quid.pro

Quid Pro Quo

Marco Arment has a great piece about the whole Twitter xAuth/OAuth thing. This blog is hardly the place to describe the technical issues, but at a high level Twitter is making a change that is going to require a bunch of app developers to jump through hoops in a very short time frame. The app developers are pissed. But Marco (developer of Instapaper and Tumblr) plays the devil’s advocate:

Twitter can do whatever they want.

It’s the simple, brutal truth. Twitter must do what’s best for Twitter. They owe us nothing.

It’s not a public good. It’s not a right. It’s a private, entirely centralized service with no meaningful competition and a massive network-effect barrier to competitive entry. Twitter has all of the power in its relationship with users and developers.

I’ve always believed that business is about the very simple value proposition of the quid pro quo, literally “this for that.” An equal exchange of goods makes for two happy counter parties. Mostly to show off my amazing Latin skills, it was my go to phrase when we launched HotWired back in the early 90’s in the face of criticism that you couldn’t/shouldn’t put advertising on the internet. Our trade was that we were creating all sorts of original content for the new medium of the web and that it was fair to ask our readers to accept advertising in exchange. Needless to say, it worked.

This phrase has been about as close to religion to me as anything and was (not surprisingly) one of the reasons I chose it for the name of this site as well. When a company gives something away for free, it is requesting your attention back in exchange. While not charging may lower the “ask” in return, you still have to give people something they want and plenty of free sites have failed as a result.

Which brings me back to Marco’s post and my complete agreement with his position. Twitter can do whatever it wants, change whatever technical standard it uses and force whatever discipline it wants on its ecosystem. Right now, Twitter has a product that everyone wants to use — in fact, I would argue that for five years the company has given far more than it has received. Twitter is now spending against that deficit and while that might piss people off, it won’t make them leave. Does Twitter have infinite “quid” to spend? Of course, not... no one does and eventually their trade will even out. But until that time, either quit complaining or go build your own sine qua non. 

Michael Arrington, voice of reason

“But the really important thing to remember, as a reader, is that there is no objectivity in journalism. The guys that say they’re objective are just pretending.”

Michael Arrington calls bullshit on his entire industry (and he’s 100% correct). The other quote I almost used — “I have little hope for this industry until the last of the old guard have finally been put down.” — is just as good.

Investing in Byliner

As is no secret to people who know me or read this site (although I’m pretty sure those two cohorts overlap completely), I’m a huge fan of all forms of journalism. It pains me that the web is still trying to figure out how to be a good medium for much of the trade — we’ve spent so much time optimizing for Google that long-form writing (over 10,000 words) just hasn’t found a place. What works great in a magazine (this piece by Neal Stephenson from December 1996 is still my favorite Wired article ever) hasn’t really worked on the web yet.

But now with Amazon Singles and other similar formats being created for ebooks, a new class of web journalism is starting to build led by Byliner. From today’s Mashable:

Byliner’s mission is to produce great stories by great writers, stories that can be read in a single sitting. Byliner Originals, the startup’s digitally published works of nonfiction, are available for $2.99 each as Amazon Singles and are readable on most tablets, ereaders and mobile devices.

Three Cups of Deceit, by esteemed author Jon Krakauer was Byliner’s inaugural story. It proved this unconventional publishing paradigm works. The story, a bonafide instant hit, exposes Three Cups of Tea author and self-professed humanitarian Greg Mortenson as a fraud who lied to his readers and misappropriated millions of dollars in donations for his own personal gain.

By way of disclosure, I invested in the company’s recent funding round. I would update my ethics statement but I have neither ethics nor a statement.

What I liked most about Byliner (besides the great team behind it) is that they are treating this like an editorial product, not a marketplace. They will be assigning stories and editing them — how novel — and have a strong connection with many of the best names in long-form journalism and a great pipeline of stories to come next. Today, they released their second story Into the Forbidden Zone about post-earthquake Japan by William T. Vollmann. The stories hope to be both timely yet timeless.

I hope Byliner is a wildly successful investment. But more importantly, I hope the company helps long-form journalism establish itself on the web. It’s a format we can’t lose.

The Guardian discovers 2006’s business model

I’ve been struggling with this post via today’s I Want Media. It seems the Guardian — usually one of the most forward thinking of newspapers — decided to launch an ad network. Really?

There's a second more commercial possibility, where the Guardian (acting in the fashion of an ad network like Glam Media) maybe able to sell advertising for bloggers’ sites. Again, blog sites continue to host themselves and retain editorial control. However, by forming a network, each site is able to achieve higher advertising rates than they would alone. Anybody who has relied on Google Ad Sense for income will know exactly how disappointing selling ads that way can be.

Isn’t that model dead by now? If you want inventory, you pay for it especially in media and technology, two of the earliest categories to be saturated by the ad networks. If you have a site that hits the Guardian’s criteria (five figures of traffic, presumably monthly?) that isn’t already being monetized, call me too. I’ve got a better pony in that race.

Revenue models — what works, what doesn’t

Two quick stories that nicely summarize how easy it is to understand what revenue models are going to work on the internet for media sites. First, the New York Post discusses how Condé Nast is increasingly making their iPad apps freer:

“...the app traffic fell off dramatically with the second issue, even though Condé shaved $1 off the price for subsequent downloads. Wired reported tablet downloads averaged 27,369 for the six months ended Dec. 31, 2010, according to the Audit Bureau of Circulations. That translates into a little over a $100,000 per month. Clearly better to have it than not, but it isn’t paying for much content on its own.”

See, paid apps don’t work! No one wants to pay for content. 27k downloads? We sold 4 times more issues of Wired magazine in January 1993 than that.

On the other hand, The New York Times Co. just reported last quarter earnings and a surprisingly good start to their digital subscription plan:

“Approximately three weeks after the global launch of its digital subscription packages, The New York Times Company reports paid digital subscribers have surpassed 100,000, although it cautions that it does not yet have visibility into conversion and retention rates for these paying customers after the initial promotional period.”

Obviously I have no visibility into their internal expectations, but I have to say that’s a much bigger number than I would have expected. Tip of the hat to NYT for getting off to a great start. As I’ve written before, I’m rooting for the success of their model.

In short, sometimes pay works, sometimes it does not. In fact, sometimes advertising works, sometimes it does not. Sometimes pay works and then it doesn’t work anymore. I’ll bet with the right set of stories, Wired could sell 300k downloads of the app. People will pay for great content, even if they won’t regularly download a new app every month. The point is, we have to get ourselves out of the silver bullet mentality of searching for the killer revenue model for media — it doesn’t exist.

Malcolm Gladwell has a great talk on spaghetti sauce and the invention of choice in consumer products. There’s no one consumer and hence we have dozens of flavor of spaghetti sauce. Similarly, there is no one media model. I can think of at least three ways to make money in media — advertising, subscriptions and embedded commerce — and countless variations within each of those buckets. Each media product needs to find its own workable combination and the rest of us need to stop thinking there’s one simple answer.

Hey, mine is transformative too!

“We have the position to be able to jump and make big acquisitions… In the case of large transformative ones, we look at them all the time, right? If we had one that actually made sense to finally accelerate a big piece of our agenda, we would do it.”

Google CFO Patrick Pichette warming the hearts of corp dev guys (and their bankers) everywhere

Blogging is no longer a technology

Upfront, the disclosures:  I worked for 6+ years as a senior executive at Six Apart and am now a senior executive at SAY Media (the company formed from the merger of Six Apart and VideoEgg). I’m writing this as a civilian (i.e., none of my corporate overlords saw this piece before I hit publish) but on the other hand I doubt there’s anything in here they’d generally disagree with. Please aim any negativity at me, not them.

Tumblr may be the new WordPress. And the folks at WordPress have long been proud of being the new Movable Type or TypePad or Blogger. We often felt they spent far more time getting folks out of other systems than worrying about building out their own although in fairness WordPress has become a great product over the last many years. And don’t look past Drupal, which has never been one of the “cool kids” of blogging but is a rock solid CMS that has been getting tremendous investment over the last few years.

The fact is, it’s a great time in the state of website building technologies. In the late 90’s as a VC, I saw a wave of CMS companies try (and mostly fail) to get funded. Today, there are a multitude of ways to build a website almost instantly. For fun, Michael Sippey and I launched a site last week with maybe an hour of investment. I bought a good domain name, we bounced around some ideas, picked Tumblr as our platform and were up and running. Is the site any good? Does it have legs? Who knows? But for an hour of investment, it doesn’t have to go anywhere. Throw a bunch of shit on the wall and see what sticks.

So is Tumblr or WordPress or Drupal or TypePad the new whatever? Honestly, who cares? This won’t come as a shock, but there’s very little money selling CMS technology anymore. The guys from Automattic (the company behind WordPress) announced late last year that their revenue was about $10 million. The license revenue of each of Six Apart’s two main CMS platforms (Movable Type and TypePad) was about the same last year before we sold the company. I have no insight into Acquia’s or Tumblr’s revenue but I’ll guarantee it is low eight figures at best and probably less.

Blogging has become a state of mind, not a technology. The reason there’s always a new blog platform every year or two is that each recapitulates the phylogeny of the others. Simplicity first! Then feature creep. Then full-fledged CMS. Website builders want a richly featured CMS but bloggers want simplicity.

Bloggers also want control which is why Twitter and Facebook will always be inherently limited as self-expression platforms. As Facebook just showed ad.ly, Facebook controls Facebook, not the users. I’ve always thought of Twitter and Facebook as gateway drugs to blogging — a great way to learn about your voice but ultimately not the best place to realize that state of mind.

Let a thousand platforms bloom! Every blogger deserves the one that best meets their specific set of needs and every blogger I know uses a combination of tools to reach their audience. No one asks what kind of camera a cable network uses or which press was used to print a magazine. Blog technology’s greatest success is that it is similarly fading into that background.

Serving multiple masters, or I wade into the Glenn Beck thingy

Let’s face it — for most of the people likely to be reading this blog, Glenn Beck is a character on The Daily Show and Stephen Colbert, not on Fox News. His extreme and polarizing views made for great theater to the believers and great parody to the rest of us. If media is about having a point-of-view, then Glenn Beck is the uber-media god among men. He can be accused of many things but lacking a strong set of opinions will never be one of them.

Not that my audience needs proof of this, but one of his recent quotes justifying his leaving (or maybe being fired from) Fox News is absolutely beautiful:

“Paul Revere did not get up on the horse and say, ‘I’m going to do this for the rest of my life.’ He didn't do it. He got off the horse at some point and fought in the Revolution, and then he went back to silversmithing.”

Absolutely wonderful. He’s not saying he’s Paul Revere. But he’s not saying he isn’t either.

The fact is, pissing people off is kind of the raison d’être of media:  having everyone’s view is not really having a point-of-view. Kevin Kelly, friend of the show and the first executive editor at Wired magazine, once told me he thought his job was to piss off 20% of the readers of the magazine every month — he just had to make sure it was a different 20% every month. Media is interesting because it elicits emotional response and Glenn Beck did as good a job as anyone at that over the last year. I may have consumed his content through the filters of Jon Stewart and Stephen Colbert, but boy it was good television.

The hard part about point-of-view based media, however, is that there are two masters — the audience and the advertisers. Even media businesses that have non-advertising revenue streams (like a cable network) still tend to be mostly dependent on advertisers. And therein lies the counterbalance to the most extreme points-of-view. As Roger Ailes head of Fox News was quoted:  “Advertisers who get weak-kneed because some idiot on a blog site writes to them and says we need to stifle speech, I get a little frustrated by that.”

Which represents the ultimate synthesis of all that is right and all that is wrong about having a strong point-of-view. Your ideas make you brilliant, their ideas make them idiots. But everyone wins until someone else stops paying the bills.

You can’t fake real-time

In a Forbes blogs post from yesterday about recent changes at Google, Eric Jackson writes an insightful off topic paragraph about analyst calls. I’ve been on a public company board for the last seven years and while much noise has been made about Sarbanes-Oxley, quarterly reporting and all of the infrastructure required of a public company, I think the analyst call is an under appreciated art. Especially in the world of FD, quarterly analyst calls are really the rawest form of open debate as exists in the financial reporting world.

And Eric is exactly right to judge an executive by his (or her) performance on these calls:

Listening to earnings calls – especially executives’ answers to questions from analysts – is one of the lost arts in stock selection in my view.  At this moment when they speak, there are no PR people or lawyers between you and the way the executives think.  One of the reasons I’m so bearish on Research in Motion (RIMM) for example is by listening to co-CEO Jim Balsillie’s answers on his calls for the last two years.  The answers are jumbled and hard to follow.  The logic is flawed.  The boasts and claims seem detached from the world of reality we all live it.  If this is how the co-CEO thinks, just imagine how this trickles down throughout all the decision-making in the rest of the company.

I haven’t listened to any of the Google calls in question in the larger article, so I won’t comment on his opinions about the departing Google exec(s). But for every public company these calls (and/or the transcripts) are always posted online and if you’re interested in learning more about the management team of a public company, they’re a great way to get an adulterated view of how a team thinks.

That’s actually not irony, it’s called insight

Martin Sorrell provides one of the more informed perspectives on the state of the content business in a Newsweek piece. Making users pay for content actually does two things — not only make money for the content creator but also qualify the audience for advertisers. It’s not at all ironic that one of the largest purchasers of advertising space would prefer to see slightly better audience profiles. Have you seen the value of a click lately?

[Martin Sorrell] does see bright spots. He likes The Wall Street Journal and Times iPad apps, as well as the Flipboard aggregator app. He consumes copious amounts of news—on his iPad, on cable, and through email-newsletter blasts. But none of that solves the trick of a dying business model. “The problem with the Internet is there’s so much of it. It’s highly fragmented, and most of it’s for free,” he says. “Consumers must pay for content if they value it,” he insists.

There’s some irony in his recommendation, considering he is a major reason why Web content is free in the first place. Media executives figured that if they gave away their content, they’d draw supersized audiences—and that supersized ad dollars would follow. A concept, by the way, that Sorrell considers lunacy. “Advertising-only models don’t work,” he says. “There isn’t enough advertising to go around. Period.”