News: Personalized or Serendipitous?

 

Every digital news designer faces the question: should the traditional serendipity of contents be preserved or should we go full steam for personalization? It turns out Google is already working on ways to combine both — on its usual grand scale.

Serendipity always seemed inseparable from journalism. For any media product, taking readers away from their main center of interest is part of the fabric. I go on a website for a morning update and soon find myself captured by crafty editing that will drive me to read up on a subject that was, until now, alien to me. That’s the beauty of a great news package.

Or is it still the case? Isn’t it a mostly generational inclination? Does a Gen Y individual really care about being drawn to a science story when getting online to see sports results?

Several elements concur to the erosion of serendipity and, more generally, curiosity.

First, behavioral among digital readers are evolving. These extend far beyond generations: Regardless of her age, today’s reader is short on time. At every moment of the day (except, maybe, in the loo or in bed at night), her reading time is slashed by multiple stimuli: social teases, incoming mail, alerts or simply succumbing to distractions that lie just one click (or one app) away. That’s one of the tragedies of traditional news outlets: When it comes to retaining the commuter’s attention, for instance, Slate or The Washington Post are in direct competition with addictive products such as Facebook or Angry Birds…

Second, the old “trusted news brand” notion is going away. Young people can’t be bothered to leaf though several titles to get their feed of a variety of topics; that’s why aggregators thrive. The more innocuous ones, such as Mediagazer, mostly send traffic back to the original news provider; but legions of others (Business Insider, The Huffington Post…) melt news brands into their own, repackage contents with eye-grabbing headlines and boost the whole package with aggressive marketing.

Below, see how BuzzFeed summed up the New York Times story on the NSA monitoring social traffic: 80 words in BF that capture the substance of a 2000 words article by two experienced journalists who collected exclusive documents and reported from Washington, New York and Berlin. buzzfeed nyt

(Note that BuzzFeed is serving a more appealing headline and a livelier photograph of general Keith Alexander, head of NSA.) How many BuzzFeed glancers did click on the link sending back to the original story? I’d bet no more that 5%. (Anyway, judging by the 500 comments that followed it, the NYT did well with their article.) This trends also explains why the Times is working on new digital products that take into account both time scarcity and the Gen Y way with news.

This leads us the third reason to wonder about personalization: the economics of digital news. In the devastated landscape of online advertising, it became more critical than ever to structure news content with the goal of retaining readers within a site. That’s why proper tagging, use of metadata, semantic recommendation engines and topic pages entries are so important. More pages per visit means more ads exposure, then more revenue. Again, pure players excel at providing incentives to read more stuff within their own environment, thus generating more page views.

Coming back to the customization issue, should we turn the dial fully to the end? Or should we preserve at least some of the fortuitous discovery that was always part of the old media’s charm?

Let’s first get rid of the idea of the reader presetting his/her own preferences. No one does it. At least for mainstream products. Therefore, news customization must rely on technology, not human input.

Last week, I spoke with Richard Gingras, the senior director of news and social products at Google (in other words, he oversees Google News and Google + from an editorial an business perspective). Richard is a veteran of the news business. Among many things, he headed Salon.com, one of the first and best online publication ever.

gingras

According to him, “Today’s news personalization is very unsophisticated. We look at your news reading patterns, we determine that you looked at five stories about the Arab Spring and we deduct you might like articles about Egypt. This is not how it should work. In fact, you might be interested in many other things such as the fall from grace of dictators, generation-driven revolutions, etc. These requires understanding concepts”. And that’s a matter Google is working on, he says. Not only for news, but for products such as Google Now which is the main application of Google’s efforts on predictive search. (Read for example With Personal Data, Predictive Apps Stay a Step Ahead in the MIT Technology Review, or Apps That Know What You Want, Before You Do in the NYTimes).

The idea is to connect all of Google’s knowledge, from the individual level to his/her social group context, and beyond. This incredibly granular analysis of personal preferences and inclinations, set in the framework of the large macro-scale of the digital world, is at the core of the search giant’s strategy as summed-up below:

google infos2

On the top of this architecture, Google is developing techniques aimed at capturing the precious “signals” needed to serve more relevant contents, explains Richard Gingras. Not only in the direct vicinity of a topic, but based on center of interests drawn from concepts associated to individuals’ online patterns analyzed in a wider context. In doing so, Gingras underlines the ability of Google News to develop a kind of educated serendipity (term is mine) as opposed to narrowing the user’s mind by serving her the unrefined output of a personalization engine. In other words, based on your consumption of news, your search patterns, and a deep analysis (semantic, tonality, implied emotions) of your mail and your posts — matched against hundreds of millions of others — Google will be able to suggest a link to the profile of an artist in Harper’s when you dropped in Google News to check on Syria. That’s not customized news in a restricted sense, but that not straightforward serendipity either. That’s Google’s way of anticipating your intellectual and emotional wishes. Fascinating and scary.

frederic.filloux@mondaynote.com

 

Microsoft Directors Have Much Explaining To Do

 

Blaming Steve Ballmer for Microsoft’s string of mistakes won’t do. Why did the Board of Directors keep him on the job for thirteen years, only to let him “retire” in the midst of several dangerous transitions — without naming a successor? What does this say about the Board’s qualifications to pick Microsoft’s next CEO?

For more than a decade, a team of physicians has been ministering to a patient who was once vital and robust, but now no longer thrives. Recurring diagnostic errors, stubborn inattention to symptoms, improper prescriptions haven’t yet killed the object of their care but, lately, the patient’s declining health has become so obvious that the doctors, now embarrassed and desperate, have scheduled a heart transplant.

Now comes the test: Would you entrust the patient’s future to such a confederacy of dunces?

With this metaphor in mind, let’s contemplate the record of Microsoft Directors since Steve Ballmer assumed the mantle 13 years ago, and ask if they’re qualified to appoint a successor.

Consider the Directors’ obdurate passivity while they watched the company miss opportunities, take one wrong turn after another, and fail to execute crucial transitions. Search was conceded to Google; digital music (players and distribution) is dominated by Apple; social networking belongs to Facebook, Twitter, and LinkedIn; the smartphone market is handed over to Google’s Android and Apple’s iPhone; tablets from the same duo are now bleeding the Windows + Office Golden Goose; Windows Vista and now Windows 8; Surface tablets… Even the once mighty Internet Explorer browser has been displaced by Google’s Chrome running on all desktop and mobile platforms.

Blaming (and forgiving) the CEO for one or two mistakes is reasonable. But if these missteps were entirely Ballmer’s fault, why did the Directors keep him at the helm? This raises the question: How much of the company’s value did the Directors themselves let Google, Apple, and others run away with? Is Microsoft’s Board a danger to the company?

The latter question comes in sharper relief when looking at the timing and manner of Ballmer’s exit.

ballmer

On July 11th, Ballmer announces a major company reorganization. More than just the usual medley of beheadings and redistribution of spoils, Microsoft was to restructure itself away from its old divisional arrangement and move towards the type of functional organization used by companies such as Apple. In addition, the new company motto became Devices and Services, evoking a virtuous circle: Best-of-class branded devices would sell more great Microsoft services, while the latter would give a boost to Microsoft devices.

A week later, on July 18th, Microsoft releases pedestrian quarterly numbers, the lowlight of which is a $900M write-off attributed to very poor sales of Surface PC/tablets

On August 23rd, Ballmer announces his sooner-than-planned retirement — sometime in the following 12 months. No word of a successor.

And, to top everything off, on September 3rd, with Ballmer on his way out, the Board approves the emergency acquisition of Nokia’s handset business, complete with 32,000 angry Finns. (We’ll discuss their misdirected anger in a future Monday Note.)

A drastic company reorganization makes sense. Instead of one more turn of the optimizing crank, Microsoft acknowledges that it needs to Think Different.

Writing off unsold inventory is the sensible recognition of a problem; it removes an impediment by facilitating a fire sale.

There was a clear and present danger for Nokia’s handset business to fail, or to become the walking dead. Microsoft bought it to avoid the possible collapse of the Windows Phone platform. In theory (i.e., ignoring cultural realities), the acquisition gives Microsoft more control over its smartphone future.

All rational moves.

But letting Ballmer go right in the middle of two huge and complicated transitions — and without immediately appointing a successor? On its face, the timing and manner of Ballmer’s exit defies common business sense. It also raises questions about the Board’s failure to adequately plan for Ballmer’s succession. Supposedly, Succession Planning is a key component of good Corporate Governance. In plain language, a Board of Directors is obligated to identify and groom successors for key positions, starting with the CEO.

Which raises a few more questions.

Microsoft undertakes two risky, company-redefining moves: a profound structural and strategic reorganization, followed by its most foreign, most people-intensive acquisition ever. What was the overwhelming need to announce Ballmer’s departure – without naming a successor – right in the middle of such instability?

Considering its résumé, what makes Microsoft’s Board qualified to pick a new CEO?

And what are the parameters of the search for Mr. Right? Assuming Microsoft hires an industry heavyweight, will this individual be given the space and power to be his own woman or man, that is to reshuffle the Board? And what about the freedom from deferring to the company’s Founder?

And what must the mood be like at Microsoft? “When you receive an order, do absolutely nothing and wait for the countermanding directive.” This ancient Army saying must now be popular in Redmond. It’s not that people working there don’t care, but they just don’t know what the next CEO will want, and they certainly don’t know when. How can one not expect damaging paralysis and politicking when the CEO is let go without a successor?

All interesting questions.

JLG@mondaynote.com

————————-

[I'll leave alone rumors such as Ford's CEO Alan Mullally replacing Ballmer. Notwithstanding the obligatory congratulations, there would be much giggling in Mountain View and Cupertino. Competent management is a necessary but not sufficient condition...see Ballmer.]

Memo #3 to Jeff — Data & User Profiling for The Washington Post

 

For customer-related technologies, the financial and intellectual backing of Jeff Bezos, and his Amazon experience can give The Post a huge competitive advantage. Here is what should be at the top of the to-do list. 

Every digital manager must plan to tap into Amazon’s fantastic engineering firepower. (Even though Bezos bought the newspaper out of his own pocket, the first thing he’ll do — if he hasn’t already — will be drafting some of his techies as “advisors” to The Post.) The key point being: the influx of engineering brainpower must not be limited to the digital side of the house, or to the newspaper’s IT infrastructure. It should impact all activities: editorial, marketing, subscriptions and paid-for products. Let’s dive into details.

Turbo-boosting the editorial. Let’s start with the basics: What characterizes media outlets playing in The Washington Post’s league? It is their ability to line up top journalistic resources to cover stories that matter, in-depth, with multiple angles and treatment modes (text, features stories, photographs, graphics, multimedia storytelling, live blogging, opinions, etc.), while deploying the best expertise on topics covered. These are the five items that make the difference between the bulk of pure players and true legacy media.

In many ways, the above is anti-economic, it is loaded with inherent inefficiencies — dry holes, dead ends, waste of time on promising leads —  that drive nuts “quant zealots” obsessed with KPI’s and productivity measurements. At this point, the difference between great newsroom managers (i.e. editors) and average ones lies in their ability to make some room for “managed inefficiencies”. An editor’s key, delicate duty is weighing the purpose of resource-intensive tasks such as flummoxing the competition, pursuing a worthy story, or launching a months-long journalistic project aimed at a Pulitzer prize. Unfortunately, weak leadership, balking at tough choices and yielding instead to a sorry attempt to spread an even level of (dis)satisfaction among constituencies causes inefficiencies to grow like weed.

The foremost goal of technology-enhanced news content is smartly weaving together all components of a topic. The idea is to keep the reader aboard by encouraging multiple levels of reading, with different angles for a subject, calls to essential archives or to other forms of journalism such as blogs or infographics. In this field, Amazon is light-years ahead of the news industry. By raising the number of editorial treatments seen by the reader, almost twenty years of Amazon’s e-commerce recommendation engine refinements will undoubtedly benefit The Post.

Another key item will be the level of news personalization. What should a Post reader see mostly? News that matters to him or her, or everything the paper’s staff collects? How to define mostly? Fully tailored contents based on past navigation? Stated preferences combined with the preserved serendipity that together make the core of news construction? This is a deeply involved problem — and the subject of a future Monday Note.

Reader profiling. All digital publishers dream of knowing exactly what reader sees what content, where, at what time of the day and on which vector: web, smartphone, tablet. The finer the granularity, the better. Slicing and dicing readership in segments of age, professions, residence, income, interests yields three types of uses:

  • increasing news content stickiness by serving customized content as mentioned earlier
  • smarter customized advertising, as opposed to dumbly drowning users into a flood of ads for months by using data collected during the shopping season. This practice, known as “retargeting”, is one of the internet “seven plagues” and the most potent repellent to advertising
  • channelling the reader to the catalogue of ancillary products any news outlet should operate. For example: once a reader is identified (even anonymously) as working in the legal field, for a media group struggling to fill the last seats of its conference on privacy laws, why not show this loyal reader a one-time only, 50% discounted ticket, valid for 24 hours only? Simplistic as this example might seem, its large scale application is far from trivial: it requires super-accurate analytics, the deployment of “event engines” that will trigger the display of the right offer, at the right time, to the right segment of the population. Fortunately, this is the kind of work Amazon geeks are particularly good at.

For The Washington Post, the benefits are numerous. Research shows that serving the right ad to the right profile can raise its value by a factor of 1.5x to 2x. And the performance of ancillary products (conferences, business events, news-related ebooks or professional products, education packages, etc.) will become easier to measure.

Impact on paywall and subscription models. Paywall theory can be summarized as follows:

  • deploying a wide range of tactics all aimed at significantly raising the number of news contents items (not necessarily articles) a reader watches every month. Let’s make no mistakes: the main dial is under the newsroom’s control, marketing wizardry won’t do the trick
  • finding readers most likely to convert to a paid-for subscription and, week after week, serving them (I write serving, not bombarding) offers they can’t refuse: an extended test-period, or a news-related bonus that reflects the breadth of the company’s line of products.

As with most theories, practice is much harder. A paid-for system is a long-term, investment-intensive, staffing-critical effort. Two legacy media did it particularly well: The Financial Times and The New York Times. The former built a subscription base that now surpasses the paper’s; the latter added $100m a year in revenue that did not exist three years ago. Most paywall strategies underperform for two reasons: first, an error in predicting the editorial contents’ ability to retain readers beyond a free threshold of 10, 15, or 20 stories a month; second, a failure to build the data-driven infrastructure that is mandatory for any paid-for product. The Washington Post does relatively well with the first test. For the second, the backing of Amazon tech brains will give it the best chances to succeed.

frederic.filloux@mondaynote.com

64 bits. It’s Nothing. You Don’t Need It. And We’ll Have It In 6 Months

 

Apple’s A7 processor, the new iOS 7 and “house” apps are all industry firsts: genuine, shipping 64-bit mobile hardware and software. As we’ve seen before with the iPhone or the iPad, this new volley of Apple products is first met with the customary bursts of premature evaluations and counterfactual dismissals.

On September 10th, Apple revealed that the new iPhone 5s would be powered by its new 64-bit A7 processor. The initial reactions were less than enthused. We were treated to exhumations of lazy bromides…

“I don’t drink Kool-Aid. Never liked the stuff and I think we owe it to ourselves to collectively question whether or not Apple’s ‘reality distortion field’ is in effect when we consider how revolutionary the iPhone 5S is and if Apple’s 64-bit A7 processor under its shiny casing will be all its [sic] cracked up to be when the device hits the market in volume.” [Forbes]

…and equally lazy “markitecture” accusations…

“With current mobile devices and mobile apps, there really is no advantage [to 64 bits] other than marketing — the ability to say you’re the first to have it…” [InfoWorld]

…and breezy brush-offs, such as this tweet from an industry expert:

“We’ll see just how good Apple’s marketing team is trying to leverage 64-bit. 64-bit add more memory and maybe registers. Period.” [Twitter]

Rather than wonder what these commenters were drinking, let’s turn to AnandTech, widely regarded as one of the best online hardware magazines.

Founded by Anand Lal Shimpi when he was all of 14-years-old, AnandTech is known for its exhaustive (and sometimes exhausting) product reviews. The 14-section September 17th iPhone 5S review doesn’t disappoint. Among other things, it provides detailed iPhone 5S vs. iPhone 5 performance comparisons such as this:

5S GeekBench Anand Edited

There are many other charts, comparisons, and considerations of the new 64-bit ARMv8 instruction set, the move from 16 to 32 floating-point NEON 128-bit registers, the hardware acceleration of cryptography operations… It’s a very long read, but not a boring one (at least not for interested geeks).

The bottom line is plain: The A7 processor is a substantial improvement that’s well supported by the 64-bit iOS7. (And I’d like to meet the author and bow to his encyclopedic knowledge.)

Was it because of AnandTech’s cool analysis that the doubters have changed their tune?

As I predicted, Apple A7 benchmarks well due to CPU arch (for IPC), new GPU, ARM v8′

Now that the A7 had become a Benchmarking Beast, the author of the previous week’s brush-off tweet (“more memory and maybe registers. Period”) has revised his position [emphasis mine]:

“The improvements Apple made with the A7 are truly incredible, and they really went against the grain in their choices. With an industry obsessed with more cores, they went with fewer, larger and efficient cores. With people expecting v8 and 64-bit ARM in late 2014, Apple brings it out in 2013 with full Xcode support and many performance optimizations.” [...] “Apple has done it again, but this time in unexpected fashion.”

That all-purpose defense, unexpected, provides a key to the wrong-footing of many “experts”.

When Apple entered the microprocessor field a mere five years ago with its acquisition of Palo Alto Semiconductor, the move was panned: Apple had no future competing with established industry leaders such as Intel, Qualcomm, Nvidia, and Samsung.

But with the successive, increasing refinement of the A4, A5, and A6, the designs were ultimately viewed as good, very good, roughly on par with the rest of the industry. What these processors lacked in raw power was more than made up for by they way they were integrated into Apple’s notion of a purposeful, usable mobile device: Enhanced UI responsiveness, reduced power consumption, obeisance to the unique requirements of media and communications.

The expectation was that Apple would either fail, or produce a “competent” (meaning not particularly interesting) iteration of previous A4-5-6 designs. No one expected that the processor would actually work, with all in-house apps running in 64-bit mode from day one.

But let’s back up and rewrite a bit of history, ourselves:

On September 10th, Samsung announced its flagship 64-bit Exynos processor, supported by Android 5.0, the 64-bit version of Google’s market-leading mobile OS. The new Galaxy S64 smartphone, which will ship on September 20th, features both 64-bit hardware and software components. Samsung and Google receive high praise:

“Supercomputer-class processor… Industry-leading performance… Tightly integrated 64-bit software and hardware open a new era of super high-performance applications previously impossible on mobile devices…”

And Apple gets its just deserts:

“Once again, Apple gets out-innovated…This confirms the trend we’ve seen since Tim Cook took over… iPhones have become second-class devices… The beginning of a long decline…”

Apple can be thankful this is fantasy: The real world would never treat it like this (right?).

My fantasy isn’t without basis: Within 24 hours of Apple’s September announcement, Samsung’s mobile business chief Shin Jong-kyun said his company will have its own 64-bit Exynos processor:

“Not in the shortest time. But yes, our next smartphones will have 64-bit processing functionality…” [The Korea Times]

As for Android support, no problem: 64-bit versions of the underlying Linux kernel already exist. Of course, the system software layer that resides on top of the Linux kernel — the layer that is Android — will also need to be converted to take advantage of the 64-bit processor, as will the Software Development Kit (SDK) that third-party developers use to create apps. It’s a sizable challenge, but one that’s well within the Android’s team skills and resources; the process has certainly been under way for a while already.

The real trouble starts outside of Google. Which 64-bit processor? Intel’s (the company says it will add 64-bit “capabilities” to Android)? Samsung’s? Qualcomm’s?

Who writes and supports device drivers for custom SoC modules? This sounds a lot like Windows device driver complications, but the complexity is multiplied by Google’s significantly weaker control over hardware variants.

Apple’s inherent control over all of the components in its platform will pay dividends in the speed and quality of the transition. There will be glitches — there will always be new, factory-fresh bugs — but the new 64-bit hardware is designed to run existing 32-bit apps, and it seems to actually do so in practice.

Now let’s go beyond the iPhone 5S. In his September 10th presentation, Phil Schiller, Apple’s Marketing Supremo, called the A7’s performance “desktop class”. These words were carefully calibrated, rehearsed, and approved. This isn’t a “Can’t innovate anymore? My asssaeta, blurted while seized by religious fervor at last Spring’s Apple Developers Conference.

Does “desktop class” imply that Apple could use future versions of its 64-bit processor to replace Intel chips in its Mac devices?

In the AnandTech post quoted above, several benchmarks compare Apple’s A7 to a new x86 chip, Intel’s Baytrail, with interesting results:

AnandTech Baytrail A7

So, yes, in theory, a future Apple 64-bit processor could be fast enough to power a Mac.

But let’s consider a 3GHz iMac running a high-end media creation application such as Photoshop or Autodesk. The processor doesn’t want to be constrained by power consumption requirements, it’s optimized for performance (this even ignores the upcoming MacPro and its thermal management prowess).

Can we see a split in the Mac product line? The lower, more mobile end would use Apple’s processors, and the high-end, the no-holds-barred, always plugged to the wall desktop devices would still use x86 chips. With two code bases to maintain ß OS X applications to port? Probably not.

Apple could continue to cannibalize its (and others’) PC business by producing “desktop-class” tablets. Such speculation throws us back to a well-known problem: How do you compose a complex document without a windowing system and a mouse or trackpad pointer?

We’ve seen the trouble with Microsoft’s hybrid PC/tablet, its dual Windows 8 UI which is considered to be “confusing and difficult to learn (especially when used with a keyboard and mouse instead of a touchscreen).”

The best suggestion I’ve seen so far comes from “a veteran design and management surgeon” who calls himself Kontra and proposes An interim solution for iOS ‘multitasking‘ based on a multi-slot clipboard.

If Apple provides a real way to compose complex documents on a future iPad, a solution that normal humans will embrace, then it will capture desktop-class uses and users.

Until such time, Macs and iPads are likely to keep using different processors and different interaction models.

JLG@mondaynote.com

 

Memo #2 to Jeff Bezos: Let’s talk about news products and design

 

Should the new owner of The Washington Post dump the print edition? What should its digital online strategy and tactics look like, both in terms of contents and platforms? 

The questions stated above might not fall into Jeff Bezos areas of sharpest expertise. But there is no shortage of smart people within The Washington Post — at least a core group eager to seize their new owner’s “keep experimenting” motto and run with it.

What can he do? For today, let’s focus on editorial products.

#1. The printed newspaper. Should The Washington Post dump its print product altogether? The short answer is no. At least not yet and not completely. Scores of digital zealots, usually with a razor-thin media culture, will push for the ultimate sacrifice. But in every market — Washington, London, Paris — there still exists a solid base of highly solvent readers that will pay a premium for the print product. This very group carries two precious features for newspaper economics: One, they are willing to pay almost any price to have their precious paper delivered every day. For a proof of that statement, see how quality papers repeatedly hiked prices in recent years, $2 or €2 is no longer a psychological threshold. Hefty street prices helped many to offset the decline of advertising revenues. Keeping the printing presses running offers a second advantage, the ads themselves: They gave lost ground, but the remaining print ads still bring 10 or 15 times more money per reader than digital versions — which is, let’s be honest, a complete economic failure of digital news products.

How long will it last? I’d say around five years. It actually depends of the evolution of the print product. Look at this weekend paper’s layout:

wapo pages

Is there anyone at The Washington Post who seriously believes this paleolithic visual will help retain readers?

Bezos should bring in a team of modern art directors from abroad. One such example is Innovation Media Consulting, an organization that works in many countries and has a great track record (I know one of Innovation’s partners well, Juan Señor, but I have no interest whatsoever in the firm.) Visually, the Post should consider a new layout (the Berliner format is a much better fit for tomorrow’s print than the old broadsheet). Also, to get a much-needed glimpse on what’s going on outside the Beltway, management should use their Amazon account to buy copies of the excellent Best Newspapers Design compilation.

Regarding the national vs. local/regional question, to me, the debate is settled: There is no point at having a physical daily newspaper with a national reach, period. (This could change if, one day, the Post is down to just one thick weekend edition.) Last August, in a remote trading post of Northern New Mexico, I found a fresh copy of the New York Times, most likely printed in Denver or Santa Fe, four hours truck drive from where I was (just have a look at this Google Map featuring the NYT printing plants locations to see my point). National + global scope belongs to digital.

#2. Digital products. The plural is important because, for a news company such as the Post, no single focus will do. At least three avenues ought to be considered: Web, mobile and tablets. (For the moment, we’ll put the Web aside, where The Post is doing great.)

For all publishers, mobile is way more tricky than initially imagined: as long as we can’t integrate content subscription in cell carrier billing, it will be difficult to have people pay for it — except if we consider some kind of in-app purchase for specialized contents. As for advertising on mobile, it now grows in “spectacular” fashion — going from the infinitesimal to insignificant. Furthermore, when comparing their product line to pure players such as Circa, we see how legacy media experienced difficulties in catching the mobile wave (see a previous Monday Note) or Pocket. The Post better work in that direction.

Tablets promise much better monetization. For this, assess the rate of iPad ownership among the Post’s readers (I bet it must be around 60%). Unfortunately, in the old press, the current rationale calls for flavors of print replicas, usually based on a PDF. As I’m writing this paragraph, I’m trying to download this morning’s Sunday edition of the Post for their iPad app; I’m stuck at about 20% of the download. (I certainly won’t ridicule the Post’s occasional glitches since it still occurs too often at my own paper– and I’m the one responsible…)

Why are digital publishers like us still struggling with this? It’s because we are stuck with a technology — namely PDF — that wasn’t designed for low download times, nor for interaction with the user, enhanced contents, social sharing, etc. Plus, many of us can’t depart form the idea that readers need to find on our apps the exact page look and feel, column structure and general layout of the print version. That assertion becomes less and less valid as the number of online readers keeps growing. That audience can become several orders of magnitude larger than the print edition’s readership: Simply consider that the NYT has 50 million people who are in contact with its online version one way another (including the very long tail), that’s more than fifty times it’s print circulation on any weekday.

Granted, a news product must have a visual identity, recognizable in every possible form, but that certainly doesn’t mean sticking to a 1993 technology with guys like us trying to keep outdated stuff alive, like a Havana car repairman nostalgically tinkering with a 1956 Chevrolet Bel Air

Jeff Bezos must keep one important things in mind: The modernization of print media has always been driven by the magazine industry, not by newspapers: From graphic design, to marketing, to advertising, weeklies and monthlies have lead innovation for decades. Now, as their print vector is dying, many of them tend to innovate on digital. They’re not doing it equally well, of course: a large group such as Condé Nast is pathetically backward — most of its titles offer only ultra-basic and unstable apps — but many publications (Fast Company, Business Week) made the leap forward with digital magazines really designed for the tablets. Even the NYT is about to launch a digital magazine for tablets that will feature great productions such as the Pulitzer Prize winning Snow Fall. So will ProPublica, I’m told.

fastco app

The Post should get rid of the cumbersome PDF legacy and switch to a full blown e-newspaper for iPad, generic Android tablets and Kindle Fire. There is no shortage of inspirational works available in the AppStore and in Apple Newsstand: Longform for the curation (my favorite weekend readings), The Magazine, TNW and more, all filled with interesting ideas or features…

To further stimulate innovation Jeff Bezos should call in firms able to genuinely think outside of the box such as Ideo or smaller shops who design great selling apps like Caroline+Young (the dataviz app mem:o), the people who did the sketching app Paper53… Personally, I’d even go as far as picking up the brain of great architects like Norman Foster, Rem Koolhas or workspace specialists NBBJ who have been commissioned to build Amazon new headquarters… It would be the most enthralling experiment to mix such great and diverse design talent pool with the Post’s journalistic excellence…

frederic.filloux@mondaynote.com

Apple Market Share: Facts and Psychology

 

Remember netbooks? When Apple was too greedy and stupid to make a truly low-cost Macintosh? Here we go again, Apple refuses to make a genuinely affordable iPhone. There will be consequences — similar to what happened when the Mac refused to join netbooks circling the drain. 

My first moments with the iPad back in April 2010 were mistaken attempts to use it as a Mac. Last year, it took a long overdue upgrade to my eyeglasses before I warmed to the nimbler iPad mini, never to go back to its older sibling.

With that in mind, I will withhold judgment on the new iPhone until I have a chance to play customer, buy the product (my better half seems to like the 5C while I pine for a 5S), and use it for about two weeks — the time required to go beyond my first and often wrong impressions.

While I wait to put my mitts on the new device, I’ll address the conventional hand-wringing over the 5C’s $549 pricetag (“It’s Too Damned High!” cry the masses).

iphone5c copie

Henry Blodget, who pronounced the iPhone Dead In Water in April 2011, is back sounding the alarm: Apple Is Being Shortsighted — And This Could Clobber The Company. His argument, which is echoed by a number of pundits and analysts, boils down to a deceptively simple equation:

Network Effect + Commoditization = Failure

The Network Effect posits that the power of a platform is an exponential function of the number of users. Android, with 80% of the smartphone market will (clearly) crush iOS by sucking all resources into its gravitational well.

Commoditization means that given an army of active, resourceful, thriving competitors, all smartphones will ultimately look and feel the same. Apple will quickly lose any qualitative advantage it now enjoys, and by having to compete on price it could easily fall behind.

Hence the preordained failure.

As a proof-of-concept, the nay-sayers point to the personal computer battle back in the pre-mobile dark ages: Didn’t we see the same thing when the PC crushed the Mac? Microsoft owned the personal computer market; PC commoditization drove prices into the bargain basement…

Interpret history how you will, the facts show something different. Yes, the Redmond Death Star claimed 90% of the PC market, but it failed to capture all the resources in the ecosystem. There was more than enough room for the Mac to survive despite its small market share.

And, certainly, commoditization has been a great equalizer and price suppressant — within the PC clone market. Microsoft kept most of the money with the de facto monopoly enjoyed by its Windows + Office combo, while it let hardware manufacturers race to the bottom (netbooks come to mind). Last quarter, this left HP, the (still) largest PC maker, with a measly 3% operating profit for its Personal Systems Group. By contrast, Apple’s share of the PC market may only be 10% or less, but the Mac owns 90% of the $1000+ segment in the US and enjoys a 25% to 35% margin.

After surviving a difficult birth, a ruthlessly enforced Windows + Office platform, and competition from PC makers large and small, the Mac has ended up with a viable, profitable business. Why not look at iDevices in the same light and see a small but profitable market share in its future?

Or, better yet, why not look at more than one historical model for comparison? For example, how is it that BMW has remained so popular and profitable with its One Sausage, Three Lengths product line strategy? Aren’t all cars made of steel, aluminium (for Sir Jony), plastic, glass, and rubber? When the Bavarian company remade the Mini, were they simply in a race to the bottom with Tata’s Nano, or were they confidently addressing the logical and emotional needs of a more affluent — and lasting — clientèle?

Back to the colorful but “expensive” 5C, Philip Elmer-DeWitt puts its price into perspective: For most iPhone owners, trading up to the 5C is ‘free‘ due to Apple’s Reuse and Recycle program. We’ll have to see if The Mere Matter of Implementation supports the theory, and where these recycled iPhones end up. If the numbers work, these reborn iPhones could help Apple gain a modest foothold in currently underserved price segments.

Still thinking about prices, I just took a look at the T-Mobile site where, surprise, the 5C is “free“, that is no money down and 24 months at $22 — plus a $10 “SIM Kit” (read the small print.) You can guess what AT&T offers: 24 months at $22/month (again, whip out your reading glasses.) Verizon is more opaque, with a terrible website. Sprint also offers a no-money-down iPhone 5C, although with more expensive voice/data plans.

This is an interesting development: Less than a week ago, Apple introduced the iPhone 5C with a “posted price” of $99 — “free” a few days later.

After much complaining to the media about “excessive” iPhone subsidies, carriers now appear to agree with Horace Dediu who sees the iPhone as a great “salesman” for carriers, because it generates higher revenue per user (ARPU). As a result, the cell philanthropists offer lower prices to attract and keep users — and pay Apple more for the iPhone sales engine.

Of course, none of this will dispel the anticipation of the Cupertino company’s death. We could simply dismiss the Apple doomsayers as our industry’s nattering nabobs of negativism, but let’s take a closer look at what insists under the surface. Put another way, what are the emotions that cause people to reason against established facts, to feel that the small market share that allowed the Mac to prosper at the higher end will inevitably spell failure for iDevices?

I had a distinct recollection that Asymco’s Horace Dediu had offered a sharp insight into the Apple-is-doomed mantra. Three searches later, first into my Evernote catchall, then to Google, then to The Guardian, I found a Juliette Garside article where Horace crisply states the problem [the passage quoted here is from a longer version that's no longer publicly available; emphasis and elision mine]:

“[There's a] perception that Apple is not going to survive as a going concern. At this point of time, as at all other points of time in the past, no activity by Apple has been seen as sufficient for its survival. Apple has always been priced as a company that is in a perpetual state of free-fall. It’s a consequence of being dependent on breakthrough products for its survival. No matter how many breakthroughs it makes, the assumption is (and has always been) that there will never be another. When Apple was the Apple II company, its end was imminent because the Apple II had an easily foreseen demise. When Apple was a Mac company its end was imminent because the Mac was predictably going to decline. Repeat for iPod, iPhone and iPad. It’s a wonder that the company is worth anything at all.”

This feels right, a legitimate analysis of the analysts’ fearmongering: Some folks can’t get past the “fact” that Apple needs hit products to survive because — unlike Amazon, as an example — it doesn’t own a lasting franchise.

In the meantime, we can expect to see more hoses attached to Apple’s money pump.

Next week, I plan to look at iOS and 64-bit processing.

JLG@mondaynote.com

Memo #1 to Jeff Bezos: Try Washington Post Prime

 

We can be sure Jeff Bezos will try many things with the Washington Post. One could be drawing inspiration from Amazon’s fabulously successful Prime service. (First article in a series) 

Changes at The Washington Post’s will be the most watched media story of the coming months and, perhaps, years. Why? First of all, with the iconic Watergate saga, The Post epitomized a historic high in print journalism. The episode combined the fierce independence of a great media company, the courage of two people — namely Katherine Graham, the paper’s proprietor, and editor-in-chief Ben Bradlee — who together bet on the tenacity and energy of two young reporters, Bob Woodward and Carl Bernstein. For my generation, these times are part of the mystique of great journalism.

wpost_watergate
The grand old days (credit: Washington Post, Watergate Files)

Second, The Washington Post was sold (for cheap, only $250M) because it faced a certain death. Its weekday circulation fell by 60% since 2003 (still 472,000 copies today), and the advertising-loaded Sunday issue lost more than half of its audience (more details in Alan Mutter’s coverage). As for digital advertising, The Post has been unable to compensate for the in print advertising hemorrhage, gaining only $1 in digital while at the same time the print ads were losing $16 — similar to everyone else in the business.

Like most of its peers, The Post was far too slow in its shift to digital journalism, leaving an open field to new, more agile ventures such as Politico, a pure digital player that even managed to snare talent form the historic newsroom. Eventually, management got around to adjust all dials in the best possible manner (see a previous Monday Note on the subject) — alas without inverting the trend.

But the main reasons to watch Bezos’ next moves remain his appetite and proven ability to reinvent aging business models. He did so with the retail business, energized by two of the celebrated obsessions that became religion in his company: maximum efficiency applied down to the minutest of details, and an unprecedented care for the customer.

Can these two ingredients apply to the  news business?

As for customer care, in general, the press has a long way to go. As both a heavy consumer (my many digital subscriptions) and a long time media professional, I can offer many sorry testimonials to the media industry’s backward customer service. From order fulfillment (weeks in some cases) to client-support, media lies at the polar opposite of the digital industry, especially Amazon. From day one, I’ve been a paid subscriber to the Wall Street Journal and an Amazon customer. After gross overcharges for my subscriptions to the Journal, its customer service repeatedly failed to even to grant me an explanation. I finally gave up: As soon as my subscription is over, I’ll walk. Fortune Magazine has been landing in my physical mailbox for many years; sadly, it is apparently unable to provide the codes required to enjoy my subscription on Apple’s Newsstand. Again, I gave up. Another example outside the news sector: Canal+, one of the largest paid-for TV network in the world (I’m not a customer): according to several customers and two consultants I spoke with, the network’s main strategy to retain subscribers is the use every possible trick to prevent them for terminating their subscription. “Even death might not be enough to exit the service”, joked a media professional…

If Amazon had behaved like that, it would have never become the retail behemoth it is today. It started in 1995 with no credibility — actually, it even had a negative image stemming from the suspicion surrounding online shopping at the time. Like others, Amazon had to build its reputation one customer at a time. I was an early adopter and, today, my reliance on Amazon keeps growing steadily (there were a few glitches along the way, quickly fixed.)

Why mention customer service? Evidently not by reason of the need to take good care of a digital or print subscriber — that should be the bare minimum. But because a media outlet such as the Post will eventually sell many other products and services beyond news; therefore, instilling a strong customer service mentality will be a prerequisite to expanding its business into other areas. Also, the move to digital raises the customer care standards bar. More for the Post than for any other media company, customers will use Amazon services as the benchmark of quality.

My bet is Jeff Bezos will use lessons from Amazon’s Prime service. For Monday Note readers outside the United States, Amazon Prime is a special service from which, for an annual fee of $79 (€60), you get free two-days shipping, free video streaming and the right to borrow Kindle titles in a catalog of 350,000 (I can hear writers and bookstore owners faint…) The least we can say is that it worked: more than 10m people joined the Prime program (including a couple of friends of mine who quickly dumped their cable subscription — call it collateral damage…) And that’s just the beginning: Amazon expects to reach 25m Prime customers by 2017. Even more interesting: when you cough up eighty bucks a year to use the service, you also tend to buy more, that’s the juiciest psychological facet of the Prime program. See how it works for the famous tech writer Farhad Manjoo (who wrote an interesting piece in Slate If Anyone Can Save theWashington Post, It’s Jeff Bezos

 I was recently looking back at my Amazon order history. Before 2006, the year I first signed up for Prime, I placed less than 10 orders per year at the site. Prime completely changed my shopping habits. In my first year with the service, I placed 46 orders. This year my household is on track to quadruple that.

These macro level numbers confirm the success: the Amazon Prime customer spends much more than a regular one: $1224 (€930) vs. $524 (€400) per year. Furthermore, Prime accounts for one third of Amazon’profits (see a detailed story by FastCompany on the matter). In short, an immense product line, served by a near-perfect execution (an Amazon order is shipped about 2.5 hours after you clicked the “Place your  order” button), augmented by a psychological incentive smelling of free, fast and convenient all conspire to generate both high ARPU and loyalty — two outcomes newspapers economics are starving for. How can such reasoning apply to our industry? Can the antique “bundling” systems benefit from it and, as an example, open the way to new super-subscriptions? What tools can Jeff Bezos leverage to pull this off?

We’ll explore answers in further columns.

frederic.filloux@mondaynote.com

Apple’s Wearables Future

 

Wearable technologies have a huge future. For Apple, they’ll create a new product category with an iPhone-like revenue stream! No so fast. Smartwatches and other wearable consumer products lack key attributes for breaking out of the novelty prison. 

‘I Think the Wrist Is Interesting’ Thus spake Tim Cook on the opening night of last May’s D11 conference.

When pressed to discuss his company’s position on wearable technologies, Cook was unusually forthcoming: Instead of pleading Apple’s Fifth, Cook launched into a substantial discussion of opportunities for his company to enter the field, calling wearables “a very key branch of the tree”.

But when asked about the heavily publicized Google Glass he parried the question by suggesting that people who don’t otherwise wear glasses might be reluctant to don such an accoutrement.

I don’t find Tim Cook’s dismissal of eyewear very insightful: Just go to a shopping center and count the eyewear stores. Many belong to the same rich Italian conglomerate, Luxottica, a company with about ten house brands such as Oakley, Persol, and Ray-Ban, and a supplier to more than twenty designer labels ranging from Armani to Versace. (As the perturbing Sixty Minutes exposé on Luxottica pointed out, the company nicely rounds out its vertical dominance of the sector through its ownership of EyeMed, a vision insurance business.)

Eyewear, necessary or not, is a pervasive, fashionable, rich product category, a fact that hasn’t escaped Google’s eye for numbers. The company is making an effort to transmute their geeky spectacles into fashion accessories. Courtesy of Counternotions I offer this picture of Sergey Brin and fashionista Diane von Furstenberg proudly donning the futuristic eyewear at the NY Fashion Week:

Glass Fashion Brin

On a grander scale, we have a Vogue article, Google Glass and a Futuristic Vision of Fashion:

Glass en Vogue 2

The company’s efforts to make Google Glass fashionable might be panned today for pushing the envelope a little too far but, in a not-too-distant future, they stand a chance of being viewed as truly visionary.

If eyewear doesn’t excite Tim Cook, what does? To him, the wrist feels more natural, more socially acceptable. We all wear one or more objects around our wrist(s).

The wristwear genre isn’t new (recall Microsoft’s 2004 Spot). Ask Google to show you pictures of smartwatches, you get 23M results and screen after screen like this one:

smartwatch_ggl

The genre seems to be stuck in the novelty state. Newer entries such as Samsung’s Gear have gotten mixed reviews. Others contend a 2010 iPod nano with a wristband makes a much nicer smartwatch.

Regardless, by comparison, pre-iPod MP3 players and pre-iPhone smartphones were getting better press – and more customers. Considering the putative iWatch, the excitement about Apple getting into this class of devices appears to be excessive.

The litmus test for the potential of a device is the combination of pervasiveness and frequency of use. Smartphones are a good example, they’re always with us, we look at their screens often (too often, say critics who pretend to ignore the relationship between human nature and the Off button).

The iWatch concept makes two assumptions: a) we’ll wear one and, b) we’ll only wear that one.

Checking around we see young adults who no longer wear watches — they have a smartphone; and middle-agers use watches as jewelry, possessing more than one. This defeats both pervasiveness and frequency of use requirements.

Then there’s the biometry question: How much useful information can a wearable device extract from its wearer?

To get a better idea about what’s actually available (as opposed to fantasized), I bought a Jawbone UP wristband a little over a month ago. With its accelerometers and embedded microprocessors, UP purports to tell you how many steps you took, how long you’ve been inactive during your days, it logs your stretches of light and deep sleep, and even “makes it fun and easy to keep track of what you eat”.  Once or twice a day, you plug it into your smartphone and it syncs with an app that displays your activity in graphic form, tells you how well you’re doing versus various goals and averages. It also suggests that you log your mood in order to “discover connections that affect how you feel.”

At first, I found the device physically grating. I couldn’t accept it the way I’m oblivious to my watch, and I even found it on the floor next to my bed a couple of mornings. But I stuck with it. The battery life is as promised (10 days) and I’ve experienced none of the first versions troubles. I traveled, hiked and showered with it without a hitch other than the cap covering the connecting pin getting a bit out of alignment.

Will I keep using it? Probably not.

Beyond the physical discomfort, I haven’t found the device to be very useful, or even accurate. It’s not that difficult to acquire a useful approximation of hours slept and distance walked during the day — you don’t need a device for these things.

As for accuracy, the other day it declared that I had exhibited a substantial level of physical activity… while I was having breakfast. (I may be French, but I no longer move my hands all that much as I speak.)

The app’s suggestion that I log my food consumption falls into the magical thinking domain of dieting. A Monday morning step on a scale tells us what we know already: Moderation is hard, mysterious, out of the reach of gadgets and incantations.

For a product to start a new worthy species for a company as large as Apple, the currency unit to consider is $10B. Below that level, it’s either an accessory or exists as a member of the ecosystem’s supporting cast. The Airport devices are neat accessories; the more visible Apple TV supports the big money makers — Macs, iPads and iPhones — by enhancing their everyday use.

With this in mind, will “wearables” move the needle, will they cross the $10B revenue line in their second or third year, or does their nature direct them to the supporting cast or accessory bins?

Two elements appear to be missing for wearable technologies to have the economic impact that companies such as Apple would enjoy:

  • The device needs to be easily, naturally worn all the time, even more permanently than the watch we tend to take off at night.
  • It needs to capture more information than devices such as the Jawbone do.

A smartwatch that’s wirelessly linked to my smartphone and shows a subset of the screen in my pocket…I’m not sure this will break out of the novelty category where the devices have been confined thus far.

Going back to Tim Cook’s oracular pronouncement on wearables being “a very key branch of the tree”, I wonder: Was he having fun misdirecting his competition?

JLG@mondaynote.com

—————————————–

PS: After two July Monday Notes on the company, I’ll wait for the Microsoft centipede to drop one or two more shoes before I write about the Why, When, How and Now What of Ballmer’s latest unnatural acts. There in an Analyst Day coming September 19th — and the press has been disinvited.

PPS: In coming days, to keep your sanity when trying to drink from the Apple kommentariat fire hydrant, you can safely direct your steps to three sites/blogs:

  • Apple 2.0 , where Philip Ellmer-DeWitt provides rational news and commentary, skewers idiots and links to other valuable fodder.
  • Asymco, where Horace Dediu provides the absolute best numbers, graphs and insights into the greatest upheaval the tech industry has ever seen. Comments following his articles are lively but thoughtful and civilized.
  • Apple Insider. You might want to focus on learned, detailed editorials by Daniel Eran Dilger such as this one where he discusses Microsoft and Google (partially) shifting to an Apple-like business model. Daniel can be opinionated, animated even, but his articles come with tons of well-organized data.

Culture War: Jeff Bezos and The Washington Post

 

by Jean-Louis Gassée

After predicting the death of newspapers, that was last year, Jeff Bezos, the Amazon founder, now buys himself the The Washington Post. Necrophilia or the beginning of another spectacular transformation of an old genre?

A successful business man reaches the dangerous age of 50, looks at his fortune and makes a decision: He’s going to plough a few of his millions into a restaurant. In the past 25 years, he’s been to many of the best dining places around the world. Power lunches, closing dinners, gastronomy road trips with the family, he’s done it all.

He knows restaurants.

But he keeps failing. He fires the chef, changes suppliers, hires a new dining room manager, looks for a classier sommelier, fights city inspectors, calls on his acquaintances and asks them to bring their celebrity friends… nothing works.

He was blinded by his command of his true calling: being a customer. He saw the show from a comfortable box seat and only went backstage when invited by a knowing proprietor eager to glad-hand a moneyed patron. Our gastronome failed to see he knew very little about being a restaurateur, the intricacies, the people challenges (theft, drugs and sex), the politics that are involved in running a real restaurant.

(During my psychosocial moratorium, before I joined the high-tech industry in 1968, I worked in a bar, a food-serving strip-joint, and a restaurant. I thought these places were deranged. Decades later, I read Anthony Bourdain’s Kitchen Confidential and realized the “people challenges” I witnessed aren’t so unusual after all. Enjoy the book and think about the goings-on back there next time a maitre d’ looks down his aquiline nose at you.)

Failed restaurants are common in Silicon Valley, with its crowd of affluent and well-traveled business people who think they can master the trade. A few of them subsidize the great dinners we get to enjoy — for a while. They have our fleeting gratitude and end up with a painfully depleted bank account.

Is this a valid parable for Jeff Bezos plowing $250M (so far) into The Washington Post? To start, the price paid for the DC “paper of record” amounts to less than 1% of the Amazon founder’s fortune. Even if he has to double or triple his initial investment while he turns the paper around, it won’t trouble Bezos’ pocketbook much — he can eminently afford the bet.

And, unlike our failed restaurateur, I don’t think Bezos’ purchase was made in a mid-life fit of vanity. (Although see this delicious piece of Internet satire that contends he bought the paper as a result of a mistaken click.) Read Bezos’ Wikipedia bio, or his letters to shareholders… you’ll see he’s a deep-thinking geek (now a term of respect. The Urban Dictionary updates the meaning: people you pick on in high school and wind up working for as an adult). He’s justifiably famous for taking the very long view, and he’s quotably willing to be “misunderstood” for a long time.

But can he win?

Personally, I hope so. I used to love newspapers, I remember how much I enjoyed breakfast with two local and two national papers, all delivered to my doorstep, an unimaginable luxury in France.

Once upon a time, for their advertising revenue, newpapers enjoyed an oligopoly. With three or four dailies in each market, prices were contained. And we, the readers, certainly didn’t mind that advertisers paid 75% of the cost of our daily fix.

Then, the Internet that Bezos has ridden so well intervened and newspapers lost the news race. The Internet won on velocity and, too often, on relevance. In a Fortune Tech piece offering “5 hacks for Jeff Bezos“, Ryan Holmes, CEO of Social Media Management company HootSuite, points to the speed and tone of social media as sources of fixes for the Post:

Perhaps the greatest criticism of newspapers today is that they have lost relevance to their own readers. Writing on the decline of the Post, New York Times media columnist David Carr points out that “[the] days when people snapped open the daily paper to find out the things they should care about were long past …” Big newspapers, in particular, have proven startlingly inept at delivering timely, relevant news to the people they serve. So, naturally, readers have gone elsewhere, to myriad online sources that better cater to their interests.

Since the Net offered a seemingly unconstrained amount of billboard space, the price that newspapers could charge for ads was quickly cut by a factor of ten and, more recently, sixteen.

But it wasn’t just the emergence of the Internet as a news medium that dealt newspapers a near fatal blow. They also lost the race because of internal, cultural circumstances.

In another case of the Incumbent’s Curse, newspapers looked down on the Internet and those annoying high-tech people and things.  Kara Swisher, co-head of AllThingsD (a Wall Street Journal enterprise), recounts her trouble with the old, arrogant culture at the Post in her Dear Jeff Bezos, Here’s What I Saw as an Analog Nobody in the Mailroom of the Washington Post letter:

“It happened every day — other reporters playfully mocking me for using email so much or for borrowing the Post’s few suitcase cellphones, or major editors telling me that the Internet was like the CB-radio fad, or sales people insisting that the good times would never end for newspapers as long as there were local businesses that needed to reach consumers. (In truth, they still do, but that’s another letter.)”

Sadly, the Post’s cultural reluctance isn’t unique. In another country, two prominent dailies I know exhibit very similar symptoms, print journalists who actively despise or even obstruct the Internet side of their house.

Much has been written about Jeff Bezos’ personal (not Amazon’s) purchase of the Post. For example: Good Luck With That – Pew Research Graphs Bezos’ Stunning Challenge, where Tom Foremski steps us through the Post’s business challenges, starting with the inexorable decline in Print revenues:

Post Revenue Decline

Another comment well worth reading, Stop the Presses: A New Media Baron Appears, comes to us courtesy of Michael Moritz, a.k.a. Sir Michael, a journalist who went over to the Dark Side and is now Chairman of Sequoia Capital, a leading venture firm. The article reminds us of Bezos’ foremost preoccupation with customers [emphasis mine]:

“It won’t come as a surprise that Bezos explains that pleasing, if not thrilling, customers is Amazon’s most important task. In his 2009 letter he provided a peek into the internals of Amazon explaining that of the company’s 452 detailed goals for the ensuing year 360 had an impact on the customer, the word ‘revenue’ was used just eight times, ‘free cash flow’ only four times and ‘net income’, ‘gross profit’, ‘margin’ and operating profit were not mentioned. Even though there is no line item on any financial statement for the intangible value associated with the trust of customers this is, by far and away, Amazon’s most important asset.

Elsewhere, Moritz reminds us of another source of Amazon’s prosperity, Free Cash-Flow, a frequent topic in Bezos’ letters to shareholders:

“Since inception Amazon has generated $20.2 billion from operations almost half of which ($8.6 B), has been used for capital expenditures such as new distribution centers, which improve life for the customer.”

With this and more in mind, we now turn to the letter Bezos wrote to employees at the newspaper. While he professes no desire to “be leading The Washington Post day-to-day”, he nonetheless makes no mystery of his goal to be an agent of change, of modernization, of adapting to the Internet Age:

“There will, of course, be change at The Post over the coming years. That’s essential and would have happened with or without new ownership. The Internet is transforming almost every element of the news business: shortening news cycles, eroding long-reliable revenue sources, and enabling new kinds of competition, some of which bear little or no news-gathering costs. There is no map, and charting a path ahead will not be easy. We will need to invent, which means we will need to experiment. Our touchstone will be readers, understanding what they care about – government, local leaders, restaurant openings, scout troops, businesses, charities, governors, sports – and working backwards from there. I’m excited and optimistic about the opportunity for invention.”

This comes from a man who, last year, said ‘People Won’t Pay For News On The Web, Print Will Be Dead In 20 Years‘.

Changing business models as a publicly traded company is impossible in practice. The old model dies faster than the new one kicks in and Wall Street runs away from the transition’s “earnings trough”. By buying the Washington Post, Bezos is afforded a privacy that the old public ownership structure doesn’t permit. (That’s exactly why Michael Dell wants to take his own company private, so he can perform surgery behind the curtains.)

Which leaves the new owner with his biggest challenge: Understanding and changing the culture at the old “paper” — which sounds harder and more expensive than a gastronome trying to become a restaurateur.

There will be blood.

This is no reflection on Bezos’ truly amazing diversity and depth of skills, but a sincere concern borne of Culture’s ability to devour anything that stands in its way, sometimes silently until it’s too late. As the saying goes, Culture Eats Strategy for Breakfast.

Of course, we have examples of people performing seemingly impossible feats. Steve Jobs’ Apple 2.0 comes to mind, a turnaround of monumental proportions to which Bezos’ Amazon achievements could be fairly compared. So, why couldn’t Bezos build a WaPo 2.0?

As Aaron Levie, the founding CEO of Box, tweeted last week:

“Industries are transformed by outsiders who think anything is possible, not insiders who think they already know what is impossible.”

One more thing, a thought I can’t suppress: Unlike Steve Jobs, who gained insight from his tribulations and then spread the benefits on the largest of scales, Bezos hasn’t been burned and tempered by failure.

JLG@mondaynote.com

 

Surveillance: The Enemy of Innovation

 

by Jean-Louis Gassée

When we think of government surveillance, we worry about our liberties, about losing a private space where no one knows what we do, say, think. But there is more. Total Surveillance is the enemy of innovation, of anything that threatens public or private incumbents.

No apocryphal levity this week. Instead, a somber look into an almost-present future. For once, Tim Cook isn’t holding his cards close to his chest; he makes no secret of Apple’s interest in wearable technologies. Among the avenues for notable growth (in multiples of $10B), I think wearable devices is a good fit for Apple, more than the likable but just-for-hobbyist TV, and certainly more than the cloudy automotive domain where Google Maps could be a hard obstacle.

Apple isn’t alone, every tech company seems to be developing smart watches, smart glasses, and other health and life-style monitoring devices. (Well, almost every tech company…we haven’t heard from Michael Dell, but perhaps he’s too busy keeping his almost-private company out of Carl Icahn’s clutches.)

To gather more facts for a future Monday Note on wearable devices, I took my usual Play Customer route and followed the example of friends who sport activity-monitoring bracelets such as the popular Jawbone UP wristband (see Frédéric’s experience in a recent MN). I look up on-line review and find more than a few negative comments, but I choose to ignore them and listen, instead, to users who say the bugs have been squashed.

At the nearby Palo Alto Apple Store, a sales gent performs the fitting and the cashectomy with equal competence. Five minutes later, I download the required smartphone app, read a few instructions, and complete a first sync. I’m ready to monitor both my daytime activities and nighttime sleep patterns.

That was three days ago. It’s too early to say much about the product experience, which has been uneventful so far, but a dark, nagging thought comes to fill the void. Here is yet another part of my life that’s monitored, logged, accessible. The somber ruminations of a recent Privacy: You Have Nothing To Fear Monday Note are rekindled. At the time, I wondered if perhaps I was being paranoid. That was before the flow of Edward Snowden’s revelations to The Guardian’s Glenn Greenwald.

This is what we think we know so far: The State, whatever that means these days, monitors and records everything everywhere. We’re assured that this is done with good intentions and with our best interests in mind: Restless vigilance is needed in the war on terror, drug trafficking, money-laundering. Laws that get in the way — such as the one that, on the surface, forbids the US to spy on its own citizens — are bent in ingenious ways, such as outsourcing the surveillance to a friendly or needy ally.

If this sounds outlandish, see The Guardian’s revelations about XKeyscore, the NSA tool that collects “nearly everything a user does on the internet”. Or read about the relationship between the NSA and the UK’s GCHQ:

…the Guardian has discovered GCHQ receives tens of millions of pounds from the NSA every year…In turn, the US expects a service, and, potentially, access to a range of programmes, such as Tempora [GCHQ's data storage system].

Those campaigners and academics who fear the agencies are too close, and suspect they do each other’s “dirty work”, will probably be alarmed by the explicit nature of the quid-pro-quo arrangements.

Every day there’s another story. Today, the WSJ tells us that the FBI has mastered the hacking tools required to remotely turn on microphones and cameras on smartphones and laptops:

Earlier this year, a federal warrant application in a Texas identity-theft case sought to use software to extract files and covertly take photos using a computer’s camera, according to court documents. 

The surveillance and snooping isn’t just about computers. We have license plate recorders and federally mandated black boxes in cars. And now we hear about yet another form of metadata collection: It seems that the US Post Office scans every envelope that they process. Not e-mail, “sneaker mail”. Reading someone else’s mail is, of course, a federal offense. No problem, we’ll just scan the envelopes so we know who’s writing to whom, when, how often…

To this litany we must add private companies that record everything we do. Not just our posts, emails, and purchases, but the websites we visit, the buttons we click, even the way movement of the mouse…everything is recorded in a log file, and it’s made available to the “authorities” as well as buyers/sellers of profiling information. It’s all part of the Grand Bargain known as If the Product Is Free Then You Are the Product Being Sold.

When asked why Google doesn’t encrypt the user data that it stores, Vinton Cerf, the revered Internet Pioneer turned Google’s PR person, sorry, VP and Chief Evangelist, serenely admits that doing so would conflict with Google’s business model and disrupt user features.

At public events, Vint Cerf, a Google employee who was an early architect of the Internet, has said that encrypting information while it is stored would prevent Google from showing the right online advertisements to users.

I’m not singling out Google: Facebook and many others would have to make the same statement.

We’re now closer to trouble with innovation. In an almost-present future, we’ll have zero privacy. Many will know what we do, what we say, where we are, at all times. This will cast a Stasi shadow over our lives, our minds, our emotions. (See The Lives Of Others, Florian Henckel von Donnersmarck’s dramatization of state-sponsored surveillance in East Berlin.)

Let’s not dwell on the discredited You Have Nothing To Fear retort and turn to what happens to All Things New under a total surveillance regime.

Personal freedoms, civil rights, new ways of doing, thinking, speaking, dressing or undressing, science and philosophy, religion, fashion or cooking or smoking… Anything really new breaks existing canons, the rules, laws, habits, and understandings of the established order.

Total surveillance protects everything, starting with the status quo. With everything open to scrutiny by our Benevolent Guardians, there’s no safe place to discuss ideas that may seem disturbing at first, but that, given time and privacy, can evolve into new standards, behaviors, and technologies.

Anything that sticks out gets pounded.

Take past 100 years. Behold all the disruptive liberties and the inventions that upended public and private incumbents. Now, imagine how many would have been killed in the womb under a total State and private surveillance blanket.

But, you’ll say, we have a democratic system; if we don’t want our privacy invaded, surely we can voice our objection through our votes. After all, we elect and fire our representatives, the ones who make the laws and who hire and fire government executives for us.

Not really, or not anymore.

Two thousand years ago, Juvenal condemned Roman politicians who tried to buy votes with food and entertainment. It was a panem et circenses culture in which society “restrains itself and anxiously hopes for just two things: bread and circuses.”

The politicking in our current demagocracy is just as unsavory. To get elected one must promise to provide more with fewer taxes — or whatever bread and circus the latest Big Data says we crave. Instead of shedding light, the campaigning makes sick entertainment.

Once in office, our solons need money to be reelected so they promptly sell “our” votes to lobbyists who are eager to finance the reelection campaigns. Even worse, these same lobbyists provide the platoons of lawyers and consultants who inject the “appropriate” loopholes into inscrutable laws.

All of this makes (most) business feel like an oasis of sense and good will. Many otherwise capable people turn up their noses at the cesspool of politics and stick to their cleaner fun.

Is the situation hopeless?

I pray not. But I can’t help but see our laws — the tax code is the prime example — as old operating systems that are patched together, that have accumulated layer upon layer of silt. No one can comprehend these rules anymore, they’re too big and complicated to fit in one’s head…they’re seemingly unfixable.

This could leave us pining for a messiah, an Arthurian pure heart who pulls the sword from the stone and leads a revolution. We know what happens next in this narrative: the Okhrana becomes the NKVD.

Or perhaps technology itself will come to the rescue. Just as terrorism is viewed as an asymmetric threat in which a small, agile, and stealthy enemy can inflict damage on a giant, perhaps technology will provide us with an asymmetric advantage against surveillance and recreate a modicum of private space for us.

What I don’t see is The State simply renouncing its surveillance, it’s so convenient. Nor do I see us paying for truly anonymous Gmail, Google Maps, or Facebook.

JLG@mondaynote.com