuations, the biggest divide lies between the static and the dynamic appreciation of the future. Wall Street analysts see prospects for the NYT Co. in a rather static manner: readership evolution, in volumes and structures, ability to reduce production expenditures, cost of goods — all of the above feeding the usual Discounted Cash Flow model and its derivatives… But they don’t consider drastic changes in the environment, nor signs of disruption.

Venture Capital people see the context in a much more dynamic, chaotic perspective. For instance: the unabated rise of the smartphone; massive shifts in consumer behaviors and time allocation; the impact of Moore’s or Metcalfe’s Laws (tech improvements and network effects); or a new breed of corporations such as the Full Stack Startup concept exposed by Andreessen Horowitz’ Chris Dixon (the man behind BuzzFeed valuation):

Suppose you develop a new technology that is valuable to some industry. The old approach was to sell or license your technology to the existing companies in that industry. The new approach is to build a complete, end-to-end product or service that bypasses existing companies.
Prominent examples of this “full stack” approach include Tesla, Warby Parker, Uber, Harry’s, Nest, Buzzfeed, and Netflix.

All of it is far more enthralling than promising investors a new print section for 2016, two more tabs on the website all manned by a smaller but more productive staff.

One analysis looks at a continuously evolving environment, the other places bets on an uncertain, discontinuous future.

The problem for legacy media is their inability to propose disruptive or scalable perspectives. Wherever we turn — The NYT, The Guardian, Le Monde — we see only a sad narrative based on incremental gains and cost-cutting. No game changing perspective, no compelling storytelling, no conquering posture. Instead, in most cases, the scenario is one of quietly managing an inevitable decline.

By contrast, native digital players propose a much brighter (although riskier) future wrapped in high octane concepts, such as: Transportation as reliable as running water, everywhere, for everyone (Uber), or Organize the world’s information and make it universally accessible and useful (Google), or Redefining online advertising with social, content-driven publishing technology, [and providing] the most shareable breaking news, original reporting, entertainment, and video across the social web (BuzzFeed).

No wonder why some are big money attractors while others aren’t.

frederic.filloux@mondaynote.com

The NYTimes could be worth $19bn instead of $2bn  

 

by Frédéric Filloux

Some legacy media assets are vastly underestimated. A few clues in four charts.   

Recent annual reports and estimates for the calendar year 2014 suggest interesting comparisons between the financial performance of media (either legacy or digital) and Internet giants.

In the charts below, I look at seven companies, each in a class by itself:

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A few explanations are required.

For two companies, in order to make comparisons relevant, I broke down “digital revenues” as they appear in financial statements: $351m for the New York Times ($182m in digital advertising + $169m for digital subscriptions) and, for The Guardian, $106m (the equivalent of the £69.5m in the Guardian Media Group annual report (PDF here).

Audience numbers above come from ComScore (Dec 2014 report) for a common reference. We’ll note traffic data do vary when looking at other sources – which shows the urgent need for an industry-wide measurement standard.

The “Members” column seemed necessary because traffic as measured by monthly uniques does differ from actual membership. Such difference doesn’t apply to news media (NYT, Guardian, BuzzFeed).

For valuations, stock data provide precise market cap figures, but I didn’t venture putting a number the Guardian’s value. For BuzzFeed, the $850m figure is based on its latest round of investment. I selected BuzzFeed because it might be one of the most interesting properties to watch this year: It built a huge audience of 77m UVs (some say the number could be over 100m), mostly by milking endless stacks of listicles, with clever marketing and an abundance of native ads. And, at the same time, BuzzFeed is poaching a number first class editors and writers, including, recently, from the Guardian and ProPublica; it will be interesting to see how Buzzfeed uses this talent pool. (For the record: If founder Jonah Peretti and editor-in-chief Ben Smith pull this off, I will gladly revise my harsh opinion of BuzzFeed).

The New York Times is an obvious choice: It belongs to the tiny guild of legacy media that did almost everything right for their conversion to digital. The $169m revenue coming from its 910,000 digital subscribers didn’t exist at all seven years ago, and digital advertising is now picking up thanks to a decisive shift to native formats. Amazingly enough, the New York Times sales team is said to now feature a ratio of one to one between hardcore sales persons and creative people who engineer bespoke operations for advertisers. Altogether, last year’s $351m in digital revenue far surpasses newsroom costs (about $200m).

A “normal” board of directors would certainly ask management why it does not consider a drastic downsizing of newspaper operations and only keep the fat weekend edition. (I believe the Times will eventually go there.)

The Guardian also deserves to be in this group: It became a global and digital powerhouse that never yielded to the click-bait temptation. From its journalistic breadth and depth to the design of its web site and applications, it is the gold standard of the profession – but regrettably not for its financial performances, read Henry Mance’s piece in the FT.

Coming back to our analysis, Google unsurprisingly crushes all competitors when it comes its financial performance against its audience (counted in monthly unique visitors):

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Google monetizes its UVs almost five times better than its arch-rival Facebook, and 46 times better than The New York Times Digital. BuzzFeed generates a tiny $1.30 per unique visitors per year.

When measured in terms of membership — which doesn’t apply to digital media — the gap is even greater between the search engine and the rest of the pack :

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The valuation approach reveals an apparent break in financial logic. While being a giant in every aspects (revenue, profit, market share, R&D spending, staffing, etc), Google appears strangely undervalued. When you divide its market capitalization by its actual revenue, the multiple is not even 6 times the revenue. By comparison, BuzzFeed has a multiple of 8.5 times its presumed revenue (the multiple could fall below 6 if its audience remains the same and its projected revenue increases by 50% this year as management suggests.)  Conversely, when using this market cap/revenue metric, the top three (Twitter, Facebook, and even LinkedIn) show strong signs of overvaluation:

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Through this lens, if Wall Street could assign to The New York Times the ratio Silicon Valley grants BuzzFeed (8.5 instead of a paltry 1.4), the Times would be worth about $19bn instead of the current $2.2bn.

Again, there is no doubt that Wall Street would respond enthusiastically to a major shrinkage of NYTCo’s print operations; but regardless of the drag caused by the newspaper itself, the valuation gap is absurdly wide when considering that 75% of BuzzFeed traffic is actually controlled by Facebook, certainly not the most reliably unselfish partner.

As if the above wasn’t enough, a final look confirms the oddity of market valuations. Riding the unabated trust of its investors, BuzzFeed brings three times less money per employee  than The New York Times does (all sources of revenue included this time):

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I leave it to the reader to decide whether this is a bubble that rewards hype and clever marketing, or if the NYT is an unsung investment opportunity.

frederic.filloux@mondaynote.com

From “Trust In News” to “News Profiling”

 

by Frédéric Filloux

For news organizations, the key challenge is to lift value-added editorial above Internet noise. Many see “signals” as a possible solution, one that could be supplemented by a derivative of ad profiling.   

Last year Richard Gingras and Sally Lehrman came up with the Trust Project (full text here, on Medium). Richard is a seasoned journalist and the head of News and Social at Google; Sally is a senior journalism scholar at the Markkula Center for Applied Ethics at Santa Clara University in California.

Their starting point is readers’ eroding confidence in media. Year after year, every survey confirms the trend. A recent one, released ten days ago at the Davos Economic Forum by the global PR firm Edelman confirms the picture. For the first time, according to the 2014 version of Edelman’s Trust Barometer, public trust in search engines surpasses trust in media organizations (64% vs 62%). The gap is even wider for Millennials who trust search engines by 72% vs 62% for old medias.

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And when it comes to segmenting sources by type — general information, breaking, validation –, search leaves traditional media even further in the dust.

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No wonder why, during the terrorist attack in Paris three weeks ago, many publishers saw more than 50% of their traffic coming from Google. This was reflected on with a mixture of satisfaction (our stuff surfaces better in Google search and News) and concern (a growing part of news media traffic is now in the hands of huge US-based gatekeepers.)

Needless to say, this puts a lots of pressure on Google (much less so to Facebook that is not that much concerned with its growing role as a large news conduit.) Hence the implicit mission given to Richard Gingras and others to build on this notion of trust.

His project is built around five elements to parse news contents with:

#1. A mission and Ethics statement. As described in the Trust Project:

One simple first step is a posted mission statement and ethics policy that convey the mission of a news organization and the tenets underlying its journalistic craft. Only 50% of the top ten US newspapers have ethics policies available on the web and only 30% of ten prominent digital sites have done so.

The gap between legacy and digital native news media is an interesting one. While the former have built their audience on the (highly debatable) notion of objective reporting, balanced point of views, digital natives come with a credibility deficit. Many of the latter are seen as too close to the industry they cover; some prominent ones did not even bother to conceal their ties to the venture capital ecosystem, others count among their backers visible tech industry figures. Others are built around clever click-bait mechanisms that are supplemented — marginally — by solid journalism. (I’ll let our readers put names on each kind.)
In short, a clear statement on what a media is about and what are the potential conflicts of interests is a mandatory building block for trust.

#2. Expertise and Disclosure. Here is the main idea:

Far too often the journalist responsible for the work is not known to us. Just a byline. Yet expertise is an important element of trust. Where has their work appeared? How long have they worked with this outlet? Can audiences access their body of work? 

Nothing much to add. Each time I spot an unknown and worth reading writer, my first reaction is to Google him/er to understand who I’m dealing with. Encapsulating background information in an accessible way (and standardized enough to be retrievable by a search engine) makes plain sense. 

#3. Editing Disclosure, i.e. details on the whole vetting process a story had gone through before hitting the pixels. Fine, but it’s a legacy media approach. Stories by Benedict Evans, Horace Dediu, or Jeff Jarvis (see his view on the Trust Project), just to name a few respected analysts, are not likely to be reviewed by editors, but their views deserve to be surfaced as original contents. Therefore, Editing Disclosure should not carry a large weight in the equation.

#4. Citation and Corrections. The idea is to have Wikipedia-like standards that give access to citations and references behind the author’s assertions. This is certainly an efficient way to prevent plagiarism, or even “unattributed inspiration”. The same goes for corrections and amplifications, as the digital medium encourages article versioning.

#5. Methodology. What’s behind a story, how many first-hand interviews, reporting made on location as opposed to the soft reprocessing of somebody else’s work. Let’s be honest, the vast majority of news shoveled on the internet won’t pass that test.

Google’s idea to implement all of the above is to create a set of standardized “signals” that will yield objective ways to extract quality stuff from the vast background noise on the Web. Not an easy task.

First, Google news already works that way. In a Monday Note based on Google News’ official patent filing (see: Google news: The Secret Sauce), I looked at the signals isolated by Google to improve its news algorithm. There are 13 of them, ranging from the size of the organization’s staff to the writing style. It certainly worked fine (otherwise, Google News won’t be such a success). But it no longer is enough. Legacy media are now in constant race to produce more in order to satisfy Google’s (News + Search) insatiable appetite for fresh fodder. In the meantime, news staffs keep shrinking and “digital serfs”, hired for their productivity rather than their journalistic acumen, become legions. Also, criteria such as the size of a news staff no longer apply as much, this because independent writers and analysts — as those mentioned above — have become powerful and credible voices.

In addition, any system aimed at promoting quality — and value — is prone to guessing, to cheating. Search algorithm has become a moving target for all the smart people the industry has bred, forcing Google to make several thousands adjustments in its search formulae every year.

The News Profile and Semantic Footprint approach. If the list stated by the creators of The Trust Project is a great start, it has to be supplemented by other systems. Weirdly enough, profiling techniques used in digital advertising can be used as a blueprint.

Companies specialized in audience profiling are accumulating anonymous profiles in staggering numbers: to name just one, in Europe, Paris-based Weborama has collected 210m profiles (40% of the European internet population), each containing detailed demographics, consumer tastes for clothing, gadgets, furniture, transportation, navigation habits, etc. Such data are sold to advertisers that can then pinpoint who is in the process of acquiring a car, or of looking for a specific travel destination. No one ever opted-in to give such information, but we all did by allowing massive cookies injections in our browsers.

Then, why not build a “News Profile”? It could have all the components of my news diet: The publications I subscribed or registered to, the media I visit on a frequent basis, the authors I searched for, my average length of preferred stories, my propensity to read large documented profiles of business persons, the documentaries I watched on You Tube, the decks I downloaded from SlideShare… Why not adding the books I ordered on Amazon and the people I follow on Twitter, etc. All of the above already exists inside my computer, in the form of hundreds, if not thousands, of cookies I collected in my navigations.

It could work this way: I connect — this time knowingly — to a system able to reconcile my “News Profile” to the “Semantic Footprint” of publications, but also of authors (regardless of their affiliation, from NYT’s John Markoff to A16z’ Ben Horowitz), type of production, etc. Such profiling would be fed by criteria described in The Project Trust and by Google News algorithm signals. Today, only Google is in the position to perform such daunting task: It has done part of the job since the first beta of Google News in 2002, it collects thousands of sources, and it has a holistic view of the Internet. I personally have no problem with allowing Google to create my News Profile based on data… it already has on me.

I can hear the choir of whiners from here. But, again, it could be done on a voluntary basis. And think about the benefits: A skimmed version of Google News, tailored to my preferences, that could include a dose of serendipity for good measure… Isn’t it better than a painstakingly assembled RSS feed that needs constant manual updates? To me it’s a no-brainer.

frederic.filloux@mondaynote.com

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

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[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:

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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