Pipeline Report November 2011

The Pipeline Report Incisive Analysis of Emerging Trends in Financial and Media Technologies November 2011 The New News Metaphor Part 1: Changes in News ConsumptionThis edition of the Pipeline Report examines emerging trends in news consumption, andsome of the underlying journalism technologies driving those changes. Changes toconsumption will, in turn, change news production and news distribution. Changes to newsproduction and distribution, will define competitive advantages in the new metaphor. Theseare discussed in part 2 of the New News Metaphor.The changes are more profound than merely delivering articles online versus in print.Online distribution is the tip of the iceberg: an emerging scaffolding of underlyingtechnology will transform the entire news experience. Unfortunately, most newsorganizations are oblivious to the shifting sands and will miss the transition.The evisceration of the news business model is hardly news. Regrettably many newsorganizations still grapple with old behaviors and obsolete business models, is if they are liferings on the Titanic. Although legacy news organizations may survive the sinking of theship, many will perish in the frigid temperatures of new competition. Regrettably, mostnews organizations continue to execute tactical responses to a strategic problem.What’s going on here?The traditional barriers to entry are gone. News organizations have relied on geographyand distribution to thwart competition. Now Geography and distribution are irrelevant. Newbarriers are emerging. These will define the next generation of winners and losers—and thewinners will have radically lower production costs.BIG BOYS DON’T CRYExhibit 1 is Craigslist, an online service (reportedly with fewer than fifty employees) thathas obliterated the newspaper classified ad business. For the past century, the classified adbusiness became an annuity stream and publishers made the mistake of considering it anentitlement. Craigslist changed the entire value-proposition and business model in undertwo years. They offer a free service (for most types of classified lists) with instantpublishing of ads. Craigslist’s cost structure is infinitesimal compared to its legacynewspaper competitors.Exhibit 2 is traditional news distribution, as exemplified by the experience of the DetroitFree Press. Traditionally, news organizations relied on geographical barriers to entry.

Plants and distribution systems were too expensive and difficult to replicate. Several yearsago, the Detroit Free Press reduced its physical newspaper distribution from seven days aweek down to three days per week. With seven day distribution, its delivery trucks werelogging three hundred and seventy nine thousand miles per week. With most ofDetroit’s home broadband accessible, the Detroit Free Press distribution network is a costimpediment, not a competitive advantage.The cost/benefit of continuing with seven day distribution no longer worked, especially whenthe Detroit Free Press was competing with news organizations with zero marginaldistribution costs. To its credit, the Detroit Free Press has developed a hybrid distributionmodel: physical newspapers on Thursday, Friday, and Sunday—the heaviest advertisingdays—and online news all seven days.FROM OLIGOPOLY TO NEAR PERFECT COMPETITIONWoody Allen supposedly once said, “80% of life is showing up.” Similarly, in days past,just delivering the news was sufficient. Organizations that enjoy a monopoly are not forcedto compete—and often become complacent, bureaucratic, and uninspired: witness the PostOffice.However, it is unfair to say that newsprint organizations have enjoyed a monopoly. Foryears at a minimum they have competed with radio and television. However, it is fair tosay with the ability of anyone around the globe to deliver basic news, the newspaperbusiness model is blown to bits—quite literally. Publishers need to stop conceiving theirbusiness as delivering newspapers, and to start thinking of it in terms of delivering news.News is the common denominator. The newspaper is becoming the obsolete container ofnews.FROM INFOSCARCITY TO INFOBESITYMore problematic, many news organizations continue to embrace the concept of scarcity:column inches in newspapers, sixty minute time slots in broadcast, and the like. News is nolonger constrained by its container.These restrictions no longer exist—the concept is irrelevant. Viewers no longer have towatch 60 Minutes in the sixty minutes from 7PM to 8PM on Sundays. 60 Minutes is aninteresting example because its differentiation based on its editorial quality and its brandallows it to escape its legacy container. Viewers can see 60 Minutes twenty four hours aday on TV, online, on mobile.Brand and differentiation—through editorial quality—are factors that provide competitiveadvantage in the new news metaphor. (More on that topic will be covered in the nextedition of the Pipeline Report.)

COLLAPSE OF THE DUAL MARKETFinally—and this is the death knell of the old business models: the capture of a dualmarket. In the old model, news organizations controlled the public’s access to currentevents. Concurrently, the news organization controlled advertiser’s access to audience.This is known as a dual market, and it was a sweet deal while it lasted.It is no mistake that Warren Buffett invested in the Washington Post and bought the BuffaloNews. The economics of this model were salivating, especially because newspapersenormous pricing power on both ends. Well folks, the gig’s up.THE NEW ADVERTISING ECOSYSTEMWhen the paradigm shifts from infoscarcity to infobesity, news organizations no longercontrol the public’s access to news or the advertiser’s access to audience. Advertising spaceis no longer at a premium; in fact, it has commoditized.More troubling is that publishers have lost control of their advertisers. With more venuesand channels (online, mobile, tablet etc.), advertisers have a kaleidoscope of options.In the old metaphor, the scarcity of column inches drove market-based pricing and gavepublishers enormous pricing power. Everyone clamored for the upper right corner of pageA3 of the New York Times, but Tiffany got it—and paid dearly for the privilege.In the new metaphor, advertising is value based. Furthermore response-based printadvertising is no longer cost effective because it lacks the daunting analytics infrastructuresitting behind online.Advertisers no longer have to pinch their noses and pray the ad works. With online theyobtain real time feedback, based on a rich underlying ecosystem that lurks beneath thesurface like sharks circling the Titanic.Absent potential privacy laws and regulations, advertisers are able to track readerbehaviors, tastes, and preferences with Orwellian glee. Location-based information onmobile devices only embellishes the horror story. If on online reader knew what advertisersknow about him, he would look like the character in Edvard Munch’s famous painting TheScream.The guru of the advertising analytics is Terence Kawaja, founder of Luma Partners, astrategic advisory firm. With crystal clarity Kawaja has gone to great lengths to explain thisdizzying and ever evolving ecosystem. Pipeline Report readers may want to review hisonline presentation, the SCIENCE-ification of Media here, and review his on DisplayAdvertisng Technology Landscape, a veritable Rosetta stone here.

The world of online advertising is complex, replete with rich analytics, benefiting advertisersand driving them to increasing cost efficiency in their advertising spend. For printpublishers to thwart this new reality is as futile as deploying the cavalry to defeat incominglaser guided missiles.Smart publishers are embracing—not fighting—these changes.A NEW EXPERIENCE FOR NEWS CONSUMERSWith a flood of information crashing through the doors, what’s a person to do? The delugebursts through our Google Readers, our cell phones, our tablets, news screens in elevatorsand at grocery stores, and via the ubiquitous TVs at chain restaurants with the continuousfeed of info-babble competing with ever-present music throbbing in the background.Do we really need to read all 88,731 articles on the Bernie Madoff trial? Probably not.A new set of journalism technologies will change news consumption and news habits. Thesetechnologies will reshape reader experiences and change behavior and economics of newsconsumption.In the old metaphor, the constraint was column inches. In the new metaphor, theconstraint is reader attention span. When column inches becomes infinite, and the barriersto news distribution collapse, where does value migrate?TAMING THE BEASTWhen reader attention span becomes the constraint, relevancy becomes the coinof the realm. Applications that surface relevant content and filter flotsam become onebasis for building competitive advantage. What are these applications and where will theyemerge? That is not clear. Here are some thoughts.One potential application is what we call News 360, giving a reader a three hundred andsixty degree view on a news story, and then enabling drill-down based on various facets.One reader reading an article on Oracle Corporation may be interested in learning moreabout emerging database technologies, while another reading the same article may beinterested in tech mergers and acquisitions. Providing faceted, drill-downs, and a variety ofstory views is one potential application.Another is story rollback, the news story equivalent of video rewind. For instance, a storyabout the Japanese government changing is energy policy for nuclear power plants might bethe subject of the day. But how did we get there? Story roll-back will rewind to the storyso readers can see how it developed. This capability could be especially interesting for

national political elections to see how candidates have changed their tune during thecampaign.A third potential area is grafting news onto the social networking stream. A number oftablet applications have recently emerged in this niche: Flipboard, Feedly, Pulse to name afew. These applications rely on a reader’s social graph to define relevancy. Is that goingto be the catalyst for the new metaphor? The Financial Times recently ran an articleregarding Facebook’s impact on news sharing.Will readers use their social networks to filter their news? Is this how news will be splicedinto the social conversation? The answer is not obvious if for no other reason, than peopleplay different roles at different times—a notion their social network may not adequatelyfilter.During the weekend, a reader might be interested in arts, entertainment and sports newsbased on a friends and family. During the week, this same person may be interested inbusiness news based on recommendations from trading partners in the capital markets.How does a single social network reconcile this? The answer is not obvious.We believe that the industry applications will meander for a while before some catalystsemerge. For one, the business models related to new news applications is unclear.In the context of the New News Metaphor, the industry is still building the foundationaltechnology—the underlying infrastructure that will power these systems.Some of the key technologies include:TAGGING AND SEMANTIC EXTRACTIONTags are descriptors (or metadata) that provide insight into the underlying text. A numberof text analytics companies have built engines to provide structure for unstructured text.The most trivial and obvious application is the tag cloud, where the descriptors aredisplayed on a web page that users can click on to uncover the underlying articles.Tag Clouds completely miss the point. The point is the tagging engines now create anunderlying infrastructure of machine readable assets that help applications navigate themorass of online text. With this technology it is possible to build automated applicationsthat bind, differentiate, collate, and curate content.DISAMBIGUATIONDisambiguation, or sometimes called entity resolution, is about uniquely identifyingnamed entities: people, cities, and subjects in news story. The technology has advanced to

the point where the software can definitively identify that one article is about GeorgeHerbert Walker Bush, the forty first President of the US, whereas another article is aboutGeorge Walker Bush, number forty three. Similarly, the technology can distinguish betweenLincoln Continental, the car, and Lincoln, Nebraska, the town. This process is calleddisambiguation or entity resolution.The power of tagging is that it creates machine readable assets. Disambiguation createsthe connective tissue between these assets. Leveraging tagging and disambiguationtechnologies, applications can now connect content with very disparate origins. Today’sarticle on George W. Bush can be automatically linked to an article memo he wrote when heowned the Texas Ranger’s baseball team. Similarly the online bio of Bill Gates can beautomatically tied to his online arrest record in April 1975.LINKED DATA STRUCTURESA related technology is the Linked Data Structure. Linked Data Structures are databases ofuniform resource identifiers or URIs. The database typically holds some content assetsrelated to an entity. For instance, a URI on Barack Obama may contain a reference to hiscurrent position, former position, his marital status, his spouse’s name, his children andtheir names, his education and schools. One of the key attributes of URIs is that thecontent is reusable.The URI Michelle Obama will similarly contain information on her spouse, children, hercollege, graduate school etc. The URI on the Obama’s schools will contain informationabout the school, such as current and past deans. All of this information is aggregated intoa linked data structure.With the ability to automatically extract key entities from articles, turn them into machinereadable assets, disambiguate them, and query a linked data structure, it is now possible tobuild very powerful applications.For instance, it is now possible to build an application to retrieve articles on the SupremeCourt and determine if the article mentions any justices who previously headed a law schoolattended by the wife of the President. In this particular instance, the application couldidentify all articles mentioning Justice Elena Kagan, who ran Harvard Law School, fromwhich Michelle Obama graduated.That example, per se, may be nonsensical, but the power of this technology is surfacehidden correlations. For instance are there any CEOs of government contractors whospouses happen to sit on philanthropic boards along with lawmakers on the House Ways andMeans committee?LINKED DATA CLOUD

The metaphor becomes even more powerful with the federation of Linked Data Structuresinto the Linked Data Cloud. This level of abstraction allows different owners (such asdbPedia, IMDb, the New York Times) to link their data to create a powerful ecosystem.Now federations of partners can combine their collective data assets. The power here is thepower of the network effect.These underlying technologies and the applications that have yet to be built upon them willdrive a completely news-reading metaphor. The applications have not yet emerged, butwill do so over the next few years.NEWS GATHERING AND NEWS DELIVERYIn the next edition of the Pipeline Report, we will discuss how these changes will affect thebusiness of news: news gathering, news production, and news delivery. As a hint, becauseof these emerging foundational technologies, news become far more agile. Newsconsumption will become far less horizontal and far more vertical, as the new newsmetaphor triggers tectonic shifts in the news business. We will also discuss new sources ofcompetitive advantage.About the Pipeline ReportThe Pipeline Report is a periodic report produced by Chris Lamb, a business strategyconsultant in media, financial technology, and web services. Previously he was at ThomsonReuters, in which he stills owns some shares. The opinions expressed herein are his own.To contact Chris, please email him at clambresearch@gmail.comTwitter Feed: @c_lambTo unsubscribe, respond this email with Unsubscribe in the Subject Field.© 2011. Chris Lamb. All Rights Reserved.V04

Pipeline Report November 2011

by clambresearch on Nov 21, 2011

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Pipeline Report November 2011 — Document Transcript