Tag Archive for 'business model'

A solution for the newspaper industry

Published on September 4, 2009 in Media, with 0 Comments. Tags: , , .

Newspaper executives around the world are scrambling at a solution to the new marketplace. NewsCorp's CEO in Australia remarked a few months ago that they only make 1/10th of the revenue on websites as they do through print - but with declining print circulation due to the popularity of online news - this is really affecting the bottom line of the industry. Unfortunately, they've been attacking news aggregators despite the fact that that's the solution to their problems - it's now a changed marketplace that they need to embrace.

The market dynamics are different now
Newspapers existed at a time when information was scarce. They performed the role of aggregating news (as well as creating it), and distributing it to the public through expensive channels which could not be easily recreated.

In today's age, information is in abundance and is drowning out consumers - with a distribution environment that is now cheap. Further, the role of news aggregation can be done more efficiently through online tools. However this has caused a problem - because in the value chain of online news, the aggregators are the ones that are able to monetise the content. Because people don't have time to read all the news now, they rely on aggregators that pull content from a variety of sources - and then only click on stories that capture their attention. These aggregators can place sponsored posts or advertisements alongside other articles, and so have found a new way to monetise content in the 'click economy'.

However from the content providers point of view, they've invested time and money in creating unique content, only for it to be ignored by consumers because they no longer have a captive audience - and for aggregators who do, to be monetising content they didn't pay for.

Google News - aggregator

Newspapers need to drop advertising and think about the entire value chain
Content can no longer rely on advertising as a revenue model - as I've argued before, it's a broken bubble economy. But premium content can exist as a paid subscriber service. This seems to be the direction newspapers are heading. But I think it's a mistake to enact paid subscriptions on all newspaper websites - it will kill demand and will not scale across the entire industry, other than for the few globally recognised newspapers and strong national brands where their location gives them a comparative advantage (ie, LA times for entertainment; Washington Post for US politics; Wall Street Journal for the capital markets).

Rather than charge consumers to subscribe to a newspaper, what the newspaper companies should be doing is creating a new type of organisation that can pool their resources. They should do this in the same way they did with the associated presses around the world several decades ago, where they can source expensive overseas content in a cooperative, which can then be distributed by newspapers in their niche markets.

Newspapers should create niche aggregators modeled in the same way Google News, Techmeme and its political cousin memeorandum (shown below) have done. Consumers will pay a subscription fee to these aggregators to get access to certain sources of information. And newspapers will get proportionally remunerated through the co-operatative making money on the aggregators service, but also control the distribution of their premium content which can be monetised further down the value chain (ie, once a consumer visits their website).

memeorandum

The model scales because a consumer has only one organisation to deal with, and can control their content consumption and payments. The aggregators also allow the consumer to define what sources of information they value. Better still, this controlled environment of information distribution puts more onus on the content creators to generate quality product. If people include them in their aggregator subscription but never click on that particular organisations content, no one can be faulted but the content creator themselves for not creating compelling content.

Better still, market dynamics can come into play. Part of the function of an aggregator is to cluster stories. This allows for a fair way of distributing the content - the news source that pays a premium can get a higher weighting in this clustering. So an aggregator may have 50 sources that all get clustered as one headline; based on a sources ability to pay per headline, will determine how much the dominate in weighting. This then puts the onus on the newspaper to create a better sales force that can monetise content later down the value chain, which can subsidise this discovery phase of the value chain.

Is this the answer?
Who really knows but its a step in the right direction. With consumers paying to subscribe to an aggregator, they're getting better value through diversity of inputs - and newspaper companies will get remunerated on how much content they provided as a proportion of the total attention by a consumer on the aggregator. The future of content will be driven by the subscription model, and this is a way that achieves that with the best value for a consumer.

Newspapers are reliant on the aggregators as a source of traffic and discovery. Rather than trying to kill them - they should copy them, license the technology and control the discovery phase of news consumption now crucial for today's information-overloaded consumer.

What's holding back newspapers from going down this path? They are too used to being the aggregators themselves. Instead, they need to realise that they must specialise now. They should focus on creating great content (a discussion in itself), and let technologists drive the discovery phase.

Semanticising Twitter for a revenue model

Published on January 31, 2009 in Business, with 0 Comments. Tags: , , , .

Twitter It was interesting to read the 11 business models for Twitter. Here's one that I rarely see ever get mentioned: semantic conversations.

The assumptions.
Before I jump into it, some context as to why I think this is a solid approach.

- advertising sucks in the traditional sense. Showing ad's blindly, is like throwing pamphlets over the Amazon hoping that your target market catches some of them. Or another example: if you're looking for some relief, do you walk down the main street of your city with your pants down yelling out "I want sexy time"? Sure, some people will approach you - but it certainly is not the most efficient way.

- search advertising is the window into the future of advertising. The reason why Google does so well is because when a user searches they are flagging their intent. No more blind guessing - now it's just a matter of accurately matching that intent to something. To extend the analogy using sex, this is like going to a single swingers party - you know everyone there is hungry, so to speak.

- Word of mouth marketing beats any other form. Imagine you're at a nightclub with your best friend. A model stops in front of the two of you - looks at your friend - and asks what cologne he's wearing. He replies, she smiles - and then walks off giving him a wink.
You tell your little brother the next day about the incident who's just run out of cologne. Next thing you know, he's at the department store calling you and asking what's that cologne's name. Unlikely story? Have a think about the last time you bought something - we tend to rely on people we trust to guide our decisions.

- Affiliate marketing is one of the most successful ways of making money on the web. My friends at Tjoos.com, help people find coupons - and they make a stupid amount of money because of affiliate deals. Affiliate marketing is rooted in a traditional concept for selling - there are suppliers like a manufacturer, and there are the retailers who onsell the supply like we see with clothing shops. With affiliate marketing, you act as a store pushing a product - and you get a cut of the final transaction if successful.

- On Twitter people talk and share The use cases of Twitter are a different topic in itself, but let's think of one of the most common: people share links with other people. As a case in point, monitor this search query I just constructed. Within minutes, you will see hundreds of new results returned. That's a lot of links been shared.

Semantic conversations explained
Let's say I just suggested that people read the book "Growth Fetish". People that follow me know me well enough to look into it as a legit thing. Perhaps some even trust my judgement to blindly buy the book (like I do with some people I know).

Now imagine, if instead of just saying the name of the book or pointing to the authors website - I had an easy way to embed Amazon affiliates. When people read I liked a book or a product, and they see a link - two things happen: they likely will follow the link to see what the fuss is about, and after reading up they will potentially make a purchase depending on how impressed or how much they trust me. Because the link tracks that I was the person recommending it, it connects the sale of that product by that person to me. And they don't need to make the purchase right there - it can happen up to 45 days later and I still get recognised for it (as is the case with most affiliate programs).

Twitter affiliated

Implementation
It's going to take a bit of thinking on how to implement this easily. For example, it needs to be drop dead easy for people to find the correct link and embed it. Twitter should tweak its system so that it recognises true hyperlinks that have words aliased, rather than just raw addresses. A way of guessing what the person is promoting and matching it to a Amazon code would be ideal (ie, "findbook:growth fetish" will have Twitter make a suggestion to link it to).

It would have to be a revenue share program, meaning Twitter and the user get a cut. That's a good thing, because everyone's interests are aligned. But it also means it needs to be thought out as it's an art to get the right progressive scale between motivating and killing.

Good luck Twitter: I'm counting on you and Facebook to work out a monetisation model, as you will drive the next wave of growth which builds the industry (like Google did post the dotcom years).

Analysing the user experience from two social networking sites

Published on May 1, 2008 in social computing, with 0 Comments. Tags: , , , , , , , , , , , , , , .

Yet again, MySpace has e-mailed me a useless e-mail that frustrates me more than it gives me value . But what I noticed recently, was another social networking site, taking a different approach.

geni

Whereas MySpace is simply alerting me, which is forcing me to painfully log into their service, Geni is actually alerting me the information without me having to take another action.

A few points of reflection on this:
1) Using my business analysis on the consumer Internet , MySpace is offering a content model (hypermedia is how I referred to this in my post) whereas Geni is offering a Utility computing product. Both these businesses consider themselves "social networking" sites and yet both offer a different product model.
2) This also highlights two different business models: MySpace is a platform whilst Geni is working on a network model. Meaning, MySpace's business model is premised on you visiting them for you to get value; Geni's isn't. To be perfectly honest, both MySpace and Geni are irrelevant for me. However platforms can come and go, but network models always stick around. As irrelevant Geni is to me, I still value it - a network business strategy (meaning you follow the user, rather than expecting them to come) builds a long term relationship.
3) Social networking sites when it's the core product, work best as utility services and not a content business. Look at what a different user experience it is for me, because I can get benefit from my Geni account despite not having to log in. Although I am not giving them pageviews, I am giving them my attention which is translating into greater brand equity for them. When you treat social networking as a content business, this distorts the service offered to users, as misaligned business views on generating revenue drive strategy in a way that is harmful to the consumer ie, I feel like saying "f**k off" whenever I see those e-mails for MySpace . But "thank-you" to Geni.

The main point I want to get at though, is that the user experience is just as important when the user is not on the site as it is when they are on the site. People shy away from the recently-recognised network model of business, because they don't get the same traffic. I say embrace it, because the market will eventually correct itself to recognise this is a superior type of strategy.