Sunday, February 26, 2012

Newspapers aren't dead, but they do need to innovate

The drop in newspaper monthly circulations is no industry secret. For the last several years the industry has been unable to adapt its business model to changing circumstances, namely the Internet. One has to ask themselves though, why is this, why is it that one of the most popular reading materials has suddenly fallen so out of favor with its constituents. The only thing comparable is the drop from some 70% of the population going out to the movies in the 50s to 25% in 2010. Is News just not as valuable in the age of social media, blogs, and twitter? Given that we still love narratives, and that it is generally accepted that the failure of the theater industry stems from a failure to adapt to technology. I think that rather than News itself not being valuable, it is the industry that has simply failed to adapt and innovate.

The real reason we get the Sunday edition

For this discussion I picked up a copy of a local news paper, The Oregonian, which I felt would serve as a good case study. The Oregonian newspaper is a typical local newspaper that caters to a very diverse set of interests within the State. Like most state news papers it has been effected by the Times/Wapo effect,its "GUI" is more or less the same as any other physical news paper, headline over photo followed by a block of text that is either wider than it is tall or taller than it is wide. Most of the weaknesses of print media are either former strengths or failures to adapt. The format of news papers was decided long before most of the people writing were alive and as a consequence is fairly standardized, this was a strength before because of the limited space of physical newspaper, but in digital age it just can't compete with the scrolling window and hyperlink format.


Because of the success of this particular design and the National effect on State newspapers(thank god Newspaper industry lawyers aren't as smart as Apple lawyers) almost all newspapers look more or less identical. They tend to differentiate via brand recognition, quality of photography and tightness of prose within the publication itself. That being said its quite clear that this is a State newspaper, although one that isn't doing too badly. The photos are large and full color but they definitely pale in comparison to larger national newspapers. One the Oregonian's biggest strengths in comparison to the Times can be seen in the photo to the left. The Oregonian, unlike most newspapers, has teamed up with Politifact to let their readers know that the story have been vetted for accuracy, and not by some partisan hack group but by a generally accepted neutral third party. If you click on the photo you can clearly seen Politifact's logo and their truthiness meter. 

It is also clearly not a small town newspaper as the language used is fairly standard and grammatical errors were not found in abundance. Where the Oregonian stands out from other small state newspapers is its App available in both the Itunes and Android Market place, something that is generally left for the big boys. Its easily accessible, free, and at present it has a modicum of customization. What they should be doing, especially since they are offering it for free, is asking for slightly more personal information and allowing users to "login" to their website something that at present is not possible. They have the beginnings of a voting system to do like what Jeff Jarvis spoke about in "What Would Google Do" , in terms of covering what the "reader" actually wants to read. You will notice that the most commented story as of this evening, when I took the screenshot, is this mornings leading headline from the Front page. 

This is actually part of the reason I think that newspapers still exist, they function as a mechanism for bringing people together to discuss what is "important". Up to this point the discussion was had in small groups disconnected and except for via letters to the editor(which were only selectively republished) the newspaper as an entity was really only communicating directly with our wallets. Newspapers like the Oregonian who have followed the Reddit model of ranking stories based on votes, I think, are going to be the ones that survive because they will add value to their print media that other newspapers simply can't.

 By keeping the conversation going on their website they are not only facilitating a public good they have a personal information goldmine at their fingertips, and most importantly the stories that get the most comments are the stories that will drive circulation which means a feedback loop can be created where by the stories that are reported on and investigated are connected to previous stories that were most commented on or controversial(while this model does have issues with link bait its vastly better than the current model).Where the Oregonian really shine is its online component, all of their writers and editors have twitter and facebook profiles that are easy to find, allowing for connectivity between the readers and the paper.

 Sadly however, there is no way to make a profile on the Oregonian, which is where a lot of the value is, and given that they give away the whole paper via their App, seems like a huge loss of potential revenue. Two years ago I would understand this as newspapers didn't have the money to hire tech guys just to maintain their databases, but in an age of universal login and permissions it makes literally no sense to not piggy back off of other networks.  

Quite possibly the biggest strength of newspapers right now, and conversely their biggest potential weakness, is their use and dependence of/on coupons and continued dependence on direct advertisement. Right on the front page is where this photo comes from, letting the reader know, hey you are saving money by buying this newspaper. This is a big reason why the Sunday edition is not only more expensive, but is the profitable paper for the week. More people read it which means advertisers pay more etc etc. What the newspaper industry needs to do is take this coupon model and digitize it(for tracking purposes), attach it to a paid for app, and ditch the weekday print editions all together. 
This Nature made app should scare newspapers silly, right now nature made will pay them to host their coupons, but if Nature made can get people to download their app they can funnel them coupons and adverts without Newspapers. Newspapers already lost round 1 to craigslist and its cost them billions, they don't want to lose round 1 to the advertisers because it will cost them their whole model.  

Advertisers are wasting money giving me this coupon and Newspapers are wasting money printing it, every knows that. The problem is lots of people do want these coupons and many of those people read
newspapers. Up to this point newspapers were the only viable option for companies to reach out to consumers at a cost effective price point, the definition of cost effective has dramatically changed in the digital age and print adverts just don't cut it anymore. Its also a sad state of affairs when the photos of the boxed food are more vibrant and sharp than the news photos.

I Included these two photos because there is often an argument that advertisers are leery of online adverts because of the fear of lascivity, but clearly if you can but these kinds of adverts in the Sunday Edition of a newspaper you can get away with quite a bit. 

One of the biggest weakness of newspapers like the Oregonian is that they are not leveraging the potential information they could be receiving back from their readers that would be insanely valuable to advertisers and marketers. The could also be source of information in terms of who knows what for social science researchers who understand the need for paying for valuable hard to acquire information like the information that could be inferred from comment patterns on stories over time in a given region. Like all newspapers they cater to their local audience, local audience behavior and information is some of the most valuable data there is. They already send out coupons it would be a simple matter of connecting user subscription profiles with the coupons they use, something that is impossible in print world and ridiculously easy in the digital world. 

Everyone likes the guy who gets
back up after he got knocked down. 
The decline in circulation that the industry is facing is not because we don't value News anymore, its not just because of advertising, its not just because of Craigslist. The news industry, like all legacy industries, suffers from institutional inertia, administrative greed and incompetence, and a systemic lack of imagination. Society still needs institutions to vet rumors, investigate the stories that social media cannot afford to investigate, and most importantly society still needs journalism to act as a check on the power of business, government, and money. We have better tools than ever to do this and our institutions are failing to utilize them. It is up to us to make these changes and they start not in National papers like the Times, but in state news papers like the Oregonian. Society still needs the fourth estate, in an age of truthiness objective fact based journalism is more important than ever.I bought two copies of the paper to do this assignment and will likely buy more in the future because it was nice to read good regional coverage but I will still mostly read online because its faster, cheaper, and more targeted to me. The Oregonian like other Newspapers needs to continue to iterate on what its already done and  innovate in new directions

Saturday, February 4, 2012

Asset Bubbles, Central Banks, and Libertarians

I am asserting that A)Bubbles exist independent of central banks(government intervention), how they react to asset bubbles definitely affects how the macro economy is effected by the bubble and its eventual popping, see for an excellent article detailing the back and forth on this very issue. B) Bubbles are an artifact of imperfection in the exchange of information(in the academic sense of the word, information travels in a variety of mediums Capital is a form of information, demand is a form of information, etc) between buyers and sellers. C) Governments and central banks can either mitigate or exacerbate the effects of bubbles on their host economies. D)Bubbles are a fundamental aspect of our economies because demand is never going to be perfectly inelastic(the exact opposite of bubble), sometimes people just want to have their furbies. E) Whenever a Bubble occurs in an interconnected international economy it will have repercussions in any attached country. F) Growth rates significantly above statistically normative growth = bubble, bubble growth can lead to collapse below minimum required growth rate to keep up with population if not managed correctly. Bubble economics, can in theory although not proven yet, be harnessed to provide additional tax income to state and local municipalities to help build out the foundation to support the new growth, this almost never happens because that excess capital that could be harnessed gets eaten up by graft, corruption, and middle men. 

I think a good example to illustrate A) is the dot com bubble of the 90s, which to be fair, was a combination of over speculation by the private market coupled with economic distortions caused by government investment in Silicon valley.The Dot-com bubble is a perfect example of what happens when state, local, and federal government do not step in to manage the bubble, people ultimately lose their jobs and the overall economy weakens. High-Tech Start-Ups and Industry Dynamics in Silicon Valley delves into the nitty gritty of what made Silicon valley such a success, and ruminates on the possibilities, that we all lived from 2007 till today.
Crash and reboot: Silicon Valley hightech employment and wages confirms what I just asserted.

What these three articles show is that bubbles occur when we grow too fast because we cannot expand and "fortify" at high rates and therefore a collapse is energetically required, from a physics standpoint. The systems entropy is too high and unstable, it has to devolve to a lower energy state, which to us looks like a bubble popping. Sillicon valley got way too much money and was trying to grow in too many different directions. No one forced people to invest in Silicon Valley but there was irrational exuberance and imperfect information flow. If the last investors had known that the money they were investing was essentially "fat", in that SV had already received more than it could statistically reliably invest with a solid return, they would not have made those investments, which would not have hurt SV, and maybe there would have not been a dot com bubble. Alas, perfect information exchange is not possible, and therefore regardless of whether or not there is government there will always be bubbles. Governments can only mitigate or exacerbate, and just like a gun is only a tool, government sucks, and is dangerous, when you give it too much power and/or when the people running it are incompetent, corrupt, or self absorbed. The same thing was true with the housing bubble, yes the central banks perpetuated it, and Congress made it so easy to be corrupt that if you weren't doing it you would lose your job to someone who was because the profit rates were incredible.

If you go to, and you compare the economic years 80-81, 81-82-83-84-84-85 you see what I am talking about. Extremely anemic growth early on, ty Carter for sucking at foreign relations, followed by Bubble growth from investments from overseas, followed by the required pop, over the whole decade we only avged 3.4ish percent growth, from 1989-1990 we only had 1.88% growth, when just 4 years earlier we were at 7%. What happened in between, the Japanese Housing Bubble, who was heavily investing in the US during the 80s, the Japanese, they have a bubble crisis investment dries up and US growth drops. 
The US needs about 3.5% growth to keep up with population, when we get above that I posit that there is a bubble somewhere to be found, either in Housing, in Financial derivatives, in commodities, or in some other kind of assets.

There was a housing Bubble that popped just a few years back, if you look at us growth rates they on the face don't appear to match up, but when you add in all the building we did on credit you can see that the bubble was not in assets, or really in homes, but was in credit, and when that credit dried up our economy tanked and we shed jobs because we had not built out the foundation to support all of our credit financed growth. The main things that have changed from 1950 to now is that we tax business and the wealth significantly less, while spending more on defense contracts, bailouts to the GE's and GS's of the world, and to the increasing costs of health care for old people. The newest bubble is the College debt bubble, I wish I could get you good empirical sources for that but since the bubble hasn't popped yet the only sources avail are either behind pay walls or aren't reputable.

Wednesday, February 1, 2012

Are you ready for the best smart phone commercial ever, watch the video and check out my commentary below. 

       This video was released right before the launch of the Iphone 4-S. The blogs were all a twitter about what features were going to be available, and Samsung had just released their SII unit and were looking to blunt the traditional boom accompianed by the release of a new Iphone unit. The add uses a variety of different persuasive techniques to convince its target audience, the traditional 18-35 year old market, people who can afford smart phones but haven't been indoctrinated into the Cult of Mac yet, or people who are fence sitters. It pokes fun at Apple by showing fans waiting in long lines, something that is normally a good thing, and flips it on its head by use of hidden fear, e.g what features will the new phone have and how will people know I have a new phone. The characters in the ad actually utter those words, which was received remarkably well. It was sending the message if you want to be cool, but not act like you are trying to be cool buy the Samsung Galaxy SII. 
     All of the actors in the ad are known unknowns, in that they represent some known character archetype. Whether its the pretentious barista, the hipster cult of mac guy, the savvy Asian, or the annoying blond. The ad is overflowing with humor and did an excellent job of displaying the strengths of the Samsung while simultaneously jumping on the bandwagon of Anti-IPhone ads that were on the internet. Another such "ad" is below, although this one is user generated.  I have included this ad, because it goes to show how a company does not have to have a whole ad campaign on its own anymore, user generated ads are not only free but they can add to the viral nature of any ad campaign. 
       One of the subtler aspects of the commercial was that the only person who said the Samsung was a "great phone" was the savvy asian, and it is known that Americans think of Asians as more tech savvy than them. This as heavily relies on the association principle, up to this point people have associated coolness, creativity, and sophistication to those who use I-brand products. This ad attempts to turn that on its head by portraying Apples customers as pretentious followers who are just being lead by the nose to buy inferior products, whereas the savvy people already have a great device, they don't have to wait in line. This ad was not seen in its entirety on TV because of its length, but segments of it were shown, and it was heavily played on the Comedy Central website, if one was watching Colbert, Stewart, or South Park during the weeks before and after the Iphone release they were almost guaranteed to see this advert. Which is ideal seeing as most of the people who watch those shows online are guaranteed to be in the target demographic. 

      I included this ad because while it was not released by Samsung it was released at the same time and was part of the decentralized viral ad campaign centered around the release of the Iphone 4s. It too pokes fun at Apples customers and is vital to understanding why Samsung felt like it would be a good idea to release an ad like the one they did. 

      This final ad is included to show just how plugged in companies are becoming in terms of social media, below is a "you tube star" who is now doing commercials for Mobile Samsung Paris. The use of dubstep and finger tutting is designed to make customers feel like Samsung is a hip, modern brand, that understands what they want out of a tech company. 

For the record, I am a total Samsung fan, although I do not own the SII.