Robot Loves Kitten

With all the breathless hype of how the iPad is a “game changer,” I wanted to do a quick run-down on some of the promises and pitfalls I see.

The Revenue Split: Apple takes 30% off the top for every application sold through the App Store. It takes the same cut for all in-app purchases, so there’s no getting around the vig.

This is probably not an issue for most magazines. In meatspace, magazines continue to juggle subscriptions with the legacy of newsstand. By going digital, they’d be able to consolidate these operations, and more easily upsell new customers to subscriptions, and even downgrade customers back to newsstand-style “per issue” pricing. This would give magazines much greater leeway and intimacy in how they sell to customers. Overall, it’s a big win.

Newsstand is frankly a nightmare. The business is consolidating rapidly on the checkout line, with large retailers like Wal-Mart wielding increasing power over pricing. Newsstand sales volume is also down, pretty much across the board. This is partly because of recessionary spending cuts, but regardless the prognosis is not good for newsstand, no matter who you are.

The newsstand math, while potentially profitable, is still challenging. Generally, 35% of copies are sold, the rest destroyed. Of that 35%, you get 50% of the cover price. So, you’re looking at collecting only 17.5% of your cover price on average per copy.  70% in the App Store compares as a pretty good deal.

Subscriptions are a different story, of course, and you’ll still have to account for the associated costs with managing your customer database, along with Apple taking its cut. The bright side is no more direct mail for renewals.

Upside: The massive potential for in-app purchases. Magazines could easily adopt iPhone-friendly a la carte pricing per issue, as well as offering tiered subscription levels, a la cable TV. The question is, are publishers ready for this?

Pricing Trends: For In-App Pricing, $.99 seems to be the magic number.

Already, GQ and Esquire have apps that cost $2.99. GQ sells in-app back issues for $1.99. These prices are probably a dollar too high, but time will tell. It’s strange that there doesn’t seem to be an option for subscribers to access this content without paying for it again (new subscribers can apparently get the app for free), but it’s still early. GQ could easily make the switch to a free app, and leverage in-app purchases for non-subscribers, allowing subscribers to roam free.

As I mentioned above, $.99 ($.70 net) compares favorably to what you’d expect from the newsstand. Subscriptions are a similar story, as most large magazines offer subscriptions at $1/issue.

Again, the promise here is in-app purchases, and for magazines to create compelling premium content offerings on a monthly basis. It wouldn’t surprise me to see confused executives push for premium pricing, to recoup initial development costs, risk, etc. This is, of course, a massive mistake. Right now, consumer adoption is the key. To have any future at all, magazines need consumers to adjust to paying for digital content. How much is immaterial, what matters is that consumers get through the checkout process.

Advertising and Scale: Will They Come?

Magazines are cross-subsidized with subscriptions and advertising. As we’re in the adoption phase, subscriptions can’t be relied upon to generate revenue, which means advertisers will need to pick up most of the tab. The question is, will they be interested in an admittedly flashy platform that doesn’t have the raw audience numbers they’re used to?

You can almost see the Web playing out all over again. Advertisers want reach, magazines individually won’t be able to deliver, and so will rely on ad networks (at the insistence of advertisers), which will drive down ad revenues, and so on, and so on.

There is a movement driven largely by Ajax-enabled websites to stress “engagement” above pageviews, and magazine publishers may be able to tap into this. In addition, publishers have the opportunity to reinvent the digital magazine ad format, working with advertisers to create more engaging and consumer-friendly ads that could actually reverse the damage of the pop-up banner.

But regardless of what flashy formats win out, advertisers today are sold on metrics, and if these new digital magazines can’t deliver suitably impressive stats, advertisers will look elsewhere.

Extras: What of the Director’s Commentary?

There’s a lot of talk about multimedia extras and exclusive content. This all makes me think about DVDs. It was initially thought that the extras were what would make the sale, and in some cases of movies with rabid fan bases, they still do, but for the most part, extras became yet another pain in the ass that complicated production and drove down profits.

I don’t see anything different in store for magazines. If your extras and exclusives are that valuable, why aren’t they in the primary product? Consumers aren’t buying the trimmings, they’re buying the meat. What publishers need to do is figure out how to create products out of their magazine sections: and then tier them into free and paid versions.

Workflow & Cost of Content Extras

All of this isn’t going to be easy to create. The workflows involved require very different skill sets, some of which can be learned, some probably not. Added to the legacy operations and inherent politics involved in any company, and any new digital operation is going to have a struggle ahead.

So, it comes down to a few key questions:

• Can you retool your product for in-app purchases, creating more opportunities to sell to customers and subscribers?
• Can you grow your audience large enough to keep metrics-focused advertisers interested?
• Can you do it all profitably, while supporting legacy operations?

And I think the answer to all three questions is probably not an iPhone/iPad app, but rather a mobile-friendly website built with HTML5.

The Guardian has a slick-looking iPhone app that has most of the features I think any news site should have. So, I have to ask: why can’t your website have these great features?

Reading between the lines, I think the brunt of corporate politics incinerating staff enthusiasm might have something to do with it. R&D platforms are fun because they’re fresh and new, but you’d better find a way to migrate these improvements into your flagship products, otherwise, you’re toast

Big publishers Time, Hearst, Conde Nast, et al. announced their JV to build an iTunes for digital magazines today. Since there are more smart people around, I’m hopeful that something might come of this. The big, burly print mag folk won’t recognize, but Web designers struggle with our templates all the time. We want to create a more magazine-like experience, too. We just have a hard time finding the time these days.

So, does this JV have a chance? Well, it’s a JV, to start with, so that’s a strike against it. We don’t know much about what they’re going to be doing, since all we’ve got are soundbites from CEOs that couldn’t pick a Kindle off a bookshelf, but there’s a few key driving points.

First, distribution. I think this is the big worry, especially since it dovetails with Eric’s TechCrunch post about the importance of customer data. Publishers lost control when distribution and warehousing started consolidating in the past 10 years or so (could be 20). This was really scary, as the portal to the land of the customer began to shrink and disappear. Now, Apple, Google and Facebook control the portals to customer land, but because things are digital now, publishers still have a chance to wedge their foot in the door via their own apps (think Kindle’s iphone app).

It’s good to focus on controlling access to customers, but the breadth of platforms they are talking about covering is a nightmare to develop for, leading to least common denominator solutions that won’t bowl anyone over. And if customers think it sucks, well …

Customer data is a tough one. Advertising, especially digital, have been migrating to behavioral and contextual targeting, which operates best on the largest possible scale. Brand ads are frankly, becoming quaint. Brand ads were important when you couldn’t reach the consumer before their purchase; today it’s easy.

Why would I place a magazine ad when I have Facebook and Twitter pages, an iPhone game, and a huge search marketing budget? I’m working my community, I’m working potential customers via search, I’m playing games, I’m handing out coupons and contest prizes. I am out there, swinging away. What’s a magazine gonna do for me?

I think brand advertising is dead. What could possibly replace it? I don’t know.

Dual revenue models: To me, this is the elephant in the room. There is a nation of digerati out there who live in a bipolar world — the stuff you pay for, and the stuff you get for free with advertising. Nobody does both. Why would I pay for something, so you can then sell me out to some advertisers? I am convinced this is a dying business model, and should frankly, be unnecessary given zero marginal-cost digital distribution.

As long as publishers insist on models that require dual revenue streams, they will always be outflanked by their web & tech brethren. And that means, eventually, they will all die.

Business and enthusiast titles have a future. Both these groups have rabid communities and potential to go really deep with databases, games, news, etc. It’s lifestyle mags that are the problem. They don’t do anything, and existed almost primarily to serve up expensive brand ads. We knew they sucked, but they were all we had.

Now we know better. Do the publishers?

The thing I’m probably most worried about when it comes to the future of all this media is that, knowingly or not, these companies are moving from a past of plentitude, where they enjoyed two overlapping revenue streams, to a single-stream future.

I don’t see any of these new media experiments, regardless of platform, supporting the traditional double-dip of subscription and advertising revenues. And it’s probably safe to say that the two revenue models are themselves diverging, advertising moving toward advanced behavioral targeting, and subscriptions moving toward micropayments, making it even harder to blend them successfully together into a lux, Conde Nast-style cocktail of profits.

The following is an interesting presentation about outsourcing production tasks. This likely won’t work for smaller orgs, but it might get you thinking about ways to trim time and money by tweaking your processes. Think Pareto Priniciple, wherein 80% of effects come from 20% of causes — i.e., keeping it simple can still deliver most of the benefits.

Newspaper Outsourcing –

So, how are you going to make a better, profitable product in a more competitive future where you’re making less money? It’s a tough question. The landscape’s changed forever.

I’ve seen several recommendations for media companies to go mobile lately, like in this commitments post. Here’s why you shouldn’t listen to them.

There are many mobile platforms, each of which has its own language and quirks. Then there’s the phones and their different screen sizes. Mobile apps are difficult and expensive, and you’re frankly not ready to deal with all that. You need to be interacting via mobile platforms, not debugging software.

What you need is a mobile strategy, not an app. Why? Because you already have a mobile platform that works on all mobile platforms, and includes multimedia and geo-location data. Yeah, it’s way cool. It’s called your Twitter account.

Did I mention it’s free?

US magazine publishers Time Inc., Conde Nast and Hearst are preparing to launch an online newsstand described as an “iTunes for magazines,” according to published reports.

This is a terrible idea, but not unexpected from a now eclipsing empire. Calling it an “iTunes” conjures up a lot of associations, not the least of which include “successful,” “dominant” even. So it’s convenient, but there’s a few really good reasons this effort is misguided, and a big waste of time and money.

First, magazines aren’t music. I don’t have a massive personal archive of magazine content to manage across multiple devices. iTunes is important because it helps control the chaos of my music collection.

Second, these publishers are hoping that they can leverage mobile apps and e-readers into a new “digital magazine” platform where consumers pay for every bit of content. Will a new platform really emerge? No, it won’t. Why? Multiple devices.

Explain to me, without using the terms “lowest common denominator” and “sucky”, how you make a great experience that works on the Kindle, Nook, iPhone, Blackberry, Pre, and Android. You can’t. Not while trying to be both creative and profitable.

So all we’re really talking about is a “digital newsstand”, an online store for content.

This is how these joint ventures typically play out: each publisher will have a few titles in the store that are formatted by store staff, because the publishers are too overworked and understaffed to do it themselves. The “experience” will be basic, beyond a few “experimental” titles aren’t actually practical to produce on a regular basis. And the formats offered will vary from title to title, because it’s actually a ton of work to reformat each issue, and the publishers themselves will vary on which platforms they’re interested in. No one will commit, because no one’s fully committed, and it will eventually fail.

These big publishers lament losing control of their distribution channels, and this is just a ploy to regain control.

Distribution is what made them powerful, and — they hope — will once again. But today, newsstands only exist in New York and the airport. Only the checkout lines are left, and they are jealously guarded by retail chains. Rapid consolidation of atoms on one side, an explosion of digital diversity on the other. Rock, meet hard place.

The simple truth is that magazines are great because they are printed. The medium is the message. Translating this to other platforms isn’t really possible, or even worthwhile. Creating a new experience, adapted for its medium, is what works. Look how the novel has changed in Japan’s cellphone novels.

Of last year’s 10 best-selling novels, five were originally cellphone novels, mostly love stories written in the short sentences characteristic of text messaging but containing little of the plotting or character development found in traditional novels.

Leave magazines alone, and create new products people will pay for: deep databases, mobile games, shopping apps. Recognize that today, everything conveys information and everything is media. The possibilities are endless.

In this context, an “iTunes for magazines” — beyond being stupid — shows an extraordinary failure of imagination.

Just saw a great article this morning, If Newspapers Were Stores, Would Visitors Be “Worthless” Then?, that compares search-engine traffic to walk-in retail store traffic.

It’s interesting because I think it highlights the benefits of the somewhat misunderstood and maligned “freemium” business model, in which a business offers a free version of its product in order to attract customers to paid premium versions.

Freemium is not a particularly easy model to implement or manage, so a lot of businesses are screwing it up. It requires a deep understanding of your customers and the purchase funnel, or how you’re converting free users to paid over time.

The Basics of Freemium
Freemium has become popular with Web businesses because it lets you turn your free-user base into a marketing tool. This isn’t the same thing as “viral marketing”, but it scales similarly well and is more predictable. Your free users paste your widget, for example, onto their websites, with a small branded logo that links back to your website. Each widget becomes an ad, attracting more new users. Then, its your job to upsell those free users to paid ones.

The reason this works is because (and this part is important) the cost of supporting this massive group of free users is LESS than you would otherwise spend in marketing to get the same number of PAID users that the free users create.

Hypothetically, you might be supporting 100,000 free users who each month attract 1,000 new free and 100 paid accounts. If your customer acquisition cost through paid marketing vehicles was $10, you’d have to spend $1,000 per month to generate 100 paid accounts. But those 100,000 free users might only cost you $200 per month in server/bandwidth costs to generate the same number.

Back to the store analogy, the walk-in traffic exists because of your prime retail location. And good businesses treat each new walk-in as an opportunity, not a burden. In the case of media, the fact that your business activities have built a brand and your free content is bringing in visitors means that the first part of the funnel is working. The fact that you feel these visitors are a burden because they haven’t converted to paying customers shows how completely deserving of a pink slip you actually are.

The traffic which comes in from Google brings a consumer who more often than not read one article and then leaves the site. That is the least valuable of traffic to us… the economic impact [of not having content indexed by Google] is not as great as you might think. You can survive without it.” — Jonathan Miller, News Corp.

So what are media companies doing wrong?
The biggest difficultly with freemium, as I see it, is how you structure your free/paid products. It’s easy to strike the wrong balance, and either have too many free users with no reason to upgrade, or not enough free users which chokes off your primary source of potential new customers. It’s really hard to do in practice.

Media companies have been the unwitting freemium poster-children for years now, and most are a great recipe for how to do it wrong. Most media sites give away their content, and then completely stumble when it comes to the upsell (Men’s Health used to be a great counter-example, generating lots of magazine subscriptions from their website, not sure how they’re doing today).

The root of the problem, in my mind, is that media companies have always had two business models: sell advertising, sell subscriptions. And a lot got screwed up in the translation to digital.

Online advertising has never been taken seriously by media companies with viable print products because the revenue and commissions generated by print vs. online ad buys are so disparate. There’s been very little serious effort to understand online advertising and the data behind it. It’s a mess, and will continue to be until we break out of the CPM/Pageview model.

Subscriptions are a difficult sell because it’s a completely different product. If I come to read an article on your site, it doesn’t mean I’m interested in what you do, it means I’m interested in the article you wrote. And I may even be wrong about being interested. That’s how searching works: I try different combinations of keywords in an attempt to generate a set of pages that is likely to contain the information I’m looking for.

So, to assume that someone who visits your website is ready to buy a print magazine subscription, only reveals how little you understand about the Internet. But you can afford these freeloaders, because they share and link to your content, bringing in more new visitors, and that is a valuable vein of new customers that you can mine.

You can work on generating more value from your advertising programs, and you can work on generating a range of paid products that visitors can purchase: exclusive reports, conferences, educational content, etc.

Regardless of what paid products you choose, you need to do some serious work in deciding how to create and manage your purchase funnels. When a visitor comes to your site and consumes your content, you need to approach them strategically. What do you want them to do? Share your content? View an ad? Buy a product? Read more content?

Most sites do all these things, peppering the reader with a million options (paradox of choice), and little of it is tracked. You need to set goals for your content and track the performance of these goals.

Once all these pieces are in place, it will be much easier to understand what parts of your business are under-performing, and what you can do to make the most of your freeloaders.

I woke up Sunday to a flurry of tweets regarding the We Make the Media conference held Saturday here in Portland, and now can’t get it out of my head.

Short background: my career started in magazine writing and editing, then moved to online editing and writing, then to Web design/development and entrepreneurial startups. I’m now working on launching a startup, as well as developing a non-profit foundation focused on sustainability and healthcare issues. I have spent the better part of a decade thinking about and working on evolving print to online, but lately, I have given up, and feel that entrepreneurial web startups will eventually win the day (i.e., I’m totally biased).

So, I’m going to outline a few thoughts. Take them or leave them, it’s mostly for my own benefit — I won’t be able to focus on work until I get this out of my head.

Journalism, who needs it?
I realize that’s a firebomb, but bear with me for a moment. There’s so much talk about how important “journalism” is to democracy, but I’m not so sure that’s true. Democracy requires accountability, transparency and a diversity of opinion. These are things, coincidently, that technology is really good at.

My point here is simply that I think the mission, the goal, needs to be broken back down to its basic tenets. Citizens do not need “journalism,” especially with all its accumulated baggage. We do need accountability, transparency and a diversity of opinion to help build better communities.

Reporters get all wrapped up in the romance of long-form, investigative journalism, but imagine if your only tool was a Twitter account: could you still be a valuable, influential voice in the community in 140-character bursts? If you’re good, I bet you could.

Break down what your core value proposition is. What is unique and important about your mission, and then try and sell me, your audience, that. If you can sell it, you’re probably on the right track.

Newspapers: your product sucks
I get the Oregonian every day as part of a “free promotion.” I never asked for it, and I can’t get them to stop delivery. This actually makes sense to me, because the Oregonian is at a point where it simply hires someone to blanket a neighborhood with papers (it does this with its magazines, too). It has no ability to remove me from this system. Zero customer service potential. In eco-conscious Portland, this is a ridiculous situation.

Almost all discussion about media is about repackaging journalism into new forms, as if changing the container will magically solve all problems. It won’t. In fact, this strategy will most likely kill you faster. The new focus is mobile and e-readers (a device category that barely exists). Cramming a commodity (news) into an expensive platform with a small audience and no revenue model is terrible math.

My feeling is that (most) print-media websites suck, and until you’ve fixed that, you have no business moving into more complex platforms. Think of the web as the bunny slope. There is absolutely no reason, besides your own incompetence, that you cannot create an exciting, profitable website. Here’s a few ideas for improvements:

Personalization: Editors like to control the “front page,” but what they ignore is repeat visitors. Me visiting your site twice in one day is a great thing, but once I do, your information architecture becomes a burden to me. Think like an app, not paper, and let me tailor my experience.

Data-driven articles: This is an extremely powerful concept most journalists have yet to wrap their heads around. In short, sometimes the data is the story. Databases, fed and maintained by editors, become like “choose your own adventure” books, where readers can chart their own course. These databases maintain their value over time and only need to be updated a few times a year. Real estate trends, restaurant reviews, and government voting records are good examples.

Advertising: To a large extent, newspapers have dug their own grave here. They make so little money online because they have let Google define the value of online advertising, and they don’t respect their own properties, littering their pages with cheap, crappy banners. Until they are willing to break out of the destructive pageview-based CPM model, the ad rates will continue to erode.

The biggest problem with online advertising however, is that it can’t compete with print on a commission basis, so salespeople won’t sell it. Until this changes, banners will always be sold as a second-rate, value-add proposition, and that’s no good for anyone.

Hyperlocal: I’m going to toss this in because I think the only way to build a successful hyperlocal startup is from the bottom up. National-scale efforts won’t work because they don’t respect what’s unique about a community. That said, it seems that hyperlocal is in danger of being co-opted as a cheap pageview generator (see the lame katu.com neighborhood sites).

Not News: Most important, I think the foundation of the future of media goes beyond traditional definitions of news and journalism. It’s about providing valuable services and outreach to the community. It’s about being a person and respecting the communities you serve, inside of and beyond your chosen media product.

Down and dirty: pick a business model
I personally think that for-profit is a better model for the future of media, if simply because it keeps everyone focused on creating the most value for the customer, in the most efficient way. That’s just good strategy, in my mind. And to anyone who thinks non-profit is more viable, you might want to take a look at what the recession and Madoff have done to the non-profit world. It has been rocked to the core, much worse than than the public sphere.

I’d also like to recommend Steve Blank, Sean Ellis, and everything “lean startup” to those building a business model. It’s really invaluable stuff and very focused on building viable customer-focused businesses. You’re not going to get it right the first time, so it’s important to put a process in place that helps you iterate toward success.

I really hope that the folks working on the incubator find some traction, because it’s entrepreneurial efforts that are going to break new ground. Established companies have already built their boat and filled it with staff. They are burdened by the past, and are difficult to steer toward emerging opportunities. With publishing, distribution and now marketing pushing zero-marginal cost, there’s going to be some amazing new companies and experiences coming down the pipeline, and I’m excited to see what’s next.

Just briefly wanted to mention a couple thoughts about RSS that have been on my mind since launching SimplerTimes.

I think it’s a mistake to think that we’ve “figured everything out” with respect to presenting content on the Web. The content, readers, platforms, contexts are so slippery that there really isn’t one best approach — there’s several. It all depends on your point of view.

SimplerTimes was designed to show me what I was missing throughout the day, creating “light reads” of the NYTimes to accompany my more substantial read every morning. The NYTimes is such a great paper that I was annoyed, knowing that I was missing great articles that I didn’t have time to dig around for.

Now the beauty of RSS is that it flattens out all the complexity inherent in the content. Everything I need is there, from any source, in one format. This frees me to think about other things, like how to customize the display of content.

Because hardware (and software) are so cheap, it’s really no big deal to set up a new app to vaccuum up RSS and repurpose it in new ways. It’s very light weight, you don’t have to store everything in perpetuity (SimplerTimes stores items for 30 days, then deletes them).

For most internal projects, it doesn’t make any sense to go from DB -> RSS -> DB, but once your infrastructure gets the least bit complex, or you’re dealing with multiple sites, it just might be the answer to keeping things simple and allowing you to focus on your ideas.

It’s been bugging me that newspapers and other publishing types are still hanging on to the idea of “editions” on their Web site.

Editors program the day’s news, package it up into an updated homepage, and voila! Success! Eureka! Brilliant! Their job is done!

Unless I visit their site more than once a day.

At which point, I’ve already seen all those stories, and I’m looking for something new. Which I can’t find anywhere, because it’s all buried in a mess of sections and categories. So here I am: a voracious reader, at your site, ready to engage with whatever you’ve got — and nothing. You don’t have time for me, you’re working on tomorrow’s edition & homepage (which will be brilliant, you add). Later, you sit at your desk and wonder why everyone’s got you on deathwatch.

I’ve been having this problem with The New York Times, so i decided to take a stab at fixing it. So here’s a little experiment in a reader’s view of the news. It’s what I expected from MyTimes, but didn’t get.

SimplerTimes: What’s New at The New York Times

The site is very simple. You simply click on the “Categories” link to customize the sections you want to see. Click “Update” and your preferences are saved in a cookie. The page now lists recent articles from the sections you’re interested in, most recent first.

Articles with a red flag are brand new within the past 2 hours, articles with a yellow flag have been published today. These simple visual cues help you navigate your way down the page, until you decide you’re done and there’s nothing more to see.

I’ve also included “Top Stories” articles on the first page. These come from the NYTimes Home Page feed. This way, you still get a taste of what the NYTimes feels is important today. So now we’ve flipped the balance of power, the main content is personalized, and the sidebar is editor-driven. I think I like it better this way.

The concept is very simple and can be extended in any number of ways.

• The categories are all feeds from the NYTimes (pulled from their OPML file, though, inexplicably, not ALL their feeds are in that file). The feeds could come from any number of sources.
• The displayed content is very limited, with better data in the feed, you’d have more options for how to display it
• I wanted to use Thickbox to display the article in an iframe on the page, but NYT uses an iframe breakout script. Bah, no fun at all.

There’s nothing particularly revolutionary here. You can certainly add each feed to your newsreader and get the same effect (without the css elements of course). But there’s something compelling to me about reconstituting all this RSS data back into a Web page that’s been customized just for me.