France — Lagardère and the faraway digital galaxy

For Groupe Lagardère, the shift to digital will be a long, long journey. Currently the n°1 media conglomerate in France, it is getting only 3% of its revenue from the Internet. In 2012, Lagardère wants to reach 10% to 12%. We are not there yet. Last week, the journalists of two of Lagardère major publications, the newsweekly Paris Match and the one day-a-week daily le Journal du Dimanche, voted by a landslide majority of respectively 95% and 92% to stop working for their website, pending further negotiations. They are invoking “money” and “conditions of production”.

Both arguments are bogus, to put it gently. Most employees of these two publications do not kill themselves on the job. They have time to write books, to appear on talk shows, etc. They get paid fairly well compared to the French newspaper industry average. For star reporters at Paris Match, managing extravagant expenses can be more time consuming than writing stories. And when I say writing, I’m being literal: several of them don’t even type. Yep, the digital world is a far away nebula. For the Journal du Dimanche (JDD), its a daily (quite a good one, actually) hitting the streets once a week. In fact, hitting the streets is figure of speech since most of the newsstands are closed on Sundays, and finding the paper is a game of chance of chance, or having the right neighborhood Tunisian grocer. It recently prelaunched its website, without earthshaking results (around 800,000 UV). As far as Groupe Lagardère, its stock lost 42% in one year

Lagardère Group journalists don’t have anything else to worry about? Of course they do — or should. Lagardère hosts the widest range of political conflicts of interest ever seen in media group. Let set aside the fact that most of the cash flowing to the mother company comes from the taxpayer: Lagardère is a major defense contractor. Let’s concentrate on the publishing arm. Most of the news operations is about to be put under one man. Jean-Pierre Elkabbach, 71, is just out of the main radio network Europe 1. He’s a long time member of the political milieu (he was already deeply esconced into the cozy French nomenklatura when Leonid Brejnev was ruling the Soviet Union). For almost ten years, Mr. Elkabbach was also the chairman of Public Senat, the private TV network of the French Senate. (Each time he had to campaign for his mandate, he used its morning slot of Europe 1 for gentle interviews with key senators). Now, he wants to control all news-related properties of Lagardère. That, I think, should be way more concerning for Lagardère journalists than the cut they of the small Internet revenues they are trying to get, or the “conditions de production” for the websites.

When politics are involved, Lagardère is careful to hedge its bets. At the upper level, management involves former staff members of different government cabinets. And, as a spokesperson, he got a street-smart guy named Ramzy Khiroun. The gent is parked at Lagardère while his former boss, the socialist Dominique Strauss-Kahn, is orbiting as the general manager of the IMF pending a re-entry in the next presidential election. Mr. Khiroun is actually working hard on preserving his relationship with the journalists community — a little bit at his boss’ expense. Regarding the Internet conflict, he said “Questions by [Lagardère's] journalists are legitimate”. Well, actually, he is wrong. The questions are totally misplaced. –FF


iPhone Applications: Apple people now believe in a Supreme Being

No, no, not Steve Jobs but an even higher entity smiling upon the company. As I hope to show, Apple’s hard work years ago is now about to pay huge unexpected dividends on the iPhone. When the iPhone first came out of Steve Jobs’ quasi-divine hands in January 2007, it was a hack, the result of clever handcrafting by Apple engineers, a crazed last-minute rush to the show deadline. As such, it lacked the basics of what we call a platform, an industry term of art – or BS. Here, a platform means a combination software, or hardware, or both on which software developers build applications. A platform requires documentation, where the building blocks are, what they do, how to use them. The platform also comes with tools, software to build and test the applications. Last but not least, a platform implies some stability, meaning it works often enough, and it’s predictable, it doesn’t take brutal turns that undo the work of developers.

Early 2007, the iPhone had none of these attributes. So, Steve resorted to proven industry maneuver: If you can’t fix it, feature it. No need for “native” (meaning running on the iPhone itself) applications. This is the New World of Web 2.0, bleated the propagandastaffel. Use the iPhone’s browser (the best in the business, it helped immensely) to run server-based applications. No need to download anything, centralized maintenance, easy updates… The faithful heretics would have none of that and a new game started. One week the hackers managed to break Apple’s barriers preventing the installation of native applications. A few days later Apple issued an update to the iPhone firmware that broke the hacks.

Let’s pause for a lemma, a building block in the story: from day one, the iPhone had something no competitor had: iTunes. Apple made having an iTunes account a sine qua non requirement for using an iPhone. For downloading songs and movies, just like its younger brother the iPod? That and more. With iTunes you backup your iPhone, you bring it back to “factory settings”, helpful if a hack “bricked” it, meaning if it became as lively of a brick, you install software updates, most of which defeated the impudent hacks.

Moving forward, the pressure was building: Apple made a very smart move by using a trimmed down version of OS X (the Mac’s software… platform) as the software engine for the iPhone. We know and love OS X, said the developers. Mr. Jobs, tear down that wall! It now looks like Google’s Android helped Dear Leader make up his mind. Rumors were mounting: RSN (Real Soon, Now), Google would announce a free, open-source platform for smartphones. Just as Steve smartly turned around and touted Intel processors after years of expounding the superior PowerPC architecture, on October 17th, 2007, he stood up and announced the SDK (Software Development Kit) for the iPhone. Availability by the end of February 2008.

The belief in Providence benignly smiling on Apple now comes in. In 2001, Apple sweated the servers, the legal agreements with publishers, the one-click payment system, the client software on PC and Mac. All this to create the still-unequaled iTunes experience. Now, one bright 2007 morning, they have an epiphany: Songs are zeroes and ones. One click and they land in a bin, a directory in the iPhone. But applications are also strings of zeroes and ones. If we put up iPhone applications in the iTunes store, they land in a different bin inside the iPhone but the one-click purchase and download is the same. Halleluiah! All the work to build the iTunes business now pays off for the applications. We must be The Chosen Ones. This is no small detail. Today, if you’re an independent software developer, writing good code is the easy part. The Evil S&M, Sales and Marketing, await you. Shelf space, physical or on the Web, is very expensive. Setting up download and payment systems isn’t for the faint of wallet either. With the iPhone, Apple removes (most of) these hurdles. All you have to do is write good code.

Picture the young developer still living in his mother’s basement, he sells 50,000 copies of his work for $10, the price of an iTunes album. Apple keeps $3, he gets $7. Times 50,000, he makes $350,000 and can now pay rent to his mother and buy her a car. (For perspective, the current forecast is for between 30 and 45 million iPhones sold by the end of 2009.) Picture also the competition. No one else has such a well-oiled, widely known system to add applications to a smartphone as Itunes. (Google says they will eventually offer one for Android.) This is a billion dollars business. Actually, $1.2 billion in 2009, according to Gene Munster a Piper Jaffray analyst. (For a healthy counterpoint, see the snarky comments on TechCrunch.) Regardless, the arrival of native applications on the iPhone is a big event, one made possible by an unintended – and rather amusing – consequence of the iTunes music distribution system. How will this be written up in books and Harvard Business School case studies? –JLG

Mail overload costs you 8 hours a week

You work in an information intensive environment. You feel like a productive person, with a clear idea of how to allocate your time, right? Think twice. According to the research firm Basex, here his how you spend your valuable time: – Interruptions for non-important stuff like non-urgent email, including the time to get back to serious work: 28% of your time – Productive content creation including writing useful stuff: 25% – Meetings (in person, phone or video): 20% – Doing some research for your work (all sources included):15% – Thinking and reflecting:12% Pathetic indeed.

Truth is, information overload is killing us. That’s ranges from unsolicited mails, “reply to all” and various flavors of “thank you!” messages. In this article, The New York Times even mentions the Silicon Valley expression “e-mail bankruptcy”, to describe someone so buried under his unopened e-mail that he has to perform a mass deletion and start over (I recently read somewhere that Marissa Mayer, Google VP for Search Product, said she had some day 800 messages backlog, who can seriously deal with that?). Information overload is hugely costly: Basex estimates at $650bn the drag on the economy and the study quotes Nathan Zeldes, an engineer at Intel who studies computing productivity issues, who said, “At Intel, we estimated the impact of information overload on each knowledge worker at up to eight hours a week.”

Not to mention the pernicious uses of email in the often-permanent sate of war in companies. A friend of mine told me recently : “Where I work, it’s Beirut in the executive offices. People no longer argue or even talk. They do so by email because it’s much better to build a case against someone than having a heated discussion. Files are building up with emails that will be used when needed. Time loss is tremendous, real issues are left aside, everyone spend hours at his desk devising an email strategy”.

Years ago, I had the discussion with Vint Cerf considered as one of the father of the internet (he’s now at Google). Vint explained how a clever use of email was critical for any organization, “and among all the criteria to evaluate my staff, is actually their ability to wisely use email”. Welcome to a new job: meet the email coach….

The Facebook Candidate

In last week Monday Note, my co-writer Jean-Louis Gassée explained why Silicon Valley was about to vote for Barack Obama, “He’s one of us”, he said. Here is couple of interesting stories I’m submitting to your point and click acumen. Two are from the Atlantic Monthly. The first one, tilted “HisSpace” explains how the use of digital media by the democratic candidate was comparable to the irruption of radio in the Franklin Delano Roosevelt election. Or to John Fitzgerald Kennedy’s mastery of television. “Obama has truly set himself apart by his campaign’s use of the Internet to organize support, writes Marc Ambinder. No other candidate in this or any other election has ever built a support network like Obama’s. The campaign’s 8,000 Web-based affinity groups, 750,000 active volunteers, and 1,276,000 donors have provided him with an enormous financial and organizational advantage in the Democratic primary. Obama clearly intends to use the Web, if he is elected president, to transform governance just as he has transformed campaigning”. The article refers also to the so-called Netroots that describes a new kind of political activism entirely based on digital networks.

But it’s on the money side that Obama’s digital inclination was the most compelling. According to the last count by the New York Times, Barack Obama has raised so far $240m compared to slightly more hat $100m for the Republican nominee John Mc Cain. More interestingly, 94% of donations to the Obama campaign were $200 o less. In the month of February alone, his campaign raised a stunning $55m, $45m coming from internet donation alone! In his piece “The Amazing Money Machine”, Atlantic Monthly reporter Joshua Green wrote : “[Obama] built a fund-raising machine quite unlike anything seen before in national politics. Obama’s machine attracts large and small donors alike, those who want to give money and those who want to raise it, veteran activists and first-time contributors, and—especially—anyone who is wired to anything: computer, cell phone, PDA”. More broadly, “Obama’08″ relies a lot on mechanisms of social and collaborative networks seen in Silicon Valley, suggests Noam Cohen in The New York Times.Does it guarantee a victory in November. Certainly not. Far from it.

Throwing a lifeline to an endangered species, print?

CEO Eric Schmidt spoke in San Francisco, at an event hosted in San Francisco by Syracuse University’s Newhouse School of Public Communications. There, he addressed the collapse of advertising revenue in print media: “It’s a huge moral imperative to help here”. Schmidt didn’t provide any detail on how the search company could throw a lifeline to the newspaper industry, but he hinted that DoubleClick, the ad server firm Google acquired, could generate “significant” revenue online for newspapers. But he acknowledged that it wouldn’t be enough to restore the profit margins that newspaper publishers historically have enjoyed from print advertising. “What we don’t know and we have not yet solved, is how to come up with digital products that will monetize at the same rate as the print ones. Once we’ll have done that — and we are on it — most of the concerns will go away”.

Let’s read between the lines: Schmidt is very concerned Google appears to be the main cause of the upheaval in the advertising sector. Google cuts off most of the lucrative links in food chain and it has no rivals for targeted advertising. To deal with such negatives, Schmidt’s idea appears to be to apply Google’s knowledge and power to funnel ad money into newspapers. But like everyone else, Schmidt also worries about the huge ad revenue gap between a print media consumer and a digital one. (To make matters worse, the gap is widening as the inventory of web pages available for ads grows faster that the number of page viewes by the users.)

In this talk, Eric Schmidt addressed other issues: – the monetization of unprofitable Google properties such as Google Maps, YouTube – the delicate situation of being a member of Apple’s board of directors and developing the competing mobile platform Android — he hinted that the two firms where far from being absolute rivals in this field – the next two big things for Google: language translation, geopositionning and related applications – his biggest worry for Google: the scalability of its culture as the company expands. This 56 minutes video of this Q&A session is definitively worth the click.

Barack Obama is our man

From a distance, it must be hard to comprehend Silicon’s Valley position on the 2008 presidential election. Isn’t Stanford University, the heart of the region, a private, capitalistic university? Aren’t all rich investors and entrepreneurs siding with the party of money, Republicans? This is the capital of capital, the world-center of free enterprise, how can we support Tax & Spend Big Government Liberals? There are many answers to that, suspiciously too many, perhaps.

Let’s start with the Caviar Left posture: now that we’ve made our money, we tell others to make sacrifices. See Al Gore pontificating about carbon footprints while traveling by private jet and living in a huge energy-hungry mansion. A note in passing: Al is a partner in a Kleiner Perkins venture capital fund. John Doerr, one of Kleiner’s lead VC is a hyperactive fund raiser for Democrats. And while we note things in passing, see Colin Powell on the masthead as a Strategic Limited Partner.

A year ago, we were all for Hillary. Out with Bush and the litany of Iraq War, frightening deficit, torture, domestic spying, healthcare, education, infrastructure neglect. Not that we were in love with Hillary but, based on her and Bill’s track record, we knew she could be bought, we could do business with her. In a not so perverse way, we like Obama for the exact opposite reason: he can’t be bought. Hillary took money from big donors, from the lobbies our elected officials sold us to. Barack, on the other hand, handily outraised Hillary by an almost two to one margin, getting money from small donors, mostly on the Web. This gets us in what I think is the real reason we like Obama: He’s one of us. I’m not saying this because he’s been spotted using an iPhone. No, what we see is someone who connects with the connected generation. We see someone like us, venture investors and entrepreneurs, who holds an optimistic and meritocratic picture of the future. The latter adjective, meritocratic, got him in trouble. Used without enough discretion at a San Francisco meeting, it upset the more pessimistic market segment, the white lower middle class with a justifiably gloomy view of their prospects.

Then, while Hillary banked on her inevitability, Barack out-strategized, outraised, out-organized and outspoke her. And as inevitability switched sides, so did we. The really real reason came into play: visionary sheep that we are, we flocked to the winner. Hillary tried every dirty trick in the Clinton playbook to try and stop him. From raising prospects of Kennedy and Martin Luther King-like assassinations to bad-faith answers to questions about Obama’s own faith. What do you think of rumors that Obama is a Moslem? Instead of saying such libel had no place in a campaign for the highest office of the land, she replied she took him “at his own word he is a Christian”. The interviewer insisted: Come on, you know these rumors are false. “I take him at his own word.” Hillary had one more opportunity to rise above the gutter, to look presidential. Instead, the highly visible low blow, this was on 60 Minutes, strengthened her reputation for being Bill’s even less principled half.

I was half-kidding when I wrote above we back Obama because we like to back the winner. To us, he looks like a mestizo of JFK and MLK, minus the women and the pharmacy. To us, he looks like he will return the US to a position of exporting hope instead of exporting fear. That’s why we allow ourselves to hope we’ll make history together. In the end, how could we support the Clintons in their re-conquest of the White House, they don’t email, they don’t use Blackberries… Seriously, the BFD (Big Fundable Deal, in VC parlance) this coming week is the iPhone Applications Developers Conference in SFO. Watch this space next week. — JLG

When the amateurs join the fray

Ever heard of Mayhill Fowler? Well, if you are following the US presidential campaign, you should have. At 61, the “citizen journalist” of the Huffington Post was last week most talked about people in the media circus. What she did was simply ask Bill Clinton for a comment a rather harsh story in the July issue of Vanity Fair

Todd Purdum’s article in VF is not exactly cozy journalism. It describes a post-presidency frenzy of private-jetting, skirt-chasing, and media outbursts that bruised Hillary bid for democrat nomination. Asked by the self-assumed amateur-journalist Mayhill Fowler, Bill Clinton erupted in a tirade against the VF reporter, calling him “dishonest”, “sleazy”, “a scumbag”, etc. Mrs. Fowler dutifully recorded the outburst and filed both an audio and a transcript to her blog on the Huffington Post. Bam!

The fun part of it is the debate that erupted in the traditional media elite. Mayhill Fowler was even profiled in the Los Angeles Times. The Fowler scoop is not an isolated piece of luck. She was the one who surfaced Barack Obama’s appreciation on the economically frustrated Pennsylvanians who, he said, ” get bitter, they cling to guns or religion.” An off-the-record remark that reverberates worldwide.

This weekend’s New York Times analysis was the perfect display of the embarrassment of the media elite facing some sort of disorganized, spontaneous, grass-rooted journalism, that didn’t even “wear its credential badges around the neck” (a major transgression), and whose work is propagating at light-speed thanks the blogs and YouTube. This sequence of events and reactions are really with the clicks to understand the new challenges of modern journalism.

Yahoo under intense Icahn pressure

Jerry Yang is going to have a lousy summer. Carl Icahn, the New York-based corporate raider is willing to force the sale of the company before its annual meeting on August 1. In a stern letter sent June 6 to Yahoo chairman Roy Bostock, Icahn outlined his plan in pretty clear terms:

“– First, I would work to have the board replace your “poison pill” severance plan with an acceptable alternative. [Carl Icahn is referring to a severance plan for employees leaving or fired in the wake of the merger, that raises substantially the price of the transaction, among other things] – Second, I intend to ask our new board to hire a talented and experienced CEO (attempting to replicate Google’s success with Eric Schmidt) to replace Jerry Yang and return Jerry to his role as “Chief Yahoo”. Indeed, it was much speculated that Jerry would serve in the CEO role temporarily until a permanent CEO was hired after the board asked Terry Semel to resign.
– Third, I intend to ask our new board to inform Microsoft that unless any alternative transaction can insure a $33 or higher stock price (of which I am skeptical) all talks of alternative transactions are over.
– Fourth, I will ask our new board to offer publicly to sell Yahoo! to Microsoft in a friendly and cooperative transaction.
– Fifth, to the extent Microsoft does not want to make a proposal, I will ask our new board do a deal on search with Google, but only if it contains termination provisions that would in no way impede a subsequent acquisition by Microsoft.”

Carl Icahn is urging Yahoo to sell itself to Microsoft for $49.5bn, about $2bn more that Microsoft last, proposal.

Steve Ballmer sees the end of media paper within 10 years

Asked about his outlook for the future of media by the Washington Post, Microsoft CEO Steve Ballmer answered this: “In the next 10 years, the whole world of media, communications and advertising are going to be turned upside down — my opinion. Here are the premises I have. Number one, there will be no media consumption left in 10 years that is not delivered over an IP network. There will be no newspapers, no magazines that are delivered in paper form. Everything gets delivered in an electronic form.”

Well, this take is actually pretty reassuring considering the litany of things where Microsoft was dead wrong. Bill Gates was right in two instances (big ones for sure): Windows and Office. On all the rest, it essentially missed the boat: most of the Internet positions — both PC and mobile based — were left to other players. And today, what remains of Microsoft domination is seriously challenged by “cloud” hosted applications. Guess who has the biggest chances to be gone within ten years? By the way, hearing the cling-clung noise of forks and knifes, this semi-amateurish video of Ballmer was taken by a Washington Post staffer. Actually, 185 of them have been trained to use the medium, as explains Chet Rhodes, Assistant Managing Editor for News Video at the Post on Beet.tv.

The rise of the nomadic web browsing

“Welcome to the Weekend Web”, said Business Week. Internet browsing differs from weekdays to weekends. In this story, Google Mobile’s chief says that the biggest part of traffic on the search giant’s mobile sites occurs Saturdays and Sundays. The weekend’s mobile web promenade involves mostly classified and local sites. Among them (on the US market), Craigslist, both a huge classifieds site and a local destination. According to M:Metrics (now part of ComScore) mobile browsing has surged 89% last year and mobile page views are up by 127%. No doubt than within few years, the mobile Web will be bigger than current PC Web… but also harder to monetize.

Here are the top 10 sites viewed on mobile phones (figures are in minutes per user and per month) Craigslist_____99 mn

Ebay_________86 mn

MySpace______85 mn

Facebook_____84mn

Go.com(1)____67 mn

Google_______63 mn

Yahoo________53 mn

AOL__________41mn

Live.com(2)___37 mn

CNN.com_____10mn

(1) Disney portal gives access to ESPN

(2) Microsoft portal

Actually, The New York Times is also quite bullish about mobile browsing. In this video interview on Beet.tv, Michael Zimbalist, head of R&D at the Times, confirms the growth of mobile pages and explains the relationship the Times is developing between mobile and print content.