jeff bezos

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

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

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