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Entries for month: June 2009

Free vs. paid content, Anderson vs. Gladwell

30 June 2009 · By Earl J. Wilkinson

A soon-to-be-released book by Wired editor Chris Anderson will spark intense new debate about the value of content in an abundance model versus a scarcity model – pouring gasoline on the already white-hot media industry discussion of how much readers should pay for content creation.

Days before its release, Free: The Future of a Radical Price is already super-charging the debate in the form of a long-distance debate between Anderson and The New Yorker’s Malcolm Gladwell. For fans of The Long Tail and The Tipping Point – two groundbreaking books by the respective authors – it’s a debate not to be missed.

In a nutshell, Anderson sees the whole world going free due to digital technology, and Gladwell doesn’t. Anderson paints the very-near-future as black-and-white, while Gladwell suggests everything isn’t moving toward a free model which he points out is not a simple model.

Free: The Future of a Radical Price is the latest Anderson book looking at how the new economics of the internet profoundly affect everything around us. In this go-around, Anderson argues that digital technology has made the world a better place – in this case, driving certain customer price points to zero.

Borrowing a well-worn Tom Friedman observation, the bricks-and-mortar world represents “atoms,” and the digital world represents “bits.” The world of atoms thrives on the economics of scarcity, while the world of bits thrives on the economics of abundance. Going from atoms to bits is going from expensive production and distribution to a cost structure of next-to-nothing.

Lower content creation costs are destroying companies that professionally create content, but benefiting consumers and ushering in an era of flowering creativity.

The net effect of this what you would expect: higher variables in pricing models and lower content creation costs.

Yet Anderson goes beyond this in his book, his response to Gladwell, and subsequent interviews:

  • Advertising is more functional in an online environment than print.

  • News is more readable in an online environment.

  • Certain content can be produced for free by volunteers as well as professional journalists.

And newspaper publishers need to face these facts and get over it – fast, Anderson seems to constantly be emphasising.

“Out of the bloodbath will come a new role for professional journalists,” Anderson writes. “There may be more of them, not fewer, as the ability to participate in journalism extends beyond the credentialed halls of traditional media. But they may be paid far less, and for many it won’t be a full time job at all. Journalism as a profession will share the stage with journalism as an advocation. Meanwhile, others may use their skills to teach and organize amateurs to do a better job covering their own communities, becoming more editor/coach than writer. If so, leveraging the Free (yes, Anderson capitalises the word) – paying people to get other people to write for non-monetary rewards – may not be the enemy of professional journalist. Instead, it may be their salvation.”

Gladwell admonishes Anderson by saying “it is not entirely clear what distinction is being made between ‘paying people to get other people to write’ and paying people to write. If you can afford to pay someone to get other people to write, why can’t you pay people to write?”

In Wired magazine today, Anderson answers by citing a parenting blog he founded called GeekDad that he put together with friends featuring volunteer contributions. From this evolved a web site that has attracted a sizable audience that attracts advertisers. Writes Anderson: “Somewhere down the chain, the incentives go from monetary to non-monetary (attention, reputation, expression, etc.).”

While acknowledging this might not be a model for the newspaper industry he said “it is the only way I can think of to scale the economics of media down to the hyper-local level.”

In a subsequent interview with PaidContent.org, Anderson says newspapers must decide which parts of their content universe they will offer for free – around which services can be sold – and which should be repositioned as premium content. The issue for newspapers isn’t free, but “freemium.” Referencing his Long Tail book, Anderson suggests giving away the head and charging for the tail – a la the Wall Street Journal, which he calls the model for “premium newspapers.”

Yet here’s the caveat: “The problem is that there aren’t many premium newspapers,” Anderson says. And there it is: The Wall Street Journal is a terrible model for 99% of newspapers because premium content for a high-earner business audience just isn’t the norm.

During the PaidContent.org interview, Anderson talks about possible models for publishers:

  • Wired magazine provides three pricing tiers: free on the web, US$5 for a print magazine, and US$0.80 for monthly subscribers. The future Wired will have many tiers.

  • Golf Digest is considering a club tied to the magazine, Anderson says. “Members” might get lessons or discounted access to courses.

  • Building community around content is a model used by Condé Nast.

“Many content creators believe that quality will win out, but Anderson believes that it is more about relevance than quality,” according to the PaidContent.org article.

Free: The Future of a Radical Price will either be an eye-opener for publishers or a conversation starter. It won't be boring. I strongly recommend the book, and I strongly recommend the Anderson vs. Gladwell debate. Dissecting this debate will advance our industry's conversation about the value of content.


* * *

Post-Mortem (June 30, 16:55): The internet is on fire about this book. Author Seth Godin just posted a fascinating comeback to Malcolm Gladwell, titled “Malcolm Is Wrong,” which you can view by clicking here. Writes Godin: “People will pay for content if it is so unique they can't get it anywhere else, so fast they benefit from getting it before anyone else, or so related to their tribe that paying for it brings them closer to other people. We'll always be willing to pay for souvenirs of news, as well, things to go on a shelf or badges of honor to share. People will not pay for by-the-book rewrites of news that belongs to all of us. People will not pay for yesterday's news, driven to our house, delivered a day late, static, without connection or comments or relevance. Why should we?” ...[more]




Paid content and 4 principles governing its true value

29 June 2009 · By Earl J. Wilkinson

How to get consumers to pay for content creation is a central tenet of most media companies today – in print, online, and via mobile.

It manifests itself in three practical ways these days:

  • How to increase circulation prices of the print newspaper.

  • How to create an online payment scheme for consumers.

  • How to derive revenue from mobile phone users, either via the web or text messaging services.

The question is not “if” consumers should pay more, but “when” we can get the technology right to make them pay more. We’ve decided as an industry that the content we create has high value, and someone has to pay the bills.

Yet we’re missing some core principles in this discussion:

1. Content’s pure value is declining due to the exponential explosion of user-generated content.

2. All content is not created equally.

3. Not all platform experiences are the same.

4. Content’s value is no longer driven by the context of scarcity, but by the context of abundance.

Most readers of this blog have some kind of connection to the Industry Formerly Known As Newspapers. To be a content-rich multi-media company, we must respect these principles as we look for new business models.

We must realise that in the decade ahead professional journalism must deliver unique value that the cacophony of questionable voices do not. As we hold high investigative journalism as an example of why newsmedia matters, we must be blunt in recognising this is less than 1% of the total volume of content our companies produce. We have to focus on improving and prioritising the other 99%.

While it is fashionable to look at the Financial Times, Wall Street Journal, New York Times, The Guardian, and other great newspapers as guides for putting a value on content, let’s be realistic. A 500-word article in the Financial Times that might make me US$50,000 is not the same as a 500-word article on a cute kid’s lemonade stand.

We have to get smart about the platforms at our fingertips. We’ve gone through a dumb era in which we tried to take the best of the internet and apply it to print, preceded by the era in which we took the best in print and applied it to the internet. We thump our chests over total audience only to realise most advertisers could care less. They want to know about the unique values of the medium and the audience connected with it. They want to see us creatively connect valuable content with platforms that draw out that value.

Finally, there is the “death of scarcity” that Mitch Joel wrote about this weekend on the Twist Image marketing communications web site.

Wrote Joel: “Editors used to control the journalists and decided which words made it to which pages. Music companies used to control the musicians and decided which albums made it into the record stores. TV stations used to control the actors and decided who got to star in which programmes.”

From furniture to luxury items to tickets, the marketing profession has been centered on a scarcity model; buy now for a discount or buy for a limited time. Yet Joel points out that the new media channels “are not about scarcity, they are about abundance. It’s not about deciding who gets access to who, it’s about everybody having access to everybody.”

To illustrate how difficult it is to put a value on something that isn’t scarce, Joel discussed the upcoming edition of Wired Magazine. Wrote Joel: “I await, with bated breath, the latest issue of Wired Magazine but have no issue deleting 180 news items from the Wired Blog as ‘mark as read’. Why? Simply put, the magazine comes out only once a month and it is scarce when compared with the 24-hour onslaught of digital content through my RSS reader. Once someone curates and edits the content in print versus simply filling the digital void, the value of the content in the magazine ‘seems’ scarcer than a model where the funnel needs to constantly be filled.”

This scarcity argument may answer the mystery behind a 2008 study by PricewaterhouseCoopers of the magazine industry. In trying to determine a typical magazine’s perceived value to the reader, PricewaterhouseCoopers found that if a print magazine had 100% value to a reader, the best e-reader experience had 47% of the print version’s value, the mobile web derived 35% value, and the computer-based web garnered only 19% value.

I didn’t understand the results of this study until looking at it from a scarcity perspective. How could a whiz-bang, jazzed-up, multi-media PC-based reading experience be valued so poorly? Perhaps it’s Mitch Joel’s argument that no matter how great the experience or frictionless the access to content, value to the consumer is still driven by perceived scarcity. (What does that do to our industry's perceptions of itself?)

What lessons can you derive from this?

In all discussions of paid content, bring the reader into the equation. Get smart about the differentiating values of content and how content genres work better in some platforms than others. Understand the laws of scarcity and abundance as it relates to marketing in the Digital Age. Respect the fact that these principles are constantly moving targets.

And be honest: We’re children learning the true value of content, platforms, audiences, and consumer behaviour. Let’s not get frustrated about what we don’t know. Let’s start connecting the dots of what we do know. ...[more]




Schibsted’s hidden asset: multiple cultures for its media properties

22 June 2009 · By Earl J. Wilkinson

For those analysts and pundits passing judgment on today’s newspaper industry, one of the big strikes against us is a belief that our internal culture is not transferable to the Digital Age.

Most media companies operate singularly when it comes to culture, and that is often their Achilles Heel. Usually, there is a dominant culture – entrepreneurialism, mindless template execution, conservatism, risk-aversion, top-down, Balkanized – that is prevalent at the business unit level. There is usually either a tight connection to a corporate office or a loose connection to a corporate office.

I visited the venerable media company Schibsted in Oslo, Norway, recently. As you know, Schibsted is one of the most progressive newsmedia companies in the world. With operations centered mostly in Europe, the 170-year-old Schibsted has a presence in the newspaper, television, film, online, mobile, book, and magazine industries. The company generates nearly US$2.1 billion in revenue.

The visit yielded an unexpected finding for me. Schibsted is sitting on a hidden asset: multiple cultures.

The asset isn’t apparent until you interact with their various business units. It doesn’t show up in the annual report. It doesn’t show up on their web site. It doesn’t appear in corporate presentations.

Over two days, I visited with the Schibsted corporate office, quality daily Aftenposten, popular daily Verdens Gang (VG) and its digital counterpart VG Nett, and online classified advertising portal Finn.

An interesting picture emerged for me.

Whereas most media companies are looking for synergies around every corner, Schibsted has set up their properties distinctly separate from the other. They seem more aware than others about merging content with platform with audience.

I was surprised that Aftenposten was located at the central train station – a good way of getting often disconnected 40- and 50-something journalists at a quality newspaper to interact with the general public in a very public, earthy setting. The editorial culture appears traditional, which is to say working behind journalism rules and journalism walls. Yet there are advantages and disadvantages to this.

At the popular newspaper, VG, there appeared to be a clearly print side to the operation (populated by 30-somethings) and a clearly digital side to the operation (populated with 20-somethings). The print side was more market-connected than Aftenposten colleagues, but not as much as VG Nett colleagues. Even within VG, the Schibsted influence seems to be to let the digital side fully exploit the digital side – and the same with print.

Still at a third office in Oslo – none of the Schibsted assets are in the same building! – Finn executives are aware of their print roots, yet they talk distantly about them like a history teacher explaining humanity's evolutionary roots. Finn has a distinct sales culture with youngish employees who mix entrepreneurialism with sales with technology. These 20- and 30-somethings like the Finn culture, and don’t churn out.

And then there was the serene Schibsted corporate office where office walls have come tumbling down in recent years. Senior vice presidents sit with other senior vice presidents in open cubicles. Executive vice presidents sit over here, digital people sit over there, and so on. This latest visit was typical: Another large group of up-and-coming young people in the auditorium going through training-and-development, a rarer and rarer site at corporate offices these days.

Meanwhile, I know Schibsted’s Blocket classified portal concept, which they want to export to other countries, is designed to be culturally malleable, too. Same with its 20 Minutes free newspapers in France and Spain, as well as its online classifieds operations throughout Europe.

Schibsted tries mightily to encourage communications among business units, yet they want enough of a disconnection to encourage full business development.

What I couldn’t help wonder was whether a company like Schibsted could take advantage of these multiple cultures. Do you want to cross cultural streams, or leave them the way they are? Could a cultural anthropologist take the editorial brainpower and audience of Aftenposten and inject some degree of Finn or VG Nett culture?

It was refreshing to see Schibsted run on a set of principles, yet allow business units to flourish without the baggage of the one-size-fits-all print culture that has dragged down less formidable companies. They realise that managing a multi-media company can’t be about copying and pasting a print newspaper culture onto assets that have nothing to do with a print newspaper. They especially don’t want to tie an anchor onto the tail of digital operations.

Culture, and how it is applied, can be turned from liability to asset in the proper setting. Schibsted proves that.

...[more]




Finn remakes classifieds in Norway unburdened by cultural baggage

16 June 2009 · By Earl J. Wilkinson

I meant no disrespect to Frode Nordseth, but his story was freaking me out.

As chief operating officer of Norway's Finn (www.Finn.no), he weaved in and out of anecdotes, data points, and PowerPoint slides to explain a “newspaper killer owned by newspapers” – perhaps the best story in the Schibsted stable of properties.

In short, Finn is Norway's leading classified advertising portal. It was founded in 1996 by five non-competing regional dailies precisely to cannibalise their print classifieds. The newspaper executives a decade ago believed it was inevitable that someone would create a better digital mousetrap for classifieds. They were correct, they were set up as competitors to their own properties, and they turned out to be the cannibals.

Finn – which means “to find” in Norwegian – today is the leader in verticals such as real estate, cars, boats, jobs, and private-party. It is Norway's fifth-leading web site in terms of unique visitors and second-leading in terms of page views. In 2008, the fast-growing Finn generated US$108 million in revenue, US$43 million in operating profits, and a profit margin of just short of 40%. The classifieds portal employs 268 people, including 80 in information technology.

Finn is the cultural opposite of media properties with print roots: always on the offensive, sales-based, solution-oriented, metrics-rich, and young. Its executives are disappointed that marketing expenditures are down to 5% of revenue in today's environment. Its digital sales dashboard confronts visitors on large plasma TV screens upon arrival in its Oslo office and is integrated into anything with a screen among Finn executives.

What freaked me out about Nordseth's presentation on my recent trip to Oslo was imagining how to explain this story to the typical newspaper executive today who didn't have a similar foresight and can't imagine creating a business to garner a fraction of what it otherwise would have made without the internet. I was equally freaked out about how important scalability is in an operation like this, relying heavily on constant technological investments.

The Finn story is like a faithful Buddhist saying a few “Hail Marys” – just in case.

For Finn and their Norwegian newspapers, “just in case” happened close to plan.

SCUBA-DIVING FOR CLASSIFIED GOLD

What Finn does well, strategically, is relentlessly burrow into classified categories. The initial Finn strategy was to optimise existing verticals. Yet it's not an optimisation most newspapers would understand. By attacking sub-categories deeper and deeper, Finn discovered under-served segments such as boats, snowmobiles, theme travel, agriculture, and more. Said Nordseth: “No money is too small for us to pursue.”

In short, newspapers snorkel the classifieds; Finn scubas the classifieds.

Despite the many sub-brands created with their scuba strategy, there is one over-arching brand. Finn's brand awareness is 97% in a country with two newspaper competitors and international players such as eBay, Facebook, Amazon, and Google.

What Finn lacks in design sexiness it makes up for in effectiveness. Nordseth likened Finn to an old Volvo: safe, not sexy, but usable.

AVOIDING BUSINESS MODEL MONOGAMY

Finn is the embodiment of a media company that doesn't believe in monogamous business models.

To illustrate this, Finn's five main areas of business are:

  • Classified ads: Revenue sources are job openings, real estate for sale, real estate for rent, cars for sale, “bits & pieces,” and yellow pages. Ads are bought for a certain period of time.

  • Brand ads: Revenue sources are real estate for sale, cars for sale, finance and insurance, and travel. Business models include pay-per-impression, search results, and banner advertising.

  • CV/resume searches: Revenue sources are recruitment firms and large corporations, and the business model is pay-per-access to search for a certain period of time.

  • Travel searches: Revenue sources are hotels and air fares. Business models include pay-per-click and a percentage of the sale value, including 10% for hotel bookings.

  • Value chain products: Revenue sources include real estate photography and real estate presentation data. Business models include payment per activity and fixed prices for full and partial photographic sets.

While its revenue sources are diverse and business models as flippable as a light switch, Finn also is open-minded about ownership structure. In addition to the five regional dailies, Norway's real estate agents own a nearly 13% stake in Finn Real Estate. So they have an equity stake in the platform they use to move inventory.

IN CONTRAST TO NEWSPAPERS

Learning of Finn's past is a kind of portal to the future for many newspapers.

For example, Finn desperately needed the brands of its five newspaper partners Adresseavisen, Aftenposten, Bergens Tidende, Fædrelandsvennen, and Stavanger Aftenblad when the digital classified initiative was launched 13 years ago. Today, the value proposition is flipped: the newspapers need the Finn brand on their print classifieds.

Nordseth believes that one aspect of Finn's success is the understanding by executives that people who search and browse the classified marketplace are not particularly interested in editorial content. The connection between news content and classifieds was a happy historical coincidence. A pure-play classified portal has no mixed loyalties to journalism and a crystal clear mission that doesn't include an editorial anchor.

The only semblance of ties to editorial today are about customer knowledge. For example, page views on Finn real estate advertising skyrocket during football matches. Why? Women flee the television screens during the matches!

The truth is, the entire culture of newspapers is why Finn was created as a stand-alone competitor. Newspaper classified departments have historically not had real salespeople but "order-takers" set up mostly to service big accounts. The key for Finn is they are willing to sell anything of any size.

By circumventing the newspaper culture, Finn has been a category killer for a newspaper like Aftenposten which has lost to the internet the car market and seen all but the brand elements of the job market migrate to digital.

THE FUTURE

What do you do when you're on top? Keep attacking, Nordseth says.

A Finn-like concept is being internationalised by Schibsted, which acquired a pure consumer-to-consumer portal in Sweden several years ago called Blocket. This portal now has a similarly dominant and profitable position in Sweden as Finn does in Norway. Blocket has been so successful that it is now being set up in other European and Asian markets, adjusted to market and cultural differences.

Meanwhile, Finn is focusing on building its position in the travel market and value chain products, and increasing market share in brand advertising. It also is keeping an eye on structural changes in the directories business.

While continuing along that strategic continuum, Finn believes it is moving from publisher to “active transaction facilitator.”

And it is always looking to differentiate. Nordseth says Finn's differentiators are its platform control and how close it is to its customers. Sounds like something anyone might say, yet here's their specific peg: Never outsource customer support or salespeople as they are your difference-makers. That Finn retains a high percentage of its employees helps, too.

Schibsted is a great story in the investment community, and Finn is one of its treasured stories. For a newsmedia industry in search of anchors in today's storm, Finn is a good starting point for imagining the future.

...[more]




About Earl

Earl J. Wilkinson is executive director and CEO of INMA. In his interactions with INMA members worldwide, Earl has one of the broadest views of newspapers of anyone serving our industry today. He is a trendspotter and a leading advocate for cultural change, transformation, and innovation. This blog represents his unique view of the emerging global news media industry.

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