About Frédéric Filloux

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The Google’s creative factory

Among the subliminal messages the Monday Note is willing to send to the media executives, one is about tactics to boost creativity in their depressed ranks. This is why Google’s experience is interesting to watch. In Business Week, CEO Eric Schmidt gives some clues:
- Don’t mess up with the 20% thing: at Google, engineers are encouraged to spend 20% of their time for projects outside their assigned duties. Schmidt says, they can actually invoke those required 20% whatever the deadline pressure are, their superior must bend to it.
- Track your innovation processes. Use the right tools to measure progress. Add layers of prototyping and testing.
- Listen to people. You don’t “manage” innovation, Schmidt says, and it comes from unexpected places.

Emotions or rational? The art of the deal decoded by psychology

In a negotiation process, whether it is for a job interview or a commercial transaction, two related approaches are often used to understand the opponent: perspective-taking and empathy. The first is the cognitive power to consider the world from someone else’s viewpoint, the second is the power to connect with them emotionally.
Adam Galinsky of Kellogg School of Management at Chicago Northwestern University and his team tested these different approaches in a study outlined in this week’s Economist. Results are worth the click

Mobile publishing — Why publishers should grab the iPhone

News publishers remain obsessed with the question: what will be the main distribution platform for their contents, and what will be the subsequent business models? For clues, let’s zoom in the iPhone’s recent performances as well as its immediate prospects.

The smartphone introduced a year ago by Apple has become the tool of choice for news-hungry Internet mobile users. According to M:Metrics, a survey company that tracks the use of mobile devices, a stunning 85% of iPhone owners report using it to access news and information contents. That compares to 58% of the overall smartphones users and only 13% of basic mobile phone owners. By the same token, iSuppli, another research firm, found out that iPhone users spent 12% of their time surfing the web versus 2.5% for the regular cellphone users. On the top of this, data shows that iPhone users spent more time, by a factor of 12 accessing a social network (another future important delivery platform for news content).

What does that means for the publishing sector? First : interface is key. Try accessing a newspaper (or even the Monday Note) on a Blackberry : it’s 1985′s teletext! Do it on an iPhone, it works fine. The added development is negligible compared to the costs of the average Content Management System (CMS) and can be accomplished internally as shown by many sites (The New York Times, Condé Nast’s Portfolio magazine).

Second, we see applications beyond the made-for-iPhone sites that could benefit the publishing industry. In the coming months, we’ll see a first batch of true applications created for the iPhone. For example, how about a powerful caching system for publishers? With it, the user stores dozens of pages of favorite sites — or hundreds of book pages — on an iPhone or iPod Touch for a quiet reading off-line. (I still wonder why a publishing company isnt developing such an application itself and giving it away with pre-loaded content. Small development cost — count less than $100k for a first version — add a nice viral demo on You Tube and you get significant PR impact).

What about the business model? Well, the most obvious one is advertising. On the Internet, scarcity of pixels doesn’t imply little revenue. Quite the contrary, actually. For most sites, the bulk of their revenue comes from very few top slots on their homepage, the remaining inventory being sold at bargain basement prices. (On the French market, discounts between rate cards and net prices average 80%). Translating: a single banner ad on an iPhone-optimized minisite can be sold at a high premium CPM. Plus there are other revenue sharing systems to explore: the monthly bill of iPhone users is 24% higher than the average mobile user’s. That’s $228 extra per year.

News providers should devote small, highly focused set of resources (a developer + a couple of junior editors would be fine) to develop content optimized for the iPhone and related micro applications. This applies also to advertising agencies and media buyers who should get into this emerging piece of digital real estate.

Can such a move prevent the possible extinction (as the Economist puts it) of parts of traditional media? Certainly not. But it is better to be in the race than on the bench.

Smartphone — Can the Apple bite the Berry?

For years, the Blackberry was the tool of choice for the executive on the move obsessive with the idea of staying in touch. Results are stunning: last year, Research in Motion (RIM) added 6.5m Blackberry users. The device is great, with features polished thanks to many iterations and a truly innovation oriented company (read this story in Business Week).

The Blackberry is stable, robust. It has a great push-mail system, and even a private, incredibly fast, network for short messaging (using the PIN number of each device). Okay, speaking of design, its neither Raymond Loewy or Jonathan Ives (Apple’s Michelangelo). But it works. Hence the market share : it peaked at around 60% of the smartphone market back in 2005. Then, Windows Mobile came: the same hassles than your desktop, but in your pocket (sorry, I can’t help it). Fine. Mid-2006, Windows Mobile market share was approaching 40%. Then came the iPhone. Apple’s pie in smartphone is cruising slightly below the 30%, but growing fast. Especially when it is adding features targeted to the office population. Who will eat whom ? Some answers in this story in the New York Times.

Beloved DNA — Personal Genomics providers could violate US law.

We mentioned in Monday Note #29 the boom of personal genomics sector. A great business really, at the convergence of intimate fear, aging population, increase in health prevention expense, paranoia, untold eugenic tendencies, growing hypochondria, etc. Just to give an idea on how it smells good, among the top players : Navigenics is funded by the big venture capital firm Kleiner Perkins Caufield & Byers, and 23andMe was co-founded by Anne Wojcicki, wife of Google co-founder Sergey Brin. (23 is the number of our chromosomes.) Legal life could be more complicated than the molecular version. These companies are under scrutiny by legislators to find out if telling someone that he has Alzheimer predisposition is comparable to an unregulated form of medicine. Lawyers are working on both sides, as they should. And geneticists are sending warning signals like in this article in the New England Journal of Medicine.

Extreme advertising –Your billboard, right from your mobile phone

You thought that you were saturated with ads, with messages of urban life misery, right ? Thinks again. Thanks to Vibes Media, now everyone can create live advertising. How it works: you’re in a stadium, attending a game (to me, nightmare as already begun); you pull out your cell phone and type a text message. Within seconds (after verification, we hope) it appears on a huge billboard sponsored by a beer brand. The advertiser now has two reasons to be happy: many eyeballs are directed on the billboard to see the constantly changing text messages; then, by deriving the number of messages, it can even figure out the number of contacts (Vibes mentions a crowd of 5000 shooting 11,000 messages — forget the game!). As Business Week pointed out, there are plenty of applications such as, in an airport, waving a loved one goodbye on a Motorola billboard… We better get muscles for our eyeballs.

And I don’t want to ruin the party, but just, figure out our future, with the combination of such technology + RFID chips + GPS localized cell phones + wifi triangulation + genomics ID + biometrics devices + behavioral science, and we are in. The network becomes a (gilded) cage.

A quick update on extreme ads practices, Condé Nast is to provide analysis based on ad-tracking system. It struck a deal with MediaAnalyzer. The system will be to measure the efficiency of long terms ad. Story in Folio Magazine.

Axel Springer AG’s bad bets

Last year was not a good one for Axel Springer AG, one of Europe’s biggest publishers. The biggest failure was the attempt to get into the mail-delivery business. Springer had to give up when the German government decided on a minimum wages for the postal industry. Then, for Springer, the mail sector no longer appeared viable. (That’s the beauty of this mail-delivery job: as long as you are forbidden to have legion of “working poor” in your plants, it is not worth it). This lead to a massive write-off and Springer lost E288m last year.
Quoted by Bloomberg, CEO Mathias Doepfner said Springer will focus on businesses that don’t depend on political decisions; he mentioned Internet and foreign businesses as expansion areas. Problem is: these two segments didn’t perform well last year either for Springer. In France, the group lost E40-50m in a failed venture to launch an ambitious daily. (As usual, French publishers applied pressure on the government. This turned to pressure on Springer, which gave up. It worked). And on the Internet front, Springer acquired 68% of AuFeminin.com, Europe biggest women’s site, for 32 euros per share. Unfortunately, Q1 results for Aufeminin.com yielded a 29% drop in profit. The share tumbled to less than 20 euros, close to its 2000 IPO level. A tougher competitive environment is cited as the cause.
Springer’s stock is now trading at 72 euros, a 50% drop from its all time high in February 2007.
Axel Springer AG controls 170 newspapers and websites and magazines in 33 countries.

The battle for New York’s papers

An update: Murdoch decides not to bid for Newday. The AP story.

Five newspapers in New York. Ranging from the most respectable to the lowest tabloid. One is the object of a bidding war, another is under siege by Wall Street. Who will control NYC’s newspapers a year from now? Here is an overview of the main players and scenarios for their possible next move.

#1 : Rupert Murdoch, owner of the New York Post and the Wall Street Journal.
Rupert completed the acquisition of the WSJ from the hands-off Bancroft family for $5.2bn in December 2007. He’s happy with his new toy. He set an office in the Journal’s headquarters overlooking Ground zero, he revamped parts of the paper (an upgrade is due this Monday April 27), and he will replace the managing editor Marcus Brauschli who resigned last week. Things are moving fast and hard, the usual Murdoch way. At 77, the Australian-born mogul seems rejuvenated by this acquisition. In his crosshairs: the New York Times. To Arthur Sulzberger, Times owner, he said in a note “…let the battle begin!”. And he means it. He will modify the Wall Street Journal to go after the Times’ audience, adding more politics, sports, and even culture.

But he won’t rest with this media trophy. On April 22, he made a $580m offer to buy Newsday. The New York (Long Island) paper is a nice business: a bit less than 400,000 copies; $500m in revenue for 2007 and a nice $80m EBITDA, many papers would be happy with such numbers. Newsday is to be unloaded by Sam Zell, the new owner of Tribune Company (The Los Angeles Times, Baltimore Sun, Chicago Tribune). Zell is saddled with a crushing debt load ($1bn due this year) that a collapsing advertising revenue can non longer support.

Why Murdoch would want Newsday ? Because he also owns the New York Post (667,000 copies), that has been bleeding money for long ($50m a year!). Murdoch wants to combine back office operations and thus save a lot of money. Plus he wants to increase pressure on the New York Times by controlling a broader spectrum of news — from highly respected financial stories to trashy tabloid gossip — and their related operations (syenergies on printing, adverstising, classifieds).
And, combining audiences, Newsday (870,000 copies) plus the New York Post (400,000) — even if there is duplication — would make life harder for the Times.

#2 : Michael Bloomberg, currently mayor of New York and main shareholder of Bloomberg LP, the financial information service he created in 1981. On April 19, Newsweek broke the story that Bloomberg could bid for the New York Times. The paper is facing a deterioration of its fundamentals, with an advertising base shrinking faster than expected and web revenues that are growing but are still far from compensating losses at the carbon-based version.

Why would Bloomberg want the New York Times? First, because he can. His stake in Bloomberg Limited Partnership is worth $11.5bn according to Forbes magazine In comparison, the market value of the New York Times Co. is estimated at less than $3bn. Michael Bloomberg is currently 65 and his second term as a mayor will end in 2009. There are obstacles. First, Bloomberg has to be embraced by the Sulzberger family: it controls the NYTimes Co’s capital through a dual shareholding structure. Also, there is no doubt that an open and friendly proposal from Michael Bloomberg for buying the Times (or a big chunk of it), would increase Wall Street pressure on the family. Such pressure is already intense (see below, the Harbinger paragraph). In other words, Sulzberger would have to be pragmatic and negotiate. Second argument: the business potential. Combining the pantheon of journalism (soon to be a mausoleum) and a Bloomberg’s fantastic business news delivery system is a no-brainer as far as shareholder’s value is concerned. Bonus result: Murdoch would have a much more difficult time eating Sulzberger’s (or, rather, Bloomberg’s) lunch.

#3 : The Harbinger-Firebrand private equity fund. To sum-up, the tandem now owns 20% of the New York Times. Their proxy contest succeeded, they get two seats at the Gray Lady’s board. Philip Falcone and his pal Scott Galloway are not exactly newspapermen, but they are nevertheless willing to push the Times to innovate. Their foray epitomizes the tremendous firepower of the big investment funds. In that instance, this power is about to reshape a icon of the media industry.

What to expect with the Harbinger gang ? Not that much because of the dual ownership model of the Times. But the management of the NY Times now must make moves in several directions: ownership, content, business model, staffing, spin-offs…

#4 : Warren Buffet. Investor, the wise man from Omaha (the Nebraska, glowing headquarters of its investment vessel Berkshire Hathaway) second to Bill Gates with a net worth of $52bn, according to Forbes. Warren Buffett is also a board member of the Washington Post Company. He knows quite a lot the newspaper business. He could be credible white knight for the New York Times.

#5 Mort Zuckerman. Owner of The Daily News (700,000 copies), Murdoch’s New York Post archrival. Friday night, Zuckerman announced he was to match Rupert’s offer ($580m)
for Newsday. Same idea as above, he whishes to combine operations and save money for both papers.

Why this battle is worth to watch, even from Europe?

1. It will we be interesting to see the results of Murdoch’s strategy to expand the territory of the Wall Street Journal towards a broader audience (French new owners of business dailies, do you read this?)

2. There is a new kind of players in town. Big hedge funds, like the Harbinger-Firebrands. Many escaped the credit crisis. We’ll see the results of the pressure they are applying to a company such as The New York Times.

3. Aside of the papers circulation, there is the online audience issue. The NYT Times, WSJ.com and even Newsday are big players in a field still pregnant with possibilities.

4. New York is New York. Among others things, it is the capital of advertising. Trends start there. So, watch.

> Related stories on MondayNote.com, here
> A profile or Rupert Murdoch. Newsweek published an excellent account on the way he’s functioning. In this piece, they revealed Michael Bloomberg’s itch to buy the New York Times
> The Bloomberg Monday Machine, the best story ever written about Bloomberg LP, how it works, its journalistic firepower, etc. In Fortune.
> The Harbinger Fund, the incredible history of an investor, Philip Falcone, whose fund is worth 760 times its was seven years ago. Read “The Midas of Misery”, cover story of Business Week.

Wall Street — When the billion-dollar is the unit on paycheck

Couldn’t help to make the connection. The very same week hunger-riots hit the headlines after a surge in food prices, the magazine Institutional Investor released its ranking of the top hedge-funds earners for 2007. The laureate is John Paulson, unknown to many (not anymore) who made $3.7bn (almost half a Kerviel!) last year by betting against complex mortgages securities that subsequently collapsed. Other winners include George Soros (net gain: $2.9bn), and James Simons ($2.8bn), a former military code breaker who is now taking care of his retirement. The fourth one is Philip Falcone ($1.7bn) whose fund, Harbinger Capital Partners is putting pressure against the New York Times. One interesting piece of data : six years ago, it took $20m to be in this top 25 earners ranking. Now it requires at least $360m, 18 times more. Oh, by the way, in this week’s issue, The Economist reminds us that the World Food Program needs — urgently — $700m to avoid an additional 100m people to fall in absolute poverty. That’s the decimal figure of Mr. Paulson’s gain. Not his fault of course. As the French aircraft maker Marcel Dassault put it when asked about his wealth, “I can’t take more than four meals a day”.

Privacy –You liked data-mining? You’ll love reality-mining

Data-mining is the use of mass-data to extract behavior patterns such as food purchases or clothes consumption. That will sound rather innocent compared to this: a scientist at the MIT is willing to learn about individual behavior by analyzing, — in real time of course — data collected by our cellular phone. As explained in the last issue of the MIT Technology Review, Sandy Pentland is working on ways to improve social networking (he’s trying it with his students and colleagues) by finding where and with whom people spend their time. It can even predict such behavior, using statistical models. Worse, reality mining will even be able to detect the most intimate feeling like depression (through voice analyzer) or Parkinson tendencies (by analyzing data from accelerometers embedded in your phone). Such technology can also be used for a vast spectrum of applications. One example is improving computer models for the spread of contagious diseases. Another reason to be convinced that the mobile phone will be much bigger than the personal computer. This one is unpleasant.