Posts from — January 2009

Great post describing an initiative on mass customization applied to newspaper. I still remember how in my business school we studied mass-customization around Dell. Dell offered capabilities to final customers to set up their hardware requirements and they would get a product that would better fit them. But also, I remember this was the case for pizza delivery because you may choose the ingredients.

The initiative consists in:

You register online and select up to seven newspaper sections by checking a box. (…)
The participating newspapers deliver their product in PDF format to the Swiss Post, which then sends them to Syntops where the company’s custom software, Syntops GmbH, assembles individualized PDFs. The PDFs are printed and dropped off to Swiss Post by 7 a.m. for delivery to the home by 11 a.m. There also is a digital version of Personal News available online.

In terms of technology, it’s a kind of DM with more contents; it’s not as complex as it may appear if there is a good information management.  Advantages of this system would be to make a more relevant newspaper and to have better possibilities for advertising targeting.

Being an interesting attempt of innovating in newspaper industry, we get to a kind of print on demand service. This is an already existing commodity service.  Printing is not necessary for most contents, and, if you heavily use e-ink, like I do, printed books and papers become something even inconvenient. It is possible to syndicate your favourite sources online, to easily build up a .txt very light file and to carry it on your ereader and you don’t need to pay nor to get any advertisement.

I like the idea of the newspapers offering a customized newspaper, but, as information gathering literacy spreads, and audience mature, they will be more able to reach their sources without any third party involved in this process. In fact, I would prefer to make a comment on mass customization more than in this concrete initiative.

The key is still having powerful contents and values so that people chose us as a reliable source. The power to aggregate is in users’ hands. We may provide tools (like bloglines, netvibes or google reader) but what we have to give them is powerful contents.

Quality media will find in mass customization a huge opportunity. Being an opinion maker, a leader in a market will make a media chosen even by the people who may disagree with their statements.  In fact, by supporting those statements or by opposition, with a clear standpoint, media can become catch-all  (catch-all is a concept taken from Political Science). Catching all audiences  widen reach and opens up a difficult entry barrier to competitors.

Catch-all media, like catch-all political parties, will tend to lead and aggregate people preferences. Mass customization is the opportunity for catch-all media to be not just in your traditional audience, but to get constantly into an incremental sector of audience that was always approaching your contents from the other side, and before, they never bought us in paper.

Credits: CC image by inju

In a fresh report from Newspaper Association of America there are a couple of original revenue generation initiatives for newspaper that seems to make sense at least for the shor term:

- St. Petersburg Times is handling 16 to 20 consumers’ shows a year with a great profit margin (45 to 65%). They are trying to lead the market in counsmer events. This is an extra activity of their promotions team. For each show, they have made a dedicated website.

It is a complementary market that can make more complete our service to both, advertisers an audience. Having events is increasingly important as offline newspapers disappear, because through this event is where our audience and advertisers will continue in physical touch with our brand. Community events with audience are a great way to continue building up a newspaper brand.

- Morristown is developing a hyperlocal strategy by launching weekly paper targeting hyperlocal communities. Advertisers want to be seen as par as the community.  They call it the “print version of facebook”. The model is simple: (only good news) of user generated content (40% of the content) and pictures, with hyperlocal ads. People want to see themselves in the paper and their neighbours, the same curiosity that drives social networks may push this kind of content that is entertainment. They may also cover hyperlocal sports events from schools with user generated content.

Similar to the case before, Morristown demonstrates how a printed paper can leverage on an online community to build up brand, entertainment contents, and a further user generated content flow.

Concept of bringing online contents to print is being used in other initiatives and it makes sense as a short term tactic.

These kind of initiatives may not transform a business model, but are a proof of dynamism and reflect a proactive approach to making more things in offline newspapers.

Full report is here.

According to CNET Sony intends to sell contents through kiosks. It is an initiative for Philippines, Thailand and Vietnam. In fact, this is a service they offer through Internet in many other countries.

Mixed models (digital delivery good sold in a physical location) could be a good starting point several years ago to let people connect a cable and bring contents back home, but it seems late for trying it. Interestingly, they are trying to make in countries that are behind pioneers in Internet literacy (to some extent, only).

Maybe, this is an experiment in how technology availability could influence consumers’ behaviour (and demonstrate the theory that piracy won because of its first mover advantage) and that is why this can be interesting. But, with their expensive pricing, it seems unlikely they will do it.

Let’s see!

Contents, before, where written in an newspaper, recorded or broadcast through the radio or the TV, published on a book, etc. Nowadays, contents continue to be that, but they may be stored and shared digitally. It means, whatever content we had, we just convert it into digits, into binary code, and then we are phisically talking about digits. No matter the language, the topic, or the platform for which they were created, contents are digits.
Because contents are digits, and because the final goal of a content business is to spread contents around the world, there is a clear trend towards standarization: we standarize advertising formats (iab), we use a few winner content publishing formats, like PDF, JPG, etc. We clearly assume that inventing a new format to publish images would be nonsense and totally out of our core business. Making this would out of our focus as media. It does not mean that other businesses have a mission to facilitate and improve imaging and endeavour in improving formats to publish images, but this is just peripherical for a media business and we do not compete with each other in this area.
We sell ideas, and they are supported on digits that carry them. Those digits are not the core to our business but the message they bring. Aditionally, the fact that our media essence could be heterogeneus in the past but we all end up flowing to the same river, converging, put us in a situation similar to all of us going to the same wedding, but in a different car, through the same road, so we are all in an unnecessary bottleneck. All of us bought a car, filled it out with petrol, paid our car insurance, and, because we are all going to the same point in our car, we will arrive later than we would arrive if we had all bought a bus, and it will cost us more money. We are media, not techonlogy business.
At the end of the day, we all try to maximize the number of digits we distribute to human, through devices. Out of romanticism, that is a content business. As content sellers we demand time. Everything is transactional, we give you contents, you give us time.
Then, audience may use any device, any language, any moment, to get to our digits. As long as an audience get to our digits and not our competitors we are wining marketshare.
- we buy time
- we sell ideas
- physically, ideas, no matter the language or the topic, nowadays are digits

With the boom of new technologies, the main worry among media businesses was to develop channels to distribute binary code to final customers and so, everyone thought a responsibility of a content business was to become a techonological organization in order to build up the platforms to make our binary reaching earlier. And this approach was probably right for that moment. Getting into the war of developing channels to transfer statements was similar to entering into the business of growing trees just because books are printed on paper; it could work, it could be perfectly fine as vertical integration but it would be very likely that someone else made better paper and we had to print our contents in his paper. Normally, publishing industry did never controled the paper production industry. So what? The same happens with new technologies, that are our new paper, we do not control it and we will never control it. Media should not pay so much attention to controling technology, but to understanding it and bringing it down to the place it gets something useful for their readers. It is an important tool but not our main business.

We are is still in the business of buying time and transferring statements to an audience, and, in fact, with new techonologies, we will exchange statements with our audience better than ever before. Bringing contents down to common physical elements: digits, opens a clear path for global media integration. Digital convergence would have as a natural outcome a global media convergence. Differentiation would be in the statements communicated while digital integration makes it easier than ever to integrate our channels creating huge sinergyes in contents revenue generation.

If technology is not yet a commodity , it will be soon a commodity , and it will get cheaper. You may get some first mover advantaje, but it’s not a key for sustaining your long term media business up and running.

Conclusion: we got the same product, digits, and global media do not compete in the tools to make digits reach their audience. Global media could digitally merge (at least top media groups) in order to get stronger technology with scale economies and concentrate in differentiation through contents.

CC image by tangent

Update: ITV, BBC in talks to share regional sites

What do you find when you look around at the supermarket? If you look carefully to product tags, you will find Unilever, L’ORÉAL, Procter&Gamble, and a bunch of corporations that virtually control everybrand in every product category in each market around the world. When it comes to media (even some people already worry on Media concentration as a potential problem for democracy, and that would be a topic for another post) we still find a group of more or less isolated smaller corporations at least, by language communities. New Information Systems and Technologies (not just Internet), open ways to integrate projects and cooperate profiting from economies of scale that would still help transforming media businesses and making it sustainable by reducing costs. This may be one of the reasons why, even being spanish, I insist in blogging in English. I really see no point on continuing with local, or regional (defining region as a linguistici community) in media business organizations. We can be local in news, but global in corporations, and, my view is that global multiplatform corporations would be necessary to have stronger media and a more independent journalism around the world.

This is just a brief note to advance my coming posts that will try to develop my point of view on how, as media businesses, we could improve our efficiency to serve a better (and cheaper) product to final customers through global integration:

(i): Digital convergence should lead us to Media (organizations) convergence

(ii) Currently, cross border media integration is under-developed (exception made of new/pure players online)

(iii) Digital convergence has a logical evolution towards integration (softer or harder integration, depends). If not merging, Media should integrate in information systems and, still, traditional media could contribute creating standards that would put them in a situation of privilege.

CC image by ntr23

On PowerPoint, a business plan that monetizes content generated by users can provide us with a wonderful business model of potentially unlimited scalability and a cost structure sustainable from the beginning.

It seems something like this was the idea behind JPG which we now read in GigaOm (through Journalism.co.uk) wanted to print a magazine with content generated and selected online by a community of users. Either it was too early for this project (but, honestly, are we going to print anything in a couple of years?), other say it is early because advertisers still do not want to invest in user generated sites, or it may just be not so easy to sustain businesses based in content generated by users.

I did work in an user generated content business (eBay, and yes, I still remember when I had to face all Spanish powersellers and their problems with the last update of Turbolister) and I know it’s not easy, and it is already recognized that social networks will be soon in trouble if they do not find cash. We also know that youtube (ugc) is performing in terms of finance much worse than hulu (professional content).

The truth is that it is still uncertain to assure that user generated content will be a gold mine while professional content is death. In fact, the demonstration that the long tail did not arrive yet they way they told us also supports the great difficulty to build up sustainable models based in user generated content.

In fact, the distinction between user generated and professional content is quite unfair very often, Shakespeare or Cervantes were not “users”? Why do we need to draw such a line? That line that separates UGC from professional content is more a concept invented to convince investors than a reality. When we talk about UGC we mainly mean contents done for free than I can exploit, no matter they were created by a Nobel prize or by my grandmother. Why am I talking about this?

Because behind the euphemism UGC many projects and business plans have been based (and I accuse myself in the first part becuase I have also produced and defended business ideas heavily based on UGC). Trying to build top-down a business place thinking that it will encourage a community to emerge is like, we say in spain: building the house from the roof. Communities, by definition, have at least a partially bottom-up growth, if not, more than a community they are a kind of army.

Well, I have to say I have seen how tuenti was created top-down and now it is a complete success (apparently).

It may be possible to build on communities but really difficult to create them from scratch. I would invest -honestly- little in user generated content, because it is difficult to control and always out of your hands.

Even if we feel very sorry for the closed company and its workers and investors, we have, as a society, to try learning on the experiences the others are  having to not repeat the same mistake. Having said that, I have to admit 8 y 10 new ventures right now are probably making this mistake. My guess is that we are going to see many UGC based business closing during the coming years and a couple of winners. I know it sounds crazy, but I even imagine youtube with a similar luck or with a radical model transformation.

Let’s leave this post online and see what happens!

(by the way, if you want to invest in a not completely user generated content business plan in Spain, let me know )

CC image by: djwudi

Let’s have a look to what is going on with sports, because it is paralel to media business. Sports teams and players are content creators.

Sport, as a digital content, is mainly one shot. If you miss the final of a world cup and you know the result, your interest for the content is much lower. In the other hand, quality is important, but not critical, so, a decent streaming can perfectly provide you with the service of watching that game you want to see.

In the other hand, sports leagues have grown mainly on TV rights revenues. All others revenues are minor compared with the cash generated by selling content rights.

These two factors combined with the growing speed of Internet access easily provides us with a complex scenario for professional sports and media business exploiting them.

In the USA, the lack of agreement between cable operators and leagues resulted, occasionally on availability for the content online through piracy instead of being available through “legal” means. In fact, it was one of the first mistakes of music industry, it was not just that you would not like to pay for the content; it was mainly that you couldn’t find it. That pushes people to other ways of getting contents they want and once they get used to those alternatives paths, changing this dynamic gets more challenging.

The need for having live sports streaming available as soon as possible is increasingly urgent… but… it won’t stop other ways of getting those contents for free. It won’t be a solution by itself, it is already too late because people got used to enjoying contents for free.

Are we going to see footballers or NBA players, like musicians, campaigning against piracy? Probably not, but we will see audiences fragmented into many different sports and probably much less incredibly highly paid superstars. Will advertisings budgets grow to compensate previously pay per view models?

With journalism moving to citizen journalism + aggregation (according to most radical views), we may well see a similar process in professional sports players. In fact, if you follow the logic and apply to other professions, you may reach the conclusion that we tend to amateurism (to some extent, or, hyper specialization) and copy-pasting or further analyzing by others.

I got no objections to the new model of managing our intellectual property. On the contrary, I think it will speed up human kind knowledge and evolution, but, let’s assume it when making up our business plans for the future.

According to the theory of the long tail, sales of products follow a Pareto distribution. But, this is not yet the case because we may tend to this, but we are coming from a very different and much asymmetrical situation.
That sales do not follow a Pareto distribution is something demonstrated by Harvard Business Review:
It was a compelling idea: In the digitized world, there’s more money to be made in niche offerings than in blockbusters. The data tell a different story.

Now we found a pricing change (increase, of course) of iTunes
Apple is likely to sell the “vast majority” of the songs for 69 cents, people familiar with the matter said. But they cautioned that the handful of the most sought-after songs — which generate the vast majority of sales on the service — would likely cost $1.29. (wsj.com)

It is purely a price increase, because, if you read the empirical demonstration that the long tail simply does not work the way they told us, the 80% of the catalogue probably is making peanuts compare with the top 20%.

Update:

In this article they tell us how Time Warner is seeing an evolution that still does not confirm the long tail theory.

From an analysis by Deloitte analyst Paul Lee we read in Daily Telegraph :

1. they may need some additional revenue streams

2. information storage costs are increasing

3. “Average revenue per user for some of the largest new media sites is measured in just pennies per month, not pounds.”

4. Concretely twitter and facebook did not make nearly any revenues yet.

5. More concentrated in growth, facebook cancelled a plan to allow employees selling shares

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Social networking, for the moment, did not find a way to be sustainable. They are, for sure, working on building revenue streams to continue providing their service, and, if they do not find it soon, they will be  in trouble.

From a really interesting interview of Hulu CEO, Jason Kilar, 3 remarkable ideas in terms of new media business development:

- global vision

- user behaviour transformation: 1 they may look for advertisers themselves, and 2 they will just be conected, it is unnecessary to continue donwloading information if it is available online.

- business venturing without the weight of a company culture legacy.

1st. Hulu’s global vision. Who will marry them in other countries?

The concept of Hulu is predicated on being a global business. Our mission statement describes us helping people to find and enjoy the world’s premium content wherever and however they want. That will be predicated on finding the right partners and having a business model that enables us to create value for advertisers, content partners and our shareholders.

We are able to measure on a daily basis (mostly geo-filtered access logs) what the latent demand might be for content all over the world for a Hulu service overseas. We are obsessed about it. The majority of our team has worked in global positions; I was global when I worked at Amazon.

2nd. Hope that users search directly for products and advertising themselves. (That would really be a revolution, because that would make the user to be searching for the advertising, contrary to what happened so far).

We have been very fortunate to go from 10 charter advertisers to over 100. I would not be surprised if that number in the fullness of time gets to be over 1,000 advertisers. That’s when you can have a substantial body of advertisers in any one category for users to choose from if they are interested in a product. So, the thing we have to drive is the volume of advertisers.

3rd. downloading contents is nonsense in a 24×7 connected society (I totally agree)

I absolutely believe the streaming business is and will be a bigger business than content downloads.

4th. disruptive venturing culture

The fact that we are a start-up is a very big advantage in that we are not dealing with an existing or legacy culture we are trying to refashion.

The interview is here