Tuesday, August 16, 2011

Newspapers need a jolt of Silicon Valley DNA

I started my career as a newspaperman, became a Silicon Valley CEO and work today as a consultant helping media companies understand technology and helping technology companies understand the media. Here’s what I have learned:

The talented people in these seemingly disparate industries are remarkably alike but the cultures of the businesses are completely different. And here is why this matters:

:: The tradition-bound and risk-averse nature of the newspaper culture is the single greatest reason publishers are losing relevance, readers and revenues while competing digital products run circles around them.

:: With new technologies, media formats and business models emerging at an ever-quickening pace, newspapers must learn to think and act like start-ups – or risk falling to the margins of the media world.

In other words, newspapers need some fresh DNA that will make them think and act more like techies and less like, well, newspaper people.

The good news for newspapers is they have an abundance of the most important asset every business needs: Great people.

Just like tech companies, newspapers are filled with exceptionally large numbers of highly intelligent, highly creative and highly motivated individual contributors whose ideas, talents and egos must be channeled efficiently into creating a product that not even the brightest among them could produce on his or her own.

Although the people working at newspapers and tech companies are more similar than you would think, their business cultures are polar opposites of one another.

Newspapers are all about faithfully and efficiently producing a well-defined product according to time-honored standards and procedures. In other words, the culture values tradition, consistency and predictability, which, by definition, are inhospitable to change – particularly the sort of disruptive change that the web, mobile and social media require.

Newspaper folk essentially come to work every day to do their best to fully optimize a product that serves a clearly identified audience, that has a clearly defined revenue model and that, until the last few years, has been a stunningly profitable business.

Tech companies – which are unencumbered by tradition, institutional inertia and frequently even a clearly defined product for the first few years – are created expressly to do something that no one else has done before.

When techies come to work, everyone in the company – from engineers to marketers to sales people – is eager to debate such fundamental questions as: What’s our product? Who will buy it? How will we sell it? How will we make money? The debate persists (almost to a maddening degree) until the product is launched – and generally continues afterwards, especially if the marketplace fails to embrace the offering with sufficient zeal. Techies will tinker until they either get it right or run out of venture capital.

Although everyone marvels at how Microsoft, Google and Facebook rocked the world and turned corporate masseuses into millionaires, the preponderance of tech start-ups actually fail, because they prove to be far less clever than the founders and funders thought they would be. But failure is an option in Silicon Valley, because you learn as much from hitting the wall as from your successes. Maybe even more.

It takes a certain mind-set to take the entrepreneurial plunge. Techies embrace uncertainty and shrug off failure in a way that would unhinge most ordinary people. They are perfectly happy blowing up what they did the day before to try a better (or at least different) idea.

This sort of restless and relentless experimentation has produced all the technologies that have changed the way consumers get and give media – and the way advertisers increasingly are attempting to reach customers. A good deal of the success of the digital media has come at the expense of newspapers, which simply have not acted rapidly or boldly enough to create products and services to meet the needs of modern readers and advertisers.

Publishers have not failed to embrace disruptive experimentation because they are not smart enough to do so. The video embedded below is proof that the folks at Knight Ridder in 1994 had a pretty good idea of what the future might hold. But the newspaper business historically was so successful that publishers didn’t need, or want, to change much about it. Consequently, risk-taking and experimentation took a back seat to business as usual.

With print circulation and advertising revenues falling to ever-lower lows for each of the last five years, newspapers now must find new ways to cost-effectively create content; build new web, mobile and social audiences, and monetize their traffic as profitably as Facebook and Google do.

To do that, they will have to bring the creative chaos of Silicon Valley into every corner of their businesses. This means launching multiple, carefully planned initiatives across the full array of print and digital media. To be sure, this must be done with discipline and care.

Sometimes newspapers will get it right. Sometimes they will get it wrong. And, every now and then they will hit a home run. But they won’t win if they don’t play.

© 2011, Editor & Publisher

Monday, August 15, 2011

How harsh should an obit be?

Its ordinarily an honor to merit an obituary in the New York Times, but it didn’t work out that way for Sherman White, who was treated rather roughly in his sendoff for a 60-year-old mistake.

The obit for
the former college basketball star pubished on Friday underscores the need for sensitivity and balance when journalists try to squeeze a lifetime into a few hundred words – especially when some sort of wrongdoing has characterized that life.

Unfortunately, discretion took a holiday at the NYT after Sherman White died at the age of 82 on Aug. 4 in New Jersey.

As the Times reported in considerable detail in a 634-word obit, White was an all-American forward at Long Island University who was destined for a promising professional career when he was convicted in 1951 of shaving points in a betting scandal. After serving nearly nine months in jail, he was banned for life from the National Basketball Association, though later played for the Eastern Pro League.

It is not until the 13th paragraph of the 16-paragraph obit that the Times reveals that White was more than a disgraced basketball phenom. In fact, the Times reports, he spent a considerable amount of time in the last 60 years working with kids in the hardscrabble community where he grew up to keep as many as he could on the straight and narrow.

Contrast White’s portrayal in the NYT with a column about him published earlier last week by Tara Sullivan of his hometown newspaper, The Record in Bergen County, NJ. While Sullivan doesn’t mince words in recounting the scandal, she provides a full and inspiring account of what White did for the next six decades.

“Rather than dissolve into a sad, post-prison life,” wrote Sullivan, White “found his place on the playgrounds — talking, mentoring or coaching the young players in his shadow.” And she quoted one of the youthful athletes he once coached, who called White “a giant of a man” who “helped develop so many young boys into men.”

Not surprisingly, the tone and emphasis of the two articles led to two entirely divergent headlines, which, as we all know, heavily influence the way stories are remembered.

At the NYT, it was “Sherman White, Star Caught in a Scandal, Dies at 82.” At The Record, it was, “Sherman White rebuilt a life and left a legacy.”

While both versions of White’s life indisputably contain the essential facts, The Record provided readers with a more authentic picture of the man than the New York Times. As such, The Record deserves our gratitude and the Times owes its readers – and White’s family – an apology.

Monday, August 08, 2011

Get ready for mobile payments

It’s not a matter of if, but when, your ever-smarter smart phone replaces currency and credit cards as the way you pay for everything from a latte to a load of lumber for the deck you have been meaning to build.

The arrival of mobile payments will restructure the way marketers interact with consumers, leading potentially to epic shifts in the balance of power and dollars from financial services like Visa and American Express to technology providers like Google and Verizon.

It also is almost certain to lead to further disruption for media companies, unless they can figure out a way to nose into the action – which already is well under way.

The mobile payments revolution will be enabled by a technology called Near Field Communications (or NFC), which adds a micro-range radio to the cellular, wifi and Bluetooth arrays already packed into every smart phone. (More on NFC here.)

While only a smattering of Android devices today are equipped with NFC, there are hopeful rumors in the ever-breathless Apple press that the next-generation iPhone will have the feature when it debuts later this year.

Whether Apple takes the plunge now or later – thus leveraging the 125 million credit cards already on file at its successful iTunes service – the company will join a frenzied land grab including the following players:

:: Google Wallet, which will be seamlessly integrated with the Android operating system that ComScore says powers more smart phones (40% of the market) than its closest competitor, the iPhone (27% of smart phones).

:: Isis, a collaboration among Verizon, AT&T and T-Mobile (the latter of which AT&T is seeking regulatory approval to acquire). These mobile providers, who utterly dominate the U.S. market, are partnered with Discover, MasterCard and Visa.

:: Visa Wallet, a parallel effort by Visa to partner with its network of member banks to create a branded payments app.

:: Serve, the American Express equivalent of the Visa Wallet effort, which has entered not only into partnerships with Verizon and Sprint but also the fast-growing Foursquare mobile check-in platform.

:: Verisign and the other point-of-purchase equipment companies who make the gizmos used to swipe cards. Verisign has a mobile banking suite that it markets with a variety of tech and banking partners.

In a way, mobile payments already have arrived.

You can flash a barcode on a mobile phone to complete a purchase at most Starbuck’s, but it’s a far more complicated process today than it will be in the future. Now, you have to establish a Starbuck’s account by handing your credit card to a clerk, who loads the funds on a Starbuck’s card. Then, you have to download a Starbuck’s app and link it to your Starbuck’s account. Finally, you have to fuss with the phone when you make a purchase to generate a barcode that can be read at the register. If you run out of money, you have to slap some plastic on the counter to recharge your Starbuck’s card.

In the future, this rigmarole will be unnecessary. Sitting on a bus or walking through the park, you will be able to virtually create and manage accounts with individual merchants, simply waving your phone and confirming a transaction whenever you happen to be in a store. More likely, you will have a generic buying account that works with all merchants. Once established, you will be able to top it up from time to time for use at a gas pump, vending machine or furniture store. You might even be able to wirelessly lend a friend $100.

Paperless banking almost is upon us. Chase has an app that allows you to deposit a check by merely taking a picture of it with your Android or iPhone.

Once the mobile payments ecosystem fully evolves, currency and plastic may well become relics of the past.

For consumers, this will provide greater convenience and arguably more security than ever.

For the winners in the land grab, it will unlock vast new markets, potentially shifting revenues from banks and credit card companies to companies like Google, Apple and the mobile carriers.

For marketers, the systems will capture a wealth of information about purchasing patterns, including who, what, when and where people bought something. Even when this data is collected without identifying individuals by name, the volume and specificity of the information will enable marketers to sharpen their messaging and tactics.

Going to the next level, sites like Blippy.Com encourage consumers to disclose and write reviews about their purchases. If such platforms take off, they will provide merchants with the ability to link specific individuals with particular purchasing patterns, enabling brands to reach consumers with unprecedented precision.

At the level beyond that, it seems entirely possible that a significant number of consumers would be willing to have all their purchases tracked in return for such incentives as discounts or frequent-shopping points that can be redeemed for cash or products in the future. This, of course, would enable the Holy Grail of target marketing: Putting the right offer in front of the right person at the right time.

Although the outlook is unclear, there can be no question that mobile payments will revolutionize marketing by creating an ocean of real-time, granular and precise consumer data.

This matters to publishers and broadcasters, because it means that marketers in the future probably will vector ever more of their advertising dollars into direct connections with consumers, instead of mass media.

As mobile payments combine with the power of digital publishing, masses of eyeballs – which happens to be what traditional publishers and broadcasters sell – will diminish in importance in the typical advertiser’s media mix.

Where does this leave the traditional media companies?

Because rich data – not mass audiences – will be the name of the game in the future, every local media company should be gathering as much data as possible about every household and individual in the community it serves.

The most immediate opportunities to do this are through newsletter programs, contests, site registration and smart mobile apps. Obviously, all of these tactics require close attention to government and corporate privacy policies.

The other thing media companies need to do is pay close attention to the evolution of the mobile payments ecosystem. Then, when the time is right, they need to buddy up with the likely winners.

Monday, August 01, 2011

Will business model ‘stabilize’ for newspapers?

Quizzed by securities analysts last week about his company’s disappointing financial performance, the best McClatchy boss Gary Pruitt could say was that he hopes the newspaper “business model will stabilize” at some unspecified point in the future. But it will not.

And it had better not, if Pruitt intends to save what’s left of his newspapers, where relentless cost cutting has halved the headcount of his flagship Sacramento Bee to some 700 increasingly nervous souls in the last three years.

“It feels like the 19th inning, but we are not sure,” the chief executive of the nation’s third-largest newspaper chain said Friday after reporting that his company’s sales in the first half of the year slid 9.6% to $618 million and his net profits in the same period plunged 68.5% to less than $3 million.

“I do think the business model will stabilize,” he continued. “I am hopeful we are much closer to the end than to the beginning. But I can't give you a read more than that.”

Sorry, folks, but it is unrealistic to think the newspaper business model will stabilize, because we are in the midst of profound and fundamental changes in the way people get information – and marketers connect with them. The model cannot stabilize, either, because the traditional strengths of the newspaper business have been turned into liabilities in the new order of things.

If Pruitt and his fellow publishers don’t intelligently de-stabilize their businesses to modernize them, they run the risk of seeing further deterioration of their once-formidable franchises. Like most other publishers, Pruitt already has lost a lot of ground: The market capitalization of his company, which peaked at $3.5 billion in 2006, now is less than $200 million.

This is why the newspaper business is not going to stabilize:

:: Because people can acquire content from any number of sources on any number of platforms at the time and place they want, there is increasingly less utility in the print product, which necessarily is a static (and often out of date) aggregation of a small subset of all the news, information, entertainment and commercial content available in the ever-expanding digital universe. Despite the diminishing importance of the legacy product among most consumers, the newspaper industry still depends on print circulation and advertising to provide 90% of its revenues.

:: The proprietary production and delivery platforms that previously provided publishers with unrivaled market share and pricing power now represent unavoidably huge fixed costs that put them at a distinct competitive disadvantage to the proliferating digital platforms. Even though roughly 1 out of 3 newsroom jobs has been lost at American newspapers in the last decade, publishers still pay far more to produce content than most digital competitors. Sadly for those of us who treasure quality journalism, the high cost of producing original content has turned the medium’s most cherished competitive advantage into a liability from the standpoint of hard-eyed financial analysis. The same can be said for owning printing presses and large fleets of delivery trucks.

:: While the monopoly or near-monopoly status historically enjoyed by publishers allowed them to charge formidable advertising rates for access to the substantial audiences they aggregated, the increasingly sophisticated digital media make it possible for advertisers to finely target their pitches to specific audiences – and sometimes even individuals – at a fraction of what they have to pay for a newspaper ad. While newspapers depend on selling un-targetable print ads at the rate of $12 (or more) per thousand in order to support their high fixed costs and double-digit profit aspirations, un-targeted banner ads can be bought by the fistful on the web for $1 per thousand – or less. With all due respect to the quality of the typical newspaper ad environment, it is hard to believe this differential pricing can be sustained over the long term.

In light of the above, it is futile to merely “hope” the newspaper business will stabilize. The hopelessness of hope is perhaps best illustrated by the fact that half of the industry’s revenue base vaporized in the last 5½ years while publishers were hoping for a different outcome. Barring a miracle, industry-wide ad sales, which were $49 billion in 2006, are unlikely to top $23 billion in 2011.

Given that despair is not an acceptable option, what are publishers to do? They must begin intelligently, and speedily, de-stabilizing their enterprises by:

:: Accepting that the old business model is winding down.

:: Understanding that consumers and advertisers are forsaking one-to-many media like newspapers in favor of some-to-one media like Facebook and one-to-one media like the wondrously individualized smart-phone experience. (See also this slightly out of date but still relevant post from 2007.)

:: Embracing digital technology to create truly new products and platforms for delivering content, building audience and then monetizing those efforts through advertising or other means. This explicitly means going far beyond porting print content to a Newspaper.Com website and upselling web banners to print advertisers.

:: Considering such previously unthinkable measures as reformulating content strategies, pulling back on seven-day-a-week printing, cutting ad rates and entering into partnerships with digital competitors that previously may have looked more like enemies than friends.

:: Leveraging their formidable strengths – brands, market presence, content-creation capabilities and sales forces – to move smartly into the future.

There is a way forward. But it will take vision and work, not just hope.