Content Matters

Bandwidth Usage is not an Occupy Issue

The New York Times today has gotten lots of attention for a ridiculous headline on a poorly written story:

Top 1% of Mobile Users Consume Half of World’s Bandwidth, and Gap Is Growing

The story itself is kind of silly. Yes, it's a fact that a minority of users utilize significant amounts of bandwidth on mobile devices. That's not new - in fact, it's why AT&T, Verizon and others have put caps on what were previously unlimited data plans.

Yet in the story, the writer compares consumption of bandwidth to consumption of oil:

The United States, with less than 5 percent of the world’s population, consumes about 23 percent of the world’s daily oil production, according to American government figures. Japan, Germany and Italy, whose populations together make up less than 4 percent of the world’s total, accounted for 31 percent of global natural gas imports in 2010, according to the International Energy Agency.

Yes, that's factually true. But where there is a finite supply of oil in the world, bandwidth is potentially infinite, depending upon the capital investment that telecoms are willing to make.

Showing even more ignorance of the issue, the author quotes an analyst suggesting that some of the imbalance may be based upon the use of SIRI in new iPhone 4S devices:

Arieso researchers, in their latest survey, found that users of Apple’s iPhone 4S downloaded 276 percent more data from an operator’s network than did people with the Apple 3G, which has been on the market since June 2008.

Part of the reason for the increase in download volumes may be Apple’s Siri voice feature on the iPhone 4S, Mr. Flanagan said. Siri allows consumers to dictate to the phone and enter more text and data into the network in an easier way.

Really? The reason iPhone 4S users consume more bandwidth than iPhone 3G users is due to their use of SIRI? That's absolutely ridiculous. There are multiple reasons iPhone 4S users are probably using more bandwidth:

• They are early adopters - so they're much more likely to be consuming video and using other bandwidth-intensive applications
• Performance on the iPhone 4S is much, much faster than on the 3G. Those who are still using a 3G are unlikely to use bandwidth-intensive services as the performance will be unacceptable.

The story, which is based on a survey done of European mobile users, also lumps together mobile phone, tablet and laptop use. The drivers of bandwidth on laptops is likely different than it is on smartphones, but there's no effort to dig into that.

Even the accompanying photo makes little sense. The image shows users reading their smartphones while coming out of the subway tunnels to travel over the Manhattan Bridge. But I doubt these users are watching video or doing other bandwidth-intensive work during this 3-minute period where they can access the web. Instead, they're probably checking email or reading text-based news, since they'll be back in the tunnel shortly.

But what bugs me most of all is the silliness of the title, an effort to equate this to the 1% vs 99% of the Occupy movement. While smartphone adoption is certainly most prevalent among the top 25% of wage-earners, it's not a 1% issue. The checkout clerk at my local Stop & Shop has an iPhone 4S; the Associate at Lens Crafters who helped me with my reading glasses a few weeks ago has an iPad 2 and previously had the first iPad. She told me that when the iPad 3 comes out, she'll upgrade to that one "I have to have it". So bandwidth consumption cannot easily be mapped to a socioeconomic scale. In fact, I'd argue that the wealthiest (who are often older) are somewhat less likely than a younger, middle class audience to use their smartphones and tablets for video and other heavy bandwidth applications.

This kind of linkbait headline and sloppy journalism is what I'd expect from a B-rate blog. The New York Times should do better.

 

 

Mad Men 2011 aka digital ignorance redux

I’m looking forward to a new show that’s targeted to hit the small screen (in whatever form it may be) in the year 2041 - Mad Men 2011.

The premise sounds pretty cool – they flash back to the year 2011 and look at the ad agencies and media companies of the day and – full of anachronisms and the seemingly bizarre behavior of the day.

Like the current Mad Men series, it will have infidelity and corporate infighting, but what will make the show special will be those flashbacks to 2011. No, I’m not speaking of the retro fashions. And it’s not the fossil fuels that powered their cars then, but rather the fact that the leaders of the agencies of 2011 themselves seemed like dinosaurs.

In the pilot movie, they’ll open with a scene at a large media conference. CEOs of various media and agency companies will be discussing their use of social media. Here are a few of the gaglines you’ll hear:

Maurice Levy, Chairman of mega agency Publicis will be asked about  whether he uses Twitter, to which he’ll reply:

"I understand how to wash dishes. I don't do it regularly"

[queue laugh track]

Hachette’s Arnaud Norry will eagerly chime in:

"I think communicating with text only with a very limited way of expression is not my style"

The scene ends with several media leaders openly ogling the shapely rear-end of one of the agency associates while one slowly exhales cigarette smoke. Oh, wait, that was a commercial for a Herman Cain campaign ad from the same year.

If only these were punchlines from some future retro show. In fact, they were real quotes coming out of this week’s Reuters Global Media Summit. The fact that major media executives can still be so dismissive of social media is sad. More than anything, it shows a complete lack of understanding that the current display advertising model no longer works.

As Andy Weissman describes it:

“…display ads online are the wrong metaphor. They come from a construct where web services were viewed as "pages" - magazine pages. They were invented by applying an old model (magazines) onto a new medium (web services) and assuming that the user is a "reader" and will accept being interrupted. Over time, the web has proven both these paradigms to be untrue in a truly profound way.”

Would Levy hire a practice leader for Publicis who has never worked in advertising but has "watched plenty of commericals on television"?  More importantly, would a client allow Publicis to assign them an account planner who had never worked in the agency business nor ever used the client's products and services?

What media and agency executives still seem to miss is that social media is not just another publishing platform. Twitter is not about pushing out 140 character headlines. It's about engagement and you can't understand engagement by simply watching someone else do it.

 

 

 

 

 

From distribution to discovery: the disintermediation of book publishing

Book publishers have long feared that once Amazon (AMZN) completed its disintermediation of bookstores, publishers would be next in their sights. And according to this NY Times article, that day is rapidly approaching.

But this isn’t some nasty plot by Amazon to take over the publishing world (well, OK, maybe in part), but rather it’s the logical progression of a rapidly changing market.

In the traditional book publishing business, the role of publisher was largely focused on production, publicity and distribution. Publishers, leveraging their marketing budgets and relationships with bookstores and book reviewers, were able to take a book and get it into the hands of readers.

In the new world of publishing, the value chain has changed. Production and distribution are largely free and the key factor for success is driving discovery. Publishers with deep pockets can still drive some awareness through traditional advertising, but even that’s a lesser aspect of how to generate success.

Going forward, publishers need to show that they can drive awareness of their authors’ books on platforms like the Kindle, iBooks and Google, while leveraging social platforms like Facebook, Twitter and Goodreads. Publishers will have to embrace new models, like offering free eBooks to drive awareness.

While “big name” authors have always developed their own following, now every author is their own brand. Publishers who help authors develop their brand and drive discovery and awareness will succeed. The rest will find themselves quickly becoming irrelevant.

Some Qwik Thoughts on Netflix

The meme of the morning is Netflix (NFLX) splitting their business into two - retaining the Netflix brand for the streaming service and rebranding their traditional DVD-by-mail service as Qwikster.

I'm a big fan of Netflix. They've been one of the great "disruptive forces" stories of the past ten years. They took a new model into a space with a dominant player and now totally own that market.

The other great thing they've done is aggressively look to disrupt their own DVD business with a streaming video business. Most disrupters eventually become disrupted themselves (think Microsoft). But the best companies are those not afraid to eat their own young, and Netflix has shown a willingness to do so. And disrupters tend to need to be there early - before their customer base seems "ready" for the disruption. Again, kudos to Netflix for this.

From an operational standpoint, it makes sense to split these two businesses.

The tradition DVD business was really about logistics. What made Netflix a success was that they could quickly process all those DVDs, so users typically receive a new DVD within 2-3 days of dropping an old one in the mail. It's why five years ago, Netflix hired former postmaster general Bill Henderson as COO.

The streaming business is about scale in a totally different way. Rather than scaling for logistics, Netflix streaming needs scale in system architecture. In this new business, it's competing with Apple, Amazon and Facebook, not Blockbuster and Wal-Mart.

So, it's little surprise that operationally, Netflix wants to run these two businesses separately. What is surprising, though, is how they seem willing to divide the customer experience across the two systems.

I use both the streaming and DVD service. I'd love to stream everything through my Roku or on the iPad, but half of the movies my family wants to see are not yet available in their streaming service, either because they're too new, or conversely, too old (e.g. Close Encounters of the Third Kind was on my daughter's wish list last week). A single queue makes the hybrid model manageable until such time that the streaming service is more complete.

Netflix should look to Amazon for their model. I mostly buy ebooks these days, either for my iPad or my daughter's Kindle, but occasionally there are books not yet available in Kindle format (continuing her Spielberg theme, my daughter wanted to read Jurassic Park, only available in print). On Amazon, I do one search - and can see all formats available. The same applies to music - where I see digital downloads and CDs.

If Netflix wants to run these as two separate operations, that's their issue. But the divide should be hidden from the customer. The hybrid model is their big advantage. Otherwise, they open the door for Redbox or Blockbuster to take back some of the DVD market, while Amazon, iTunes and Facebook vie for the streaming and download business.

Can Yahoo Be Fixed?

Now that Carol Bartz is out, the important question becomes what can be done with Yahoo?

Don't get me wrong - Yahoo has some amazing assets. Yahoo Finance remains the best financial information site on the web and my.yahoo still serves as the startup page for a huge base of users. Their traffic is ridiculous - north of 600 million uniques each month, and they have great assets.

But the company is incredibly unwieldy. While Yahoo is the oldest surviving "new media" company, it's become as oversized as the old media companies it sought to replace. But downsizing Yahoo won't be easy. Sure, it can sell off some assets (like its Alibaba and Yahoo Japan investments) but selling off parts of the core will be very difficult. Yahoo's businesses are intertwined and I don't know that you can break off major parts while retaining their value.

The biggest challenge that size brings is slowness. If you had an important development project to deliver, would you rather have a team of 5 or a team of 100? I'll take the team of 5 smart developers any day. Good software development is tricky. Cutting that team of 100 to 50 doesn't solve the problem.

Yahoo's traffic and content are attractive. But uncovering the value of those assets will be a huge challenge and I don't know who would have the magic to unlock it.

 

 

 

 

Hewlett Packard's Massive Tablet Fail

There have been no shortage of studies of how Bill Hewlett and David Packard, working out of a garage, built a great company that helped make Silicon Valley what it is today. And in the years to come, there will be no shortage of studies of how former HP (HPQ) CEO Mark Hurd destroyed shareholder value and ripped apart that once-great company.

Today's news that HP would look to spin off its PC business, while shuttering its Palm and tablet division was predictable. Yet the sad part is that HP was positioned to succeed in tablets, but they followed the wrong strategy.

It's clear that HP totally misunderstood the market. They looked at the iPad from a technical perspective - features and capabilities - without understanding the emotional response that Apple products generate. No one will buy an iPad wannabe that's priced $100 less than the original.It's why you don't see *skips* priced $5 less than a pair of Nike Air Jordans. In reviewing their marketing site, the biggest advantage they pitch is better multitasking than the iPad. Seriously?

There were three ways to get tablet market share, and HP chose to follow none of them. As I see it, the options were:

1) Be super-low cost. This is a tough one, as it costs HP (and anyone else) more to create a tablet than Apple pays, due to the volume Apple is selling and that it has locked up agreements with the big suppliers. Yet, if HP really wanted to go after the consumer market, they could have subsidized the purchases by pricing their tablets at $249, half the price of an iPad. They might have lost $250m per year for a few years, but they could have bought their way into the market. This would not have been my preferred approach, but it would have worked and been less costly than the current writedowns.

2) Innovate. Another way to gain market share is to do something truly innovative. This would be a big challenge, in that much of the innovation around the iPad comes from the ecosystem of developers. There's a big iOS development community and a growing one for Android, but nothing there for WebOS. But, there are always things you could do. What if HP struck a deal with a movie studio to push releases out to the Touchpad before they were on DVD? I think this would have been the toughest course for them to take, as it would have to be a game-changer to draw an audience away from Apple.

3) Focus on a different market segment. This is the strategy that I believe HP should have pursued. There are a number of b2b opportunities for tablets that are not being fulfilled by Apple or Android devices. In particular, I'd start with the medical community. I've no doubt that in a few years, all nurses and doctors will use tablets to capture and maintain patient data. But with HIPAA privacy laws, an open platform like the iPad wouldn't work. HP, meanwhile, has deep relationships with hospitals and health care organizations who use its servers and software for various applications. It would have been easy for HP to go after that segment. Other interesting segments could be legal, government, aerospace, etc, where specialized needs and high security are critical. HP was better positioned than any other vendor to take that market and they instead tried to beat Apple head-to-head.

Building great products is important. But more important is understanding your markets and choosing to go after segments you can win. HP has clearly failed.

 

 

Being Digital First

The Guardian Media Group yesterday announced its intent to go Digital First. Editor-in-chief Alan Rusbridger told staff that they would need to “move beyond the newspaper, shifting focus, effort and investment towards digital, because that is our future".

The Guardian makes this move from a position of strength. Despite a financial loss of £33m, they are among the only newspapers to have seen their print circulation rise in the past year. Of course, GMG have been among the leaders in embracing digital openness and the web for a long time. While others have set their strategies around digital barriers, the Guardian were pioneers in the move to digital. In 2006, they announced a “web-first” service, where news was posted online prior to the print edition. While that hardly sounds shocking today, they were the first UK newspaper to do so.

It’s clear that newspapers are starting to divide themselves into one of three business models:

1. Gated
2. Metered
3. Open

The Times of London and NY Newsday are probably the best examples of the gated model. The strategy for this model is clear – protect the core business. In the case of the Times of London, the focus is on staving off the erosion of the print product. For Newsday, it’s a mixed strategy. Slowing the print decline is certainly part of the equation, but by providing free access to Cablevision subscribers, they are also using Newsday as a loss-leader to hinder competition from Verizon.

The Metered approach is gaining the greatest attention, with the New York Times and, to some extent, the FT adopting this model. For the Times, the model is pretty clear. They want to remain digitally relevant, but hope to add value to print subscribers and generate digital subscription revenue from their most active users. To strike this balance, the Times has put up a fairly porous pay wall, where users can avoid the meter via Google’s “first click free” and use of social links. My guess is that the strategy will do more to slow print erosion than generate digital-only subs, but time will tell.

While technically a metered approach, the FT model is quite different from the NY Times. Originally, unregistered users could get 3 clicks per month, while registered users could view 30 pages. Over time, that has been cut back where unregistered users get a single click and registered users only 10 clicks per month. Social media links are treated no differently, so there are no easy ways to bypass the wall. Of course, for the FT, which is largely a b2b product, the drivers are very different. A primary goal for the FT are to protect the enterprise sales that they make to large financial institutions and corporations. That’s their core business and they are aggressively looking to protect that.

So, what is meant by open?

Open encompasses more than simply an online access strategy. Yes, it starts with full and complete access to the guardian.co.uk website. But openness goes way beyond that. It encompasses their open platform, which includes free access to their content API, encouraging customers and partners to integrate their content. For partners, the Guardian also provides a MicroApp Framework, which allows partners to add functionality and content directly on the Guardian website.

But openness is more than just a technological framework. It’s a mindset that drives all decision making. And that mindset seems to be that if there is a way to make their content and tools more useful to their audience, they should do so, even if there is risk to an existing business.

Your business model drives your level of innovation. If everything is centered around protecting the print business (as in the gated approach), innovation is snuffed out. Every decision is made through the lens of “will this help us retain our print readers?”

Which brings us to Digital First.

More than anything, I believe that too is a mindset for decision making. The Journal Register Company adopted a digital first approach last year. According to CEO John Paton,

our Digital First transition strategy is centered on the cost- effective creation of content and sales and not the legacy modes of production.

Journal Register set a goal of removing themselves from any process not focused on their “core competencies of content creation and the selling of our audience to advertisers.” Paton adds that “To be in the news business now means you must run your business as Digital First.  And that means Print Last.”

Digital First is much more than simply creating an iPad or iPhone app. The market is changing every day and it’s not enough to have a website and a phone app. Today’s publishers must be prepared to publish to n-devices. Today, that may be web, iPad, iPhone and Android. But it’s also Facebook; and Chrome; and Flipboard; and the 10 partner sites where you may be able to reach new audiences. And tomorrow will bring dozens of new platforms and devices and more opportunities to connect with your audience.

Being Digital First means a commitment to creating the infrastructure and the mindset to be able to easily deliver content to n-platforms, in each case optimized towards creating the best possible user experience for your audience. And it means doing so nimbly, so you can explore new platforms and create exciting new opportunities for advertisers and partners.

The Guardian have embraced mobile. While their website is free, they charge a nominal fee (£3.99 per year) for their iPhone app. According to their latest statistics, the Guardian iPhone app has had more than 400k downloads, with an impressive 17% conversion rate. Mobile now accounts for 10% of their web traffic. That iPhone-centric strategy has served them well until now, but in moving to a Digital First world, the will have to embrace a multi-platform, multi-device strategy.

While many publishers have taken the ostrich approach, the Guardian Media Group have shown an understanding of where the media business is heading and a willingness to take the risks necessary to get there. I look forward to watching their transition to Digital First.

 

Cisco Kills Flip: There's an App for That

The Flip camera came on the scene with a bang a few years ago, but now is disappearing with barely a whimper. The easy answer might be that it's been pushed aside by iPhones and iPods, but I think that's only part of the reason.

The Flip was always destined to be a niche product. It's core strength was it's simple  interface - while traditional camcorders were feature-packed, Flip was designed for simplicity. Initially conceived as a disposable video camera to be sold at drug and convenience stores, the Flip was the perfect choice for kids, moms or grandparents, not the gadget-focused crowd. With two buttons, limited zoom, and a pop-out USB connector, it was the easiest way to capture video and post it to YouTube.

Cisco acquired Flip creator Pure Digital two years ago for nearly $600m, a deal that didn't make sense to me at the time. It was positioned as a way for Cisco to penetrate the consumer market, but was never something they could integrate with the rest of their business. In theory, anything that drove more consumption of video would be good for the core router business, but that seemed a stretch.

So what happened?

Cisco added little value to the Flip, post-acquisition. Sure, there were deeper pockets funding advertising and distribution, but little else. It would seem that a consumer product company might have been able to drive adoption more effectively.

Any cheap digicam can now produce video comparable to that of the Flip. More importantly, so can many phones. While kids were an attractive target in 2009, today the iPod Touch has become ubiquitous, so there is less need for a dedicated video camera. Gaming devices like the Nintendo DSi have cameras as well, further eroding the market. Meanwhile, the consumer products companies joined the fray. For her 12th birthday, my daughter wanted not a Flip (though she had used mine many times), but rather the Kodak PlaySport. She has an iPod Touch but wanted this as well. The PlaySport is waterproof and comes in purple. What more could a 12-year-old want?

The sad thing is that the Flip could have survived, albeit as a niche offering. Cisco never effectively communicated the value proposition very well. My Panasonic Lumix uses MTS format, requiring conversion to mpg format before posting. The iPhone 3GS and iPod Touch offer video, of course, but the interface remains limited. By focusing on users, Flip could have provided a diferentiated offering.

The Flip was an innovative product and filled a niche when it first launched. But Cisco was never the right home for it, and with so many products offering video as a feature, it's demise should come as little surprise.

The Folly of Trading on Twitter Sentiment

One sign of the bubble (or, perhaps the pending apocalypse) could be the fact that the so-called Twitter Hedge Fund is oversubscribed by 250%. The Derwent Absolute Return Fund sought to raise $40m, but apparently has commitments of over $100m.

This fact should not come as a huge surprise. The Derwent fund capitalizes on three hot trends:

1. Social media, specifically Twitter
2. Big Data
3. Algorithmic trading

Yet I am convinced that we will later look back at this fund as a prime example of a frothy market and nothing more.

Perhaps the simplest way to see that this fund is selling hype more than anything else is to look at the relative size of the Twitter logo vs. their own branding on their home page.

In fact, the Twitter logo on the Derwent page is more than twice the size of the logo on Twitter's own home page. That's no accident. Clearly, they are appealing to investors who want to get "in on Twitter" whatever that may mean.

Anyone who has done any extensive text analytics can tell you how sentiment analysis remains far from an exact science.

At its best, using professionally authored content, the best statistical models for sentiment generate results in the 70-80% range. But even those are questionable. As an example, let's look at a NYT article announcing the recent news that AT&T would acquire T-Mobile.

What's the sentiment of that story?

Well, as I read it, it's largely positive for AT&T and for Deutsche Telekom (parent of T-Mobile), neutral for Verizon, negative for Sprint, positive for Wall Street investment banks and largely negative, though with some positives, for mobile consumers.Of course, a sentiment engine will assign it a somewhat meaningless score - perhaps it's 0.5777234 positive.

Now, that's with "professionally authored" content. So let's take a look at some tweets around the deal. Using Topsy (which searches the Twitter archive), I looked at tweets from March 20-21 that mention both AT&T and T-Mobile.

The results were mostly just news headlines, rewritten or retweeted, like these:

There were a few ironic or humorous comments, of course, like this one:

I'd rate that as a negative sentiment about AT&T, but not specifically about this deal. Regardless, I doubt that the sentiment engine would parse the irony well.

Beyond the difficulty of assigning sentiment to tweets, there's a much bigger issue at play. If you look at the patterns of tweets what you find is that most are reactive rather than proactive. An event occurs, the news media puts out a story, then many others RT that story. That may be an effective way to share news and information among the masses, but from an algo standpoint I'm less convinced. Traders trade the story when it first hits (or, as the axiom goes, they buy the rumor then sell the news). Twitter sentiment is likely to be a lagging indicator, at least in the real-time world of algo trading.

I understand that the investment strategies are based on research, like this paper by researchers at Indiana University, but it's not that difficult to draw correlations when backtesting with almost any set of data. I'm pretty sure that we will look back at this as one more data point for the tech bubble.

 

 

Openness and Flexibility: the Future of Book Publishing

Last Thursday I participated in BISG Next, a one-day workshop/conference by the Book Industry Study Group. Since I’ve spent most of my career on the digital media side, I found it a fascinating look at the changes facing the traditional book publishing industry.

The BISG represent many of the more forward-thinking people in the book industry. If the first step in solving a problem is admitting you have a problem, then BISG participants were well on their way through that step. That said, I also saw that many of the participants felt that the way to solve the problem was by using the same tools and skills they’d used in the past, which I don’t think is a realistic option.

The program was a set up as a one-day problem-solving workshop. Teams were created to assist a theoretical publisher in setting their strategy to take them through the year 2020 in four areas:

1. Identifying the customer & core business
2. Mobile strategy
3. Content strategy
4. Making content discoverable

What was most promising about the process was that the participants seemed to embrace things that may have been anathema to them just a few years ago. Some of the key themes that emerged were community, new business models (including free), increased verticalization, a customer-centric approach (including a focus on analytics and data exhaust), open, extensible platforms and a need to become agile.

I was on one of the two teams looking at mobile strategy. Our team took a broad-based view of mobile, first deciding that a flexible and open platform would be required. We started with a few core assumptions:

• Success in mobile meant that we would need to open up our content to others; it would be arrogant to assume that we alone would build the most compelling apps for our content;
• We should embrace the idea of writable APIs. The publisher in our exercise had books on musicians and technology,  as well as textbooks; any of these could be augmented by allowing others to add content (concert video or audio, author presentations, teacher lesson plans);
• We would seek to partner with market leaders wherever feasible. Today that might include apps like Instagram or a wiki like setlist.fm;
• A major role for the publisher going forward would be in the curation and organization of other people's content;
• Especially in those segments where we served an enthusiast audience (particularly music) we would look to engage with a community, both by building social features into the platform and through participation in existing external platforms (e.g. Facebook, MySpace and whatever may follow).

I think our team put forth a compelling vision and plan, but we were far from unanimity. Openness and ceding control are not values that come easily to an industry where editors have often had total control over their product.

And therein lay the biggest challenge. While most of the people in the room acknowledged the need for rapid change, there was near unanimity that the existing staff would be best-positioned to fill these new roles. In our group, there was much talk of how a book Editor would be able to curate community content and how those with the existing domain knowledge would be best positioned to build great new apps. While I’ve no doubt that people in those roles could make significant contributions as part of a team, the centralized editorial power that led to success in traditional book publishing is a very different approach than the team-based, user-centric sharing model which they will need to embrace going forward.

That said, I was most pleased in the ending discussion, where many people in the group raised the issue of whether these plans were being too conservative. Of course, it’s easier to rip apart someone else’s (theoretical) publishing business than to jettison or revamp parts of your own, but this was a promising discussion.

I’d like to thank the BISG for inviting me to participate in this event.