About Frédéric Filloux

Posts by Frédéric Filloux:

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

News Media: Diversify or Die

 

The era of news media based on single product is over. In every field, diversification is mandatory, but yields will vary. Decisive prioritization will make a big difference. 

Below is a list – by no means exhaustive – of products and services to be found in most media organizations. Their targets include both individual customers (I use the term on purpose because it goes well beyond the notion of readers), as well as corporate clients. Difficult as it may seem, I’ve assigned a tentative value to each item. In turn, the sum of items in any given mix must translate into the famous Average Revenue per User (ARPU), a number that should be everyone’s obsession. (In the end, the metric of choice ought to be the Margin Per User, but it is very complicated to assess for two reasons: one, some products take a while to take off and, two, in integrated media companies, most resources are spread across many products). These precautions aside, here is a quick overview:

338_table_diversif

Now, let’s examine each item in detail, looking at the nature of the product (or service), its business potential and its priority level.

Daily Print Occasional Reader. This is, by all means, the least valuable customer. For premium brands that increased their street price in recent years, the margin can remain significant. But, for the vast majority of media outlets, the costs of serving occasional, rare customers in remote places are staggering. The practice needs urgent reassessment. In most cases, this means eliminating the weakest point of sales.
Potential: Zero. Setting rare exceptions aside, this amounts to decay management.
Priority: Low. (Well, high priority when it comes to cleaning up this line of business.)

Daily Print Subscriber. Its indisputable value relies on a single fact: Some customers (note the emphasis) will pay almost any price to see their dead-tree copy on their doorstep or on their desk every morning. True. But less and less so. It won’t resist the generational shift nor the objective practicability – and depth – of the digital vector.
Potential: Limited due to unavoidable reader depletion
Priority: Limited. Stick to the well-known mechanism of subscribers gathering (good data management helps).

Weekend Print Occasional Readers and Subscribers. Basically, same as above – with one caveat: Some weekend print products still bring sizable advertising revenue. In the US, large dailies are said to bring half of their revenue on weekends (another reason to reconsider weekday products).

Digital Occasional Reader. Can be funneled in through SEO and similar tactics. In most cases, annual ARPU (mostly ads) remains in the single digit.
Potential: Depends on the ability to go for volume and on decisiveness in terms of advertising creation. To put it another way, if you stick to IAB-like formats, you’re doomed. Conversely, If you take control of advertising creation on your own properties, the stakes rise quickly.
Priority: High. Go beyond the usual low-yield system.

Digital Registered Users. In short, anything must be done to get your audience to leave names and email addresses. These are your high-contribution customers of tomorrow. Then, don’t spare any resource, both in terms of technology and smart people to operate it.
Potential: High.
Priority: Top.

Digital Subscribers. For quality media, this is the most precious revenue stream. (It doesn’t apply, of course, to commodity news providers or aggregators who bet solely on volume.) Hence the importance of harvesting as much registered users as possible. Next step is to work on the conversion rate. A good CRM mechanism is a plus, but a great, valuable, unique product is mandatory. User’s won’t pay for digital access (whatever the platform — desktop web, mobile, web, apps) unless they are convinced that you provide irreplaceable stuff.
Potential: High.
Priority: Top.

eBooks Publishing. Disappointing, so far. This must remain cheap to operate. Preferably, opt for partnering with an established digital publisher eager to take advantage of your brand’s reach and reputation. They’ll do the tedious part for you, sparing you most operating costs.
Potential: Average, can become a quiet and steady P&L contribution.
Priority: Low.

Intelligence & Special Reports / Customized Intelligence. This only applies to highly regarded B2B brands. It can be expensive to operate (it requires specialized staff — that must be kept small). Highly customized, bespoke intelligence reports carry significant upside, but they border on consulting.
Potential: Sizable if you are able to sell high premium products to a high-paying niche of solvent customers (every word in the phrase counts).
Priority: Average. There is a significant risk of losing money for a long time before achieving traction.

Events & Conferences. According to people who organize such, the segment is (a) very crowded, (b) highly dependent on the general business climate. Conference attendance usually is the first budget item slashed by corporations in down times. One sure thing, tough: Conferences & Event indeed are editorial products. They must be supported (ideally induced) by the news staff; like the so-called enterprise journalism, they must be the product of deep editorial thinking, with an angle; and they must be focused on providing something unique. If these boxes are checked, high margin will ensue. (Read The Eight Types of Journalism Events That Works on PBS Blog)
Potential: High if well engineered and executed.
Priority: Depends on the level of competition in your market. I’d say: High.

Moocs & Training Products. One of my favorites. Three reasons: One is demographic: More and more people will have no choice but to immerse themselves in deep training simply to survive in the job market. The second is the dual market potential: Corporate for paid-in-advance products, and B2C for sponsored courses. I no longer believe in the ability for a media company to collect paid-for users since big Mooc outlets (Coursera, Audacity, Kahn Academy and others) are sterilizing the business of online education by proposing great courses at no charge. But media can leverage on their brand, reach, as well as their portfolios of advertisers.
Potential: High
Priority: Top. Because we are talking about tomorrow’s customers here. Better start showing up on their radar. Risk is limited as long as you stick to a cost structure in which productions costs are pre-guaranteed.

eCommerce. Important, but impossible to detail here: Too many possibilities. Some media are doing well selling tickets for sports events or concerts, other are more into high-priced items aimed at corporations. In the end, it depends on the performance of your lead-gathering machine. Many companies are learning fast. Potential varies widely, depending on your market.

Content Syndication. This needs serious consideration. Digital news is overwhelmed by shallow, recycled, often mediocre contents. Premium is rare because it’s expensive and risky to produce. Therefore it carries tangible value. Hence the importance of a selective dissemination towards outlets that can’t afford original production. In order to realize its full potential, quality editorial production needs the adjunction of essential attributes such as granular semantic and a powerful, API-based distribution platform.
Potential: High (especially for well-structured and well-distributed contents).
Priority: Should be on the very Top.

Again: Many more items can be added to this enumeration. But a fact insists: As journalism sees its economics faltering, diversification is mandatory. It requires agility, light structures (in some cases disconnected from the mother ship), dedicated staff who think fast and react faster. The upside is promising.

frederic.filloux@mondaynote.com

Brace For The Corporate Journalism Wave

 

 [Updated with fresh data]

Corporations are tempted to take over journalism with increasingly better contents. For the profession, this carries both dangers and hopes for new revenue streams. 

Those who fear Native Advertising or Branded Content will dread the unavoidable rise of Corporate Journalism. At first glance, associating the two words sounds like of an oxymoron of the worst possible taste, an offense punishable by tarring and feathering. But, as I will now explain, the idea deserves a careful look.

First, consider the chart below, lifted form an Economist article titled Slime-slinging Flacks vastly outnumber hacks these days. Caveat lector, published in 2011. The numbers are a bit old (I tried to update them without success), but the trend was obvious and is likely to have continued:

336_PRvsJ_516px

Update:
As several readers pointed out, I failed to mention a Pew Research story by Alex T. Williams that contains recent data that further confirm the trend: (emphasis mine)

There were 4.6 public relations specialists for every reporter in 2013, according to the [Bureau of Labor Statistics] data. That is down slightly from the 5.3 to 1 ratio in 2009 but is considerably higher than the 3.2 to 1 margin that existed a decade ago, in 2004.

[Over the last 10 years], the number of reporters decreased from 52,550 to 43,630, a 17% loss according to the BLS data. In contrast, the number of public relations specialists during this timeframe grew by 22%, from 166,210 to 202,530.

 Williams also exposes the salary gap between PR people and news reporters:

In 2013, according to BLS data, public relations specialists earned a median annual income of $54,940 compared with $35,600 for reporters.

And I should also mention this excellent piece in this Weekend FT, on The invasion of Corporate News. –

In short, while the journalistic staffing is shrinking dramatically in every mature market (US, Europe), the public relation crowd is rising in a spectacular fashion. It grows in two dimensions: the spinning aspect, with more highly capable people, most often former seasoned writers willing to become spin-surgeons. These are both disappointed by the evolution of their noble trade and attracted by higher compensation. The second dimension is the growing inclination for PR firms, communication agencies and corporations themselves to build fully-staffed newsrooms with editor-in-chief, writers, photo and video editors.

That’s the first issue.

The second trend is the evolution of corporate communication. Slowly but steadily, it departs from the traditional advertising codes that ruled the profession for decades. It shifts toward a more subtle and mature approach based on storytelling. Like it or not, that’s exactly what branded content is about: telling great stories about a company in a more intelligent way versus simply extolling a product’s merits.

I’m not saying that one will disappear at the other’s expense. Communication agencies will continue to plan, conceive and produce scores of plain, product-oriented campaigns. This is first because brands need it, but also because there are often no other ways to promote a product than showing it in the most effective (and sometimes aesthetic) fashion. But fact is, whether it is to stage the manufacturing process of a luxury watch, or the engineering behind a new medical imagery device, more and more companies are getting into a full-blown storytelling. To do so, they (or their surrogates) are hiring talent — which happens to be in rather large supply these days.

The rise of digital media is no stranger to this trend. In the print era, for practical reasons, it would have been inconceivable to intertwine classic journalism with editorial treatments. In the digital world things are completely different. Endless space, the ability to link, insert expandable formats all open new possibilities when it comes to accommodating large, rich, multimedia contents.

This evolution carries both serious hazards for traditional journalism as well as tangible economic opportunities. Let’s start with the business side.

Branded content (or native advertising) has achieved significant traction in the modern media business — even if the quality of its implementation varies widely. Some companies (that I will refrain from naming) screwed up big time by failing to properly identify what was paid-content as opposed to genuine journalistic production. And a misled reader is a lost reader (especially if there is a pattern). But for those who pull out good execution, both in terms of ethics and products, native ads carry a much better value than banners, billboards, pushdowns, interstitials, or other pathetic “creations” massively rejected by readers. I know of several media selling dumb IAB formats that find out they can achieve rates 5x to 8x higher by relying on high quality, bespoke branded contents. These more parsimonious and non invasive products achieve a much better audience acceptance than traditional formats.

For media companies, going decisively for branded content is also a way to regain control on their own business. Instead of getting avalanches of ready-to-eat campaigns from media buying agencies, they retain more control on the creation of advertising elements by dealing with the creative agencies or even with the brand themselves. Such a move goes with some constraints, though. Entering branded content at a credible scale requires investments. To serve its advertising clients, BuzzFeed maintains 50 people in its own design studio. Relative to the size of their entire staff, many other new media companies decided from the outset to build fairly large creative teams (including Quartz). That’s precisely why I believe most legacy media will miss this train (again). Focused on short-term cost control, also under pressure from conservative newsrooms who see branded content as the Antichrist, they will delay the move. In the meantime, pure players will jump on the opportunity.

Newsrooms have reasons to fear Corporate Journalism — in the sense of the ultimate form of branded content entirely packaged by the advertiser — but not for the reasons editors usually put forward. Dealing with the visual segregation of native ads vs. editorial is not utterly complicated; it depends mostly on the mutual understanding between the head of sales (or the publisher) and the editor; the latter needs to be credible enough among his peers to impose his/er choices without yielding to corporatism-induced demagoguery.

But the juxtaposition of articles (or multimedia contents) produced on one side by the newsroom and on another hand by a sponsor willing to build its storytelling at any cost might trigger another kind of conflict, around means and sources.

In the end, journalism is all about access. Beat reporters from a news media will do their best to circumvent the PR fence to get access to sources, while at the same time the PR team will order a bespoke story from its own staff writers. Both teams might actually find themselves in competition. Let’s say a media wants to write a piece on the strategy shift of major energy conglomerate with respect to global warming; the news team will talk to scores of specialists outside the company, financial analysts who challenge management’s choices, shareholders who object to expensive diversification, advocacy group who monitor operations in sensitive areas, unions, etc. They will also try to gain access to those who decide the fate of the company, i.e. top management, strategic committees, etc. Needless to say, such access will be tightly controlled.

On the corporate journalism side, the story will be told differently: strategist and managers will talk openly and in a very interesting way (remember, they are interviewed by pros). At the same time, a well-crafted on-site video shot in an oil-field in Borneo, or on a solar farm in Africa will reinforce the message, in a 60 Minutes way. The whole package won’t carry silly corporate messages, it will be rich, carefully balanced for credibility and well-staged. Click-wise, it is also likely to be quite attractive with its glowing, sleek videos and great text that will have the breadth (but not the substance) of professional reporting.

I’m painting this in broad strokes. But you get my point: Authentic news reporting and corporate journalism are bound to compete as audience could increasingly enjoy informative, well-design corporate production over drier journalistic work — even though it is labelled as such. Of course, corporate journalism will remain small compared to the editorial content produced by a newsroom, but it could be quite effective on the long run.

frederic.filloux@mondaynote.com

How Linking to Knowledge Could Boost News Media

 

A key way to differentiate value-added news from commodity contents is to rework the notion of linking. Thanks to semantics and APIs, we could move from dumb links to knowledge linking.

Most media organizations are still stuck in version 1.0 of linking. When they produce content, they assign tags and links to mostly internal other contents. This is done out of fear that readers would escape for good if doors were opened too wide. Assigning tags is not exact science: I recently spotted a story about the new pregnancy in the British Royal family; it was tagged “Demography”, as if it was some piece about Germany’s weak fertility rate.

Today’s ways of laying out tags and and structuring topics are a mere first step; they are compulsory tools to keep the reader within the publication’s perimeter. The whole mechanism is improving, though. Some publications already use reader data profiling to dynamically assign related stories based on presumed affinities: Someone reading a story about General Electric might get a different set of related stories if she had been profiled as working in legal or finance rather than engineering.

But there is much more to come in that field. Two factors are are at work: API’s and semantic improvements. APIs (Application Programming Interfaces) act like the receptors of a cell that exchanges chemical signals with other cells. It’s the way to connect a wide variety of contents to the outside world. A story, a video, a graph can “talk” to and be read by other publications, databases and other “organisms”. But first, it has to pass through semantic filters. From a text, the most basic tools extract sets of words and expressions such as named entities, patronyms, places.

Another higher level involves extracting meanings like “X acquired Y for Z million dollars” or “X has been appointed to Finance Minister….”, etc. But what about a video? Some go with granular tagging systems; others, such as Ted Talks, come with multilingual transcripts that provide valuable raw material for semantic analysis. But the bulk of contents remain stuck in a dumb form: minimal and most often unstructured tagging. These require complex treatments to make them “readable” by the outside world. For instance, a untranscribed video seen as interesting (say a Charlie Rose interview), will have to undergo a speech-to-text analysis to become usable. This processes requires both human curation (finding out what content is worth processing) and sophisticated technology (transcribing a speech by someone speaking super-fast or with a strong accent.)

Once this issues are solved, a complete new world of knowledge emerges.  Enter “Semantic Culturonomics“. The term has been coined by two scholars working in France, Fabian Suchanek and Nicoleta Preda. Here is a short abstract of their paper (thanks to Christophe Tricot for the tip):

Newspapers are testimonials of history. The same is increasingly true of social media such as online forums, online communities, and blogs.
Semantic Culturomics [is] a paradigm that uses semantic knowledge bases in order to give meaning to textual corpora such as news and social media. This idea is not without challenges, because it requires the link between textual corpora and se-antic knowledge, as well as the ability to mine a hybrid data model for trends and logical rules. [...] Semantics turns the texts into rich and deep sources of knowledge, exposing nu- ances that today’s analyses are still blind to. This would be of great use not just for historians and linguists, but also for journalists, sociologists, public opinion analysts, and political scientists.

In other words, and viewed through my own glasses, these two scientists suggest to go from this:

335_semantic1

…To this:

335semantic2C

Now picture this: A hypothetical big-issue story about GE’s strategic climate change thinking, published in the Wall Street Journal, the FT, or in The Atlantic, suddenly opens to a vast web of knowledge. The text (along with graphics, videos, etc.) provided by the news media staff, is amplified by access to three books on global warming, two Ted Talks, several databases containing references to places and people mentioned in the story, an academic paper from Knowledge@Wharton, a MOOC from Coursera, a survey from a Scandinavian research institute, a National Geographic documentary, etc. Since (supposedly), all of the above is semanticized and speaks the same lingua franca as the original journalistic content, the process is largely automatized.

Great, but where is the value for the news organization, you might ask? First of all, a trusted publication (and a trusted byline) offering such super-curation to its readers is much more likely to attract a solvent audience: readers willing to pay for a service no one else offers. Second, money-making business-to-business intelligence services can be derived from modern tagging, structuring and linking. Such products would carry great value because they would be unique, based on trust, selection and relevance.

frederic.filloux@mondaynote.com

BuzzFeed: An Open Letter to Ben Horowitz

 

Ben Horowitz, the erudite cofounder of the Andreessen Horowitz (A16z) firm is a respected heavyweight in the Silicon Valley’s venture capital milieu. But A16z’s $50m BuzzFeed funding looks surprisingly ill-advised, to say the least. 

From: frederic.filloux@mondaynote.com
To: Ben Horowitz, Andreessen Horowitz, Menlo Park, California
Re: A16z investment in BuzzFeed
———————————————————
Dear Ben:

May I ask you something? How long did you spend on BuzzFeed before deciding to invest $50m? I’m not talking of Jonah Peretti’s PowerPoint deck or spreadsheets, which, I’m sure, must be quite compelling. But did you sample the real thing, the BuzzFeed site?

And how many times a day do you log in? Please, don’t tell me it’s part of your mandatory media diet, I’ll have to struggle not to express polite disbelief.

Frankly, your investment leaves me bewildered.

Judging by your blog and your remarkable book (I energetically proselytize both), you embody a mixture of vista, courage, combining focus on details with broad systemic vision, all supported by deep hands-on experience.

In addition, you are of the generous type and I was even happier to buy two copies of your book (including a paper version for a friend) knowing all proceeds will go to Women in the Struggle — a noble cause.

In short Ben, I have a great deal of respect for you. You are the type of person our modern economy needs.

Except that I don’t share your vision of the news business. In fact, I’m standing at the polar opposite of it.

Let me be clear: I do not question the goals and means of the VC business you’re in. In fact, I think this extraordinary ecosystem of financing innovation has long been a vital booster to the economy. Whenever I get the opportunity, I preach this in France, only to find out that my plea is beyond the cognitive grasp of the French governing elite (our VC perimeter is 33 times smaller than yours for a GDP only 6 times smaller.) The whole system sounds fine to me:  investors gives you money — $4.15bn for Andreessen Horowitz at my last count —  your mission is to multiply, you create scores of high qualified jobs. Great.

But is BuzzFeed really such a good multiplier?

Obviously, you know more than I do about BuzzFeed’s long term’s prospects: Impressive growth, heavy reliance to technology. From a pure business perspective tough, I would be very careful to put other people’s money in a traffic-machine that depends for 75% on social referrals because not all clicks are born equal. BF’s are myriad, but they are worth a tiny fraction of, say, a click on The New York Times.

I spent some time trying to overcome my reluctance to BuzzFeed’s editorial content. I wanted to to convince myself that I might be wrong, that BuzzFeed could in fact embody some version of journalism’s future. But if that’s the case, I will quickly resettle in a remote place of New Mexico or Provence.

BuzzFeed is to journalism what Geraldo is to Walter Cronkite. It sucks. It is built on meanest of readers’ instincts. These endless stream of crass listicles are an insult to the human intelligence and goodness you personify. Even Business Insider, a champion practitioner of cheap click-bait schemes, looks like The New York Review of Books compared to BuzzFeed. And don’t tell me that, by hiring a couple of “seasoned editors and writers” as the PR spin puts it, BuzzFeed will become a noble and notable contributor of information. We never saw a down/mass market product morphing into a premium media. You can delete as many posts as you wish, it won’t alter BF’s peculiar DNA.

Fact is, quality content does exist in BuzzFeed (an example here), but in the same way as a trash can contains leftovers of good food: you must go deep to find it.  It won’t change the fact that what people enjoy the most on BuzzFeed is unparalleled ability to package, organize and disseminate mediocrity broken down in this promising nomenclature:

334-buzzfeed

Ben, don’t tell me you’re proud of A16z investment in BuzzFeed. By funding it, you are contributing to the intellectual decrepitude of readers, the youngest ones especially — already severely damaged by Facebook and Snapchat sub-cultures. Did it ever cross your mind that these people are going to vote some day?

Two years ago, one of your competitors, the Founders Fund (I believed it held values similar to yours) published an essay titled What Happened to the Future?. Their article outlines the conflict between “funding transformational technologies (like search or mobility)” and supporting “companies that solved incremental problems or even fake problems”. Do you realize that, by funding a company such as BuzzFeed, you fall on the wrong side of the fence?

Look, I’ve no problem to see BuzzFeed or The HuffingtonPost thrive. They’re run by super-smart people (such as this one) who developed audience-building techniques that legacy media should pay more attention to.

What bothers me the most is to see smart money such as A16z’s being diverted to such a shallow product.

Ben: You want to invest in the information business? Consider what the Sandler Family did with ProPublica: they provided the seed money for a fantastic public interest journalism project (which, in passing, snatched two Pulitzers). Technology-driven ProPublica is now financially autonomous. Or consider emulating Pierre Omidyar who supports First Look Media, which promotes the kind of journalism a democracy badly needs.

Of course, these two ventures won’t produce VC-caliber ROI, but you already have plenty of items in A16z portfolio to keep your investors salivating. So, why wallow in BuzzFeed?

And if you want to put your excess of cash into something even more meaningful, hop on a Netjets plane and go to Africa. I recently bumped into an investment banker from Lazard who gave me the full picture of the economic potential of African countries, in every possible field — including leapfrogging technologies that build on the explosion of the mobile internet. For that matter, I’m personally exploring opportunities and the development of mobile apps for health and education in poor countries (a non-profit project). I started modestly by lending an Android phone and other items to an eye surgeon who runs (pro-bono) surgery campaigns in Sub-Saharian Africa. After her last campaign in Burkina-Faso last spring, we debriefed and the conclusions are staggering in terms of demand and opportunities. And I know the same thing is happening with mobile education. I decided to put €10,000 of my own money, just to see some of the ideas I’m nurturing could fly. If I were you Ben, I’d put a million dollars to explore this. And if I were running A16z, I would invest millions in long-term projects such as the automated large-cargo drones system described at the end of Alexis Madrigal’s recent story in The Atlantic that could change a whole continent economy. Or in mobile phone-based projects in Africa funded by PlaNetFinance Group or others. Tech investment in developing countries is indeed a Next Big Thing — much bigger than listicles. Risks and upsides are both huge. Right up your alley.

Best regards,

—Frederic Filloux

Legacy Media: The Lost Decade In Six Charts

 

Ten years. That’s how far away in the past the Google IPO lies. Ten years of explosive growth for the digital world, ten gruesome years for legacy media. Here is the lost decade, revisited in charts and numbers. 

The asymmetry is staggering. By every measure, the digital sphere grew explosively thanks to a combination of known factors: a massive influx of capital; the radical culture shift fostered by a “blank slate” approach; obsessive agility in search of new preys; flattened hierarchies; shrugged-off acceptance of failure; refocusing on the customer;  a keen sense of competition; heavy reliance to technology…

By showing neither appetite nor will to check theses boxes, the newspaper and magazine industry missed almost every possible train. In due fairness, some were impossible to catch. But legacy media stubbornly refused to overhaul their culture, they remained stuck in feudal hierarchies, invested way too late in  tech. And, perhaps their cardinal sin, they kept treating failure as an abomination instead of an essential component of the innovation process.

Consequences have been terrible. Today, an entire industry stands on the verge of extinction.

Le’s start with stock performance:

333_stocks

At last Friday’s closing, Google was worth $390bn, the New York Times Company $1.85bn, Gannett $7.62bn (82 dailies and 480 non-dailies, TV stations, digital media properties, etc.) and McClatchy $392m (multiples dailies, digital services…)

In 2003, Google was minuscule compared to the newspaper industry:

333_revenue2003

 

333_revenue2013

Between 2003 and 2013, Google revenue grew by 60x. In the meantime, according to Newspapers Association of America data, the total revenue of the US newspaper industry shrank by 34%. While sales (newsstand and subscriptions) remain steady at $11bn in current dollars, print advertising revenue plunged by 61%.

For the newspaper industry, the share digital advertising, despite growing by 180%,  remained way too small: it only grew from 2.6% to 14.5% and was therefore unable to offset the loss in print ads.

333_digit.vs_print

The split in valuation and revenue, inevitably reflected on investors perception in terms of funding :

333_funding_valuation

In the chart above, Flipboard’s huge funding (and an undisclosed but tiny ad revenue), was used mostly to grab market share and eliminate competition. Flipboard did both, swallowing Zite (a far better product, in my view) for a reported $60m, i.e. $9 per user (the seller, CNN, achieved a good upside, while, regrettably, it had been unable to build upon Zite). The Huffington Post was acquired by AOL for $315m in 2011, an amount seen as ridiculous at the time, but consistent with today’s valuation of similar properties. In the newspaper segment, The Washington Post was acquired last year by Jeff Bezos for $250m; Le Monde was acquired by a triumvirate of investors led by telecom magnate Xavier Niel for $110m on 2010; and the Boston Globe was sold by The NYT for $70m when the Times purchased it for… $1.1bn in 1993.

For the newspaper industry, the only consolation is the reader’s residual value when compared to high audience but low yield digital pure players:

333_readrs_value

In the chart above, Vox Media’s reader value differs widely: Google Analytics grants it 80 million unique visitors per month; Quantcast says 65 million; and ComScore sees 30 million – such discrepancies are frequent, a part of the internet’s charm. As for Le Monde, thanks to the restoration of its P&L (even if its finances seem a little too good to be true), it’s fair to say its reader’s value could be much more than €7, a number based on the 2010 price tag and a combined audience of 14.9m viewers. These numbers include duplicated audiences of 8.8m in print, 7.9m for the fixed web and 3.2m on mobile (source Audipresse One Global, July 2014).

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The reader value gap between between digital players and legacy platforms also raises the question of investment attractiveness. Why does VC money only flocks to new, but low yield digital media?

This is a matter of discussion for next week.

frederic.filloux@mondaynote.com

The Future of Mobile Apps for News

 

The modern smartphone is 7 years old and yet, when it comes to designing mobile applications, we are still barely scratching the surface. Today we’ll see how harnessing technology already embedded in a phone can unleash great potential. 

A mobile news app has simple goals: Capture and retain reader attention, and repeat the process, several times a day. Pretty straightforward. But not that simple in the real world. For a news provider, the smartphone screen is the the most challenging environment ever seen. There, chances are that a legacy media or a pure-player will find itself in direct competition, not only with the usual players in its field, but also with Facebook, Snapchat, Instagram and scores of gaming applications. Distraction is just one icon away; any weakness in functional or graphic design can be lethal.

331_Iphone-wireframes-elements

Hence the questions for publishers: What type of news should they put on their mobile apps, what formats, what about images and video, sharing, curation, connections to other apps? Should they be selective or stuff as much as they can in their app? Or should they build easily digestible news blocks à la Circa? Or put more emphasis on a nice, small package of news items, as Yahoo News Digest brilliantly does? Or — the last trend –design an app for fast reading, like The New York Times NYT Now? (I must say, NYT Now, is my favorite news application — and I tested many; it delivers exactly what its promises: a constantly updated news stream, sending back to NYT’s stories, and well curated picks from the web. At the same time, Les Echos, the business media I work for, released LesEchosLive, an app also built around a single vertical “rail” of news with compact stories that expand and collapse as needed — readers seems to like it a lot…)

But… Good as they are, these forays into mobile news consumption are not enough. The  mobile tsunami has just begun to unfurl. Soon, it might flood a solid half, then two thirds of all news pageviews — and we can expect further acceleration after the release of the next batch of iPhones: their larger screens will provide more attractive reading.

If mobile is to become the dominant vector for news, retaining readers will be much more challenging than it is on a PC or tablet (though the latter tends to engage readers 10x or sometimes 20x more). A news app needs to be steered with precision. Today’s digital marketing tools allow publishers to select multiple parameters monitoring the use of a application: They can measure how long the app is used, when, for how long, why and where people tend to drop it, what kind of news they like, if they hit a paywall and give up, and why they do so, etc. Similarly, when an app remains unopened for too long, smart tools can pinpoint the user and remind her of the product’s benefits. These tools are as good as the people who (a) set the parameters, (b) monitor them on a daily basis, and (c) take appropriate action such as launching a broadside of super-targeted emails. But these are incremental measures, they don’t breed exponential growth in viewership (and revenue).

Why not envision a few more steps forward and take advantage of technologies now embedded in every smartphone? A mobile phone is filled with features that, well directed, can significantly improve user experience and provide reams of usage data.

Imagine a news feed natively produced in different formats: long, short, capsules of text, with stills and videos in different sizes and lengths. Every five minutes or so, the feed is updated.

After a while, your smartphone has recorded your usage patterns in great detail. It knows when you read the news and, more importantly, under what conditions. Consider Google Now, the search engine’s intelligent personal assistant: It knows when you are at work or at home and, at the appropriate moment, it will estimate your transit time and suggest an itinerary based on your commute patterns; or take Google Location History, a spectacular — and a bit creepy — service for smartphones (also tablets and laptops) that visualizes your whereabouts. Both Google services generate datasets that can be used to tailor your news consumption. Not only does your phone detect when you are on the move, but it can anticipate your motions.

Based on these data sets, it becomes possible to predict your most probable level of attention at certain moments of the day and to take in account network conditions. Therefore, a predictive algorithm can decide what type of news format you’ll be up for at 7:30am when you’re commuting (quickly jumping from one cell tower to another with erratic bandwidth) and switch for faster reads than at 8:00pm, when you’re supposed to be home, or staying in a quiet place equipped with a decent wifi, and receptive to richer formats.

By anticipating your moves, your phone can quickly download heavy media such as video while networks conditions are fine and saving meager bandwidth for essential updates. In addition, the accelerometer and internal gyroscope can tell a lot about reading conditions: standing-up in a crowded subway or waiting for your meeting to start.

By poring over such data, analytics specialists can understand what is read, watch and heard, at what time of the day and in which environment. Do users favor snippets when commuting? What’s the maximum word-length for a story to be read in the subway without being dropped, and what length is more likely to induce future reading? What’s the optimal duration for a video? What kind of news package fits the needs and attention for someone on the move? What sort of move by the way? Motion and vibration for a car are completely different than the ones from the Bay Area transit system or London’s Tube. Accelerometers and motion sensors can tell that for sure — and help to decide if it’s better to serve the smartphone owner with a clever podcast while she is likely to be stuck in her car for the next 50 minutes on Highway 101 heading to San Jose (as revealed by her trajectories and GPS patterns of the last few months) or favor text and preloaded videos for BART commuters between Oakland and San Francisco.

This approach, based on a large spectrum of patterns analytics, can enormously increase readers’ appetite for news. This is yet another reason for media companies to lean more and more on the technology side. Until now, with very few exceptions, legacy media have been slow to move into that direction. As someone who loves good journalism and smart news formats, the last thing I want to see is newcomers providing cheap editorial succeed at capturing people’s attention only because they’ll have been first to harness these technologies. We’ve had that experience on the web, let’s not make the same mistake twice.

frederic.filloux@mondaynote.com

News on mobile: better be a Danish publisher than a Japanese one

 

This is the second part of our Mobile facts to Keep in Mind (see last week Monday Note – or here on Quartz). Today, a few more basic trends and a closer look at healthy markets for digital news. 

Last week, we spoke about the preeminence of mobile applications. Not all readers agree, of course, but I found more data to support the finding; among many sources, the remarkable Reuters Institute Digital News Report (PDF here) is worth reading:

47% of smartphone users say they use mainly apps for news

According to the report, this figure has risen by 6 percentage points in just one year. By contrast, 38% of the news consumption is made via a browser — which is losing ground: -4% in just a year.

The trend is likely to accelerate when taking in account demography: On smartphones, the most active groups are the 18-24s and the 35-44s; on tablets the most active group is the 45-54 segment.

Platform usage varies in accordance to local market share, but when it come to paying for news, Apple leads the game:

iOS users are x1.5 likely to pay for news in the US
and x2 likely to pay in the UK than Android or other users

Here is the bad part, though. Again based on the Reuters report, the use of smartphones does narrow the range of news sources. More than ever, the battle for the first screen is crucial.

Across the ten countries surveyed,
37% of users rely on a single news source
vs. 30% for PC users

In the UK, the trend is even stronger with 55% of mobile users relying a single news source. This goes along with good news for those who still defend original news production: mobile news consumption is quite focused on legacy media. The BBC app crushes the competition with 67% of respondents saying they used the app the previous week, vs. 25% for Sky, MSN and Yahoo are trailing with respectively 2% and 7%.

If you want to survey a healthy digital news market, go to Denmark

MN_328_vikings_logo

A Viking logo (from the TV Series) as viewed by the Brand New blog;
note the ancient reference to technology…

Not only does Denmark rank among the best countries to live and develop a business in, but when it comes to digital news, it leads the pack in several of ways:

Despite the digital tsunami, Denmark retains many strong media brands. As a result, legacy media are the prime way for accessing digital news. And since Danish media did well embracing new platforms, they enjoyed similarly success on social, funneling readers to their properties.
The opposite holds for France and Germany where the transition is much slower; in those countries digital users rely much more on search to reach news brands. Two side effects ensue: News readers are more accidental and therefore generate a much lower ARPU; and the greater reliance on Google is problematic (hence the call to arms in France and Germany against the search engine giant.)

— Because of the strength of its traditional media brands, the Denmark news market has left very little oxygen to pure players: They weigh only 10% of weekly digital news, vs. 39% in the US and 46% in Japan were legacy media have been severely hit.

— Danes are the heaviest users of both smartphones and tablets to access news.

— They use mobile apps more than anywhere else: 19%, vs. 15% for US and 12% for Germany.

— They are mostly Apple users : 58% say they use an iOS device to access news in the last week (vs. 28% in Germany), hence a better ARPU for mobile publishers.

—  Danish news consumers generously overlap their devices way more than in any country. 79% use a PC, 61% a smartphone and 39% a tablet. Only 24% use only a PC for news. In Japan by contrast, 58% admit using only a PC for their news diet; up there, the use of smartphone and tablet to access information is respectively one half and one third of Denmark.

— In Danish public transportation, smartphones has overtaken print as the main news vector by 69% vs. 21% of the usage.

We all know where to seek inspiration for our digital news strategies.

frederic.filloux@mondaynote.com

Mobile Facts To Keep In Mind – Part 1

 

By the end of 2014, many news media will collect around 50% of their page views via mobile devices. Here are trends to remember before devising a mobile strategy. (First of a two-part series.)

In the news business, mobile investments are on the rise. That’s the pragmatic response to a major trend: Users shift from web to mobile. Already, all major media outlets are bracing for a momentous threshold: 50% of their viewership coming from mobile devices (smartphones and tablets). Unfortunately, the revenue stream is not likely to follow anytime soon: making users pay for mobile content has proven much more difficult than hoped for. As for advertising, the code has yet to be cracked for (a) finding formats that won’t trigger massive user rejection, and (b) monetizing in ways comparable to the web (i.e. within the context of a controlled deflation). Let’s dive into a few facts:

Apps vs. WebApps or Mobile sites. A couple of years ago, I was among those who defended web apps (i.e. encapsulated HTML5 coding, not tied to a specific OS platform) vs. native apps (for iOS, Android, Windows Phone). The idea was to give publishers more freedom and to avoid the 30% app store levy. Also, every publisher had in mind the success enjoyed by the FT.com when it managed to put all its eggs in its web app and so retain complete control over the relationship with its customers.

big_phone
Credit: Vintage Mobile / Popular Mechanics

All of the above remains true but, from the users’ perspective, facts speak loudly: According to Flurry Analytics, apps now account for 86% of the time spent by mobile users vs. 14% for mobile sites (including web apps.) A year ago, the balance was 80% for apps and 20% for mobile web.

Trend #1: Native apps lead the game
at the expense of web apps and mobile sites 

One remark, though: the result must take in account the weight of games and Facebook apps that account for 50% of the time spent on mobile. News-related usage leans more to mobile as there is not (yet) demand for complex rendering as in a gaming app. But as far news applications are concerned, we haven’t seen major breakthroughs in mobile web or web apps over the last months and it seems development is stalling.

News vs. the rest of the app world. On a daily total of 2hrs 50mn spent by mobile users (source: eMarketer), 2% to 5% of that time is spent on news. Once you turn to growth, the small percentage number starts to look better: The news segment is growing faster (+64% Y/Y) than messaging and social (+28%) or gaming and entertainment (+9% each); the fastest usage segment being the productivity apps (+119%) and that’s due to the transfer of professional uses from the desktop to the mobile.

Trend #2: On mobile, news is growing faster
than game or social 

…And it will grow stronger as publishers will deploy their best efforts to adjust contents and features to small screens and on-the-go usage and as mobile competitors multiply.

iOS vs. Android: the monetization issue. Should publishers go for volume or focus on the ARPU (revenue per user)? If that’s the reasoning, the picture is pretty clear: an iOS customer brings on average five times more money than an Android user. And the gap is not about to close. However, Android OS has about one billion users vs. 470m users for iOS, but most of Android users are in low income countries, where phones can cost as little as $80, and prices are falling fast. By contrast, an iPhone will cost around $600 (without a carrier contract) and the not-so-successful “cheap” iPhone 5C shows that iPhone is likely to remain a premium product.

Trend #3: There is more money to make on iOS
than Android and that’s not likely to change

Beside, we must take in account two sub-trends: iOS will gain in sophistication with the arrival of iOS 8 (see Jean-Louis’ recent column about iOS 8 being the real version 2.0 of iOS) and a new breed of applications based on the new Swift  programming language. Put differently: Advanced functionalities in Swift/iOS 8-based apps will raise the level of user expectations; publishers will be forced to respond accordingly: as apps reside side by side on the same mobile screen, news apps will be required to display the same level of sophistication than, say, a gaming app — that’s also why I’m less bullish on web apps. Behind the iOS/Android gap lies another question: Should publishers have the same app (content, features, revenue model across) all platforms – or must they tailor their product to platform “moneygraphics”?  That’s an open question.

I’ll stop here for today. Next week, I’ll explore trends and options for business models, marketing tactics, why it could be interesting to link a news app to the smartphone accelerometer and why news media should tap into game developers for certain types of qualifications.

–frederic.filloux@mondaynote.com

Google might not be a monopoly, after all

 

Despite its dominance, Google doesn’t fit the definition of a monopoly. Still, the Search giant’s growing disconnect from society could lead to serious missteps and, over time, to a weakened position. 

In last week’s column, I opined about the Open Internet Project’s anti-trust lawsuit against Google. Reactions showed divided views of the search engine’s position. Granted, Google is an extremely aggressive company, obsessed with growth, scalability, optimization — and also with its own vulnerability.

But is it really a monopoly in the traditional and historical sense? Probably not. Here is why, in four points:

1. The consent to dependency. It is always dangerous to be too dependent from a supplier one doesn’t control. This is the case in the (illegal) drug business. Price and supply will fluctuate at the whim of unpredictable people.This is what happens to those who build highly Google-dependent businesses such as e-commerce sites and content-farms that provide large quantities of cheap fodder in order to milk ad revenue from Google search-friendly tactics.

326_jaws
In the end, everything is a matter of trust (“Jaws”, courtesy of Louis Goldman)

Many news media brands have sealed their own fate by structuring their output so that 30% to 40% of their traffic is at the mercy of Google algorithms. I’m fascinated by the breadth and depth of the consensual ecosystem that is now built around the Google traffic pipeline: consulting firms helping media rank better in Google Search and Google News; software that rephrases headlines to make it more likely they’ll hit the top ranks; A/B testing on-the-fly that shows what the search engine might like best, etc.

For the media industry, what should have remained a marginal audience extension has turned into a vital stream of page views and revenue. I personally think this is dangerous in two ways. One, we replace the notion of relevance, reader interest, with a purely quantitative/algorithmic construct (listicles vs depth, BuzzFeed vs. ProPublica for instance). Such mechanistic practices further fuel the value deflation of original content. Two, the eagerness to please the algorithms distracts newsrooms, journalists, editors, from their job to find, develop, build intelligent news packages that will lift brand perception and elevate the reader’s mind (BuzzFeed and plenty of others are the quintessence of cheapening alienation.)

2. Choice and Competition. In 1904, Standard Oil Inc. controlled 91% of American oil production and refining, and 85% of sales. This practically inescapable monopoly was able to dictate prices and supply structure. As for Google, it indeed controls 90% of the search market in some regions (Europe especially, where fragmented markets, poor access to capital and other cultural factors prevented the emergence of tech giants.) Google combines its services (search, mail, maps, Android) to produce one of the most potent data gathering systems ever created. Note the emphasis: Google (a) didn’t invent the high tech data X-ray business, nor (b) is it the largest entity to collect gargantuan amounts of data. Read this Quartz article The nine companies that know more about you than Google or Facebook  and see how corporations such as Acxiom, Corelogic, Datalogix, eBureau, ID Analytics, Intelius, PeekYou, Rapleaf, and Recorded Future collect data on a gigantic scale, including court and public records information, or your gambling habit. Did they make you sign a consent form?

You want to escape Google? Use Bing, Yahoo, DuckDuckGo or Exalead for your web search, or go here to find a list of 40 alternatives. You don’t want your site to be indexed by Google? Insert a robot exclusion line in your html pages, and the hated crawler won’t see your content. You’re sick of Adwords in your pages or in Gmail? Use AdBlock plug-in, it’s even available for the Google Chrome browser. The same applies for storing your data, getting a digital map or web mail services. You’re “creeped out” by Google’s ability to reconstruct every move around your block or from one city to another by injecting data from your Android phone into Maps? You’re right! Google Maps Location History is frightening; to kill it, you can turn off your device’s geolocation, or use Windows Phone or an iPhone (be simply aware that they do exactly the same thing, but they don’t advertise it). Unlike public utilities, you can escape Google. Simply, its services are more convenient, perform well and… are better integrated, which gets us to our third point:

3. Transparent strategy. To Google’s credit, for the most part, its strategy is pretty transparent. What some see as a monopoly in the making is a deliberate — and open — strategy of systematic (and systemic) integration. Here is the chart I made few months ago:

326 graph_goolge

We could include several recent additions such as trip habits from Uber (don’t like it? Try Lyft, or better, a good old Parisian taxi – they don’t even take credit cards); or temperature setting patterns soon coming from Nest thermostats (if you chose to trust Tony Fadell’s promises)… Even Google X, the company’s moonshot factory (story in Fast Company) offers glimpses of Google’s future reach with the development of autonomous cars, projects to bring the internet to remote countries using balloons (see Project Loon) or other airborne platforms.

4. Innovation. Monopolies are known to kill innovation. That was the case with oil companies, cartels of car makers that discouraged alternate transportation systems, or even Microsoft which made our life miserable thanks to a pipeline of operating systems without real competition. By contrast, Google is obsessed with innovative projects seen as an absolute necessity for its survival. Some are good, other are bad, or remain in beta for years.

However, Google is already sowing the seeds of its own erosion. This company is terribly disconnected from the real world. This shows everywhere, from the minutest details of its employees daily life pampered in a overabundance of comfort and amenities that keep them inside a cosy bubble, to its own vital statistics (published by the company itself). Google is mostly white (61%), male (70%), recruits in major universities (in that order: Stanford, UC Berkeley, MIT, Carnegie Mellon, UCLA), with very little “blood” from fields other than scientific or technical. For a company that says it wants to connect its business to a myriad of sectors, such cultural blinders are a serious issue. Combined to the certainty of its own excellence, the result is a distorted view of the world in which the distinction between right and wrong can easily blur. A business practice internally considered virtuous because it supports the perpetuation of the company’s evangelistic vision of a better world can be seen as predatory in the “real” world. Hence a growing rift between the tech giant and its partners and customers, and the nations who host them.

frederic.filloux@mondaynote.com