Often, this is about scrapping

Many websties owe their success to their ability to suck data from others, combine and reorganize them in a more efficient way. This leads to many questions. Some are legal – to which extent can you built a business on other’s material ? – and economical – what can be the value of such a venture ? This article explores the issue by taking interesting examples.
> story in Wired

Free press — The success of New York free papers

amNewYork and the local edition of Metro have found their niche in the Big Apple.
The first one is profitable, with a revenue estimated to $18m-$20m and undisclosed profit. amNY is helped by its shareholder, Tribune Inc., which allows the free paper to reprint stories from Newsday and to benefit from its printing plan. Amazingly enough, the revenue is half the one generated by each of the two big free papers in Paris, 20 Minutes and Metro. Metro NY is not yet profitable, and its revenue is even smaller than amNY’s, at $14m. Both survive in the context of a rather depressed New York daily press.
> story in Crain’s

Google — Indexing the physical world

The US Patent Office is a gold mine for journalists and industry watchers. From sketches on a possible new Macintosh (the first one being a small notebook sliding inside a vertical docking station) to hints on future Google plans, there is always something to eat. The website Search Engine Land has found three new patents filed by Google engineers. They have to do with finding and indexing new layers of search : the text in images (for instance the words visible in any urban area). The patents cover recognition, enhancements, and extraction of this information.
> see story on Search Engine Land site
> directly connected to the patents, have a look at the fantastic Google Street View application available on selected US neigborhood. Go here to see the demo (don’t pay attention to the host who looks like the perfect moron).

When non-profit empowers good journalism

Later this month a new website, based in New York, and devoted to investigative journalism will hit the net. It bears something special : ProPublica will be the first news organization entirely and generously funded by a private foundation.
Three things will make this experience interesting to watch.
- First is the scope of the venture.
Even though ProPublica is not unique of its kind, there will be no parallel in terms of journalistic ways and means compared to other non- profit media outlet (see links below). The site will be funded with $10m each year. It will be sufficient to accommodate no less than 24 reporters, plus a dozen of various staffers. Such team, entirely devoted to in-depth reporting, will be among the biggest in its kind. A 2005 survey by Arizona State University of the 100 largest U.S. daily newspapers showed that 37% had no full-time investigative reporters, a majority had two or fewer such reporters, and only 10% had four or more. By that metric, ProPublica will be have a considerable firepower.
- Second is the journalistic ambition.
ProPublica will be lead by Paul Steiger, former editor of the Wall Street Journal during the last sixteen years. The guy knows quite a bit about the genre. Under his editorship, the Journal won 16 Pulitzer Prizes. According to Steiger, the site will target any “abuses of power by anyone with power: government, business, unions, universities, school systems, doctors, hospitals, lawyers, courts, nonprofits, media”. Well. “Vaste programme” would have said the General de Gaulle.
- The third item to watch will be the media reverberation the site will get.
In theory, ProPublica will publish on its own site, but it will also make its material available to any publication for free, on the basis of its audience, mostly. Once its reporters will nail something interesting, Steiger will negotiate with several news organizations – print, but also TV or radio – to publish it. In some case, it will hand over unfinished material, if it fits better the selected distributor. Several issue remains fuzzy. If the story looks appealing, a certain competition could ensue ; there will also be some risk to have good stuff stolen, borrowed, or stealthy recuperated. Somewhat tricky. (Imagine such setup in some Latin countries like France where the journalistic standards are rather loose ! ).
The real assessment of ProPublica’s performance will be its ability to find good stories and to have them published or broadcasted with a maximum resonance. Some news outlets will jump on the opportunity, others will be reluctant. Even the New York Times does not rule out using Steiger’s material (such revenge will be tempting for the Times). Some precautions stated by its editor Bill Keller : “We’ll always have a preference for work we can vouch for ourselves.” (It better be, with an editorial staff of 1400!)
It will also be measured on the long run by the difference this rich, highly focused, and professionally managed news organization will be able to make in terms of journalistic output. We’ll see to which extent the intrinsic independence provided by a philanthropic funding could be the ultimate competitive edge to unearth great stuff.
Who are the funding fathers (so-to-speak) by the way ? Herbert Sandler founded a saving and loan institution in 1963, in Oakland, California. The business prospered gently and was later sold to the big financial service firm Wachovia for a nice $26bn — that left an cool $2.4bn for the Sandler family. In that context, even a multi-year commitment of $10m is pocket change. (Another set of non profit organizations will also contribute for lesser amounts).
One thing remains hard to admit.
In 2008, one of the most respected editor in the United States felt that the only refuge to perform the kind of journalism he (and us) like was a private foundation. Under normal circumstances, someone with the stature of Paul Steiger would have been able to raise money through classic channels, hire good people and be able to find a decent business model. This no longer apply to investigative journalism, which should remain – at least in theory – one of the safety net of modern democracies.
> see a presentation of ProPublica
> two philanthropy funded news sites : the Center for Investigative reporting and the Pulizter Center
> Listen to Paul Steiger’s description of Pro Publica on National Public Radio
> Paul Steiger, reflects on its years at the Wall Street Journal and exposes his views on the evolution or the job, here in the WSJ .
> In his WSJ piece, Paul Steiger mentioned the possibility of merger between Bloomberg and the New York Times after the election. The verdict on analysts : it doesn’t have much of a “high probability. But at some point, all these newspaper companies will go private or be acquired. It’s just a matter of when.” story in Condé Nast Portfolio

Predictions — 14 things to expect for 2008

What to expect next year in the media & tech sector and other things…

1. Social Network will divide themselves like organic cells when they mature.
Tell me : who is interested in being part of a 100+million social network ? Really. Who want to confront his address book to Facebook and finding a horde of friends of friends who wants to be yours ? In 2008, segmentation will be the keyword for social network. At some point, it will re-create social classes, castes, etc.

2. News, information, will find new channels of distribution.
Like the social networks for instance. That will contribute to their value by increasing the “qualification” of a large part of the public, as the advertising world puts it. We (journalists) will be red quite often of Facebook and MySpace. The problem will be to cash-on this audience.

3. Mobile phone applications will thrive.
Boosted by the iPhone and the Android Platform (see Monday Note#14), 2008 will see the explosion or reliable applications that will change our use of the cellphone. The divide will appear between the basic applications (talk and sms) and broadband uses like in western countries. Research in Motion’s Blackberry will remain ahead of the pack for a pure productivity oriented uses. Their software is great, and it is reliable as a Land Rover (but a Land has some look, I’m just begging them : please hire a good designer, yours look like refugees of the soviet era ; on the same stroke I’m begging Steve Jobs : buy this company, even at a market cap at $ 66bn and a P/E at 63, it’s a bargain).

4. Rupert Murdoch will reinvent the Wall Street Journal.
In the past, he has shown he is not he kind of passive investor. He’s driven, and he has an agenda. Part of it is to make the Journal more accessible. Right or wrong, WSJ.com will be free. The paper will become more tabloidish in the pursuit of news. White collar law-breaker, beware, you’ll be exposed.

5. Business news will become more mainstream.
Thanks to new players, learning lessons from the large audience media, thanks to the convergence between pop culture and finance culture, thanks to the 30′s generation for which economy (but not greed) is key.

6. Blog will decline.
Too much uninterested stuff, too much sterile prattling. A Darwinian selection will operate between blogs written by pros or half-pros, and the rest of the “noise”.

7. Apple will come up with new new-things.
Definitely an Iphone2, and some kind of ultra-portable notebook. How it will look like ? Well, there is more than 200 new patents in the iPhone to capitalize on. Let’s take a guess then : a expanded touch sensitive screen that will replace the mouse by the finger, with an iPhone like keyboard ; a 3G standard connection comparable to the Amazon Kindle for background download of numerous new stuff, flash memory allowing 8 hours battery life and no boot-up delay. All in a 20 x 15 x 1cm sleek aluminum and unscratchable plastic box that will synchronize with my main Mac once its just close to it, without hand, Ma !

8. The green frenzy will catch on the computer industry. In 2008, it will cost more in electricity to operate servers than to buy them. Green, opportunistic, ayatollahs won’t ignore this. Pressure will intensify, business opportunities as well.

9. Google will continue its revolution of the computer industry.
With its $2bn a year investment in datacenters, it will own the “cloud”, i.e. the hundreds of thousands of computers we are taping into, on a day to day basis. No one will be able to match
this power.

10. Corollary, Microsoft will take the role of the major opponent to Google.
Funnily enough, the memo it produced to counter the acquisition of DoubleClick, on the grounds of…antitrust provisions say a lot on its fair to fall behind.

11. Advertising will look for (and find) new sneaky ways, and will invent new metrics.
One of them in the product placement. In a country like France, thanks to the poor heath of the press, it has been a bonanza. The best (and worst) is yet to come. Indirect, stealthy ads will be quantified, measured, yielded, and monetized. Ethics will dilute.

12. Subprime tremors will still be heard.
2008 will be the year for the so-called sovereign funds, helping banks, investment outlets, avoiding bankruptcies. They have their agendas, their flaws (see Monday Note #15). They’ll be everywhere.

13. Another bubble is likely.
Giant investment funds (pension funds, hedge funds, endowments funds, sovereign funds) are under tremendous pressure to invest. They are inducing distortion in economics, and inflating prices in the tech area. Wiser, due-diligence based venture funds will have the last world — after all, they survived many crisis.

14. Barack Hussein Obama will be elected the 44th President of the
United Sates of America on November 4, 2008. Why ? Because he’s smart, he’s new, he’s clean, he’s authentic and because he is, by any measure, the antidote to the Bush era. And he will be 47 at the time of the election. And because Sept 11th legitimate post-traumatic disorder will be over. (Bear with me : this is the riskiest assumption of this note!)

Further readings about theses predictions :
> About the Cloud Computing and the advance of Google in that field, see this story in Business Week.
> About the upcoming clash between Google and Microsoft, read this features in the New York Times
> About Google acquisition of DoubleClick, see how Microsoft will unleash his lawyer to fight the deal. Read in Bits, the tech blog of the New York Times. And Europe is delaying the agreement of Doubleclick deal, story in the NY Times
> About the upcoming bubble. The view of Tom Perkins, founder of the most successful venture capital firm in the world, Kleiner Perkins Caufield & Byers. See this chat with Financial Times readers.
> And about disruptive vision : Andy Grove’s two emails. The cofounder of Intel remains an active thinker . This autumn, he wrote two emails. One to Jeff Immelt, CEO of General Electric, the other to Lee Scott, CEO of Wal-Mart. Grove urged the first one to build an electric car, and the second to rework the US healthcare system. Grove and his Stanford pal call it cross-boundary disruption, XBD for short. Refreshing thoughts from a bright mind.
> story in Condé Nast Portfolio

Murdoch is at the office

Last Thursday, Rupert Murdoch officially became the new owner of the Wall Street Journal. But the remaking of the paper had begun way before. From his new office set up in the World Financial Center where the WSJ is headquartered, he has worked on staff as well as content issues.

> story in the New York Times

The acquisition of Dow Jones won’t be a quick return-on-investment operation.

And the pressure on DJ execs will be hard : NewsCorp is producing a 15% margin on sales, while Dow Jones had a an operating margin of 8% last year, excluding restructuring costs.

story in Bloomberg

Social Network — It’s just the beginning

By 2011, 50% of the online adult population in the US and 84% of the teens will use a social network each month, says the research firm eMarketer. Currently, 70% of the young Americans visit a social network once a month. Whatever the margin of error, the figures shows the potential of such network. It implicitly emphasis the issue of the valuation of personal data.

> see a summary of eMarketer

Facebook is actually the most visible part of a immense industry which its the direct marketing, which has elevated the data-mining to an art. In the following story, MIT’s Technology Review outlines the modus operandi of one them, Acxiom Corporation.

> story in the TR

Three years ago, Fortune magazine ran a detailed, and rather frightening, but great story about Acxiom, the company you don’t know, but who knows you.

> see the Fortune story

Aside of the advertising frenzy, one of the key development of those social networks will be their foray into news. No doubt they will become one of the next major news channel.

>see this story about the LinkedIn news that will be rolled out next year.

The French press if officially a charity business

Is this a new sign of the ultimate decrepitude of the press sector in France ?
The five professional organizations representing all categories of print media has received the the permission by the French government to launch the Association Presse & Pluralisme. Its main characteristics is to offer tax deductibles to its generous contributors. What is seen as equity in a normal free economy is viewed as grant in the French system.
> story in Le Figaro

Copyright, Interface and Dynamic Value

Last week, n°1 private European TV network, TF1, announced it was suing both the French version of YouTube and its competitor DailyMotion. Claim : €100m for
the first, €40m for the second. Before firing up its lawsuit, TF1 took the precaution of removing from its own video-sharing site all dubious video (for sure, no one is immune).

By this action, TF1 wants to protect is juicy TV series. Heroes, TF1 said, has been viewed 80,000 times on both video sharing sites, and the network estimates the loss in advertising revenue at €66,000 per episode ; the company states also that for 100 illegal viewings of the platform, it looses 20 download on its video on demand service.
Sounds widely optimistic.

In France, managing the convergence between culture and digital access is a special issue in which the repression has been elevated at the level of a national principle.

Three weeks ago, a report suggested to intensify the pressure on the internet access providers to prevent file-sharing ; the report, commissioned by President Sarkozy, was produced by Denis Olivennes, the CEO of the biggest seller of books and records on the country, called Fnac. Basically, it’s like asking Monsanto to defend organic food. Fnac — like everybody else — has not evolved significantly toward the digital era. Funnily, “Fnac” was, last october, the most searched terms on Google France, which sounds as a major failure in terms of brand awareness – especially for an url that is simply “fnac.com” (please, fire the communication director!).

No wonder why the main recommendation of the report is to increase the use of the stick.

This view failed to grasp three factors :

- The all digital food-chain abhor vacuum. Once it decided he want something – wether it is a song, a TV serie, a videoclip -, it finds a way, like nature. Tools emerge, they are diverted. Take the Bit Torrent protocol for instance. It was originally designed to facilitate the transfer or huge computer files among Linux programmers. It is now the most used tool for illegal downloading, and Hollywood is considering using it for legal offering of movies. I checked Mr Olivennes report : there is NOT a single reference to the Bit Torrent protocol.

- Interface is key. More than ever. For the exploitation of a cultural good, the question is not killing piracy but rather to maximize the amount of money that can be drawn from it. The response lies much more in Apple strategy (since 2001 : 100 million Ipod sold and 3 billion songs downloaded) that Mr. Olivennes government operated baton. The poorer is the availability and the quality of the interface, the bigger the illegal downloading will be.

- The very notion of value is a fluctuating one. And it’s not only a question of supply and demand. The value of a good varies dynamically upon the way it is made available to the public. By extension, the “free” notion, describe as an “illusion” and a “lie” by President Sarkozy as he was introducing the Olivennes Report last month, should not be such a scarecrow. It’s part of the dynamic pricing system of the intellectual property. Without this “free” evil, a large part of the internet economy would not exist today, and many software widely used would not have found their way to a marketable existence. Ignoring such fact is a blunder.

PS : One example of the significance of the interface : last week, as I was working on the Monday Note, I purchased a law book on Amazon even though it is was legally available for free on the Internet – simply because reading 300 page on a book is a much better experience than on a screen interface ; I paid €15 for a music album on iTunes – because the buying interface is great and time is money; but at the same time I illegally downloaded a TV series on the painstaking Bit Torrent stuff because it’s not available on any paid interface. The value I granted for a product fluctuated from 100% to zero simply because of the access conditions.

Further readings in intellectual property issues :

The excellent report written by Andrew Gowers, former editor of The Financial Times now at Lehman Brothers. This report ruffle many feathers on some copyright related issues.

> see the full report here
One of the greatest thinker on the evolution of the intellectual property is Stanford professor Lawrence Lessig, the inventor of the Creative Common license (the variable Copyright). The Economist profiled him last week.

> story here
A summary of the lawsuit : TF1 vs. YouTube & DailyMotion
> story in the weekly Le Point(in French)
>The Olivennes Report (in French) carried by Le Monde