Archive for the ‘internet’ Category

How to Finance Online Journalism (Freemium 2.0)

November 10th, 2010

In the last few weeks the debates on the business models of online journalism (which can be extended to any online business) have been boiling high, and it seems there are three alternatives at the moment:

  • Make everything free: This model is based on advertising, so it’s not really free, but a user or reader doesn’t have to pay extra. The downside for the provider of the service is of course that having ads on your site doesn’t generate much revenue when the monetary transaction depends on a user action (someone must click the ad). Pay-per-click will become the dominant payment model because it allows for exact measurement. This will result in decreasing revenue, so it’s not profitable in the long run. Free can also be combined with voluntary payments through Flattr or other (micro)payment services where users can donate.
  • Paywall: Users have to pay to see whatever content (and ads). But this permanent barrier prevents the spreading of the content too, so you’re less likely to gain audience because they eventually discover it.
  • Freemium: The free part of your content has only basic functionality. To enjoy the full service (premium), users will have to pay. This usually works very well but doesn’t seem to make too much sense for, say, a newspaper.

All of these three models have their individual up- and downsides and none alone seems to be sensible for online newspapers in particular. That’s when I got struck by this idea: Why not combine all of them? Here’s how it’d work.

Premium component: Users can subscribe for a monthly or annual fee and access all of your content. No hassle.
Paywall/free component: In case of a newspaper, each article has (i.e., is assigned) a monetary value (longer features with lots of photographs are expensive, short articles cheap). Users can read the headline and an excerpt (5 lines or so) for free, and if they want to read the whole article, they have to pay. Not a lot, maybe 10 cents. Once enough people have read the article and it’s been paid for, it becomes available for free until the end of time.
Example: an article’s value is €400,- , including the journalist’s royalties, photo royalties, rent, electricity, whatever expenses need to be covered (in proportion), so after 4,000 people have read the article (not including subscribers), it goes free. Why are subscribers not included? Because they’re paying for comfort, not access. I think it goes without saying that ads will be there as well (though I hope interruptive banner ads will go away soon in favor of relevant contextual ones).

Not only is this a reasonable pricing and revenue model, it also pays tribute to what people care about. The more often an article is read, the faster it goes free, the sooner it will be linked to from other sites, the more the idea spreads.

At this point you might want to ask “But why would anyone stop cashing in when people are coming to see it?” See, the logic is this: Good article/hot topic—lots of readers—incoming links—more readers. It’s not going to work the other way round. It’s always a bet. What’s new is that the financing is split between subscribers and casual readers: Subscribers are pre-financing, paying readers (and ads) re-financing. And free makes you a good person.

Posted in business, current affairs, internet, marketing, media | 1 Comment »

Competence Creates Redundance

October 20th, 2010

Last week, a new quiz show debuted on German TV, and something remarkable happened: The candidates were asked what service a certain phone number belonged to (it was the coastguard). Next day the coastguard posted a (outraged) press release that their phone lines had been down until early morning because people called them as they were still seeking proof that TV had not given them incorrect information.

Now someone might think that this is a one-in-a-million event, but I don’t think so. It’s just the tip of an iceberg that the old media doesn’t (want to) see. I bet if you go through all online search queries from that night, you’ll find a similar result.

This happens all the time, and it’s increasing each day. People are getting more competent on how to find information they’re looking for, it’s a slow but steady adoption process. They realize that everyone has instant access to information, unlike a few years ago, when in order to spread a bit of information a journalist would have to search an archive, going through microfilms and almanacs for hours. That’s when information was scarce, because it was isolated.

Today almost everything is connected, creating an abundance of information. So the journalists’ job has shifted from retrieving to collating information. What’s unchanged is the verification part, but exactly this is the critical point. As people become more sceptical of what they’re presented, your verification only matters so far as they’re going to trust you. (Note: This only seems to apply to news, when it comes to entertainment people still shut their brains down.)

The notion that not all content (i.e. news) is created equal only holds true with regard to trust and relevance. If you remove these two, everything is just noise. That’s what the web is. And we have learned to search and pick our sources according to our personal preferences. We’re collating our information ourselves, the vast majority of which is free. This is what bothers people like Springer CEO Mathias Döpfner because it renders their business model redundant. So he’s not getting tired of fighting for paid content for the online and app versions of his print products. Politicians have joined this quest too, mostly because they are afraid of a future where people cannot be influenced through an established and limited number of channels they more or less control. They want to make the internet a reflection of the “real world”.

But this is not going to happen. People have become their own journalists because the entire chain is availbale for them. From research to printing press, they have everything at hand, plus a worldwide audience. If they care about some topic so much they eventually become the best in their field, and also are writing for a loyal audience, then maybe they can monetize their passion this way, be it by ads or a premium subscription model or something we haven’t thought of up to now. The Springer approach, trying to trick people into believing that their content is better just because it must be paid for doesn’t work out. The value is elsewhere, and sometimes, it’s moving quickly.

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First, make a Point

September 16th, 2010

If you’re into music, you might already have heard of Kirby Ferguson’s Everything is a Remix, a documentary in which he argues by the example of Led Zeppelin that a lot of music we believe to be original is indeed remixed. In his case remix is rather a euphemism for stolen or copied.

Feel free to watch the video, it’s quite educative. The problem I’m having with it: There is no point. Which, if you think about it, is a deficiency of a lot of documentaries, because the information you’re presented with has already been filtered, so the author might as well make his point himself.

The hard part for Kirby is to raise money for the 3 other parts of the series that are yet to come, but how likely is it for someone not making a point to find support? Besides, how likely is it that with today’s consumptive attitude towards music people care enough?

Well, with about 900 “likes” (by the time of writing) he might pull it off, if he had a dollar for every one. Somehow I just don’t feel like buying an affiliate-linked Led Zeppelin DVD from someone who just tried to sell me on the opposite.

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Where applicable

September 15th, 2010

Over the last few years it seems free has gained a lot of traction as a pricing model. Free software, free online services, free e-books — and of course the free samples of physical products you’re presented with at every turn. Free has turned the default strategy to gain market share. But is it?

In his (appropriately named) book “Free! The Power of a Radical Price” Chris Anderson points out that all economies gravitate towards abundance. We will always produce as much as we can and try to sell it at maximum profit. To maximise profit, we find cheaper components and manufacturing, giving a decrease of marginal cost, i.e. the cost difference to make one more piece, which ultimately drops to zero (if rounded down). To gain market share, products and services also become ever cheaper until they also are free at some point. This is obvious in the digital domain (a digital copy doesn’t produce any marginal cost), but it also happens in the physical world — you don’t pay extra for long-distance calls, for example.

But in the physical world, most free is calculated into the price of products that must be paid. This (cross-)subsidization can also be found in the digital area, when you have free software with limited functionality, and you have to pay for the full version. Or free personal editions, but enterprise versions must be paid. Anderson calls this versioning “Freemium”. Basic versions are free, premium editions must be paid.

To be concise, I will also add the third model of how free is being financed, which is by a third party. In practice this is sponsoring or advertising: Advertisers pay a TV station to get air time, and the viewer gets both the programme and the ads without paying extra. (By the way, charging viewers for HD delivery is no business model for the future. Handling files on hard drives is cheaper than handling video tapes.)

So how do you use this to gain market share? It depends on your market. Not all markets are the same. What you need is attention. But neither is all attention the same. Getting noticed is not enough. The crucial question is: How pressing is the problem that you service or product can solve? If it’s not, a free offer is of no use because it’s not relevant. The point is that free itself is not necessarily a conversion mechanism, no matter how valuable the product or service is. This is a common mistake among marketers who rely on free only, believing that once people see how good it is, they will buy it. In fact, it’s the other way round: The more people need something regardless of actual value, the more likely they buy it regardless of cost.

That said, free does not spare you the effort of promotion. It is merely step 2. Step 1 is to find people who need it. Then you can promote the free offer. And if you get no response, you should put it back and focus on something else. Don’t cancel it entirely, just put it at the bottom of your priority list — it might well be that you’re just too much ahead of your time. The wrong thing to do is to put more and more value and effort into something nobody wants (yet).

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What’s missing

September 7th, 2010

When Apple released the lastest version of ITunes last week, they also announced that they had redesigned the icon of the application. They got rid of the CD, because they claim to have outsold CDs (go figure, in one third of the lifetime of the silver disc), and lots of (self-appointed) designers have started mocking the new icon for looking cheap and they’d expect better and so forth.

Have a look yourself. Some are neat reflections of technique. What’s missing in every single one is art.

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To the Fairest

September 3rd, 2010

When Eris, the goddess of strife in Greek mythology, was not invited to the wedding of Peleus and Thetis, she took revenge by inscribing the words “to the Fairest” on a golden apple and rolling it into the proceedings, which lead to an argument between the gods, resulting in the Troyan War — hence the name apple of discord (read the long version here).

So you might have guessed it, this post is about Ping, or rather about the posts about Ping. The usual suspects have been writing about this already (as they should), but what struck me quite surprisingly was that all of them were disappointed by the social networking capabilities of the new iTunes feature. After all, that’s what it is. The misunderstanding I’m sensing here is that people were expecting a Facebook or Twitter Killer App. Guess what, it’s not. It’s not even intended to be. It’s a well-thought idea to sell more stuff by having people promote what they like. It’s the opportunity of having a conversation or building a tribe right in the marketplace — you can’t go any closer. VentureBeat says this feature might well extend to books, movies and apps too. I wonder why Apple didn’t make it so straight away, because the adoption curve doesn’t change.

But what if it doesn’t work? So what? To all who forgot, Apple doesn’t depend on Ping’s success. FastCompany compared this to Google Buzz, which started out with a similar user base (160 million) and still wasn’t a huge success.

Sidebar: FastCompany also writes
“But, once again, Apple is living just a little bit in the future. If it didn’t deliver a signature element of risk in its new product launches, well, it’d be Sony.”
That’s what it looks like. Yet Sony, at its core, is still a lot like Apple. When founded about 65 years ago, they only succeeded because of their persistent belief in transistor technology (and engineering genius, of course), just the way Apple do with their products.

The people who really depend on it (some more than others) are the musicians. Independent artists on CD Baby are worried if Apple will give them access to their album pages so they can use this new opportunity. I’m curious to see how much time Apple will give to its new idea before its declared success or failure.

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Different View on Gmail

September 1st, 2010

Personally, I like using Gmail, and most of the people I know do so too (otherwise they’d switch their service). This article won’t change my mind right now, still it’s an interesting view. The good news is, Google can improve on it.

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Learning from a HOPA

August 12th, 2010

You might have seen the latest hoax by TheChive that’s spreading over the Web. TechCrunch’s put up an interview with its creators. Most important quote: “We didn’t need mainstream media to make this happen. We just needed the people.” There you go.

(Sidebar: TheChive’s successfully pulled off two more hoaxes in the past that got picked up by the media, and after the second one journalists said “You’re not gonna fool us again.” They were wrong. Huffington Post, Leno, you name it. When you’re hot, you’re hot.)

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Cover or Art

August 12th, 2010

This is the headline of a regional newspaper’s article today. Its diplomatic conclusion is that a cover band makes art in its own right by picking a song and making it theirs. And it might not surprise you that I don’t agree.

Here’s why: By design, a cover band exists to play songs that have been made and performed by others. It’s quite arguable if the songs themselves are to be considered art, but that’s a different (yet related) topic. The purpose of a cover band is to resemble the feeling of a song when they play it, only that it’s on stage and not at home, so you can have a good time with your friends. Musicians who play in cover bands do so because they love playing their instrument (sometimes to perfection), not because they feel the urge to create art. Because if they did, they’d spend their time creating and not mimicking.

That said, there is a huge difference between a Mariachi band covering Heavy Metal songs and a Rock/Pop ensemble (2 guitars, bass, drums, keys, brass trio, vocalists) covering songs arranged for this kind of ensemble. It’s remarkable versus predictable.

Funny enough, the article quoted the singer of the band that “it is one side of the coin to make it in today’s music market, but even harder to be accepted by endorsers and sponsors”. That’s quite obvious when you try to be everything to everyone. The marketer’s dilemma. And because there are marketers on the other side of the table too, it’s no safe bet for anyone. It makes sense for an instrument manufacturer to endorse an extreme performer because that gets them noticed, but maybe by fewer people. A middle of the road performer may find a larger audience, but they won’t give a lot about music gear. An artist doesn’t worry about this, because he has embraced that art does not depend on endorsements or sponsorships and she would never sacrifice this art for a little more comfort (only for a lot, that’s just how the lizard brain works).

A little aside: There’s an internet radio called NewcomerRadio, that says its mission is to promote newcomer bands to broadcast radio and other internet stream radio stations. Yet their stream sounds like any other radio station, because their rotation is the same. And so they pick their newcomers to fit into this rotation, and -presto!- nothing happens, because nothing stands out. Different artists that sound all the same. Wasted.

Doing the opposite would have a totally different effect. There’s thousands of bands out there, and I’d rather go to the edges instead of what used to be the centre. Brazilian Polka bands and Indian Viking Folk singers are just way cooler than yet another High School Punk band. It’s all there — if you dare. Yes, chances are you will lose your old listeners. The ones you will find instead will not only listen but also do the promotion themselves. Now that’d be helping your mission, wouldn’t it?

Posted in business, creativity, internet, marketing, media, music | 1 Comment »

(Gone) Before Its Time

August 5th, 2010

As bold the eulogies were when it was announced, they’re even bolder now that Google Wave‘s end as an independent service has been proclaimed. Undoubtedly it’s tool that provided the sought-after curve-jumping, paradigm-shifting innovation which by itself was hard enough for people to wrap their heads around. But I believe what really prevented the breakthrough was a lack of trust. Google still has a major trust problem, and as long as people are suspicious about what’s happening with all their data, a product that deals with such better be trustworthy.

And it’s also worth a look at the marketing startegy that went with it: Google was quite eager to announce it when Wave was still in alpha. And it was a marvel. Then they released the invitation-based beta which still had a lot of glitches and hickups and one year later it was open for public. Which was too late. It’s always easy to be clever in hindsight, but the important thing to point out here is that there was no need whatsoever for Google to tell the public about Wave, because until today there is no competitor. Why hurry? They could easily have waited one more year and make it a finished product.

One more thing. As far as I remember, they didn’t promote it heavily once it was up and running, which wouldn’t have been the worst of ideas. I’m not talking TV here, I’m about press releases for the geeks that want to use this service as  soon as they have someone to do it with. I didn’t use my account because there was no one I was having a project with that would have offered itself to be run on Wave. But if I had, it’d be comforting my sleep a lot had Google told me: “We know there’ve been some issues concerning our security in the last months, but we promise you that your Wave data is 100% safe with us. We use advanced rocket science encryption, so even we don’t know what you’ve been putting in there.” Now you’ve got something to work through the adoption curve.

The majority of users, it seems, is still in the desktop age. This is the domain of Microsoft. Make a document, save it on your hard drive or local network. One application for each purpose. Sifting through 86 emails to find out who said what and when. It’s the classic switching dilemma: As long as their pain is not big enough to see the comfort of the solution, people don’t switch. Because it requires them to take a step back and consider the whole issue. The question is not: “How do I make this work with what I got so far?” but “Looking at both solutions as a whole, which serves my needs best?” That’s the marketing challenge not only Google faces. Only more often than others.

Posted in business, internet, marketing, workflow | Comments Closed

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