kevin cabral's blog: bits+thesis

Jim Spanfeller, CEO of Forbes.com and chairman emeritus of the Internet Advertising Bureau, just prodded Google to “help clean up the cesspool” that is the web. Some have already said he’s stumbled into his own cesspool, here’s my reaction.

Spanfeller has two suggestions for Google:

1. Share the wealth

   Spanfeller suggests that Google makes a stunning $60 million per year directing its users to Forbes.com. This is remarkable since this would mean that Forbes accounted for almost 0.5% of Google’s global revenue base last year!Spanfeller implies that Google makes money whenever a user clicks on Forbes.com through a search for “Forbes” and that Forbes must compete with other marketers for control of its brand in Google. This couldn’t be further from the truth. Google only makes money if a user clicks on a paid keyword on the right-hand side of search results. Searches for Forbes, “Forbes.com” and “Forbes Magazine” don’t reveal any paid keywords. The two paid ads attached to the “Forbes” keyword have been purchased by Forbes itself, so the only way Spanfeller can be correct is if Forbes is spending $60 million/yr. on Google ads.Moreover, the accusation that Spanfeller makes that Google forces Forbes to “buy its brand name” aren’t necessarily true. Google and most networks place restrictions on the general public’s ability to bid on unique brands. Try searching for “Amazon.com” and you will find zero non-Amazon ads because they are forbidden by policy. If Forbes hasn’t made the protected list and that’s causing a problem, then it should simply ask for its brand to be added.Overall, I find it astounding that the CEO of Forbes and a chairman of the IAB does not seem to understand some basic elements of Google’s revenue model. With that said, I am glad that he’s joining the digital community and hope that this and other criticism he’s receiving on PaidContent.org will be seen constructively.

2. Preferential treatment for “professionally produced” content.

   How this would be accomplished isn’t clear, but I would guess that he probably has in mind something like putting up Forbes headlines on the Google frontpage or highlighting Forbes articles in search results.

This wouldn’t be the first time we’ve heard pleas for cash and content subsidies and I can empathize with their motivation: Google finds what’s popular and not necessarily what’s great.

But fixating upon Google as the only solution to their problems illustrates a fundamental blind spot which traditional media have about search technologies and Google itself. They seem to think that Google controls what people see rather than understanding Google as an algorithm and network that traditional media can use to their own advantage – and Google will help them to do so.

For example, Forbes can easily go over to Google and signup for free Google Custom Search.  This will allow them to use Google technology to search “only the best” content on their website or even on a network of other “professional” sites. For instance,  Forbes could ally itself with US News and World Reports, Newsweek and so forth to create a selective search engine. With this many popular sites linking to the search engine, it will rise relatively quickly in Google PageRank enabling Google to funnel more traffic over to them. Mission accomplished: a solution to the cesspool.

Now, the question is whether or not anybody cares for this solution. I think there is a market that cares. Well-curated blogs already provide this service for readers. Information services like Hoover’s, CapitalIQ and Bloomberg make billions by helping people to find critical information. A question Forbes should ask its readers honestly is whether or not it belongs in that ballpark. Personally, I tend to associate Forbes more with the dubious “10 Best Cities for Young Professionals” type lists than I do with insightful analysis a la The Economist.

What I do hope Spanfeller will come to understand is that Google makes it readily possible for traditional media to take “cleaning up the cesspool” into their own hands and they should do so. Let the market test whether Google is wrong. Better yet, hop a cab it over to Google’s New York headquarters on 15th Street and I’m sure they’ll be glad to help you try the experiment. If they aren’t, then you can talk to Live, Yahoo, Ask, WordPress, Daylife and and a few hundred other companies who would also be happy to help. Heck, you can talk to me and I’ll be happy to help you start cleaning up the cesspool.

In my last post, I painted the future of newspapers with a grim broad stroke. Sometimes this is a necessary way to capture attention and suggest scenarios where one’s perceived assets are completely irrelevant. This is true much more often than people believe it is. The lifespan of even large, successful public companies, quite often, lasts less than 30 years but our models too often conveniently assume that cash flows and growth will continue in perpetuity.

So now it’s time to take a look at traditional media from the other side: what does it do right? What unique values does it add? Thanks to the input of friends, I’ve come to a series of themes. These assets which traditional journalism has can be a strength, a weakness or an opportunity for entrepreneurs to complement or disrupt.

Asset #1: Traditional Media Brands

Traditional Media Brands are ________. Fill in the blank. Most traditional media folks would like to say “trusted.” Based upon surveys of American attitudes about media quality and accuracy, I severely doubt that traditional media are trusted. If anything, they are mistrusted and viewed with an increasingly critical eye which has been amplified by the blogosphere.

I think that what is true is that media brands are

habit-forming

. We like to hear what they are saying, even if we don’t believe it. Whether in print or online, it feels “good” to read a respected outlet like the New York Times or Wall Street Journal regularly. I believe this is mostly because everybody else does it. After all, most people want to be like their neighbors. This tendency is harder to create in the blogosphere. Google Reader helps, but it can’t build the new media brands.

My advice to new media would be: tout how many people read your site and integrate social networking to ensure readers that they aren’t alone. To old media: you can become a launching pad to new media. Why can you only read the New York Times on the NYT Reader? If “The New York Times Brings You The World” it is only fair to live up to that brand promise by integrating RSS feeds from elsewhere.

Asset #2: Traditional Media Invests

Traditional media invests large sums in people and projects and this provides a public good that supports good journalism. While the blogosphere has spawned many new stars like Nate Silver or Matt Yglesias, many of its most popular bloggers like Andrew Sullivan are products of very traditional journalistic training.

This training path for an aspiring New York Times writer looks something like this: go to Columbia Journalism School, get top grades, intern at the Times, start working your way up. It’s not especially entrepreneurial, but most highly talented people do not want to start out as freelancers or entrepreneurs. Too risky. “The firm” thus provides a way to gather this talent and provide it with some security during early years as well as a network that stays with them throughout life. Can new media provide this training ground? What tools and resources will be necessary to induce talented people to pursue a journalistic career?

Related to this is investment in projects. Good investigative reporting takes time and money which new media outlets don’t typically have. The Huffington Post has launched a pooled investigative reporting unit which tries to address this. The large revenue bases and monopoly profits from local subscribers gave large outlets like the New York Times the ability to invest in investigations. Today, that is increasingly unwinding. Traditional outlets are also trying to pool coverage. I suggest that pooling won’t work in the long-term for the same reason that joint ventures don’t. Suggestion: seek greater efficiency at the firm level. How can New York Times do investigative reporting cheaper than the competition? Leverage experts in your readership3

Asset #3: Traditional Media is Local and Prominent

This asset has several implications: first, it naturally attracts attention. Whereas new media have fragmented national audiences, traditional media like The Washington Post benefit from proximity to sources and high awareness/mind-share. If you’ve got a tip on tax evasion in Washington DC politics, who are you going to call first? Second, being local allows media to tailor its voice and coverage to local preferences. Recent research by Dube, et. all indicates that there are really very few truly national brands. Third, being prominent attracts ownership by sugar daddies. Publishers of large local institutions become famous and influential in disproportion to their economic profits. In that way, owning a newspaper could be a little like owning a sports franchise where fame and public service, not profits, are the main consideration. Finally, being local gives a newspaper access to the centers of power. Inevitably local politicians, corporations and other interests will all put much effort into influencing local news as long as local government remains a powerful force.

My advice to new media and old media companies would be to learn how to localize your content and institutionalize your brands. On localization, I am incredulous that reading NYTimes.com from Chicago, I end up being served the exact same headlines/pages as I would get from New York City. These companies need to test & learn to see what works following the lead of e-commerce providers like Amazon who long-ago realized that they compete in national markets where tastes are regional, demographic and personal. On institutionalization, the New York Times needs some allies. What local institutions from banks to sports teams to PBS stations can NYTimes.com partner with? How can NYTimes.com develop relationships in far-flung places like Alaska? Recall the scramble for news on Sarah Palin and how badly out-scooped the Times was by the Anchorage local paper. Growing nationally requires innovative marketing, business and relationship development that just isn’t being done now.

Asset #4: Media Originates Stars

New media’s influence in amplifying stardom cannot be understated. Consider Susan Boyle and her recent Twitter and YouTube stardom in the United States after shocking some famous snobs on British television. Today it’s true that no story sleeps for long due to new media but Susan Boyle’s shocking stardom came against the backdrop of very traditional media. I don’t think the initial shock and strength of the wave would have been nearly as great had she merely recorded a video on YouTube or been featured on Amazon.com. While there are clearly examples (Edward Sawtelle anyone) of new media leading the way, I think most stars are still first born in traditional media.

So, question for any traditional media outlet is: how many stars did you help the world discover this year?

Asset #5: Traditional Media Readers are Old but Wise

It’s a well-known fact that traditional media has old readers and viewers. But is this necessarily a weakness? In the old media advertising world, it is since readers are just passive “spenders” and we know that old misers don’t move the needle. You need that 18-35 male demographic, or professional women or DINKs and DINs and other acronyms. My advice to old media would be: think about what you can do with your readership is you think of them as wise rather than old. Can they be the experts you need?

I can’t help but think that as much as our generation has gained by omnipresent digital media, it is also missing something. I’ve lived on both sides. I grew up loving libraries, reading microfilm and being thoroughly appreciative of the solace and focus required to learn using traditional media. But I have fallen into the new media trap and I almost never visit a library or buy a newspaper today. I suspect that generations behind me are even more electronically focused. This is so extreme that I have never heard of a fellow business school student suggest that we should visit the library to find a book on a topic. All research is done online. Can those who are older and wiser help to bridge this gap?

That’s what new media leader Gawker called the Newspaper Association of America’s meeting earlier this week in San Diego.

Eric Schmidt, Google CEO, was invited to give the keynote, and he put it politely: “I would encourage everybody, think in terms of what your reader wants. These are ultimately consumer businesses and if you piss off enough of them, you will not have any more.”

What’s happening?

Print media are re-enacting, before our very eyes, the famous business cases of years gone by. The New York Times is today’s Kodak. Faced with the advent of digital photography technology, Kodak did the following:

Insisted that digital photography was complementary to traditional. Kodak said that people will always want to print on film. AP’s Chairman John Singleton last week: “print is still the meat, online is the salt and pepper.” This represents digital media as a sub-class of newspapers when, in fact both are just a sub-class of an information world which has fundamentally changed. It would be helpful if Singleton would understand that newspapers are just a distribution format.

“Embraced digital” by building a product that’s “Kodak quality film on a computer.” That being PhotoCD. $500 million later, Kodak realized that consumers didn’t want to pay for an expensive machine to store their photos when they already had a computer. The New York Times has embraced digital quite well by building a website, but it’s still largely a copy of the New York Times which is based upon the antiquated concept of “All the News That’s Fit to Print.” Google has already changed how information is found and ferreted: by the crowd not the editors.

Kept the “scientists” in charge of execution. Hoping to effect change, Kodak turned over its CEO position to a Motorola veteran. But this failed to affect any change in a culture dominated by Ph. D. managers focused on silver haloid film technology. The New York Times has this two times over: Sultzberger and Robinson are watching the avalanche tumble down the mountain from the top while I understand that most digital initiatives are being serious cramped by editorial managers who think of digital as an offshoot from print. The only exception to this seems to be a “skunk works” of 20-somethings led by CTO Mark Fron, who isn’t even one of the New York Times’ 30, count it 30, executive officers.

Ignored network economics. Kodak built Gallery, kiosks, cameras, printers and a whole proprietary chain designed to give people a total solution. The problem is that digital technology is too flexible to require that. Focused competitors will offer each of those options and Kodak will struggle to compete if it’s not interoperable. The New York Times is following this same path: it re-invented the Facebook (or Google Reader) wheel with TimesPeople, created its own ‘authoritative’ Wikia with Topics and kept its own proprietary New York Times Marketplace where job postings cost $395/month. The result: every single one of these features are inferior substitutes to alternatives open on the net. The New York Times would do well to learn from Amazon.com and Firefox which have translated their vast traffic into *billions* of dollars in highly profitable revenue through partnering with the best of breed in each category. Amazon.com escaped bankruptcy by letting millions of others sell on its platform while cherry-picking the 20% most lucrative products for itself.

Held onto antiquated assets. Kodak sold off its pharmaceutical businesses and raised cash to keep itself out of bankruptcy. New York Times hasn’t even gotten that far: hanging onto a passive interest in NESN, WQXR radio New York, a regional media group serving small Southeastern US markets. These assets are on the block but they’re not getting sold. The problem is likely endowment bias. Psychologists know that people overvalue what they own and often refuse to sell it until it is worthless. I have felt the force of that in some of my own past dealings.  These assets are antiquated and need to go (note that I avoid “non-strategic” since surely they could be strategic to somebody, just not the NY Times).

Failed to restructure operations and, with it, debt. The New York Times is “running on fumes” in Henry Blodget’s words (ironic that he’s mentioned just after Amazon) precisely because it has $1 billion in debt and no cash with a high burn rate. Who’s going to take the hit? Of course, the Times would love for bond-holders or the federal government to subsidize its largess. But it doesn’t look realistically like the business model of running capital intensive printing presses with unionized labor and high-cost copyeditors is going to thrive. Beyond selling antiquated assets, the Times needs to take an axe to the cost structure. Thus far, shockingly, there have been NO layoffs at the Times. Most likely something like 25% of staffers need to go; cutting about 500 jobs would likely produce cost savings of about $75 million/yr. which might be enough to induce debt-holders to take a recipricol haircut themselves. Between asset sales and cost cuts, this can probably widdle down the debt to $500 million. Who is more likely to help pay it down? The 150 million online readers of the times ($3 each) or the 1 million daily readers ($500 each)? The answer seems pretty obvious.

I recognize that I’ve been extraordinarily brash in my commentary for a casual outsider. I’ve focused entirely on the negatives, without speaking much to any positive signs. A thorough evaluation would look clearly at both. Thus there is of course some probability that the New York Times isn’t in meltdown; that it’s seeing “glimmers of hope” . With the benefit of hindsight, it’ll be easy to second-guess this post some years from now. But if we think history is worth something, then learnings from Kodak tell us that the Times is headed towards meltdown and will likely continue to fail to recognize signs of it until it is far too late. It doesn’t have to be that way and I sincerely hope that they will heed the warnings which are now apparent and take action. The Times which results may very well be a smaller company, but it will surely be more profitable, and equally if not more impactful, if it can only come to see that the world has changed and it must adapt or become extinct.

The New York Times has finally developed an alternative “skimming” interface to the paper which enables readers to browse articles section-by-section, as they would with the newspaper spread on the kitchen table:



I’ve been an advocate of adapting the best of the old world to the new for some time. In every “old world” category, from media to e-commerce, there are users who prefer the offline experience. Zoomii, for instance, transforms Amazon.com into the world’s largest browseable bookstore.

But the New York Times effort takes one step forward, and two steps backwards. Attempting to appeal to laggards by building replicas will ultimately fail because online replicas make poor reproductions of printed media. The size, dimensions, resolution and characteristics of paper printed media simply cannot be translated into HTML. The Internet is a new medium which requires adaptation not imitation.

My suggestion to New York Times in building an alternative user interface online that works for offline user is to isolate the root causes of what works offline and see which of those can be adapted for use online. In other words, they need to decompose the bundle of features that users appreciate offline and then prioritize them in order to understand what will be gained or lost in translation. For comparison, they should also look at things users don’t enjoy and study both “online” and “offline” reader groups.

Here’s my hypothesized decomposition of what’s enjoyable about reading printed media:

Intangible Tangibles – the freshly delivered morning paper feels unique and personal. Consumed with coffee in the morning sun, the paper is a ritual for many where they absorb their regular dose of news before getting on with the day. Online media, by contrast, posts stories in real-time as they become available. Although they each come with a dated byline individually, there is no definitive edition for Saturday, February 14th 2009. I suspect this can be overwhelming for many offline users, who find themselves constantly refreshing NYTimes.com in the search for new stories.

Implications: if users want to receive the news in full edition, then the New York Times could start providing users the option to browse a personal edition of the newspaper. Some users may want the stories in it to exactly mimic the printed edition; others may want to wait until all stories about their beloved sports team have been filed. That said, the New York Times can’t replicate the sun or dimensions of the kitchen table.

Store and Share – fans of Web 2.0 liked to tout that it revolutionized media by making media social. That’s only partially true. It’s helped make media social but anonymous and faceless. The first social media began with the newspaper around the kitchen table, the magazine on your desk or open paper at the diner. Any printed media manager knows that readership of any printed media is many times circulation, so a question remains: how much of the value of printed media is in the ability to save and share it with others?

Implications: online sharing doesn’t allow offline users the same experience, although it can often be better. E-mailing a story is not the same as passing it across the kitchen table. To address these users, the NYT ought to look closely at its own “social” layer which in my experience does not allow users to readily save and share stories. Indeed, the NYT social layer is largely a waste of screen real estate. I’d suggest that the NYT experiment with the top space testing the relative attractiveness of social features, the crawl, supplemental “Did You Know?” content on each article, etc.

See What’s Important: seeing a newspaper engages the brain in a very different way than searching Google or NYTimes.com. The newspaper has sightlines, varied print sizes and column lengths. Articles are arranged in rough “order of importance” as deemed by the editors and placed in sections whose width varies day-by-day. Pictures and sidebars focus your attention to where it should be. Coverage differs in quality day-by-day: a lifestyle section is likely to be much more complete  in a thick weekend addition than a thin weekday edition. Replicas like “Skim NYT” fail to capture any of these features. Each article is apportioned the same space, every section is present each day, etc.

Implications: reading the “skimmable” version of the NYT feels like an artificial replica. Rather than try to put every story on one page, the online editors ought to consider the approach taken by DayLife.com of highlighting what’s important and providing impactful visuals. I suggest that one of the most important cues that the Times can provide is giving us hints about story length so we know whether we’re clicking a 2000 word feature story or 300 word newsflash.

Prioritize: does anyone read the whole paper? or even skim the whole paper? We usually skim or read the sections we find important by picking them up out of the pile. This is probably because we know that reading everything will be less beneficial, even if we had the time, than focusing on a few key items. A benefit of printed media is that it allows this kind of focus, without making us feel guilty. We focus by throwing sections of the paper that we might be tempted to read, but know that we don’t want to, aside.

Implications: any good skimmer should have a way to “throw out” sections you don’t want to read. The NYT Skimmer should allow users to order sections based upon what they feel is important and remove those which are of no interest. A virtual section like “Frontpages” could show all stories on the frontpage of any section allowing for some future discovery, but the functionality would attempt to reproduce our ability to prioritize. Similarly, users could be allowed to “quick scan” all headlines in a section, then check a handful to read more on. If they checkboxed 5 stories, these could be tiled side-by-side with the first 200 words of each visible. If the user wanted to read each of these stories, they could quickly “Add to Playlist” to read each one successively while always having the option to skip to the next a la iTunes.