Category Archives: business models

Chutzpah: Why Craig can’t save classifieds

In an open letter to craigslist, Steve Outing asks its founders and operators to help save the newspaper industry from itself. My response:

Steve,

It takes real chutzpah to ask Craig Newmark and Jim Buckmaster of craigslist to help newspapers salvage their classifieds businesses and thus save democracy, or at least the part of it that newspapers presumably foster.

Your clever open letter to them, at the same time congratulating and blaming, misplaces responsibility. It assumes they have the authority to solve a problem that the news industry inflicted upon itself: how to replace a subsidy predicated on controlling and authoritarian business practices.

Steve, I can’t decide if your modest proposal is naive, self-serving or tragically poetic.

Craig Newmark never set out to disrupt the newspaper industry. Motivated only by helping people out, he created a simple list for his friends, initially distributed through email, and later on the Internet when one friend showed him how to create a Web page. Their trust in him, as well as a passion for serving others through technology, gave craigslist its authority.

You miss the magic of craigslist. It is Craig’s “friends” — a community that has grown to 40 million people a month in 500 U.S. cities and 50 countries (larger than all news sites combined by several factors) — who disrupted newspaper classifieds. Call them users, customers, an audience, a market, or marketplace, they discovered that through craigslist they could do for themselves what others charged excessively in order to handsomely subsidize their businesses.

Trust in Craig, still craigslist’s chief customer service representative, remains at the heart of it. So are democratic, open markets: the right of the people to conduct commerce and journalism among and between themselves.

Meantime, newspapers charged premium prices for access to an arcane classification system that published a few, annotated lines of shorthand in very small type at the back of a dense product with limited, daily distribution. The hard-to-find, hard-to-read, one-way advertisements were distributed to parts of a relatively small geographic region for sellers and buyers to discover, at least those who happened to buy the newspaper and read the classifieds section on the very day they were prepared to make a transaction.

For a lousy experience, newspapers in growth markets such as Dallas, Denver and San Jose made hundreds of millions of dollars that drove margins of 30 per cent or more with these high-yield liners.

The experience was not significantly improved by importing this business to the online version of the newspaper. What didn’t work in print didn’t work online.

Newspapers used their profits not to expand their social mission, but rather to drive the stock price of the companies that owned them, to finance acquisitions, to reward management, and to acquire additional wealth through cost-management: death by acquisition accelerated by cutting their way to profitability.

Financing news operations has never been much a part of it; ask any editor who has asked for budget increases or additional staff to cover a society growing increasingly complex and competitive. The moral imperative is a myth perpetuated by editors and journalists, not by the publishers you (Steve) are asking Craig and Jim to help.

Now, other forms and systems – a collaborative, more democratic Fifth Estate, if you will — are emerging to replace an institution that is broken. Almost anyone can deploy the simple technology that craiglist uses. Anyone can participate in its journalism and commerce.

Publishers would be better served by implementing enlightened business strategies with a passionate consumer connection at its core. Until then, they will continue to be cast in a survival drama of their own making.

Newspapers are like a broken satellite falling of orbit. The technology is failing; the mission may soon be scuttled. To stay in orbit, the engineers must repair and update the technology systems. More importantly, the flight controllers must restore trust in the mission and its results by relinquishing control. Otherwise, Satellite Newspaper – classifieds and all — will burn up in the atmosphere.

Craig Newmark and Jim Buckmaster may be talented astronauts, but they shouldn’t go down with the pilots of their competitors’ obsolete ships.

The mensch that roared

Is Craigslist insignificant? I’ve weighed in to a small debate:

Publishers underestimated Craigslist once with devastating results. Newspapers, which derive nearly 80 of their revenue from classified advertising, lost half or more of their lucrative classified business over the past five years, a loss that now threatens the economic stability of the industry. So while, as my friend and former publisher John Greenman suggests, Craigslist may not be remarkable for the amount of money it takes from a single newspaper market, it is hardly inconsequential. Were it not for its mostly free approach Craigslist could do much greater damage.

Now the question is whether publishers will make another, perhaps fatal, mistake by missing the point of the Craigslist experience: shifting trust in the digital marketplace. Craig Newmark is a mensch, the trusted face of online classifieds, an always-on customer-service celebrity with the world’s biggest buddy list. “Trust is the new trust,” is how the enigmatic Newmark once explained it to me. What he means is that in an environment where anyone can do what he does, the authentic expression of trust is the key differentiator. That may not be entirely true, but it is enough true to crush a greedy, feudal business predicated on controlled distribution and an arcane classification system for categorizing commerce among and between people. It is the emergence of everyone as an online broker in an open, connected marketplace that warrants coverage, breathless as that may be.

A satellite falling out of orbit

It is a big deal, or at least it used to be, when the nation’s publishers and editors gather at an annual conference to talk about business, craft, the role of newspapers in democracy, information technology, and the future. The latter has dominated the conversation lately so the mood has been decidedly somber.

But the despair of recent years seemed muted last week when about 1200 leaders from the news industry came to Washington at a joint conference of the Newspaper Association of America, American Society of Newspaper Editors and a newspaper production and technology exhibition.

Resignation filled the corridors of Washington’s drab and confusing convention center as publishers and editors contemplated the demise of the printed newspaper amid the emergence of digital media. The annual sessions with political leaders, as well as the opening of the industry’s $450 million museum, provided the only energy for a satellite falling out of orbit.

For that matter, there was little enthusiasm for the session on social media in which I participated. About 60 people attended our session. My slides are here.

The conference exposed troubled and turbulent times for newspapers. The technology hall was deserted, a stark contrast to the high-energy, shoulder-to-shoulder exhibitions that other sectors hold. One major publisher held a high-profile retirement party for a news exec getting out while the getting is still there. Editors shared painful stories about change, layoffs, finding news jobs, and dreams deferred. Some, already retired, returned to spin tales of better days gone by.

As with all their conferences, NAA and ASNE made and spun news. Highlights from a strange, sad week.

– At a luncheon for the editors hosted by the Associated Press, MediaNews founder and CEO Dean Singleton quizzed Sen. Barack Obama about whether he would send more troops to Afghanistan, where “Obama bin Laden is still at large?” “I think that was Osama bin Laden,” a somber Obama answered.

— Two reporters covering Sen. John McCain greeted their-favorite-senator-running-for-president with a box of Dunkin’ Donuts and sugar-coated questions that brought groans from fellow journalists. “We even brought you your favorite treat,” said AP’s Liz Sidoti. “Oh, yes, with sprinkles!” replied the candidate, who ate it up.

– A glass elevator in the Newseum stocked with colorful cocktails lifted news execs to seven floors of digital exhibits and sumptuous spreads prepared by Wolfgang Puck. In a city of free museums, the public must pay $20 for the privilege, drinks not included, of appreciating the Constitutional amendment that guarantees citizens free speech and a free press. Happily, the best of the Newseum is free: the daily, front pages of newspapers displayed as posters outside the building.

– The Newspaper Association of America issued a press release boasting that newspaper-owned web sites earned more revenue than all local media companies combined. Reason to celebrate, I suppose, if you ignore the pure-play Web sites that now have a 44 percent share of the local online ad market, eclipsing the share held by newspaper sites, currently about 27 percent and sinking. Which is like saying that Sen. Clinton is the leading the Democratic candidate if you don’t count Sen. Obama.

– The American Society of Newspaper’s annual census showed that the number of full-time journalists working at America’s daily newspapers shrank by 4.4 percent in the past year, the largest decrease in the past 30 years. Given the performance of newspaper moderators at the candidates’ sessions, it appeared as if the best journalists had either left their jobs, were laid off, or didn’t attend the newspaper conference.

See Also: The Burn

Conference Bay auctions from Singapore

From Singapore: Conference Bay, an eBay-style auction marketplace for buying seats at conferences worldwide.

Nothing new here, right? We all know about online auctions. The only innovation is applying a well-tested online transaction model to a different niche -  in this case a potentially high-value niche that may provide real utility – and new buying power – for a global audience. It’s worth comparing this service to another crowd-sourced approach to aggregating event information: Yahoo’s Upcoming, which is full of Yahoo’s social media goodness – and lots of free events, too. You can add comments, people, maps, etc.. But at the end of the day (and more than two years after Yahoo! purchased Upcoming), it’s a big list to promote events – but not to directly sell or determine pricing for seats.

Insight: Innovation happens everywhere.

I should also note: the We Media/connected/story-telling culture helped me find Conference Bay. Global Voices co-founder Ethan Zuckerman’s blog mentioned Solana Larson and the Global Voices crew that came to We Media Miami, and this popped up in our Technorati tracker for the wemedia tag. Someone named Anne from the Phillipines who knew or knew of Ethan commented in his blog – and I followed the link to Anne’s blog, then read down not only to see some familiar names and interests, but, reading down to the next post, a link to Conference Bay.

Wanted: Free labor

The social web depends on content, tagging and utility created or improved by the good will of the people formerly known as the audience.

Where does good will end and greed take over? That depends on whether you’re a giver or taker. Dan Gillmor at the Center for Citizen Media is bothered by the free labor scheme he sees in a corporate blog post about new features just announced at Reddit, a commercial recommendation service and competitor to Digg owned by the Newhouse family’s Conde Nast magazine group, which, along with Vogue, Glamour and Bon Appetite magazines, publishes Wired (which publishes various blogs, among which we find a recent report on a crowdsourced Shins video shot by fans).

Reddit is looking for programmers to hire – and volunteer translators. Dan is bothered by that explicit distinction of value – cash for coders, air kisses for translators.

The finger-wagging at Reddit raises this question: Is there a qualitative, ethical or rational distinction between Reddit’s overt and explicit request for help with its product, the result of which could be a more valuable service for whoever uses it, and the implied request for help from the multitude of platforms and conversation-fueled media – like Facebook, MySpace, Kos, PerezHilton – or from the non-profit competitor to Digg and Reddit – NewsTrust? (Disclosure – I advise NewsTrust). They all depend on user-supplied content, comments, tags and filtering to create any semblance of a business model. Is asking for free translations going too far? But asking for recommendations, evaluations, comments, photos or trackbacks is ok?

Comment: A backlash against uncompensated contributions to commercial media would be fun sport to watch. Imagine if millions of people decided to dump Facebook next week, just for spite.

Analysis: The hype around crowdsourcing leads, at times, to visions of an open-source digital utopia in which everything online is produced for free by righteous individuals who donate their writing, editing, video, photo, coding, translation or whatever skills to virtuous, free, universally accessible, multi-lingual projects that are made better through the collective intelligence and will of said crowd. Professionals, meaning pay is involved, not necessarily skill, fade to black in this world. Though fantastical, the vision draws on the ancient sense of human connectedness. When people put their minds to it, anything is possible. Even Wikipedia. Indeed, the principle of shared, linked intelligence – through hyperlinks – is the bedrock of the web itself.

The ideal of digital collaboration – all for one and one for all – degrades to a more distopian tragedy when for-profit companies try to persuade unpaid contributors to expand, enhance and add value to their services. AOL built its chat-driven empire on the backs of volunteer chat moderators. But recruiting volunteers to work hard and well for your benefit isn’t easy. Commercial failures in volunteer-dependent hyper-local journalism come to mind – Dan Gillmor’s Bayosphere, for one, followed by Backfence. But so do commercial survivors, like delicious, MySpace and YouTube.

Forecast: The crowd will continue to create AND contribute – on its own terms, when and where it feels like it makes sense. Asking for help may at times appear selfish. The willingness to offer it reflects our yearning to link with and help each other.

We Media analysis and links

I’ve been reflecting on our experiences at We Media Miami and digesting a great deal of reporting and analysis about what happened. It’s ALL been helpful. The diversity of viewpoints again underscores the eclectic and complex nature of “We” – and the promise of invention and innovation driven by the We Media community.A number of exciting ideas and outcomes emerged from our conversations in Miami, including a variety of projects and collaborations we’ll be talking more about in weeks to come.

Meanwhile, here are some We Media links:

  • You can find a still-growing archive from the forum – now with audio and some lovely photos: here.
  • Robin Miller of Slashdot produced a nice montage video – just ignore my babbling about cheese and skip ahead to the palm trees and sunshine.
  • The We Media blog includes a compilation of the “ahas” suggested throughout the forum.
  • Steve Rosenbaum, a film-maker-story-teller and newly funded CEO of Magnify.net, has been hanging and talking with us for several years. He sees how our conversation and the work of iFOCOS has moved forward. “Since my last visit with the WeMedia team, things are different. In an important way. It’s changed. the WE in WeMEDIA got bigger, the ‘MEDIA’, got smaller. Or more intimate, more more focused. Not sure which.” Steve, yes – and thanks for noticing.
  • Jemima Kiss must have typed her fingers to the bone with all of her live blogging and follow-up reporting for The Guardian, starting with our opening-round fire alarm and continuing this week with an item about Craig Newmark, who spent some of his time in Miami doing virtual battle with Wikipedians over the content of his own biography.
  • Rebecca Weeks, the director of business development for Real Girls Media (which just launched Divine Caroline) captured the frenetic flavor of a real-life forum with lots of people and ideas swirling around everywhere – sometimes you’re not sure who’s saying what. Kinda like when you say, “I saw it on the internet. Somewhere.” In Rebecca’s case, the Miami story incorporates the insights of “a panelist” and “an audience member.” Yes, I heard them too.
  • Rich Oppel, editor of the Austin American-Statesman, wrote for his newspaper that Miami seemed less rancourous than the previous two We Media forums – and I agree, “but a few grenades were tossed between the new and the old.” Rich wrote:

    The media are an unsettled lot today, with new media drawing audiences but rarely making money. Some rather ceremoniously swear off the almighty dollar.But not all. The angst rose when a panel of venture capitalists said they would insist on financial returns, traditional as that may be, and when foundation executives spoke of “investments” in new media based on performance instead of merely handing over money.

  • More on the angst and ennui of making money in Rich Skrenta’s follow-up thoughts. Rich, CEO of Topix, must have had a bleak flight back home. Citing the failure of Dan Gillmor’s Bayosphere, and many other citizen journalism projects that have “largely failed,” Rich wrote:

    By implicit definition, participatory media is non-commercial. If it’s commercial, someone owns it, and it’s not “we” anymore.

    That’s got to be especially bad news for the failed projects on his list that are new or still breathing – such as NewsTrust; but good news too, since NewsTrust is non-profit (Discosure: I’m an advisor). Is Rich right? I don’t think so, and I’ll elaborate on this down the road. To begin with, most new businesses fail. Period. Meanwhile, the definitions of success and failure have changed for media (though I’ll stipulate that going out of business counts as failure). Modest success – and profitability – is not failure. It’s the long tail, which leads to …

  • Wired Magazine editor/Long Tail author Chris Anderson was not in Miami, but like many others who weren’t there, he contributed to the conversation. He responded to Rich: “We Media is alive and well. It’s just the would-be We Media institutions that are not. A phenomenon is not necessarily a business. That doesn’t make it any less of a phenomenon.”