Browsing Tag


Ad Blockers Will Change How Ads Are Sold

advertising By November 9, 2015 Tags: , , 14 Comments

Thomas Schreiber at DNI’s conference 

Ad blocking keeps growing and widening the chasm between publishers and advertisers. Media executives no longer hold back, they now openly blame the advertising community  for being too slow to grasp the full extent of the digital advertising problem, they claim the ad industry badly needs a deep overhaul.


From “Trust In News” to “News Profiling”

journalism By February 1, 2015 Tags: , , 8 Comments


by Frédéric Filloux

For news organizations, the key challenge is to lift value-added editorial above Internet noise. Many see “signals” as a possible solution, one that could be supplemented by a derivative of ad profiling.   

Last year Richard Gingras and Sally Lehrman came up with the Trust Project (full text here, on Medium). Richard is a seasoned journalist and the head of News and Social at Google; Sally is a senior journalism scholar at the Markkula Center for Applied Ethics at Santa Clara University in California.

Their starting point is readers’ eroding confidence in media. Year after year, every survey confirms the trend. A recent one, released ten days ago at the Davos Economic Forum by the global PR firm Edelman confirms the picture. For the first time, according to the 2014 version of Edelman’s Trust Barometer, public trust in search engines surpasses trust in media organizations (64% vs 62%). The gap is even wider for Millennials who trust search engines by 72% vs 62% for old medias.



And when it comes to segmenting sources by type — general information, breaking, validation –, search leaves traditional media even further in the dust.



No wonder why, during the terrorist attack in Paris three weeks ago, many publishers saw more than 50% of their traffic coming from Google. This was reflected on with a mixture of satisfaction (our stuff surfaces better in Google search and News) and concern (a growing part of news media traffic is now in the hands of huge US-based gatekeepers.)

Needless to say, this puts a lots of pressure on Google (much less so to Facebook that is not that much concerned with its growing role as a large news conduit.) Hence the implicit mission given to Richard Gingras and others to build on this notion of trust.

His project is built around five elements to parse news contents with:

#1. A mission and Ethics statement. As described in the Trust Project:

One simple first step is a posted mission statement and ethics policy that convey the mission of a news organization and the tenets underlying its journalistic craft. Only 50% of the top ten US newspapers have ethics policies available on the web and only 30% of ten prominent digital sites have done so.

The gap between legacy and digital native news media is an interesting one. While the former have built their audience on the (highly debatable) notion of objective reporting, balanced point of views, digital natives come with a credibility deficit. Many of the latter are seen as too close to the industry they cover; some prominent ones did not even bother to conceal their ties to the venture capital ecosystem, others count among their backers visible tech industry figures. Others are built around clever click-bait mechanisms that are supplemented — marginally — by solid journalism. (I’ll let our readers put names on each kind.)
In short, a clear statement on what a media is about and what are the potential conflicts of interests is a mandatory building block for trust.

#2. Expertise and Disclosure. Here is the main idea:

Far too often the journalist responsible for the work is not known to us. Just a byline. Yet expertise is an important element of trust. Where has their work appeared? How long have they worked with this outlet? Can audiences access their body of work? 

Nothing much to add. Each time I spot an unknown and worth reading writer, my first reaction is to Google him/er to understand who I’m dealing with. Encapsulating background information in an accessible way (and standardized enough to be retrievable by a search engine) makes plain sense. 

#3. Editing Disclosure, i.e. details on the whole vetting process a story had gone through before hitting the pixels. Fine, but it’s a legacy media approach. Stories by Benedict Evans, Horace Dediu, or Jeff Jarvis (see his view on the Trust Project), just to name a few respected analysts, are not likely to be reviewed by editors, but their views deserve to be surfaced as original contents. Therefore, Editing Disclosure should not carry a large weight in the equation.

#4. Citation and Corrections. The idea is to have Wikipedia-like standards that give access to citations and references behind the author’s assertions. This is certainly an efficient way to prevent plagiarism, or even “unattributed inspiration”. The same goes for corrections and amplifications, as the digital medium encourages article versioning.

#5. Methodology. What’s behind a story, how many first-hand interviews, reporting made on location as opposed to the soft reprocessing of somebody else’s work. Let’s be honest, the vast majority of news shoveled on the internet won’t pass that test.

Google’s idea to implement all of the above is to create a set of standardized “signals” that will yield objective ways to extract quality stuff from the vast background noise on the Web. Not an easy task.

First, Google news already works that way. In a Monday Note based on Google News’ official patent filing (see: Google news: The Secret Sauce), I looked at the signals isolated by Google to improve its news algorithm. There are 13 of them, ranging from the size of the organization’s staff to the writing style. It certainly worked fine (otherwise, Google News won’t be such a success). But it no longer is enough. Legacy media are now in constant race to produce more in order to satisfy Google’s (News + Search) insatiable appetite for fresh fodder. In the meantime, news staffs keep shrinking and “digital serfs”, hired for their productivity rather than their journalistic acumen, become legions. Also, criteria such as the size of a news staff no longer apply as much, this because independent writers and analysts — as those mentioned above — have become powerful and credible voices.

In addition, any system aimed at promoting quality — and value — is prone to guessing, to cheating. Search algorithm has become a moving target for all the smart people the industry has bred, forcing Google to make several thousands adjustments in its search formulae every year.

The News Profile and Semantic Footprint approach. If the list stated by the creators of The Trust Project is a great start, it has to be supplemented by other systems. Weirdly enough, profiling techniques used in digital advertising can be used as a blueprint.

Companies specialized in audience profiling are accumulating anonymous profiles in staggering numbers: to name just one, in Europe, Paris-based Weborama has collected 210m profiles (40% of the European internet population), each containing detailed demographics, consumer tastes for clothing, gadgets, furniture, transportation, navigation habits, etc. Such data are sold to advertisers that can then pinpoint who is in the process of acquiring a car, or of looking for a specific travel destination. No one ever opted-in to give such information, but we all did by allowing massive cookies injections in our browsers.

Then, why not build a “News Profile”? It could have all the components of my news diet: The publications I subscribed or registered to, the media I visit on a frequent basis, the authors I searched for, my average length of preferred stories, my propensity to read large documented profiles of business persons, the documentaries I watched on You Tube, the decks I downloaded from SlideShare… Why not adding the books I ordered on Amazon and the people I follow on Twitter, etc. All of the above already exists inside my computer, in the form of hundreds, if not thousands, of cookies I collected in my navigations.

It could work this way: I connect — this time knowingly — to a system able to reconcile my “News Profile” to the “Semantic Footprint” of publications, but also of authors (regardless of their affiliation, from NYT’s John Markoff to A16z’ Ben Horowitz), type of production, etc. Such profiling would be fed by criteria described in The Project Trust and by Google News algorithm signals. Today, only Google is in the position to perform such daunting task: It has done part of the job since the first beta of Google News in 2002, it collects thousands of sources, and it has a holistic view of the Internet. I personally have no problem with allowing Google to create my News Profile based on data… it already has on me.

I can hear the choir of whiners from here. But, again, it could be done on a voluntary basis. And think about the benefits: A skimmed version of Google News, tailored to my preferences, that could include a dose of serendipity for good measure… Isn’t it better than a painstakingly assembled RSS feed that needs constant manual updates? To me it’s a no-brainer.


The two things that could hurt Google 

Uncategorized By October 26, 2014 Tags: , 7 Comments


Google’s recent Search Box feature is but one example of the internet giant’s propensity to use weird ideas to inflict damage upon itself. This sheds light on two serious dangers for Google: Its growing disconnection from the real world and its communication shortcomings. 

At first, the improved Google search box discreetly introduced on September 5 sounded like a terrific idea: you enter the name of a retailer — say Target, Amazon — and, within Google’s search result page, shows up another, dedicated search box in which you can search inside the retailer inventory. Weirdly enough, this new feature was not mentioned in a press release, but just in a casual Google Webmaster Central Blog post aimed at the tech in-crowd.

Evidently, it was also supposed to be a serious commercial enhancer for the search engine. Here is what it looked like as recently as yesterday:



Google wins on both ends: it keeps users on its own site (a good way to bypass the Amazon gravity well) while, in passing, cashing on ad modules purchased, in this case, both by itself bidding for the keyword “perceuse” (drill) on, and also by Amazon’s competitors offering the same appliance (and whose bids were lower.)

In due fairness, the Google Webmaster Blog explains how to bypass the second stage and how to make a search that lands directly to the site, in our example. Many US e-commerce sites did so. Why Amazon didn’t is still unclear.

Needless to say, this new feature triggered outrage from many e-commerce sites, especially in Europe. (I captured these screenshots on because no ads showed up for US retailers, most likely because I’m browsing form Paris).

For Google’s opponents, it was a welcome ammunition. Immediately, the Open Internet Project summoned a press conference (last Thursday Oct. 23), inviting journalists seen as supportive of their cause. In a previous Monday Note (see Google and the European media: Back to the Ice Age), I told the story of this advocacy group, mostly controlled by the German publishing giant Axel Springer AG, and the French media group Lagardère Active. The latter’s CEO, Denis Olivennes is well-know for his deft political maneuvers, much less so for his business acumen as he missed scores of digital trains in his long career in retail (he headed French retailer Fnac), and in the media business.

Realizing its mistake, Google quickly pulled back, removing the search box on several retailers’ sites, and announcing (though unofficially) that it was working on an opt-out system.

This incident is the perfect illustration of two major Google liabilities.

One: Google’s disconnect from the outside world keeps growing. More than ever, it looks like an insulated community, nurturing its own vision of the digital world, with less and less concern for its users who also happen to be its customers. It looks like Google lives in its own space-time (which is not completely a figure of speech since the company maintains its own set of atomic clocks to synchronize its data centers across the world independently from official time sources).

You can actually feel it when hanging around its vast campus, where large luxury buses coming from San Francisco pour out scores of young people, mostly male (70%) mostly white (61%), produced by the same set of top universities (in that order:  Stanford, UC Berkeley, Carnegie Mellon, MIT, UCLA…). They are pampered in the best possible way, with free food, on location dental care, etc. They see the world through the mirrored glass of their office, their computer screen and the reams of data that constitute their daily reality.

Google is a brainy but also messy company where the left hemisphere ignores what the other one does. Since the right one (the engineers) is particularly creative and productive, the left brain suffers a lot. In this recent case, a group of techies working at the huge search division (several thousands people) came up with this idea of an improved search box. Higher up, near the top, someone green-lighted the idea that went live early September. Many people from the left hemisphere — communication, legal, public affairs — might have been kept in the dark, not even willfully, by the engineering team, but simply by natural cockiness (or naiveté). However, I also suspect the business side of the company was in the loop (“Google” and “candor” make a solid oxymoron).

Two: Google has a chronic communication problem. The digital ecosystem is known for quickly testing and learning (as opposed to legacy media that are more into staying and sinking). In practical terms, they fire first and reflect afterwards. And sometimes retract. In the search box incident, the right attitude would have been to put up a communiqué saying basically, “Our genuine priority was to improve the user experience [the mandatory BS], but we found out that many e-retailers strongly disliked this new feature. As a result, we took the following steps, blablabla.” Instead, Google did nothing of the sort, only getting its engineering staff to quietly remove the offending search box.

There is a pattern to Google’s inability to properly communicate. You almost discover by accident that these people are doing stunning things in many fields. When the company is questioned, it almost never responds by providing solid data to make its point — that’s simply unbelievable from a company that is so obsessed with its reliance to hard facts. Recall Google’s internal adoption of W. Edwards Deming’s motto: In god we trust, all others bring data.

In parallel, the company practices access journalism, picking up the writer of its choosing, giving him/er a heads-up for a specific subject hoping for a good story. Here are two examples from Wired and The Atlantic.



These long-read “exclusive” and timely features were reported respectively on location from New Zealand and Australia. They are actually great and balanced pieces since both Wired’s Steven Levy and Atlantic’s Alex Madrigal are fine journalists.

While it never miss a opportunity to mention its vulnerability, Google is better than anyone else at nurturing it. Like Mikhail Gorbachev used to say about the crumbling USSR: “The steering is not connected to the wheels”. We all know what happened.


How Facebook and Google Now Dominate Media Distribution

business models, social networks By October 19, 2014 Tags: , , , , , 13 Comments


The news media sector has become heavily dependent on traffic from Facebook and Google. A reliance now dangerously close to addiction. Maybe it’s time to refocus on direct access. 

Digital publishers pride themselves on their ability to funnel traffic from search and social, namely Google and Facebook (we’ll see that Twitter, contrary to its large public image, is in fact a minuscule traffic source.) In ly business, we hunt for the best Search Engine Optimization specialists, social strategists, community managers to expand the reach of our precious journalistic material; we train and retrain newsroom staff; we equip them with the best tools for analytics and A/B testing to see what headlines best fit the web’s volatile mood… And yet, when a competing story gets a better Google News score, the digital marketing staff gets a stern remark from the news floor. We also compare ourselves with the super giants of the internet whose traffic numbers coming from social reach double digit percentages. In short, we do our best to tap into the social and search reservoir of readers.


Illustration by Rafiq ElMansy DeviantArt

Consequences vary. Many great news brands today see their direct traffic — that is readers accessing deliberately the URL of the site — fall well below 50%. And the younger the media company (pure players, high-performing click machines such as BuzzFeed), the lower the proportion of direct access is – to the benefit of Facebook and Google for the most part. (As I write this, another window on my screen shows the internal report of a pure player news site: In August it only collected 11% in direct access, vs. 19% from Google and 24% from Facebook — and I’m told it wants to beef up it’s Facebook pipeline.)

Fact is, the two internet giants now control most of the news traffic. Even better, they collect on both ends of the system.

Consider BuzzFeed. In this story from Marketing Land, BuzzFeed CEO Jonah Peretti claims to get 75% of its traffic from social and to not paying much attention to Google anymore. According to last Summer ComScore data, a typical BuzzFeed viewer reads on average 2.3 articles and spends slightly more than 3 minutes per visit. And when she leaves BuzzFeed, she goes back to the social nest (or to Google-controlled sites) roughly in the same proportion. As for direct access, it amounts to only 6% and Twitter’s traffic is almost no existent (less than 1%). It clearly appears that Twitter’s position as a significant traffic contributor is vastly overstated: In real terms, it’s a tiny dot in the readers’ pool. None of this is accidental. BF has built a tremendous social/traffic machine that is at the core of its business.

Whether it is 75% of traffic coming from social for BuzzFeed or 30% to 40% for Mashable or others of the same kind, the growing reliance to social and search raises several questions.

The first concerns the intrinsic valuation of a media so dependent on a single distribution provider. After all, Google has a proven record of altering its search algorithm without warning. (In due fairness, most modifications are aimed at content farms and others who try to game Google’s search mechanism.) As for Facebook, Mark Zuckerberg is unpredictable, he’s also known to do what he wants with his company, thanks to an absolute control on its Board of Directors (read this Quartz story).

None of the above is especially encouraging. Which company in the world wouldn’t be seen as fragile when depending so much on a small set of uncontrollable distributors?

The second question lies in the value of the incoming traffic. Roughly speaking, for a news, value-added type media, the number of page views by source goes like this:
Direct Access : 5 to 6 page views
Google Search: 2 to 3
Emailing: ~2
Google News: ~1
Social: ~1
These figures show how good you have to be in collecting readers from social sources to generate the same advertising ARPU as from a loyal reader coming to your brand because she likes it. Actually, you have to be at least six times better. And the situation is much, much worse if your business model relies a lot on subscriptions (for which social doesn’t bring much transformation when compared, for instance, to highly targeted emails.)

To be sure, I do not advocate we should altogether dump social media or search. Both are essential to attract new readers and expand a news brand’s footprint, to build the personal brand of writers and contributors. But when it comes to the true value of a visit, it’s a completely different story. And if we consider that the value of a single reader must be spread over several types of products and services (see my previous column Diversify or Die) then, the direct reader’s value becomes even more critical.

Taken to the extreme, some medias are doing quite well by relying solely on direct access. Netflix, for instance, entirely built its audience through its unique recommendation engine. Its size and scope are staggering. No less than 300 people are assigned to analyze, understand, and serve the preferences of the network’s 50 million subscribers (read Alex Madrigal’s excellent piece published in January in The Atlantic). Netflix’s data chief Neil Hunt, in this keynote of RecSys conference (go to time code 55:30), sums up his ambition by saying his challenge is “to create 50 million different channels“. In order to do so, he manages a €150m a year data unit. Hunt and his team concentrate their efforts on optimizing the 150 million choices Netflix offers every day to its viewers. He said that if only 10% of those choices end up better than they might have been without its recommendation system, and if just 1% of those choices are good enough to prevent the cancellation of a subscription, such efforts are worth €500m a year for the company (out of a $4.3bn revenue and a $228m operating income in 2013). While Netflix operates in a totally different area from news, such achievement is worth meditating upon.

Maybe it’s time to inject “direct” focus into the obligatory social obsession.


Google might not be a monopoly, after all

Uncategorized By June 30, 2014 Tags: , 12 Comments


Despite its dominance, Google doesn’t fit the definition of a monopoly. Still, the Search giant’s growing disconnect from society could lead to serious missteps and, over time, to a weakened position. 

In last week’s column, I opined about the Open Internet Project’s anti-trust lawsuit against Google. Reactions showed divided views of the search engine’s position. Granted, Google is an extremely aggressive company, obsessed with growth, scalability, optimization — and also with its own vulnerability.

But is it really a monopoly in the traditional and historical sense? Probably not. Here is why, in four points:

1. The consent to dependency. It is always dangerous to be too dependent from a supplier one doesn’t control. This is the case in the (illegal) drug business. Price and supply will fluctuate at the whim of unpredictable people.This is what happens to those who build highly Google-dependent businesses such as e-commerce sites and content-farms that provide large quantities of cheap fodder in order to milk ad revenue from Google search-friendly tactics.

In the end, everything is a matter of trust (“Jaws”, courtesy of Louis Goldman)

Many news media brands have sealed their own fate by structuring their output so that 30% to 40% of their traffic is at the mercy of Google algorithms. I’m fascinated by the breadth and depth of the consensual ecosystem that is now built around the Google traffic pipeline: consulting firms helping media rank better in Google Search and Google News; software that rephrases headlines to make it more likely they’ll hit the top ranks; A/B testing on-the-fly that shows what the search engine might like best, etc.

For the media industry, what should have remained a marginal audience extension has turned into a vital stream of page views and revenue. I personally think this is dangerous in two ways. One, we replace the notion of relevance, reader interest, with a purely quantitative/algorithmic construct (listicles vs depth, BuzzFeed vs. ProPublica for instance). Such mechanistic practices further fuel the value deflation of original content. Two, the eagerness to please the algorithms distracts newsrooms, journalists, editors, from their job to find, develop, build intelligent news packages that will lift brand perception and elevate the reader’s mind (BuzzFeed and plenty of others are the quintessence of cheapening alienation.)

2. Choice and Competition. In 1904, Standard Oil Inc. controlled 91% of American oil production and refining, and 85% of sales. This practically inescapable monopoly was able to dictate prices and supply structure. As for Google, it indeed controls 90% of the search market in some regions (Europe especially, where fragmented markets, poor access to capital and other cultural factors prevented the emergence of tech giants.) Google combines its services (search, mail, maps, Android) to produce one of the most potent data gathering systems ever created. Note the emphasis: Google (a) didn’t invent the high tech data X-ray business, nor (b) is it the largest entity to collect gargantuan amounts of data. Read this Quartz article The nine companies that know more about you than Google or Facebook  and see how corporations such as Acxiom, Corelogic, Datalogix, eBureau, ID Analytics, Intelius, PeekYou, Rapleaf, and Recorded Future collect data on a gigantic scale, including court and public records information, or your gambling habit. Did they make you sign a consent form?

You want to escape Google? Use Bing, Yahoo, DuckDuckGo or Exalead for your web search, or go here to find a list of 40 alternatives. You don’t want your site to be indexed by Google? Insert a robot exclusion line in your html pages, and the hated crawler won’t see your content. You’re sick of Adwords in your pages or in Gmail? Use AdBlock plug-in, it’s even available for the Google Chrome browser. The same applies for storing your data, getting a digital map or web mail services. You’re “creeped out” by Google’s ability to reconstruct every move around your block or from one city to another by injecting data from your Android phone into Maps? You’re right! Google Maps Location History is frightening; to kill it, you can turn off your device’s geolocation, or use Windows Phone or an iPhone (be simply aware that they do exactly the same thing, but they don’t advertise it). Unlike public utilities, you can escape Google. Simply, its services are more convenient, perform well and… are better integrated, which gets us to our third point:

3. Transparent strategy. To Google’s credit, for the most part, its strategy is pretty transparent. What some see as a monopoly in the making is a deliberate — and open — strategy of systematic (and systemic) integration. Here is the chart I made few months ago:

326 graph_goolge

We could include several recent additions such as trip habits from Uber (don’t like it? Try Lyft, or better, a good old Parisian taxi – they don’t even take credit cards); or temperature setting patterns soon coming from Nest thermostats (if you chose to trust Tony Fadell’s promises)… Even Google X, the company’s moonshot factory (story in Fast Company) offers glimpses of Google’s future reach with the development of autonomous cars, projects to bring the internet to remote countries using balloons (see Project Loon) or other airborne platforms.

4. Innovation. Monopolies are known to kill innovation. That was the case with oil companies, cartels of car makers that discouraged alternate transportation systems, or even Microsoft which made our life miserable thanks to a pipeline of operating systems without real competition. By contrast, Google is obsessed with innovative projects seen as an absolute necessity for its survival. Some are good, other are bad, or remain in beta for years.

However, Google is already sowing the seeds of its own erosion. This company is terribly disconnected from the real world. This shows everywhere, from the minutest details of its employees daily life pampered in a overabundance of comfort and amenities that keep them inside a cosy bubble, to its own vital statistics (published by the company itself). Google is mostly white (61%), male (70%), recruits in major universities (in that order: Stanford, UC Berkeley, MIT, Carnegie Mellon, UCLA), with very little “blood” from fields other than scientific or technical. For a company that says it wants to connect its business to a myriad of sectors, such cultural blinders are a serious issue. Combined to the certainty of its own excellence, the result is a distorted view of the world in which the distinction between right and wrong can easily blur. A business practice internally considered virtuous because it supports the perpetuation of the company’s evangelistic vision of a better world can be seen as predatory in the “real” world. Hence a growing rift between the tech giant and its partners and customers, and the nations who host them.


Google and the European media: Back to the Ice Age

Uncategorized By June 23, 2014 Tags: , , , , 12 Comments


Prominent members of the European press are joining a major EU-induced antitrust lawsuit against Google. The move is short on rationale and long on ideology. 

A couple of weeks ago, Axelle Lemaire, France’s deputy minister for digital affairs,  was quoted contending Google’s size and market power effectively prevented the emergence of a “French Google”. A rather surprising statement from a public official whose profile stands in sharp contrast to the customary high civil service profile. As an MP, Mrs Lemaire represents French citizens living overseas and holds dual French and Canadian citizenship; she got a Ph.D. in International Law at London’s King’s College as well as a Law degree at the Sorbonne. Ms. Lemaire then practiced Law in the UK and served as a parliamentary aide in the British House of Commons. Still, her distinguished and unusually “open” background didn’t help: She’s dead wrong about why there is no French Google.

The reasons for France’s “failure” to give birth to a Google-class search engine are simply summarized: Education and money. Google is a pure product of what France misses the most: a strong and diversified engineering pipeline supported by a business-oriented education system, and access to abundant capital. Take the famous (though controversial) Shanghai higher education ranking in computer science: France ranks in the 76 to 100 group with the University of Bordeaux; 101 to 150 for the highly regarded Ecole Normale Supérieure; and the much celebrated Ecole Polytechnique sits deep in the 150-200 group – with performance slowly degrading over the last ten years and a minuscule faculty of… 7 CS professors and assistants professors. That’s the reality of computer science education in the most prestigious engineering school in France. As for access to capital, two numbers say it all: according to its own trade association, the size of the French venture capital sector is 1/33th of the US’ while the GDP ratio is only 1 to 6. That’s for 2013; in 2012, the ratio was 1/46th, things are improving.

The structural weakness of French tech clearly isn’t Google’s fault. Which reveals the ideological facts-be-damned nature of the blame, an attitude broadly shared by other European countries.

A few weeks ago, a surreal event took place in Paris, at the Cité Universitaire Internationale de Paris (which wants to look like a Cambridge replica). There, the Open Internet Project uncovered the next European antitrust action against Google. On stage was an disparate crew: media executives from German and French companies; the former antitrust litigator Gary Reback known for his fight against Microsoft in the Nineties – and now said to help Microsoft in its fight against Google; Laurent Alexandre, a strange surgeon/entrepreneur and self-proclaimed visionary  living in Luxembourg Brussels where his company DNA Vision is headquartered, who almost got a standing ovation by explaining how Google intended to connect our brains to its gigantic neuronal network by around 2040; all of the above wrapped up with a speech from French Economy Minister Arnaud Montebourg who never misses an opportunity to apply his government’s seal on anti-imperialist initiatives.

The lawsuit alleges market distortion practices, discrimination in several guises, anticompetitive conduct, preference for its own vertical services at the expense of fairness in its search results, illegal use of data, etc. (The summary of EU allegations is here). The complaint paves the way for painstaking litigation that will drag on for years.

Among the eleven corporations or trade groups funding the lawsuit we find seven media entities, including the giant German Axel Springer GroupLagardère Active whose boss invoked the “moral obligation” to fight Google. There is also CCM Benchmark Group, a large diversified digital player whose boss, Benoît Sillard, had his own epiphany while speaking with Nikesh Arora in Mountain View a while ago. There and then, Mr. Sillard saw the search giant’s grand plan to dominate the digital world. (I paid a couple of visits to Google’s headquarters but was never granted such a religious experience – I will try again, I promise.)

Despite the media industry’s weight, the lawsuit fails to expose Google practices directly affecting the P&L of news providers. Indeed, some media companies have developed business that competes with Google verticals. That’s the case of Lagardère’s shopping site but, again, the group’s CEO, Denis Olivennes, was long on whining and short on relevant facts. (The only fun element he mentioned was outside the scope of OIP’s legal action: with only €50m in revenue, paid the same amount of taxes as Google whose French operation generates $1.6bn in revenue).

Needless to say, that doesn’t mean that Google couldn’t be using its power in questionable ways at the expense of scores of e-retailers. But as far as the media sector is concerned, gains largely outweigh losses as most web sites enjoy a boost in their traffic thanks to Google Search and Google News. (The value of Google-generated clicks is extremely difficult to assess — a subject for a future Monday Note.)

One fact remains obvious: In this legal action, media groups are being played to defend interests… that are not theirs.

In this whole affair, the French news media industry is putting itself in an awkward position. In February 2013, Google and the French government hammered a deal in which the tech giant committed €60m ($81m) over a 3-year period to fund digital projects run by the French press. (In 2013, according to the fund’s report, 23 projects have been started, totaling €16m in funding.) The agreement between Google and the French press stipulates that, for the duration of the deal, the French will refrain from suing Google on copyrights grounds – such as the use of snippets in search results. But those who signed the deal found themselves dragged in the OIP lawsuit through the GESTE, a legacy trade association – more talkative than effective – going back to the Minitel era  that supports the OIP lawsuit on antirust rather than copyrights grounds. (Those who signed the Google Funds agreement issues a convoluted communiqué to distance themselves from the OIP initiative.)

In Mountain View, many are upset by French media that, on one hand, get hefty subsidies and, on the other, file an anti-Google suit before the Europe Court of Justice. “Back home, the [Google] Fund always had its opponents”, a Google exec told me, “and now they have reasons to speak louder…” Will they be heard? It is unlikely that Google will pull the plug on the Fund, I’m told. But people I talk to also said that any renewal, under any form, now looks unlikely. So will be the extension of an innovation funding scheme in Germany — or elsewhere. “Google is at a loss when trying to develop peaceful relations with the French”, another Google insider told me… “We put our big EMEA [Europe and Middle East] headquarters in Paris, we created a nicely funded Cultural Institute, we fueled the innovation fund for the press, and now we are bitten by the same ones who take our subsidies…”

Regardless of its merits, the European press’ involvement in this antitrust case is ill-advised. It might throw the relationship with Google back to the Ice Age. As another Google exec said to me: “News media should not forget that we don’t need them to thrive…”




Puzzling Over Google’s Nest Acquisition

Internet of Things By January 19, 2014 Tags: , , , 50 Comments


Looking past the glitter, big names, and big money ($3.2B), a deeper look at Google’s last move doesn’t yield a good theory. Perhaps because there isn’t one.

Last week’s Monday Note used the “Basket of Remotes” problem as a proxy for the many challenges to the consumer version of the IoT, the Internet of Things. Automatic discovery, two-way communication, multi-vendor integration, user-interface and network management complexity… until our home devices can talk to each other, until they can report their current states, functions, and failure modes, we’re better off with individual remotes than a confusing — and confused — universal controller..

After reading the Comments section, I thought we could put the topic to rest for a while, perhaps until devices powered by Intel’s very low-power Quark processor start shipping.


A few hours later, Google announced its $3.2B acquisition (in cash) of Nest, the maker of elegant connected thermostats and, more recently, of Nest Protect smoke and CO alarms. Nest founder Tony Fadell, often referred to as “one of the fathers of the iPod”, takes his band of 100 ex-Apple engineers and joins Google; the Mountain View giant pays a hefty premium, about 10 times Nest’s estimated yearly revenue of $300M.


Tony Fadell mentioned “scaling challenges” as a reason to sell to Google versus going it alone. He could have raised more money — he was actually ready to close a new round, $150M at a $2B valuation, but chose adoption instead.

Let’s decode scaling challenges. First, the company wants to raise money because profits are too slim to finance growth. Then, management looks at the future and doesn’t like the profit picture. Revenue will grow, but profits will not scale up, meaning today’s meager percentage number will not expand. Hard work for low profits.

(Another line of thought would be the Supply Chain Management scaling challenges, that is the difficulties in running manufacturing contractors in China, distributors and customer support. This doesn’t make sense. Nest’s product line is simple, two products. Running manufacturing contractors isn’t black magic, it is now a well-understood trade. There are even contractors to run contractors, two of my friends do just that for US companies.)

Unsurprisingly, many worry about their privacy. The volume and tone of their comments reveals a growing distrust of of Google. Is Nest’s expertise at connecting the devices in our homes simply a way for the Google to know more about us? What will they do with my energy and time data? In a blog post, Fadell attempts to reassure:

“Will Nest customer data be shared with Google?
Our privacy policy clearly limits the use of customer information to providing and improving Nest’s products and services. We’ve always taken privacy seriously and this will not change.”

What else could Fadell offer besides this perfunctory reassurance?  “[T]his will not change”… until it does. Let’s not forget how so many tech companies change their minds when it suits them. Google is no exception.

This Joy of Tech cartoon neatly summarizes the privacy concern:


The people, the brands, the money provide enough energy to provoke less than thoughtful reactions. A particularly agitated blogger, who can never pass up a rich opportunity to entertain us – and troll for pageviews – starts by arguing that Apple ought to have bought Nest:

“Nest products look like Apple products. Nest products are beloved by people who love Apple products. Nest products are sold in Apple stores.
Nest, in short, looked like a perfect acquisition for Apple, which is struggling to find new product lines to expand into and has a mountain of cash rotting away on its balance sheet with which it could buy things.
[…] Google’s aggressiveness has once again caught Apple snoozing. And now a company that looked to be a perfect future division of Apple is gone for good.”

Let’s slow down. Besides Nest itself, two companies have the best data on Nest’s sales, returns, and customer service problems: Apple and Amazon. Contrary to the “snoozing” allegation, Apple Store activity told Apple exactly the what, the how, and the how much of Nest’s business. According to local VC lore, Nest’s Gross Margin are low and don’t rise much above customer support costs. (You can find a list of Nest’s investors here. Some, like Kleiner Perkins and Google Ventures, have deep links to Google… This reminds many of the YouTube acquisition. Several selling VCs were also Google investors, one sat on Google’s Board. YouTube was bleeding money and Google had to “bridge” it, to loan it money before the transaction closed.)

See also Amazon’s product reviews page; feelings about the Nest thermostat range from enthusiastic to downright negative.

The “Apple ought to have bought Nest because it’s so Apple-like” meme points to an enduring misunderstanding of Apple’s business model. The Cupertino company has one and only one money pump: personal computers, whether in the form of smartphones, tablets, or conventional PCs. Everything else is a supporting player, helping to increase the margins and volume of the main money makers.

A good example is Apple TV: Can it possibly generate real money at $100 a puck? No. But the device expands the ecosystem, and so makes MacBooks, iPads, and iPhones more productive and pleasant. Even the App Store with its billions in revenue counts for little by itself. The Store’s only mission is to make iPhones and iPads more valuable.

With this in mind, what would be the role of an elegant $249 thermostat in Apple’s ecosystem? Would it add more value than an Apple TV does?

We now turn to the $3.2B price tag. The most that Apple has ever paid for an acquisition was $429M (plus 1.5M Apple shares), and that was for… NeXT. An entire operating system that revitalized the Mac. It was a veritable bargain. More recently, in 2012, it acquired AuthenTec for $356M.

With rare exceptions (I can think of one, Quattro Wireless), Apple acquires technologies, not businesses. Even if Apple were in the business of buying businesses, a $300M enterprise such as Nest wouldn’t move the needle. In an Apple that will approach or exceed $200B this calendar year, Nest would represent about .15% of the company’s revenue.

Our blogging seer isn’t finished with the Nest thermostat:

“I was seduced by the sexy design, remote app control, and hyperventilating gadget-site reviews of Nest’s thermostat. So I bought one.”

But, ultimately, he never used the device. Bad user feedback turned him off:

“[…] after hearing of all these problems, I have been too frightened to actually install the Nest I bought. So I don’t know whether it will work or not.”

He was afraid to install his Nest… but Apple should have bought the company?

So, then, why Google? We can walk through some possible reasons.

First, the people. Tony Fadell’s team is justly admired for their design skills. They will come in handy if Google finally gets serious about selling hardware, if it wants to generate new revenue in multiples of $10B (its yearly revenue is approximately $56B now). Of course, this means products other than just thermostats and smoke alarms. It means products that can complement Google’s ad business with its 60% Gross Margin.

Which leads us to a possible second reason: Nest might have a patent portfolio that Google wants to add to its own IP arsenal. Fadell and his team surely have filed many patents.

But… $3.2B worth of IP?

This leaves us with the usual questions about Google’s real business model. So far, it’s even simpler than Apple’s: Advertising produces 115% or more of Google’s profits. Everything else brings the number back down to 100%. Advertising is the only money machine, all other activities are cost centers. Google’s hope is that one of these cost centers will turn into a new money machine of a magnitude comparable to its advertising quasi-monopoly.

On this topic, I once again direct you to Horace Dediu’s blog. In a post titled Google’s Three Ps, Horace takes us through the basics of a business: People, Processes, and Purpose:

“This is the trinity which allows for an understanding of a complex system: the physical, the operational and the guiding principle. The what, the how and the why.”

Later, Horace points to Google’s management reluctance to discuss its Three Ps:

“There is a business in Google but it’s a very obscure topic. The ‘business side’ of the organization is only mentioned briefly in analyst conference calls and the conversation is not conducted with the same team that faces the public. Even then, analysts who should investigate the link between the business and its persona seem swept away by utopian dreams and look where the company suggests they should be looking (mainly the future.)
There are almost no discussions of cost structures (e.g. cost of sales, cost of distribution, operations and research), operating models (divisional, functional or otherwise) or of business models. In fact, the company operates only one business model which was an acquisition, reluctantly adopted.”

As usual — or more than usual in current circumstances — the entire post is worth a meditative read. Especially for its interrogation at the end:

“The trouble lies in that organization also having de-facto control over the online (and hence increasingly offline) lives of more than one billion people. Users, but not customers, of a company whose purpose is undefined. The absence of oversight is one thing, the absence of an understanding of the will of the leadership is quite another. The company becomes an object of faith alone.  Do we believe?”

Looking past the glitter, the elegant product, the smart people, do we believe there is a purpose in the Nest acquisition? Or is Google simply rolling the dice, hoping for an IoT breakthrough?



News: Personalized or Serendipitous?

journalism By September 29, 2013 Tags: 11 Comments


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, one of the first and best online publication ever.


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.