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-    One on the fragility of models, as discussed in a previous Monday Note, a column by NYT’s Joe Nocera. Perhaps Joe Nocera ought to have generalized his cautionary advice.  The danger doesn’t just stem from too much reliance on the Value et Risk (VaR) model.  More generally, most complex models become inherently unstable, unreliable once they’re used by competing players trying to outguess, “outmodel” each other.
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-    The other by two great writers, Michael Lewis, the author of Liar’s Poker and Moneyball, among other really good books, and David Einhorn, a hedge fund manager and author of Fooling Some People All The Time.  The paper centers on the laziness and/or willing blindness of the financial police a.k.a the SEC and ratings agencies.
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I kept the most important for last: Obama and Congress. What we want to watch is how the new President manages to stop Congress from playing the same dirty old games.  I’m first referring to earmarks (funding a congressman’s local pet projects on the back of unrelated legislation) and, much more important, to selling out to lobbies ranging from pharma, healthcare, insurance, Wall Street (remember the CDS midnight vote) and telecom, just to name a few.  Depending upon who’s counting, www.lobbyists.info or the Washington Post, there are between 22,000 and more than 30,000 lobbyists in Washington.  What Obama has going for him, for us, in his drive for change are the millions of networked supporters he gathered during his campaign and has since carefully maintained via mybarackobama.com and change.gov.
We’ll watch how he uses his direct access to voters to squeeze some real reform from our corrupt Congress – the one we kept reelecting with a feeling of futility.
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Happy new Year! — JLG
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(For the difference between predictions and forecasts, see Paul Saffo’s Harvard Business Review paper here, the full article is unfortunately no longer free but Paul’s contains many other free and valuable essays).
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2009-2015 — Near-death experiences (and experiments)

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January 2009 — At the Journal, a quick situation assessment: No surprise, here. It’s bleak: for the entire year, advertising revenue is down 19% for print and copy sales revenue dropped by 4%. Overall, print revenue is down by 15%. Online revenue grew by 13%, but since it represents slightly less than a quarter of the total operations, the entire company revenue is down by 10%. Profit is gone. The group is in the red, its core business bleeding and no immediate improvement in sight
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At The Chronicle, the situation is somewhat better. Copy sales are stable (thanks to an aggressive subscription campaign), print advertising is holding better (-15%, instead of -19% for its competitor), and online advertising is growing fast. The overall revenue is down by 9%, one percentage point better that The Journal .
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One key difference, though. The Journal owns a much bigger online portfolio than the Chronicle does, thanks the previous year acquisitions. They own a dozen of interconnected brands, many of them not news-related (again, see Part 1 for details). By comparison, The Chronicle’s online business is three times smaller in revenue, with cash coming only from display and search-related advertising.
Key figures look like this:
-    The Journal gets 24% of its revenue online; each time it gains 1 dollar on its digital activities, its print operation loses 5 dollars
-    The Chronicle only makes 9% online, then — even though it is doing slightly better with its paper — each time it gains a dollar online, it loses 10 dollars in print.
We are looking at a full year here; the situation is actually much worse with monthly data showing an accelerated deterioration.
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As a first measure, the board of the Journal demands a global salary cut of 10%. The effect will be much faster than the classic staff reduction that takes a year to benefit the P&L. The board is rather blunt: “… a) do it now, no procrastination allowed here, say the directors; b) in the process, manage to flatten the salary curve a bit. Yep, biggest paychecks will take the biggest hit, this will make cuts more socially acceptable and help with the esprit de corps at the company; c) don’t tell your people we are doing this to avoid staff reductions, we might be forced to do that later this year”.  Management is left with no alternative and is also asked to come back within a month with a comprehensive set of cost-cutting programs.
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No such reaction at The Chronicle. The “one-dollar-gained-ten-lost”, moving from print to online, left the management in disarray.  Rushing to online? OK, but there are hurdles: without a proper copyright agreement, The Chronicle doesn’t have much control on its content. If the company wants to value its news material on others platforms, or with partners, the entire production staff is entitled to a piece of the action.  And even if the staff relinquishes this right, case-by-case negotiations will be tortuous and lengthy. Plus, many journalists have valuable blogs and other editorial presence outside the company. Massaging the whole thing into a valuable asset will take forever.
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At The Chronicle, taking action on the paper side seems much preferable. In less than 9 months, management reduces the number of pages, proposes a “subscribe-à-la-carte” system, in which people can select the day they want for the paper to be delivered (sports, business, features, culture). They also increase free distribution targeting audiences that are more valuable to advertisers. In the end, more than 50% of The Chronicle will be free. This “hybrid model”, as it’s called, is clearly a bold move.
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2011, the untold online shift
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Even bolder is The Journal’s decision to proceed with what they call “a progressive switch to digital”. This is decided in the middle of 2011, after almost two full years of recession in which all media groups have shrunk dramatically. As viewed by The Journal, the paper business model is no longer sustainable in its traditional form. As a first step, local and regional online coverage are beefed up. Legions of bloggers and local independent micro sites are enlisted to form what becomes a cluster of dozens of regional websites, heavily promoted in the paper itself and through local media outlets. At the time, everyone wonders why the The Journal is so assertively cannibalizing itself.
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The answer comes in the Spring of 2012: The journal announces that, from now on, its paper version will only be available in major cities. Other readers will rely on a cascading system of websites proposing news coverage of an unprecedented granularity. In the process, the circulation of the paper is cut by 40% overnight — this was the most expensive part of production and distribution. In the meantime, thanks to its clusters of news sites, The Journal’s footprint and audience are larger than ever. The ad market, in the early phase of a slow recovery, praises the move.
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As for The Chronicle, the transition towards the hybrid model yields three unintended consequences. First, the transition improves demographics, which is potentially good, but because of the recession, has no effect on advertising, whether it is volume or prices. Second, at the same time, copy sales revenue drops sharply: people grab ten copies of the paper when they find a free stack and do a secondary distribution at the workplace. Last but not least, The Chronicle faces an outcry from its faithful readers: they criticize a “cynical business move” where the paper is free for the affluent (i.e. valuable advertising-wise) and paid for the rest of the populace.
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Facing a revenue squeeze and a bad image, The Chronicle is considering its options. Its subscription strategy, and the marketing that went with it, have accentuated its audience segmentation. Fact is: the paper makes money two days a week, is barely breaks even for another day, and bleeds money the three remaining days. A decision is therefore made to slash the number of issues to only three days a week: Monday with big sports features; Thursday with an emphasis on politics and society, and Saturday with rich features, cultural and urban guides. In the process, another 25% of the staff has to go. After four years of alarming losses, The Chronicle is slowly coming back to break-even, even though restructuring costs led to a loss for FY 2013.
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By the following year, the two newspapers will have completed their shift. The Chronicle
will soon give up the Monday and Thursday publication and will become a free quality weekly supported by an excellent, breaking news, website. As for The Journal, it will shift to a full online publication, offering a vast range of contents, from international to hyper-local news. No more paper.
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The end of the News as we knew it
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By the end of 2014, the global economy has recovered somewhat, but the media landscape has been forever altered. In the United Sates, a third of the newspapers are gone. Google Media owns 52% of the New York Times (the rest being in a trust, no more publicly traded shares). Gmedia, headquartered in the Times Renzo Piano’s building makes tons of money selling ads on the 87 websites properties of the NYT Digital (the paper is still published in five cities in a 32 pages tabloid format). In several countries, pure players have emerged in the political and business fields. Pro Publica, the non-profit news site has become a major provider of quality journalism. In Scandinavia, the vast majority of people are getting their news on mobile devices and on the Net.
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In France, many newspapers are still on life support, but everyone is used to it. Libération, once he front runner in the Gallic politicized left wing journalism just changed its name to “Libe89″ after being acquired by the Rue89 Group. This media outlet has developed a chain of highly segmented (and profitable) pure players. Le Monde is virtually nationalized with the same ‘friends of the State’ shareholders as the Agence France Presse. Its management has remained reasonably independent given the circumstances, at least from its journalists’ standpoint, the readers being slightly more doubtful.
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The worldwide news stream is now split in three tiers:
-    Commodity News, available everywhere more or less at the same time. It is read and viewed mostly on Intelligent Mobile Devices. IMB adjust the flow of news to reading patterns in real time thanks to a Google-patented system called DINC for Dynamically Individualized News Cycle. With DINC, you adjust the level of serendipity you desire. This flow is provided by Internet pure players (some of them former newspapers such as The Journal) that sometimes also publish a free papers in selected cities
-    Value-added news, a niche and paid-for segment. Good journalism, but definitely a “Class Market”, mostly for the elite and seniors (in French: old people). These are either urban multiweeklies or pure-player websites.
-    Participatory mash-up. Rumors and facts are mixed and flow into social networks, RSS feeds and widgets. Hugely popular among youngsters. The “News” part is mostly provided by advertising agencies and commercial brands. This is where the money — and the true influence — is.
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Not related (really?): In the 40 largest democracies in the world, the extremes of the political spectrum, right and left, accounts for a dreaded 35% of the votes.  Each general election is now seen as a chilling gamble. –FF
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Back to Steve Chu, what he means by ‘scientific breakthrough’ is ‘we have no idea’. Unlike the Intel engineers who only worry about how to implement a step in their roadmap, for batteries, we have no plan, we’re searching for one.  For at least 50 years, that’s how old the question of a practical electric car is, we’ve been looking in what is know as one of Science’s Last Frontiers, Electrochemistry.

About 10 years ago, I sat next to Steve Chu, recently ‘Nobelized’, at a dinner in the Stanford house of a noted chemistry professor.  I asked him about batteries.  ‘Ah…’ came back the answer, followed by a courteous attempt to wean me from any hope for a medium term breakthrough in battery technology.  A hard science problem with no known path to a solution.
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Back to us VC, the close relationship between Stanford and Silicon Valley is a tight and fruitful one. If a Stanford professor tells us the solution is still hidden in parts unknown of basic science, we know we should stay away from the problem, our money won’t solve it.
This is but one example of why you don’t see us invest much in New Energies.  You might want to think of us as follows: some of us are stupid all the time; all of us are stupid from time to time; but, as a group, we’re not permanently obtuse.  Statistically, our billions go to real, practical technologies.  Otherwise, we’d disappear.
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With this in mind, we’ll be watching how the Obama administration manages the difficult navigation between hopes for solutions to our energy problem and hard scientific realities.  For example: how will the Energy Czar handle the truth about nuclear energy producing 80% of the electricity in one of Old Europe’s countries?
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Part 1: the (comparatively) easy years

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2000 — At the turn of the century, The Journal and The Chronicle are fierce competitors in the same national market. They don’t have the same approach to the news business, nor the same DNA or history.
The Journal is of a conservative management type: strong journalism, highly structured governance. The Chronicle is definitely more flamboyant. One day, sparks of genius fly in the newsroom, brilliant news coverage inspiring its journalists. But, the next day, on another story, the paper totally misses the point. The Journal is solid, regular, and more often than not, a bit dull. The Chronicle is brilliant, extravagant and unpredictable.
Both companies are financially sound – that is as much as a newspaper can be in the year 2000.  They both face the (then) usual cost structure — high industrial costs (paper, printing, distribution), too much staff (even unions admit it) — and a dual revenue stream: 60% advertising (a large chunk of it classifieds), and copy sales for the remaining 40%.
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The two boards of directors are as different as can be. The Journal’s board is a stern and demanding group of people. There is the lineup of usual suspects: managers of serious businesses, intellectual figures such as the dean of a major university (which includes a school of journalism), the head of the n°1 venture capital fund of the country, a more classical banker, the founder of a successful tech company who now spends his time scouting the planet for new ideas (he’s a consultant for a big cell phone company). The Journal union representative also sits at the boardroom table — this will turn to be a key element in the turbulent years ahead. The Journal boards members are kindly requested to do their homework prior any meeting, and they have a small secretarial office to assist them.
The Chronicle’s board is more like an intellectual forum. There are also strong business people, but global pundits from many horizons outweigh them. Discussions are much wittier and more vibrant that the debates at The Journal, those are more technical and down to earth.  Although heavily unionized, The Chronicle’s board doesn’t include union representation, a simple matter of keeping discussions inside the boardroom, “among equals”.
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On the Internet, neither paper makes significant money, but each does it in a different way. The Journal’s managers feel there might be something big out there, but they are not willing to cannibalize their business by giving away too much for free; as a result, a portion of the site charges for access, especially archives.
The Chronicle is more open; most of the content is online, readers are invited to join the fray, which they do with enthusiasm. Therefore, on the Internet, The Chronicle is much more visible than The Journal. This is amplified by The Chronicle’s ability to latch on emerging digital trends. Undoubtedly, hype is on their side.  They closely monitor the pulse of  the dot-com boom and tell glowing stories of eccentric start-ups with skyrocketing audiences, tons of fresh capital and maverick CEOs.
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The Journal is more circumspect toward the dot-com frenzy. A year earlier, its board of directors and its top managers gathered in for a two-day session to examine the Internet’s impact on the paper’s business. They came to two conclusions:
a) Do not rush the news transfer to the Net as long as there are no compelling application or viable business models;
b) Focus on areas where the Internet offers an indisputable advantage, that is on everything that can be stored in database systems, i.e. guides and classifieds.
Based on these findings, The Journal will keep a low profile on news but will allocate capital to invest in small outlets such as city guides and applications that could help migrate classifieds to the web. On March 10, 2000, as the Nasdaq peaks at 5132 points, The Journal and The Chronicle are clearly on a divergent path. The Chronicle is surfing on these trendy digital times. It is the darling of advertising agencies eager to express their creativity.
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2000-2005
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Then, the downfall, the burst of the Internet bubble. In less than 3 years, the Nasdaq index is divided by five. Advertising dries up in the same proportion. Since the Journal has partaken much less than The Chronicle in the dot-com boom bonanza, it suffers less.  To adjust, The Chronicle slashes a large percentage of its investment in its own website, reducing staff, reassigning people to the paper itself.
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At the Journal, the board is upset. The company must take a sizeable write-off for the acquisitions — small ones — made in the previous years. But management stays on one consistent message: It doesn’t matter that companies based on sand and fictitious “eyeballs” have gone belly-up. Fact is, this colossal correction won’t stop a major trend: everything that fits better on the Internet will inevitably migrate on it. Then, say the managers, let’s cut costs to restore margins, but let’s keep investing in niche businesses poised to become tomorrow’s profit engines. Between 2000 and 2005, The Journal invests in no less than 15 companies, ranging from cultural events agenda to all kinds of guides (local ones, travel, shopping).  These are connected to the transaction business through long-term deals that don’t look too sexy by the time they are signed. The idea is to snare the user into a mesh of relevant contents and services, small by themselves, but powerful when interconnected. Among the acquisitions are technologies and services suited to the progressive transfer of the lucrative classified business to the on-line world.
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On the advertising front, The Journal faces another challenge. Its books show an alarming concentration of orders coming from a small number of big media buying agencies. As day to day negotiations over dollars (or Euros) per page are growing more difficult, The Journal feels vulnerable — and slightly pressured, to say the least. Too often, after protracted bargaining for big, annualized contract, an additional deal comes up. For the coming year, the deal focuses on the amount of market research the paper will purchase from the media-buying agency: this is a quid pro quo, a thank you for the Big Automaker or the Big Retail Chain pages.
The Journal’s management is so inflamed by this practice that it decides to initiate a slow-motion strategy: for big annual budgets, bypass media buying agencies and deal directly with advertisers. The board is warned: this is a multi-year strategy, in which the performance might first degrade before improving.
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No such moves at The Chronicle. The relationship with the advertising food chain – creative people, planners, media-buyers — is so wonderful that it is out of the question to spoil it with pedestrian bean-counting considerations. Two years after the dot-com bust, the Post is back with its Internet enthusiasm in full bloom, thanks to two engines: blogs and user generated content (UGC). Its faithful and devoted audience creates a veritable cornucopia of blogs, funny and controversial ones, cleverly screened and promoted by a gang of dedicated editors. The Chronicle’s journalists are invited to join the party. Most of them do, often brilliantly.
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One day, The Chronicle’s digital editor presents interesting stats to the CEO: almost 50% of the page views on the site are generated by stories not originated by the physical paper. An excellent news by itself. Except that UGC doesn’t pay very much: the ad community doesn’t view UGC as valuable inventory. As far as the journalists’ blogs are concerned, they are treated as private space for reporters and therefore carry no ads.
The digital edition manager is ordered to open everything to banner ads. Foreign correspondents, whose blogs are the most successful ones, are the first to react: “Great”, they say unanimously, “How much we get for this?” Management patiently explains: since the paper is spending big bucks to maintain a bureau in New York and Shanghai, it sounds normal to include the correspondents’ production into the journalistic perimeter that is entitled to be monetized by the company. “No money, no ads on our blogs”, is the answer. To avoid confrontation, the idea is shelved.
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At The Journal, managers have taken note of the blogs quarrel. Along with the board, they pore over figures showing the potential of blog audiences: authored by pros or by talented amateurs, either way, huge! Time to take another look at the future and to make smart legal moves. The board summons a specialized law firm and issues the following brief: we want to own these things. Not only for our own monetization with banners and search ads, but we also want the leeway to syndicate these contents to other sites. It’s OK to pay for a good outside specialist, as we do for freelancers, but not for our own staff.
The Journal’s managers decisiveness is stimulated by another statistic showing the constant erosion of readership. “The big shift has begun”, says the CEO to its board.
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2005-2009
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Six months later, The Journal lawyers come with a proposal for the union representatives. The key points are:
-    Our revenue base is eroding sharply.
-    Five years from now, at the current rate, there is no way we’ll be in a position to sustain a newsroom with several hundreds journalists and editors.
-    The only way to stabilize the drop in revenue is to take advantage of the ongoing shift to the on-line world. Specifically: monetize every single piece of editorial on as many platforms as we can.  We’ll use our position, a powerful and trusted source, to syndicate our content on other media.
Six months of intense bargaining follow. Unions obtain a better profit-sharing formula aimed at the time when the digital windfall materializes.  Also, unions manage to get much better control over what the company can and cannot do with editorial content. At the board level, a Content Integrity Committee is created. It will guarantee the preservation of contents and prevent its dissemination to third party considered not compatible with The Journal’s (high, it goes without saying) standards. This body will be co-chaired by the union rep and the dean of the university; it is given its own part time staff of junior auditors (law students specializing in copyrights).
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On that basis, The Journal launches multidirectional initiatives to capitalize on its digital foundation. Journalists are encouraged to set up blogs based on their beat. Some are even allowed to tap on a pool of junior editors who will manage vast streams of user generated content: qualified comments on stories (the ones that excite debate and traffic), external “experts blogs”, moderated forums on specific subjects boosted by “online events”, highly publicized on all the online brands of the company and in the newspaper itself.
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On the commercial side, the salespeople are relieved. Thanks to the integrated brand strategy, the available inventory increased dramatically, not only in real terms (which is not sufficient), but on relevance terms vis-à-vis the ad market. The salesman working on travel and tourism for instance, is now able to sell a vast set of contents, ranging from reporting by the in-house writer, supplemented by a dozen of specialized bloggers and forums where users exchange travel tips. All of this increases the granularity of the coverage and accrues to The Journal’s quality label, to its “trusted source” image.  In addition, the cut The Journal gets on travel and tourism transactions (the four-year-old deal) is gaining traction, meaning revenue numbers are going up.
In summary: The Journal built a nice ecosystem in which every brand takes advantage of the other, getting and sending back traffic, supporting the sales force’s killer pitch: “We are specialists / We offer a profiled audience”.
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In the meantime, the strategy of progressively bypassing media buying agencies and their utterly expensive food chain is yielding mixed results: media agencies have a lock on many key accounts. But, over time, The Journal’s firmness of purpose gains credibility and begins to yield better deals. The real crack is discernible among online advertisers, they begin to see media-buyers as adding little or no value. A Yalta of sorts ensues, and CPT stop spiraling down.
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As far as The Chronicle is concerned, the end of the decade finds it in a different position. The progressive loss of paper readers is taking its toll on its P&L. The paper is losing money (so does its competition). It maintains good journalistic acumen and creativity, but it is losing momentum. In the last two years, several of its prominent journalists have launched their own blogs outside the mother ship. For instance, the football specialist feeds his highly regarded blog with all the material he gets while on assignment for the paper. It is a lose-lose game. The writer does not make much with the ads (a third-party network of sites sells his blog); and his online work is not an asset for his paper, which pays for it. The Chronicle enjoys great assets, though. A remarkable brand,  a sharp feel for the spirit of the times — at least intellectually speaking — and enviable journalistic firepower and influence.
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This is how the end of the year 2008 looks like for The Journal and The Chronicle, two great media players in their markets, facing dreadful times. Neither anticipated that the Big Shift will, in fact, mutate into a textbook-case of value destruction. In this new arithmetic, each dollar painfully gained online translates into a loss of 8 to 12 dollars for the print product — which, at this time, still account for three quarters of the revenue. They’re horrified: in spite of all their efforts, their world is unraveling much faster than anyone expected. –FF

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Next week: the tough years: 2009-2015
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But, before going any further, I want to make sure readers of the Monday Note have fully abandoned all hope for any turnaround whatsoever in newspaper business. Let’s face it: our beloved trade is spiraling down. We’ll see many fatalities and, of course, a few survivors. Latest headlines: The Miami Herald (good regional paper, solid journalism with 19 Pulitzer Prizes, strong readership) is said to be for sale by its owner, the McClatchy Company, the third-largest newspaper publisher in the US. With a $2bn debt load and a market cap down by 97% since 2005, McClatchy has no choice but to unload its most precious asset (one that is still making little money, btw). E.W. Scripps has put another big regional paper on the block: The Rocky Mountain News ($11m loss in 9 months). For these two good papers: no bidder in sight.
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Overall, ad sales for US newspapers are bound to plunge by 15%-20% this year. The drop accelerates in the last two quarters of 2008. This is the unavoidable consequence of the deterioration of the American economy: 1.9m jobs destroyed since the beginning of the year, including 1.2m in the last three months alone. The unemployment rate now reaches 6.7%, but the picture is much worse if “hidden unemployment” is taken into account. The number of “discouraged” people, individuals who gave up their search for a job climbed by 17% on yearly basis, and those who declare working less than they want rose by a stunning 62.2%. Including both categories, the jobless rate is now 12.5%.
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Even more worrisome are the historical references used to contextualize these gloomy figures: “worse single month drop in jobs since 1974″; “likelihood of the biggest recession since WWII (comparable to the 1982’s when GDP contracted by 2% over the year)”; “the largest decline in consumer confidence since its tracking began in the 50’s”.France is likely to be spared by this crisis, at least by the perception of it. Call it the Chernobyl cloud syndrome. Back in 1986, when the explosion of an Ukranian nuclear reactor spread a vast radioactive cloud all over Europe, France was told by its government it had miraculously escaped the toxic cloud. See: according to our map, the polluting cloud stopped right at the border with Germany. Today, in similar fashion, we appear still in denial of the upcoming 2009 recession (even though Nicolas Sarkozy outlined a €26bn stimulus package).  Echoing this is the unshakeable confidence of the media industry, it insists the crisis can be weathered in one way or another. Everyone seems to believe that major French papers are definitely “too important to fail” and that Bank X or Y will ultimately throw a lifeline to group Z when it runs out of cash next March (I will come back with names and figures in a few weeks).
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Obviously, with advertising orders vaporizing and copy sales falling, bean counters have switched to realism mode. But harsh measures are nowhere in sight. Ascribe this to the difficulty in making structural adjustments: while it takes three weeks to implement staff reduction in most countries (US, UK, Spain, Scandinavia), doing a “plan social” in France takes six months of legal hassles. And forget decisive and effective measures such as significant, across the board, salary cuts: they take months to negotiate (I hope to be proven wrong, but I doubt it).
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On the subject of drastic measures, please go to the excellent blog “Reflection of a Newsosaur”: in a two-part analysis, Alan Mutter (himself a former editor) outlines all the contingency plans American newspaper are undertaking. Worth to read, or to show to the next happy-go-lucky union representative you have in front of you.
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I’ll stop here. Let’s have a glass of California Merlot, Nordic Aquavit, Australian Chardonnay, or French Sancerre (depending on where you while reading this…). Let’s look at the bright side: the evolution of the Internet business model in light of recent events involving three news outlets: the NY Times Digital, Politico, and the Huffington Post.
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The NY Times rolled-out last week a great feature called Times Extra. In a nutshell, it allows the integration of outside links for every subject displayed on the home page of the New York Times website. The links are presented in green and you can scroll down (and switch the new feature off if you don’t like it). The system is powered by Blogrunner, a straightforward news aggregator (owned by the Times) that crawls more than 10,000 sources and ranks them based on popularity.
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[Just an quick detour]: the funny thing is that Techmeme, a remarkable news “aggrefilter” (the expression is from Cnet’s Dan Farber), just announced it was hiring a human editor to supplement its algorithm-based retrieval system. Techmeme will pick a former Wired.com editor (read Techmeme’s creator Gabe Riviera’s funny post on why “Automated news doesn’t quite work”).
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Coming back to the Times Extra, here is why it is relevant:
1) From the reader’s standpoint: this feature enhances the panoramic view of a news items by integrating trusted sources, at least ones approved by the NY Times, from the competition or from quality blogs.
2) From the publisher’s standpoint, especially the small but serious ones: it helps hundreds of them rise from the depths of cyberspace.
3) In an era of interconnected information, this is exactly what a modern and self-assured news organization should be: selective, open, not afraid of linking a piece of news to a competitor, simply because it is relevant and newsworthy.
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Second good news: the deal announced last week by Politico. This excellent political site has allied itself with 100 news organizations, including 67 newspapers, in the Politico Network (see the members map here). Here is an example of how it works: the site of a local radio station publishes Politico’s coverage of Congress and of the new administration – for free. In exchange, Politico places an ad on the station’s site. Ad revenue is split between the two according to a formula using the volume of Politico material actually used (see story in Editor & Publisher).
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Smart concept indeed: with a hundred sites inventories to sell, Politico Network suddenly becomes way more credible in its discussions with media buying agencies. Its content gets much more audience in areas it could not reach by itself. Financial performance will be interesting to follow. (By the way: such a deal would be unworkable in France because journalists are legally entitled to be paid for every piece of news published by any third party site. That’s the copyright law, which overrules the employment contract).
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The final encouraging news of the week involves the Huffington Post (see previous Monday Note for story on “superblogs“). Last week, “HuffPo” disclosed it had raised a whopping $25m from the venture capital firm Oak Investment Partners. (Read the story in All Things Digital). This gives the Huffington Post a post-money valuation close to $100m. Not bad for a pure player with a relatively modest 4.5m unique visitors a month.
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The Oak investment is good news since it represents a genuine validation of the pure player business model by the venture capitalist community. VCs do take risks, calculated ones. They invest based on due diligence, including thorough market research. No gambling here: analysis precedes action. The deal holds up hope for Internet media outlets with significant audiences and professional management but insufficient capital.
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The Internet economy is moving in the right direction: The HuffPo financing, the Times Extra initiatives and the advent of the Politico Network all provide evidence of such progress. Similar news organizations are bound to find sustainable business models. Eventually.  –FF
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