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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.]

May 27 2010

14:00

The Newsonomics of wilting flowers

[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.]

Ah, the Dream of the Wilting Flowers. Like many web dreams, premature, premature, premature…and then, maybe soon, pop. A sensation, with lots of dollars involved. Our best current example: Steve Jobs’ “invention” of the iPad, which of course was dreamed up in quite similar forms, decades before, in the fancies of Alan Kay and Roger Fidler, among others.

It’s all timing, right?

So it’s a good time to get a sense of what’s happening in local mobile commerce among news companies.

A friend visiting the exhibition hall at the NAA Orlando convention in April told me he’d been besieged by mobile commerce vendors. Then there’s the group (mobile commerce) grope, symbolized by the Groupon craze. Get a whopping good deal — but only if you can get enough of the crowd to go along with it as well. Of course, iAds are on the horizon, with Apple offering a sweet-smelling twist on walled-garden marketing pitches. Google’s AdMob — the leading mobile ad network — just got the thumbs-up from the FTC and has launched AdWhirl, its open-source (take that, Apple) “mediation layer” to facilitate mobile commerce. You can’t stay on top of all the mobile-marketing plays these days, no matter how much you try.

Let’s look at newspaper companies and what they’re doing with mobile commerce. Talk about timing: When Dan Finnigan ran Knight Ridder Digital a decade ago, one of his favorite mantras was the Dream of the Wilting Flowers. As in: It’s 4:30. You’re driving down the street. Your phone knows where you are, of course, and coming up, on the right is a florist…with a perishable commodity, flowers that will be worthless within 24 hours. Your “smart” phone, knowing where you are, who you are, your flower-buying habits, and maybe your spending proclivities, sends you the florist’s coupon for half-off, if you stop by within the half-hour. Satisfied merchant, satisfied customer, a perfecting of supply and demand.

It’s still a great vision, with a new generation chasing it, and getting closer. Talk to newspaper companies, though, and you’ll hear the answer is “we’re not yet there.” Closer, but not quite there.

Bill Ganon sees that wilting-flower dream, but he’s drilling down into something more basic: mobile sales training and the establishment of mobile pricing standards and analytics. Then, maybe by the end of the year, he says, the location-aware capabilities of smartphones may start to smell the daisies.

Ganon is the general manager for local market development for Verve Wireless, and Verve is the newspaper industry’s biggest mobile play. Spurred first by AP investment and partnership in summer 2008, many newspaper companies have turned to Verve for mobile content and, now, ad solutions. Verve now powers more than 400 mobile news sites for newspaper and broadcast companies including MediaNews, Hearst, Belo, McClatchy, Freedom, and Lee.

Verve is making a new ad push, after seeing its first forays fall flat locally. That push is predicated on scale. Its network — the Blackberry has just been added to the iPhone, with Android and iPad applications on the way, says Ganon — has grown dramatically. Year over year, for April, it has grown to 8.9 million uniques (from 2.9) and 130 million page views (from 51 million).

When Ganon — a veteran of old media sales at Newsweek and Sunset, as well as eight years with Qualcomm — took over local sales eight months ago, he found a ragtag group of local mobile efforts. Now, as Ganon describes his work, we can see the emerging newsonomics of local mobile pricing. As the mobile commerce world explodes, Ganon is focusing on the basics. He says Verve can now count 75 local sites beginning to make consistent sales, up from around 20 when he came on board. The basics of the push:

  • Training: Verve’s local market sales team of four is spending lots of time training newspaper and broadcast sales staffs on how to sell mobile. That’s reminiscent of the ongoing training done by Lem Lloyd’s merry band through the Yahoo-powered Newspaper Consortium. (In fact, with all the Yahoo, Verve, and marketing-services training ongoing, I’d wager that newspaper sales people have gotten more training in the last two years than in the previous two decades.) Verve’s training focuses on taking the mystique out of mobile: “Advertisers don’t like stealth solutions. They like to know what’s behind the curtain,” says Ganon.
  • Pricing: Ganon urges a $15 CPM (cost per thousand) floor for selling mobile. With that guideline, he says Verve-powered sites are averaging $19 CPMs, which would be about twice the average of what news sites on getting on the desktop web. Says Ganon: “This is your time to define metrics.” In other words, try to establish a price, not allowing prices to fall to low single digits as inventory is sold by middlemen, as has happened in the main digital business. Right now, most newspaper companies can count no more than five percent of their digital revenue, coming from mobile. Most of that total — maybe $100 million — is going to bigger, national brands like The Wall Street Journal and The New York Times. That’s out of maybe $500 million involved in mobile advertising overall in the U.S.
  • The Pizza Sale: Salespeople are being trained to sell the crust (a banner ad), the sauce (a landing page, tailored to action off the ad), and the toppings (call-to-actions, whether “click to call” or map directions). Pricing is still impression-based, though, Verve sees cost-per-click and cost-per-acquisition offers down the road.

What’s apparent is how early we are in local mobile selling — and how far away it is today from adding appreciably to news site revenues. The deals are small, and even the best-performing sites can count no more than 20 advertisers, with most having far fewer on their sites at any one time.

And the Dream of the Wilting Flowers? Ganon says Verve should be able to add in location-aware selling, maybe by the end of the year, but he believes that it “will be a major breakthrough.” So, 2011, maybe. When that breakthrough comes, the big question is who will benefit most: the local newspaper and broadcast companies, or Apple, or Google, or Yahoo, or maybe Verizon or AT&T?

Ask Walter Sanchez, publisher of BQE Media in Brooklyn and Queens and a Verve client, and he’ll tell you it’s an uphill climb. I met Walter at a recent New York Press Association conference, and his marketing efforts were way ahead of the curve, among publishers. He’s busy selling social sites, SEO, SEM, and mobile sites, he’s proud of getting such small businesses as Beach Bum Tanning sold on mobile ($500 a year for a landing page and 3,000 short-text messages). But he’ll tell you that most local merchants are indeed still mystified by the web, and they’re slow adopters: “When those 21-, 22- and 23-year-olds start buying their own businesses, in a few years, then, we’ll see real adoption.”

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