online publishing

The misdirected revolt of the dinosaurs

The junkies are rebelling against their dealer. The dope is the traffic, and the dealer is Google. For years, the search giant flooded the market with an ideology built on the early 2000′s, ill-fated, get all eyeballs you can, the rest (i.e. monetization) will take care of itself.
Publishers have invested tons of money, energy and brainpower in order to follow The Google Way: designing sites, structures, pages, even setting editorial rules to gain audience. Any kind of audience, by any means necessary. Legions of Search Engines Optimization (SEO) consultants were enrolled to help implementing the new click-to-Grail.  At the same time, the so-called Search Engine Marketing (SEM) made a lot of expensive noise as media organizations were buying keywords to improve their ranking in search results, some of them spending as much as €100,000 a month in this digital heroin. At some point, for many sites, clicks coming from Google thanks to SEO compliance and aggressive SEM were contributing to 40% or 60% of their entire traffic.

Then, the tide reversed.

Publishers soon realized the Google windfall was not as high as expected. As the search giant kept thriving, their own revenue plummeted. Over the last 12 months, newspapers print and digital advertising revenues have melted: -16% in Western Europe, -19% in Central/ Eastern Europe and -21% in North America.  At the same time, Google is still cruising at a 35% operating margin altitude. The economic crisis and the structural problem of web sites (endless inventories inducing low prices) caused CPM (revenue of an ad per thousand viewers) to drop. This convinced publishers the advertising-based free model wasn’t going to fly. They told themselves that sometime, somehow, readers will have to pay, and that Google, with its all-you-can-eat, free-for-all system, was in fact “doing evil” to they dying business.

That was the backdrop for last week’s 62nd Conference of the World Association of Newspapers (WAN) Congress and for the 16th World Editors Forum (WEF) I attended and spoke at, in Hyderabad, India. More

Negative-sum games

As if current economic conditions weren’t dire enough, several forces conspire to push the media sector’s financial performance further downward. These factors are an obsession with market share, price wars, and first movers’ ability to set the tone, often for the worse.

Take the iPhone application market as an example. At first, publishers were elated: at last, a content distribution platform with an embedded transaction system. They saw it as the first step to make customers pay for content. Then, another idea took over: market share. Like “eyeballs”, the old Internet Bubble de rigueur metric, market share is today’s mirage: once you get it, profit is (almost) sure to follow. Never mind there are zillions of companies that have once and for all severed the connection between market share and profit (Apple for computers, BMW in the auto industry, Nucor in steel production, name but a few).

Unfortunately, the first one who shoots for market share sets the standard, sometimes with surprising twists and turns. Take the Wall Street Journal: first-rate web site, highly successful business-wise with one million paid subscriptions (about $100/yr). When it came to the iPhone opportunity, guess what: they went for a free application loaded with pathetic ads — apparently locked on the saturation mode, the same banner kept showing endlessly. Just a few weeks ago, seeing a steep drop in profits, the WSJ.com reversed itself and restricted access to its app. More

The hype(r) local digital journalism

Everybody wants to go local. Internet-wise, it sounds like the new flavor of the month week. Going local is a digital and idealistic version of Mao Zedong’s “hundred flowers blossom”. (The Chinese dictator did actually encourage the expression of dissenting opinions; this turned out to have unpleasant consequences for those who took Dear Leader to his word). So, fine. Let’s see thousands of European and US cities generate a flurry of local websites covering city councils, local controversies, urban planning, etc. Every committed citizen will be able to monitor the community’s pulse just by clicking on a URL; it will be easy and efficient to launch (or to join) grassroots campaigns against the construction of an ugly overpass or for the clean-up a hazardous landfill. All of this is real.

As I write this, I listen to NYU professor Clair Shirky’s lecture delivered last September at the Harvard University Shorentsein Center (transcript and Video here). Always brilliant and convincing, Shirky revisited the 1992 pedophile priests scandal in Boston, one that was heavily covered by the Boston Globe, but died out due to a lack of resonance in the public. Evidently, today, things would have reverberated very differently.  So, yes, there is a useful future for local digital media.

Having said this, allow me to express a slightly skeptical view.

First, people tend to celebrate the hyperlocal web for the wrong reasons, that is the depletion of local coverage by traditional media. Last Thursday, I was at the University of Central Lancashire in Preston (UK) for its 12th Digital Editors Network. There, the British news agency Press Association presented a “Public Service Reporting” project. The PA would recruit legions of citizen journalists, they would be asked to comply with the agency’s ethics standards as they report on local issues. As for now, the PA is building several pilots and is looking for funding. Tony Johnston, The PA’s training chief who presented the case, stated its ambition: a network of 500 to 800 journalists costing £15m to £18m a year (€17-20m, $24-29m). In a preamble, he explained that the British newspapers’ shrinking local coverage paved the way to such an initiative (details in Journalism.co.uk here).

Well. There are two ways of considering such move. One is to say: Great, community members take over the coverage that matters to them, they use all available tools: social network, live blogging, Flip-camera produced videos, to give local stuff the exposure it needs.
Another view is this: Doing local journalism is as complicated as any other kind of reporting. Poring over local financial records requires the same amount of time, dedication and expertise as digging into a national political party’s finances. Yes, citizen-like journalists will do fine reporting on “lighter” issues such as the state of schools or of the sewage system. But uncovering and preventing what really matters, such as the misuse of public funding, rigged bidding procedures for large projects and so on is a very different story.

More broadly, a professional journalist is required to avoid take sides in doing his or her job. Leaving such coverage to self-appointed journalists is opening the pandora’s box to all kinds of agenda-driven reporting. More

The Long Tail: Coming Up Short.

The Long Tail is a beautiful intellectual construct. Beautiful, therefore right. Who wouldn’t want to see it succeed? Chris Anderson coined the term back in 2004, in a Wired magazine article. A skillfully marketed book followed, which turned out to be a bestseller (i.e. the the Tail’s profitable head). When the concept began to gain currency, we all experienced an epiphany: visions of soon-to-be revealed bonanzas lying in our stashes of books, music, or for us journalists, news material buried deep in the bowels of our web sites.

Five years later, doubt is setting in. Fact is: very few businesses have been able to extract money from the Long Tail. Of course, as Anderson predicted, when entire inventories become accessible online, some of the lowest selling items in catalogs do get their Day in the Sun. But, when it comes to converting exposure into cash, the result is a pitiful rounding error. Last week in Oslo, friends and I were discussing the Long Tail theory’s impact on the news business. It turned out everyone around the table shared the same suspicion. One such doubter directed me to a recently released research paper by two Wharton scholars. To challenge Anderson’s theory, Professor Serguei Netessine and his student Tom F. Tan pored over Netflix data.

For Monday Note readers outside of the US, Netflix is a (some say The) DVD rental company deploying a huge physical delivery system (2 million DVD sent each day, $300m a year in postage fees). For Anderson, Netflix is the Long Tail’s poster-child: a vast inventory made easily accessible thanks to the internet, with users smartly rating forgotten gems. Three years ago, Netflix launched the Netflix Prize, a crowd-powered contest aimed at improving its user ratings recommendation algorithm by 10% (quite a leap, actually). $1 million would go to the winner. To feed the math-freaks, Netflix opened its data vault, a boon to the Wharton scholars who hungrily dug into the 200-2005 numbers. Their study is called “Is Tom Cruise Threatened? Using Netflix Prize Data to Examine the Long Tail of Electronic Commerce,” (full text here , presentation  here). The key finding:

“The Wharton researchers disagree with Anderson’s theory and its implicit challenge to the Pareto principle, or so-called 80-20 rule, which in this case would state that 20% of the movie titles generate 80% of sales. Anderson argues that as demand shifts down the tail, the effect would diminish. Using Netflix data, Netessine and Tan show the opposite — an even stronger effect, with demand for the top 20% of movies increasing from 86% in 2000 to 90% in 2005″. More

A Case Study: Le Figaro’s Advertising Gamble

Let’s start with a counterintuitive move: At a time when, all over the world, publishers are  tired of the red-ink their printing plans produce and dream of dumping the dinosaurs, the historic French daily Le Figaro fires up this Monday a brand new €80M printing facility to launch a redesigned edition. Behind this apparently irrational decision lies a gutsy but calculated bet to change French advertising habits.



French  newspapers love what they call
Une Nouvelle Formule. As the Fall approached, the left-leaning Libération launched its own, then Le Monde retooled its weekly magazine. “Libé” is betting on an elegant graphic redesign; fine, but this is merely a diversion, a way to avoid painful challenges such as editorship, insightfulness, content relevance.
Le Monde Magazine wishes to reconnect an excellent but elitist magazine to the advertising market and, incidentally, to its readers. To beef up its mag operation, Le Monde brought in a new seasoned editor, a new art director and relies on an abundance of journalistic or photographic talent at and around the paper in order to produce high-quality content.
How these two initiatives will fare is too early to tell. Le Monde’s mag was launched Friday, as for the redesigned Libé, it is barely a week old.

Le Figaro’s move is both more ambitious and much riskier. First, let’s have a look at the company’s fundamentals. More

How to make readers pay for news

An idea is gaining momentum: online readers must open their wallet. In recent weeks, several suggestions for moving from wish to implementation have popped up. The latest one comes from Google. The company proposes to give a boost to its not-so-successful Checkout service by harnessing it to online newspapers interests. Quite a change here. Only a few months ago, Google’s haughty advice to the newspaper industry was : You’re on your own guys ; Darwin is in charge here ; adapt or face extinction. Last November in Paris, I personally witnessed Googlers’ poor performance in front of media barons — an embarrassing mixture of unpreparedness and arrogance. Some of us felt really sorry the search giant screwed up so badly.

Google was slow, but it finally got it. It understood that its position — “Thank us to the billion clicks a month we send to your sites, we bring value to your businesses, the rest is your problem” — was no longer defendable. Google can no longer ignore the dramatic deterioration of the news media sector. 
Here are key figures for the US market:
- The best recent period was 2005 ; that year, US newspapers reported a total advertising revenue of $49.4bn. 96% from print (35% from classifieds) and 4% from online. Since then, between 2005 and 2008, things changed dramatically :
Total ad revenue :…….. -23.4%
Print:………………………..-26,7% (and a drop in classifieds of -42.4%)
Online:……………………..+53,4%
It looks like this :

Now, to get a more precise and recent representation, let’s compare the last available quarter (Q2 2009), with the recession’s impact, to Q2 2005. Here is the evolution over four years :
Total ad revenue:……………-44%
Print:…………………………….-47% (classifieds dropping by : -64%)
Online:………………………….+30%

An important precision for the online ad revenue: it peaked in Q4 2007; since then it has dropped by 23% in Q2 2009. More

Web + Print: A Powerful Combo

In today’s context of massive revenue depletion, everyone (almost) agrees on one thing: digital media revenue sources will have to be diversified. There is no magic bullet, no dominant model that will guarantee, by itself, a sustainable revenue stream. Time to think the hybrid way.  Free will coexist with paid-for, different users (occasional vs. intensive) will be discreetly assigned different revenue models, platforms will diversify as technical standards for publishing or transactions emerge, opening new fields for monetization. Old churches and ideologies will crumble.

The biggest stimulus for such creativity is the collapse of the internet advertising model. On average, CPM (cost per thousand viewers) have dropped by 30% – 40% during the last twelve months and very few expect a recovery.  As far as booking rates are concerned, they are dropping as well. It is frequent to see only a mere 30% of pages inventories actually sold to advertisers. Unlike prices, this latter percentage is likely to bounce back at the first sign of economic relief.

But the classical advertising model’s weakness is more structural. The “old” banners / display stuff doesn’t fly as expected. People simply don’t click enough on those items and even sophisticated targeting yields minor relief. The only “healthy” segment is search ads, but it is dominated by the Google Way — a massively deflationary one. Successful medias will be the ones who manage to shake off the old cobwebs and proceed to rethink their relationship with the advertising sphere. It will be fairly easy for social or non-hard news sites, but true information content vehicles are likely to struggle with ethical issues…

As far as platforms are concerned, last week, we looked at smartphones: they’re on their way to become the main vector for news, whether it is for text or video. Numbers looks good: last year, according to IDC, on the 1.19 billion mobile phones sold worldwide 155 million (13%) where smartphones. In 2013, says IDC, 1.4 billion handsets will be sold, among them 280 million (20%) smartphones. And if anyone harbored any doubt regarding the ecosystem’s health, just consider the 65,000 applications available for the iPhone and the state of the competition. As explained in this Fortune magazine story, the sector is red-hot: since the iPhone introduction in june 2007, Blackberry quarterly sales have more than tripled. Even Google joined the fray with Android phones — and following a trajectory than will put the search engine to a collision course with Apple (see Jean-Louis’s column War in the Valley; Apple vs. Google).

Coming back to the title of today’s column, let’s talk about paper, the pulp, dead tree version. I can see many reasons why some sort of paper version can help. More

Paid news on Mobile. Why it could fly.

This week, I downloaded the iPhone application of the British newspaper the Independent. It’s a new breed of app, taking advantage of the new features embedded in the third iteration of the iPhone OS. For a daily newsmedia, Push Notification is the most interesting new feature, combined, in this case, with an offline reader. On the iPhone’s main screen, a red badge tells you the number of stories updated and unread since the last time you used the app (see below).

Home page of The Independent iPhone App

Then, inside the app,12 categories work the same way. On a wifi network, in the background, it takes a minute or so (three four times longer on a 3G network) to download a batch of 150 stories updated every day.  Then, the articles can then be read, quickly or leisurely, regardless of your connection. Pretty cool.

There are many reasons to be confident in the development of news on smartphones. Especially with the Apple innovation engine showing the potential to create a brand new sector — as it did in the music business with iTunes. As we speak, 43% of mobile internet traffic is generated by the iPhone device. Competitors have seen the threat and opportunity. RIM’s Blackberry wishes to enter the mobile app market — with an eye on the lucrative specialized news segment — and we can count on the combined impact of Google’s Android (their smartphone OS) and Chrome OS (their netbook platform) due next year. And Microsoft won’t stand still either. (Yes, they were early with Windows Mobile and let their lead evaporate, but they’re taking the situation seriously, they know what’s at stake if they don’t “make it” in the smartphone market.) And Nokia, the cell phone king, hard-pressed to stay ahead in the new smartphone world, but, just like Microsoft, rich, awake and determined. More

The News Cycle Heartbeat

How do mainstream media and blogs interact? How do they feed each other ? Everyone in the newsmedia would love to get a better view of the mating dance. A few weeks ago, scientists at the Cornell University unveiled a thorough analysis of the relationship between the two universes. Borrowing from genomics techniques, they dug into a huge corpus of politically-related sentences and tracked their bounces between mainstream media (MSM) and the blogosphere.

Their dataset:

  • About 90 million documents (blog posts and news sites articles) collected between August 1 and October 31, 2008, i.e. at the height of the last US Presidential race.
  • 1.65 million blogs scanned.
  • 20,000 media sites reviewed, marked as mainstream because they are part of GoogleNews.
  • From this dataset, researchers extracted 112 million quotes leading to 47 million phrases, out of which 22 million were deemed “distinct”. These phrases were important enough to be considered as news.
  • The phrases where political statements or sound bytes pertaining to the political race  and uttered by the two candidates, their running mates or their staff.
  • Processing these 390GB of data took about nine hours of computer time (using a complex set of algorithms, involving “markers”, as in genetics).

The findings, in a nutshell:

  1. Mainstream media lead the news cycle. They are the first to report a quote, the story behind it, the context, etc.
  2. The 20,000 MSM sites generate 30% of the documents in the entire dataset and 44% of  the documents that contained frequent phrases.
  3. It takes about 2.5 hours for a phrase to reverberates through the blogosphere.
  4. The phrases that propagate in the opposite way (from blogs to MSM) amounts to a mere 3.5%.
  5. A news piece decays faster on the MSM than on the blogosphere.

The comparative curve looks like this :

For those who want the complete analysis, the full report is available here.

As expected, this research triggered controversy. More

The end of the breaking news — as we know it

In the internet storm sweeping the media, breaking news is, without a doubt, the main casualty. This branch of the information stream is the most likely one to endure a kind of “commodity syndrome”. The breaking news circa 2010 will be ubiquitous, instantaneous and simultaneous. Its value, its market price actually, will tend to zero as a result.

Two forces are at work, here: the professionalization of the blogosphere and the impact of Twitter. Dealing with this is critical for the survival of traditional media. Let’s have a closer look. More