About Frédéric Filloux

Posts by Frédéric Filloux:

On Marc Andreessen’s optimistic view of news

 

A strongly-worded column by venture capitalist Marc Andreessen triggered an intense debate on the future of news. Andreessen might be right places, but his views can also be dangerously simplistic. 

For starters, it is always great to have an outsider’s view. Marc Andreessen’s witty, and fast-paced dithyramb on the future of news is undoubtedly welcome. But, as always, regardless of the depth and breath of the big picture he paints, the devil lies in the details. In no particular order, here are my thoughts on his manifesto.

As a European, I found his piece extraordinary US-centric or, slightly more broadly, Anglophone-centric.

Andreessen wrote :

[T]he market size is dramatically expanding—many more people consume news now vs. 10 or 20 years ago. Many more still will consume news in the next 10 to 20 years. Volume is being driven up, and that is a big, big deal.
Right now everyone is obsessed with slumping prices, but ultimately, the most important dynamic is No. 3 – increasing volume. Here’s why: Market size equals destiny. The big opportunity for the news industry in the next five to 10 years is to increase its market size 100x AND drop prices 10X. Become larger and much more important in the process.

By saying this, Andreessen makes two good faith mistakes.

First, he mixes up global reach and monetizable audience. Evidently, a growing number of people will enjoy access to news (maybe not all the 5 billion cellphone users he mentions), but the proportion of those able to generate a measurable ARPU is likely to be very small.

The Scalability that works for Google Maps or WhatsApp doesn’t work as well for the notion of relevant information, one that is more tightly connected to language, proximity and culture.

Second, he overestimates the addressable news market’s fragmentation. I live in France, a 66 million people country with a high standard of living and good fixed and mobile internet access. In spite of these factors, it remains a small market for the super-low-yield digital news business that brings few euros per year and per user (except for a minuscule subscriber base.) I remained stunned by the inability of good journalistic products, created by smart people, to find a sustainable business models after years of trying.

And the huge, globalized English speaking market does not warrant financial success. The Guardian is one such example. It operates one of the finest digital news system in the world but keeps bleeding money. The Guardian brings a mere $60m in digital ad revenue per year — to be compared to a kitten-rigged, listicles-saturated aggregator generating a multiple of this amount. Journalism has become almost impossible to monetize by itself (I’ll come back to that topic).

Andreessen also vastly underestimates the cost of good journalism when he writes:

[T]he total global expense budget of all investigative journalism is tiny —  in the neighborhood of tens of millions of dollars annually.”

Fact is, journalism is inherently expensive because it is by laborious and unpredictable: An investigation can take months, and yield nothing; or the journalistic outcome can be great, lifting the reputation of the media, but with zero impact on the revenue side (no identifiable growth in subscriptions or advertising). The same goes for ambitious coverage of people or events. No one has ever translated a Pulitzer Prize in hard dollars.

This is also the case for what Andreessen calls the “Baghdad Bureau problem”. It was said to cost $3m/year for the New York Times. In fact, on an annual basis, the Times spends about $200m for its news operations, including $70m for foreign coverage alone. The NYT is likely to stay afloat when it goes entirely digital (which might happen before the end of the decade), but one of the nastiest features of digital news is the unforgiving Winner Takes All mechanism.

As far as philanthropy is considered, I won’t spend too much time on the issue except to say this: Relying on philanthropy to cure malaria or to support ill-understood artists bears witness to an absence of sustainable economic system. (Until, perhaps, the artist dies; as for malaria, there is indeed a very long term benefit for society, but not for those who supply the treatment, hence the mandatory call to generosity.) Saying investigative or public-interest journalism could/should rely on philanthropy is the same as admitting it’s economically unsustainable. Luckily, American society has produced scores of philanthropists free from any agenda (political, ideological, religious) — such as the Sandler Foundation with ProPublica. That’s not the case in France — not to mention Russia and many other countries.

There are plenty of areas in which I completely support Marc Andreessen’s view. For example: A media company “should be run like a business“, i.e. seek the profitability that will warrant its independence (from every economic agent: shareholders, advertisers, political pressure, etc.) This brings us to the size and shape of a modern news factory (I use the term on purpose). We have to deal with an unpleasant reality: Good journalism is no longer sustainable as a standalone activity. But — and that’s the good news — it remains the best and indispensable core around which to develop multiple activities (see my recent column about The News Media Revenue Matrix).You can’t develop services, conferences, publishing, etc. around a depreciated journalistic asset. On the other hand, this asset has to be drastically streamlined: In many cases, less people, better-paid (simply for the ability to retain talent) and with sufficient means to do their job (don’t go for the press junkets because the travel budget has been slashed, you’ll lose on three counts: credibility of your brand, self-esteem of your team, quality of the reporting.)

Unfortunately, as Andreessen noted, there are plenty of hurdles to overcome. In fact, most existing news companies do not fathom the depth of the transformation required to survive and thrive. Nor do they understand the urgency to set this massive overhaul in motion. Such moves require strength, strong leadership, creativity, a fresh approach, unabated confidence, and a systemic vision — all of the above in short supply at legacy media. Note that when Marc Andreessen prides himself to be an investor in media ventures (for instance Business Insider– no conflict of interest), all are digital natives and bear none of the burdens of traditional media. His bullishness on news is selective, personal.

frederic.filloux@mondaynote.com

News Media Revenue Matrix: The Bird’s Eye View

 

Publishers struggle with newer and more complex business models. Some appear stronger than others but, above all, a broad palette is a must. It is a means to capture emerging opportunities and to compensate for the drying up of older revenue sources.

Today, I submit the following revenue matrix for a modern, content-rich news outlet. As I see it, in the news business “modernity” mean this:

A proven ability to produce original content in abundance and under multiple forms: news reporting, investigation, analysis, data journalism, long form (for ebook publishing), enterprise-like journalism, live feeds; all of the above in the form of text, images, graphics and videos.

A cultural mindset to produce contents for the platform with the best fit: a news story for a newspaper, an interactive piece on the web, live coverage for mobile. The collective publishing mindset should no longer allow first- and second-class news products. Every piece of newsroom output must be designed as a contribution to a cascading revenue system in which each element empowers every other one.

– A newsroom equipped with the best tools money can buy or — even better — build. These include a powerful Content Management System (CMS) aimed at dispatching production to every platform. The CMS must be connected to a semantic analysis system that makes all pieces of information — from a feature story to the transcript of a video — compatible with the semantic web’s standardized grammar. In order to extract more value from a piece of content, the CMS must also connect to multiple databases. For example, the name of an obscure city must be able to generate a map – through the Geonames base; a Board Director must be tied to a high value database of business leaders such as The Official Board; the name of a company must lead to open-source corporations listings.

Mastering the semantic web is indissociable from acquiring information gathering capabilities such as aggregation and filtering (see a previous Monday Note: Building a business news aggrefilter ). Such feature is a prerequisite to building high-margin products as well as exploiting the social media echo chamber. After collecting contents through RSS feeds, the combination of semantic news analysis matched against the taxonomy of, say, Twitter, will yield a trove of information on what audiences like or dislike — not only for a news media but also for its competitors. It is a complex and expensive endeavor but, in the long run, it will be worth every penny.

– And more importantly, a global editorial thinking. Too often, newsroom management suffers form what l’ll call “mono-product bias”, focusing on what is seen as noble — namely print. At a very minimum, modern editorship must embrace a widespread digital strategy. But it also must envision a sustainable game plan for a complete lineup of ancillary products that also deserve editorial coherence and strength.

Having said that, let’s have a look at the following matrix. No rocket science here, I simply made a list of 14 products that many news outlets already operate. I then tried to assess the outlook for each revenue stream. (My original idea was to assign a estimated ARPU for each cell, but there are too many parameters to be taken into account).
Click to enlarge the table:

310 table revenue

Now, let’s focus on specific products and revenue streams.

Daily Print Edition. I’m very bearish on print. Granted, it still brings the most substantial chunk of revenue – but also most of the losses. And prospects are bleak: copy sales, subscriptions, even ad sales deteriorate fast. Some light can come from ads – when they are components of customized campaigns. Daily newspapers need to be vastly simplified in order to free up resources for the wide array of other revenue streams — especially digital. I’m a big supporter of Financial Times’ Lionel Barber “Memo on reshaping the newspaper for digital age“.

Weekend editions will do better than dailies for several reasons. First, their function — long formats, portfolios, reading habits — makes them better armed against the digital tsunami that devoured news. Second, they remain a great vector for pricey advertising: on some anglo-saxon markets, weekend editions accounts for half of the print ad revenue. The New York Times understood that well as its full digital access + weekend edition bundle is a hit among customers.

Advertising revenue stream. Let’s face it, traditional ads ormats, print or digital, are dying. The conjunction of programmatic buying and ad saturation/tracking/targeting will seal their fate for good. The best outlook seems to be for customized operations and brand contents (or combinations of the two). They can spread on every platforms, including on mobile where, so far, users massively reject ads. In addition, these customized operations carry high value (huge CPMs or hefty flat fees.)

Event & Conferences. The segment is crowded and success depends on a subtile combination of attendance fees vs sponsorship, but also of editorial content. A conference is indeed a full editorial vector that needs to be treated with the same care as any other publication, i.e, with a precise angle, great casting and first class moderation that favors intellectual density over speakers flogging cheap sales pitches. News media are well positioned to deploy an efficient promotion for a content-rich, sustainable, conference system.

Intelligence & Surveys. Attractive as they might sound, these products require a great deal of expertise to make a difference. Very few media can fulfill the promise and justify the high price that goes along with such offerings.

Training and MOOCs represent an interesting potential diversification for some business publications. They carry several advantages: by addressing a young readership, MOOCs can create an early attachment to the brand; the level of risk is low as long as the media company limits itself to being a distributor (quality MOOCs production is very expensive). For a business publication, such activities represent a great way to increase its penetration in the corporate world where the need for training is limitless.

Premium Subscriptions. Some large, diversified media companies are already considering complex subscription packages for a small number of high-yield clients. In addition to print and full digital access, such packages could include access to conferences & events, MOOCs, market intelligence, and other publications. Testing the concept is a low-risk proposition.

The Business to Business segment remains the province of specialized publications. But the potential is there for general-audience media: corporations are hungry for information. The era of the bulky corporate intranet that no one watches is gone; today, for their staff, companies want apps for mobile and tablets that will save time while being precisely targeted and well-designed. Not an easy market – but  a very solvent one.

Sketchy and questionable as it is, the above matrix also illustrates the complexity of designing and selling such a wide range of products to individuals or corporations. Only a small number of news organizations will have the staff, skills and resolve to address such a broad range of opportunities.

frederic.filloux@mondaynote.com

@filloux

Building a business news aggrefilter

 

This February 10, Les Echos launches its business news aggrefilter. For the French business media group, this is a way to gain critical working knowledge of the semantic web. Here is how we did it. An why. 

The site is called Les Echos 360 and is separate from our flagship site LesEchos.fr, the digital version of the French business daily Les Echos. As the newly coined word aggrefilter indicates, it is an aggregation and filtering system. It is to be the kernel from which many digital products and extensions we have in mind will spring.

My idea to build an aggrefilter goes back to… 2007. That year, in San Francisco, I met Dan Farber, at the time editor-in-chief of CNet (now at CBS Interactive, his blog here) – and actual father of the aggrefilter term. Dan told me: ‘You should have a look at Techmeme. It’s an “aggrefilter” that collects technology news and ranks them based on their importance to the news cycle’. I briefly explored the idea of building such an aggrefilter, but found it too hard to do it from scratch, off-the-shelf aggrefilter software didn’t exist yet. The task required someone like Techmeme founder Gabe Rivera – who holds a PhD in computer science. I shelved the idea for a while.

360 cap

A year ago, as the head of digital at Les Echos, I reopened the case and pitched the idea to a couple of French computer scientists specialized in text-mining — a field that had vastly improved since I first looked at it. We decided to give a shot to the idea. Why?

I believe a great media brand bearing a large sets of positive attributes (reliability, scope, depth of coverage) needs to generate an editorial footprint that goes far beyond its own production. It’s a matter of critical mass. In the case of Les Echos, we need to be the very core of business information, both for the general public and for corporations. Readers trust the content we produce, therefore they should trust the reading recommendation we make through our aggregation of relevant web sites. This isn’t an obvious move for journalists who, understandably, aren’t necessarily keen to send traffic to third party web sites. (Interestingly enough, someone at the New York Times told me that a heated debate flared up  within the newsroom a few years ago: To which extent should NYT.com direct readers to its competitors? Apparently, market studies settled the issue by showing that readers of the NYT online actually tended to also like it for being a reliable prescriber.)

In the business field, unlike Google News that crawls an unlimited trove of sources, my original idea was to extract good business stories from both algorithmically and manually selected sources. More importantly, the idea was to bring to the surface, to effectively curate specialized sources — niche web sites and blogs — usually lost in the noise. Near-real-time information also seemed essential, hence the need for an automated gathering process, Techmeme-like. (Techmeme is now supplemented by Mediagazer, one of my favorite readings.)

Where do we go from here?

Initially, we turned to the newsroom, asking beat reporters for a list of reliable sources they regularly monitored. The idea was to build a qualified corpus based on suggestions from our in-house specialists. Techmeme and Mediagazer call it their “leaderboard” (see theirs for tech and media). Perhaps we didn’t have the right pitch, or we were misunderstood, but all we got was a lukewarm reception. Our partner, the French startup Syllabs, came up with a different solution, based on Twitter analysis.

We used our reporters’ 72 most active Twitter accounts to extract URLs embedded in their tweets. This first pass yielded about 5000 URLs, but most turned out to be useless because, most of the time, reporters linked their tweets to their own or their colleagues’ newsroom stories. Then, Syllabs engineers had another idea, they data-mined tweets from people followed by our staff. This yielded 872,000 URLs. After that, another filtering pass found out the true curators, the people who found original sources around the web. Retweets also were counted as they indicate a vote of relevance/confidence. After further statistical analysis of tweet components, the 872,000 URLs were boiled down to less than 400 original sources that were to become the basis of Les Echos 360’s Leaderboard (we are now down to 160 sources).

Building a corpus of sources is one thing, but ranking articles with respect to their weight in the news cycle is yet another story. Every hour, 1,500 to 2,000 news pieces go through a filtering process that defines their semantic footprint (with its associated taxonomy). Then, they are aggregated in “clusters”. Eventually, clusters are ranked based according to a statistical analysis of their “signal” in the general news-flow. Each “Clustering” (collection + ranking) contains 400-500 clusters, a process that more than occasionally overloads our computers.

Despite continuous revisions to its 19,000 lines of code, the system is far from perfect. As expected. In fact it needs two sets of tunings: One to maintaining a wide enough spectrum of sources to properly reflect the diversity of topics we want to cover. With a caveat: profusion doesn’t necessarily create quality. Crawling the long tail of potentially good sources continues to prove difficult. The second needed adjustment is finding the right balance between all parameters: update frequency, the “quality index” of sources – and many other criteria I won’t disclose here. This I compare to the mixing console inside a recording studio. Finding the right sound is tricky.

It took years for Techmeme to refine its algorithm. It might take a while for Les Echos 360 — that’s why we are launching the site in beta (a notion not widely shared in the media sector.) No surprise, a continuous news-flow is an extremely difficult moving target. As for Techmeme and Mediagazer, despite refinements in Gabe Rivera’s work, their algorithm is “rectified” by more than a dozen editors (who even rewrite headlines to make them more explicit and punchier). A much lighter crew will monitor Les Echos 360 through a back-office that will allow us to change cluster rankings and to eliminate parasitic items.

For Les Echos’ digital division, this aggrefilter is a proof of concept, a way to learn a set of technologies we consider essential for the company’s future. The digital news business will be increasingly driven by semantic processes; these will allow publishers to extract much more value from news items, whether they are produced in-house or aggregated/filtered. That is especially true for a business news provider: the more specialized the corpus, the higher the need for advanced processing. Fortunately, it is much easier to fine-tune an aggrefilter for a specific field (logistics, clean-tech, M&A, legal affairs…) than for wider and muddier streams of general news. This new site is just the tip of the iceberg. We built this engine to address a wide array of vertical, business-to-business, needs. It aims to be a source of tangible revenue.

frederic.filloux@mondaynote.com

@filloux 

 

Why Twitter needs a design reset

 

Twitter is the archetype of a greatly successful service that complacently iterates itself without much regard for changes in its uses. Such behavior makes the service — and others like it — vulnerable to disruptive newcomers. 

Twitter might be the smartest new media of the decade, but its user interface sucks. None of its heavy users is ready to admit it for simple reason: Twitter is fantastic in broadcast mode, but terrible in consumption mode. Herein lies the distortion: most Twitter promoters broadcast tweets as much as they read them. The logical consequence is a broad complacency: Twitter is great, because its most intensive broadcasters say so. The ones who rarely tweet but use the service as a permanent and tailored news feed are simply ignored. They suffer in silence — and they are up for grabs by the inevitable disrupter.

Twitter’s integration can’t be easier. Your Tweet it from any content, from your desktop with an app accessible in the toolbar, or from your smartphone. Twitter guarantees instant execution followed by immediate gratification: right after the last keystroke, your tweet is up for a global propagation.

But when it comes to managing your timeline, it’s a different story. Unless you spend most of  your time on Tweeter, you miss many interesting items. Organizing feeds is a cumbersome process. Like everybody else, I tried many Twitter’s desktop or mobile apps. None of them really worked for me. Even TweetDeck seems to have been designed by an IBM coder from the former Soviet régime. I looked around my professional environment and was stunned by the number of people who acknowledge going back to the basic Tweeter app after unsuccessful tries elsewhere.

Many things are wrong in the Twitter’s user interface and it’s time to admit it. In the  real world, where my 4G connection too often falls back to a sluggish EDGE network, watching a Tweeter feed in a mobile setting becomes a nightmare. It happens to me every single day.

Here is a short list of nice-to-have features:

Background Auto-refresh. Why do I have to perform a manual refresh in my Twitter app each time I’m going to my smartphone (even though the app is running in the background)? My email client does it, so do many apps that push contents to my device. Alternatively, I’d be happy with refresh preset intervals and not having to struggle to catch up with stuff I might have missed…
Speaking of refreshes, I would love to see iOS and Android coming up with a super-basic refresh system: as long as my apps are open in the background, I would have a single “Update Now” button telling all my relevant apps (Email reader, RSS reader, Twitter, Google Current, Zite, Flipboard, etc.) to quickly upload the stuff I’m used to read while I still have a decent signal.

Save the Tweet feature. Again, when I ride the subway (in Paris, London or NYC), I get a poor connection – at best. Then, why not offer a function such as a gentle swipe of my thumb to put aside a tweet that contains an interesting link for later viewing?

Recommendation engine. Usually, I will follow someone I spot within the subscriptions of someone I already follow and appreciate. Or from a retweet. Twitter knows exactly what my center of interests are. Therefore it would be perfectly able to match my “semantic footprint” to others’.

Tag system. Again, Twitter maintains a precise map of many of its users, or at least of those categorized as “influencers”. When I subscribe to someone who already has thousands of followers, why not tie this user to metadata vectors that will categorize my feeds? Overtime, I would built a formidable cluster of feeds catering to my obsessions…

I’m puzzled by Twitter’s apparent inability to understand the needs of the basic users. The company is far from unique in this regard.; instead, it keeps relying on a self-centered elite of trendy aficionados to maintain the comfy illusion of universal approval – until someone comes up with a radical new approach.

This is the “NASA/SpaceX syndrome”. For decades, NASA kept sending people and crafts to space in the same fashion: A huge administrative machine, coordinating thousands of contractors. As Jason Pontin wrote in his landmark piece of the MIT’s Technology Review:

In all, NASA spent $24 billion, or about $180 billion in today’s dollars, on Apollo; at its peak in the mid-1960s, the agency enjoyed more than 4 percent of the federal budget. The program employed around 400,000 people and demanded the collaboration of about 20,000 companies, universities, and government agencies. 

Just to update Pontin’s statement, the International Space Station cost $100bn to build over a ten years period and needs about $3bn per year to operate.

That was until a major disrupter, namely Elon Musk came up with a different way to build a rocket. His company, Space X, has a long way to go but it is already able to send objects (and soon people) to the ISS at a fraction of Nasa’s cost. (Read the excellent story The Shared Genius of Elon Musk and Steve Jobs by Chris Anderson in Fortune.)

In the case of the space exploration, Elon Musk-the-outsider, along with its “System-level design thinking powered by extraordinary conviction” (as Anderson puts it), simply broke Nasa’a iteration cycle with a completely different approach.

That’s how tech company become vulnerable: they keep iterating their product instead of inducing disruption within their own ranks. It’s the case for Twitter, Microsoft, Facebook.

There is one obvious exception – and a debatable one. Apple appears to be the only one able to nurture disruption in its midst. One reason is the obsessive compartmentalization of development projects wrapped in paranoid secrecy. Apple creates an internal cordon sanitaire  that protects new products from outside influences – even within the company itself. People there work on products without kibitzing, derivative, “more for less” market research.

Google operates differently as it encourages disruption with its notorious 20% of work time that can be used by engineers to work on new-new things (only Google’s dominant caste is entitled to such contribution). It also segregated GoogleX, its “moonshots” division.

To conclude, let me mention one tiny example of a general-user approach that collides with convention. It involves the unsexy world of calendars on smartphones. At first sight not a fertile field of outstanding innovation. Then came PeekCalendar, a remarkably simple way to manage your schedule (video here) on an iPhone.

Peek-Photo3

This app was developed by Squaremountains.com, a startup created by an IDEO alumni, and connected to Estonian company Velvet. PeekCalendar is gently dismissed by techno-pundits as only suitable for not-so-busy people. I tested it and – with a few bugs – it nicely accommodates my schedule  of 25-30 appointments a week.

Showing this app during design sessions with my team at work also made me feel that the media sphere is by no mean immune to the criticism I detailed above. Our industry is too shy when it comes to design innovations. Most often, for fear of losing our precious readership, we carefully iterate instead of seeking disruption. Inevitably, a young company with nothing to lose nor preserve will come up with something new and eat our lunch. Maybe it’s time to Think Different™.

frederic.filloux@mondaynote.com
@filloux 

 

Those media assets that are worth nothing

 

The valuation gap between high tech and media companies has never been wider. The erosion  of their revenue model might be the main culprit, but management teams, unions and boards of directors also bear their heavy share of responsibility. 

Two weeks ago, with a transaction that reset the value of printed assets to almost nothing, the French market for newsmagazines collapsed for good. Le Monde acquired 65% of the weekly Le Nouvel Observateur for a mere €13.4m ($18m), at a valuation of €20m ($27m). In fact, thanks to convoluted transaction terms, Le Monde will actually disburse less than €10m for its controlling share.

This number is a hard fact, it confirms the downward spiral of French legacy media values. For a while, rumors have been flying about bids for prominent newsmagazines that would float around €20m. At the same time, Lagardère Groupe (a €7bn media conglomerate based in Paris) put most of its French magazines on the block, saying it would close them down if no buyer showed up. It turned out to be a “good” way to tip potential bidders, they can now sit and wait for prices to come down as balance sheets continue to deteriorate. This brilliant strategy is attributable to Arnaud Lagardère, the son of Jean-Luc Lagardère, the swashbuckling group founder. The heir is fond of tennis, top-models and embarrassing statements. He once said of himself: “Maybe [he] is incompetent, but not dishonest” — definitely right on the first count. Today, Lagardère Groupe faces a negative value for a large part of its magazine portfolio, meaning it is willing to actually pay the buyer willing to acquire a publication.

I discussed this situation with financial analysts in Paris and London. They are unforgivingly critical of the causes for this unprecedented value depletion. For a start, newsweeklies paid the price of deteriorating copy sales (roughly -15% for 2013) and of an anemic advertising market. But the real sin, these analysts point out, is the delay in transforming and restructuring companies. One put it bluntly:  “It is clear there won’t be a single euro left for shareholders who didn’t do their job. Today, every acquisition on the French market is first and foremost weighed down by the need for a costly restructuring, which, in addition, will take three or for times longer than in the UK or elsewhere in Europe”.

The case of Le Nouvel Observateur is the perfect example. This iconic magazine of the French social democrats perfectly fits the picture of a nursing home where residents don’t do much while waiting for the unavoidable end. A thick layer of journalists there are keen to praise the weekly: “You come on a tuesday morning to write your column and by the following thursday, you’re gone. I don’t complain.” Two insiders told me that one of the events that finally pushed the aging owner of the “Nouvel Obs” to sell was the nixing of a timid management proposal: cutting one week of vacation (out of twelve) to save money. Also true, a good third of the staff actually does working hard to produce the magazine week after week. But a digital transformation — comparable, for instance, to what the Atlantic Media Group undertook is the US — is a dream completely out of reach.

From an investor standpoint, buying the Nouvel Observateur means spending from the outset €15m to €20m, just to realign the company with decent working practices. French laws and collective bargaining do not help. In the case of Le Nouvel Observateur, the change in ownership will trigger a “clause of transfer” that will entitle every journalist to leave the company with at least one month of salary per year of employment (raised to 120% of the monthly wage beyond 15 years). For the upper layer of the newsroom that will see their working habits incompatible with a probable productivity realignment, this could be a once-in-a-lifetime opportunity to reward their long and tranquil tenure… at a cost of several million euros for the new owner. The same goes for mandatory buyouts, the customary way to push out people no longer needed. (What is Le Monde buying you might ask? Basically a 500,000 subscribers base, a better bargaining position on the advertising market, add a dose of vanity…)

Again, from a investor perspective, being forced to spend €15m-20m before allocating the first cent to a transformative investment is a severe deterrent. This mechanism also threatens daily newspapers such as Liberation (another icon of the French left wing, where I spent 12 years of my career). Isolated, stuck with a single product, dealing with a 35% decline in its paid circulation last year, a weak advertising base and a discredited management (in a recent internal vote, 90% of staff mistrust the bosses), a negative P&L despite €12m in State subsidies, this company faces a certain death unless it radically transforms itself. Its only way to survive might be to forgo the costly daily print edition, move to a well-crafted weekly distributed in selected urban areas, and extend it to realtime digital coverage on web, mobile and tablet. But such a move would mean yet another downsizing, along with heavy costs. No one is willing to be dragged into such “social Vietnam”, as one of my interlocutors puts it.

Those who advise potential buyers are quick to point out that, if the goal is to take a position in the digital world, their money would better be spent in building a pure player from the ground up. With €20 or 40 million, you can definitely build something powerful in the journalistic field.

The highly publicized startup culture — some would say “ideology” — with its unparalleled mixture of agility and skyrocketing valuations contributes to the demise of legacy medias. Consider the table below. It shows the gap between the valuation of each customer of social networks and legacy media:

305 valuations

For what it’s worth, this comparison illustrates the tremendous loss in value for legacy media. Several actually make (slim) profits while digital companies such as Pinterest or Snapchat don’t even have a revenue model. But as unfair as it sounds, investors — venture capital firms, Wall Street, high tech giants — are betting on two factors: the scalability of current user bases (with factors 10x or 20x being the norm) and also the ability of digital players to swiftly adjust themselves to quickly changing environments. Two qualities unfortunately not associated with legacy media.

frederic.filloux@mondaynote.com

 

Is Yahoo serious about media?

 

Under Marissa Mayer’s leadership, Yahoo keeps making substantial efforts to become a major news media player. Will a couple of well-know bylines and a shiny mobile app do the job? 

A big Silicon Valley player entering the news business has long been the worst nightmare of legacy publishers. Combining an array of high tech products with the ability to get all the talent money can buy, the Valley giant could be truly disruptive. Ten years ago, the ongoing fantasy was Google or a Yahoo gulping the New York Times or another such big media property. For many reasons — economical as well as cultural ones — it didn’t happen. Yahoo once approached NYT’s columnist Thomas Friedman, offering him a hefty pay raise to become its star writer. But the Times’ globo-pundit quickly backed off when he realized that most of his reputation —  as arguable as it can be (see the cruel Tom Friedman OpEd Generator) — was tied to his employer. Yahoo and others put the issue at rest for years, focusing on core challenges: survival for Yahoo and global domination for Google.

Until now.

Last year, we first witnessed a significant move from the tech galaxy: Jeff Bezos acquired the Washington Post by. As mentioned in the Monday Note (see the Memos To Jeff series), Amazon’s technical firepower will undoubtedly exert a transformative — rather than merely incremental — impact on the Post. Further, I guess this will end up being a welcome stimulus for the entire industry, it really needs a tech kick in its sagging backside.

Then came the Yahoo initiatives. Last fall, Marissa Mayer, snatched three visible talents from the New York Times: Megan Liberman, until then the Times’ deputy news editor, was appointed Yahoo News editor in chief; Mayer also tapped iconic tech columnist David Pogue; a month later, she picked the Times’ chief political correspondent Matt Bai. Finally, on November 25th, Marissa Mayer announced that she hired former TV host Katie Couric as the portal’s “global anchor”.

Here we are: Expect Yahoo to simultaneously enter three major information segments: General audience programming with Katie Couric’s show; political and national issues; and tech coverage (in addition to the classical Food site). Logically, Yahoo started with the tech side. Pogue himself introduced Yahoo Tech on stage at CES last week — and didn’t pass up the opportunity to blast its competitors, mocking their nerdy and obscure language. Interface wise, I found the site pretty clever with its one page, endless scrolling structure — a trend to be noticed —  and articles showcased in about 120 tiles (approx 7 tiles x 18 rows), each expanding as needed and keeping its own URL, which is essential for social sharing uses.

Regardless of David Pogue’s ability to put a the human face on technology, Yahoo Tech is entering an increasingly crowded segment. This month, the Wall Street Journal rolled out WSJD, set to take Walt Mossberg’s and Kara Swisher’s AllThingsD slot, itself reborn as Re/Code (can’t find a geekier name), operated by the same duo. The Re/Code money machine will be the already sold-out Code Conference and its offsprings. WSJD features potent editorial firepower with no less than 50 writers on deck.

Marissa Mayer made no mystery of the fact that her editorial initiatives will be directed at Yahoo’s #1 priority, “the company’s commitment to mobile”. When she landed at Yahoo, Mayer was dismayed to discover that everyone received a Blackberry. Now, the company wants to board every relevant ecosystem, starting with iOS and Android.

That’s what Yahoo does with its interesting NewsDigest App for iOS, launched at CES. As its tech web site does, the mobile app focuses on a series of hot trends. First of all, with its truncated structure, the app borrows a lot from Circa (see a previous Monday Note); it also inherits technology developed by Summly, the startup it acquired in March last year (merely five months after the app’s launch). Summly’s core idea is a news summarizing algorithm. The NewsDigest iteration does actually much more than condensing stories: In a neat interface, it creates context by slicing coverage as follows:
–Image gallery
–Infographics
–Maps
–Stock charts
–Main Twitter feeds
–Video
–Wikipedia
…plus a set of references if you want more.

For a story picked up yesterday, it looks like this:

304_yahoo_news

Evidently, there is room for improvement. Weirdly enough, the app is updated only twice a day and carries less than ten stories. Both elements go against the idea of a smartphone app supposed to update on a permanent and to provide content in an endless stream. Plus, automated as it is, the prose can’t quite compete for a Pulitzer Prize. But, if Yahoo decides to hand the key ingredients over to a competent editorial team, the NewsDigest could become a really good product.

Coming back to this column’s main topic, I believe Yahoo is really up to something in the news sector:
— Yahoo enjoys huge traction in the mobile world: According to Marissa Mayer, among the 800 million people who access Yahoo every month (excluding Tumbler), roughly 400 million reach the portal through their mobile phone. (Despite that number, one irritating thing: Yahoo made its app available to the US AppStore only, ignoring the hundreds millions of English-speaking users on other shores, East and West of Sunnyvale, California.)
— Unlike with Google’s mobile strategy, Yahoo is free from Android’s strategic goals and from a difficult relationship with Apple. It can therefore play the two ecosystems equally, opening the potential for one to gain leverage against the other.
— Even better, by last week acquiring Aviate, an Android customizing interface layer, Yahoo can now create its own branded experience on top of the standard Android interface.
— Assuming it enters the news business for good, Yahoo will act like a tech company, not a legacy media one. In other words, it will first build a sizable audience for its news ecosystem while deliberately ignoring the revenue side as long as needed. Then, it will optimize and datamine this user base to understand in the most granular way what works and what doesn’t. Having successfully gone through those steps, Yahoo will then transform the (hopefully vast) newly acquired audience into a money machine.
This is the way it works nowadays.

frederic.filloux@mondaynote.com

@filloux

 

Surviving 2014

 

2014 won’t be an easy year for the digital news business. The good news is the list of mandatory actions is coming into sharper focus. Today, we look at key items.  

The hard part is finding positive signs. My own guess: for the news industry, the excruciating migration from print to digital will get worse before it gets better. If I had to draw a J curve, as economists put it, it would look like this:

303-J-curve

Note that the green list is longer than the red one. But we are still not through with the negative key factors.

For the news media industry, advertising will remain problematic this year. The graph below sums up the sector’s dire situation (a US view that mostly applies to other mature markets):

303 revenue

For 2014, planet remains badly aligned:

There is nothing is sight to correct the huge imbalance between the supply of digital advertising space and advertisers’ demand. Digital media continue to produce millions of new URLs per day that banners simply can’t match. As long as no one is willing to reduce the supply-side, the imbalance is likely to last. This is even more regrettable when considering how the media industry will need to increase its own promotion activities in order to support the diversification that is key to its survival. Practically, if an online publication decided to close 30% of its inventory and assign it to promote its mobile apps, verticals, ancillary products, etc., it would win on both ends. First, it would recreate some scarcity, meaning higher revenue metrics and, second, it would beef up the promotion of its own products. Unfortunately, such an idea won’t last a minute in a short-term budgetary review.
– Thanks to Real-Time Bidding (RTB), publishers actually fuel the price deflation
by auctioning their leftover inventory on various marketplaces. In doing so, they generate some revenue – at the expense of the format’s per unit value (in such auctions, expect no more than 5-10% of nominal prices). In addition this process mechanically applies negative pressure to premium placements because the advertisers will opportunistically purchase a guaranteed and targeted audience wherever available. Even the New York Times will jump on the RTB bandwagon  — “in [its] special way”, it claims. We’ll see.
- Making serious money with mobile ads will remain elusive. For most digital news outlets, mobile users are likely to pass the 50% of the total audience later this year. Unfortunately, the magic advertising formula has yet to be cracked as a mobile user only brings a fraction of the equivalent web revenue. I don’t believe in a miracle ad format that will make the commercial experience “engaging” or “enjoyable”… You don’t “engage” people on the move. You grab, seduce, retain them with repetitive and attractive contents that properly fit their time-wise needs and cognitive availability. Then, if the content is good enough, unique, and able to create a reflexive daily habit — then you might be able to convince a fraction of the audience to pay for it. Note the italics, they point to significant obstacles on the road to the mobile pot of gold.
On mobile, I feel interface quality and selectiveness of functionalities are even less forgiving than on the web: you can’t allow useless stuff on a smartphone screen, there is simply no tolerance for it. All contents being equal, the success of a mobile news product will largely depend on the quality of its interface.

Now let’s turn to the green part, the hopeful one.

Agility. One of the benefits of the continuing newsrooms shrinkage (no, we’re not through, yet) will be news staffs making further gains in agility and polyvalence. As Scott Klein, senior editor for news applications at ProPublica, puts it in the NiemanLab Predictions for 2014 (worth a read):

You can be a good journalist without being able to do lots of things. But every skill you don’t have leaves a whole class of stories out of your reach. And data stories are usually the ones that are hiding in plain sight.

Scraping websites, cleaning data, and querying Excel-breaking data sets are enormously useful ways to get great stories. If you don’t know how to write software to help you acquire and analyze data, there will always be a limit to the size of stories you can get by yourself. And that’s a limit that somebody who competes with you won’t have.

To put it more bluntly, in 2014, thriving newsrooms will share the following characteristics: (a) they will be fastest to inject a critical proportion of new blood in their ranks and (b) they will invest in training to add the skills, mostly tech ones, required by modern journalism.

New Forms of Ads. Digital Advertising is half-way through a decisive transformation. As I wrote here many times, the market will stretch at its extremities; one will end up with more automation (the aforementioned RTB trap) while the other end might be more virtuous. It will be based on tailored promotional operations and Branded Content product lines (see coverage in the Monday Note), both form carrying higher CPMs and better reader acceptance. I’m a true believer in the continuity — not the blend nor the confusion — between journalistic contents and commercial editorial. Brand, companies, have a lot to tell beyond traditional advertising. Most publishers will be slow movers in that field. Even if such new forms of ads turn to be a fad (which I don’t believe), it won’t be a costly mistake to hire a commercial editor flanked by a couple of smart people, a combination of writers and strategic planners (not easy to find, I’ll admit, you might instead consider training existing staff), able to understand and convert client needs into good storytelling aimed at attracting (but not deceiving) readers.

2014 will be the year of media companies realizing they must morph into technology companies — or embrace, one way another, the technologies that guarantee their survival. Consider the following factors: advertising requiring better audience profiling; smart recommendation engines becoming mandatory to retain readers; semantic “footprint” becoming the de rigueur instrument to serve a solvent and loyal readership; journalism thriving through data… These all make the need for tech people able to understand editorial issues more pressing.

As long as those prerequisites are well understood, I’m bullish on the future of digital news.

–frederic.filloux@mondaynote.com
@filloux

The not-so-quaint charm of the email newsletter

 

In spite of today’s obsession with social networks, the email newsletter remains a potent vector for the dissemination of news and for driving traffic back to websites. It comes with one condition, though: reintroducing a human touch. 

Today, producing a newsletter looks so easy: Select RSS feeds from your site, fire a plug-in to extract selected headlines and areas, insert the feeds in a template and send the whole thing via a router interface. Done.

Many sites do it on auto-pilot. And the result of such automated treatment is crude newsletters throwing together a bunch of headlines and snippets. On the surface, the output does reflect the content of a site, but it actually fails to reveal any editorial choice other than the basic home page hierarchy. An opinion piece, an in-depth profile, or an investigative report will be processed in the same mechanical way: headline, nutgraf, a couple of links and nothing further.

Based on my personal use, such work ends up in a special designated folder I created on my main Gmail account for each publication I subscribe to. After a while, I stopped looking at those robotized emails. To make things worse (for the senders), Google does the filing for me — unbeknownst to me, actually. A couple of months ago, Gmail created several tabs, one of them titled “Promotions”, that collect all newsletters, including the ones I willingly subscribed to. Google chooses for me the emails should I read first. Great. I don’t understand why this arbitrary filtering didn’t trigger any outcry, both from subscribers and publishers of legit newsletters (I happen to be both). Needless to say, the opening rate of emails falling into the infamous Promotions folder is significantly altered. All at the pleasure of Google and its algorithms.

Coming back to the newsletter itself, we can detect the beginning of a shift away from robotized email towards the written-by-humans form.

Again, I’ll refer to Quartz, the business site launched a year ago by the Atlantic Media Group (see a previous Monday Note series here). Their email newsletter is called “The Daily Brief”; it is 800-words long, no images, cleverly written and edited, sent to about 45,000 subscribers worldwide, in three editions (US, Asia, Europe and Africa.)

Here is how it looks on mobile devices:

qz phones

The structure is simple: Five main headers containing five to seven items, each summing up what the story you might click on is about. The headers are: “What to watch today”, “While you were sleeping”, “Quartz obsession interlude” (it refers to Quartz’ proprietary revision of the old beat structure), “Matter of Debate”, and “Surprising discoveries”. A good mixture of news, fun, serendipity, thoughtful items. The links do not always send back to qz.com, they can lead anywhere. Sounds pretty simple at first. But, as Quartz editor Kevin Delaney recently told me, the Daily Brief is the result of a thorough editorial process. The email newsletter is touched by no less than four people, including two seasoned editors, Gideon Lichfield, Quartz global news editor who spent 16 years at the Economist, and Adam Pasick, the Asia editor and a 10-year Reuters veteran. Newsrooms who assign junior writers to expedite email newsletters should think again… Quartz is one of the few media I know to actually devote sizable resources for such a “simple” news product (also read this analysis on MailChimp, Quartz email router). But many are now considering the formula: The Wall Street Journal recently launched its “10-Points” email newsletter, built on the same principles as Quartz’s Daily Brief.

wsj-10points2

Sophisticated email newsletters are not new. For years, bloggers affiliated or not with large media organizations have been using them to promote their work and attract readers, gaining significant traction in the process. To name but a few, Andrew Sullivan’s Daily Dish on Politics, or Andrew Ross Sorkin’s Dealbook (part of NYTimes.com) have become full-fledged news brands. I asked Juan Señor, partner at Innovation-Consulting, who worked on many newspaper modernizations, for his opinion on the matter:

Conceptually, our take and that of other newspapers investing in newsletters or news briefings – as we call them – is that you have to move from commodity news to selling intelligence. In an age of abundance you have to sell scarcity. The laws of economics prescribe that the more abundant a product is, the less valuable it is in price. The more volume I have, the less value I can extract from it.’ 

Juan adds two critical factors needed to create a valued product: Timing — sending a news briefing at the right time to maximize its impact — and the multi-device format.

In spite of their age, email newsletters remain a relative primitive stage. Let’s talk first about the user interface. A newsletter begs to be read both on mobiles and on a desktop. You can no longer decide for the reader which screen size h/she will read your stuff on. Responsive design is mandatory. But applying responsive design techniques is way more complicated for newsletters than it is for websites. Even large medias such as the NYT are providing single formats newsletters. (I will humbly admit that, while the Monday Note blog switched to responsive design a while ago, I’m still struggling to do the same for our newsletter.) While I want to send a newsletter from a series of blog posts in a single stroke, I’m still waiting for the WordPress plug-in that will let me do that through a wide range of email routers. In the same fashion, I would welcome add-ons to the most popular word processors that would output good-looking, responsive html emails.

Another thing about email design: It must be conceived to be read offline. I live in a 4G city (Paris) but I still get poor 3G or even EDGE service in too many places (French carriers are said to slow down network speed in order to accelerate the switch to 4G). Therefore, the ability to read complete content offline beyond headlines is, in my view, a basic feature. Going a bit further, I would dream of newsletters pre-loading multiple layers of reading, allowing the reader to jump from the main page to one or two levels down — without requiring a connection.

Deeper improvements to newsletters will come from the usual combination of analytics and semantics. A well-crafted engine will detect what parts of an email newsletter I read the most, what subjects I’m more inclined to click on. Then, the system will adapt the content of my newsletters in order to increase my propensity to open and to engage (i.e. to click on links.) This will make the old-fashioned newsletter an even more powerful website traffic vector.

frederic.filloux@mondaynote.com

 

News: Mobile Trends to Keep In Mind

 

For publishers, developing an all-out mobile strategy has become both more necessary and more challenging. Today, we look at key data points and trends for such a task. 

#1 The Global Picture
— 1.7bn mobile phones (feature phones and smartphones) were sold in 2012 alone
— 3.2bn people use a mobile phone worldwide
— Smartphones gain quickly as phones are replaced every 18 to 24 months
— PCs are completely left in the dust as shown in this slide from Benedict Evans’ excellent Mobile is Eating the World presentation:

ben-evans

The yellow line has two main components:
— 1 billion Android smartphones are said to be in operation worldwide (source: Google)
— 700 million iOS devices have been sold over time, with 500 million still in use, which corresponds to the number of iTunes accounts (source: Asymco, one of the best references for the mobile market.)
— 450 million Symbian-based feature phones are in operation (Asymco.)

#2 The Social Picture 

Mobile phone usage for news consumption gets increasingly tied to social networks. Here are some key numbers :
— Facebook: about 1.19bn users; we don’t exactly know how many are active
— Twitter: 232 million users
— LinkedIn: 259 million users

When it comes to news consumption in a social environment, these three channels have different contributions. This chart, drawn from a Pew Research report, shows the penetration of different social networks and the proportion of the US population who get their news from it.

300_pew

One of the most notable data points in the Pew Report is the concentration of sources for social news:
— 65% say to get their news from one social site
— 26% from two sites
— 9% from three sources or more (such as Google +, LinkedIn)

But, as the same time, these sources are completely intertwined. Again, based on the Pew survey, Twitter appears to be the best distributor of news.

Among those who get their news from Twitter:
— 71% also get their news on Facebook
— 27% on YouTube
— 14% on Google+
— 7% on LinkedIn

Put another way, Facebook collects more than half of the adult population’s news consumption on social networks.

But a closer looks at demographics slightly alters the picture because all social networks are not equal when it comes to education and income segmentation:

If you want to reach the Bachelor+ segment, you will get:
— 64% of them on LinkedIn
— 40% on Twitter
but…
— only 30% on Facebook
— 26% on G+
— 23% on YouTube

And if you target the highest income segment (more than $75K per year), you will again favor LinkedIn that collects 63% of news consumers in this slice, more than Facebook (41%)

Coming back to the mobile strategy issue, despite Facebook’s huge adoption, Twitter appears to be the best bet for news content. According to another Pew survey, the Twitter user is more mobile :

Mobile devices are a key point of access for these Twitter news consumers. The vast majority, 85%, get news (of any kind) at least sometimes on mobile devices. That outpaces Facebook news consumers by 20 percentage points; 64% of Facebook news consumers use mobile devices for news. The same is true of 40% of all U.S. adults overall. Twitter news consumers stand out for being younger and more educated than both the population overall and Facebook news consumers

 And, as we saw earlier, Twitter redistributes extremely well on other social platforms. It’s a no brainer: any mobile site or app should carry a set of hashtags, whether it’s a stream of information produced by the brand or prominent bylines known for their insights.

 #3 The Time Spent Picture

Here is why news is so complicated to handle in mobile environments. According to Flurry Analytics: On the 2 hours and 38 minutes spent each day on a smartphone and an a tablet by an American user, news accounts for 2% as measured in app consumption, which accounts for 80% of time spent. The remaining 20% is spent in a browser where we can assume the share of the news to be much higher. But even in the most optimistic hypothesis, news consumption on a mobile device amounts to around 5 to 6% of time spent (this is correlated by other sources such as Nielsen). Note that this proportion seems to decrease as, in May 2011, Flurry Analytics stated news in the apps ecosystems accounted for 9% of time spent.

This view is actually consistent with broader pictures of digital news consumption, such as these two provided by Nielsen, which show that while users spend 50 minutes per month on CNN (thanks to is broad appeal and to its video content), they only spend 18 minutes on the NYT and a mere 8 minutes on the Washington Post:

300 nielsen

All of the above compares to 6hrs 42min spent on Facebook, 2hrs on YouTube or Yahoo sites.

In actionable terms, this shows the importance of having smartphones apps (or mobile web sites) sharply aimed at providing news in the most compact and digestible way. The “need to know” focus is therefore essential in mobile because catching eyeballs and attention has become increasingly challenging. That’s why The New York Times is expected to launch a compact version of its mobile app (currently dubbed N2K, Need to Know, precisely), aimed at the market’s youngest segment and most likely priced just below $10 a month. (The Times also does it because the growth of digital subscriptions aimed at the upper market is slowing down.) At the other end of the spectrum, the NYT is also said to work on digital magazine for iPad, featuring rich multimedia-narrative on (very) long form such the Pulitzer winning Snow Fall (on that matter, the Nieman analysis is worth a read).

This also explains why the most astute digital publishers go for newsletters designed for mobile that are carefully – and wittily – edited by humans. (One example is the Quartz Daily Brief; it’s anecdotal but everyone I recommended this newsletter to now reads it on a daily basis.) I personally no longer believe in automated newsletters that repackage web site headlines, regardless of their quality. On smartphones, fairly sophisticated users (read: educated and affluent) sought by large media demand time-saving services, to the point content, neatly organized in an elegant visual, and — that’s a complicated subject — tailored to their needs way.

#4 The ARPU View

On mobile devices, the Average Revenue per User should be a critical component when shaping a mobile strategy. First, let’s settle the tablet market question. Even though the so-called “cheap Android” segment  ($100-150 for a plastic device running an older version of Android) thrive in emerging markets, when it comes to extracting significant money from users, the iPad runs the show. It accounts for 80% of the tablet web traffic in the US, UK, Germany, France, Japan, and even China (source: Adobe.)

The smartphone is more complicated. A year ago, many studies made by AppAnnie or Flurry Analytics showed that the iPhone ecosystem brought four times more revenue than Android. More recently, Flurry Analytics ran a story stating that the average app price for Android was $0.06 vs. $0.19 for the iPhone and $0.50 for the iPad.

The gap is closing as Android terminals attracts a growing number of affluent users. Still, compared to iOS, it is notoriously difficult to carry paid-for apps and services in the Android ecosystem, and Android ads remains cheaper. It’s likely to remain the case for quite a while as iOS devices are likely to remain much more expensive than Android ones, and therefore more able to attract high-end demographics and the ads that go to them.

How this impacts a smartphone strategy: Publishers might consider different business models for the two main ecosystems. They could go for fairly sophisticated apps in the iOS world, served  by a well-oiled payment system allowing many flavors of In-App add-ons. By contrast, the Android environment favors a more “go-for-volume” approach; but things could evolve quickly as the Android share of high-end audience grows and as the PlayStore gains in sophistication and gets as friction-free as the AppStore.

frederic.filloux@mondaynote.com

What to do with $250m in digital journalism? (II)

 

In a previous Monday Note, we looked at an ideal newsroom, profusely funded by Pierre Omidyar and managed by whistleblowing facilitator Glenn Greenwald, a structure that combines the agility of a tech startup with the highest of journalistic standards. Today, we look at the product and the business model.   

Profit or non-profit? Definitely for-profit! First, because the eBay founder’s track record (see this The New Inquiry article) shows a fierce appetite for profitable ventures. And second, because there no such thing as a free and independent media press without a strong business side: financial vulnerability is journalism’s worst enemy while profit breeds scalability. How to make money, then, with a narrow niche such as investigative journalism? Can Omidyar’s venture move beyond the cross-subsidy system that powered legacy media for decades? This weekend, in a FT.com interview, Henry Blodget justified the deluge of eye-grabbing headlines spread over Business Insider by saying “The dining and motoring sections pay for the Iraq bureau”. . .

For this, Omidyar can look at a wide set of choices: he could devise click-driven contents built on the proven high volume / cheap ads equation. Or he could opt for what I’ll call the Porsche Model, one in which the most visible activity (in this case sports car manufacturing) brings only a marginal contribution to the P&L when compared to its financial activities: in 2009, Porsche made $1bn in profit from car sales and almost $7bn betting on Volkswagen stock. More realistically, an endowment-like model sounds natural for a deep-pocketed investor like Pierre Omidyar. Most US universities are doing fine with that model: a large sum of money, the endowment, is invested and produces enough interest to run operations. One sure thing: If he really wants to go against big corporations and finance, to shield it from pressure, Omidyar should keep its business model disconnected from its editorial operation.

Investigative journalism is a field in which the subscription model can work. In France, the web site Mediapart offers a credible example. Known for, among many others feats, its investigation of the Budget Minister’s hidden Swiss bank account that led to its resignation, Mediapart maintains a newsroom of seasoned reporters working on hot topics. In five years, it collected close to 80,000 subscribers paying €9.90 per month; the web site intends to make €6m ($8m) in revenue and a profit of €0.4m ($0.5m) this year. Small amounts indeed, but not so bad for a market one fifth the size of the US. Scaling up to the huge English-speaking market, and assuming that it will go for a global scope rather than a US-centric coverage, the Omidyar-Greenwald venture could shoot for 500,000 to 800,000 subscribers within a few years, achieving $40m to $60m in yearly revenue.

On the product side, the motto should be Try Everything – on multiple segments and platforms.

Here is possible product-line structure:

298 graph

Mobile should primarily be a news updating vector. In a developing story, say hearings on the NSA scandal, readers want quotes, live blogging, snapshots – all easy to grab while on the go. Addiction must be the goal.

Newsletters deserve particular attention. They remain an excellent vector to distribute news and a powerful traffic driver. But this requires two conditions: First, they must be carefully designed, written by human beings and not by robots. Second, they must be run like an e-commerce operation: a combination of mass emailing and heavy personalization based on collected navigation data. For an editorial product, this means mapping out granular “semantic profiles” in order to serve users with tailored contents. If the Omidyar-Greenwald project lives up to its promise, it will deliver a regular stream of exclusive stuff. A cleverly engineered email system (both editorially and technically) stands good chances  to become a must-read.

User profiling must allow the creation of several verticals. Judging who will join the venture from the first bylines (see article in CNet), the coverage intends te be broad: from national security to White House politics, sports issues (a sure click-bait), civil liberties, military affairs, etc. This justifies working on audience segmentation, as not everyone will be interested in the same subject. The same goes for social web extensions: the more segmented, the better.

Web TV. If you want to go beyond kittens or Nascar crashes, providing TV contents on the web is more difficult that it appears. But “programs” available in Scandinavia show that, for developing stories, Web TV can be a great substitute for conventional TV as it allows simultaneous coverage of multiple events. Nordic viewers love that.

Fact-checking. Since the Omidyar-Greenwald project is built. t on trust and transparency, it should consider launching the equivalent of politifact.com, a fact-checking web site operated by the Tampa Bay Times, which landed a Pulitzer Prize in 2009. A vertical fact-checking site on national security, privacy and data protection issue would definitely be a hit.

Other languages. Going after the Chinese market could be hard to resist. According to Internet World Stats, it is by far the largest single market in the world with 538 million people connected to the web in 2012. For a media venture aimed at lifting the veil on corruption, China offers strong potential in itself. As far as evading censorship, it should be an appealing challenge for the squad of hackers hired by Omidyar-Greenwald.

A print version? Yes. It sounds weird, but I strongly believe that a well-designed weekly, large format (tabloid or Berliner), distributed on selected, affluent markets, would complete the product line. Print remains a vector of choice for specific, long-form readings, ambitious news scenographies with high impact photographs, for an in-depth profile or a public interest story.

Global Thinking. Its potential for worldwide reach is one of this venture’s most interesting factors. It will be of limited interest if it doesn’t embrace a global approach to public interest journalism in large democracies but also in countries that are deprived of a free press (a long list). Creating a high standard, worldwide affiliation system to promote investigative journalism everywhere, regardless of the economic and political constraints, should definitely be on the founders’ roadmap.

frederic.filloux@mondaynote.com