Felix Salmon

Content economics, part 2: payments

Felix Salmon
Mar 3, 2013 09:57 UTC

Apologies for the delay between part 1 and this: I wanted to wait until Amanda Palmer’s TED talk appeared online, because it’s an important part of the other big aspect of content economics. Part 1 was about the ability of publishers to sell readers to advertisers; part 2 is about the ability of publishers to persuade readers to pay the publisher directly.

There are basically three ways to go about this. You can put up a paywall; you can ask for donations; or you can sell non-digital things to your digital audience.

On its face, Palmer’s talk is about the second strategy, but in fact it’s about all three. (And yes, I’m the “financial blogger” referred to in the talk.) For instance, when it comes to online publishing, why are paywalls more common than tip jars, despite the fact that they’re much more difficult to implement? Palmer does a great job of walking us through the answer to that question: there’s something shameful, there’s a whiff of the panhandler, in asking strangers for money.

At the beginning of the talk, Palmer talks about her early career as a living statue, and the people who would drive by, shouting “get a job!” as she waited for people to drop money into her hat. The implication, of course, was that being a living statue is not a job (its surprisingly consistent revenue stream notwithstanding), and that a living statue’s income represents an entirely one-way transmission of value: spectators give money, and receive nothing in return. The rest of Palmer’s talk is an attempt to explain that the value goes both ways, and that there is (or should be) nothing shameful about creators asking for money. But the attitude she’s pushing against is deeply ingrained.

A couple of weeks ago, for instance, I asked Andrew Sullivan why he chose to put up a paywall rather than putting up a tip jar. His answer (at about 23:00) was unambiguous:

This is not a tip jar. And it is not a pledge drive. It is a subscription. And that makes it a different proposition. It’s telling people I’m not an amateur, and I’m not a charity. I’m doing work that I’m asking people to pay for. And it seems to me that at some point, we have to say that, in new media. Or else it is not going to continue to exist…

I had two pledge drives early on, in 2002 and 2003, which netted a certain amount of money. But this is a different model. This is trying to make it sustainable, long term: don’t give it money just because you like me. We are trying to create an actual site that is news and opinion that people value and pay for, and become associated with in the long run. We could have done a tip jar. We decided no. We wanted to be a business. And do it the right way.

The distinctions here are subtle ones: Sullivan still nags his readers, just as public radio does during its pledge drives, but in his mind those nags aren’t part of a pledge drive, because he’s a business, rather than an amateur, or a charity. And similarly, although he raised $500,000 from readers before his paywall even existed, those dollars weren’t donations, for much the same reason. There’s something shameful, on this view, about working for tips; there’s an unpleasant neediness about asking for charity. And it was those reasons, as much as any simply financial considerations, which resulted in Sullivan plumping for a paywall model.

Truth be told, Sullivan’s paywall is not much of a wall at all. 70% of his readers don’t click on the read-on links at all; they just stay on the home page, which is always free. And of the 30% who do click on read-on links, 91% are still within their allocation of seven free stories. Which means that overall, just 2.7% of his readers are reaching the point at which it gets a little bit harder to read what they want to read. And the actual number is lower even than that: many of his readers use RSS readers to consume his content, or else they disable cookies, or otherwise don’t get counted among the people visiting his website.

But as Sullivan would probably agree, the choice between a paywall or a tip jar is not as clear-cut as it sounds: realistically, it’s more of a spectrum. Some paywalls are forbiddingly high “Berliners“: if you don’t cough up, you have no access. Most, however, are porous to a greater or lesser extent. The Times and Sunday Times of London will give you the first 75 words or so of any story; the New York Times will allow you a certain number of free articles per month, plus all articles arrived at from external sites; the WSJ will let you in if you’re coming from Google, or from a link which has been emailed to you by a subscriber. At other sites, the wall is drawn around some content but not all: the New Yorker, for instance, puts only some of its magazine content online for free, while the Boston Globe hides all of its content behind a Berliner paywall but then allows a subset of that content onto Boston.com for free.

None of these models is obviously better than any of the others. No paywall lasts untouched for long: all publishers are making decisions to put up or take down paywalls every day, and it can be hard to keep track of which publications have which model. (Right now, for instance, without looking, I genuinely can’t remember whether the Economist is paywalling any of its content or not.) Just in the past few days, we’ve seen one high paywall demolished, at Variety; there, the new proprietor, Jay Penske, called it the “end of an error“. Meanwhile, another paywall has been erected, at Fortune: for the time being, for now, most Fortune magazine content is now behind a wall, while online-only content is free.

In an editor’s letter which isn’t online, Fortune’s Andy Serwer says that “we consider Fortune’s content valuable enough that we have decided not to give it all away online”. The unfortunate implication is that the online-only content, including the excellent Term Sheet blog, is not valuable enough to be worth charging for. On the other hand, if you look at the pricing, you’ll see that the cost of a digital subscription — $19.99 per year — is exactly the same as the cost of a digital subscription plus home delivery of the magazine. And the unfortunate implication of that is that all the extra value one finds in a magazine — the art direction, the layouts, the ability to read it while waiting for your airplane to take off — is also worthless. (Contrast that with the NYT paywall, which doesn’t really charge for the content at all, but rather for the online ability to navigate from one story to another.)

The real reason why Fortune put up a paywall, of course, has nothing to do with how valuable Andy Serwer thinks the magazine’s content is. Instead, the paywall is just another way for the Time Inc brass to try to make money and keep the magazine’s rate base high, the idea being that people will be less likely to cancel their magazine subscriptions if they know that they won’t be able to read that content online for free.

Which brings up a fundamental rule of online subscriptions: there is zero correlation between value and price. There are lots of incredibly expensive stock-tipping newsletters which have a negative value: you’d be much better off if you didn’t subscribe to any of them at all. And of course there’s an almost infinite amount of wonderfully valuable content available online for free, starting with Wikipedia and moving on through the sites of organizations like Reuters, Bloomberg, the Guardian, and the BBC.

Or look what happened when Newsweek and Sullivan parted ways: both of them started subscription products, at almost identical prices. (Sullivan wants $20 per year; Newsweek wants $25.) That doesn’t mean the two products have almost-equal value; it just means that both Newsweek and Sullivan — just like Marco Arment, for that matter — came to the conclusion that the $20-a-year range was more or less the point on the supply-and-demand curve where they would maximize their income. They might be right about that; it’s hard to tell. Paywalls are put together in so many different ways, at so many different price points, that trying to work out their relative merits, in terms of income generated, is almost impossible.

But there’s another consideration, too: the more formidable the paywall, the more money you might generate in the short term, but the less likely it is that new readers are going to discover your content and want to subscribe to you in the future. Amazing offline resources like the Oxford English Dictionary and the Encylopedia Britannica are facing existential threats not only because their paywalls are too high for people to feel that they’re worth subscribing to, but also because their audiences are not being replaced at nearly the rate at which they’re dying off. The FT, for instance, has discovered that its current subscriber base is pretty price-insensitive, and has taken the opportunity to raise its subscription prices aggressively. That makes perfect sense if Pearson, the FT’s parent, is looking to maximize short term cashflows, especially if it’s going to sell off the FT sooner rather than later anyway. But if you’re trying to build a brand which will flourish over the long term, it’s important to make that brand as discoverable as possible.

And the lesson of very porous paywalls, like Sullivan’s, or even of pure tip jars, like Maria Popova’s, is that on the internet, people prefer carrots to sticks. That’s one of the lessons of Kickstarter, too. To put it in Palmer’s terms: if you want to give money, you’re likely to give more, and to give more happily, than if you feel that you’re being forced to spend money. If you look at the $611,000 that Sullivan has raised to date, essentially none of it has come from people who feel forced to cough up $20 per year in order to be able to read his website. To a first approximation, all of that money has come from supporters: people who want Sullivan, and the Dish, to continue.

Palmer concludes her talk by saying that “people have been obsessed with the wrong question: how do we make people pay for music. What if we started asking: how do we let people pay for music?” The same question can and should be asked about other forms of online content, too. Tomorrow Magazine raised $45,452 — more than three times its goal — from 1,779 people, none of whom felt in the slightest bit grudging about the money they were spending. A mere 296 people clubbed together to raise $24,624 for Baltimore Brew. 99% Invisible, a radio show, raised $170,477 from 5,661 people. And that’s just a few of the Kickstarter journalism projects which were funded in 2012. There are lots of other models, too, like membership of Longreads, or Spot.us, which helps to fund all manner of interesting and amazing journalism. What all of these projects have in common is that they’re free online even as they’re asking for money: they’re not going to punish anybody for not supporting them by throwing up a paywall and saying “well, in that case, we won’t give you access”.

As Palmer says, this kind of model involves something quite rare in the journalism community: the ability to trust that people will support you, even if they don’t have to do so. And the stronger the relationship you have with your readers, the more you’ll be able to trust them. This is why Palmer’s Kickstarter campaign was so successful: not because she had a lot of fans (that, in itself, doesn’t work), but because the connection she has with her fans was so strong. As Paul Smalera says, “digital media needs to reconnect to readers”:

For all of the hype around interactivity, big media is still primarily a one-way street. And the rise of programmatic ad-buying will only reinforce that trend. Most old media revenue officers aren’t going to care about connecting to their online audience, beyond understanding their aggregate profile and average value to an ad network. Yet cultivating those reader relationships on an editorial level can unlock all sorts of value, understanding, and yes, even revenue.

Twitter is great at this: readers are quite right when they feel that they know the people they follow on Twitter, in a way they never do just by reading polished content. But there’s more to connecting with your audience than Twitter. Indeed, the best way of all to do it is to venture out into the real world.

Events are one obvious way of doing that, and can be significant profit drivers in their own right. Atlantic Media is fantastic at monetizing its brand by putting on conferences, as are other franchises: the tech world is a particularly good place for such things, as All Things D or Wired or TechCrunch will attest. The NYT has its Dealbook conference, the New Yorker has its festival, and of course the business press has branched out into things like the Economist’s gatherings or the WSJ’s whole suite of events.

Big formal expensive events like these aren’t easy to put on, of course — they require large dedicated staffs, and a huge amount of effort. But non-sponsored events like Radiolab Live are a bit cheaper and easier, and anyone can cobble together a Meetup, or even just tell his readers to meet him at the Oyster Bar for an impromptu celebration.

And events are just one tiny part of the non-digital world which digital creators can put their brand on and sell. The whole Kickstarter phenomenon, for instance, is based on the idea that if you give enough money, you’ll get stuff in return. Palmer was offering glossy books and LPs and CDs and even (if you ponied up $10,000) promised to come and paint your picture and have dinner with you. Tomorrow offered a phone message from a porn star. 99% Invisible offered books and shirts and all manner of other stuff. Kickstarter is no tip jar: make no mistake, it has a very large element of e-commerce to it as well. Meanwhile, Monocle has seven stores around the world, plus an elaborate e-commerce site, and Mental Floss magazine makes a good third of its revenue from selling things.

Think of this as the flipside of content marketing: if brands can bypass publishers and create their own content in order to sell the stuff they produce, then publishers can bypass advertisers and sell their own stuff — be it a $40 chemistry cocktail set or a £415 cashmere scarf — to their readers directly.

The bigger lesson here is that when it comes to persuading your readers to pay you money, it actually helps to be small. There’s an exception for finance, of course, and also for the NYT, which is unique in many ways. But the lesson of Palmer’s talk is that while 25,000 supporters aren’t nearly enough to support a band on a record label, they’re more than enough to support a band on Kickstarter — or, for that matter, to keep an iPad magazine going strong. What’s more, while consumers can be very loyal to brands and to publications, in many ways it’s easier to become loyal to an individual, especially when she has an idiosyncratic and unique voice.

If you want to read The Dish, you can’t get there by going to thedish.com or to thedailydish.com or anything like that: you get there by going to andrewsullivan.com. The person is the site, and when that happens, the readership becomes much more willing to hand over money. Do I want to give Fortune $20 a year so that I can read its magazine articles online? No, I do not — especially when we live in a social world, where if I find a story I love, the first thing I want to do is be able to share it. On the other hand, I’m much more willing to spend $20 a year to support Andrew Sullivan, even if I rarely visit his site, precisely because I don’t particularly have to do so, and can read any of his stuff whether I pay him or not.

We’re not talking about micropayments here: those have never taken off, and I doubt they will, at this point. For a long time, people thought that the sheer size of the internet would enable enormous numbers of people to pay negligible sums of money, which would add up to substantial amounts in aggregate. The problem with that was that it’s just too hard to spend money online: the effort involved just isn’t worth it, for sums of a dollar or less.

Instead, the sheer size of the internet enabled the opposite to happen: it enabled smallish numbers of people to pay modest amounts of money, which can add up to just as much in total.

So if you’re a huge publicly-listed corporation, by all means create an elaborate paywall in the hopes that people will decide that they need your content and will just have to pay for it. Every so often, that can work, as it has at the FT and the NYT. But frankly I don’t think those examples are particularly replicable: they’re both sui generis in many ways. Instead, it seems to me, the most promising aspect of content payments is at the other end of the spectrum. Build up a relationship with your readers, in large part by giving your content away for free; ask for money with pride and shamelessness; and place no cap on how much you let your readers spend. Give them the opportunity, and you might be very surprised at what they’re willing to buy.


Well, maybe now we understand why Mr. Bezos, the country’s expert on low-friction purchases, has backward-integrated into “journalistic media properties & production.”

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Content economics, part 1: advertising

Felix Salmon
Feb 21, 2013 00:59 UTC

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.


The most preposterous thing about that Nielsen graphic is that people spend more than ten times as much time watching live tv as DVR’d TV. Really? The only people who sit through an ad these days (other than sports) are the ones who can’t find the remote. Upton Sinclair’s quote, “It is difficult to get a man to understand something, when his salary depends on his not understanding it” is totally relevant here. Neither the networks, nor the tv ad buyers, nor nielsen have any incentive to acknowledge how the world is changing, and they never will. We all just have to wait for them all to die, and then a new generation of ad buyers will redirect those ad dollars to online. And ‘site wraps’, as innovated by Denton, are very much branded advertising.

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The SEC’s weird newswire investigation

Felix Salmon
Jan 31, 2013 09:17 UTC

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 agree with Steve Hamlin’s point, especially since this particular embargo system “grew partly out of a 1905 scandal in which traders obtained confidential cotton-crop estimates”.

It also sounds like the FBI drove the investigation more than the SEC, I suspect because the embargoes in question are with departments of the federal government. Hypothesizing about the motives for the leak, my take is a combination of CYA (“we’re aware of this and being thorough”) and a not so subtle warning to Bloomberg, Reuters, and Dow Jones that they better toe the line.

Imagine the uproar if it did emerge that a few selected organizations were routinely gaming the embargo system to provide government economic reports to their data feed subscribers before the general release – even by a few seconds. I can write the summary of the Gretchen Morgenson column or Jesse Eisinger article: “All taxpayers fund the Labor Department to gather statistics about the U.S. economy. Hedge funds and investment banks then pay data providers for early access to get an edge over small investors.”

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Are annotations the new comments?

Felix Salmon
Jan 21, 2013 12:11 UTC

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.


“readers comment on individual sentences or paragraphs or arguments”

Well, you _can_ do this now, but it does require that the commenter explicitly include the pointer to the text.

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The game theory of #mintthecoin

Felix Salmon
Jan 9, 2013 17:43 UTC

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:

Don’t mint the coin Mint the coin
Threaten to mint the coin Bluff Open Defiance
Don’t threaten to mint the coin Negotiate Last Resort

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.


Frankly, I don’t understand. How is minting a coin any different from having some private bank enter the number 1 trillion into a computer and then using that number to buy T-Bills (which are themselves electronic) from a primary dealer? If you’re entering numbers in a computer in the first place, what does interest matter? ZIRP is assured into infinity so who cares what the interest cost is? All the coin idea does is prevent banks from collecting interest on that portion of the debt. It doesn’t reduce the debt – it wouldn’t even reduce the deficit since you KNOW they’re going to spend whatever they “coin”.

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When news sells at a premium

Felix Salmon
Jan 4, 2013 20:42 UTC

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.


5 x revs for a 3rd tier also ran in the news business. A fool and his money are easily parted.

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The transparent DealBook conference

Felix Salmon
Dec 14, 2012 08:38 UTC

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.


My link apparently got eaten by the comment software…
http://krugman.blogs.nytimes.com/2012/12  /07/why-people-are-confused-about-the-f iscal-cliff/

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Why we won’t have tablet-native journalism

Felix Salmon
Dec 11, 2012 00:26 UTC

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.


‘You’re basically left with a high-tech means of reading the kind of thing which could have been written centuries ago.’

I can’t believe that you actually wrote those words and then missed the meaning of what you wrote.

The high-tech allows me to read anything, anywhere, anytime in the world, then disappears ‘poof!’ to give me a pure reading experience!

Thats the dream !!! (well, at least for me)

PS: BTW having inline links in articles is again a part of the pure reading experience for me.

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Why Bloomberg is interested in LinkedIn

Felix Salmon
Dec 10, 2012 16:56 UTC

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.


I’d add to T.E.D.’s remark that on top of the speed and authority, simply having everything in one, or at most two places, is _incredibly_ important. I’ve done de-novo research where I was assembling data about some novel ESG feature, in order to test whether it might correlate with performance. Even when data sets are available (e.g. from academic researchers, or non-profits like the Carbon Disclosure Project, or the American Customer Satisfaction Index project at UMich/Ross, or the Great Place To Work Institute), and you don’t need to go out and interview companies yourself, it is a HUGE FREAKING PAIN to get all the data together, make sure it’s in common units, and get everything loaded into a single usable database (or Excel sheet, or whatever). Bringing together a useful amount of data in the absence of something like Bloomberg or TR is many hours, even weeks or months, of work. Even at the lowest echelons of financial industry salaries, that time is worth WAY more than the cost of a data terminal.

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