About Frédéric Filloux

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Transfer of Value

This is a story of pride vs. geekiness: Traditional newspapers that move online are about to lose the war against pure players and aggregators. Armed with the conviction their intellectual superiority makes them immune to digital modernity, newspapers neglected today’s internet driving forces: relying on technology to build audiences and the ability to coalesce a community over any range of subjects — even the most mundane ones.

When I discuss this with seasoned newsroom people on both sides of the Atlantic, most still firmly believe the quality of their work guarantees their survival against a techno-centric approach to digital contents.

I’m afraid they are wrong. Lethally so.

We are a facing a culture shock. On one side, legacy medias: Great franchises who grew on strong values, such as “pristine” journalism, independence, storytelling, fact-checking, solid editing, respect for the copyright… Along the way, they made their share of mistakes, but, overall, the result is great. After all, at the height of the Fourth Estate’s power, the population was better informed than today’s Facebook cherry-pickers.  Now, this (aging) fraternity faces a new generation of media people who build their fiefdom on a completely different set of values. For instance, the notion of copyright has become exceedingly elastic. A few months ago, Flipboard began to aggregate contents from French news organizations, taking large excerpts — roughly capturing the essence of a story — along with a token link back to the original content. Publishers sent polite letters saying, in substance: ‘Guys, although we are fond of your iOS applications, you can’t simply pick up our stuff without permission, we need to talk first…’

Publishers’ attitude toward aggregators has always been ambiguous. Google is the perfect example: on one hand, publishers complained about the search giant’s power; and, at the same time, they spend huge sums of money optimizing their sites, purchasing relevant keywords, all to make the best use of the very power they criticize. In Belgium, publishers challenged Google in court for the Google News product before realizing they really depended a lot on it, and begging for reintegration in the Google traffic cauldron.

Another example of the culture shock: reliance on technology. It’s a religion for the newcomers but merely a support function for traditional editors. Unfortunately, evidence shows how wrong it is to snub the traffic building arsenal. Here are a few examples.

On July 5th, The Wall Street Journal runs an editorial piece about Mitt Romney’s position on Obamacare.

The rather dull and generic “Romney’s Tax Confusion” title for this 1000 words article attracted a remarkable 938 comments.

But look at what the Huffington Post did: a 500 words treatment including a 300 words article, plus a 200 words excerpt of the WSJ opinion and a link back (completely useless). But, unlike the Journal, the HuffPo ran a much sexier headline :

A choice of words that takes in account all Search Engine Optimization (SEO) prerequisites, using high yield words such as “Squandering”, “Snafu”, in conjunction with much sought-after topics such as “Romney” and “Health Care”. Altogether, this guarantees a nice blip on Google’s radar — and a considerable audience : 7000+ comments (7x more than the original), 600 Facebook shares, etc.

HuffPo’s editors took no chance: the headline they picked is algorithm-designed to yield the best results in Google. The aggregator invested a lot in SEO tools: I was told that every headline is matched in realtime against Google most searched items right before being posted. If the editor’s choice scores low in SEO, the system suggests better terms. In some instances the HuffPo will A/B test headlines: It will serve different versions of a page to a couple of random groups and, after five minutes, the best headline will be selected. Found on Quora, here are explanations by Whitney Snyder, HuffPost’s senior news editor:

The A/B testing was custom built. We do not, however, A/B test every headline. We often use it to see if our readers are familiar with a person’s name (i.e. John Barrasso vs GOP Senator), or to play up two different aspects of a story and see which one interests readers more. We also A/B test different images.

Other examples below will prove the effectiveness of HuffPo’s approach. Here is a media story about a TV host whose position is in jeopardy; the Daily News version: a 500 words article that looks like this:

The Huffington Post summed it up in a 175 words form, but introduced it with a much more potent headline including strong, Google-friendly locutions:

Results speak for themselves:

Daily  News original version : 2 comments, 1 tweet, 1 Facebook share
HuffingtonPost version : 4601 comments, 79 tweets, 155 share.

Like no one else, the HuffPo masters eye-grabbing headline such as these :
Watch Out Swimmers: Testicle-Eating Fish Species Caught in US Lake (4,000 Facebook recommendations), or: Akron Restaurant Owner Dies After Serving Breakfast To Obama (3300 comments) or yesterday’s home: LEPAGE LOSES IT: IRS ‘THE NEW GESTAPO’ displayed in a 80 points font-size; this adaptation of the Maine’s daily Press Herald generated about 6000 comments on the aggregator.

The point is not to criticize the Huffington Post for being extremely efficient at optimizing its work. They invested a lot, they trained their people well. Of course, the bulk of HuffPo’s content  comes from : a) unpaid bloggers — 9,884 new ones last year alone according to Arianna’s count; b) content borrowed from others media and re-engineered by 170 journalists, a term that encompass various kinds of news producers and a bunch of true writers and editors; c) a small percentage of original reporting.  Each day, all this concurs to “over 1,000 stories published” that will translate into 1.4 million of Facebook referrals and 250,000 comments. Staggering numbers indeed. With some downsides, too: 16,000 comments (!) for an 200 words article about Barack Obama asking to turn off Fox News during a campaign tour is not likely to attract enviable demographics advertising-wise. The HuffPo might make a billion page views per month, but most of them only yield dimes.

The essence of what we’re seeing here is a transfer of value. Original stories are getting very little traffic due to the poor marketing tactics of old-fashion publishers. But once they are swallowed by the HuffPo’s clever traffic-generation machine, the same journalistic item will make tens or hundred  times better traffic-wise. Who is right?  Who can look to the better future in the digital world ? Is it the virtuous author carving language-smart headlines or the aggregator generating eye-gobbling phrases thanks to high tech tools?  Your guess. Maybe it’s time to wake-up.

frederic.filloux@mondaynote.com

Lessons from ProPublica

Paul Steiger is one of the men I admire the most in my profession. Five years ago, at the age of 65, and after a 16-year tenure as the Wall Street Journal’s managing editor, he seized the opportunity to create a new form of investigative journalism. Steiger created ProPublica, a non-profit newsroom dedicated to the public interest and to deep dive reporting. He hired a bunch of young staffers (coached by seasoned editors and reporters) that could help him lift data journalism and computer-assisted reporting to the highest level. Thanks to wisely managed partnerships, he gave ProPublica a wide audience and the quality and breadth of his newsroom’s reporting landed it scores of awards, including two Pulitzer Prizes. ProPublica was the first online news organization to receive such a seal of approval.

All this in five years, with now 33 journalists. Kudos.

Last wednesday, at the end of quick hop to New York, I paid Paul Steiger a visit. His corner office nests on the 23rd floor of Broadway, overlooking Wall Street’s canyons and Manhattan’s southern tip. At 70, Steiger has a twinkle in the eye that you don’t often find in reporters half his age. Especially when he speaks about ProPublica’s most shining journalistic moments.

In late 2006, the Sandler Foundation, approached Steiger with a wish to allocate a fraction of its immense wealth to the funding of investigative reporting. The newsman made four recommendations:

– The first one was to rely on a permanent staff as opposed to hired guns. “To do the kind of journalism we wanted to do, you must have people comfortable enough to stay on the story as long as needed. You also must accept dry holes. Freelancers will starve in such conditions!”

– Two, for the biggest stories, he wanted to partner with one or two large news organizations that could be granted some exclusivity over a short period of time in exchange for good visibility.

– Three, in order to guarantee the widest reach, Paul Steiger wanted to distribute the material freely on the web.

– Four, he would solely be responsible for content; funders or other contributors would not be involved in selecting stories. (Actually, on ProPublica’s first board meeting, none of the financial backers knew what the newsroom was working on.)

The partnership proved to be a great idea and expanded much farther than anticipated. It relied quite a lot on Paul Steiger’s and Stephen Engelberg’s personal connections (Engelberg is ProPublica’s editor-in-chief.) Quite often, Steiger explained, once a story neared completion, he’d place a call directly to a key editor in a major publications. “Sometimes, I could feel the excitement over the phone”, he laughs. He had to be very careful not to say too much before hammering the deal. I asked him how he handles confidential sources: “Well, we do not mind giving sources’ names to editors and lawyers, but less so to beat reporters… You know, reporters are human, and they might be tempted to call the sources themselves…”

Cooperation with other medias turned out to breed an unexpected advantage: transforming good national stories into a local ones. The best example, is the Dollars for Docs project. In a nutshell: a sizable portion of pharmaceutical firms operating in the United States are now required to reveal all direct contributions to doctors. (It’ll be 100% next year.) Needless to say, they complied reluctantly, providing a sloppy, almost useless database. As a result, the two reporters assigned to the subject were at a loss when it came to retrieve relevant data. Then, a young ProPublica in-house data specialist joined the team and solved the puzzle in a few weeks. The story was published by ProPublica’s five partners: The Chicago Tribune, The Boston Globe, PBS, NPR and Consumer Reports. Why Consumer Reports? “Because they had polling capabilities”, Steiger said. “Pharmaceuticals companies were saying patients didn’t mind if doctors got fees from them, we proved patients actually care…” After a few days for the key partners’ exclusivity window, the database was released on the web on October 19, 2010. In an easily searchable way, it showed the status of 17,000 doctors receiving a total of $750 million. A small stimulus to keep the flow of prescriptions smooth and steady — and to contribute to the indecent cost of healthcare in America.

Then the local mechanics kicked in. In the months afterwards, no less than 125 local outlets picked up the story, extracting relevant local information from the database and adding context. That’s one of the most interesting aspects of ProPublica’s work: its ability to cause a national interest story to percolate down to the local news organizations which, in turn, will give the story more depth by connecting it to its relevant community. (ProPublica now has 78 partners)

I asked Paul Steiger if he believes this model could be translated into a classic business. After all, why not gather half a dozen non-competiting news outlets, happy to split the price of large journalistic projects — each costing from $100,000 to $200,000 to produce — in addition to a small fee from local news? Paul Steiger says it cannot be made to work. To sum it up, by asking a newspaper or a TV network to pay, ProPublica would directly compete with their clients’ internal economics. Inevitably, someone will say, hey, last year, we paid x thousands dollars in fees for ProPublica’s stories, that’s the equivalent of y staffers. Not to mention the state of the news industry with, in fact, very few companies willing (and able) to pay extra editorial costs. The consequence would be a down spiral: deprived of the vast audience it now enjoys, the organization would have a hard time attracting clients for its content, nor would it be able to attract donations. Fact is, such syndication doesn’t work. California Watch, which operates on the same beat as ProPublica, burns more than $2 million a year but collects less than… $30,000 dollars in syndication fees.

That’s why ProPublica plans to stick to its original structure. Next year, Paul Steiger will step down as ProPublica’s editor-in-chief and chief executive, he’ll become executive chairman, a position in which he will spend most of his time raising money for the organization. As it stands today, ProPublica is on a sound path. The first two years of operation were solely funded by the Sandler family, for about $10 million a year. This year their contribution will be down to $4 million, with $6m coming from other sources. In 2013, the breakdown will be $3m and $7 million. Not only did ProPublica put itself at the forefront of the public interest, high quality, digitally boosted, modern journalism, but it also created a sustainable way to support it.

frederic.filloux@mondaynote.com

The Insidious Power of Brand Content

Dassault Systemes is one of the French industry’s greatest successes. Everyday, unbeknownst to most of us, we use products designed using DS software: cars, gadgets, buildings and even clothes. This €2bn company provides all the necessary tools for what has become known as Product Lifecycle Management: starting from the initial design, moving to the software that runs the manufacturing process, then to distribution logistics and, at the end of its life, disposing of the product.

Hence a simple question: What could be the axis of communication for such a company? The performance of its latest release of CAD software? Its simulation capabilities?

No. Dassault Systemes opted to communicate on an science-fiction iceberg-related project. The pitch: a French engineer — the old-fashion type, a dreamer who barely speaks English — envisions capturing an iceberg from a Greenland glacier and tugging it down to the thirsty Canary Islands. The DS mission (should it choose to really accept it): devise all the relevant techniques for the job, minimize melting, maximize fuel-efficiency. The result is a remarkable and quite entertaining documentary, a 56 minutes high-tech festival of solutions for this daunting task’s numerous challenges. I watched it in HD on my iPad, in exchange for my email address (the one I’m dedicating to marketers). It’s a huge, multimillion video production, with scores of the helicopters shots, superb views of Greenland and, of course, spectacular 3D imaging, the core DS business. The budget is so high and the project so ambitious, that the documentary was co-produced by several large European TV channels such as France Televisions and the German ZDF. Quite frankly, it fits the standard of public TV — for such a genre.

But this is neither journalism nor National Geographic film-making. It’s a Brand Content operation.

In advertising, Brand Content is the new black. You can’t bump into an ad exec without hearing about it. It’s the new grail, the replacement for the other formats that failed and the latest hope for an ailing industry. But there are side effects.

Let’s have a closer look.

1/ What defines Brand Content as opposed to traditional advertising?

In a good BC product, the brand can be almost absent. It’s the content that’s front and center. In France, advertisers often quote a series made by the French Bank BNP-Paribas titled “Mes Colocs” (My roommates). The title says it all. Launched two years ago, it featured 20 shorts episodes, later supplemented by… 30 bonus ones, all broadcast on YouTube and DailyMotion. Mes Colocs became such a success that two cable TV channels picked it up. The brand name does not appear — except in the opening credits. But, far from being a philanthropic operation, its performance was carefully monitored. BNP-Paribas’ goal was obvious: raising its awareness among young people. And it seems to have worked: the operation translated into a 1.6% increase in accounts opening and a rise of 6.5% in the number of loans granted to young adults (details in this promotional parody produced by the agency.)

This dissociation between brand and content is essential. An historical French brand has been rightly celebrated for being the first to do brand content decades before the term was coined: Michelin with its eponymous guides provided a genuine service without promoting its tires (read Jean-Louis’ Monday Note Why Apple Should Follow Michelin.)

The following opposition can be drawn between traditional advertising and content-based message :

2 / Why the hype ?

First of all, medias are increasingly fragmented. Advertisers and marketers have a hard time targeting the right audience. BC is a good way to let the audience build itself — for instance through virality. It is much more subtle than relying on the heavily (and easily) corrupted blogosphere.

Second, most digital formats are faltering. Display advertising is spiraling down due to well-known factors: unlimited inventories, poor creativity, excessive discounts, bulk purchasing, cannibalization by value killing ad networks, etc. Behavioral targeting is technically spectacular but people get irritated by invasive tracking techniques (see my previous take: Pro (Advertising) Choice.)

Three, marketers have matured. The caricatural advertorial grossly extolling a product is long gone.  Today’s contents are much smarter, they provide information (real or a respectable imitation), and good entertainment. Everything is increasingly well-crafted. Why? Because — and that is reason #4 for growth in BC — there is a lot of available talent out there. As news media shrink, advertising agencies find an abundance of writers, producers, film-makers all eager to work for much more money they could hope to get in their former jobs. Coming in with a fresh mindset, not (yet) brain-washed by marketing, they will do their job professionally, accepting “minor” constraints in exchange for great working conditions — no penny pinching when you do a web series for a global brand.

Five, compared to traditional advertising messages, Brand Content is cheap. As an example, see the making of a recent and highly conceptual Air France commercial shot in Morocco; the cost ran into seven figures. Now, imagine how many brand content products can be done with the same investment. Brand content allows an advertiser to place multiple bets at the same time.

3/ The risks. (Here comes the newsman’s point of view)

Brand content is the advertiser’s dream come true. The downfall of the print press has opened floodgates: publishers become less and less scrupulous in their blurring of the line between editorial and promotion — which is precisely what ad agencies always shoot for. Most women magazines, the luxury press, and now mainstream glossies allocate between 30% and 70% to such “tainted” editorial: nice “journalistic” treatment in exchange for favors on the advertising side. I’m not blaming publishers who do their best to save their business, I’m just stating the facts.

The consequence is obvious: readers are not informed as they should about products. Less and less so. (Although islands of integrity like Consumer Reports remain.) That is not good for the print media as it feeds the public’s distrust. While many publications lose what’s left of their credibility by being too cosy with their advertisers, brands are becoming increasingly savvy at producing quality contents that mimic traditional editorial. As brands tend to become full blown medias, the public will get confused. Sooner or later, it will be difficult to distinguish between a genuine, editorially-driven prime-time TV show and another one sponsored by an advertiser. Call it the ever shrinking journalism.

frederic.filloux@mondaynote.com

Off The eBook Shelf

Readers are voting with their wallets: The eBook is winning. In the US, eBooks sales are now topping hardcovers for the first time (story in TechCrunch). Not everywhere of course. According to the Bowker Global eBook Research, the global market for eBooks is driven — in that order — by India, Australia, the UK and the United States. The laggards are Japan and (no surprise) France. The chart below shows the percentage of internet population reporting the purchase of a digital book over the last six months prior to the survey.

Interestingly, for most population samples, the level of purchases is not correlated with awareness. France enjoys the highest level of awareness but its internet population buys five times less eBooks than India’s. Once an Indian internet user finds an attractive digital book offer, he/she will most likely jump on it. This could lead to the following: in emerging countries, the cellular phone has become the main communication tool, leapfrogging the deployment of land lines; similarly, we could see eBooks bypassing print in countries like India where a large segment of the population is getting both literate and connected at a fast pace. (Actually, Bowker also reports that over 50% of respondents in India and Brazil are likely to buy an eBook in the next six months, ten times more than in France.)

If the rise of the eBook happily provides access to knowledge in emerging countries, the picture is more contrasted in countries with a long history and high penetration of printed books.

For instance, let’s have look at the ISBN registrations data for the United States. The chart below, drawn again from Bowkers (full PDF table here) shows a steady progression:

Between 2002 and 2011, in the US market, ISBN registration grew by 61% and reached 347,178 new titles. (A technical note: I’m only taking into account books that fall in an identified category, such as Arts, Biography, Business, etc. I’m excluding the huge segment labeled as nontraditional, which includes reprints, public domain, and titles printed on demand; this segment grew by over 3500% to 1.2 million registrations, which would distort the picture.)

We clearly see the impact of mainstream e-readers such as the Kindle and the iPad. Without any doubt, they contributed to the growth of registrations. (Unfortunately, ISBN counts does not provide a breakdown between print and digital.) Over the last nine years, some book publishing segments fared better than others. See the chart below:

Fiction is doing twice better than all other categories together. The Digital Book is the medium of choice for fiction: a) eBooks are set to be cheaper that print and price elasticity is now a proven fact, the cheaper a book is, the more likely a reader is to try it; b) e-commerce breeds impulse buying (cf the famous “One-Click® feature); c) readers can test the product more efficiently than in the printed world as Amazon and the iBooks Store make larges sample available for free. No surprise, then, to see the Fiction category holding well.

No surprise either in seeing the three worst performers also as prime victims of the digital era. History books have to compete with the vast trove of material available on the web; that’s the Encyclopaedia Britannica syndrome, going out of print after 244 years of duty, demoted by the 11-year-old Wikipedia. Like it or not, most history books publishers will follow the same fate.

Similarly,Travel and Computer books are in direct competition with mostly free online services. Who will buy a “how-to” computer book today? There are plenty of video tutorials explaining how to replace a hard drive or how to struggle with Photoshop? And let’s not even mention the Travel segment with tons of guides, reviews, price comparators and transactions services. As for the language sections of the bookstore, again, a simple query in Google can help with spelling, translation and grammar… Even the precious Roget’s Thesaurus is online, and rather efficiently so. I’ll just venture French Canadians did Roget one better: A company called Druide publishes a suite of applications for PCs, tablets and smartphones called Antidote. It’s an unusually clever combination of dictionary, thesaurus, quotations, etymology and more. I wondered for a while about the name Antidote — until I realized Quebecois saw the product as an antidote to… English. An old struggle.

The main eBooks casualty is likely to be bookstores. In a city like New York, in the Fifties, about 330 bookstores were in business. Now they are down to 30 or even less, laments André Schiffrin, former head of Pantheon Books, in his recent book Words & Money. Countries like France or Germany have laws that protect independent bookstores: From Bordeaux to Berlin, citizens are thankful for finding warmer and more relevant recommendations than the algorithm-based suggestions provided by Amazon. But how long will it last?

frederic.filloux@mondaynote.com

Pro (Advertising) Choice

A couple of weeks ago, I came to a realization: I was becoming more and more reluctant to click on advertising banners because I feared I being digitally tailed for the next few months. When I mentioned this to friends, I noted that I was not alone. Everyone had their example of ads that, once clicked, become as sticky as the proverbial band aid. This could be the result of exploring a product (read my own experience testing an app), or occasional research on a subject… Your online behavior — queries you send, ads you click on — draws your marketing profile, enabling brands to deluge you with “targeted” ads. A shoe freak will be swamped by shoemakers ads, someone who intends to buy a car will be targeted by automakers and dealers. (I always wonder how the web page of someone afflicted with an embarrassing disease looked like…)

Once you’re caught in the behavioral targeting net, you’ll have a hard time cleaning up your surfing. I recently tested a utility for my computer — a poor quality product I quickly dumped — and ended up having to spend time removing the offending cookies with metaphorical tweezers. Now, I sacrifice a “polluted” browser (and a specific email account) which I use to click on ads, download products or marketing information, and do my best to keep my other browsers clean.

Why not flush the hundreds of cookies piled up inside my browsers, you might ask? Good question. In a file on my two computers, I keep almost 200 encrypted passwords, ranging from subscriptions to various publications, accounts to e-commerce sites or business online services. I don’t want to re-enter these codes each time I get rid of unwanted cookies. Hence the “dirty” browser.

The conclusion is obvious: behavioral advertising is backfiring. The more experienced users become, the more cautious they get in order to avoid aggressive tracking. For advertisers, this is the exact opposite of what they meant to achieve. And I take the trend will accelerate. Marketers have more sense of efficiency than of measure; they were quick to embrace these clever technologies without considering they might end up killing the golden goose. It is happening much earlier than anyone has anticipated.

The debate around the Do Not Track (DNT) system epitomizes this trend. The idea originated at the US Federal Trade Commission (FTC): it devised a piece of software embedded in a browser or an application, able to send a signal instructing a web site not to inject a tracking cookie in the user’s computer. After that, it is up to the website to comply or not. Mozilla quickly included the feature in its version 9.0 of Firefox, and Twitter followed.

Early june, Microsoft added fuel to the fire by announcing the DNT feature will be turned “on” as a default on its new Internet Explorer 10 browser set to work with Windows 8. This is by no means unimportant: the vast majority of users do not change default settings in their software. As a result, a sizable percentage of web surfers could end up automatically asking web sites to forgo any tracking. A potential catastrophe for the advertising industry: while most ads are purchases in bulk, at heavy discounts, the industry relies on behavioral targeting to increase the efficiency of ads — and of their resulting margins.

Intense lobbying on behalf the ad community ensued.

First, the definition issue, As viewed by the FTC :

An effective Do Not Track system should go beyond simply opting consumers out of receiving targeted advertisements; it should opt them out of collection of behavioral data for all purposes other than those that would be consistent with the context of the interaction.

Naturally, marketers are in favor of a much narrower definition, excluding the data collection process. In other words, OK for not targeting users, but their personal data must be ours.

In this story, Atlantic’s senior editor Alexis Madrigal makes the following point:

No one understands the industry’s definition because it deviates so far from the standard english definition of the word ‘track.’
Stanford’s Aleecia McDonald found that 61 percent of people expect that clicking a Do Not Track button should shut off *all* data collection. Only 7 percent of people expected that websites could collect the same data before and after clicking a ‘Do Not Track’ button. That is to say, 93 percent of people do not understand the industry’s definition of DNT.

Eventually, Microsoft had to backtrack under pressure from the Digital Advertising Alliance. The DAA is a one-year old body that defines itself as the “Self-regulatory program for online behavioral advertising”; it lines up all the major players in the business, including Google, Apple and Microsoft. The DAA fired a first shot by saying that the “on” default setting envisioned by Microsoft was going way beyond FTC’s definition as well as the W3C (World Wide Web Consortium)’s DNT recommendation. The DAA suggested DNT activation ought to be left to users — for instance, when they launch their browser for the first time. As a consequence, Microsoft’s IE10 featuring a DNT set to “on” as a ‘‘factory default’’ would be seen as “non-compliant” and the no-tracking signal sent to websites could be legally ignored.

The battle is just starting. It is unclear if Microsoft will fight the non-compliance issue and what kind of compromise will be reached. (The DAA’s final position will be disclosed in a few months.) In the meantime, digital kremlinologists will keep dissecting Microsoft true motives. After all, according to eMarketer, this year, in the US alone, the Redmond giant will make $700 million in advertising revenue:

This chart also clearly shows what’s at stake here. With DNT-as-a-default, Microsoft is obviously aiming Google and Facebook — and their higher advertising income. Both rely heavily on data-collection to serve relevant ads. It is even a crucial part of Facebook’s business model (see this previous Monday Note: Facebook’s Bet on Privacy) based on people giving up personal data in exchange for its service. A bet increasingly at risk.

frederic.filloux@mondaynote.com

Apps Features: Social vs. “Related”

Mobile application design is hard. For websites, we have well-established graphic rules. For PC screens, the tolerance for interface mishaps is fairly broad. Mobile apps are the  opposite: space is much scarcer, every pixel counts. Try shrinking a tablet app screen down an to a smartphone size: homothecy (linear reduction) rarely works. This is the reason why we often see fine iPad applications turn into flunked smartphone ones. It sometimes takes a while for a successful iPad app turn in to a well-adapted iPhone one: Flipboard, Zite and Bloomberg BusinessWeek were wise enough to take as much time as needed to roll-out great apps for the small screen.

When designers (and marketeers) perform user tests for a small screen app, they realize their design will have to adjust to many new circumstances and constraints. Reading time and general use conditions change substantially from a tablet to a smartphone: while the former is definitely a lean-back device, the latter will be used in many different ways, often including uncomfortable settings — I glance at my phone in a lobby, a waiting line, in the subway, etc. All this deserves thoughtful consideration when designing an application. The same applies to advertisers: they can’t expect to capture the same level of attention when moving from tablets to the smartphones.

With this in mind, I made a quick list of mandatory features for mobile applications.

Social vs. “Related”. Today’s hype leaves no other option but making an application as “social” as possible. This being the certitude du jour, allow me to think differently.

True, some apps are inherently social: when it comes to rating a product or a service, the “crowd factor” is critical. Beyond that, it should be a matter of personal choice — an antinomic notion to today’s the “Social” diktat. When you enroll into Spotify, the default setting is to share your musical taste with your Facebook friends and to suffer theirs in return. I personally can’t stand such obligation: I quickly dumped the application and cancelled my account.

The social idea’s biggest mistake is the belief in a universal and monolithic concept everyone is supposed to be willing to embrace with a similar degree of scope and enthusiasm. That’s a geeky, super-cartesian, Zuckerberg-esque view of society. Among my friends, some like opera (the singing, not the browser), others prefer heavy metal and I’m more into jazz tunes; some are tech-minded like me, others are more inclined towards literature. When it comes to sharing news, I tend to be naturally selective about the people I send a link to: I don’t want to swamp everyone with stuff they don’t care about. I might be wrong, but this is the way I see the social cyberspace: segmented and respectful of each other.

Where am I getting with this: When I read news online, I care about what is related (i.e. recommended by editors) as much as what is social (recommended by the crowd). Of course, Trending, is a good indicator of what’s hot. Here is a good example on TechCrunch iPad app, by any measure a thoughtfully designed one. Its Trending sidebar cleverly displays what’s hot and how it evolves:

Even better: when you dive into a story, the app will give you a better-focused “Trending” indicator on a particular company, in this example Buddy Media….

… will send you to the Crunch Base repository of people and companies:

TechCrunch’s social treatment is mostly Twitter-based. Subjects are connected to relevant tweets with the underlying story shown in a web view:

Related contents come in different flavors. Take the Bloomberg way shown in its remarkable BusinessWeek application. Companies mentioned in a stories can pop-up in a black sidebar drawn from the Bloomberg financial app.

Similarly, ProPublica’s application uses a lateral “drawer” to display related contents in an efficient way:

These features are by no means secondary. Providing related contents or a supplement of data, such as financial of biographical information, is the best proven way to retain users.

Finally, a word about graphics. Apple and the iPad have set the bar pretty high and very few apps takes fully advantage of their graphics power. One company rises way above the crowd: Roambi, in a class in itself when it comes to visualizing information. My take is, someday, most business sites will borrow from Roambi’s spectacular way of displaying graphics (part explanation of its design sophistication: the core of Roambi’s designers comes from the video game industry).

One last world about the ongoing debate between open web-apps and proprietary ones such as iOS or Android: The gap is narrowing. The FT.com, which pioneered the genre two years ago, made tremendous progress in its app. Periodically, a new release comes up with slight improvements in fluidity and ease of use. The iOS system and its software development kit remain a must for games and 3D intensive applications, but for news and data apps, HTML5 is getting closer.

One feature, though, is missing in most of these apps: the ability to use them offline. 3G coverage and cellular data transfers are more unstable than developers tend to believe; users should have more leeway in configuring their apps to download content in the background, ready for later offline use.

frederic.filloux@mondaynote.com

Facebook: The Collective Hallucination

Facebook’s bumpy IPO debut could signal the end of a collective hallucination. Most of it pertains to the company’s ability to deliver an effective advertising machine.

Pre-IPO numbers looked nice, especially when compared to Google at this critical stage of their respective business lives:

Based on such numbers, and on the prospect for a billion users by the end of 2012, everyone began to extrapolate and predict Facebook’s dominance of the global advertising market.

Until some cracks began to appear.

The first one was General Motors’ decision to pull its ads off Facebook. This was due to poor click-through performance compared to other ads vectors such as Google. No big deal in terms of revenue: according to Advertising Age, GM had spent a mere $10 million in FB ads and a total $30 million maintaining its presence on the social network. But Facebook watchers saw it a major red flag.

The next bad signal came during the roadshow, when Facebook issued a rather stern warning about its advertising performance among mobile users.

“We believe this increased usage of Facebook on mobile devices has contributed to the recent trend of our daily active users (DAUs) increasing more rapidly than the increase in the number of ads delivered.”

If Facebook can’t effectively monetize its mobile users, it is in serious trouble. Numbers compiled by ComScore are staggering: last March, the average American user spent 7hrs 21 minutes on mobile versions of Facebook (80% on applications, 20% on the mobile site). This represents a reach of more than 80% of mobile users and three times that of the next social media competitor (Twitter), see below:

(source : ComScore)

More broadly, Facebook experiences the unlimited supply of the internet in which users create inventory much faster than advertising can fill it. This trend is known to push ads prices further down as scarcity no longer contains them. The reason why the TV ad market is holding pretty well is its lasting ability to create a tension on prices thanks to the fixed numbers of ad slots available over a given period of time.

Unfortunately for its investors, in many ways, Facebook is not Google. First of all, it has no advertising “killer format ” comparable to Google’s AdWords. The search engine text ads check all the boxes that make a success: they are ultra-simple, efficient, supported by a scalable technology that makes them well-suited for the smallest advertisers as well as for the biggest ones; the system is almost friction-free thanks to an automated market place; and its efficiency doesn’t depend on the quality of creation (there is no room for that). One cent a time, Google churns its enormous revenue stream, without any competition in its field.

By contrast, Facebook’s ad system looks more traditional. For instance, it relies more on creativity than Google does. Although the term sounds a bit overstated considering the level of tactics Facebook uses to collect fans and raise “engagement” of any kind. For example, Tums, the anti-acid drug, developed a game encouraging users to throw virtual tomatoes at pictures of their friends. On a similar level of sophistication, while doing research for this column, I landed on the Facebook Studio Awards site showcasing the best ads and promotional campaigns. My vote goes to the French chicken producer Saint Sever, whose agency devised this elegantly uncomplicated concept: “1 ami = 1poulet” (one friend, one chicken):

If this is the kind of concept Facebook is proud to promote, it becomes a matter of concern for the company’s ARPU.

Speaking of Average Revenue Per User, last year, Facebook made $4.34 per user in overall advertising revenue. A closer look shows differences from one market to another: North America, the most valuable market, yielded $9.51 per user vs. $4.86 for the European market, $1.79 in Asia and only $1.42 for the rest of the world. Facebook’s problem lies exactly there: the most profitable markets are the most saturated ones while the potential for growth resides mostly in the low-yield tier. In the meantime, infrastructure costs are roughly identical: it costs the same to serve a page, or to synchronize a photo album located in Pennsylvania or in Kazakhstan (it could even cost more per user in remote countries, and some say that FB’s infrastructure running costs are likely to grow exponentially as more users generate more interactions between themselves).

Facebook might be tempted to mimic a rather questionable Google trait, that is “The Theory Of Everything”. Over the last years, we’ve seen Google jumping on almost everything (including Motorola’s mobile business), trying a large, confusing array of products and services in order to see what sticks on the wall. The end result is an impressive list of services that became very valuable to users (mail, maps, docs). But more than 90% of Google revenue still come from a single stream of business, search ads.

As for Facebook, we had a glimpse already with the Instagram acquisition (see a recent Monday Note), which looked more like a decision triggered by short-term agitation than by long-term strategic thought. We might see other moves like this as Mark Zuckerberg retains 57% of the voting shares and as the company sits on a big (more than $6 billion) pile of cash. Each month brings up a new business Facebook might be tempted to enter, from mobile phones, to search.

All ideas that fit Facebook’s vital need for growth.

frederic.filloux@mondaynote.com

Francois Hollande’s Start-down Nation

A forgettable election campaign just wrapped up: François Hollande is now the President of the French Republic. Time spent on foreign issues during last week’s one-on-one television debate mirrored the rest of the campaign: less than fifteen minutes in a 2hrs 50 minutes bout, one that left most viewers yawning. This campaign was petty, gallic-centered, oozing with demagoguery and completely devoid of great projects or ambitions for the country.

Mr. Hollande himself epitomizes this political flabbiness. He’s the default candidate. Last year, after Dominique Strauss-Kahn’s sexual implosion, Hollande kept running his tiny electoral diesel engine in low gear, bereft of grand ideas, unable to get into overdrive. He didn’t win because of his track record — he has no such thing. He was both a mediocre party leader and the weak manager of the poorest French department, which he left heavily indebted. Mr. Hollande didn’t win because he embodies any kind of grand aspirations either; other than getting into the Élysée palace, he has none. Instead, he portrays himself as a “normal guy” after — it’s also fair to mention — the hyper-kinetic, agitated, communication-obsessed, Nicolas Sarkozy.

Sure thing: with François Hollande, the country will rest; it will settle into gentle indolence as the rest of the world evolves and interacts. Most likely, the Euro zone crisis will heat up with a worsening situation in Spain where a quarter of the population — and half of the youngest citizens — are unemployed. Most likely also, ratings agencies will further downgrade French debt — since 1973, the country never had a balanced budget. Meanwhile, Mr. Hollande will fulfill his electoral promise of hiring 60,000 additional teachers; this while the country needs less teachers (there are less kids in front of them) but higher paid ones, along with higher respect and better working conditions. He’ll travel to Brussels and renegotiate the European Treaty, pitching the notion of growth (eureka!) against the “austerians“. On this, he might be right somehow (see last week’s Paul Krugman’s column in the New York Times titled Death of a Fairy Tale.)

All this doesn’t mean the Socialist presidency will be as dangerous as too many like to say. People making more than one million euros per year will indeed enter a 75% tax bracket: The new president claimed “[he] doesn’t like rich people” (a few years ago, he assigned a threshold of wealth to the equivalent of $60,000 a year). But vis-à-vis the much-bashed “Finance”, he’s likely to act as a pragmatist. A possible chief of staff for Hollande could  be Jean-Pierre Jouyet, currently chairman of the Financial Markets Authority and former minister of European affairs. There is no shortage of left-leaning talented people, and this middling leader is likely to surround himself wisely — on many counts, he can’t do worse than his predecessor.

France won’t fall from the cliff, nor will it shine brightly under the new regime.

And it won’t innovate either.

What made this campaign so depressing was both sides seemed to willfully ignore one of the most potent engines of the economy, that is innovation and a country’s ability to foster it. Both candidates seemed totally disconnected from critical challenges in which France is failing in every possible way.

Take higher education. The failure is unequivocal, regardless of political leanings. France might have about 80 universities, most of them second or third rate and producing mostly unemployable people. And if you dare a transatlantic comparison, you generate killer statistics. France’s budget for higher education and research is the equivalent of Harvard University’s endowment (€24 billion or $31 billion for French universities and public laboratories and $32 billion of cash reserves for Harvard). Overall, France’s spending per student is less than half of the US — and 15 times less if you compare to the Ivy League colleges. French faculty members, unions and politicians have made their best efforts to disconnect universities from the business world. They’ve been remarkably successful. As a result, Gallic colleges have become poorer, and largely unable to cope with the legions of students that land onto their benches, facing underpaid and unmotivated professors.

Of course, France has a different way to produce — and to reproduce — its elites. Two highways, actually: l’Ecole Nationale d’Administration (ENA) and l’Ecole Polytechnique. Mr. Hollande is an offspring of the first (so was his former partner, Ségolène Royal, the unlucky but picturesque 2007 presidential candidate.) As someone who grew inside this comfy seraglio and who traveled very little abroad, the new French president can’t envision an alternative to this trusted model for running the country. As for Polytechnique, it produces the top French engineers, a caste in itself, that has little to do with those graduating from top anglo-saxon colleges. The difference between a Polytechnique student and a Stanford one is the former will dream to manage, one day, a large industrial concern such as Thales (defense electronics) or the energy group Total, while the Stanford grad will want to see his/her name on a campus building — after a creating a successful business, needless to say. As the New York Times noted in a recent story about the return of class war,

Just under half of France’s 40 largest companies are run by graduates of just two schools: ENA,(..) and École Polytechnique (…). Together the schools produce only about 600 graduates a year. There are fewer than 6,000 ENA graduates alive today, compared with at least 160,000 Oxford alumni.

This doesn’t constitute the best soil for a start-up culture. And the venture capital activity is not likely to help either. In 2011, French VC funds invested €822 million in start-ups, a 21% drop vs. 2010. Even worse, 64% of these funds went to second or later rounds of financing, initial funding collected a mere 8% of the total. Not exactly a risk-prone attitude.

Again, international comparisons hurt. French VC invested last year about €13 or $16 per company and per inhabitant; that compares to $93 in the United Sates and more than $110 in Israel. Speaking of Israel, if we take into account the money flowing from abroad, the figures are even more staggering as VC funding per capita rose to $280 in 2011 according to IVC-KPMG data:

In 2011, 546 Israeli high-tech companies attracted $2.14billion from local and foreign venture investors, the highest amount in 11 years. This is almost 70 percent above the $1.26 billion raised by 391 companies in 2010 and 91 percent above the $1.12 billion raised in 2009.

In their excellent book Start-up Nation, the story of Israel economic Miracle, authors Dan Senor and Saul Singer also write:

Comparing absolute numbers, Israel — a country of just 7.1 million people –attracted close to $2 billion [in 2008] in venture capital, as much as flowed to the UK, Germany and France combined. (…) In addition to boasting the highest density of start-ups in te world (a total of 3,850, one for every 1,844 Israelis), more Israeli companies are listed on the Nasdaq [list here] than all companies from the entire European continent.

To complete this quote: about 250 companies originating from Israel had an IPO on the Nasdaq. Today 50 companies remain listed vs. 47 European companies including 3 French ones.

None of the above was mentioned, even remotely, during the French election campaign. Nicolas Sarkozy did very little about fostering innovation — he didn’t have a clue. As for François Hollande, the strongest part of its electorate (largely composed of teachers and other public servants) opposes any rapprochement between private sector and public higher education. And let’s not mention the underlying “ideology” of venture capital, carried interest, IPO’s, flexible employment rules, etc. Hollande’s supporters will also oppose any removal of cobwebs from the 102-year-old labor code that greatly complicates the management of companies employing 50 or more people. As a result, France has 2.4 times more companies with 49 employees than with 50, read this story in Bloomberg BusinessWeek.

This makes France a rather start-down nation. Nothing to celebrate.

frederic.filloux@mondaynote.com

Advertising: The trust Factor

The digital advertising equation is outlined in the Nielsen graph below. The Global Trust in Advertising survey released this month (summary on Nielsen site and PDF here) underlines one key finding: For the vast majority of digital users, trust lies first and foremost in recommendations and opinions from their peers. As for the bulk of formats found on web sites or on mobile (such as various flavors of display advertising), they fall to the bottom of the chart. Nielsen’s study, based on 26,000 respondents in 56 countries, was conducted in Q3 2011.

Here are the expanded results (click to enlarge):

By themselves, these figures provide the perfect explanation for the current state of the advertising industry and, more specifically, for the digital ads segment.

Then, superimposing the ad revenue structure of most news medias companies would show an alarmingly symmetry: these businesses derive most of their revenue, allocate most of their effort to the least trusted ad vectors: display banners of various forms (on web, mobile or social), online video ads, etc.

The survey also provides a grim view of what people trust: they put more of their faith in a branded website (58% positive), a brand sponsorship (47%) ad, or even a product placement in a TV series (40%) than in a display ad on a website or on mobile (33% each)!

Even worse is the general distrust of advertising: on this list of 19 ad vectors, only 5 are are trusted by 50% of the respondents.

Let’s focus on a few items:

Recommendation from people I know: Trusted: 92% Not Trusted: 8%
Consumer opinions posted online: Trusted: 70% Not Trusted: 30%
Problem is: traditional medias don’t own these two segments. Social networks and consumer websites do. It’s a key Facebook’s strength to have people engage in conversations around brands and products. (IMO: a pathetic waste of time). Interestingly enough, the social network environment doesn’t boost the despised banners that much: When served on a social network, banners gain a mere 3 percentage points (at 36%) against a plain website or a mobile context. This must be a matter of concern for Facebook’s revenue stream: its unparalleled ability to pinpoint a target doesn’t raise the level of trust.

Editorial content such as newspaper articles. Trusted: 58%, Not trusted: 42%
Not surprising, but worth a bit more thought. It pertains to the level of trust readers put in the medium of their choice — carbon or bits. As expected, a fair and balanced product review written by a non-corrupted journalist (every word in the sentence counts) will be trusted. That’s what I call the Consumer Reports syndrome. This organization deploys 100+ professionals testers — and no ads beyond the ones for its own paid-for services and extra publications. Among its enviable base of 7 million subscribers, half pay $6.95 a month (or, a much better deal, $30 dollars a year) to access ConsumerReports.org — this is good ARPU compared to other digital medias who only make a few bucks per year and per viewer in advertising revenue.

What does this mean for online outlets? They should consider beefing up the volume of product reviews, while preserving the reliability of their coverage. This also raises the question of the separation between journalism, advertorial and plain advertising. By no means should a publisher accept blurring the lines: beneficial on the short term but damaging on the long run. Having said this, when I see a growing number of anglo-saxons magazines making big money from high quality advertorials, I tend to believe online medias should consider sections of their websites or applications harboring such content. But two requirements need to be met: (again) no confusion whatsoever; and editorial standards for what will indeed carry commercial content, but in a well-designed, informative, visually attractive package. One important point to keep in mind: this type of service is typically out of reach for a Facebook, a Google or a Microsoft. But moving in such a direction requires unified thinking between publishers, the sales house (and the ad agencies they are dealing with) and the editorial team. A long way to go.

Ads served in search engine results:  Trusted: 40% Untrusted: 60%
Speaking of Google, here’s another interesting finding in the Nielsen survey: by and large, readers doesn’t trust search ads. To many viewers, text ads popping up on pages, on YouTube video or on emails, are seen as intrusive and irrelevant (to say the least: look at this hilarious site featuring inappropriate ad placements.) Still, search ads account for about 60% of online ad revenues. Why? Essentially because it provides a cheap, convenient, and totally disintermediated way of promoting a product. On this count, Google makes no mystery of its intention to vaporize the advertising middleman thanks to its superior technology.

The digital advertising party is just warming up. The business will continue its ongoing transformation. Currently, digital accounts for 16% of the global ad spending. It is likely to gain 10 more percentage points over the next five years. Not all markets nor products carry the same potential: According to the Financial Times, Unilever currently spends 35% of its US budget on digital, compared with 25% in Europe and only 4% in India. For news medias, the opportunity is that brands and agencies are still searching for the right formula. Brands face an incredibly complex challenge as they have to play with many dials at the same time: traditional ads, digital, web, mobile, apps, social, behavioral. And all are tightly intertwined, creating flurries of new metrics: ROI naturally, but also engagement, sentiment, feelings.

Like elsewhere in the digital world, the most successful players will be the genuine tinkerers. Software giant Adobe is said to spent 20% of its digital budget on experimental campaigns. They test, measure, adjust and iterate.

It is up to digital medias to go from passive to active in the quest for the right model. Their economics depend on it.

frederic.filloux@mondaynote.com

NYT Digital Lessons

The New York Times Company’s latest quarterly numbers contain a rich trove of data regarding the health of the digital news industry. Today, we’ll focus on the transition from traditional advertising to paywall strategies being implemented across the world. Paywall appear as a credible way to offset — alas too partially — the declining revenue from print operations.

First, the highlights.

(See NYTCO’s press release here and stock here. Unless otherwise stated, all figures are for Q1 2012 and comparisons are Q1 2012 vs. Q1 2011.)

  • Total Revenue is stable at $499.4 million.
  • Operating profit is down by 23% at $19.6 million. When excluding depreciation, amortization and (generous) severance packages, OP is up 9.4% at $57 million.
  • Print advertising for all properties and from all sources is down 8.1% at $238 million
  • Circulation revenue is up 9.7% at $227 million.
  • Digital subscriptions, launched just a year ago, reach 454,000. That’s a 16% growth vs. Q4 2011.
  • Digital advertising for the entire NYTCO (this includes NYTimes.com, BostonGlobe.com, Boston.com, About.com, etc) is down 10.3% to $71 million.
  • Such decrease is primarily due to About.com losing 24% of its ad revenue to $22.6 million, and 50% of its operating profit to $7 million. This online guide is entirely dependent on advertising.
  • But the real bad news is the decline in digital advertising for the NYT News Media Group  consisting mostly of the NYT and the Boston Globe. Revenue dropped by 2.3% to $48.5 million for the quarter.
  • Digital advertising accounts for 22.5% of the entire NYTCO ad revenue, and for 30% of the NYT News Media Group’s digital advertising revenue.

We can discern four trends:

#1:  Digital advertising is struggling, even for a major brand such as the New York Times.
Again the evolution :
FY 2010: +18%
FY 2011: +10%
Q1 2012 (Y/Y):  -2%

This confirms a much feared trend. By and large, in a news context, the performance of digital advertising is on the decline. All indicators are now flashing red: CPM (cost per thousand impressions), cost per click, volumes, yields, etc. The cause is well-known, and way more acute for digital than for print: ads and news contents do compete for the same eyeballs. The more attractive and eye-catching the content is, the lesser the ad yields. Behavioral advertising won’t change that much — at least for hard core, high value-added news environment.

This decline also announces a major shift in the way ads are sold. The advertising flow is likely to split: premium ads such as well-placed special packages will still be sold for high prices by in-house teams. But the bulk of the inventory will shift downward to bazaars in which gazillions of pageviews will be dumped into real-time exchanges supposed to optimize prices. The bad news: such schemes are likely to fuel deflationary trends for remnant (i.e. sub-premium) inventories. The good news: media organizations such as online news outlets or pure players are likely to join such marketplaces and perhaps gain an operating role of sorts — assuming they are smart enough to cooperate (I’ll address this in an upcoming column).

#2 Paywalls work. With roughly half a million paying subscribers, the NYTimes.com has captured the equivalent of 39% of its weekday print circulation of 1.3 million. In its financial statements, the Times doesn’t break down its revenue structure, but a significant part of the 13% increase in circulation revenue (print + digital) is attributable to digital subscriptions (the rest comes from the recent print price hike).
Estimates are difficult but here are some clues: on these 500,000 digital subs, it is estimated that 60% pay the basic $15/mo rate while 40% opt for the full $35 digital package. This would translate to digital subscribers contributing $34.5 million (18%) to the $190 million in NYT Media Group circulation revenue that appear in its quarterly statement. 18% is not that bad for a paywall that is barely one year old (even though this estimated revenue doesn’t reflect the cost of the NYTimes’ massive promotions for its paywall program). But again, compared to the $48 million of digital advertising, it is significant.

#3 A warning to paywall dreamers: some restrictions apply. In order to be successful, a digital subscription must check the following boxes:
Own a sizable share of a given (and preferably solvent) segment of the population. In other words: start from a large built-in audience. Globally, the New York Times has about 34 million unique visitors per month – a large pool for conversions to the paywall.
Don’t expect a paywall to work for a small site or a niche product — unless it is a reference for its community. Even then, in spite of its reference status in New England, the Boston Globe shows a mere 18,000 paid-for digital subscribers.
– Allow time to grow the subscriber base. A paywall strategy must spread over several years. The free audience first has to be converted into registered users able to be thoroughly data-mined; then the paywall will be tightened with less and less articles available for free (the NYT recently lowered its threshold from 20 to 10 free articles); the entire process will take at least two to four years, depending on where you start from.
– Carefully manage porosity. That’s why some people refer to a “semi-permeable membrane” (see the interesting conversation between Clay Shirky and NYT’s Digital manager Denise Warren on NPR last January). While it is tightening its paywall, the NYT leaves willingly plenty of free access to its content: if you land its site from a search engine, from Facebook, Twitter, or from a blog, no limit applies (same for the FT.com, actually). Such tactic has two virtues: it doesn’t affect natural referencing and incoming traffic from search engines (which could weigh as much as 30-40% of the audience), and the brand remains exposed to many — such as social networks users.
– Quality is non-negotiable. A successful paywall requires exclusive, unique, authoritative, high-quality content. A paywall isn’t the right solution for streams of “commodity news” or user-generated contents. It won’t work for the Huffington Post. Despite its enormous audience, the HuffPo’s embryonic original content won’t do much to alter its “Left wing Fox News” positioning (Even though the HuffPo managed to score a Pulitzer Prize for National reporting for its remarkable Beyond The Battlefield series.)

#4 Print is still alive. While print advertising is drying up, the share of circulation revenue keeps rising (in relative terms.) The good news: price hikes don’t seem to matter: the recent increase to $2.50 had no effect on sales. Actually, the Times uses its weekend edition (priced at $5.00) to channel digital subscriptions by providing the best deal of its complex rate card. Which leads to two conclusions: a sizable reservoir of readers is ready to pay for quality-on-paper at almost any price (see a previous Monday Note Cracking the Paywall); and commercially strong weekend editions can be a potent vector for digital subscriptions.

Print and digital strategies are more intertwined than ever.

frederic.filloux@mondaynote.com