Newspapers are in the connecting people business

Speech given by Norbert Specker at Bocconi University, Milano, April 1998. Starts with a look at the situation of online publishing at the time and ends with a statement about the newspaper as a social network

Part I
On Business Models, Revenue Sources and Multiple Platform Publishing

Let us look at a couple of examples where it looks as if the same business model has been applied - and yet has not enjoyed the same success.

The Daily Me

Five years ago Todd Chronis was travelling the world with a mission: "News in Motion" was the project. It aspired to deliver a sort of "Daily Me", an individualized newspaper that was a a conglomerate of different sources, form the New York Times to the Washington Post. It had the cartoon from the LATimes, the technology column from the Star Tribune and you could even add the financial reporting from Le Monde.

The newspapers were interested. But it never flew.

Yahoo offers a personalized version for all sorts of information. It is called "My Yahoo" and is available after a rather extensive subscription process. It is free in exchange for a range of personal information. The goal being of course, to offer you not only personalized information, but also personalized advertising.

The service is highly successful.

Alliances

1995, Peter Winter, then CEO of the New Century Network, a powerful alliance of newspapers accross the USA, presented a convincing model. The model is called "aggregating eye-balls". The more people look at your site, the easier it will be to sell it to the advertisers. If we can leverage the strengths of the newspapers in this partnership and cross-reference visitors to our partnersites, we will win this game.

In March 1998, the consortium declared failure because of disability to match goals.

In 1997 four of the five biggest publishers in Switzerland decided that only together could they fence off the online competition. They formed a company by the name of "PressWeb". Only half a year later they launched a classified service with over 60000 classifieds at any given time - and they estimate to be profitable by the end of 1998. This publishers' alliance will make it very hard for any third party to enter the Swiss classified market.

It is a successful alliance.

So what makes one approach successful and the other not? Even though they look the same?

Business Models

It is the old problem with business models. The parameters are always different. Business plans, money involved, circumstances, marketing plans, people involved, support secured, customer base. And more often than not: timing. And in each case it would be a very specific, unique set of conditions that would best be presented by somebody directly involved.

But much more important is the fact that we are still in an evolving market and not for a moment do I believe what we see today on the Net is what will still be there in five years.

Let us take a step back and look at the revenue sources that have been identified so far and are approached by the newspapers that are online today.

Revenue Sources

Roughly four categories:

1. Advertising/Sponsoring/Classifieds
2. Subscription
3. Transactional
4. Access/Distribution

Advertising/Sponsoring/Classifieds

Rate Cards based on Cost per Thousand (Majority)

Click Through (not liked much but done occasionally)

Filter-based-Pricing (5% for each criteria, New York Times, Chris Neimeth) For example: only males, only in New York, younger than 30 would add 15%

Portfolio-Advertising (across different online products for a specific target group) (Gruner+Jahr, Stan Sugarman; sugarman.stan@guj.de)

Sponsored Websites (Eurosoccer, The Guardian or Worldmedia with the world cup cafe/Bertrand Pecquerie; b.pecquerie@worldmedia.fdn.fr)

Sponsored pages/areas on the website (Wall Street Journal among others)

Classifieds
- raise print price and automatically put the ad on the web
- opt-out option (only if you chose to be present on the web do you pay)

Subscription

Wall Street Journal with 160000 and more paying subcribers is the shining example but still an exception. And it looks it will stay an exception for a while among newspapers. Unpaid subscription has been applied often and is a sensible data gathering move

Transaction

Little evidence of this being a major revenue stream. Touches strongly on the issue of keeping advertising and editorial separated. Still, USA Today claims more than 30% of revenue generated through a marketplace, offering deals with 35 partners.
Also the New York Times gets a cut on the books it sells through its site from Barnes&Noble.

Access/Distribution/Websitebuilding

Is offered by quite a few local newspapers. Seems to be a valable starting point done with conviction (StarNet; Bob Cauthorn; bcauthorn@azstarnet.com)

Multiple Revenue Models

Almost without exception every online newspaper has learned to not rely on one revenue source alone, but to mix the different possibilities to create a money stream - or in most cases a money trickle. The ultimate role model has not yet evolved - and most likely never will.
For one thing, many of those revenue sources are already under threat. Even Shell sells advertising on it's site. About clasifieds we will talk later but it does not look good there either.
The access business is under so much pressure that it will not be interesting for much longer and so forth. New sources permanently have to be found and will have to be found for quite some time to come.

Multiple Platform Publishing

A range of additional revenue sources has been opened by newspapers who have fulfilled the prerequisite for an old battle cry in the industry "Reformat, Repackage, Resell", - the prerequisite being that you can easily repurpose the content you have created for the newspaper.
The Web is then just one platform option. Others are for example CD-ROMs (successfully sold by Neue Zürcher Zeitung, FAZ or Uitgeversbedrijf Tijd), Telephone Displays (Time Out together with Ericsson) or Pager (StarNet). Traditionally newspapers that have sold their content via database services like Genios for years are much further in this respect than others.
And many internet strategies in newspapers face their first biggest hurdle in reorganizing their production and database tool and migrating them into an open standard. For how can you create with a mill stone of legacy systems around your neck?

Where is the Meat?

Between 1994 and 1996 the single most often posed question after any presentation to do with online newspapers was "when will you make money?"

1997 in Zurich, this question was not posed once.

This has to do with the realization (not everywhere yet unfortunately), that the Internet is not just another way to produce a newspaper. But rather a totally different business. A new business. And that the most important thing at the moment is to get the company into a position where it can eventually earn money.

Let me pick the elements that I think we can use independently of national cultures and money (most successful offers on the Internet are not successful because they have a lot of money in the back. Not to start with anyway) to sketch the areas that need a lot of care if a newspaper wants to become successful in this area.


Part II
The Net is what newspapers are not. A selection of challenges and a couple of remedies. Fully aware of the fact that change is slow and hurtful

The Internet is what a newspaper is not

Because the traditional structure of a newspaper hinders growth in this new field.

A few challenges:

The newspaper business is built on scarcity (only a few have a printing press, access to information and the dirstribution channels)
-
but the net is built on abundance (you have way too much of almost everything)

Newspapers are strictly organized along a hierarchy
-
The net is team oriented

Newspapers don't reinvent themselves anymore. They are a mature product. Profitabilty stems from streamlining the existing production process, not from innovation.
-
the net thrives on change and innovation

Newspapers live on serving people
-
the Net lives on connecting people

It is because of this so different approach that probably newspapers online are not where they should be. Or else, why are newspapers who were some of the first industries to get themselves involved in online services not playing a more important role in this field?

Why has not one newspaper managed to create something like Yahoo?

The Internet is not a mass medium

I would like to share with you, why I think it is not a sustainable approach to look at the Internet as a mass medium and why I think the most important elements in creating a successful online media site is attitude (of the management) and a care for people. Either you form a separate company with the right attitude and the right people - which many have done - or you change your organizational structure to create a company that is ready for this "Network Economy".

Attitude

To illustrate why attitude is important let us start with defining "success" in a world that has little to do with the traditional newspaper world. How do you measure the success of your online venture?

Of course there are the "hard" factors:
Return on Investment, Growth of Advertising Sales etc.

But how about the "soft" factors:
How do you measure success in things like developing new alliances?
How do you measure success in accessing the knowledge of the people in your organization you never knew was there (through the use of the Intranet and the help of a knowledge manager)?
What is the time-frame? Is success only if your website is profitable in 24 months? Or does it count that you gave your company the initial kick to change into an innovative organization?
What is more important: Website traffic or the depth of the relationship with your customers? How do you measure the quality of your online relationship?

Straddle vs. Fosbury

You have to change your technique.

When for years people had done highjumping in the "Straddle" technique, there came a time, when it just wouldn't go higher anymore. People had reached their limit.

Along came a guy who decided there was nothing to prevent him from jumping with his back to the bar. Not only did he win the Gold medal at the Olympics, he also took highjumping into another sphere.

So each newspaper has to find its own Fosbury Flop. Preferrably without it being a flop.

How do you change the technique?

This for most companies is a long and hurtful process. Nobody likes change per se. Interestingly enough companies see that getting involved in the Internet has a huge change potential by itself.

It is one of the astounding facets of this structural change from a hierarchical mind set to a networked mind set: only in the beginning does a company chose to "go on the net". Once the network structure has it's grip on the company, a company can not go back. It has to change.

In that a company is much like man of whom O. W. Holmes said

Man's mind,
stretched to
a new idea
never goes back
to its original
dimension


But just going from the experience with many internet site developments I would offer two key elements:

Internet is a strategic issue. It has to be dealt with as such and demands high involvement on the management level. For it will change the company.

No Internet site without a mission statement.


Part III
Newspapers are in the Connecting People Business

About people - and about connecting them

The "BRAVO" birthday party started on a Saturday at lunch. Our around 60 guests were wildly mixed into small groups of 4 and a car. Then - to their surprise - they were given a range of organizational task to be creatively solved until evening (food, drinks, music, entertainment).

It fulfilled our vison: It is our party, so on the day of the party we didn't want to have to do any work. We wanted to enjoy it.

More important: Before the party ever started our guests had shared the common experience of doing everything needed for this party.

We provided little "BRAVO" stickers while we watched them set up and enjoyed how they enjoyed themselves.

Why was this the best party most of the people there ever went to?

Because it was not our party, it was theirs. What we achieved was: we connected people with each other. Online publishing is about holding parties.

"The trouble for newspapers is, that they think of people as groups, when people want to be thought of as individuals"
Jean Gaddy Wilson, Director, New Directions For News

The killer application is E-Mail - but why?

People want to be thought of as individuals, because connected to the net, that is exactly how they behave.

Since 1994, when first the Internet started to become an issue in media houses, we have always been aware of the fact, that most of the traffic on the Networks is produced by E-Mail-Messages. Talking to Vin Crosbie (crosbie@well.com) who is an E-Mail crack I learned that the daily volume can not be measured any more but that estimations are around 5 thousand million E-mail-Messages per day at the moment.

Newspaper have been aware of this, but hardly any of them tried to understand what that really means and how a newspaper could capitalize on that.

Others did: Hotmail (www.hotmail.com) for example, who provides e-mail addresses for people, whether they have their own computer or access the mail through an internet cafe (HotMail was bought for 45 Mio. $ by Microsoft having 2 Mio. subscribers). And of course also Yahoo, the most visited site on the Net, offers this feature.

Because providing this service is connecting people with each other.

Classifieds are extremly important

Because they are an important revenue stream.

Because so many other internet companies are trying to get them (Yahoo = 45 Mio. Pageviews on classifieds in February. All US newspapers together = 30 Mio., Microsofts CarPoint etc.) away from the newspapers.

But mainly: Because they connect people with each other

Classifieds fulfill a basic connection need. Everybody has to buy or sell something, wants to rent or rent out, looks for somebody or wants to be found by somebody.

Classifieds are an excellent connecting tool.

Newspapers are in the "Connecting People Business"

Nobody probably ever researched how many people a normal newspaper connects with each other:

First it is the connection through things that both parties read. Like TV it happens less and less that you can be sure that the other person has seen or read the same thing as you. But if the person does, it is a very popular way to connect. So if you are newspaper of say 100000 circulation, how many people do you think talk with each other about what you wrote?

Then there are the normal advertisments. Advertisers put them into the newspaper, because they hope it will help to connect the readers with their product. How many of your 100000 readers see an ad for a special sale - for example - and go and connect to the company and the people working in that shop?

Thirdly the classifieds. With jobs, cars, houses, dating and the many other areas of classifieds. How many people per ad connect to the person who put the ad in? And how many scan through something that is not newspaper owned content, but content that comes from the people?

So these are hidden numbers. We don't know. But I would presume that the more connections between people a newspaper enables, the stronger is its commercial base.

It is my strong belief, that a newspaper that realizes that its prime strengths lie in connecting not only information with context but also people with each other, will come up with exactly the right strategy for the Internet.

Three steps

First you produce a newspaper. That is basically a one-way affair.

Then you start to become interactive - you give people the chance to talk back to you and you use that feedback to make your product better and to build a relationship with this person.

And lastly you try to make it very easy for those people to also connect with each other. You try to become the virtual town square.

How could this be done?

Free E-Mail account

One example I have already mentioned. It is giving a free e-mail account to all your readers. Look on how it is done on hotmail. It allows your readers to be reached through E-mail without having to go to the trouble at the moment of hooking themselves up. People do not like to change e-mail addresses once their friends know what it is. And having an e-mail address makes them "connectable".

Buddy List

Another feature I would look at would be the buddy list. What it does is that it tells you, who of your friends are online. So I log on the Internet and I see that Robin Hunt in London and Monique van Dusseldorp in Amsterdam are online too. It is a little pop-up window with the names of the people I arranged to be on the buddy list with. Beside Robin and beside Monique is a little coloured dot. So I drop them a line right away and they will answer back right away. It becomes like chat. The site to look at on how it is done is : icq = I seek you. Great feature to connect people with each other.

Feedback

This has been discussed often. Journalists do not like to talk to their readers. Because their job is writing - not relationship building. So if at the end of an article on the Internet there is a feedback button so people can write back to this journalist, it might happen that this journalist gets a lot of e-mails he or she has to answer. So either you have this labeled as part of the job and you allow some time for it - or you do not have a feedback button. Which of course is extremely against all we just said. A third possibility would be, to make the journalist just the moderator of his own list. That means that people write their comments and everybody else can see it and react to it. It helps people to connect with each other and reduces the workload on the journalist.

Obituaries

One of the many things people use the Internet for is to find a way to deal with the loss of somebody. People put sites up for the people they loved. They can do so much more than in an advertisment. Pictures, poems, comments of other people. Many do it for their pets as well.
The difference is: Tomorrow it is still there and it changes over time as people learn to live with the loss, as they get encouragment, as time goes by.
I do not think this is a cynical proposition. It helps people through connecting them with eachother.

Dating

Now we talk of love. Of people who are looking for someone or want to be found by someone. 96 of the top 100 newspapers in the States offer "voice personals", dating services by telephone. Online this works much better. You can offer people all kinds of help to find a matching partner. Sometimes only for a tennis match. Or vacation. Or more.

Because the entries are textbased you can add sophisticated mapping software. An example to look at here is Star Tribune in the section Get Acquainted.
A dating service is about connecting people with each other.

Advertisers

Somebody said that in the newspaper business if you signed on an advertiser, the job is done.
If you sign on an advertiser online, the work just starts.
Why? Because you want to offer this advertiser a very good treatment. You want for example to help him get connected to people very well. Maybe you make a little book review contest to tie him in better to the site if it is a bookshop. Maybe you offer to do very cheaply one of five standard websites for him. Maybe create a little mall, a shortlist of your advertisers and on and on.

Send this to....

C/NET has a nice feature that allows people to connect your content and themselves with other people. You push a button, enter the e-mail address of the person you want to send the particular article to, and off it goes.

Relationship Building

Nancy Malitz of the Detroit News last fall made a nice list of links to relationsship building applications. It can be found on the conference site
It offers a range of ideas for competitions such as having people do the last caption in a cartoon or doing funny comments on pictures. Offering a "Greeting Card" service is also a great way to connect people with each other. A nice little tip she offered was that it is much better to do a poll (I agree/do not agree) first and then ask people "why?". This creates stronger reader feedback. It is altogether a very helpful list, so I urge you to look at it if you want to learn more about the "connecting people business".

Be Prepared

What would you do if something major happened in your region? Like the earthquake this winter in Italy. When their was the earthquake in Los Angeles, people used the newspaper site to find out about their relatives. It became a people connecting place. You want to be able to provide this service too.

These are just a few of the many possibilities. You will come up with even better ones when you think about how you can connect people from where you are at.

Conclusion: More gives more

Wired's Kevin Kelly used the fax example to show how in a networked world the sum of the network increases as the square of the number of members.

The first fax machine was virtually worthless. The second one gave the first one some value, because now it could communicate with another fax machine. With every additional fax machine the number of possible connections increased exponentially. And therefore increased the value of the whole network of faxmachines.

Don't think fax machines for a moment. Think people.

If you help people to connect with each other the value of the network around your site will grow exponentially. Newspaper are in the "Connecting People Business" as well as in the "Connecting Information with Context Business". And for the online world, this former qualification becomes extremly important. I say this even though I have Nils Bohr's bonmot in my ear.

"Predictions are difficult, especially for the future"