online publishing

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The redistribution game for news

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by Frédéric Filloux
Forget the 70-30 split for subscription between publishers and distributors. Today, for publishers, the new norm is a 100%-70% split of ad revenues, depending on who sells the ad. For news distribution, re-intermediation will be intensely competitive.

The chart above illustrates the upcoming shift in news distribution. No doubt: We’re heading towards a new phase of massive re-intermediation, of reshuffling the layers between the news producers (traditional media houses or pure players) and readers. This raises important questions: What will publishers gain or lose in the process? Will they end up handcuffed to a cluster of gatekeepers or will they reap decisive gains for their business model.

Who becomes the dominant player in this new structure? More

New generation CMS can help monetizing quality journalism

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by Frederic Filloux

Monetizing digital journalism requires one key ingredient: Causing quality contents to emerge from the internet’s background noise. New kinds of Content Management Systems and appropriate syntax can help in a decisive way. 

Until now, mining good journalism from the web’s depths has been done from the top. Over the last 13 years, looking for “signals” that flag quality content has been at the core of Google News: With a search engine scanning and ranking 50,000 sources in 30 languages and 72 editions, its inventor, the famous computer Scientist Krishna Bharat, has taken his extraordinary breakthrough to an immense scale. More

NYT vs Buzzfeed: Valuations Discrepancies – Part II

 

by Frédéric Filloux

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

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

Let’s start with one point of contention:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

frederic.filloux@mondaynote.com

The New York Times and Springer Are Wrong About Blendle

 

by Frédéric Filloux

With its idea of creating “iTunes for the press”, Blendle rattles the news industry’s cage. In spite of blessings from The New York Times and Axel Springer, the shiny new thing might just be a mirage.  

Last week, two young Dutch people came up with a string of magic words: “iTunes for the press”, “New York Times”, and “Axel Springer”. The founders of Blendle, Alexander Klöpping and Marten Blankesteijn, were promising a miracle cure to a sick industry: a global system for the distribution of editorial products (the iTunes reference), backed by the gold standard of digital journalism (The New York Times), and also supported by the European leader of the rebellion against Google (Axel Springer). Great casting, great promises. Like handing out Zmapp doses in an Ebola ward.

Blendle’s principle is to unbundle publications and sell stories by the slice, for €0.10 to €0.30 ($0.13 to $0.38) each. (Actually, on Blendle.nl, some articles shoot up to €0.89 or $1.11, publisher’s choice). Basically, you register and get €2.50 credit, browse a well-designed kiosk (or an equally good app), and cherry-pick what you want. Blendle added unique features such as the possibility of a refund for a story you don’t like; its founders saying its a mandatory feature for any e-commerce business (“returns” account for around 4% of transactions). Launched in April on the Dutch market, the service is a success: 135,000 subscribers so far. According to the founders, 20,000 to 30,000 are added each month. Not bad for a 16-million-people country that enjoys an internet penetration of 94%.

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This indisputable success spread beyond Netherlands when Blendle announced The New York Times Company and Axel Springer SE had invested a combined €3m ($3.8m) in the startup. (For more on the subject, see coverages by Les Echos (in French), The Guardian, Bloomberg BusinessWeek.)

I see many reasons to cast strong doubt about Blendle’s sustainability as a global business, and I see no benefit for digital media. The idea of unbundling news content is an old one. I recall a 1995 conversation with Nicholas Negroponte, at the time head of MIT’s MediaLab. Back then, he envisioned exactly what Klöpping and Blankesteijn are trying to implement now (both were 8-year old at the time.)

Negroponte’s vision never materialized and there are many reasons for this.

The first one is the hyper-abundance of free content, especially in English, a notion completely overlooked by Blendle’s advocates. Years ago, I used to tell my colleagues at Schibsted ASA in Norway that their country was so small (4.5m inhabitants) and their market position so dominant, with the huge traffic machines of their large print and digital publications, that if they put out online text in Pashto, it would still drive serious audience numbers. (Schibsted became a $2.2bn global player thanks to a strong diversification strategy served by a remarkable execution.) In the case of Blendle, the Dutch language serves as a cordon sanitaire, a kind of firewall mostly shielding publishers from the interference of free contents. In other words, it makes a relative sense for De Volkskrant, NRC, or De Telegraaf  to join Blendle since they are already well-positioned on a small market.

This cannot work for the English language and its 1.2 billion speakers spread across the world, including 350 million native speakers. Pick any subject in the news cycle — say, Blendle precisely. In a few clicks, I will get a 800 words story from the Economist, a 900 words one for the Guardian, another 700 words article for BusinessWeek and a 1600 words piece from TechCrunch. And I’m not mentioning the… 24,400 other “Blendle” references that pop-up in Google News. In this list, only The Economist intends to join the Dutch service. Hence my question: Would you pay even 20 cents to get the Economist story while a profusion of good coverage is available just one click away for free? Me neither.

Second reason for discounting the Blendle model: News media have always built their business on a “cross-subsidy” system. Quite often, high audience stories — that don’t even cost much to produce (sports as an example), support low audience but costly reporting such as foreign coverage or “enterprise journalism” (that is when editor decide to assign large  resources to go after a worthwhile subject –needless to say, this concept has become an endangered species.) Granted, a media powerhouse such as The New York Times still produces unique contents that justify paying for it (about the recent NYT economics, read Ken Doctor’s piece on NiemanLab). But I doubt that a buy-by-the-slice Blendle revenue will contribute for more than a fraction of a percentage point to the $200m a year cost of operating the Grey Lady’s 1300-staff newsroom.

Third reason: Lack of serendipity. A well-edited media — print or digital — is a clever assemblage of diversified subjects aimed a triggering readers’ curiosity for topics outside their usual range of interests. That’s not likely to work in Blendle’s model, because it relies on three entry points — Trending, Realtime and StaffPicks — that actually transfer the classical user-induced serendipity to the editors of the service. I doubt lots of media are actually willing to give up the opportunity to capture reader’s attention on the widest possible spectrum by leaving the reins in Blendle’s hands.

Fourth reason: Advertising loss. While digital ads is mostly a failure for the news industry, separating ads from content sounds like a weird idea. Today, publishers are working hard to get a more granular profile of their audiences in order to serve them with more relevant contents, tailored ads, and ancillary products. Content dissemination won’t help this process.

Why then do the NYT and Springer, both strongly attached to the value of their editorial production, jump aboard this boat? For the Times, it might have to do with the idea of diversifying revenue streams in every possible ways by extracting more dollars for its vast supply of occasional readers. Axel Springer’s motive is different. The German giant is literally obsessed with undermining Google’s de facto position in the news sector. Hence the bets it takes here and there, buying the French search engine Qwant or taking over the babbling Open Internet Project. Both choices are far from promising high potential, scalable moves.

Publishers who are tempted by the Blendle model also choose to ignore the damage suffered by the music industry. Once the user was given the opportunity to buy each song separately (for a dollar, not 20 cents), the ARPU quickly collapsed, and there was no turning back. Also, at the time, the paid-for music was not competing against free content — except for piracy — in the way that today’s paid contents have to face a profusion of free editorial, sometimes excellent.

And finally, let’s not forget that the original “iTunes model” is not as shiny as it used to be. For Apple, its ARPU went from $4.3 per user for Q1 2012, to $1.9 per user for  Q1 2014, a 56% drop. The reason: Users are massively switching to the flat-fee/no ownership model of music streaming (hence Apple bet on Beats.)
Even before it reached news media, the iconic iTunes system was already seriously damaged.

frederic.filloux@mondaynote.com

Legacy Media: The Lost Decade In Six Charts

 

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

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

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

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

Le’s start with stock performance:

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

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

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

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

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

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

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

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

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

This is a matter of discussion for next week.

frederic.filloux@mondaynote.com

The New York Times KPI’s

 

Here are numbers lifted form the NYT’s Innovation report (see last week) and other sources. 

Most of The New York Times’ reach comes from its digital audience. Regardless of the metric, viewers on desktops and mobile are crushing print readers.

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Sources: ComScore for the monthly uniques (US only); internal count for the home page views per 24 hours period and Gfk MRI based on net weekday & Sunday readership, Fall 2013 survey.

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In theory, the Times can get rid of print. Digital revenue far exceeds the cost of running the newsroom, which amounts to $200m a year for 1300 writers and editors. Even if you add $20m for the 200 technical staff needed to run digital operations, and even 30% more for overhead, sales, marketing, and support staff, the result would still be a substantial profit  — but would advertisers come in the same way for a digital-only product?

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The ad market seems to reward quality journalism over aggregation and listicles: The NYTimes.com monetizes itself three times better than Business Insider and nineteen times better than BuzzFeed. For this graph I simply divided annual advertising revenue for each media by the number of monthly users: 30m UVs for the NYT, 12m UVs for Business Insider according to ComScore figures quoted in this 247wallst story, and a revenue estimated at $20m by Reuters. (Had I used a 25m UVs assumption, BI’s ARPU would have been only $0.80 per visitor and per year).

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The Times is known to have invested a lot in its digital subscription system (760,000 subs to date). It turns out to have been worth every penny. For those who doubt the paid model’s efficiency, The New York Times provides a great blueprint for quality media.

–frederic.filloux@mondaynote.com 

 

Time to Rethink the Newspaper. Seriously.

 

The newspaper’s lingering preeminence keeps pulling legacy media downward. Their inability to challenge the old sovereign’s status precludes every step of a critically needed modernization. (Part of a series).  

This column was scheduled to appear in the next two or three weeks. Then, on Thursday, the thick Innovation report by an ad hoc New Times task force came to the fore. Like many media watchers, I downloaded its 97 pages PDF , printed it (yes) and carefully annotated it. A lot has been written about it and I’m not going to add my own exegesis on top of numerous others. You can look at the always competent viewpoint from Nieman Lab’s Joshua Benton who sees The leaked New York Times innovation report as one of the key documents of this media age. (Other good coverage includes Politico and Capital New York — I’m linking to the NYT tag, then you’ll have all the stories pertaining to Jill Abramson’s brutal firing as well).

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This report is important one for two main reasons:

— The New York Times is viewed as one of the few traditional media to have successfully morphed into a spectacular digital machine. This backdrop gives a strong resonance to the report because many news organizations haven’t achieved half of what the NYT did, whether the metric is the performance of its digital subscription model, or its achievements in high-yield advertising – all while keeping its impregnable ability to collect Pulitzer prizes.

— We rarely, if ever, see an internal analysis expressed in such bold terms. Usually, to avoid ruffling feathers, such reports are heavily edited – which ends up being the best way to preserve the status quo. Even more, mastheads tend to distance themselves from endorsing conclusions coming from the “management crowd” – a coldly demeaning phrase. But, it the Times case, the report was expressly endorsed by the top editors (Abramson and her then second-in-command Dean Baquet who now leads the shop.)

Let’s then focus back to this column’s original intent: Why reinvent the newspaper, quickly and thoroughly.

Until last week, the reference on the matter was an email sent in January 2013 by Lionel Barber, the Financial Times editor (full-text in the Guardian), in which he sets a clear roadmap to shifting resources from print to digital:

I now want to set out in detail how we propose to reshape the FT for the digital age. (…)

[We] are proposing a shift of some resources from night work to day and from print to digital. This requires an FT-wide initiative to train our journalists to operate to the best of their abilities. And it requires decisive leadership. (…)

On unified news desks, we need to become content editors rather than page editors. We must rethink how we publish our content, when and in what form, whether conventional news, blogs, video or social media.

 A year later, key numbers for the FT are impressive:

— A 2013 profit of £55m ($92m, €67m) for the FT Group (which includes the 50% stake Pearson owns in the Economist Group); that’s an increase of 17%, while sales are slightly down by 1% to £449m ( $755m, €551m)

— 415,000 digital subscribers (+31% in one year) who now account for two-thirds of the FT’s total audience (652,000 altogether: +8%, including a staggering 60% growth in corporate users at 260,000)

— A rise in digital subscribers that offsets the decline in advertising now accounting for 32% of FT Group revenue vs. 52% in 2008.

— For the first time, in 2013, FT digital content revenue exceeded print content.

The FT might be on sale – but its management did quite well.

Echoing Lionel Barber’s view of resources reassignments are the equally strong terms from The New York Times’Innovation Report:

In the coming years, The New York Times needs to accelerate its transition from a newspaper that also produces a rich and impressive digital report to a digital publication that also produces a rich and impressive newspaper. This is not a matter of semantics. It is a critical, difficult and, at times, painful transformation that will require us to rethink much of what we do every day. [page 81] 

Stories are typically filed late in the day. Our mobile apps are organized by print sections. Desks meticulously lay out their sections but spend little time thinking about social strategies. Traditional reporting skills are the top priority in hiring and promotion. The habits and traditions built over a century and a half of putting out the paper are a powerful, conservative force as we transition to digital — none more so than the gravitational pull of Page One. [It] has become increasingly clear that we are not moving with enough urgency. [page 59]

The newsroom should begin an intensive review of its print traditions and digital needs — and create a road map for the difficult transition ahead. We need to know where we are, where we’re headed and where we want to go. [page 82]

These quotes from a news organization that never gave up on great journalism will be helpful to those who desperately struggle to transform newsrooms. It is also a plea for the necessity of dumping the obdurate print-first obsession:

— It precludes modernizing the recruiting process as journalists are still too often picked for their writing capabilities while many other talents are needed.

— It limits audience development initiatives. In today’s print-oriented newsrooms, most writers and editors consider their jobs done once the story is filed in the CMS (Content Management System). Unfortunately, in every fast-growing digital media outlets such as Buzzfeed, The HuffPo, Politico, Quartz, Vox Media, now part of the competitive landscape, throwing the story online is actually just the beginning. The ability to cause a news item to reverberate around the social sphere is now as important as being a good writer.

— As stated in the Times report, convincing the masthead on the mandatory resource-shifting in only part of the journey; most of the transformation’s weight lies on the shoulders of the rank and file in the newsroom.

— At the NYT as everywhere else, the old guard (regardless of age, actually), is the main obstacle to the necessary rapprochement between the editorial and the business side. For instance, by rejecting the idea that Branded Content would greatly benefit from the newsroom expertise (although everyone agrees that a news writer should never be asked to write advertorial), or that a conference is indeed an editorial initiative directed to a valuable audience segment, such conservative postures are actually shrinking the company down to its most fragile component.

— The same goes for the analytics arsenal. I heard scores of examples in which newsrooms call for more dashboards and indicators, but seldom use them. Editors should be supported by tactical analytics teams (including at the editorial meeting level) that will provide immediate and mi-terms trends, as well as editorial decision-making tools.

One of the most difficult part of the transformation of legacy media is not addressed in the Times Innovation report nor in the FT’s exposé. It pertains to the future of the physical newspapers itself (the layout of the Times remains terribly out-of-date): How should it evolve? What should be its primary goals in order to address and seduce a readership now overwhelmed by commodity news? What should be the main KPIs (Key Performance Indicators) of a modern newspapers? What about content: types of stories, length, timelessness, value-added? Should it actually remain a daily?

(To be continued…)

frederic.filloux@mondaynote.com

 

Lessons from a good vertical: Skift.com

 

For digital media companies, creating good verticals that breed small but valuable audiences has become essential. On that subject, here are my takeaways following a conversation with Rafat Ali, founder and CEO of Skift.com. In 20 months, Rafat’s company has become a reference in the travel intelligence business. 

There is no excuse for not trying to build a vertical digital service (web site & mobile app) for a strong media company shifting to digital. As long as you have a powerful (not to be confused with profuse) newsroom coupled with a well-structured contents system, trying a foray in a specific domain is worth considering. As an example, see Atlantic Media, one of the most innovative media brands, as it deploys a series of verticals nested in its Government Executive Media Group. These units all generate small but extremely valuable and loyal audiences — and enviable revenue per user (more on the Atlantic in a future Monday Note).

Building a vertical is a mere matter of implementation, you might say. But a look below the surface shows how such process demands much more than merely putting a small group of good writers in a digital stable, and asking them to gather news on a specific subject.

That’s why Skift.com drew my attention. In less than twenty months, manned by only 9 people crammed in an mid-town Manhattan office, Skift.com has become a strong voice and a reference in the travel industry: airlines, booking systems, hotels, tour operators – and all the the sector’s disruptors.

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I met Rafat Ali five years ago in Hyderabad, India; we were both of speaking at the same conference. Rafat was about to exit his first and remarkable startup, PaidContent.org (a terrible name he now laughs off), one of the first blogs decoding the media industry’s transformation. After building it from scratch and spending eight exhausting years producing and editing stories, Rafat sold it to the Guardian for a reported $30m – right before the 2008 crisis. (Last year, PaidContent was acquired by GigaOm).

After a short transition, Rafat was free to go. So did he. In 2010, at the age of 36, he left for a two-year series of trips to Oman, Iceland, Burma, India (where he has family), radiating from his bases in New York and London. At last out of PaidContent’s trenches, he took the time to read a hundred books during his journeys. Following @rafat on Twitter, you could feel his excitement, and also his growing interest in the travel sector.

‘You have to remember, it was 2010, the iPad had just been launched, everyone was thinking about what to build on it’, said Rafat. His first idea was to re-invent the travel guide book for the iPad. But he soon realized how crappy the whole travel industry’s information ecosystem was: ‘I was blown away.’ While the transactional part of the travel business had been completely broken apart by a massive, unprecedented disintermediation — benefiting the customer, trade information remained frozen in the past, with its sets of professional printed publications perpetuating a jargon-filled verbiage offering little or no actionable intelligence, nor useful data

Nature (and digital business) abhors vacuum, so does Rafat Ali, who decided to fill the void. When asked to define Skift in a nutshell, he said this: ‘In late 2011, we wanted to build the Bloomberg News of travel’. (When it comes to business information, this is quite a goal. Never aim low, I can’t agree more.) Rafat’s wanted to build something based on a few concepts: rely heavily on data, capitalize on the open-web, use APIs aggressively (to connect with third party data sets), aim at professionals, consultants, experts, and — last but not the least — prosumers who often know more than merchants. (Read Rafat’s post on the “Mediata” Startups).

The other key to Skift’s concept — which means shift in Danish — was tearing apart the silo culture that plagued the travel industry for decades: ‘You have airlines, airports, cruises, hotels, technology… All of these silos have collapsed in global interconnected megatrends, and we knew we could make our voice heard across all…’, explained Rafat while pointing at this graph:

SkiftCircularGraphic-b
Graph ©
Skift.com

As far as editorial is concerned, Rafat believes journalistic content is needed to create addiction, daily use, while-data related products generate usefulness, stickiness, loyalty and, ultimately, monetization. Content-wise, at the beginning, the site was built on four “legs”: aggregation (collecting headlines); curation (with a tweet-length phrase to describe a story); licensed content (full articles brought from news providers); and originally produced articles. Today, Skift is down to two items: 40% of articles are licensed (mostly Newscred) and 60% are original content — about 15-20 short business stories (produced by a staff of three…)

Business-wise, Skift positioned itself primarily as a B2B company, then secondarily as B2B-2C. Its traffic is still modest (1m UVs/mo), but growing fast; so does its newsletter business, expected to reach 75,000 subscribers by year end. No mobile apps in sight as the mobile web works well for Skift: mobile users account for 35% of web traffic and 50% of newsletters readings.

Skift sells few but high yield ads, to the point that Rafat is about to create a tiny studio to create bespoke brand contents. (Maintaining the mandatory Chinese wall could be tricky in such a small structure.)

But Skift’s true gem is its industry dashboards and data collection system, a well-structured tree that leads to scores of statistics and rankings. Inside, you’ll learn that AirBnB — whose valuation is now higher than Hyatt — has a Skift Score (a combination of indicators) roughly twice the “bookings & tools” industry average. Or that Dutch airline KLM scores way better than the hippest Virgin Atlantic. Or that Hertz masters the social ecosystem way better than the trendy Über.

Using data analytics, Skift produces reports — short and updated twice a month (as opposed to quarterly “bibles” prone to quick obsolescence.) ‘We will focus mainly on marketing, strategy and technology to produce competitive intelligence’, said Skift’s CEO. Rafat’s intense focus on doing few things but doing them well extends to the obligatory conference business: Skift intends to do just a single event about the Future of Travel, in a similar fashion to Quartz’sThe Next Billion conference (see the #qznextbillion hashtag for a list of tweets linking to videos). In both cases, these events are built on strong editorial concepts, ‘We want to make a conference about leadership instead of a vendors-to-vendors type…’ said Rafat.

What’s next for Skift? First, an off-site staff meeting in Iceland. Actually, Rafat Ali is considering a global franchise set in Reykjavik. Less anecdotal, Skift founder wants to apply his news and contents formula beyond the travel industry to what he feels are interconnected sectors — at least in discretionary spending — namely food & beverage and retail sectors.

One final note. Looking at the state of travel information, I can’t help but discern a complete failure of traditional, legacy journalism. Too cozy with the main players and their corrupting PR machines, too filled-up with press junkets and freebies, the mainstream media coverage of this $6.5 trillion/260 million jobs sector has become mostly illegible. This leaves a large open field to new players.

frederic.filloux@mondaynote.com

 

Dealing With Data Frenzy

 

Last week, I attended the Newspaper Association of America’s MXC conference in Denver. We were to focus on the publishers’ use of data. A hot topic that sometimes becomes overly broad and leads to unrealistic expectations. Here are some key points I made.   

For any digital publisher, relying on data is no longer an option nor a luxury. It has become a necessity. Each passing quarter confirms the demise of digital advertising: yields continues to fall, programmatic buying (most often operated by large third party players) takes over and continues to fuel deflation. Highly visible media brands — two years ago the Huffington Post, now BuzzFeed — deal with the issue by generating huge quantity of pages saturated with kittens and listicles, each yielding very low CPMs. At the other end of the spectrum, strong media houses develop customized, sophisticated campaigns for high-end brands (see examples on NYT’s IdeaLab page); they also fill their pages and apps with so-called Branded Content items — which very few publishers manage to implement correctly.

For news publishers, the use of data should focus on four goals:
— Increase advertising yields through smarter targeting
— Improve their editorial recommendation engines (hence raising the number of page views per visit)
— Up-sell ancillary products
— Raise the performance of their subscription system (if any.)

Over the recent years, the advertising community managed to find a new gun to shoot itself in the foot. It’s called targeted ads. Everyone has ugly anecdotes about those. Typically, the stories go like this: You do a web search for an item and quickly find it. In the following months you’re deluged by ads for the product you bought. The annoyance prompts many to opt for AdBlocking systems — I did (except for sites I’m in charge of), with no regret nor guilt.

To put it mildly, there is room for improvement, here.

Coming back to profiting from site users’ data, one good example I heard recently is a recent request made by a large airline to the Financial Times: “Find us people who travel on long haul flights and who log on FT.com more than four times per month and from locations scattered along our routes”, i.e. super-frequent flyers used to business or first class, etc. Thanks to IP location analysis yielding geospatial coordinates for each connection, the retrieval of such high-value clientele wasn’t overly complicated. The geolocation principle applies to other requests, such as finding residents of a specific city or suburb, in order to serve effective advertising.

When you think of profiling, use a passport analogy. Anyone who visit a site from a browser (it’s more complicated with mobile apps), is issued a passport in the form of an anonymous cookie, such as this one, injected in my computer by the New York Times:

nyt_cookie

As a digital subscriber, I have inherited no less than 113 cookies from the NYTimes, each one stored in my computer for a specific purpose. They come from every segment of my navigation (pages, sections, articles, blogs), each generates a “stamp” on the passport. The more stamps I get on my passport, the more NYTimes people knows about me. Over time, the process draws a finely defined profile.

The example I often use looks like this (my perspective is from a French business media company):

Based on her past navigation, the user ID:6547dgfc_9088 turned out to be:
— A woman in her 30’s
— Leaving in Toulouse [Thanks to the geolocation of her internet box] She works :
…in the aerospace industry
… most likely in a financial department
… with a special interest in European regulations
… at a fairly high position.
Then we should be able to serve her with:
— Local ads / adjusted for her income and likely tastes [she also visits our lifestyle sections & other online properties in our network] — Adjusted editorial recommendations [related stories] based on her sector and position
— A special deal for our next conference on corporate finance
— A notification when someone in our team or among our partners publishes a book (paper or digital) relevant to her interest
— An abstract of our annual in-depth survey on aerospace
— A sneak-peak at our partner’s COOC (Corporate Open Online Course) featuring four hours of talk by a prominent tax lawyer from Brussels [don’t forget the Red Bull] — [And if she’s not a subscriber] A promotional, customized, one-time newsletter featuring the economics of commercial airplanes, with past stories from our newsroom, curated links, etc., all of the above driving to the inevitable conclusion: this discerning individual should definitely take advantage of our one-time offer.    

This “internal” profiling can be spectacularly enhanced by working with a major profiling third party. As an example, the large European player Weborama has accumulated a staggering 70 million profiles for an internet population of 52 million French users (each person can be linked to multiple profiles.) All over Europe, Weborama has collected 210 million profiles, roughly 40% of Europeans web users. In our example, by tapping into such large databases, the profile of this upwardly moving female exec from Toulouse will be enhanced up to the minutest detail of her tastes and preferences.

For the media company, reaching such productive interplay between a profiled individual and its ability to serve her with relevant content, services and products requires a well-integrated system — and a critical mass of products.

Understanding someone’s social and semantical genome through internal an external profiling is only a part of the equation. Matching the customer’s profile to the company output (journalism, conferences, publications, surveys…) also demands that the genome of those products be precisely established. If we want to “talk” to the customer’s profile, a story must have its set of tags, keywords and metadata; so does the theme of an upcoming conference that must go beyond a basic presentation, or the description a book. Ideally, every single piece of what the news organization produces must have its semantic genome encoded in a standardized way.

In defining user profiles, media organizations must have a rich and diverse line-up of contents, services and ancillary products. The broader the spectrum of a media brand, the better. All things being equal in terms of editorial quality, an isolated media will be less well armed than a larger company that operates multiple properties ranging from editorial to e-commerce and uses those to construct a wide range of user profiles.

Much more than in print media, isolation is not an attractive option in the digital world.

frederic.filloux@mondaynote.com

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