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August 09 2012

15:50

July 26 2012

18:56

Chicago Tribune staff: We're frustrated and concerned about Journatic connection

Jim Romenesko :: Eighty-eight Chicago Tribune staffers have written to editor Gerould Kern about their “deep frustration and concern in the newsroom over the Tribune’s continued relationship with Journatic,” which they say “threatens to jeopardize our credibility.

Read the staff letter here - by Jim Romensko, jimromenesko.com

14:00

The newsonomics of Amazon vs. Main Street

Order it on Amazon. Then run to your front door and have it handed to you. The news of Amazon’s same-day delivery blitzkrieg — first explained in depth in an excellent Financial Times piece — elicited a near-maniacal laugh among newspaper companies: What next?

Of course, the impact of Amazon’s move extends well beyond the further toll it may take on the ever-shrinking newspaper business — but that crater-creating possibility may well be the biggest news of a big news summer. Advertising — in Amazon-contested markets — will never be the same.

We’ve known that newspaper advertising revenues are in a deep, downward spiral — higher single digits this year, with early budget guesses showing the same for 2013. In the U.S., overall ad revenues are half what they were five years ago, down $25 billion a year from 2007.

Here’s what most hurts most about the new Amazon threat: It aims directly at the one category of newspaper advertising that has fared the best, retail.

Classifieds has decimated by interactive databases. National has migrated strongly digital. Retail, which made up of just 47 percent of newspaper ad revenues 10 years ago, is now up to 57 percent of newspaper totals. Now that advertising, albeit in just a few markets initially, will have to compete with Amazon-forced marketplace change.

Amazon, of course, isn’t targeting newspaper revenues. It’s targeting customers — selling more to current ones and engaging new ones. Further hits to newspaper revenue are just another unintended consequence of accelerating disruption of all business as usual.

The same-day push is built on strategies long in the making. Amazon knew its day of reckoning on its sales tax exemption would come. Like all big, smart companies with legions of lawyers and lobbyists, it delayed the inevitable, and with each delay, built market strength and cash.

Now the jig is finally up. Combine revenue-starved states and the late-arriving sense that Internet business no longer needs a societal jumpstart, and Amazon is being forced to charge sales taxes, though it negotiated their arrival with great agility. The exemption allowed Amazon an incredible price advantage, and many of us have been glad to take advantage of it. Not having to charge customers four to nine percent in sales in taxes (which land-based merchants couldn’t avoid) allowed it to provide lower prices.

Amazon knew this day would come. What the market didn’t know was that sales tax settlements would lead to Amazon quickly flipping its model. It had paid sales taxes in a few states, forced to do that in places it had warehouses. So it placed those warehouses close enough to customers (Nevada for Californians, for instance) to make two-day shipping a snap. Now, with the tax changes underway (it’s estimated that Amazon will be on the hook for sales taxes for half the U.S. population) , it no longer needs to selectively place vast warehouses in only a few states — it can place them everywhere and much closer to customers.

Today, if you’re in Baltimore, Boston, Chicago, Indianapolis, New York City, Philly, Seattle or D.C. , you can place an order and it the same day through Local Express Delivery. That becomes Amazon’s base program. It is now building out that simple concept with 7-Eleven distribution lockers and much more, city by dense city. Behind that new delivery service stands an array of back-end technologies, analytics, and logistics that far surpass what anyone else possesses. Even now, to get a sense, of what’s behind the evolving system, just check out the left-hand navigation on this page.

The program builds on the smarts of Amazon Prime, whereby 10 million Amazon customers pay $79 a year and get “free” two-day shipping. Same-day is just the next logical step, both for delivery of goods and deepening of customer relationships and selling opportunities — which, remember, increasingly include media (“The newsonomics of Amazon’s Prime/Subscription Moves”).

The unintended impacts of Amazon’s same-day push will be as intriguing as the ones we can foresee. Just for starters:

  • Will local advertising expand or retract? Retailing will be more intensely competitive, and anti-Amazon appeals need to be transmitted somehow, via smartphone, websites, print, community events, and more. Was SoLoMo just a dream, or is it now a counter-strategy? (Newspaper companies efforts to become regional ad agencies, ironically, may get a boost from the Amazon move.) Preprints, which may total as much as 40 percent of the $11 billion or so U.S. dailies take in as “retail,” will be a prime front here, one way or the other. While retail advertising impacts could be substantial, brand advertising may well become more important, as online buyers decide among brands in different ways.
  • Will newspapers be forced to accept still another death blow to their fortunes, as retail ads are further disrupted? The impact on print is up in the air. Further, Find ‘n Save, a fledgling newspaper-consortium-owned Amazon competitor finds itself even more outmatched as same-day delivery further trumps one of its key differentiations.
  • Will Google, with all its eggs in the ad basket, find unexpected competition, as Amazon further disintermediates advertising itself, becoming the first and only stop between “I want this” and delivery of the good? Will advertising itself be replaced to larger degree as manufacturers are forced to differentiate themselves within Amazon, maybe moving marketing spend there?
  • What will cityscapes and shopping centers of all kinds look like if Amazon’s plans succeed? Imagine a cityscape without big box stores, Walmart, Best Buy, and Bed Bath & Beyond? Impossible, you say? How about one without Borders, Tower Records, and Blockbuster Video, all of which have left hulking holes in the American suburban landscape. Nothing is safe from digital disruption; nothing, holy or commercial, is sacred. Optimistically, a couple of dozen communities are creating next-generation uses for these eyesores, as the big box reuse movement (good rundown and reuse wiki via Slate) has been unexpectedly spawned. Will big boxes, the spirit-sapping, wallet-supporting icons of our age of disenchantment, take the brunt of Amazon’s assault, or will it be smaller stores?
  • What might it do to employment? Will CVS checkers be replaced by more truck drivers and order fillers? Or is the future simply more robotic, as Amazon’s purchase of warehouse-product-picking Kiva Systems changes the supply chain? No, it’s not sci-fi, though it appears to be the year of the “robots,” as computers do everything from local “reporting” (Journatic) to filling our orders for toothpaste and printer ink.

Let’s take a first look at the competition, as we look at the newsonomics of Amazon vs. Main Street.

In one corner, there’s Amazon. Its strengths:

  • Quick findability, in your living room.
  • Delivery to your door, or near it, now “same day.”
  • Wide selection, often more than is available locally (but sometimes less).
  • Wide-ranging and increasingly deep user reviews.
  • Guaranteed satisfaction or easy return.

In the other corner, it’s Main Street. Its appeals:

  • Buy it now. Pick it up. See, buy, use. Ad veteran Randy Novak says that more than 80 percent of retail sales now come from areas within 15 minutes of a stores’ location.
  • The visual and tactile shopping experience; NAA’s Randy Bennett points to retailers’ role as “showcasers.” Then, there’s shopping as entertainment, plainly as much heaven for some as hell for others.
  • Habit.
  • Getting out of the house once in a while.
  • Support of the local guy.

Proximity here is fascinating. The local edge has long been proximity, that 15-minutes-away appeal. Now, Amazon counters that with 12 inches away (your nearest screen) and some number of hours, as Americans do their new arithmetic on buying.

Beyond proximity, there’s price. Yes, Amazon is acknowledging that the 20-year-long sales tax furlough it got is finally ending. It knows it will have to add that 4-9 percent of sales tax to its prices across the country within several years. So where will that tacked-on pricing put it?

Let’s remember that its world-class algorithms track competitors’ pricing in real time. After all, that’s been — often to Amazon investors’ chagrin — CEO Jeff Bezos’ strategy from the beginning: sacrifice profit margin for market share and growth. Its last quarterly report showed 1 percent net profit — on $13 billion of sales. Expect it to match or beat on many items, absorbing low margins, and maybe loss leaders to win market share from Main Street.

How much room, with tight margins, will Amazon have to maneuver? That could tell the tale here. Squeezing margins — lowering prices — will have one at least near-term consumer impact. If you’re selling the same vitamins, shoes, or dog food as Amazon, you’ll have to lower some prices to compete. The cautionary tales of bookstores and music stores, and now Best Buy, show that consumers don’t find a lot of sense in paying more locally than through the web.

As we consider price, the shipping fee comes clearly into view. With Prime, the innovation that paved this road, members don’t worry about each shipping cost. Pay once — that $79 annual fee that’s been remarkably stable — you get shipping “free.” Look for Amazon to embed free same-day shipping into another similar program, Prime Same-Day, for $99 or $139, or include it for anyone spending more than $500 a year, for example; we believe that Prime members may average $1,500 in annual purchases already. As with Prime and with Amazon overall, again, build market share for the long term, even at the risks of low profitability or even loss.

There’s a lot of nuance we’ll miss in the first passes on the topic, of which Farhad Manjoo had the best. This commercial initiative is aimed of course at goods, not services. It’s the goods-selling competitive and geographic landscape — think Amazon categories like drugs, clothes, toys, and electronics — that could be transformed. Services, like those that we use today — health care, restaurants, fitness centers, and, of course, coffee shops — would be unaffected. In an ideal world, we may have less time for mundane shopping and more for more fruitful activity. Or we may have big empty buildings, fewer community jobs, and less socializing. And, maybe people will have more time to read. We’ll probably see all these things happening at once.

Amazon, of course, just wants to make money. Yet, it has already, in part, disintermediated shopping itself. Expect it to be extend its Subscribe (interesting choice of words, right?) and Save program, wherein you get small discounts for getting regular deliveries of goods, like detergent, that you reorder over and over again. Expect it to try to change our mindsets from shopping to deciding and then letting it go, and getting it delivered without a second thought — changing the very notion of shopping.

With price differentiation now driven by algorithm, with ad offers driven by those with the biggest data, and now with delivery of our daily goods newly rationalized, it looks like those that prize news creation best continue to look elsewhere for revenue. That’s one of the reasons I’ve become increasingly enthusiastic about reader revenue. Yes, newspapers could repurpose their daily delivery systems here, to actually aid Amazon, but that seems like a real longshot. The technocrats of commerce, Amazon, Google, Facebook and Apple, are the biggest game in town — and increasingly, they want to be the only one.

Photo by Stephen Woods used under a Creative Commons license.

April 27 2012

14:00

This Week in Review: Rupert takes the stand, and the Post’s pressure on young aggregators

Fresh accusations and denials for News Corp.: After several months of investigation, News Corp.’s Rupert Murdoch and his son, James, testified this week before the British government’s Leveson inquiry into their company’s phone hacking and bribery scandal. Rupert made headlines by apologizing for his lack of action to stop the scandal and by admitting there was a cover-up — though he said he was the victim of his underlings’ cover-up, not a perpetrator himself (a charge one of those underlings strenuously objected to).

Murdoch also said he “panicked” by closing his News of the World newspaper last year, but said he should have done so years earlier. He spent the first day of his testimony defending himself against charges of lobbying public officials for favors, saying former Prime Minister Gordon Brown “declared war” on News Corp., which Brown denied. James Murdoch also testified to a lack of knowledge of the scandal and cozy relationships with officials.

Attention in that area quickly shifted this week to British Culture Minister Jeremy Hunt, with emails released to show that he worked to help News Corp. pick up support last year for its bid to takeover the broadcaster BSkyB — the same bid he was charged with overseeing. Hunt called the accusation “laughable” and refused calls to resign, though one of his aides did resign, saying his contact with News Corp. “went too far.”

The commentary on Murdoch’s appearance was, perhaps surprisingly, mixed. The Washington Post’s Erik Wemple mocked the fine line Murdoch apparently walked in his currying favor from public officials, and the Guardian’s Nick Davies said Murdoch looks vulnerable: “The man who has made millions out of paying people to ask difficult questions, finally faced questioners he could not cope with.” He antagonized quite a few powerful people in his testimony, Davies said, and the Leveson inquiry ultimately holds the cards here.

But Murdoch biographer Michael Wolff said Rupert doesn’t use his newspapers to gain officials’ favor in the way he’s accused of doing, and Reuters’ Jack Shafer argued that there’s nothing really wrong with lobbying regulators to approve your proposals anyway. “Don’t damn Murdoch for learning the rules of the regulatory game and then playing them as aggressively as he can,” he wrote.

Plagiarism and aggregation at the Post: A Washington Post blogger named Elizabeth Flock resigned last week after being caught plagiarizing, but the story went under the radar until the Post’s ombudsman, Patrick Pexton, wrote a column charging the Post with failing to properly guide its youngest journalists. Pexton said he talked with other young Post aggregators who “felt as if they were out there alone in digital land, under high pressure to get Web hits, with no training, little guidance or mentoring and sparse editing.”

Poynter’s Craig Silverman wrote a strong follow-up to the column, talking to several people from the Post and emphasizing the gravity of Flock’s transgression, but also throwing cold water on the “journalism’s standards are gone, thanks to aggregation” narrative. Reuters’ Jack Shafer thought Pexton went too easy on Flock’s plagiarism, but others thought it was the Post he wasn’t hard enough on. The Awl’s Trevor Butterworth said Flock’s mistake within the Post’s aggregation empire shed light on the “inherent cheapness of the product and the ethical dubiety of the entire process. You see, the Post—or any legacy news organization turned aggregator—wants to have its cake and other people’s cake too, and to do so without damaging its brand as a purveyor of original cake.”

BoingBoing’s Rob Beschizza made the same point, criticizing the Post for trying to dress up its aggregation as original reporting. The Raw Story’s Megan Carpentier used the example as a warning that even the most haphazard, thoughtless aggregated pieces have a certain online permanence under our bylines.

Technology, connection, and loneliness: A week after an Atlantic cover story asked whether Facebook was making us lonely (its answer: yes), MIT professor and author Sherry Turkle echoed the same point last weekend in a New York Times opinion piece. Through social and mobile media, Turkle argued, we’re trading conversation for mere connection, sacrificing self-reflection and the true experience of relating with others in the process.

Numerous people disputed her points, on a variety of different fronts. Cyborgology’s David Banks charged Turkle with “digital dualism,” asserting that “There is no ‘second self’ on my Facebook profile — it’s the same one that is embodied in flesh and blood.” At The Atlantic, Alexandra Samuel said Turkle is guilty of a different kind of dualism — an us/them dichotomy between (generally younger) social media users and the rest of us. Turkle, she wrote, “assumes conversations are only meaningful when they look like the conversations we grew up having.”

Like Banks, Mathew Ingram of GigaOM pointed out the close connection between online and offline relationships, and sociology prof Zeynep Tufekci argued at The Atlantic that if we are indeed seeing a loss in substantive interpersonal connection, it has more to do with our flight to the suburbs than social media. Claude Fischer of Boston Review disputed the idea that loneliness is on the rise in the first place, and in a series of thoughtful tweets, Wired’s Tim Carmody said the road to real relationship is in our own work, not in our embrace or denial of technologies.

New media lessons from academics and news orgs: The University of Texas hosted its annual International Symposium on Online Journalism last weekend, one of the few of the scores of journalism conferences that brings together both working journalists and academics. As usual, University of British Columbia j-prof Alfred Hermida live-blogged the heck out of the conference, and you can see his summaries of each of his 14 posts here.

Several people distilled the conference’s many presentations into a few themes: The Lab’s staff identified a few, including the need to balance beauty and usefulness in data journalism and the increasing centrality of mobile in news orgs’ strategies. At the Nonprofit Journalism Hub, conference organizer Amy Schmitz Weiss organized the themes into takeaways for news orgs, and Wisconsin j-prof Sue Robinson published some useful notes, organized by subject area.

A couple of specific items from the conference: The Lab’s Adrienne LaFrance wrote on a University of Texas study that found that the people most likely to pay for news are young men who are highly interested in news, though it also found that our stated desires in news consumption don’t necessarily match up with our actual habits. And Dan Gillmor touted the news-sharing potential of one of the conference’s presenters, LinkedIn, saying it’s the first site to connect news sharing with our professional contacts, rather than our personal ones.

[Editor's note: Mark's too modest to mention the paper he coauthored and presented at ISOJ.]

Reading roundup: Several interesting debates lurked just a bit under the radar this week. Here’s a quick lay of the land:

— Reuters’ Felix Salmon wondered why the New York Times doesn’t sell early access to its big business scoops to hedge funds looking for a market advantage, as Reuters and Bloomberg do. GigaOM’s Mathew Ingram argued that the public value of those is too great to do that, and Salmon responded to his and others’ objections. The conversation also included a lively Twitter exchange, which Ingram and the Lab’s Joshua Benton Storified.

— The Chicago Tribune announced its decision to outsource its TribLocal network of community news sites to the Chicago company Journatic, laying off about 20 employees in the process. The Chicago Reader and Jim Romenesko gave some more information about Journatic (yes, the term “content farm” comes up, though its CEO rejected the term). Street Fight’s Tom Grubisich called it a good deal for the Tribune.

— In a feature at Wired, Steven Levy looked at automatically written stories, something The Atlantic’s Rebecca Greenfield said she didn’t find scary for journalism’s future prospects, since those stories aren’t really journalism. Nebraska j-prof Matt Waite also said journalists shouldn’t be afraid of something that frees them up to do their jobs better, and GigaOM’s Mathew Ingram tied together the Journatic deal and the robot journalism stories to come up with something a bit less optimistic.

— This week on the ebook front: A good primer on the U.S. Department of Justice lawsuit of Apple and publishers for price-fixing, which The Wall Street Journal’s Gordon Crovitz said is a completely normal and OK practice. Elsewhere, some publishers are dropping digital rights management, and a publishing exec talked to paidContent about why they broke DRM.

— Gawker revealed its new commenting system this week — the Lab’s Andrew Phelps gave the background, Gawker’s Nick Denton argued in favor of anonymity, Dave Winer wanted to see the ability for anyone to write an article on it, and GigaOM talked with Denton about the state of tech.

— Google shut down its paid-content system for publishers, One Pass, saying it’s moved on to its Consumer Surveys.

— Finally, a few long reads for the weekend: David Lowery on artist rights and the new business model for creative work, Ethan Zuckerman on the ethics of tweet bombing, danah boyd on social media and fear, and Steve Buttry and Dan Conover on restoring newsroom morale.

Rupert Murdoch artwork by Surian Soosay and texting photo by Ed Brownson used under a Creative Commons license.

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