Posts from — March 2009

As we develop into an increasingly virtual world, our lives are definitely moving into a “virtual reality” that is complementary to our physical life. (In philosophy, in fact, would be not so clear which of our existences is the complement, but this is not our topic now).

Virtual goods made 2.1 billion US $ compared to 16.9 billion revenues in advertising in 2007. In other words, virtual goods are worth watching closely since any digital player may get a share of this market in a coming future incorporating new revenue streams.  If online games managed to create virtual objects that are worth real money for their audience, it may be the case that we, online media, may find a similar response. In fact, if I am typing this letters right now is because I am sure that media can create virtual goods within their communities of influence.

Virtual goods (summarized from Lehdonvirta’s excellent work: Virtual item sales as a revenue model: identifying attributes that drive purchase decisions.) are not information goods (a mp3 file) but “simulations” of material objects that sometimes do not have a material counterpart with 3 key characteristics: mutually excluding (their usage by one person excludes the use of a different person), persistency (it has to exist for some length of time) and interconnection (must not exist in isolation).

Virtual purchase drivers are:
1. Functionality: goods that improve performance, new functions or gameplay options.
2. Hedonism: aesthetic attributes
3. Social drivers: like facebook gifts that sometimes got artificial scarcity

“Virtual goods are more suited to creating and maintaining social distinctions and bonds because of their built-in rivalry and scarcity.”

Therefore, virtual goods are, at the end of the day, not that different to “real” goods. As we buy a Gucci bag, or a BMW, we are not just buying the physical object (its functionality) but the social, hedonistic part… how this object differentiate us from the others by its brand, design, etc. We are defining ourselves in society by acquiring some goods are not others.  Physical goods have a great “virtual” load in their attributes.

World of Warcraft, Habbo Hotel or Second Life may appear that have nothing to see with online media, but, there may be rules of their business model we should be watching because they are making money.  Online media will probably be soon a major supplier of “virtual goods”.

Encouraging registrations has not been crucial for online newspapers. Still today, our reasons to register most online newspapers are not so attractive. As a result, registration volume is low and newspapers’ permission levels –i.e. permission levels on their audience- are low. Ft.com may be an example of a good attempt trying to gain permission from its readers and they claimed in march 08 having 7,1MM registered users what is peanuts compared with some social networking websites, and, the comparison could be even harder in terms of user activation even it is high compared with most newspapers.

Online media and, particularly, online newspapers, would like to increase the relationship with their audience and that is one reason for a moving towards social application usages of their platform, and, sometimes, even to trying building up social networks themselves. There are, of course, other reasons, like locking in users, engagement increase, or the feasibility of a more powerful targeting. So, knowing who is behind the screen is interesting for the advertiser, and so it is for the content supplier, but online media did not find the path for doing it.

How can online media increase permission levels without damaging audience growth? Maybe some people believe that increasing permission levels is not that relevant, but from my view it is a key challenge and we have to respond on how we are going to engage audience so they are happy not just to enjoy our contents, but to belong and contribute.

After having a look to pluck, I get back to the idea that technological commoditization is (to some extent) a matter of fact that will come with time and that will help media getting back to core. Of course, still after decades automotive industry compete in adding new developments to their products as do mineral water suppliers.  Differentiation will always play a role, but there is certain degree of commoditization in what is physically a product, in what we actually sell.
The physical side of our product (the “water” we sell) has been dominant during the revolutionary beginning of digital development. By adopting and developing new technologies some companies have got faster than others in their growth.  In response to this reality, some media companies lost their focus and after a kind of existentialist debate believed that trying to be in the fast adoption and development of new technologies was going to be key to succeeding with the new technologies.
Those who invented and developed presses for printing were not those who later built publishing houses or media businesses, or those who invented and developed TVs were not who later exploited broadcasting enterprises. And, I would add that first mover advantage has probably been overvalued when talking on digital businesses, mainly, when we still do not know whether and how some initatives will make money (i.e. be sustainable).
We are moving to an stage in which technology will get cheaper, easier to get and more widely and commonly known, and in which media businesses will start realizing that their competition is not there (or at least, not completely there).
In this context, companies like pluck, Autonomy and others, may progressively become much more relevant than media internal product and technological development departments. Then, media would again focus in values, brand, contents, and what is not physical in their product while saving those efforts.
Media convergence may not necessarily come from mergers and acquisitions, but from a new relative standardization and commoditization of technologies under their contents, and this is, in my opinion, our route ahead.

BBC, that just launched a redesign for world service, provides at the top of its homepage a search box repeating what they have in other sites. It means that it is firstly offering a search experience. In fact, it is hiding the browse menu one click deeper in “explore”.

Audience mix search/browse has always been a topic when trying to find out how users approach to our websites and a conclusion that was typically argued was that less experience users tend to search while more experienced (loyal) users in our websites browse.  But, it may change a lot case by case, site by site.

No matter what’s the user preference in search/browse, building up our user experience through search may guide us to display more relevant information for the user from the beginning reducing the importance (and the cost) of our editing teams to build up main and section homepages.

When we build user experience from search, we recognize that it’s not up to us deciding what we want them to read, and so, we –content providers- may try to give answers to users’ requests. Additionally, this experience is widely recognized and assumed, so we make our content easier to be reached.
By contrast to what happened in other media, in which search was left to a symbolic space, BBC shows an experience that is very easy to recognize, but, major strategic implications my come from a development towards search:
1. Search is a big market with a main player in which online media still did not compete. “Traditional” media can build up qualitatively different search experiences so they, at last, offer a different search product.
2. Media, learning from google experience on how to display contents, may perfectly find a different way to end up in a similar but qualitatively different product. Google tries to clean up but its algorithm its search results while all contents begin in a level playing field. Media could do the opposite, by qualifying contents, spread to a higher contents range while capitalizing (and taking care) of it’s know how and historical trust.
3. Opening up search in a media web may just be an strategic beginning for playing in this field, first with owned contents and gradually adding others..

It may seem sci-fi today, but it is quite likely to be the future of many media (content) enterprises.