On-demand Media

What’s the problem with aggregators?

So what is newspapers' problem with aggregators? This is not a rhetorical question. I genuinely want to know.

On Tuesday this week, a group of UK newspaper editors went to Parliament to complain about their inability to negotiate with Google (News?), as a group, for the right to link to their stories. And today Paidcontent reports that the UK's Newspaper Licensing Association "says it will from September extend its licenses to cover web links" – i.e. it will (try to) charge people for the right to link its content.

We all know the arguments against this sort of thing – most famously articulated by Jeff Jarvis. Links bring traffic and traffic means ad money. What's not to like?

But what is the opposite argument? I've heard lots of things, but I'm not sure they amount to a case. This is what I've gathered from reading on the web and talking to newspaper people over the last month or two. I would really appreciate any corrections, additions, comments etc.

1. Aggregators (Google News) and curators (Huffington Post, Drudge) compete with newspapers' own front pages. This means that
   1. Newspapers' front pages get fewer hits and less money
   2. Newspapers don't get to promote other articles – which leads to fewer hits and less money
   3. Newspapers lose their agenda-setting powers
   4. Newspapers lose their direct relationship with their readers – because aggregators' audiences don't look for newspapers' brands, and may not ever care who published the articles they read
2. Readers who arrive from aggregators or search engines read fewer articles (usually one)
3. Front pages ads have higher CPMs
4. Readers who don't care about the front page are less likely to subscribe, because of the brand/relationship problem

All of these issues are about aggregators stealing audiences from newspapers' front pages. But how much of an overlap is there between aggregators' audiences and those readers who might conceivably have visited the newspaper's front page if the aggregator didn't exist? An example: the US edition of Google News featuring an article from the Scotsman's on Susan Boyle. Very few US readers would have gone to the Scotsman just to check if it had something interesting.

Everybody seems to agree that for most news sites the proportion of readers arriving via the front page is decreasing; but is the actual number decreasing too? For what types of paper? For which market segments?

Finally - to the extent that aggregators are stealing audiences from newspapers' front pages, you could say that they are "bad news" for them. Maybe. But whether or not this is the case has very little to do with how large Google is. Google's large share of the aggregator market may (perhaps) give it bargaining power when newspapers ask for money. But newspapers would still have the problems (1-4) above even if Google had a small share of the aggregator market. Whether newspapers, without colluding, could impose a linking fee on an industry of small aggregators looks very much like an open question from here.

Towards a strategy for the newspaper problem

If you've been reading my previous posts you'll know that I've been thinking about newspapers' monetisation problem for a while. So far I've been mainly sharing some rather philosophical thoughts on the problem, but the point of all that is to serve as background for a more practical and positive strategy that I'm trying to put together.

These are the building blocks:

• One is what economists call price discrimination. It's no good to say "I will charge X for my content, and those who value it enough will pay and the rest won't get so see it". What you want to do is charge each reader as much as s/he is likely to pay. If someone is unlikely to pay at all, then it's better to let that person read the content for free, because then at least you get the ad revenue. The trick is to do this in such a way that those who might have been willing to pay don't get the stuff for free. Albert Sun recently wrote a post with the basic ideas.
• Marketers' approach to price discrimination is to do segmentation: identify distinct groups of readers who share similar needs, see what they are interested in, and see if you can find a way of charging them a different price according to their willingness to pay. Typical example: business travellers vs leisure travellers. Most business travellers buy return flights with outbound and return legs in the same week, while leisure travellers usually spend a Saturday night away. So you charge less for flights involving a Saturday night stay – you charge as much as leisure travellers are willing to pay, which is less than business travellers would. Note that the product you are selling here is the same, and it costs you the same to deliver it to either segment. But you would make less money if you chose a single price for all customers.
• The key is how you do the segmentation, and here the web offers a myriad of possibilities that are not available in other media. The FT started along these lines by identifying users who visit the site more than 30 times per month and only charging them. Others have gone about it by identifying 'premium' content that would appeal to a select audience and making the rest free.
• But you can be much more granular than that. For each visitor you can tell if s/he came via your front page or via a direct deep link; whether they live in your core city or country; whether they came from search, social networks, news aggregators or blogs (and which blogs); how often they visit you; whether they are reading current news or old archive content; whether they are on a PC or on the move; whether they are at work or at home (sometimes); etc.
• The challenge is to combine these parameters judiciously and ask how much leverage you have with each segment – and not just ask what content or activities should be paid-for. For example, you might conclude that a medium-frequency user who never visits the front page is unlikely to pay a subscription if he is abroad (because most of the site might be irrelevant to him), while local users may be likelier prospects. Don't ask any segment for more than it is willing to pay, and be willing to give any of them your content for free (with ads) if that's all you can get from it – provided this doesn't mean giving it for free to those who could pay.
• Finally, you need to move away from thinking of your content as the beginning and end of your readers' needs. Increasingly, your content – i.e. articles – are just stepping stones in sequences of pages connected by hyperlinks. It is these sequences – or flows – that are at the centre of people's needs, and they are often orchestrated by people who have no affiliation with you: news aggregators, social contacts, blogs, etc. These mediators, and their brands, are standing between you and consumers. But don't fight them; work with them. Treat them as channels (in the marketing sense), market to them, and devise win-win strategies that work for you and them. This need not mean just exchanging money – e.g. it could mean exchanging demographics.

Enough for now. Hopefully you can see where this is going. I would be very interested to hear from people working along similar lines.

Marketing musings on the newspaper problem

Following on from my recent critique of the newspaper paid-content debate, I've been trying to think more positively about solutions to the problem. I'll post about that sometime soon. For now here are just a few musings, not necessarily in the right order or coherent. Read at your own peril.

Idea #1: News content brands are not consumer brands

An example: if your work involves doing strategy around new media, you probably start your day by skimming all the articles that paidcontent.org and a few other sites have published in the last day. What you are looking for here is not content (although content is part of it), but rather an overview of what you should know about. If an entry is relevant to you, you follow the link and often land in a newspaper site. This could be a major brand like the WSJ, the Guardian, etc, or a newspaper you had never heard about, in Australia, thus just happened to have an interview with a key executive.

The crucial thing to note here is that the newspaper's name – its brand – is largely irrelevant to you. You followed the link because Paidcontent told you should read the article. The fact that you ended up reading the Guardian's version of a story rather than the Times' is a result of Paidcontent's choice, not yours. The newspaper's brand had no effect on your actions, but it may have had on Paidcontent's.

Note two more things: first, the main service that the Paidcontent people offer is not their writing (or anyone else's), but rather awareness of content across the web that you need to know about (and this is a service more than a product). Second, for paidcontent.org you could substitute your Twitter feed, your email inbox, your Facebook page, Google News, the Drudge Report, the Huffington Post, Martin Sabe's blog, whatever. The point is that you start by visiting a place that will tell you what you should read across the web.

Idea # 2: Aggregators are consumer brands

Note how this view contrasts with the notion of "content discovery" that you often hear. Paidcontent's role is not just to alert you to a newspaper article that you may or may not have found interesting even if Paidcontent had not existed. To a large extent, the article is interesting because Paidcontent and its peers (or your friends, or the Drudge Report) linked to it. Paidcontent has that power not just by virtue of its good editorial judgement, but also, and crucially, because its readers know who its other readers are – namely, their peers. Paidcontent helps decide what you peer group is reading today – and, by implication, what you should read if you want to be in the loop.

(All of this just says that aggregators are articulators of social identity, much like fashion brands: they reflect and are targeted at specific communities.)

Aggregators are consumer brands in a second sense too: unlike the content they link to, they are actually chosen by their readers. Some compete for the same readers (e.g. techcrunch vs valleywag vs gigaom), and they all invite repeated, loyal custom.

You don't discover news content. You discover aggregators. And if you like them you come back, or subscribe.

Idea # 3: The web, like print, is a push medium. It's just that the pushers have changed

In marketing lingo, in the example above Paidcontent was a channel, and newspapers' content was distributed in a push, not a pull way. But the pusher was not the newspaper; it was Paidcontent.

Granted, if instead of Paidcontent the pusher is your Facebook friends then things change a little in that the pushers are not businesses but other consumers. But still,

• What you read was pushed to you by someone
• That someone had it pushed to him/her by a business, or by someone who in turn had it pushed to him/her by a business
• In this chain, the first business that pushed the article was the newspaper's own front page

True, the old brands are no longer in control of our attention, and now we (the readers) have a lot more say in deciding what content we read. But between us and the old brands now sit the aggregators, who are malleable. "If it doesn't spread, it's dead" said Henry Jenkins. True. But there are entire industries involved in the spreading.

Idea #4: The main structural change that the web has brought to the news business is not the digital distribution of content, but the separation of aggregation and content

Scenarios like the one above would not have been possible before the internet, and would have been rare as recently as four years ago. But that is changing quickly.

Today it is possible to run a successful aggregation business (like the Drudge Report) without having much of a content business. This lowering of barriers-to-entry has lead to an explosion of niche curators whose products are far more targeted and comprehensive than any integrated business could dream of.

The reason that traditional businesses cannot compete is not that they would struggle to produce enough targeted aggregations to satisfy small niches – with enough resources they could do that. It is because firms in the traditional, integrated aggregation-plus-content business have strong incentives not to link to other websites (I've written about this conundrum before). But to satisfy a web-savvy niche audience you just have to send people to all sorts of sites across the web. This is not just because you can't hope to cover all relevant events with your own content, but your readers audiences demand to be taken to the 'original' articles, clips, etc. Put differently,

Idea #5: Readers don't expect aggregators to report on world events; they expect them to report on web events

By linking to a newspaper article, Paidcontent need not have implied any sense of endorsement or recommendation of it: the PC blurb might be inviting you to read the article to see its questionable reporting, which you should be aware of. Paidcontent's promise – what it asks you to trust it on – is to keep you up to about with what is being said. If what is being said turns out to be unreliable that has nothing to do with the promise.

 

Newspapers are in the breakfast business

The recent anxiety about business models for news has got me thinking about some of this blog's old subjects. Let me start with three recent quotes:

The medium does not matter. [...] It doesn't matter if they want to print the Wall Street Journal on salami and people want to eat it. [...] Whatever way people want it is fine: it's the quality and what you're getting that matters
– Kara Swisher

Instead of focusing on the paper part, which may go away, we need to focus on the news part
– Phil Bronstein

I mean, we've always believed in the value of content, and also that for a publisher the most important relationship is with the reader rather than the advertiser. So I think we've always felt it's important to have a direct, paying relationship with our audience
– John Ridding

There are two key assumptions implicit in these views:

• Consumers will pay for what they want, if it is adequately priced, unless they can get it for free
• Consumers want content

The first assumption is the basis of economics – and, you'll be pleased to hear, I won't dispute it. But the second is more problematic.

Consider this quote, from Mark Potts (my emphasis):

But maybe we're all looking at this through the wrong end of the telescope—or rather, the microscope. Maybe there is something in the news business that people might want to pay for. It's just not what some of the pay-proponents think it is. Maybe—maybe—the thing you can charge for is the package the news comes in, not the specific news items themselves. [...]

What people do buy are packages of news, often supported by other, non-news content. Journalists don't always like to think about this, but the reasons for subscribing to a newspaper often are as much about the comics, the crosswords and the ads as they are about the news itself. That's what people plunk down their quarters for: the package, not the story. News collected in a convenient, easy-to-use form that adds value.

This feels right. People will pay for what they want, and they certainly want to read the news. But perhaps the thing that they want – the object of their desire – is not the news content, but something else. I'm not quite sure of what this is, but I have a vague hunch. Bear with me.

The retreat into content

Back some ten years ago, news executives began to see that one day the internet would change their business forever. Clearly, printed news and scheduled TV would eventually be disrupted by the web and on-demand viewing, but nobody could quite tell how the new technologies and consumer habits would shape up.

Their reaction was to embrace multi-platform strategies. "We are not in the newspaper/television/magazine business", they said, "but rather in the news content business." So they invested millions in new technologies, newsrooms and skills that would let them create content to be consumed "whenever and wherever" people wanted.

This thinking was in the spirit of a long and honourable tradition in marketing, one that was famously articulated by Theodore Levitt in his 1960 Harvard Business Review paper "Marketing Myopia". In it he chastised many defunct industries for not having understood what business they were really in and focusing too much on their products instead of the consumer needs these were supposed to address. For example (my emphasis),

The railroads did not stop growing because the need for passenger and freight transportation declined. That grew. The railroads are in trouble today not because that need was filled by others (cars, trucks, airplanes, and even telephones) but because it was not filled by the railroads themselves. They let others take customers away from them because they assumed themselves to be in the railroad business rather than in the transportation business. The reason they defined their industry incorrectly was that they were railroad oriented instead of transportation oriented; they were product oriented instead of customer oriented.

The news industry failed to follow Levitt's prescription all the way. It did the right thing in seeing beyond the physical products (newspapers) that it was producing. But instead of finding new ways of satisfying the underlying consumer needs, it concentrated on the disembodied news 'content' that would be involved in that satisfaction, whichever form it took. It never stopped being product oriented; it just replaced a physical product (newspapers) by an intangible one (news content).

To use an analogy, imagine that you are in the construction industry and one day you realise that in the near future consumers won't need the kinds of two-floor houses that you've been building for generations. The experts tell you that people will probably live in something like hotels or student-like dorms, or maybe in large communal spaces – they don't know, but they do know that houses are finished. So you say "fine, but however people choose to live they will still need buildings, and buildings will always need bricks. So I'll rebrand myself as a brick-maker".

This has two problems. First, bricks are undifferentiated – they are commodities. And second, they are not chosen by consumers – they are chosen by the people who manage to sell to consumers and build dwellings for them. Your once-powerful consumer brand now has to work in a business-to-business context – where it has no equity – and your old brand equity among consumers is gone. Even worse, the brick-making industry has been there for centuries, and it has some strong specialised players that won't welcome new competition.

At least some of the blame for this state of affairs must go to the armies of consultants and techno-enthusiasts who proclaimed that from now on "the consumer is in control", and there is no longer any point in trying to control how or when content is to be consumed. "Just look at the kids", they would say. "They are using RSS feeds, email, Youtube, Myspace etc in their own terms. They dictate how news is consumed. Stand in the way and your content will be pirated, your brand will be abandoned, or both. Consumers really want their content, they want it now, and they have the means to get it on their terms. Surrender or be killed."

Content companies responded to this by surrendering control over aggregation. They started publishing their content is disaggregated form, allowing anybody – consumers, other media companies or even machines – to re-aggregate it in new ways. Newspaper websites started publishing RSS feeds of all their news, hoping to increase their reach through people who would re-publish these in Facebook, blogs, news aggregators, what have you. TV companies started slicing their news bulletins into individual packages that were uploaded to Youtube, from where people could embed them on their own blogs. "Go where your audience is" was the motto. Eventually most TV programs ended up being published under a common brand – Hulu, where the kids are – thus creating

the uberbrand of media, and the networks [...] simply relegated themselves to being content producers. In essence, the networks have quit. What happened to the value of a network brand?
– Kevin Wasong

The new house builders

The best proof that disaggregated content was not the only option is that we are finally beginning to see new industries that are beginning to address consumers' real needs around news. I am referring, of course, to aggregators—editorially-run sites like the Huffington Post and the Drudge Report, thousands of professional and semi-professional blogs, and automatic aggregators like Google News—whose value proposition is that they send you to wherever you need to go across the web to read the day's key stories, form the horse's mouth.

To translate the brick analogy to the news business, the old houses are the newspapers, the incumbent brick-makers are the newswires (who seem to be doing well), and the new dwellings are the blogs, aggregators and curators where people find links to newspaper articles. The masses who find these links are not newspapers' customers, they are the aggregators' customers; to them, content is a commodity. Another quote:

A consumer is now as likely to discover newspaper content on Google, visit our sites, then flit away before even discovering that it was the Daily Mirror or the Telegraph that created the content in the first place. [...] Or worse, they may visit an aggregator like Google News, browse a digital deli of expensive-to-produce news from around the world, and then click on an ad served up to them by Google. For which we get no return. By the absurd relentless chasing of unique user figures we are flag-waving our way out of business.
– Sly Bailey

What is particularly painful to newspapers about this is that curators and aggregators are taking exactly the same place in consumers' minds that newspapers' brands used to own. This is no coincidence, since curators are addressing the same need that newspapers used to cater for – a good overview of the world in the morning when you wake up – but better. They do a better job at this not least because, increasingly, "an overview of the world" means "an overview of the web". Of course content is still needed – it is the bricks in the house – but it is not among content items that consumers make their choices. They choose curators, and the curators choose the content.

Memo to newspapers: it is not that people want your content for free. Properly speaking, many of your readers don't really want it at all. What they want – what satisfies their news habit – is aggregation. It is for that that they used to pay you, back when the only way of aggregating content was to own it and print it all in a newspaper. Today you are trying to get aggregators to pay you for the right to aggregate your content – like house-builders paying for their bricks. You may or may not succeed in this. But even if you do, your brands will continue to wither, your products will continue to become commoditised, and your margins will remain low, until you provide something that is the object of consumers' choices. Only then will they once again care to remember your name in the morning, when they think of breakfast – and only then will you be able to command a premium.

Doing this means aggregation. And that is a problem. For reasons I've outlined in an earlier post, there are strong economic forces preventing newspapers from entering the aggregation business. If a newspaper's website doesn't aggregate other people's content it just can't compete. But if it doesn't drive reach to its own content its transition to the web must inevitably mean producing less content – and laying off journalists. But this they can't do, because they need that content for their print versions. Catch 22.

Poor newspapers. Yes, they made some mistakes. But maybe they just didn't have an option.

The barbarians have arrived

In his wonderful essay about the internet (which, inexplicably, hasn't been translated into English yet, so this is my translation), Italian novelist Alessandro Baricco sets out to understand the meaning of a world in which people no longer read newspapers from cover to cover, no longer see films from beginning to end, but surf in a sea of links, jumping from one disaggregated snippet to the next. For him this is no less than a

Copernican revolution in knowledge according to which the value of an idea, of a piece of information, of a datum, is related not principally to its intrinsic characteristics but to its history. It is as if brains had started thinking in a different way: for [these readers], an idea is not a circumscribed object, but a trajectory, a sequence of steps, a composition of distinct materials. [...] Today there is a large part of mankind for which, every day, the knowledge that matters is that which can get into a sequence with all other knowledge.

For Baricco, the change is not just about technology and the media. It is also a mutation in society. New individuals are being born – the barbarians, or mutants – for whom the very experience of content is fundamentally different from what we've known until now:

Experience, for the barbarians, is something that looks like towing, like a sequence, like a trajectory: it supposes a movement that links different points in the space of the real: it is the intensity of that spark.

For centuries it wasn't like this. Experience, in its highest and most redeeming sense, was related to an ability to get close to things, one by one, and to develop an intimacy with them that could open the most hidden of chambers. [...]

It seems that for the mutants, by contrast, the spark of experience jumps in the quick movement that it traces between different things. It is as if now nothing can be experienced except through longer sequences, made up of different "somethings". [...]

As a general rule, the barbarians [...] don't move towards a goal, because the goal is the movement. Their trajectories are born from chance and die from tiredness: they don't seek experience, they are experience.

If Baricco is right, newspapers are history. Their problem is not just about business models or distribution technologies. (Packaging a newspaper, self-contained, in a Kindle won't help: what the barbarians want is not self-contained.) The very nature of content is changing beyond recognition, and any business with it as its foundation will be shaken to its core.

 

Postscript: for more positive thoughts on what can be done, see this