The Praized Blog

In the most-awaited session of the afternoon of Day 1 at LeWeb, Michael Arrington (from TechCrunch) sat down with Marissa Mayer, Vice President, Search Products and User Experience at Google to discuss a series of hot topics like recent Google innovations, mobile and the newspaper industry.

On recent innovations:

• Mayer says Google is focused on future of search and they expect different modality of search, not just through keywords. That’s why they launched Google Goggles this week which is basically image recognition (you take a picture and Google tells you what it is). See this example. They also expanded voice search to Japanese and added the “What’s nearby” mobile functionality. Mayer thinks that people will eventually talk to their phone or take a picture to make a search. They also added real-time results (from Twitter, blogs, Facebook, MySpace, etc.) to regular search results, which drastically increases the relevancy of Google search results.
• On Google Chrome, she mentioned the release of Chrome Extensions which allows anyone to add functionalities via plugins in the Chrome browser (like Firefox). She said there are “tens of millions of Chrome users”.
• On Google Wave, Arrington stated “there’s something there” but wondered if we needed more “training”. I think most people are unsure of the value of Wave today and that’s why the Techcrunch founder asked the question.

On mobile searches:

• Mayer says they’ve grown tremendously on smart phones. Asked by Arrington if their total share of mobile searches over total searches was in the 1 to 5% range, she answered “slightly higher than that”.

On newspapers:

• Arrington started by saying we all understand the dire situation of print media and mentioned Eric Schmidt recent vision piece in the Wall Street Journal. He then asked Mayer: “What’s your vision?”. The VP from Google answered with a question: “how do you get users more engaged with news online?” She continued by stating that if we could build a news site from scratch today, it would probably look very different than what we have today. She then mentioned The Living Stories experiment they’re doing with the New York Times and the Washington Post. “What if the story was alive? Not just the print version posted online.” She added that the Web ”puts pressure on the atomic unit of consumption. The article is the atomic unit.” She then suggested we could aggregate all news story on the same topic on one page, like Wikipedia, to help with discovery in Google.
• She closed that topic by suggesting “personalized stream of news”, probably on your mobile phone, would be interesting. The stream would be filtered according to your social circle, location, the news brands you like, the writers you like, and the important news you should know about (she called them “veggies”).
• Asked if newspapers will move fast enough, she thought so and mentioned the New York Times and Washington Post are very progressive partners and very interested on how they can reinvent themselves.
• On Murdoch, Mayer mentioned the partnership with MySpace. Asked if she thought News Corp would pull their content from Google, she answered ”I hope not” as it would impact comprehensiveness of their results set. She added ”we have to respect the content owners. We would respect his will.”
• Finally, Arrington asked if Google would consider paying for content, Marissa Mayer proposed that they already have programs for content monetization through Google Adsense and their display ads network.

See more on Techcrunch.

Conceivably the next great media company will be all spokes and no hub. It will exist as a constellation of connected apps and widgets that live inside other sites and offer a full experience plus access to your social graph and robust community features.

via The Next Great Media Company Won’t Have a Web Site – The Steve Rubel Lifestream.

What it means: Brilliant quote from Steve Rubel. He hits that one right out of the park.  He understands that content and features want to be atomized (or de-portalized) and that has a major impact on the way media companies operate online.  This is the main reason why we built our Praized platform on a hub & spoke API model, where activities are happening at the edge and aggregated at the hub level. And when you add the social graph on top of those spokes, you get local verticals + friends, probably the most relevant experience possible.

I was watching the US Open Federer-Djokovic match on TV yesterday when, towards the end, Federer made an amazing, between-the-leg, return to score a point. I immediately tweeted “What a hit by Federer!!!”. I then stopped everything I was doing to watch a couple of instant replay on CBS, the network that broadcasting the game in North America. I was floored, what a shot. Federer went on to win the game.

Turns out I wasn’t satisfied with the two instant replays the network had provided me. I wanted to see more of it! Five minutes after the game, I searched for the word “Federer” on Twitter. Somebody had already uploaded the whole scene to YouTube in HD quality! I could watch it, pause it, analyze the shot the way I wanted to. I then tweeted back
the YouTube URL for all my friends to see.

What it means: a critical mass of people were watching the game. Someone took the time to “atomize” a portion of the broadcast (the amazing shot) and uploaded it on YouTube (the support). The “news” was then “announced” on Twitter (the discovery tool). Why isn’t this happening on CBS.com?

The Wired blog reports on a new customer satisfaction study from market researcher Parks Associates explaining that Cablecos could soon see customer exodus if they don’t improve their customer service.

“Cable subscribers are generally less satisfied, which creates opportunities for satellite and telco/IPTV providers to grab customers,” said Kurt Scherf, vice president, principal analyst, Parks Associates, in a prepared statement. “Although cable operators have improved service efforts, cable operators will still hemorrhage subscribers unless they are perceived as offering leading-edge features at equal or better value. In today’s economic climate, carriers cannot afford to ignore these findings.”

What it means: I suspect the biggest threat to cable companies in the long run is not bad customer service.  It’s content atomization.  Initiatives like Hulu.com, internet broadcasting on TV networks web sites (I can watch full episodes of popular US series on CTV.ca) and BitTorrent allow anyone to watch their favorite TV shows anytime anywhere.  Compare this to cable packages, where you need to buy a minimum number of channels, some of which you never watch.  TV viewers will soon clamor for personalization and customization and will want to pay only for channels “consumed”.  Expect TV sets to come with Wi-Fi chips allowing you to connect your TV to your wireless router.

I have to come back to yesterday’s blog post concerning Christie Blatchford’s take on blogging.  My friend Mitch Joel wrote a follow-up post and underlined something Blatchford said which I hadn’t picked up the first time around.  She said:

“Do we really want to spend them on something as ephemeral as a blog?” 

I think this is the crux of the matter.  It’s not about blogs, it’s not about the iPhone, it’s not about Facebook, it’s not about Twitter, it’s not about Friendfeed, it’s not about print publishing, it’s not about TV, it’s not about the music industry, it’s not about (insert your favorite media here)…

Physical & digital supports to consume & distribute your content have multiplied in the last two decades.  We now live in a very fragmented world where people consume the same content in various sizes ranging from bite-sized (ex: micro-blogging), to appetizer-sized (ex: blogging), the full meal (ex: a newspaper column) to five-course-meal-sized (ex: a book).

Mitch uses Twitter to micro-blog, writes post on his Six Pixels of Separation blog, has a column in the Montreal Gazette and is currently writing a book. Oh, and he’s a partner at Twist Image, one of the top interactive agencies in Montreal…  Like Mitch, you need to be present at every step of the value chain.

To finish this week’s series on business models atomization, I’d like to address the situation where media has been completely atomized. I think that happens when individuals start becoming media themselves, broadcasting “news” through their blogs, Twitter tweets or their Facebook status updates. That concept, explored last summer in my famous “I am Media” blog post really resonated through the blogosphere. What I missed at the time was the corollary:

If I am Media, I am also Advertising.

I remember being very annoyed by the first Facebook Beacon implementations. I gave them a good scolding and wasn’t happy with the way I was depicted, becoming a “Blockbuster spokesperson”. My friend Perry challenged us to think further about these experiments. In my blog post comments, he said: “In order for them to win, urgently, they need to push the envelope on new ad product models. I think the model of stepping “meaningfully” over the line and then back gets them more forward motion.” He was right but I’m not sure the Facebook folks have learned anything yet…

Facebook Beacon is an amazing idea but it’s really badly executed. In a world where individuals can become media, Beacon could be the “AdSense for People” but it needs to be completely reversed.

Facebook should:

1. Give user control over which ad appears in their newsfeed (i.e. which brand/service you’re endorsing) and when it appears.
2. Share revenues with the user using a performance-based model.

There are obviously a couple of massive challenges with this model. The first one is Facebook does not yet have the inventory of word-of-mouth ads to make it really interesting for users. The second one is “spwom”, individuals “selling out” to brands they don’t believe in, which would be the equivalent of spam for word-of-mouth recommendations. But I believe there might come a time when recommenders get rewarded for talking about their favorite products or places…

Continuing our series on the atomization of content and business models, today I look at the newspaper industry.

First, from the user point of view: online (vs. the print version), it’s much more difficult to find the glue that will make your news container (your URL) stick together. if you have a strong brand (the New York Times, for example), people will navigate directly to your site but readers can now access your content via RSS readers, blog posts and news aggregators like Google News. These have been flourishing, reorganizing newspapers’ articles (the new content atoms), into flexible reading formats. For newspapers, it’s a catch-22. You want to be indexed by news aggregators to drive traffic back to your site but you wonder if you’re losing brand equity at the same time. Efforts at trying to get readers to register to newspapers’ sites (to generate potentially valuable socio-demographics information) have been a major failure. Clearly, the only strategy now is building a strong brand online while allowing readers to access your atomized content via a variety of vehicles but that creates problems from a monetization point of view.

Traditionally, the newspaper business model has been found in these three revenue categories: reader subscriptions, traditional display advertising and classifieds. Except for a few exceptions (the Wall Street Journal comes to mind), experiments in paid online user subscriptions have been failures as digital content is much more difficult to sell as an aggregate than print content. Classified revenues are being nuked by free sites like Craigslist or Kijiji, or aggregators like Oodle. Newspapers have been also forced to offer free classifieds, managing to generate some priority placement /enhanced content revenues but not to the previous print level. Online display advertising is working but it does not monetize as well as print advertising.

To better monetize their destination site, newspapers have been looking at various new solutions. One is in-line text ads (double-underlined sponsored keyword ads appearing directly in the article text) delivered by companies like Vibrant Media but, as I mentioned yesterday, the blurring of the line between editorial and advertising content has created ethical issues within news organizations. Already in 2006, in an article called “Is It News…or Is It an Ad?”, the Wall Street Journal exposed the various issues around the product:

“This type of online advertising within the text of an article, known as in-text advertising, has been around for a while. But it used to be relegated to niche sites like the videogamers’ haven IGN.com and ScienceDaily.com. Now it is appearing on some mainstream journalistic Web sites, like those of News Corp.’s Fox News, Cox Enterprises Inc.’s Atlanta Journal-Constitution and Hearst Corp.’s Popular Mechanics magazine. That marks a departure from a long-observed tradition in the print medium of keeping editorial content separate from advertising. “Journalism ethics counselors decry the trend. “It’s ethically problematic at the least and potentially quite corrosive of journalistic quality and credibility,” says Bob Steele, the senior ethics faculty member at the Poynter Institute, a journalism school in St. Petersburg, Fla.”

More recently, Tim McGuire from the Walter Cronkite School of Journalism in Arizona wrote about its use in the Arizona Central web site:

Michael Coleman, Vice-President of Digital Media for AzCentral, told me late Friday that the site has been using Vibrant Media for “two or three weeks.” Coleman described the relationship as a test and said this is not a “Gannett roll-out” of the concept even though some Gannet papers are using the system. “We’ve got a pretty non-committal contract with them, Coleman said. “The publisher made the call, and we decided to try it and see what happened.” Coleman said the experimental aspect of the deal explains why nobody has announced this deal.

Business Week wrote about the phenomenon in December:

Many journalists believe that selling the words in a story blurs the line between editorial and ad content. Some worry it creates an incentive to insert ad-linked words or order up certain types of stories. Forbes’ online arm caused a ruckus in 2004 when it rolled out in-text ads. After an outcry among the editorial staff and negative media coverage, Forbes ended the practice. (…)

Publishers are paid by Vibrant and other marketing companies based on how many times readers scroll over a word. Advertisers only pay Vibrant for how many times a reader actually clicks on an ad. In-text ads draw a higher response than traditional Web ads: About 0.2% of Web users click on posterlike ads known as banners; Vibrant CEO Douglas Stevenson says 3% to 10% scroll over and click on in-text ads, depending on the category.

I think the use of in-line text ads might be problematic thus far because newspapers have been using the technology to better monetize their destination site. I would suggest that the better use of this new ad vehicle would be to monetize a smaller atom of content, i.e. the news article, decentralized from the destination site. Embedding in-line text ads within RSS feeds or other distribution mechanisms might be a small price to pay to allow readers to access news article outside of the newspaper’s site. Another option would be to have RSS ads, like the Feedburner Ad Network.

I think the general takeaway here is that newspapers shouldn’t look at the same business models to monetize centralized and atomized content.

Update: The Kelsey Group discusses “Newspaper Next 2.0, a “progress report” by the American Press Institute on the evolution of newspaper companies beyond the print edition.” I took a quick glance at it (it’s a 110-page document) but it does not seem to address many of the business model issues that newspapers are facing. As my friend Peter K. says in the post, “The report has a better fix on consumer-oriented solutions than business solutions. But that’s not surprising for a newspaper industry (i.e. editorial-driven) product. If the Yellow Pages Association commissioned similar research, it would probably be the other way around.”

Additional food for thought for yesterday’s blog post on atomizing your business model: this Fortune magazine interview with Irwin Gotlieb, CEO of GroupM (a media-buying company owned by WPP Group) details a portion of their strategy regarding future business models for television.

Last spring, for example, he crafted a $1 million pact with NBC Universal that changed the age-old model of how TV ads are bought: The bigger the hit, the more you pay. With DVRs allowing people to skip commercials, Gotlieb decided that a show’s popularity no longer mattered. He told NBC executives that he would pay based on who was watching the commercials. It was a controversial move, but again competitors adopted the new system. Rino Scanzoni, GroupM’s chief investment officer, who negotiated the deal, credits his boss. “He was saying, ‘Digital video recorders are being incorporated in set-top boxes. Television is going digital by 2009. What impact will that have on our business, now and in five years?’ ” says Scanzoni. “This is something we needed to do to get ahead and drive the change.”

As the line between the web and TV blurs, viewers will have even more control over what they watch. Inevitably that’ll mean watching fewer commercials, and Gotlieb knows it. So while spending money on increasingly dear (and often unwatched) spots in “Lost” and “The Office,” he also wants to own the shows themselves to figure out new ways to infuse them with ads. That’s why he started GroupM Entertainment, a throwback to the 1950s, when shows like The “Colgate Comedy Hour” dominated primetime, to create everything from rock concerts to TV series. In March, GroupM Entertainment produced “October Road,” a series that aired after “Grey’s Anatomy” and has been picked up for another year. (In exchange, ABC gave GroupM discounted ad slots to pass along to clients.) It also produced “Dr Pepper Band in a Bubble,” an MTV reality show. The goal isn’t to turn TV shows into run-on commercials. But having a hand in content creation gives GroupM a better idea of what types of shows will be hits – not to mention first dibs on prime ad buys. “The Digital Age requires advertisers not to interrupt content but to create it,” says Peter Tortorici, a former president of CBS Entertainment. “Programming only works if people really enjoy it and keep coming back.”

What it means: I note a few insights in those two paragraphs. First, the fact that GroupM has been very proactive in trying to reinvent the TV business model even though they’re not a TV network. Maybe the distance helps to craft more innovative ideas. The second insight is the introduction of a performance-based model for TV in a DVR world. I believe we will see those models launched in every traditional media vehicles. The third insight is the blurring of the line between editorial and advertising content. The smaller the content atom becomes, the closer the advertising atom gets to its “cousin”. As a consequence, I think we will see more and more conflicts in the future between editorial and advertising. Will society be mature enough to discriminate between these two?

A couple of news articles caught my eye last week. Mediapost reported on a TV exec seminar hosted by Havas’ Media Contacts unit. Talking about the online video revolution, Mediapost says “major TV providers are moving aggressively online–and not only to their own online destinations, but in an array of “distributed” online content options to deliver their programming directly to consumers regardless of where they are on the Web.”

In addition, TorrentFreak discussed data from Mininova (one of the largest torrent listing sites) showing that “ 50% of all people using BitTorrent at any given point in time do so to download TV-series, quite an impressive number. In total, over a billion TV-shows are downloaded every year, and this number continues to rise.”

Flickr photo by Marshall Astor

What it means: recently, all savvy media industry strategists have been talking about content atomization and clearly, in the TV industry, TV channels are being atomized by new Web technology. Whereby, in a traditional cableco world, channels used to be the basic content building blocks (think about how your cable TV subscription is structured), TV shows have become the new atomic element.

But there’s a problem.

The content is being atomized but the main TV business model (30-second ads) was built to be part of a larger element, the TV channel. Ads used to fill, i) the “empty spaces” between shows and ii) planned 3-minute interruptions during the show. In the first scenario, those empty spaces don’t really exist anymore as shows become the basic element and BitTorrent is disrupting the second scenario by offering easily accessible ad-less versions of your favorite programs.

Guess what. Someone forgot to atomize the TV business model while they were busy atomizing the content.

So, how do you atomize TV’s business model? Is it all about product placement, sponsorships, pre-roll ads? Do you move to a user-paid subscription model for individual shows? And BTW, is the future cableco the equivalent of a RSS reader for online videos?

And what does it mean for other media, newspapers for example?

In the case of newspapers, from a content point of view, news articles are the new atoms. This is the way news information travels online. But, in that situation, newspapers’ business model has been blown to bits (no pun intended). Let me explain. Like TV channels, newspapers are inserting ads in the empty spaces around news articles. These spaces don’t really exists anymore, so how do you monetize? News article sponsorships? A-la-carte article user-paid
subscriptions? This one is not easy as journalism ethics (rightfully so!) have kept news article and ads completely separated. How do you bring ads closer to the article without breaking readers’ trust?

What about radio?

For the traditional FM radio industry, individual songs are clearly the basic atom of content. But those are so easy to find online through legal (music streaming services, iTunes) or illegal means (BitTorrent again). As for their business model, radio stations insert ads around songs. Again, these slots don’t exist in an atomized world. Maybe radio stations should invest in original content or better DJs (Wired calls them robo-DJs in “Why things suck”)? Can radio stations move online as trusted brands and become real music aggregators/recommendation engines? It might be too late. So, is FM radio as we know it screwed? Maybe more than people think. That one again is not easy to solve.

And finally, directory publishers?

As for directory publishers, their business model is currently in the ranking of directory listings. But those individual listings might be the new content atoms. And if they are, it means that the ranking structure does not exist anymore. Is it now the merchants’ phone number and a pay-per-call model? Is it pay-per-click to individual merchants? Given that directory content is all about advertising, atomizing content does not impair a directory publisher from atomizing their business model but it just needs to be properly executed. I believe pay-per-call and pay-per-click to individual merchants might definitely be the way to go.

Conclusion

If you’re atomizing your content, don’t forget to atomize your business model! This blog post raises important questions about future traditional media business models. I don’t have all the answers at this point but I meant this post as a wake-up call to stimulate deeper strategic thinking in all traditional media firms.

Yesterday, I wrote about what I thought were the most important news in 2007 in the local and social media space. Today, I’d like to propose my 2008 predictions, an always interesting exercise.

1. The year of Identity. One of the big challenges of social media is having to sign-up and add your friends in a multitude of web sites. Expect 2008 to be the year where this problem becomes a major issue and gets potentially solved through identity interoperability initiatives like OpenID.
2. Social is now everywhere and open. The last few months of 2007 have set the stage for a very social 2008. Any new major initiatives will include social elements by default and will use existing standards like OpenSocial, DiSo or Facebook.
3. Fragmentation & personalization of media. Given the lower barrier to entry for new local/social projects, user and advertiser fragmentation will continue to accelerate in 2008. From a user point of view, this will lead to new personalization tools allowing consumers to create their own unique media view.
4. The year of ad networks. As a corollary of point #3 above, given that user fragmentation will accelerate, an increasingly large number of ad networks will pop-up to aggregate consumers into a critical advertising mass. It’s all about advertiser defragmentation. Directory publishers will want to become ad networks themselves to push their ads outside of their core destination sites in order to increase their total reach.
5. Content wants to be distributed. That’s the second corollary of point #3. Increasing user fragmentation requires content producers to atomize their content and push it in the fabric of the web. Think of your business in terms of content units or atoms (some inspiration came from Clay Shirky’s “fame vs. fortune” post from 2003).
6. Social graph-based search. I am now a firm believer that social graph-based search will be the future of search (including local search) and we will see this concept gain some tractions in 2008. I think humans will always trust recommendations and advice from people in their “social network” (friends, family, colleagues, known experts, etc.) more than a machine. Online word-of-mouth is the biggest local search opportunity out there.
7. More M&A activity in local. 2007 was quite active from a local M&A (Idearc buying Infospace’s directory business, Citysearch/InsiderPages, AT&T/Ingenio, Marchex/Voicestar, etc.) but I expect 2008 to be even more active given i) the need for directory publishers to execute on their strategies and ii) the need to aggregate traffic to increase advertiser ROI.
8. Mobile: the year before the big bang. 2008 will be the year where a solid mobile development base (open devices, networks, platforms) is established leading to an explosion in 2009. Watch for the Google spectrum bid in January.