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December 08 2011

15:20

Why Our Startup Decided Not To Target the Newspaper Industry

Are there opportunities for technology startups which target the media business?

Fred Wilson -- a venture capitalist who has made investments in Twitter, Zynga, Tumblr, Etsy, and FourSquare, among others -- apparently thinks not. As reported on MediaShift on November 15, Wilson told an audience of CUNY students with interests in business and journalism that better opportunities could be found in industries that aren't as "picked over" and have problems that aren't being solved.

As the co-founder of a technology startup that once considered the news industry as a source of partnerships and revenue, I agree with Wilson that startups should look elsewhere.

However, the reason they should do so is not because the media industry lacks problems that need to be solved. If anything, the media industry has problems that span every sector of the industry and every segment of the value chain. Rather, the reason why startups should look for other opportunities is many industry problems are so intractable, and the chance for making a successful business is so slim, that it simply doesn't make sense to target it.

The case of Invantory

Right now, we're developing Invantory, a mobile software platform that targets the local classifieds marketplace that is currently dominated by Craigslist. We're going to make the Invantory experience one that is defined by an easy-to-use interface and great-looking photographs that are now possible with most smartphones. Further, we're attacking a problem that has vexed users of Craigslist and newspaper classifieds for years -- the lack of a system to vet who you're dealing with. Our reputation system, which is built on proprietary algorithms and other safeguards, will help users better evaluate the other parties before they make contact.

My partner, Sam Chow, is a former Microsoft engineer and an experienced programmer for Apple's iOS platform. My own background is online news, content and communities. In the 2000s, I was a technology journalist and online editor, and in the 1990s, I worked at a daily newspaper and on a daily television newscast.

My news roots run deep, and I thought there might be some alignment between our platform and the needs of local news publishers, which have seen their own classifieds revenue fall sharply in the last five years. In 2006, classified revenue in four categories (cars, jobs, real estate and "other") totaled $17 billion, according to the Newspaper Association of America. Last year, it totaled just $5.6 billion. Wouldn't it be great if our platform could somehow help the media industry, while building Invantory's user base?

craigslist_350x225.png

I began seeking out publishers, online news professionals and other experts to better understand the market and the possibilities for our platform to serve online news operations through white-label apps or other solutions. Very quickly I realized there would be a problem selling to publishers. Most people I talked with had reservations about dealing with software vendors, ranging from a reluctance to share revenue to outright mistrust.

"I've dealt with enough vendors to become very cynical," a publisher of a small newspaper told me. "Whether they extrapolate revenue based on bigger markets or outright lie, we have become very suspicious."

This sentiment, which was echoed by others I spoke with, made me realize that the sales cycles would be punishing. For many customers, it would be hard to get our foot in the door, let alone successfully close a deal.

Yet the same publisher was interested in a technology that could help once again make classifieds a draw -- as well as bring in revenue or improve efficiencies. He readily admitted that his own technology was complicated for users. "On Craigslist, it's easy to create an ad, upload a photo, and publish," he said. "We should be able to do that."

The barriers

I spent time studying how classified systems worked at various publishers. I found it very interesting that many smaller publishers still had a classifieds desk that took ads over the phone, often augmented by email with customers. Some larger publishers had online classifieds tools, but they were clunky. Part of the problem related to the fact that most attempted to serve both the print and online classifieds, and did neither job well. Others were poorly configured. The system used by my hometown newspaper didn't even let me post classifieds locally -- but did make it possible to create listings in markets more than 20 miles away. The system also tried to charge expensive rates for relatively small ads -- $15 to $20 was a typical base rate for a small text ad in print. (A simple online classified ad was included for free.) No wonder people were abandoning newspaper classifieds for Craigslist.

Beyond the clunky ad creation systems, one of the biggest technology problems I observed was the nonstandard online publishing platforms used across the industry. This is actually a huge, underappreciated issue for all news publishers, including broadcasters, news agencies, blog-based news and opinion sites. It leads to additional costs, complexities, and talent shortages that companies based on older media platforms -- including print, television and radio -- did not have to deal with.

Among newspaper websites, it's not hard to find home-grown hacks or heavily customized content management systems. Even at publishers which use the same CMS across their properties, variations are common -- a typical example might involve different versions of Drupal and Drupal modules, owing to staggered technology upgrades, different needs for various brands, and complications involving legacy applications and data. Throw different registration and online payment systems into the mix, and you can start to understand the problem new software platforms targeting this industry are faced with.

Related to the CMS mess was a lack of developers and other technical staff at media organizations. This is a problem that afflicts many industries, not just the news business. But it exacerbated the problem with nonstandard publishing systems. Not only would heavy programming work be required to get Invantory to work with a new customer's site, but integration would largely fall back on us. Systems integration is technology consulting that requires lots of time and specialized development staff. It was not a business that we wanted to get into.

The Final Nails in the Coffin

The final nails in the coffin came at the New England Newspaper & Press Association's fall conference in October. There, I heard more details about the pain being experienced by publishers, and received advice that helped us make our decision to abandon our original plan to target the media industry.

One of the speakers, Amy Mitchell of the Pew Project for Excellence in Journalism, laid out the grim financial outlook. She stated that while most newspapers are still managing a profit, they're surviving by managing costs. Mitchell was unable to identify any solution to the revenue crisis. "We are not recommending anything other than experimentation," she told the audience, adding that this was going to be tough at many publications whose corporate cultures are resistant to change and innovation. This signaled that publishers were not only less likely to invest in innovative technologies, they were also unable to afford more expensive third-party software.

News industry analyst, author and blogger Ken Doctor was even more skeptical of a turnaround. "It is impossible for anyone to keep up with the disruption," he stated. Doctor went on to predict that broadcasters would soon begin to feel the same pain as newspapers and magazines, as business models based on traditional advertising eroded further.

However, Doctor also saw opportunity in tablet platforms. "If you read, you're going to have a tablet," he said, adding that the price of Kindles and other devices will soon drop to $50. "Why wouldn't you buy one?" he asked the audience.

The final presentation of the afternoon was from Alan Mutter, a former newspaper editor turned Silicon Valley CEO. As a consultant, speaker and author of the Reflections of a Newsosaur blog, he has become a well-known pundit on the travails of the news industry. During his NENPA talk, he predicted more top-line pain for publishers, owing to a number of trends:

  • "The audience trend is you don't have audiences under the age of 40."
  • "The most important thing happening is brands are going directly to consumers."
  • "High-priced reach advertising is not defensible."
  • "Coca-Cola has 34 million friends on Facebook ... This is the future for marketing and advertising."

Later in the day, I spoke with Mutter, and described our vision for Invantory as a mobile classifieds platform that could potentially sell white-labelled apps and platform technology to the news industry. He was pessimistic, not only because of the problems I cited earlier, but also because of the climate for raising capital in this space. "VCs with any experience won't invest in you," he warned.

Nevertheless, Mutter seemed hopeful about the idea of doing something different with classifieds. "Think about a real way to reinvent the classifieds market," Mutter told me. "Because there isn't one now."

Moving on

That evening, I met my partner and told him that the idea of selling to the news industry wouldn't work. Doing so would require huge investments of time and staff expertise, for skeptical customers who generally couldn't afford expensive technology systems. Raising capital would be more difficult when investors heard who we were targeting. We are still going ahead with our plan to create a mobile classifieds platform, but will instead go direct to consumer based on a freemium business model.

We've already built out the cloud infrastructure and now have a demo application. Work has already started on our intellectual property -- the proprietary technologies that will drive our reputation system. Soon we will begin user testing. (If you're interested in signing up for product updates, or seeing an alternative to Craigslist in your town or city, please use the sign-up form on the front page of the Invantory website.)

We understand that we'll face a new set of challenges, especially in terms of developing a solid go-to-market strategy and revenue plan. But we believe the time is ripe for innovation in this space.

Ian Lamont is the former managing editor of The Industry Standard and a web media veteran with years of experience developing online news, community and content. He eventually left the news media to return to grad school, earning an MBA as an MIT Sloan Fellow. His startup, Invantory, is a mobile software platform for local classifieds. Follow him on Twitter at @invantory or @ilamont or email him at ian.lamont@invantory.com.

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September 16 2011

18:17

What's the Best Business Model for Metro Newspapers?

Metro daily newspapers have been in a long rut in the United States, with many retrenching, closing or flailing for a new digital business model while cutting editorial staff to the bone. Many papers are watching the pay walls at places like NYTimes.com, and the new launch of the pay site, BostonGlobe.com. And what about newspapers like the Guardian in the U.K. that have kept content free, and pushed for an even bigger global audience?

What's the right mix of free and paid content for metro newspapers? Answer our poll, and share your thoughts in the comments below.


What's the best business model for metro newspapers?

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May 11 2011

19:02

No Gloom Here: In Latin America, Newspapers Boom

If you spend much time in U.S. newsrooms these days, you might contract a serious case of gloom and doom. Talk is still focused on declining circulations, aging readerships, and the absence of new business models to pay for the production of quality content.

But it would be a mistake to assume that this is the case for the rest of the world. In fact, in many regions, the newspaper business is booming. Some countries' newspapers are pulling in record advertising and those double-digit profit margins that were common in 1990s America.

I recently had the chance to observe this phenomenon firsthand at the Bogota, Colombia, conference of the World Association of Newspapers and News Publishers (WAN-IFRA), where there was little gloom or doom to be found.

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Instead, newspapers were reporting extraordinary growth in advertising sales from 2005 to 2009: 62 percent in Argentina, 70 percent in Brazil, and 57 percent in Colombia itself. (These figures, drawn from a ZenithOptimedia forecast, contrasted with 34 percent drops in the U.S. and the U.K. over the same period.)

Newspaper circulation is growing sharply in Brazil (29 percent), modestly in Argentina and Bolivia, and holding steady in Colombia and Chile. (It was down more than 12 percent in the U.S.)

But what's most striking about the Latin American news industry is the sense of dynamism. The digital revolution is coming to Latin America -- but it's arriving hand-in-hand with the news organizations, and that makes all the difference.

Multi-Platform Success

That point was reinforced with a visit to the newsrooms of El Tiempo, Colombia's leading daily. The newspaper understandably prides itself on the way it has implemented newsroom convergence. Its expansive headquarters are a few decades old, but look freshly minted, refitted top to bottom with new technology. They include the daily paper, two television channels (CityTV and Canal El Tiempo), as well as a vast array of online products.

In El Tiempo's model, information is endlessly produced and recirculated across platforms. Pieces that air on the television channels are recut by a team of young online editors into two- and three-minute pieces that can circulate online. Breaking news goes out on Twitter, leading traffic back to the website and the newspaper. Each platform is carefully monitored for editorial quality.

According to newspaper director Roberto Pombo, "We had to appoint a journalist to be our Twitter editor because we had a report that went out on Twitter that diverged from the story on ElTiempo.com. It was a garden-variety error, but it convinced us we needed editors to be responsible for social networks."

Pombo has shaped the paper's news to be platform neutral. "We're going with everything in every medium, and the audience can stay where they are," he said. Pombo said the newspaper El Tiempo, whose staff create much of the core content, generates about a 9 percent profit, which is augmented by profits from the television and online operations. "Our newspaper readers are not diminishing, our online audience is growing, and the ads are holding," he said.

Online earnings are smaller but are growing more rapidly. The company has no plans to charge for online content, but goes to great lengths to leverage cross-promotion.

robertopomboeltiempo.jpg

Spanish Ownership

"You can't carry out convergence as a cost-cutting measure -- but you save money in the long run," Pombo said. "All I care about is that if somebody gets a news update on Twitter and somebody asks, 'Where did you get that,' they answer 'Tiempo.' It's all about the brand."

El Tiempo was founded in 1911 and long operated under the leadership of the Santos family. In 2007 the paper was sold to Planeta, a Spanish publishing group, which had to readjust to the Colombian market.

"The owners are living two realities. There's an economic crisis in Spain, but things are fine here, so we have to explain it to them," Pombo said. Spain's newspapers are suffering worse than those in the U.S.

El Tiempo is not alone in its prosperity. Sebastian Hiller, director of La Vanguardia Liberal in the city of Bucaramanga, said, "Most of the major Colombian papers are making 15-20 percent profits, and some of them 30 percent, especially if they've been investing in convergence." (One exception is the venerable Bogota paper El Espectador, which has recently struggled back from the brink of extinction.)

Slow, Steady Economic Growth Good for News

What explains the robust health of these Latin American news organizations?

The first answer is the local market. The Andean nations have largely dodged the 2008 economic downturn, and have been experiencing steady growth in recent years.

Second, this growth has been more evenly distributed than in the past. Many Latin American countries are seeing incomes rise among the urban poor, and with them disposable income. This is a sweet spot for newspaper sales, since there may be discretionary spending for a daily newspaper, but not enough for a computer and an Internet connection.

In Colombia, as in other Latin American countries, there has been a boom in new tabloids and glossy consumer magazines, many of which subsidize quality broadsheets in the same company. Some of these tabloids have reached circulations of 2 million to 3 million within two years of their launch.

Capturing Digital Sales

Third, and perhaps most intriguing, digital is arriving in Latin America, but more slowly than in the U.S. and Europe. This has allowed news organizations to learn from other markets' mistakes, and claim larger shares of the online advertising space before the search engines and aggregators can dominate it. The managers don't care whether the advertising ends up on paper or online -- as long as it ends up with them.

One of the side benefits of this development is a dramatic rise in quality. A number of papers in the region have expanded their foreign coverage and investigative journalism, and have won the prizes to prove it. (For a striking example, look to Costa Rica's La Nacion, where exemplary reporting in 2004 landed two past presidents in jail.)

This is not to say that everything's rosy south of the border. Mexican newspapers are under attack from narco traffickers and corrupt government officials, while Argentina's leading newspaper, Clarin, is locked in a bitter contest with the government. On the other hand, news media are playing a stronger role in Latin American society than ever before, and their business models may buy them precious time to forge a path into the future.

Anne Nelson is an educator, consultant and author in the field of international media strategy. She created and teaches New Media and Development Communications at Columbia's School of International and Public Affairs (SIPA) and teaches an international teleconference course at Bard College. She is a senior consultant on media, education and philanthropy for Anthony Knerr & Associates. She is on Twitter as @anelsona, was a 2005 Guggenheim Fellow, and is a member of the Council on Foreign Relations.

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May 03 2011

22:27

What's the Best Social Media Policy for News Organizations?

So far, most legacy news organizations have been all over the map when it comes to social media policies. The old guard doesn't want reporters and editors to go on Twitter and show bias or give opinions on stories in progress. The new guard wants to mingle with the audience and have some personality on social media. The latest place to put up restrictions is Bloomberg, which asked reporters to join Twitter but "we should not share work in progress or use social media as a vehicle for breaking news."

So what is the right balance for a social media policy? How much freedom should reporters and editors have to engage with people, and how much should be restricted? Vote in our poll below, or share your own thoughts in the comments.




What's the best social media policy for news organizations?online surveys

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April 25 2011

17:41

Why I Gave Up the Newspaper to Save Newspapering

The following is a guest post from Nicholas White, the CEO of The Daily Dot, a new startup in community journalism. White leaves a long lineage of newspaper men and women in his family to join digital media and explains why.

Six months ago, I quit my family's 179-year-old newspaper company. I left not because newspapers are crumbling -- though they are -- but because the very thing that has made the old industry so fragile offers hope for the future of journalism.

daily dog grab.jpg

I quit to start an entirely new newspaper: an experiment in media called The Daily Dot.

Everything you know about this failing industry is wrong. Which is to say, it's right, but it's also not why the industry is failing.

Growing Up with Newspapers

I grew up in the news business. My family has owned and operated small-town newspapers for six generations. You can see the history of the entire industry in the United States in the history of my family: why it once was great, what's wrong with it now, and why I'm starting the newspaper of the future to save it.

if mack.jpg

My great-great-granduncle I. F. Mack bought our first paper, the 47-year-old Sandusky Register, in 1869. He was a "free lance" or "bad boy" (depending on whom you asked) of the old school, and he was a fixture of the local scene. In 1891, the Detroit Free Press said, "He runs a Republican morning newspaper in the city of Sandusky, Ohio. The town and county are both Democratic, but still the Register lives on, a credit to a larger city. Mr. Mack is one of the most brilliant paragraphers in the country and maintains a paying business because more people desire to see what he says than they do for the news in the paper."

He left the Register to R.C. Snyder, his son-in-law, who owned the Norwalk Reflector 16 miles to the south. He was a small man who strode the avenues of Norwalk and Sandusky, Ohio, swinging his cane like a boulevardier's rapier. He kept a stub pencil and ends of newsprint in his pocket in case news broke out wherever he found himself. His daily column chronicled the comings and goings about town, a favorite feature of which were the antics of his grandson and the Pleasant Street Gang. He was also a shrewd businessman and he bought out the competition or put them out of business, and we became monopolies.

When Snyder died shortly before World War II, my grandfather was in Washington, so my great-grandmother took over. We had nearly lost everything in 1929, but we didn't lay off a single employee during the Great Depression, even though we had to print our own money, good only in town, to stay afloat. Mambi inherited that huge burden, and at less than five feet tall, she handled the company's debt collections personally and with all the mercy and compassion of a loan shark.

Twenty years after she died, my father still heard complaints about her behavior, such as the time she walked into a haberdashery on Main Street during business hours, stood in the middle of the sales floor, and loudly announced that she wouldn't be leaving until she got the money she was owed. But she handed down a company that was debt-free.

My grandfather ran the papers when he returned from Washington. He published his son's school report cards in the paper (D average). That may not have been great parenting, but he wanted everyone in town to know that we printed the news, all of it, and without exception.

Publishers Not from the Community

For more than a century, these newspapers were of, by, and for the people that lived in their communities.

And community is why the newspaper business is falling apart.

Some blame lies with the industry. Dad (Dudley White, Jr.) took over the newspapers in 1957. He started buying other newspapers across the country, and we became a chain, like everyone else. He remained publisher of his hometown papers, and he continued to run the editorial page where he advocated for things like a university campus (successful) and an effort to combine town and township (unsuccessful).

In his mid-40s though, he moved to California. That was OK because a good community man took his place.

Today, as a result of my father and my cousin's leadership, the company owns 12 newspapers and 10 radio stations. Eventually, as the company grew, publishers mostly stopped being community men and women. They merely paused in the towns they covered -- keeping the lid on things until they got a better offer, a bigger town, and a larger paycheck. The publisher today who's an authentic member of his community -- and I am privileged to know a few -- is rare indeed.

The internal problem, however, is not nearly so large as the fact that the world beyond our insular industry is changing. Community itself has moved. People don't swing their canes on Main Street anymore, and if someone did, he wouldn't hit a soul.

That doesn't mean community is gone, however. Wherever people get together and talk, and form relationships and social structures and identities, you've got a community.

We may once have defined it by geography, but it wasn't ever really about breathing the same air: It was about the ethereal bonds between people.

Redefining Place

And today, people are forming those bonds in ways that transcend and redefine the concept of place.

nicholas white.jpg

So what is community about today? I wish I could tell you. Human nature is such that we can't imagine anything that is truly new -- at least, not all at once. Most of the time, we just rearrange images of the past whenever we attempt to see the future.

Stumbling our way toward the inevitable requires a leap of faith. The Daily Dot, a new publication we announced recently, is my leap. The Daily Dot will swing its cane on the main streets and thoroughfares of the online community.

There are communities in Facebook and Reddit and Etsy today just as surely as there was a community in Sandusky, Ohio, 142 years ago. But right now they're living without the benefit of community journalism. The Daily Dot is going to change that. We're going to report what happens in those communities, up and out of those communities, just the way my great-great grand-uncle did. When news breaks in Tumblr or the kids get up to tricks in 4Chan, we'll be there with our stubs of newsprint to tell the story.

This is what we mean by calling The Daily Dot the hometown newspaper of the world wide web. There are stories waiting to be told, issues discussed, and communities defined by their collective senses of interests, concerns, and even histories. These are the aspects that have always been foundational to a sense of community for my family, and as we migrate to a world of digital natives and experience more of our lives online, The Daily Dot will be the paper of record for these emerging territories.

Community Journalism in a Digital World

I trust that if we keep following people into the places where they gather to trade gossip, argue the issues, seek inspiration, and share lives, then we will also find communities in need of quality journalism. And rather than simply covering the web from broad and outside perspectives like other publications, The Daily Dot is conceived from the outset to be of, by and for the web -- which is, after all, the largest community in the world.

We will be carrying the tradition of local community-based journalism into the digital world, a professional coverage, practice and ethics coupled with the kind of local interaction and engagement required of a relevant and meaningful news source. Yet local to us means the digital communities that are today every bit as vibrant as those geographically defined localities.

Unfortunately, geography is forged into the very foundation of the newspaper business, in its heavy iron presses and fleets of trucks, and in the deeply etched mindsets of its journalists. It may be that the industry as we've known it for the last century has to disintegrate so that the reportage it sustained can survive and flourish.

The only reason I walked away from my family's generations-long heritage serving communities is because I thought I could better carry on that work through a startup. If that sounds crazy, well, my father is fond of saying, "You don't have to be a genius to run a newspaper. You just have to have brass f---ing balls."

If you think community and journalism matter, or if you live any part of your life online, I want you to join us. Go to dailydot.com and sign up for our newsletter. There are stories waiting to be told.

Nicholas White is the co-founder and CEO of The Daily Dot, the hometown newspaper of the world wide web.

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