Felix Salmon

Back in December, Peter Kafka summed up the most important question with regards to the future of online advertising. Do advertising dollars ultimately end up where people spend their time, he asked, echoing Kleiner Perkins’ Mary Meeker says, or, pace Bernstein Research’s Todd Juenger, is that a “fallacy”?

I’m with Juenger on this one. As he says, “time spent is supply, advertising spend is demand… Just because there is a large and growing supply of Internet inventory doesn’t mean advertisers have a correspondingly large desire to deliver more Internet impressions.” Indeed, as the price of online inventory continues to fall, it seems just as likely that online ad spend will go down (because the ads being bought are getting cheaper) as that it will go up.

According to Meeker, some 67% of all ad dollars are spent either on TV or in print. And according to Juenger, ad spend on TV actually went up, between 2009 and 2012, even as Americans’ attention moved away from TV and towards other screens. That makes sense to me, mainly because of the point I was making back in 2009, drawing the distinction between brand advertising, on the one hand, and direct marketing, on the other. TV is brand advertising; online ads, by contrast, are closer to direct marketing.

When people like Meeker look at ad spend, they’re looking mainly at brand advertising. Brands are valuable things, and billions of dollars are spent every year to keep them that way, mostly on TV and in print. And if you have a big national brand, there’s really only one way to reach a big national audience: you need to buy ads on TV. Doing so is expensive, but it’s necessary, and it works, which explains the huge sums of money which still flow into TV every year.

As Juenger explains, the audience for network TV has been shrinking by 1.8% per year for the past 20 years — but at the same time, the audience for every other TV channel  has been “atomized into increasingly tinier fragments”, leaving the networks the only game in town for advertisers wanting scale. The result is that network-TV ads have been increasing in price by 4.9% per year on a per-person-reached basis, resulting in total revenues growing, by 3% a year, in a market which is actually shrinking.

The corollary to the continued success of network TV is the utter irrelevance of online ads. Here’s a handy chart from Nielsen, breaking down the amount of time we spend in front of various screens each month:

TV is still the monster, the elephant: for all the talk of cord-cutting, Americans have clearly voted that, given the choice, they’d much rather have cable TV than broadband internet.

And for web-based publishers, the situation is much, much worse even than this chart makes it look. Consider: the number of websites out there is many orders of magnitude greater than the number of TV channels, which means that even as network TV is winning over small cable channels, small cable channels are still in a much better position than just about any website which isn’t called Facebook or Google or Yahoo. Moreover, if you’re running a news site, you’ll be even more sobered to learn that just 2.7% of the time that people spend on the internet is spent on news sites. You think you’re competing against a lot of other news sites to attract advertisers? You don’t know the half of it. In reality, you’re competing against the other 97.3% of websites, and they are competing against TV. It’s a fight you can’t hope to win, especially since non-news websites are so much better at delivering people primed to buy stuff (search) or delivering large numbers of people in narrowly-targeted demographics (Facebook).

The key concept at the heart of Juenger’s fallacy — the thing which Meeker doesn’t seem to understand — is the fact that internet advertising in no way substitutes for TV or print advertising, no matter how often digital ad-sales people bring out their metrics of comparative CPMs.

In 2011, I gave a talk to a group of online ad-sales people who were so full of the multitude of different ways that they could target and quantify their product, they literally no longer understood what brand advertising is, or why it exists, or why brands would be so foolish as to spend so much money on it. They’re quants, living in a world where something only has value insofar as it can be quantified, and where the unquantifiable therefore is perceived to have no value at all. In other words, they’re basically in the direct-marketing business: they’re the digital version of junk mail. As a result, just about every website in the world is in the business of delivering that digital junk mail to our computers and iPhones and iPads.

This, then, is the biggest reason why TV ad dollars are not going to become online ad dollars: online ads simply don’t do what TV ads do. TV ads are large and beautifully produced and expensive, and they’re presented on a beautiful screen without distractions: they fill up the screen, and 30 seconds of time, and they appear often enough that they become part of the world of the people watching 145 hours of TV every month. Online ads don’t behave like that at all: they’re easy to ignore, there’s nothing inherently interesting about them, and insofar as they grab your attention, they tend to do so in a very annoying way, by preventing you from reading or watching the thing you were looking for.

Hence the rise of so-called native ads: things you want to read and look at and click on. There’s a certain amount of promise there, and the native-ad industry is certainly going to grow from its present size. But it’s tough: building these things is a huge amount of work for the advertiser, with no guaranteed payoff. And selling them is even more work for any publisher.

And here’s the next big problem with selling online advertising, especially native advertising: it’s really expensive to do so. While online journalism is still cheap, online ad-sales staffers tend to cost a fortune, especially if they have a clue what they’re doing. This is something the Meekers of the world would do well to remember: the ad dollars spent online are spread across so many sites that a massive proportion of them end up just going straight into the pockets of the people selling those units, or else to the various ad networks and other intermediaries which have popped up in a very busy and messy space.

This kind of thing just doesn’t exist in TV or even in brand advertising more generally — areas which are much simpler, much easier to navigate, and which sit much more comfortably within consumers’ comfort zone. And it’s not going away. I was told this evening that Buzzfeed alone has no fewer than sixty ad-sales people, all of whom are out there, knocking on doors, taking potential clients out to lunch, and generating income one hard-won deal at a time. That doesn’t scale. (Update: BuzzFeed CEO Jonah Peretti says that the actual number is 19.)

Indeed, if you want to get your brand out there on the internet, you can try buying ads on websites, or you can try going native on a site like Buzzfeed, but the fact is that the whole point of the internet is that it disintermediates: it’s great at drawing direct connections. Hence the rise of what’s known as “content marketing”: why buy ad space from a publisher, when you can be the publisher instead? We’re still in the early days of this, but already musicians are discovering that brands are much friendlier — and pay much higher rates — than record labels, while American Express has been employing extremely good journalists for years.

On top of that, as Liz Gannes and Noah Brier note, nobody “goes online” any more: the internet is becoming an ambient background thing-that’s-always-there, rather than a mass communications medium that people consciously think of themselves as paying attention to. When you pick up a magazine, you do so because you want to read it; similarly, when you turn on the TV. But the internet is different: your phone is always just sitting there, and sometimes it beeps at you; your computer is always on your desk at work, and it’s never not online. In a mobile world, the distinction between being online and not being online is an increasingly silly one to draw. And as a result, the idea of using “time spent online” as a useful metric of anything, really, is equally silly.

So if the internet is not going to displace TV as a medium for mass-market brand advertising, might it at least be good at direct marketing? Can publishers not deliver certain readers, in certain demographics, to marketers who want to reach them? To a certain extent, yes. But the fact is that Google and Facebook, between them, are extremely good at delivering as many of those readers as any advertiser could ever want: all that Facebook needs to do is turn a dial, and billions of new impressions get added to the stock of global inventory, targeted at any demographic that any advertiser could want. Google, similarly, owns search, especially mobile search. It’s conceivable that some marketers might prefer to reach an audience some other way — but this is a race to the bottom, with a finite amount of demand chasing an essentially infinite amount of supply. That’s a buyer’s world, where the sellers have no real leverage at all.

Some very large proportion of the websites on the internet have a pretty basic business model: “we will publish great content; millions of people will want to read or view that content; advertisers will want to reach those people; and so we’ll be able to sell our audience to advertisers and make lots of money”. There are people out there who have succeeded with that model, but the number of successes is dwarfed by the number of failures, and the amount of scale you need to even get your foot in any media buyer’s door has been rising dramatically for years. By the time you’ve paid for your content and for your ad-sales infrastructure, the chances that you’ll have any money at all left over for your shareholders are slim indeed, and getting slimmer year by year.

All of which means that smart online publishers are looking beyond advertising, to other forms of generating revenues. But that story will have to wait for part 2.

A couple of weeks ago, the WSJ’s Brody Mullins had a big story about the fact that the SEC was investigating a political-intelligence consultancy named Marwood. Marwood doesn’t seem to have done anything wrong, but the very fact that it was being investigated was, at least as far as the WSJ was concerned, front-page news.

This week, Mullins has done it again, this time with an SEC investigation of firms which provide financial data. Once again, there’s nothing in the story to suggest that any of these firms, which include Bloomberg, Dow Jones, and Thomson Reuters, have broken any insider-trading rules. And yet here’s a juicy front-page story all the same, based entirely on the fact that there was an investigation at all, regardless of whether the investigation actually discovered anything untoward.

I’d love to know the story behind these stories. It seems pretty obvious that they’re being leaked by the SEC, in a way that seeks to embarrass the subjects of the probes as much as possible. Marwood and Bloomberg and Thomson Reuters might have done nothing wrong at all, but if the WSJ determines that there’s front-page news here, then its readers are surely expected to conclude something about smoke and fire.

There’s a clear implication in the latest story, for instance, that the data companies in question (which include the WSJ’s corporate parent) did do something wrong, and that they’re just lucky the SEC can’t prove it in a court of law:

Investigators decided against filing charges because they couldn’t link the pattern to specific actions by media companies, people familiar with the probe said.

A key issue, one of the people said, was whether the government could prove in court that a time advantage for a trader of a sliver of a second—as little as a few thousandths—was enough to conduct profitable trades on confidential information.

Even so, these people added, investigators continue to have general concerns about the handling of federal economic data.

This whole thing has a decided whiff of “doesn’t the SEC have anything better to do”. For one thing, to answer the SEC’s question, it’s not at all obvious that getting information a few thousandths of a second ahead of anybody else would allow some computer somewhere to conduct a profitable trade on the information. Firstly, big economic data comes out before the stock market opens, which means that any profitable trades would have to take place either on the much less liquid out-of-hours market, or else on the bond market. Both of them are largely free of high-frequency traders.

Yes, there’s a lot of trading and jostling and positioning in the bond market in the run-up to a big data release, but I can pretty much guarantee you that all markets are in holding-their-breath mode when it comes to, say, the final couple of seconds. The traders and the algobots are short or flat or long, they’re waiting for the number, and then they’ll burst into action as soon as the number is released. If you want to trade a couple of thousandths of a second before the number is released, you’re going to be looking for a counterparty who doesn’t know what the number is but who is willing to trade anyway. It’s hard to imagine such counterparties exist.

The news agencies can blame themselves a little bit, here, because they have for many years been highly invested in the idea that if you get a certain piece of information first, even if it’s just by a fraction of a second, then you can make a huge amount of money. All of them get incredibly excited about the times when they move the market: when a story comes out, and then some financial instrument — normally a stock, but a commodity will do in a pinch — moves sharply on the news. They charge a lot of money for their real-time news feeds, and the implication is something like this:

1. The news hits the wire.
2. A smart trader, staring intently at his newsfeed, sees the headline cross the wire, and immediately groks the implications.
3. The trader then puts in a monster buy/sell order, picking off a bunch of tortoises who aren’t smart or rich enough to subscribe to the wire service in question.
4. The price moves sharply.
5. Monster profit!

It’s a lovely story, but it’s also a fairytale: things don’t actually happen that way. In the real world, when a piece of news hits a wire, at that point it’s public. And once it’s public, the market then reflects that public information in the share price. If you’re a broker-dealer who was quoting a security at one price before the news came out, you’ll now be quoting it at a different price after the news has come out.

The key question to ask is this: how many trades happened (a) at the old price, but (b) after the news became public? Most of the time, the answer is zero, or very close to zero. News headlines often move the market, but that doesn’t mean that someone has gotten financial benefit from reading them first.

The point here is that once a headline crosses the wire, that information is, by definition, public. And if it’s public information, it can’t be insider information. There are lots of good reasons why the U.S. government and rival news agencies would be cross if one of the wires published that information a fraction of a second before the other ones did. But just because someone is cross doesn’t mean that laws have been broken, or that inside information has been traded upon. An embargo is an agreement between a news source and a journalist; it’s not something to be enforced by the SEC.

So I do wonder what the SEC thought it was doing, here, conducting what the WSJ describes as a “technically and legally complex” probe. What exactly was the SEC hoping to achieve? And why is this weird investigation, in and of itself, newsworthy as anything other than a waste of government resources?

I’m in Munich, for the DLD conference, where Ben Horowitz took the opportunity to introduce the Rap Genius guys to the European digital-media crowd. But it’s actually Horowitz’s partner, Marc Andreessen, who has the best explanation of what the investment is all about:

Back in 1993, when Eric Bina and I were first building Mosaic, it seemed obvious to us that users would want to annotate all text on the web – our idea was that each web page would be a launchpad for insight and debate about its own contents. So we built a feature called “group annotations” right into the browser – and it worked great – all users could comment on any page and discussions quickly ensued. Unfortunately, our implementation at that time required a server to host all the annotations, and we didn’t have the time to properly build that server, which would obviously have had to scale to enormous size. And so we dropped the entire feature.

Andreessen calls this “annotate the world“, and, as he notes in his post, it’s a very old idea indeed; the prime example is of course the Talmud, although you can probably trace it back to Socrates and even earlier. Up until now, however, annotation has been given short shrift on the web.

We’ve had a few other things instead: there’s commenting, of course, which is being constantly reinvented but never seems to be done well, and there’s also the kind of layered editing history one finds at Wikipedia, which is very hard to navigate. The promise of Rap Genius is to take the granularity and teleological iteration of Wikipedia edits, and make give them the visibility of a comments section.

But is the opposite possible? Recently, two different people told me on the same day that they were going to launch a comments section based on annotations — where readers comment on individual sentences or paragraphs or arguments, rather than a story or post as a whole.

The promise here is twofold: it helps the conversation stay on topic, and it also raises the possibility of really improving the original post, keeping it updated and accurate, all through crowdsourced technology.

I like the idea of moving from comments to annotations, if only because existing commenting technology just hasn’t worked well at all, and just about anything else would probably be an improvement. It shouldn’t be distracting, however, which is a problem: the annotations at Rap Genius are very obvious, because they’re the heart of the site, while most bloggers and news organizations would not want to give their commenters quite that much prominence. And of course it should be social: I’m certain to be particularly interested in the comments of my friends.

The first versions of these systems are going to be clunky and annoying — version 1.0 of anything always is. The only way to learn what works in practice is to roll something out and see what happens. But if this takes off, it could be a significant evolution in the way that we talk about web content. Right now, for instance, if I want to link to something somebody said on a web page, I’ll normally just end up linking from Twitter to an undifferentiated page, rather than to the specific thing being said. And more generally, the conversation around things like blog posts tends to happen mostly on Twitter and Facebook, where it’s easy to miss and almost impossible to archive.

It would be amazing if annotation could change all that, helping to make comments more on-point and also providing a centralized archive of the conversation around any given story. I doubt that Rap Genius will be the company to do that, but internet comments are more of a bug than a feature these days, and I do think that annotation is a very promising way of potentially addressing the problems they have.

As Cardiff Garcia says, when it comes to #mintthecoin, “it’s important for advocates to define carefully what they’re actually calling for”. The basic matrix, as I see it, looks a bit like this:

I’m in the bottom-left corner: Negotiate. That’s the job of the President of the United States: to negotiate with Congress, rather than to do tricksy, Constitutionally-dubious end-runs around it. Joe Weisenthal, to his credit, is also clear where he stands — he’s in the bottom-right corner. He doesn’t advocate using the threat of minting the coin as a negotiating tool; rather, he’s advocating that negotiations should happen as normal, and only in the very last resort, if all negotiations fail, should the coin be deposited at the Federal Reserve so as to avoid a catastrophic default.

One problem is that it’s very hard to keep the existence of the coin secret, especially if the executive-branch negotiators, who are going to be spending a lot of time with the representatives of House Republicans, know that they have it in their metaphorical back pocket. Basically, the existence of  a secret plan to mint a coin is functionally equivalent to a public threat to mint the coin, if the House Republicans find out about the secret plan. In that event, the Negotiate strategy becomes the Bluff strategy. And as Cardiff says, the Bluff strategy is really stupid:

For the Republicans, having Obama threaten to use the coin might be wonderful news because then they could force him to actually use it. By this reasoning, not only will the worst-case scenario of default be avoided, but they could then look forward to screaming “Dictator!” while accusing him of having used a legally questionable tactic (or at least of going against the intent of the law) and of running an end-around on the balance of powers (and actually they’d be right about this).

This argument would be ludicrously hypocritical, but unfortunately it would also play better publicly than the hypothetical White House defence. Which would probably sound something like this: “The Republicans backed me into a corner again, and despite my being the president who said that we should all put aside childish things, I ordered a shiny coin and called it a trillion dollars, which I’m allowed to do because of a poorly written amendment to a law that was undeniably meant for something else.” Not exactly a winning case.

The Open Defiance strategy — let’s just print the coin anyway, and thereby stop the House Republicans from using the threat of default as a negotiating tactic — looks pretty silly too, because you’re basically using a sledgehammer to crack what might ultimately be a pretty thin nut. At this point, it’s worth moving out of the econowonkosphere and into the even weirder world of Republican politics. Once we get there, we learn from the likes of Greg Sargent and Kim Strassel that the Republicans aren’t nearly as coherent on this issue as they were in 2011, and that, in Strassel’s words, there’s a good chance that “Round Two is already Mr. Obama’s”.

The grown-up Negotiate strategy, it turns out, actually has an incredibly high chance of success, while any other strategy risks creating massive political chaos. (I can easily, for example, see the Republican party refusing to support any nominee at all for key positions like Defense and Treasury and State, if Obama goes all scorched-earth with a Coin strategy.)

The Negotiate strategy is far from ideal, of course. Since the debt ceiling has been and will be reached many, many times, even something with a very high chance of success is statistically certain to fail eventually. So the obvious best-case scenario is to abolish the debt ceiling entirely, or, failing that, to raise it to, say, a few quadrillion dollars. But right now, when we’ve already reached the debt ceiling, is probably not the best time to try to negotiate such a thing. (In fact, any time there’s a Democrat in the White House is probably not the best time to try to negotiate such a thing.) For the time being, the executive branch should do what the executive branch has always done when the debt ceiling looms, which is to persuade Congress to raise it.

It’s worth adding a meta-media note here, too. The #mintthecoin meme has successfully migrated from the outer reaches of the econoblogosphere into a fair amount of mainstream media coverage, and as a result it has actually started to be taken seriously outside the Beltway. And even, in a few cases, inside the Beltway too. But be clear, this is absolutely a media-driven meme: people talking about it are not talking about an actual political proposal which an important number of serious DC politicians genuinely want to implement. As I say, it’s a Flying Spaghetti Monster thing — it’s a ticklish thought experiment, nothing more. Many media organizations are having a lot of fun with it, and that’s their right. But, especially in this case, it’s important not to mistake media coverage for reality.

I’m fascinated by the economics of the Al Jazeera acquisition of Current TV, at an eye-popping price of roughly half a billion dollars. That’s about $12,000 for each of Current TV’s 42,000 nightly viewers. But of course as Liana Baker and Peter Lauria note, Al Jazeera isn’t interested in Current TV’s handful of viewers: this is “a pay-for-distribution play”, and what Al Jazeera is really buying is Current TV’s access to 40 million households. Looked at that way, the price is about $12.50 per possible/potential viewer.

The way that the economics of the cable-TV industry work, potential viewers can actually be worth much more than actual viewers. Current TV was reportedly receiving 12 cents per subscriber per month from cable TV channels — just under $60 million per year. That’s real money, and it helps to explain how Current TV could possibly have revenues of $100 million per year.

Why would cable companies pay Current TV more than $50 million per year, if almost none of their subscribers evinced any particular interest in watching it? Part of the answer is, simply, Al Gore: he turns out to have been extremely good at personally selling the Current TV service to cable companies and getting them to pay good money for it. Brian Stelter quotes one Current TV executive as saying that “when it came to distribution issues, he was always available to make that final call. He was always the closer.”

Gore’s pitch relied heavily on the idea that cable companies needed a “diverse set of news sources” — and he’s right about that. News is special, which is one reason why CNN can charge 57 cents per subscriber per month for its content, even as its ratings continue to plunge. A non-news channel with such low ratings could never ask for such sums, but if you’re a cable-TV provider, you basically can’t not offer CNN, which means you have to pay whatever Time Warner is asking.

An even more extreme example of the same phenomenon is CNN International — it’s a cash cow which almost nobody watches unless they’re in some far-flung hotel room. It doesn’t matter what the viewership is or what the ad revenue is. The important thing is that TV providers around the world all feel compelled to offer it.

Al Jazeera — clearly — doesn’t have the same kind of clout in the US that Al Gore has. It’s been trying for years to get onto cable lineups here, with no real success. While cable companies know they have to have Fox News (because it gets good ratings), and CNN (because it’s CNN), they need to be persuaded to buy Current TV, and they have no particular desire at all to have Al Jazeera. Foreign stations are, well, foreign: even the BBC has had real difficulty making serious inroads on the distribution front. Which is why Al Jazeera is setting up a whole new channel, called Al Jazeera America, targeted directly at a US audience.

But the bigger lesson here is that any media company which aspires to platform status needs news. Why did all those cable companies pay for Current TV? For much the same reason that BuzzFeed is aggressively hiring journalists. Back in September, David Holmes did a clever mashup, comparing BuzzFeed’s most-viewed posts with its best-reported posts. Needless to say, there was no overlap at all in the two. But both are crucially important to the success of BuzzFeed: the cross-subsidy is alive and well, and is being funded by aggressive venture capitalists for highly commercial purposes. BuzzFeed recently raised $19.3 million at a reported $200 million valuation — the news operation surely accounts for a significant chunk of that valuation, and not necessarily because of the traffic it drives.

Al Jazeera isn’t in this business for profit: this is more about projecting soft power into the world, demonstrating that the Arab countries can produce valuable, first-rate, uncensored journalism. For the prize of two Cézannes, Al Jazeera is buying the Arab world a significant measure of credibility in the single most important country on the planet. Or it’s attempting to, anyway.

Al Jazeera probably won’t be able to persuade most of the cable companies to pay 12 cents per subscriber per month. It doesn’t care much about that; it would happily take the slots on offer even if they generated no revenue at all. Indeed, it might even pay the cable companies, in the first instance, if it needs to do so in order to keep its potential viewership high. The important thing is that America is given the opportunity to discover what Al Jazeera is capable of. Then, if and when it starts getting traction, it will be Al Jazeera America which will have the upper hand in any future negotiations. Because there’s something very special about high-quality news, and the cable companies know it.

Margaret Sullivan, the NYT public editor, has mixed feelings about the first DealBook conference, which took place on Wednesday. Her job is to worry about such things, but it’s worth taking her post seriously, because conferences and other live events are one of the few bright spots in the media business-model world right now.

The DealBook conference was in some ways the platonic ideal of the form. It had a banal and meaningless title (Opportunities For Tomorrow), it had a bunch of CEOs (Jamie Dimon, Lloyd Blankfein, Eric Schmidt, Dick Costolo, Indra Nooyi), a series of celebugeeks (Marc Andreessen, Jared Bernstein, Glenn Hubbard, Paul Krugman), and a passel of famous-for-being-rich types (Ray Dalio, David Rubenstein, Stephen Schwarzman). It even had a 15-minute stump speech from Charles Duhigg about his bestselling book. Something for everyone!

Of course, the real reason that conferences succeed or fail isn’t in their programming but rather in their audience: the trick is to get enough boldface names on stage that a lot of important people want to come and mingle with each other. I didn’t go to this conference, but I have colleagues who did, and they were impressed by the quality of the audience. If conferences develop a reputation as a place full of people you want to meet, it pretty much doesn’t matter any more what happens in the panels.

The NYT put a lot of effort into curating the audience for this invitation-only conference: like Davos, you needed an invitation and money before you were allowed in. (Because the Times Center is relatively small, filling it up is the easy bit.) It’s especially important to get a high-quality audience when your conference takes place in New York City, because the on-stage headliners are likely to stay only for their own sessions, rather than mingling with everybody else. And of course, as at all conferences, it gave the audience every opportunity to mingle and network and gossip: having real conversations with interesting people is nearly always better than listening to the interesting conversations of others.

The one thing the audience didn’t particularly come for was for anybody on stage to commit journalism. Conferences can be lucrative brand extensions, for news organizations — the D conferences, in particular, are by all accounts insanely profitable — but it’s rare for them to be particularly newsworthy in and of themselves. For journalists, they’re more of an opportunity to meet a lot of potential sources, and also to get to know those sources a little bit outside the context of formal news interviews. And there’s nothing wrong with that, especially if you think that access journalism has any value at all.

DealBook in general, and Andrew Ross Sorkin in particular, is a prime example of how access journalism can have real value. His crisis book, for instance, is a genuinely important historical document, and could probably have been written by no one else. The rich and important have power and influence, and if you want to understand that power, and document it, you need access to those people. The conversations that Sorkin has on stage with the likes of Dimon and Blankfein are not exactly the same as the conversations he has with them off the record, for obvious reasons. But they do have value, especially because it can be hard to duck a direct question if you know you’re being live-streamed across the internet.

So what were Sullivan’s problems with this event? Firstly, she doesn’t seem to like access journalism at all:

Here is what the conference did not have going for it: A great deal of distance between sources and those who cover them — something traditionally thought to be a bedrock journalistic idea.

This is far too facile. Carol Loomis has been covering Warren Buffett for half a century, and by Buffett’s own admission they talk pretty much every day. He’s friends with her family, and she with his: there is essentially no distance at all between Loomis and Buffett. But Loomis is a first-rate journalist all the same. Or, if Sullivan wants to stay within the NYT, she need look no further than Gretchen Morgenson, who became so close to her source Josh Rosner that they ended up writing a book together.

I think that Sullivan thinks that the DealBook conference, far from being a smart way of monetizing the NYT brand, was meant to be some kind of public grilling: a live Meet The Press for the Wall Street set. Such an event would certainly be interesting, although it’s hard to see why any potential interviewee would say yes to such a format: while politicians have to be out in front of the public, CEOs do not. And in any case, it’s far from certain that anybody would actually get more value out of watching hard questions than they currently do out of watching relative softballs. Last year, for instance, I moderated a panel where I asked a pretty tough question of NYSE CEO Duncan Niederauer; he got a bit flustered and angry, but didn’t really say much of substance, and I can’t say that the audience was particularly well served by that question.

Sullivan’s next beef is even less comprehensible:

More than anything, DealBook is one of those creatures of 21st-century journalism – as much about “brand” as anything else.

Sullivan never explains how this distinguishes 21st-century journalism from 20th-century journalism or even 19th-century journalism; it seems to me that journalism has always been about building brands, and probably always will be. But Sullivan, with her creatures and her scare quotes, clearly thinks there’s something newfangled and distasteful going on here: I would love to see a future post where she explains exactly what that might be. In this post, she just counts logos, which tells us exactly nothing about anything. But she did worry about the fact that the conference was sponsored:

Such sponsorships are another creature of 21st-century newspapering, eroding the sharp line between advertising and editorial content.

Huh? This I just don’t get at all. The editorial content surrounding the conference was clear: there was a DealBook newspaper supplement, and a live blog, and I daresay there might even be a separate article or two somewhere on the NYT website. But all of that content had exactly the same line between editorial and advertising that any other NYT editorial content has. Yes, some of the ads were for BlackBerry, which sponsored the conference and I’m sure got a big package deal. But I don’t see BlackBerry infesting the editorial content anywhere; the BlackBerry product demonstration, for instance, didn’t even get a mention in the live blog.

I suspect that what Sullivan is implying here is that the conference itself is editorial content, and that since Blackberry was on stage during the conference, that makes it seem editorially-endorsed, somehow. That’s a stretch: it’s exactly the same adjacency tactic which drives the age-old model of having advertisements in the newspaper. When the BlackBerry presentation is introduced by the Chief Advertising Officer of nytimes.com, it’s pretty clear which side of the editorial/advertising divide it lies.

Sullivan wraps up her complaints — the things she says “can’t help but make me a little queasy” — thusly:

Given the lunchtime rollout of a new Blackberry device, the overall friendly questioning of prominent newsmakers, the reception afterward – featuring wine, hors d’oeuvres and the incessant rubbing of journalistic and corporate elbows — the word “adversarial” did not come to mind. Nor did the word “watchdog.”

The fact is that Sullivan could pick any NYT story at random, and the chances that she would consider it “adversarial”, or performing any kind of “watchdog” role, would be very low indeed. There are always some stories which fall into that category, of course, but very few. On the front page of the website right now, for instance, is an assiduously-reported piece by Annie Lowrey, one of the presenters at the DealBook conference, headlined “High-Tech Factories Built to Be Engines of Innovation”. There’s not a hint of the adversarial or the watchdog about it, but that doesn’t make it any less valuable, and I’m sure that Sullivan doesn’t feel queasy when she reads it. So why is she holding the DealBook conference to a different standard?

And is Sullivan really going to complain about the fact that a conference, where some attendees paid $1,500 apiece, dared to feature wine and hors d’oeuvres at its reception? Journalists rub elbows with this crowd every day — that’s their job — and it’s utterly commonplace for there to be some kind of wine and food in the vicinity.

Sullivan thinks that the conference debases the NYT’s editorial independence: given that you can’t run a conference without boldface names, she says, “the Times’s indebtedness to these sources lurks in the shadows”. To which I would say: quite the opposite. When you’re running a conference and your sources are right out there, in the open, on stage with you, that’s the limelight, not the shadows. The shadows is what we’re given the other 364 days of the year, when innumerable stories are written on the basis of off-the-record conversations with these exact same sources.

Very few readers suspect, I think, just how much senior executives talk to the press. There’s an ultra-sophisticated way of reading the business press, which generally starts with the dual questions “who is the main source for this story” and “what is that person trying to achieve”. But the overwhelming majority of readers don’t read that way.

Which means that public conferences like this one, where everything is live-streamed and on the record, actually constitute much more transparent journalism than the vast majority of what you read in the paper. Sullivan might not like the fact that if you want senior executive sources to talk to you, it generally helps to be reasonably polite and respectful. But at least at this kind of conference that kind of thing is out in the open, rather than being hidden in the back channels.

Last week, when the Daily died, I declared that the reason, in part, was that tablet-native journalism was impossible. And I got a lot of rather vehement pushback, including some smart commentary from John Gruber, taking the other side of the argument.

That most existing iPad magazine apps are slow, badly-designed, can’t search, etc. does not mean iPad magazine apps cannot be fast, well-designed, and searchable. Salmon says “This wasn’t The Daily’s fault” but he’s 180 degrees wrong. All of these problems were entirely The Daily’s fault.

All impossible tasks have not been accomplished; but not all tasks that have not yet been accomplished are impossible. When it comes to media, what strikes many as The Daily’s cardinal sin is eschewing the open Web for the closed garden of a subscriber-only iOS app. The idea being that you can’t win without a web-first strategy. But that’s what “everyone” said about social networks too — until Instagram came along and became a sensation with an iPhone-only strategy.

I’ve since talked about this issue at some length, with both David Jacobs of 29th Street Publishing — someone who specializes in developing iPad-native apps — and with Ben Jackson, another one of my critics. And I still think that tablet-native journalism is an idea which isn’t going to take off any time soon.

Gruber’s point, which Jackson also made, is that you can’t tar an entire platform with a few bad apps. Maybe The Daily was bad; maybe lots of Condé Nast apps are bad; maybe the people selling ads on iPad apps are responsible for degrading the experience of using them so as to maximize ad revenues. But in theory, all of these problems can be overcome — and in fact, in practice, many of the problems I cited in my post have already been overcome, at least by one or two publishers. (For instance, the Businessweek app does have search, and the NYT app will let you start reading stories before the whole thing has downloaded.)

Be that as it may be, however, no one’s been able to convince me that there even is such a thing as tablet-native journalism, let alone that it has any chance of really taking off.

Certainly there’s lots of journalism which appears on tablets, and sometimes even exclusively on tablets. The Magazine, from Marco Arment, is the most cited, but one might also point to (what’s left of) Newsweek, where something called Newsweek Global “will be supported by paid subscription” and available on tablets. In both cases, however, the main reason for moving to the tablet seems to be revenue-related: it’s just vastly easier to charge for subscriptions on a tablet than it is on the web, and Newsweek needs to have a subscription product, to prevent itself from being forced to refund all the money it’s already been paid by print subscribers.

And if The Magazine is really the best thing we’ve found so far in the tablet-journalism space, that’s pretty depressing. For one thing, there’s pretty much zero journalism in it; it’s mostly first-person essays by Marco’s friends. And then there’s the fact that it deliberately abjures all the clever things that the iPad can do, opting instead for a very clean and simple interface: what Craig Mod calls “subcompact publishing”.

Subcompact publishing helps in terms of making great writing immersive: there are no distractions, just text (and maybe the occasional link or illustration) on a white background. Once you get lost in the story, the medium becomes invisible, just like all great storytellers should. It’s taking journalism and doing to it much the same thing that Readability does, or Apple’s “Reader” button in Safari. But when all you have is text, the journalism itself isn’t really tablet-native: it doesn’t shape itself to the contours of the medium in the way that radio journalism does to radio, or TV journalism does to TV, or tabloid-magazine journalism does to tabloid magazines. You’re basically left with a high-tech means of reading the kind of thing which could have been written centuries ago.

But Jacobs makes a good point: if you look at these publications at the story level, you’re missing something very important. Jacobs has worked on apps for websites like Gothamist and the Awl, where the content in the app is exactly the same as the free content on the website, but the way that content is presented is different in important ways. Websites need to be fresh and constantly-updated; apps can be a bit more curated. And importantly what’s not there makes a big difference: one of the great things about The Magazine is that each issue is an easily-digestible length.

Marco has a lot of information, from Instapaper, about the stories people like to read on their tablets, and specifically how long the sweet spot is. Each issue of The Magazine, or the Awl’s Weekend Companion, is much shorter than the daunting downloads one might get from The Daily or Wired or Businessweek. These smaller apps are not trying to present everything; they’re acting as real editors, and serving up something much more digestible. In the case of the Awl, the value ($4 per month) is actually in the way that the editors have subtracted a huge amount of the content available on the website. Similarly, Matter publishes just one article at a time, and doesn’t even force you to use its own app: you can call it up online and then read it using Instapaper, if you like.

So my feeling is that insofar as tablet journalism is going to have any success in the foreseeable future, you’re not going to see it in elaborate downloads with glossy production values. Jackson made this point: every time someone demonstrates ability in putting together great, intuitive iOS applications, they tend to be hired (or acqu-hired) very quickly by some big company like Facebook or Google. Radio journalists know how to edit radio shows, and TV producers can put together TV shows, but there are basically no journalists who can produce an iOS app to tell the stories they want to tell, and the coders they might conceivably work with, as part of a team, tend not to work for news-media organizations.

Instead, we’re going to see universal journalism, which can be accessed — and possibly edited — in different ways on different devices. It might be free on the web, for instance, while costing a couple of bucks in the form of a simple iOS app. Maybe it will only be available on iOS, but for business-model reasons, not because it couldn’t work on the web. Or maybe, as in the case of Matter, it will be available in any format you like, for a single flat price.

I’m quite excited about what Ev is doing at Medium, in terms of creating a new and intuitive way of writing online — it’s long past time that we managed to move away from the evil tyranny of Word. And then, once a Medium post has been created, it looks great on any device. That’s the future, I think: write once, look great anywhere. Rather than anything tablet-specific.

As Henry Blodget realizes, the most interesting part of the latest speculation about Bloomberg buying the FT is buried en passant:

Factions within his company have argued that it would be smarter to buy a digital property, pointing to the Web site LinkedIn as an example.

As Blodget also notes, this isn’t really an either/or choice: the price tag for LinkedIn would be so gargantuan that it would make very little difference whether Bloomberg also bought the FT or not. But a billion dollars — the much bandied-about price tag on the FT — is still a large enough sum that anybody paying such a price has to have a pretty clear strategic reason for doing so. And if you’re going to start putting serious money against a strategic vision, then it makes sense to be very clear what that strategy is, and what it isn’t.

The purchase of the FT would basically be a soft-power move. Bloomberg has a stated aim of becoming “the world’s most influential news organization”, and the FT would be a helpful fill-in acquisition on the road to that goal. Bloomberg’s influence started in the financial markets, but the company has become more ambitious than that, so it’s investing other ways of reaching important people who might not have any need or desire to spend $20,000 a year on a Bloomberg terminal. And the investment in news outside the Bloomberg wire is paying off: Bloomberg TV got the first Obama interview after the election, for instance, while Bloomberg Businessweek had that juicy interview with Tim Cook.

Still, the FT is a news product, which would fit within the broader Bloomberg News operation, and wouldn’t really alter the mission or the economics of the company as a whole. Bloomberg makes its money selling terminals to Wall Street, and it sells those terminals as a one-stop shop for everything you need, from the Lebanese yield curve to the flight schedule between Rio de Janeiro and Santiago de Chile. One of the things that Bloomberg subscribers want is high-quality news, and thus was Bloomberg News born: its first job is always to give the terminal subscribers the news they’re demanding.

Buying LinkedIn, by contrast, would involve moving far beyond the terminal and into a much bigger world. Bloomberg’s business has — somewhat amazingly — not yet been disrupted by the internet. To the contrary, Bloomberg has been able to piggyback on the bandwidth revolution, and can now sell terminals in Riyadh as easily as it can in London. But there’s a limit to how many people are willing and able to spend $20,000 a year on an information terminal, especially given how much richness of information can be found on the internet for free. And Bloomberg is running up against that limit. Which means that the company is faced with a choice: either continue to reap the spectacular dividends from the existing franchise, or else try and grow, somehow, beyond the confines of the terminal.

If Bloomberg opts for growth (and there’s no reason why it should, given that it’s not a public company), then it’s easy to see why LinkedIn could be a very smart way of getting there. In the beginning, traders got Bloomberg terminals because of the unrivaled fixed-income analytics. But for many years now the terminal’s killer app has been its messaging product, which alone is worth $20,000 a year to many if not most of Bloomberg’s subscribers.

More than five years ago I was describing Bloomberg as “the world’s first social-networking billionaire”. With apologies for quoting myself:

Bloomberg invented social networking before Mark Zuckerberg was even born. Bloomberg LP was founded in 1981, and Bloomberg saw very early on the huge potential of two-way information flows. Rather than just sending information to his clients, he would allow them to ask specific questions and get immediate answers. Once that was possible, it was relatively easy to allow them to message each other. Long before email really took off, Bloomberg messages were regularly flying all over Wall Street, both within firms and between them.

At the center of it all was an open directory of pretty much everybody on the Street. Everybody had his own page on Bloomberg, could be found very easily, and could communicate equally easily with anybody else on the system, bypassing the phone calls and layers of secretaries which had previously intermediated the conversation. It wasn’t long until a Bloomberg became as necessary as a telephone as a tool for keeping in touch. And even today, long after every firm has opened its systems up to the internet and email, many research notes and messages continue to be sent out on Bloombergs instead.

Since then, however, the social-networking world has exploded, even as the Bloomberg network hasn’t. The astonishing rise of Facebook and LinkedIn show the power of network effects: everybody’s on them because everybody’s on them, while attempts to build smaller, more “exclusive” networks invariably fail. Bloomberg might have been the first social network, but it shunned rather than embraced the open internet, and today it’s in pretty much the same place it was in five years ago: extremely profitable, but with limited growth potential.

The acquisition of LinkedIn would be a clear declaration that Bloomberg had its eye on more than just the people with $20,000/year terminal budgets, and was interested in reaching the professional world more broadly. LinkedIn has not taken off as a messaging medium in the way that Bloomberg did, but in many ways it’s the closest thing there is to Bloomberg Messenger for the rest of us. Bloomberg knows, on a deep institutional level, how professionals network and message each other; LinkedIn has a network which dwarfs Bloomberg’s. The two together could be a formidable combination.

That said, I don’t think LinkedIn would be worth the money, for Bloomberg. If you’re thinking of acquiring a company, the first question to ask is how much it would cost to build something similar yourself. And if Bloomberg wanted to port its network over to the internet, so that it was available to people who don’t subscribe to the terminal, the benefits could be similar while the cost (including any drop in terminal subscriptions) would surely be much lower.

Pricing would be tough; I suspect that Bloomberg would want to charge something reasonably substantial for the service, positioning it somewhere in between LinkedIn, which is free, and the terminal. The trick would be to make it expensive enough that current Bloomberg subscribers wouldn’t need to worry about getting constantly spammed by random nobodies. Maybe that’s not possible: maybe the universe of Bloomberg subscribers is the maximum size that an open network, where everybody is connected to everybody else, can get. At some point, surely, spam starts becoming a problem.

But surely it’s inevitable that Bloomberg’s social network will make its way onto the internet at some point, somehow. When that happens, it will become an immediate and obvious competitor to LinkedIn. And if LinkedIn is worried about that potential competition, maybe it should be receptive to any overtures it receives.

The Daily has reached the end of its life: as News Corp splits in two, its losses, which might have been manageable within the current behemoth, would have loomed far too large in the smaller spinoff.

The news is not particularly surprising, but it would be wrong to simply dismiss it as a Murdoch folly which holds few lessons for anybody else. Rather, I think that The Daily has taught us all an important lesson — which is that tablets in general, and the iPad in particular, are actually much less powerful and revolutionary than many of us had hoped. Specifically, far from being able to offer richer content than can be found on the web, they actually find themselves crippled in unexpected ways.

News apps, it has become clear, are unwieldy and clunky things. Every issue of a new publication has to be downloaded in full before it can be opened; this takes a surprisingly long time, even over a pretty fast wifi connection. That’s one reason why web apps can be superior to native apps: no one would dream of forcing people to download a whole website before they could view a single page.

On top of that, the iPad’s native architecture is severely constrained in many ways. Look at any publication you’re reading in an iPad app, and search for a story. Oh, wait — you can’t: search is basically impossible within iPad apps, which at heart are little more than heavy PDF files, weighed down with multimedia bells and whistles. Navigation is always difficult and unintuitive, and pages are never remotely as dynamic as what we’ve become used to on the web. This wasn’t The Daily’s fault. Again, take any native iPad publication at all. Read to the end of a story, and then see how many headlines you can click on: which stories are you being given the choice to read next? The answer is probably none, and again the reason for that is built deep into the architecture of the iPad, and of other tablets too.

When the iPad was first announced, there were lots of dreams about what it could achieve, and how rich its content could be. But in hindsight, it’s notable how many of the dreamers came from the world of print. Web people tended to be much less excited about the iPad than print people were, maybe because they knew they already had something better. The web, for instance, doesn’t need to traffic in discrete “issues” — if you subscribe to the New York Times, you can read any story you like, going back decades. Whereas if you subscribe to a publication on a tablet, you can read only one issue at a time.

I’m reminded, here, a bit of Apple’s iOS Maps debacle. Compared to old-fashioned static maps, Apple’s maps are amazing. They also come with clever 3D views: an impressive bit of technological gimmickry which doesn’t add a huge amount of real value. But while Apple was working on rendering technology, Google was incrementally improving its own maps in much more useful ways, employing a huge team to add vast amounts of rich data every day. The result was that by the time Apple’s maps launched, they were inferior in most ways to Google’s alternative.

Similarly, when the iPad launched, it allowed people to do things they could never do with a print publication: watch videos, say. But at the same time the experience was still inferior to what you could get on the web, which iterates and improves incrementally every day. The iPad then stayed still — the technology behind iPad publications is basically the same as it was two years ago — even as the web, in its manner, predictably got better and better. No iPad publication is remotely as innovative or as fun to read as, say, BuzzFeed, because BuzzFeed has coders who can do very clever things with their chosen platform, and iPad publications don’t. If you’re publishing on the iPad, you’re basically a designer rather than a coder, and you’re far more limited in what you can do. This kind of thing, for instance, works OK in Safari for iPad, but you won’t find it in a downloaded publication.

One of the things that confused me, when The Daily launched, was the way in which it failed to leverage the wealth of rich and valuable content available within News Corp. You couldn’t watch episodes of The Simpsons, you couldn’t get access to amazing footage from Avatar, you couldn’t read exclusive extracts from HarperCollins books. Murdoch was happy to spend a large eight-figure sum on building custom-made content for the new publication; he even shelled out for a Superbowl ad. But he never managed to use The Daily as a means of bringing his company’s already-existing content to life in new ways for a new platform, and I suspect that iPad constraints are part of the reason.

Tablets, it turns out, are a great way to consume content which was designed for some other medium, like books, movies, and videos. But weirdly, magazines and newspapers are having a harder time of making the transition: there are many books I prefer in electronic format, but there isn’t a single magazine or newspaper which I’d rather read on the iPad than on paper.

The promise of the iPad was that it would usher in a rich-media world combining the versatility of the web with the high-design glossiness of magazines; the reality is that it fell short on both counts. The Daily was Rupert Murdoch’s attempt to get a head start in the new medium, but in this case the medium simply isn’t good enough to get traction: the only iPad-native content which has worked really well has been games.

As far as news and journalism are concerned, the verdict is in: tablets aren’t a new medium which will support a whole new class of publications — there’s almost nothing you can do well on a tablet that you can’t just put on a website and ask people to read in a browser. Publications of the future will put their content online, and will go to great lengths to ensure that it looks fantastic when viewed on a tablet. But the tablet is basically just one of many ways to see material which exists on the internet; it’s not a place to put stuff which can’t be found anywhere else.

Rupert Murdoch is quoted in today’s press release as saying that “The Daily was a bold experiment in digital publishing”, and he’s right about that. Someone needed to see whether there was such a thing as tablet-native journalism, and Murdoch took that role onto himself. The answer, it turns out, is no. But we didn’t know that when The Daily launched in 2010. Now we do.

Update: Some good responses in the comments, and also from Ben Jackson.

Update 2: Gruber weighs in, and of course is a must-read. I’m going to revisit this subject, after doing a bit of homework. But to make one thing clear: I’m not saying that there’s no such thing as a good tablet news-reading experience. I’m saying there’s no such thing as good tablet journalism: that is, journalism made for the tablet specifically. If you take, say, an old-fashioned long-form text story, there are ways to make it a joy to read on tablets. (Just like books can be a joy to read on tablets.) But there’s nothing tablet-specific about that. If you look at something like Marco Arment’s The Magazine, the app is lovely, clean, and lightweight. But it doesn’t take specific advantage of the tablet format to do the kind of journalism which can’t be done in a different medium.

I had a fascinating lunch, a couple of weeks ago, which lodged in my mind the idea that stock picking, at least when practiced by individuals, is best analyzed as an upper-middle-class hobby rather than as purely profit-focused investing activity. Once you start looking at it that way, suddenly a lot of behavior, which looks irrational under most lights, starts making a lot of sense.

For instance: subscriptions. These things are serious money-makers, whether they’re old-fashioned newsletters, whether they’re Barron’s subscriptions ($149/yr), or whether they’re slightly more high-tech products like the various subscription products at thestreet.com (between $152/yr and $1,040/yr), Minyanville (between $499/yr and $899/yr), or, now, at Seeking Alpha ($2,388/yr).

These prices aren’t always completely transparent (good luck trying to find the Minyanville prices on their website, for instance), but they’re high for a reason: they’re sending the message that the subscriptions are meant to make you money. At the same time, however, if you compare these sums to the sort of money that the upper-middle classes spend on, say, golf, then they don’t look quite so large. A golf habit is unlikely to cost you less than $5,000 a year, and can cost tens of thousands, not including the extra amounts that many people pay to buy real estate on the golf course.

What’s more, the number of golfers in America is significantly larger than the number of stock-pickers. This is a niche market, which means again that prices need to be high: you’re never going to sell millions of subscriptions to anything.

One thing worth noting here: stock picking, even more than golf, is an overwhelmingly male hobby. Put aside all the mathematics about how individual investors consistently underperform the market and pay enormous fees to various financial-service middlemen; all you really need to know is that if something is done only by men, it probably isn’t particularly sensible.

Still, the Seeking Alpha model is an interesting one: they’re basically crowdsourcing their subscription product, by offering their contributors between $100 and $500 per article (or more, if the article gets lots of page views), if they consider the post high-quality enough to qualify for the Seeking Alpha Pro product.

You can do the math: Seeking Alpha says that it wants to feature five “Alpha-Rich” articles per day on its pro site, for which it will pay $500 apiece. Let’s say it also features a couple of dozen Pro articles at $100 a pop: that adds up to an editorial budget of $5,000 per day, or about $1.25 million per year. Divide that by $2,388, allow some budget for in-house editors and the like, and the product looks like it will break even once it gets to about 600 subscribers. Which is not all that many, considering Seeking Alpha gets about 4 million visitors per month from the US alone.

I would never recommend any stock-picking subscription, just as I would never recommend stock-picking. But the Seeking Alpha model is quite a clever one: the articles are behind a paywall for 1-3 days, then they get opened up to the public, where they can accumulate a decent comment stream and give the author (as well as the subscription product) the oxygen of publicity. After that, they go back behind the paywall, because even old analysis is valuable when you’re dealing, as Seeking Alpha wants to do, primarily with undercovered small-cap stocks.

What’s more, it stands to reason that a crowdsourced product is likely to provide more value than product with just one or two authors: no individual can come up with that many insightful ideas, and Seeking Alpha Pro is able to prominently feature ideas from contributors who might only have one or two great analyses per year.

Still, the ultimate value of any such product is ultimately likely to be negative rather than positive, if only because once you’ve paid for it, you’re going to want to act on it. And the minute you start trading stocks on your own, you become the dumb money.

How much is the real cost of a subscription, then? The $2,388 a year is just the up-front cost, but on top of that you need to layer on your trading fees and your general underperformance. What’s more, if you’re subscribing to Seeking Alpha Pro, you’re probably subscribing to other products, too. Call it $5,000 a year, all-in.

Which is actually not that much, compared to other hobbies: I know people who can spend $5,000 on a single bicycle. If you’re into classic cars, $5,000 is nothing. And similarly, if you’re skiing or flying around in small planes or even just taking a luxury vacation once a year, $5,000 can be a relatively modest sum for a reasonably affluent person. And none of those hobbies come with the extra thrill of dreaming that they could end up being highly profitable.

One thing I would note, though: from a financial-media perspective, you’re limiting yourself enormously if you spend too much time chasing that small group of hobbyists — especially if you’re not trying to sell them subscriptions. Look at the enormous number of websites which put stock tickers next to company names, so that the hobbyists can see exactly what the stock in question is doing that day. It makes the site seem as though it’s targeted at silly males, rather than at a broader, smarter audience.

As a rule: if you want to attract women (and most men for that matter) as well as the stock-picking men, get rid of those tickers and sparklines and constant reminders of what the market did today. Most of the hobbyists are perfectly capable of reading a news article about Apple without being told what the company’s ticker symbol is. But the rest of us find such things incredibly annoying.

Back in mid-2010, the FT’s Money Supply blog disappeared behind the FT paywall, with promises that it wouldn’t be the last. From the top on down, the general attitude at the FT has been clear: the idea that the FT should publish information for free is “an absurd notion”, and given that the FT’s blogs are part of its high-value content, there’s no reason why they, too, should be free.

The problem was always that the FT’s best blog — representing a large chunk of its most valuable and highbrow content — was its Alphaville flagship, which consistently fought tooth and nail to remain free. Alphaville is incredibly good at reaching the leaders, especially in the US, that the FT desperately wants to reach even if it can’t persuade them to buy a subscription. And with Alphaville free, it was hard to put the FT’s other blogs behind the paywall.

So 2011 came without any new paywalled blogs, and then 2012. Finally, today, in a comment, Alphaville’s Lisa Pollack has announced the FT’s retreat from the whole idea. “The Powers hath spoken,” she writes: “Money Supply will be made consistent with the rest of FT blogs.” Which means that it will be free, at least in monetary terms.

There’s a quid pro quo, though: if you’re not paying in money, you’re going to pay in terms of personal information. From November 19, all FT blogs, including Alphaville, will reside behind the FT’s registration firewall: if you haven’t registered, you can’t get through. The idea is that if the FT knows who you are, it can target its ads better, and get more money for them.

The registration-wall compromise is an interesting one, and seems to be happening with much less fanfare than we heard in 2010, when the paywall went up. If the FT wanted, it could paint this as part of what you might call a ziggurat model: the first couple of articles you read each month are completely free, and then there’s a blog layer which is free with registration, and then there’s a newsier layer which costs a certain amount of money, and then there’s the Lex layer on top of that, which costs even more, all the way up through the high-dollar newsletters and even the subscriptions to services like Medley.

But it’s hard to square a rich free-with-registration layer with the FT’s stated philosophy that if its content is of value, then it should not be free. There are basically two choices here, both unpalatable to the FT. One is that the blog layer effectively institutionalizes the FT’s blogs as a kind of ghetto, and implies that the content on the FT’s blogs is somehow less valuable than the rest of the FT’s content. Alternatively, and more worryingly for the FT’s model, it implies that genuinely web-native content, with links and comments and interaction and everything else we’ve come to love over the past decade or so, is almost impossible to pull off behind a paywall, and that if and when all FT journalism starts embracing such methods, the newspaper’s model is going to run into serious difficulty.

My view is that both are true — at least so long as the FT refuses to follow the NYT and allow free access to people following links from social media or other websites. As long as millions of people hit the FT’s paywall every month, it’s basically turning away the very readers it should be attracting — including, incidentally, a lot of subscribers who get perennially annoyed when they too hit the paywall. The world of online information is becoming fragmented by social media, and people simply don’t read the FT the way that the FT wants them to read the FT: by navigating to the home page and then reading through stories which interest them. They want to talk about stories with their peer groups, and there are very, very few people out there who can comfortably assume that most of their peer group has an FT subscription.

So there’s a big long-term external problem with the way the FT’s paywall is set up — and it helps to create an internal problem, too. So long as the news side rather than the blog side is the part of the business which is bringing in subscription revenue, the FT will overvalue the news side and undervalue the blog side — no matter how important or valuable the journalism produced by the blog side. The result is bloggers who feel underappreciated, and who get the clear message that they should move over to the less web-native news side if they want to climb the FT career ladder.

All that said, it’s still good news that the FT has finally decided to retreat from its decision to paywall its blogs — a decision which was always born more out of ideology than of practicality. I just wonder what’s going to happen if and when the rest of its news hole becomes bloggier, as is happening at all major news organizations.

This will come as a surprise to absolutely no one, but the Financial Times is going up for sale, according to Bloomberg, with an asking price of £1 billion. (Pearson has denied the story, in less than convincing terms.)

That’s big number. Here’s the back-of-the-envelope: the FT Group made £22 million in the first half of this year, so £1 billion would be roughly 23 times earnings. But the FT Group includes 50% of the Economist, which is highly profitable, as well as Medley Global Advisors, Mergermarket, and sundry other bits and pieces. I’m not entirely sure why Pearson would want to hold on to those things after selling off the FT, but the report is that it’s the newspaper, rather than the Group, which is for sale. (Maybe Pearson reckons it can fetch more by selling the Group off in parts than it could selling the whole.)

Pearson hasn’t said whether the FT is profitable on a standalone basis, but if it does make money, it doesn’t make much. There is lots of value in the FT brand, but it’s not the kind of value you can compute with a DCF analysis. Whoever buys the FT will not be doing so in the expectation that it will pay for itself through profits: to the contrary, I fully expect any acquirer to spend a substantial amount of money investing in the FT over and above the purchase price.

Up until now, Pearson has had a strategy of trying to maximize cashflow from the FT: it charges enormous sums for subscriptions, and generally behaves as though it wants to extract the maximum amount of money from the newspaper before the franchise dies. The strategy was once explained to me in very simple terms: that it would be downright embarrassing for a newspaper called the “Financial Times” to be a money-losing operation. As a result, the FT does everything it can to maximize profits, even if that means reducing the value it provides to subscribers. (Everything from Lex to China Confidential, for instance, gets its own surcharge, making a lot of FT content off-limits to people spending $350 per year or more.)

It is unlikely that the FT’s new owner, if and when the paper is sold, will take the same approach. After all, the current strategy will never generate $1 billion of value: that’s why Pearson is being sensible by selling rather than holding. Here’s how Michael Lewis explains it:

The right price to pay for a newspaper is a bit like the right price for a sports team or a work of art: whatever some rich person is willing to pay. And as profits dwindle, that rich person is paying less and less for the cash flows, and more and more for the cachet…

There’s a word for an investor who clings to an asset whose chief value, its cachet, is of virtually no value to them: insane.

Pearson loves to repeat that “the FT is a valued and valuable part” of the company, but there’s a good reason why public, listed companies tend not to own things like sports teams or works of art. For that matter, Pearson is one of very, very few public companies which own newspapers and which don’t have a dual-class share structure giving control of the company to some mogul or family. The buyers might not be doing DCF math, but the sellers do it all the time, and the value of $1 billion to Pearson is vastly greater than the present value of the FT’s future cashflows would ever be.

The new owner, of course, will want to get $1 billion of value out of his investment, but he won’t be trying to get there by using the FT’s current playbook of constantly raising subscription rates. That, along with its paywall paranoia — the determination with which it attempts to prevent non-subscribers from reading all but the tiniest amount of FT content — means that it is actively repelling the population which is its best chance at future growth and relevance.

The FT loves to tell advertisers that it reaches lots of very rich and important high-level executives, which is true. Newspapers sell readers to advertisers, and those executives are where the money is right now. But they’re not where the money will be, in say a decade’s time. When Rupert Murdoch bought the WSJ, I expected him to turn it into a formidable global brand, especially in China; instead, he invested millions in a new section devoted to New York City. It turns out that Murdoch’s desire to compete with and beat the NYT is greater than his desire to invest in an ultra-long-term project which would probably only pay off after he was dead.

But there are two huge global news companies which are desperate to make inroads in China and other fast-growing countries: they have an enormous strategic interest in reaching the next generation of global technocrats, and they know they can’t do that with terminals alone. They need something which can travel more easily, something with a first-rate reputation: a foot in the door, if you will. To Bloomberg and Thomson Reuters, the value of the FT is not in its profitability, but rather in its reach and its reputation. It’s one of the very few possible ways of reaching the people who will be running the world in 10 or 20 or 30 years’ time — no matter what country they currently live in.

The FT isn’t there yet: it’s still far too reliant on its UK business-news monopoly. Articles like “Foreign demand in London boosts Telford” only really make sense in a physical newspaper read on commuter trains into the UK capital, but we’ll keep on seeing them, so long as that physical newspaper is attractive to a lot of UK advertisers. For all that media executives love to talk about globalization, the fact is that for the time being there’s precious little genuinely global advertising, and there’s still more money in UK print ads than there is in glossy B2B online-branding campaigns aimed at international business executives.

And there’s another inconvenient fact for would-be acquirers of the FT: journalism doesn’t have economies of scale. The bigger that journalistic organizations become, the less efficient they get: salaries rise, new layers of editors and managers appear, and per-person budgets grow all everywhere, for everything from IT to travel expenses. Journalism is a world of diminishing returns: size matters, but it’s also very expensive. If the FT was absorbed into a much larger organization, its editorial budgets would end up rising even before the new owners started investing money in putting reporters all over the world, building the foundations for future relevance.

The Bloomberg story does mull the prospect that the FT could end up being a vanity purchase for a billionaire “from Russia, the Middle East or Asia”; this is possible, but my guess is that it’s unlikely. For one thing, Michael Bloomberg and David Thomson are just as rich as anybody who might think about putting themselves on the list, and they actually know how to make money out of news. And on top of that, Pearson wouldn’t just sell to the highest bidder: they might be a public corporation, but that doesn’t mean they’re completely insensitive to the optics of these things.

The most intriguing part of the Bloomberg story, for me, is the bit where it says that Thomson Reuters may decide not to make an offer. That would be sad: I would love to have the FT’s amazing roster of journalists in-house here at Reuters, although of course all such decisions are vastly above my pay grade. (It should go without saying, but I’ll say it anyway: no one here ever tells me anything, and you should probably believe the opposite of what I say.) If Thomson Reuters decides not to get into a bidding war, that would surely have a huge effect on the dynamics of any negotiations. But ultimately, the FT belongs in a media company, not at Pearson. And although it might take a while to get there, that will almost certainly happen at some point during the tenure of Pearson’s incoming CEO, John Fallon.

Simon Dumenco has a question: would you rather own a magazine, or a digital startup? He notes that some magazines are making real money these days, including Marie Claire, even as most digital startups fail. Old Media isn’t sexy, he says, but “a lot of magazines continue to be not only damn good businesses, but are doing better than ever.”

I don’t know about the better-than-ever thing: I’d need to see some numbers before I was persuaded on that front. At any given point in time, statistically speaking, some small set of magazines is going to be having a record year. But in aggregate, ad-supported magazines — which are the magazines Dumenco’s talking about — are ultimately in the business of attracting the attention of readers, and then selling that attention to advertisers. These days, there are more demands on our attention than ever, and they are more convenient than ever. If you have some time to while away , you can still read a magazine. Or, you can pick up your phone, and play Angry Birds, or check your email, or Twitter, or Facebook, or, well, I’m not telling you anything new here.

As a long-term investment, then, I’d be worried about owning a magazine, no matter how profitable it might be today. The fashion books will probably last longer than most, although as their audience spends less time with magazines and more time on Pinterest, inevitably they won’t be able to charge quite as much as they used to for that audience’s attention.

In terms of short-term cashflow, on the other hand, it’s no contest. Digital startups are designed to burn all of their revenues and then some: if you’re making money every quarter, you’re doing something wrong. So if, like Dumenco, you’re looking primarily at current profitability, the choice is clear: magazines will always win that fight, even unto their dying day.

If you’re the kind of owner who likes old-fashioned things like owning a profitable enterprise, then, there’s a decent case for sticking with ink on paper. If you own a digital startup, the chances are that it will lose money either until it goes bust, or until you sell it. But at that point, of course, you could make a fortune.

There are a handful of people who have turned digital media properties into steady money-spinners; Nick Denton springs to mind, and the reason that the Bleacher Report sold for $180 million is just that it was extremely profitable. But Dumenco’s talking about how the press likes to “treat venture capitalists like rock stars”, and venture capitalists aren’t in the business of cashing quarterly dividend checks. The big difference between VC owners and the rest of us is that VC owners expect their companies to lose money. That, in many ways, is their big competitive advantage: they’re sitting on enormous amounts of money entrusted to them by their investors, and it’s their job to spend that money in a no-holds-barred attempt to build the most valuable companies they can. Until, after five or ten years, they have that glorious exit.

What happens after the exit? Well, the company isn’t a startup any more, that’s for sure. And by that point the VC owners are on to their next thing. It’s not their job to build some great eternal franchise like, say, Vogue: they don’t have that kind of time horizon. In any case, the digital world moves so fast that there’s really no such thing as an eternal franchise any more.

The simple answer to Dumenco’s question, then, is this: what kind of owner are you? Do you mark your holdings to market, and reckon that you’ve made money if your company is worth more this year than it was worth last year? Or do you instead want to own a property which makes a lot of money, and which can continue to support your lavish lifestyle indefinitely, just by dint of the profits it makes? Similarly, do you like to take risks, or is it more important to you that the assets you own preserve their value over time?

But of course things aren’t as simple as that. Just look at Variety, which Reed Elsevier recently sold for $25 million, after previously turning down offers as high as $350 million. Or look at TV Guide, which went from being worth billions to being worth nothing at all over the course of two tumultuous decades. Newsweek is not alone in “going to zero”, as the financial types have it: Dumenco might be happily handing out awards to Food Network Magazine, but he sure isn’t giving out any gongs to Gourmet, which was unceremoniously shuttered in 2009, along with a magazine — Modern Bride — which was pretty much nothing but ads. And I myself worked for Condé Nast Portfolio for nearly all its two-year existence, during which time it managed to burn through something on the order of $100 million. Even digital startups don’t generally lose money that quickly.

The fact is that owning a magazine is a risky proposition. It might not be as risky as owning a single digital startup, but by the same token owning a stable of magazines could well be riskier than owning a portfolio of startups. Silicon Valley types love to moan about how difficult and expensive it is to hire good engineers these days, but the cost of running, printing, and distributing a national magazine dwarfs the costs of any startup not called Color. And what’s more, most of those costs are fixed, not variable. The economics of magazine publishing are ruthless: if your revenues exceed your costs, then any marginal money you bring in is almost pure profit. Which is why profitable magazines tend to be very profitable. But if your revenues are lower than your costs, it’s incredibly difficult to cut back, and you’re probably doomed.

My answer to Dumenco, then, is that given the choice, I’ll choose the startup. Just look at his winners, this year: they’re all worthy awardees, I’m sure, but there’s no one on the planet who could have predicted even a few years ago that Harper’s Bazaar, Allure, and Traditional Home were particularly well positioned for this kind of glory. There’s something scary and random about the magazine industry — and in the world of magazines, failure hurts, much more than it does in Silicon Valley, where it’s a veritable badge of pride.

I’m not saying that print is dead: it isn’t. That said, it’s definitely showing symptoms of old age and decline — and all those high-tech pill bottles labeled “mobile strategy” or “native advertising” aren’t going to change the underlying diagnosis. Venture capitalists don’t mind pouring money into digital startups, because the value of those startups, if things go well, will rise ten dollars for every dollar the VC spends. That’s an attractive business to chase. In the magazine industry, by contrast, it’s still very much possible to make profits. But how much is your magazine worth? If you make $10 million a year, but the value of your magazine is $40 million lower each year than it was the previous year, you’re not in a good position.

Moreover, what happens if you do fail? The failed magazine publisher has a dim future indeed; the failed digital-startup visionary is immediately showered with new opportunities.

I’m no great fan of VCs, while I’ve been a lover of magazines all my life. But the overwhelming majority of my media consumption these days is digital, and magazines in general are beginning to seem a bit slow and uninspired. I go to the airport newsstand because I know I’ll be asked to turn my electronic devices off — and even then, more often than not, I end up buying nothing.

All the magazines I’ve had over the years have had some kind of “wow” factor — something which made them seem a few steps ahead of wherever I happened to be. I still get that “wow” factor today — but I get it almost entirely online. The age of the magazine is coming to an end, slowly; the age of digital is only in its infancy. And that is why, Simon, the uncertainties of digital ultimately trump the storied legacy of print.

It’s hard to make money in journalism, and even harder to make money in print journalism. But here’s what I don’t understand: invariably, every time a print publication fails, it announces that it’s not going to die, it’s just going to “transition to an all-digital format”. Newsweek, of course, is no exception. But this is supposed to be the clear-eyed, hard-hearted world of Barry Diller:

If doesn’t work out? Move on! “Sell it, write it off, go on to the next thing,” he says.

Once upon a time, Newsweek was a license to print money; from here on in, it will be a drain and a distraction. Merging it into the Daily Beast never made a huge amount of sense, and now it’s being de-merged: instead, its journalism “will be supported by paid subscription and will be available through e-readers for both tablet and the Web”. Some of it, I guess, will be syndicated to the Daily Beast.

The chances that Newsweek will succeed as a digital-only subscription-based publication are exactly zero. If you had a team of first-rate technologists and start from scratch trying to create such a beast, you’d end up with something pretty much like Huffington — which lasted exactly five issues before bowing to the inevitable and going free. There’s no demand for a digital Newsweek, and there’s no reason, either, to carve off some chunk of the NewsBeast newsroom, call it “Newsweek”, and put its journalism onto a platform where almost nobody is going to read it.

What you’re seeing here is, basically, path-dependency. If Barry Diller were given the Newsweek brand on a plate, he would never invest in turning it into some kind of subscription-based digital-only operation. The opportunity costs alone are too big: the same money, invested in the Daily Beast or in some other property with a chance of succeeding in an increasingly social world, would surely have a much higher probability of generating positive returns.

Instead, Newsweek is hitching its fortunes to a motley group of e-readers (Zinio!), all of which are based on pretty clunky old publishing technology, and none of which have any ability to take advantage of the social web. Magazines are dying, and millions of people are buying tablets and e-readers: that much is true. But I simply don’t believe that Barry Diller and Tina Brown really think, in their heart of hearts, that they have the unique ability to build the world’s first successful subscription-based tablet-first publication where so many before them have failed. Especially not when that publication is forced to bear the legacy “Newsweek” name.

Brown, remember, killed off Newsweek.com as soon as she took control of the magazine: she decided that while the brand had some kind of meaning in print, the digital future belonged to the Daily Beast. With today’s announcement, she seems to be attempting some kind of freemium strategy: give away the Beast for free, and then charge for the, er, premium content in Newsweek. The problem being, of course, that the whole point of merging Newsweek with the Daily Beast was that in an online world where nothing is more than a click away, Newsweek content isn’t more valuable than anything else. That’s certainly not going to change after today’s layoffs.

All of which is to say that today’s announcement (the “all-digital” bit, that is, not the killing-off-print bit, which was simply inevitable) is basically an exercise in face-saving. When it comes to the optics, it’s always more respectable, more techno-visionary, to do something new and digital than it is to simply close down and write off a failed acquisition. Newsweek’s journalists have already been incorporated into the Daily Beast newsroom: shutting down the printing presses and moving on would simply be recognizing the reality of a world where neither Sidney Harmon nor his family wants to subsidize the magazine any more.

Instead, Newsweek is going to have to suffer a painful and lingering death. There’s no way that first-rate journalists are going to have any particular desire to write for this doomed and little-read publication, especially if their work is stuck behind a paywall. At the margin, it will certainly be better to work for the Beast than for Newsweek: the supposedly “premium” arm will in reality be the bit which smells like old age and irrelevance. It’s not going to work. So, really. Why even bother?

Padraic Fallon died on Saturday night, age 66. The news came as a shock to me, not least because I was pretty sure that Fallon was 66 years old back in 1995, when I first met him. Euromoney, naturally, is the place to turn for a characteristically warm and spicy remembrance, but you can be sure that across London — and large swaths of Ireland, too — there are thousands more such remembrances being retold tonight, always with an alcoholic accompaniment.

It’s rare to find an English financial journalist who hasn’t intersected with Padraic at some point. (He’s one of those men known universally by their first names; one of the pleasures of working for Euromoney was listening to bankers mangle the pronunciation of “Padraic” while affecting a close friendship with the man.) Thousands of us went through the legendary Euromoney Publications graduate-trainee scheme, where the first thing we were told to do was to read his famous, and quite intimidating, style guide. And then, for those of us who worked on Euromoney magazine, there were the occasional editorial meetings chaired by the man himself in the company boardroom. The first words Padraic ever spoke to me were at one of those meetings. I remember those words to this day: “Are you wearing an earring??”

I realize now — and only now — that Padraic was still in his 40s at the time, but the cigar-chomping chairman was already a legend. Everybody who read his style guide knew that he was a fantastic writer, with a copy-editor’s eye for detail. But then he was so much more: a fantastic reporter, for one. And a fantastic editor. And an excellent publisher, who could sell and charm (or charm and sell) as well as anyone. And a highly-aggressive businessman, to boot, who always paid himself handsomely: last year alone he made about $8.5 million.

On top of that, Padraic was never a man shy about his opinions: one of the ways that he built Euromoney into a powerhouse in the first place was by being unapologetic about being a cheerleader for the then-nascent Euromarkets — basically, the market for offshore dollars, which weren’t taxed by the U.S. government. While at the same time relishing the scoop and the scandal as much as any journalist.

The opinionated founder-editor-publisher, of course, is the kind of person we see a lot of these days: think Mike Arrington, or Nick Denton, or Josh Marshall, or many others. In that sense it’s a very modern role, but it’s also as old as publishing itself, and Padraic was one of the masters. He also understood, long before the World Wide Web was even invented, the power of having multiple platforms: he was early to branch out into conferences, book publishing, and like. He also, I believe, was responsible for the Euromoney Awards: if you haven’t heard of Euromoney magazine, you’ve certainly seen the awards logo appear in the corner of hundreds of bank advertisements all over the world.

Padraic could make mistakes: his ideology and his ambition led him to the board of Allied Irish Bank, where he served from 1998 to 2007, overseeing the very years where the bank overstretched itself massively and then ultimately became insolvent. He also asked me to design a new publication he had decided to put out, called MTNWeek. But to err is human, and in many ways the most attractive thing about Padraic was just how human he was.

Every so often I’m asked how I ended up doing what I do; ultimately, the man responsible for my entire career, such as it is, was Padraic Fallon. He pretty much invented the idea that journalists could have huge success writing about bonds for a living, and he instilled in me a deep understanding of the bond market (and its corollary, a deep mistrust of the stock market) which served me very well indeed, first when I was writing about sovereign debt restructurings in the early 2000s, and then when I started blogging the financial crisis.

Padraic was very old-fashioned in many ways: the cigars, the dinners at the Savoy, the chauffeur-driven car. But he was also a great believer in modernity and change, and in particular the ability of small groups of badly-paid twenty-somethings to out-work, out-report, and generally beat much larger groups of much more well remunerated veteran reporters. Padraic gave thousands of us hugely valuable transferrable skills, as well as the idea the bond market is always the most important market, anywhere. He was surely right about that.