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February 03 2011

15:30

The Newsonomics of apps and HTML5

Editor’s Note: Each week, Ken Doctor — author of Newsonomics and longtime watcher of the business side of digital news — writes about the economics of news for the Lab.

Apps are all the rage, with The Daily’s taking center-stage this week. With tabletmania sweeping the country, you can almost hear the howls of publishers across the country, as they implore their IT chiefs: “Get me an app, pronto!” Consequently, there are many busy hands at companies like Mercury Intermedia, Verve, Mediaspectrum, Bottlerocket, Mercury Intermedia, DoApp, WonderFactory and the New York Times’ Press Engine operation, all of which are meeting the demand.

Apps are a wonder, a come-out-of-nowhere phenomenon that Apple invented for the iPhone and has been perfecting ever since. Apple just passed the threshold of 10 billion app downloads, and has spawned an entire new industry of entrepreneurs and rival (Android, Blackberry and Amazon) stores.

And yet, if you talk to tech people at the tops of news companies, they don’t focus mainly on apps. They talk about HTML5. If apps are the popular phenomenon of 2011, publishers’ on-ramp to digital reader payment, HTML5 is the future, they’ll say. And they are rapidly building the foundation for that future now.

I’m far from a tech expert, but I have talked with enough people to know that the unfolding behind-the-scenes drama of app and HTML5 development is an important one, vital to the future prospects of the news industry as it forages for new sustainable business models and forges new digital products for the mobile age. So let’s take a peek at the interplay between native apps (those we know from iPhone and iPad  innovation) and HTML5 apps (those quietly being developed in great number). Most importantly, let’s begin to explore the newsonomics of these technological changes.

Beyond Apple vs. Adobe

Most of us non-tech people first heard of HTML5 when Steve Jobs told the world last April why he wouldn’t allow Adobe’s Flash in his apps. The announcement was played by much of the press as an Apple vs. Adobe power struggle, but technologists tell me that Flash had had its issues for awhile. It made Google search engine optimization, key to everyone, difficult — and then Apple’s very public non-support gave a strong push to the alternative of HTML5. Yet the handwriting was on the wall. “We are abandoning Flash as a way to solve problems — with its coding and weight issues — for HTML, Javascript and CSS [cascading style sheets],” says Rob Covey, senior vice president of content and design of National Geographic Digital Media.

Now companies, from The New York Times to NPR to National Geographic, are rapidly building out both staffs and products based on HTML5, “rethinking interactivity,” Covey puts it. They’re also determining how that new, expected, pervasive interactivity — witness The Daily’s debut — will be accomplished most efficiently. The technology, they say, is the essential foundation for next-generation products, web and mobile, more elegant and faster than previous HTML in its presentation and more flexible in its implementation.

One big benefit: the browser-delivered HTML5 app experience is remarkably like our gee-whiz experience of Apple’s native apps. “The big deal here is is that there is no latency,” says Guy Tasaka, a New York Times Company and NewsStand alum, who now heads Tasaka Digital, a tech consultancy to news companies. That means that the fluidity we’ve all come to love about apps is built into emerging browser-based applications. It also means, as Tasaka emphasizes, “the sense of a beginning and an end…. HTML5 apps give the user a sense of a package.”

For a good tour of these apps, check out Paul Miller’s recent Engadget piece, which both describes the phenomenon and provides screenshots of HTML 5-based sites from Flixster and Amazon to the Huffington Post, USA Today (even with one for Google iTV) and the New York Times’ Times Skimmer, updated from an earlier version produced two years ago. Use these pages and you get a similar sensation to that of Flipboard’s on the iPad. (Flipboard CEO Mike McCue talks with Om Malik about HTML5+ here.)

So, in effect, the coolness of apps can be replicated, more or less, through the browser-based apps.

The app conundrum

The impact of an app-like browser experience is a big, and multi-edged, one.

On the tech level, it means a major re-training of staff in HTML5, a process that began more than a year ago at The New York Times, says Times CTO for digital operations, Marc Frons. (The Lab talked with Frons earlier this week about the paper’s new article recommendation engine.) “I knew HTML5 would have a major impact, but it has happened faster than I thought,” he tells me. Frons says much of that training, a reskilling really, is done — and that the company is well on the way to using HTML5 as the basis for most of its digital development. Rob Covey says that the retraining issue is a nuanced one, a smaller challenge with savvy developers ramping up their skills, and larger one for website producers used to using more basic coding to create pages.

On a business level, it creates a conundrum.

Steve Jobs not only created an unexpected revolution with apps. He also proved that people would pay for them. Indeed. Analysts say this new (native) app industry generated $5.2 billion in 2010 and could hit $15 billion this year. The great majority of that revenue is non-News, of course, but news publishers have begun to build their “paid content” hopes on apps nonetheless. The Guardian, The Washington Post  and CNN are among those charging small subscription prices for smartphone apps, but the big expected payoff is coming this year, as many news publishers see tablet apps as the route to cementing paying digital relationships.

Why? There seems to be some mental toggle that consumers do, swapping their demand for “free online” for a willingness to pay for mobile apps. Maybe it’s the perceived freedom of mobile. Maybe it’s the sense that we are buying something tangible — an app, a product — and making it our own on the smartphone or the tablet. Maybe it will last; maybe it won’t.

A balancing act

Yet if news technologists are right that browser-based HTML5-powered apps can deliver great experiences, then why do we need native apps? Some will tell you that apps are just a front, a way of productizing something that their new browsing experiences can deliver just as well. The power is in the code, not the app. But will readers pay for something they don’t own? Maybe apps will just become shells for delivering HTML5.

Which brings us back to the tablet. On the iPad, we can both consume news through an app and through a browser. Publishers report, among early adopters, a range of experience as to how much access comes via one or the other. As various paid tablet models go forth, this question may become a big one.

Publishers have to wonder: Is it the romance with discrete, ownable apps that consumers are willing to pay for, or is it the wider experience? We can see, in the makings of Apple’s evolving publisher subscription policies, an understanding of this dilemma. That may be why Apple is forcing news publishers to restrict browser access to news if they want to retain their direct customer relationships with readers — and continue to offer enabling apps through iTunes. There’s a balancing act here, in the uncertain interplay between native apps and HTML5 apps, as both publishers and Apple try to hedge their bets.

“Give it a year”

For now, it’s a twin development path. Apps are still a big news rage in 2011 — most would pay the price of admission to both the tablet and the paid reader content games — so the app creation companies are doing land-office business, and big news companies are creating apps even as they focus increasing peoplepower on HTML5.

Yet the promise of next-generation (later 2011-2013+) user experience seems solidly rooted in HTML5. That twin development is costly, a headache for smaller publishers, and still another factor separating out the big news boys — the Digital Dozen I identified in the Newsonomics book — from the rest of more local, smaller, more struggling news companies. Further, it’s just one more example of how the future of the business of news is rooted in technologies, from HTML5 to vastly improved analytics, which, among industry leaders, are now starting to drive strategy and execution.

In the end, we’ll see technological possibility and business heft mix and match in unpredictable ways. One technologist suggests that “application of the web using HTML5 is just a phase. Websites will eventually surpass apps in readability and usability as designers and technologists combine the best features of an app with the immediacy and depth of the Web.”

It’s hard to know at this point what that quite looks like, but, as he says, “Give it a year.” Then, though, business realities will determine how stuff gets built and sold. Remember those 10 billion downloads? The new app store ecosystem — not just Apple’s, but Google’s, Amazon’s, Palm’s and Blackberry’s — will drive some of that decision-making, as well.

[Image by Justinsomnia used under a Creative Commons license.]

November 29 2010

15:00

The Newsonomics of eight-percent reach

[Each week, our friend Ken Doctor — author of Newsonomics and longtime watcher of the business side of digital news — writes about the economics of the news business for the Lab.]

We’ll all familiar with the chaos of the moment. Publishers and broadcasters, readers and viewers, search giants and software midgets — they all see that we’re on the verge of the next news and information revolution, as the built-out Internet really begins to power human access to content on an array of digital devices, anytime, anywhere. But it’s not just the media dealing with that revolution. The same chaos of choice that alternatively delights and befuddles envelops businesses as well.

For old-fashioned sellers of newspaper space and broadcast time, it’s been a fitful education, and a reminder that merchants don’t want to buy advertising — they want to find customers, as cheaply and efficiently as possible. The First Amendment didn’t tie merchants to media in a constitutional permanence; it just seemed that way.

Marketing spend — email marketing, social media commerce, search engine marketing and optimization, building and operation of brands’ own websites, events and conferences, among others — is increasing worldwide, while “advertising” stagnates, and that’s due mainly to the increase in digital, increasingly measurable, marketing alternatives for businesses of all kind.

Yet, it’s also clear that we’re at the beginning of this digital marketing revolution, with two numbers convincing me we’re maybe not even a tenth of the way there. I’ll call that the Newsonomics of eight-percent reach, and explain those eight percent in a moment.

Consider first the big picture of marketing spend. Chuck Richard, a fellow information industry analyst at Outsell, has done work showing that marketing ad spend in the U.S. now totals $368 billion, of which 32.5 percent is going to digital and 30.3 percent to print.

It decreased at the rate of only 4.5 percent in the recession-wracked 2009, and should rise about 4.2 percent this year. Spending on advertising alone was down 8.5 percent in 2009 and is forecast to be down 0.8 percent in 2010.

So against those numbers, let’s look at a couple of numbers.

Google reaches about eight percent of the small businesses in the country, estimates Click Z’s Gregg Stewart. That’s 1.5-2 million businesses who use Google’s ad services, contributing to its $27 billion annual revenue run rate. As Stewart points out, Google advertising is a convenience for many harried smaller merchants:

Local businesses face a multitude of challenges daily; servicing customers, generating sales, meeting payroll, and in effect doing what they “do” for a living. Basically, they’ve got their hand in everything and this rarely allows for deep specialization in any one specific facet of their business. Local businesses do not have the time required to research keywords, monitor results, and modify bids and ad creative along with all the additional complexity that is associated with SEM.

Look at that eight percent another way, of course, and we see 92 percent upside, a big opportunity to help merchants make sense of the chaos. Google — along with Yahoo, Yelp, Yellow Pages companies, AOL, and Microsoft — have been plumbing this territory, and so have newspaper companies and a trio of hungry online marketing services companies.

Now Google is making a couple of aggressive moves. It has announced Boost. It’s a product that is built on top of its local listings and Google Maps. Boost — there’s an ironic ambiguity to the name, in that it is intended to boost Google’s revenue and boost some money out of the pockets of local media — adds the ability to put ratings and reviews in place-based ads, and they are sold on a pay-for-performance basis, unlike an earlier similar offering. The Boost test is going forward in more than a dozen cities.

Secondly, Marissa Mayer, Google’s long-time maestro of the search business, is now in charge of the local business. That’s another signal of what an opportunity Google sees in local business, online and on mobile.

How much of the local business market do you think metro newspapers reach? Eight percent, estimates Mike Sacks, VP for operations at Tribune. That’s a number, give or take a couple of points, I’ve heard from other publishers as well. While that total is likely higher for smaller-circulation dailies, its small size is a reflection of the old way of selling, pre-chaos.

Newspapers worked the biggest local merchants for big contracts, concentrating on getting a relatively small number of checks from a small number of deep-pockets advertisers. Now, those advertisers — the likes of Best Buy, Target, and Macy’s — are increasingly going direct to their customers and using all manner of social and engagement media to find and upsell customers (“The Newsonomics of online marketing“).

So, newspaper companies, including Gannett, Hearst, and Tribune, most prominently, are re-strategizing. If the dollars from that eight percent are only half what they were 10 years ago, then we’d better get some revenue from the other 92 percent, they’re saying. They’re doing that three main ways:

  • Retraining salesforces, and hiring more commissioned salespeople, to work the territories, selling not only space in their own papers and sites, but Yahoo inventory, Facebook placements, mobile messaging and more.
  • Telesales: Think “boiler room” lite; more salespeople calling more prospects.
  • Self-service: Sack’s Tribune is one of the companies using the Mediaspectrum platform to enable local merchants to place their own online or print ads. This Orlando Sentinel “Place an Ad” page shows what merchants can choose from. At the sister Sun-Sentinel, in Fort Lauderdale, Sacks says that more than a hundred new advertisers have been added in the year the service has been in place. “Every single cent is a new one…I’d like to see it grow ten-fold,” he says of the prospects of turning an experiment into a line of significant revenue. Sacks says average sized deals come in at about $1,000/$2,000 and also provide lead generation for upselling. Overall, Mediaspectrum’s self-service ad product is in place at almost 100 newspaper titles, including all of the Tribune’s papers (but not broadcast properties), UK’s Trinity Mirror chain, Morris Publications, the Columbus Dispatch, and the Washington Post. Most offer both online and print placements.

As we enter 2011, this new battle for local ad dollars is growing in strength, as merchants aim to make sense of the chaos of marketing choice. This exercise in chaos — and how sellers of marketing services do or don’t take advantage of it — affects more than just newspapers, of course. Locally, commercial broadcasters and Yellow Pages companies — the two other local media with substantial feet-on-the-street sales forces — are sensing the same opportunity to get to smaller businesses, as they, too, lose some of the bigger-business advertising they’ve long held.

Advertising agencies are in the midst of their own identity crises, as their value proposition to businesses is thrown into question, with the advances of pay-for-performance advertising and self-service overall.

The online-only players aren’t just the search giants. ReachLocal, Orange Soda, and Yodle are the companies you hear a lot about when you talk to local site general managers. They are all working the same turf, with ferocity. A recent visitor to the Yodle “sales pit” came away with the impression of “how well trained these guys are” and how their state-of-the-art customer relations management system qualified prospects well.

That 92-percent “open” market — maybe 23 million businesses — tells us how early we are in this digital marketing movement. Commerce change is one thing. For those who care about the news, the big thing to watch is whether those dollars, as they move digitally, move to companies that produce news, distribute news — or have nothing to do with news.

Photo by Leo Reynolds used under a Creative Commons license.

May 06 2010

14:30

The Newsonomics of simplicity

[Each week, our friend Ken Doctor — author of Newsonomics and longtime watcher of the business side of digital news — writes about the economics of the news business for the Lab.]

More and more, I’m thinking we’re making this new digital business too complicated. Sure, the technology behind the business is awe-inspiring — but then so was hydropower and electrification. Technology is often complex and developed by only a minority of us, while a majority of us are put to the task, and the fun, of using it.

The digital news business itself can be a blur, followed via Romenesko, Twitter, or the PowerPoint poison of your choosing. Lots there, always on. But business solutions — serving readers and advertisers better — aren’t complicated, and the more complex we make them, the less seems to get done.

Take this well-used quote from Larry Bossidy, once chairman of Honeywell, a prince of another technology era: “If you can’t describe your strategy in 20 minutes, simply and in plain language, you haven’t got a plan. ‘But,’ people may say, ‘I’ve got a complex strategy. It can’t be reduced to a page.’ That’s nonsense. That’s not a complex strategy. It’s a complex thought about the strategy.”

We can parse the differences between complex and complicated in the digital business, but won’t do it here. Probably the better exercise is to see how good a strategy you can express in a single tweet. And, of course, the collective consciousness has that figured out; small business blogger Lora Kolodny talked about the art — and four competitions based on it — recently in her New York Times blog.

Recently, as I look at the latest strategies being deployed, I’ve been using this emerging prism of simplicity. Here the newsonomics are simple: Make it easier to make new revenue; save expenses by adopting simpler solutions. I’ll share a few here, and hope you’ll add to them.

  • People love coupons: That’s at the top of the duh list, but the love is still eye-popping. Nielsen recently reported the explosion of digital coupons, with their redemption up 263 percent year-over-year. According to the report, newspapers are still the main source of coupon distribution, at 89 percent, and newspaper inserts account for the most coupons redeemed, at 53 percent. As Twitter studied commercial patterns, in the run-up to launching Promoted Tweets, what did they notice? Retailers like Whole Foods and Starbucks found their followers (and Facebook fans!) loved coupons. So now the challenge: taking that simple challenge and delivering location-aware, buying-interest-aware coupons, on the right platform, to the right customers, at the right time. Yes, that Wednesday food coupon is less old-fashioned than we think; now the simplicity required is finding the right technology to seamlessly offer digital coupons to news customers — before non-news companies do a better job of it.
  • Flyerboard: I recently talked to Victor Wong, one of the co-founders of Flyerboard, the oh-so-simple digital ad flier product that now finds itself on more than 100 newspaper sites, first adopted by Hearst and most recently by McClatchy. As a Yale undergraduate, he and a couple friends noticed that someone had begun digitizing the printed fliers commonly found on college neighborhood kiosks and walls. They then opened a company — PaperG — moved to commercialize the notion and have found great early uptake, based on an incredibly simple idea. They are now moving forward with PlaceLocal, a potentially far bigger idea: Harvest all the freely available digital information about local busineses, sweep it into templates, create spec ads on the fly and sell those to local retailers. Both ideas simply use already available information, repurporsed by smart technology and a company of a dozen or so people.
  • Outsourced regional editions: Okay, so you are The New York Times, and you want to double down on local engagement. You want to be a great national paper, but also a little regional, aware that such content might increase retention of all-important print subscribers. But you’re The New York Times, and the economics of the business don’t justify paying six-figure salaries to new regional staff. So you ask where can you get high-quality, low-cost journalism supply, and take advantage (in a symbiotic way) of the advent of the Chicago News Cooperative and Bay Citizen. You simply take advantage of the outflow of real talent out of top newsrooms — and stretch your six-figure payments to get lots more content than a single staffer would provide.
  • Content management in a cloud: Emerging from bankruptcy, Freedom Communications just announced an expansion of its relationship with technology provider DTI. It will move what had been its own hosted circulation and marketing management to DTI Cloud. Why hire, train and pay your own full-time tech staff — at each paper, I’d imagine — when a single company can give you a hosted, software-as-a-service solution in the cloud? Simple, in concept, at least: use someone else’s centralized technology to solve a problem that is replicated multiple times across multiple properties. Cloud computing, of course, isn’t new, but the newspaper industry has adopted it unevenly. MediaSpectrum (ads and content management) and Clickability (content management) are among the companies that have worked this cloud landscape in the news industry. Cloud “installations” carry their own support issues, of course; all solutions do. We’d have to believe, though, that the often-complex and costly solutions to production, printing, distribution, finance, and HR used in the news industry can benefit from some more heavenly solutions. Better to slim here and put resources into content creation and ad selling.

That’s just the top of a list. What else has the news industry done to introduce smart simplicity — or what else should it do?

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