The next information wave

It’s easy to hate the most over-used phrases used to describe the web age – paradigm shift, knowledge revolution, Web 2.0 etc.  

But hey we’ve all faced the tyranny of an empty page – it’s tough out there. And faced with amazing changes to how we locate information represented by Google and the other search engines it’s easy to reach for the bottle of superlatives.  

Even the growth of email has meant a phenomenal change to the way we consume and create information in the last 15 years as documents and comments flow back and forth in minutes that used to take faxes, printers, and letters hours or days.  

Despite all these examples of card-carrying “gee whiz”  moments however it looks like we are just about to be swept up in another wave.  

We are just starting to consume knowledge in another way which may result in an equally dramatic lifestyle change when compared to the growth of search engines, or the early days of the web itself.  

The on-rushing wave is the e-book (or more properly the ‘E-Reader’), with an estimated 10 million being sold by the end of this year just in the US alone and dozens of different E-Readers in the works from different companies emerging in the next 12 months – with a combined marketing budget in the hundreds of millions that will make the recent Apple iPad launch look like a hiccup.  

On the surface of it is this just another example of hyperbolic silliness? Because isn’t the E-Reader just another way to consume books that we’re already reading in hardcopy anyway, and as many have pointed out there are a lot of advantages of traditional hardcopy over the electronic alternative?  

What is interesting about E-Readers is not the ‘E-book’ part at all. Instead E-Readers are going to very rapidly reshape how we consume information on the web. This is not about a ‘new device’ it’s about a new way to consume information, because as is somewhat obvious most of the information on the web is just not available in hardcopy form at all. And that really matters.  

Backlit screen reading is hard to do (sorry Apple I know you’re trying with the iPad). It’s hard on your eyes,  it’s not very portable (try reading a laptop with your feet up), and in this information-packed age unless you’re looking at a huge screen it is hard to skim read and quickly identify the key points in screen-based information.  

This has lead to an emphasis on other aspects of screen-based information that compensate for these drawbacks of the web on a computer screen by adding new functionality: dense hypertext links to make cross referencing easy, the ability to comment and interact with authors as represented by blogs, the ability to locate and reassemble information in many different ways as represented by search engines, and in most journalism courses a recognition that writing for the web requires a specific style (admonitions to not write more than two sentence paras etc).  

But the E-Reader is changing that (read “Customized newspapers on e-books: Calibre cross-platform e-book subscription management” to see how you can subscribe to websites out there on the web on your E-Reader, via their RSS feeds,  just like you can subscribe to a podcast on iTunes).  

What happens when everything from the web is as portable and easy to read as paper?  

It’s not JUST the E-Reader: the way this is going to turn our information-consuming lives upside down is driven by a groundswell of the growth of machine-readable info feeds on sites represented by Really Simple Syndication, and emerging platforms like Calibre which enable you ’subscribe’ to any website on any E-Reader – for FREE.  

The E-book just happens to be the final crest of the wave which is about to sweep away already undermined sections of the publishing industry.  

Still not convinced?  

The only thing worse than a ‘paradigm’ shift is an attempt to predict the future so here goes with a few near-term predictions:  

1. the world of journalism is about to get vastly more competitive – journalists in a newspaper will be competing with bloggers with more specialist knowledge who previously had limited circulation because you couldn’t purchase your average blog conveniently on a newstand or read it on the way to work on the train. The blogger is providing the information for free.
2. intermediaries that seek out big stories will get more important in their own verticals (wherever those stories are) whether they are using algorithms like Google or whether they are using human curated approaches like ‘The Week’, or social media mechanisms like Stumbleupon or Digg. Try and find for example, amongst the 100m+ or so out there which are the most entertaining blogs? To some extent this question was irrelevant  if those blogs didn’t get read – but not any more.
3. new ways of consuming stories will arise – for instance ‘collaborative reading’. On my Kindle or Sony Reader or iPad or whatever why should I not be able to view annotations on a text by my colleagues, or classmates, or friends?
4. we’re not talking individual wikis – we’re talking wiki world – why buy a ‘How To’ manual for  your motorcycle when there is a completely portable version?
5. traditional publishers who are congratulating themselves on being web savvy like the New York Times or Guardian are going to come under even more pressure because E-Readers in many cases will have the effect of destroying ad revenue and their ability to really track readership. With the aid of software on an E-Reader like Calibre this is the equivalent of Tivo for the publishing world: in your Kindle DX via Calibre no javascript is active (so Google Analytics aint going to know you’ve read the story) all it knows is that someone downloaded their RSS feed (not which particular stories were read).  And fancy ads are not going to come across because people writing recipes to extract your content with Calibre simply don’t want them.  Even if you instituted counter-measures by embedding an ad image joined with a story image, it’s almost the equivalent of going back to the flat ad serving done in newspapers. 
6. even the acknowledged guru of the web commerce world, Amazon, may be shooting themselves in the foot. They want you to buy e-books from them – but why? If you can read any old PDF or niche website out there on the web from the comfort of the couch? Or a million free book titles? I bought an Amazon Kindle DX and have yet to buy a book on it (but thanks Amazon anyway for paying the wireless subscription charges).
7. if it isn’t already obvious the E-reader is going to reduce further the cost of information globally even more: expect to add value with your startup company by better locating information, or better curation, but expect an uphill road if you think it’s about unique content (Mr Murdoch take note).
8. a bit like podcasting has broken the barriers to entry for local radio talk shows your decision is not ‘which paper do I buy in my home town’, instead it’s ‘which blogs do I want to read from the entire internet?’ Publications are becoming ‘unbundled’ and publishing deadlines paradoxically may actually become less important in an age of instant satisfaction. Why should I read some crap which some journalist stitched together at the last moment to make the Sun weekend edition when I can read a combination of bloggers who only produce pearls once a month? 

Like the sound of this new world or hate it?  

Is it not going to happen at all?  This is a blog – talk back.

Posted under Kewl

Financial forecasts look negative for newspapers

There are some nervous investors in the newspaper world.  Even after the recent 30% lift in the broader stockmarket, newspaper stocks like the New York Times Company and the Washington Post Company are trading on price to cashflow multiples of 4.2 and 6.8, where their 3 year averages were 11.8 and 10.6 respectively (Gannet actually trades at 1.8 x cashflow - albeit with a lot of debt).

Newspapers were seeing revenue decline year on year even before the credit crunch started. From the peak in 2005 of about $50 billion in newspaper ad revenue in the US,  revenue declined to $38bn in 2008.

Warren Buffett wouldn’t buy a newspaper these days for any price and newspapers themselves (those that are left after companies like Tribune have filed for bankruptcy and others have shut down) are even pleading for charitable status before those oh-so-friendly politicians.

The public already seems to be voting with their feet with the Pew Research Centre results showing that the percentage of Americans getting most of their national and international news from the web has gone from 15% in 2001  to about 40% today. Environmentally insensitive as my household is, it also seems tactless to  be throwing hunks of trees out with the rubbish every week in this age of global warming concensus.

It’s fascinating (particularly for bloggers … Ahem..) to watch. Sort of like a slow motion car crash.

And it is indeed slow motion; back in the mid 1990s I worked for a  very large business magazine publishing group who were very concerned about the commodification of news on the web. This (listed) group’s response to the threat posed by the web was to spend quite a bit of money trying to build web based vertical business communities around subscription products where ‘news’ was only a small part of the offering (they were trying to sell conferences, lists, and databases etc).

Can the traditional news industry restructure before it’s too late?

Does the news industry ‘get it’ (including television news for that matter), or are they in terminal decline? And if the traditional news industry is in terminal decline where are we going to be getting our news from – who is going to take up the slack? Bloggers? Google News? None of the above?
Looking at the online output from a lot of newspaper websites you could easily come to conclusion that on the surface they don’t get it.

The response of most papers to these strategic challenges, it seems to me, is to put in systems so they can multi-purpose copy to put out web versions and hardcopy versions at the same time. Like … errrmmm … wow ….

As an approach it’s likely to be fundamentally flawed because screen reading habits are simply different from hardcopy reading habits (so you can’t easily re-purpose for both). For example conventional advice onscreen is to write no more than 2 sentence paras, use online emphasis tools like colour etc where appropriate, and heavily use subheadings.

Another key point is that online the unit of consumption is not the newspaper ‘Section’ but rather the individual story itself, much as in the online music industry consumers increasingly buy singles through websites like iTunes rather than albums.  The individual article becomes the point where most people directly enter the parent website – so links from an article to your other articles and similar techniques to generate traffic within a website become far more important than in a hardcopy publication.

Most newspapers seem not to understand search engine optimisation

Another fundamental problem that is easily recognisable on your favourite newspaper’s website is an inability to respond fully to the needs of search engine optimisation. If you want to boost your online advertising revenue you  need to pull in punters who are actually actively looking for information via a search engine rather than hoping that they will serendipitously spot your ad at the right time. You don’t have to be a genius to realize that a buyer who is actively looking is worth paying more for as a marketeer.  As a publisher you also need to recognise that (typically) 75% of the traffic to your website will come from search engines.

Google ranks words that occur in titles as more important than words that occur in body text. Yet newspaper subeditors seem to think they are principally employed to produce clever puns (‘Shopping Maul’ or ‘Welcome to the House of Funds’ in a business publication I just read) and subeditors also seem to be singularly thoughtless when it comes to choosing commonly used keywords to please Google and Co. For example, have a look at the titles on the New York Times online. Even where newspapers will go as far as encoding the title in the URL (e.g. the title of this article on Drivelry.com if you look at the url) the keywords in the title are often highly unlikely to be searched for.

To put this another way, the average blogger who uses Wordpress straight out of the box (the free pubic domain software that underpins this blog) is likely to have better search engine optimisation than most newspaper websites.

The average blogger is also likely to be heavily scrutinizing Google’s Analytics plug-in to track readership from the first day they start blogging, to see what sort of response they get from their audience. In many publishing groups in my experience that sort of data probably never even gets out of the IT Department down to the journalist…

Cost-cutting on a newspaper doesn’t get you to profitability though

Printing and distribution account for about half a newspaper’s costs. So couldn’t you just shut down the presses?

Probably not.

If say the New York Times managed to halve its quarterly operating expenses, by dropping production of the physical paper, its online advertising revenues would still only cover about a fifth of its operating expenses.

As an article late last year in the Financial Times, Lex Column (link to the original quoted on the Magforum blog) said:

“To break even as an ad-funded digital-only business, with a quarterly cost base of, say, $338m, the New York Times – already the No. 1 newspaper website in the US – would either need 4 times as many unique users or ad rates 4 times as high as today’s, or some combination of the two.”

So where are we going to be getting our news from in 5 years time?

This is an issue which has been exercising that compulsory oracle for news hounds, ‘On the Media’ (who now even have a specific theme tune for business models to save the news industry). In a recent interview  Brooke Gladstone interviewed ex journalist David Simon who harrumphed that:

 “The Internet is a marvelous tool, and clearly it is the information delivery system of our future. But thus far it does not deliver much first generation reporting. Instead, it leeches that reporting from mainstream news publications whereupon aggregating websites and bloggers contribute little more than repetition, commentary and froth.”

 

[I thought it important to validate his worst fears about bloggers by doing just that.]

He went on to say:

“The day I run into a Huffington Post reporter at a Baltimore zoning board hearing is the day that I will be confident that we’ve actually reached some sort of equilibrium. You know, the next 10 or 15 years in this country are going to be a halcyon era for state and local political corruption. It is going to be one of the great times to be a corrupt politician, all right?”

We are watching a fascinating drama play out: an irresistible force (the creation of increasing numbers of niche content sites written by bloggers and disseminated by aggregators and search engines) meeting an immovable object (the newspaper industry) and neither charitable status nor anything else is going to save the latter from being completely transformed.

Blogs versus newspapers: who will win the battle?

Let’s draw a veil over the likelihood of bloggers or mainstream journalists attending zoning hearings. Here is a 10 point list of why newspapers have their work cut out for them: 

1. Hosting a blog costs nil (on say Wordpress.com) or $20 a month in hosting fees if you want to host it under your own domain name
2. Bloggers use free graphics libraries under Creative Commons intellectual property rules that can be used to create professional looking articles e.g. free photos from Flickr in this blog
3. Bloggers gain the inherent linking benefits from other bloggers (after keywords, linking is  a primary determinant of website results rankings on Google)
4. Bloggers live and die by search engine optimisation (and therefore are extremely conscious of it)
5. Bloggers close the feedback loop on whether their articles work by closely reviewing tracking data
6. Bloggers have interests and expertise in specific subject areas that no generic journalist can match (let’s face it, some journalists are often a pale reflection of their phone books anyway) 
7. Bloggers create sites that are extremely niche (the internet’s ‘long tail’ applies just as much to news consumption as shopping) yet because of the search engines they can be found. What publication (for example) would target the dozen or so people who would be interested in this article?
8. Bloggers are going to write for free in many cases, for the same non-monetary reasons a lot of poorly paid authors write for the publishing industry
9. Bloggers who don’t write for free will test to destruction the emerging revenue models that for the average newspaper journalist are the province of upper management: Adsense, affiliate programs, emerging electronic platforms like the Kindle, micro donations, pay-to-post, subscription lists (the old ‘controlled circulation list from the hardcopy publishing world) etc
10. Bloggers use increasingly powerful publishing platforms like Wordpress that have developed whole software eco-systems around them (where the platform itself is free)

There are other points we could make e.g. whether individual bloggers are worth going after with a lawsuit, how well some of those bloggers write (or not) but you get the idea.  To put it perhaps unkindly it could be argued that it would be great if some local and national newspapers shut down and just got out of the way – there will be someone else around to do their job at a lower cost when they’re gone (probably out of work journalists).

But (it’s incontrovertible) …. screen reading sucks

Oh yeah. Fair point. We see this in websites that I consult on commercially- we track print requests from online articles and there are a hell of a lot of them. It may sound like biting the hand that feeds you but at almost 2000 words anyone who’s got this far in this article without printing it deserves a medal.

However the response to this objection is that screen-based reading is getting better every day and increasingly it’s not going to involve a stupid laptop computer that takes 5 minutes to boot, has a keyboard and other components you don’t need to read with, and whose battery dies after 2-3 hours.

When it comes to portable screen-readers the future is now. It’s pretty clear that screen reading devices that you can read with your feet up on the couch like the Kindle (reviewed last year at Drivelry.com)  are getting there with consumers, with estimates from Citigroup that Amazon sold 400,000 Kindle units in 2008.  The newest Kindle even has a text-to-speech function i.e. it will read a book to you aloud.

And again the economics of the cost of distributing a book electronically will eventually force readers to buy a Kindle or look-alike unless they want to pay double for the equivalent in paperback.

As of May 13th 2009, David Simon (mentioned in the On the Media interview above) would be doubly horrified to learn that Amazon (at a 30/70% revenue split in their favour - the same terms they generously offer major newspaper chains) now makes the Kindle platform available to all 41 million-odd bloggers out there as a sales channel. For the modest sum of $1.99 you can even have all the articles from this website (Drivelry.com) delivered automatically to your very own Kindle reader.  Disclosure: this is a plug, run, don’t walk etc etc].

Nobody expects the Kindle to be a significant source of revenue in the short term, but in the medium to long term this is the publishing equivalent of an earthquake.

Posted under Kewl

Expect this item to expand over time…

But here’s a couple of recent classic bloopers suggesting by implication how not to run a website.

1. The gift voucher which costs $10 to ship to you

Go into Woolys Wheels website and try and buy a gift voucher. Choose, say, the $100 gift voucher and their shipping cost is $10 … (-: Then ring them to point this out and speak to an unhelpful employee who then tells you he can’t do anything about it.

Result: customer goes to another bike shop.

2. The supermarket that deletes your laboriously compiled shopping lists

Coles upgrades their online shopping database. Decide that irrespective of the fact that many of your customers may have spent a couple of hours laboriously putting together the contents of their standard shopping lists, you will just delete all shopping lists where the customer hasn’t bought anything recently (even where the customer has only registered one week prior to the upgrade). 

Result: customer goes to Woolworths.

3. You can buy anything at our store provided you pay with our credit card

You’re one of the biggest online auction sites out there. Decide to force all your sellers to offer Paypal as a payment method, and then, take it a step further by insisting that all transactions will be paid for using Paypal on the basis of “improved buyer experience”. Assume that neither the market or the relevant competition authorities will realize that you are just trying to increase the takeup of Paypal – as if you force every Ebay user to have a Paypal account they are increasingly using Paypal on other websites (and in fact in your own publically released financial results Paypal just happens to be the fastest growing area of your business …).

Result: Competition authority rejects your approach, begins examining other parts of your business, and you create thousands of annoyed sellers and buyers. Your stock price crashes as every news item that mentions you triggers dozens of responses from annoyed sellers talking about their poor experience with your business.

4. As an auction seller you can leave any feedback about a buyer – providing it’s positive

Seems unfair I know to mention Ebay again, but with this much recent management talent you just can’t avoid them.

You earn most of your revenue from sellers (basically unless they use Paypal buyers are worth nothing to Ebay). So to “improve the buyer experience” disable the ability of sellers to leave negative feedback for buyers, whilst buyers can continue to leave negative feedback for sellers. Better still, disallow sellers from trading (even with a previous track record of thousands of items from which you earned thousands of dollars in commission) if they have a few recent negative feedback items.

Result: thousands more responses from annoyed sellers anywhere Ebay is mentioned on the web.

5. Use our web form to submit a sales enquiry – but don’t expect a response 

Clarence St Cyclery website. Currently 5 days and counting. If it was a technical query you can sort of understand this – I mean, like, that’s a cost  centre. But a new business enquiry? Most people expect a response in 1 day. Many prospective customers will submit an enquiry and keep looking at your competition until you respond – so it’s best to respond within hours.

6. Use Skype subscriptions for your business – you just won’t be able to renew them

There are a number of great features in Skype which make it ideal for a small business. Free integration with Salesforce.com to allow incoming caller id based popups for example, free global conferencing with other Skype users etc. However if you’re running a small business you want to be able to coordinate invoicing and control expenses. Enter Skype’s ‘Business Control Panel’ where you can allocate credit to multiple users and perform various other corporate functions. 

But there’s current a big trap for BCP users: if they purchase a Skype Subscription through the BCP (which gives you both a set of incoming phone numbers and free calling to standard phone lines for various countries as well as voicemail etc) you cannot actually renew it at the end of the term of the subscription! Nobody of course tells you this in advance so at the end of your (say) 3 month subscription for your employee they are left with a set of phone numbers which you may well have given out to clients that cannot renewed as part of the subscription (the only way – and it’s an expensive way) around it is to individually extend each phone number (when the numbers come with a subscription anyway).

Result: each individual Skype user must purchase their own subscription with all the lack of control (the subscription and phone numbers belong to the employee and not the company) and lack of expenditure tracking involved.

7. The downloadable takeaway pizza menu that you can’t print

Christos Pizza website. You just want to order a pizza. Great, there’s a takeaway menu you can download. Only problem is someone has failed to explain to their graphic designer that a lot of printers don’t support inverse printing well (where you have white typeface on a black background).

Result: the printed version of the menu that you would to take to your friends downstairs and get their orders from is totally unreadable.

8. The books for sale on Amazon that you cannot buy

Amazon. I am surprised that Amazon could make a list like this but their Marketplace (3rd party sellers) book sales can be the most frustrating experience on the planet if you are shipping outside say the UK or US. Essentially you choose a book from the MarketPlace section, add it to your shopping basket, go all the way through the payment process, including putting in credit card details, and finally as the last stage of the half dozen steps in the buying process you are told that the MarketPlace seller does not ship to your country. Buy half a dozen books at a time and you can waste 45 minutes taking each MarketPlace seller through the whole process. Amazon support tells me that their shipping information indicates which country MarketPlace sellers ship to: it most definitely doesn’t.

What’s your classic ecommerce blooper experience?

Listening to a Bloomberg podcast commentary the other day, the commentator noted that he was old enough to remember the last few bad recessions. Times where you walked into a store and were literally mobbed by sales staff, times where restaurant staff would pull out your chair. If you’re running an commercial website ‘times are a changing’.

Posted under Hate pets