Wetpaint CEO Ben Elowitz on the Future of Digital Media
This post was originally as a contributed piece to Fortune. It is republished here for Digital Quarters readers.
Tech’s top firms — from Apple and Google to Amazon and Netflix — are vying to reshape media with different game plans. Here’s what they each need to know.
Digital media has the power to change the world. Actually mastering this 21st century business (and art) is unbelievably hard, however. That begs the question: The top media companies all know they need to make changes — but how do they find the right change and execute well? Let’s look at this question through the lens of six key players in the digital media revolution.
Apple (AAPL): Transform the rest of our digital experience.
It may seem arrogant to give advice to the one company that has surprised everyone again and again by being light years ahead of the industry — as well as the consumer. Yet, in a new era of leadership, the most important thing for Apple will be holding on to Jobs’ core values and strength. As corporate leaders go, Jobs was always the best change agent on the planet, and he was never willing to accept the status quo. That’s why Apple is a perennial leader when it comes to devices and distribution for premium media content like music and movies.
The Apple crew must extend its golden touch to the rest of the digital media device world. It’s time to supply the living room with a first-class TV experience; and to seamlessly flow all entertainment between the mobile, iPad, TV, and desktop worlds. AirPlay, iCloud, and AppleTV aren’t all the way there yet. Apple’s next challenge is to make devices that leap forward and bring entertainment and applications wherever I am, and to know me as one person across all of these environments. To do so — and to do so well — will take a huge imagination. And, even without Jobs himself, it’s clear that if anyone can do it, it’s still Apple.
Facebook: Be everywhere the consumer is.
More than any other company on the Web — even Apple — Facebook has changed the nature of digital experiences. It’s already established itself as the dominant social operating system for consumer audiences. And yet it has the potential to go much, much farther. If you need more proof, just this month Facebook announced that it will be facilitating the spread of mobile applications, not to mention linking into them — finally bridging the gap between Web and app. It’s invading Apple iOS’ and Google Android’s territory, providing the cross-application linkages that have always unequivocally been the job of an operating system.
Increasingly, Facebook has the opportunity to wire consumers, applications, data and devices together. But for Facebook to do this, Mark Zuckerberg will need the kind of imagination that Steve Jobs had. Indeed, Zuckerberg will have to imagine a whole new ecosystem, this time one where Facebook facilitates all connectivity. He’s proven he can execute already. But can he take on a vision this big?
Google (GOOG): “What got you here won’t get you there.”
This trademark phrase from Wetpaint COO Rob Grady is particularly apt in Google’s case. Google is the undisputed king of finding answers to questions — as long as they’re being asked from desktop and laptop computers. But when it comes to applying its great search strength to mobile environments, tablet devices and communications, Google is still lost. While the Android operating system is clearly one of the winners, it doesn’t give Google the essential financial success in mobile that it has on the desktop. Google needs to reinvent itself. It needs to make a bold “burn-the-bridges” move, adopting a Reed Hastings-like philosophy that the company cannot rely on search alone. Only, in Google’s case, it’s even harder.
Here’s why: Hastings had already clearly identified the next wave’s product at Netflix (NFLX) — streaming video over the Internet — but Google has to find a new vision altogether. This is not to say that Google needs to exit the search market by any means. But, instead, it must reinvent its own search portfolio, the way Intel (INTC) reinvented the microprocessor generation after generation, always allowing its newest chip to put the last one out of business, before the competition did. Indeed, Intel’s sustained success was built, in part, on destroying what worked and replacing it with something that worked even better. Google’s new vision should surely have three components: mobile, search and social. The good news is that, thanks to Android, Google already has A+ platforms to build on the first two.
But search needs to get beyond the query box, and the mobile device can be more than a phone plus PDA. Google’s challenge — and its opportunity — is to reinvent it as a completely connected device that is woven into the fabric of daily living. It should know where I am, who I’m with, and what I’m doing — or at least have some educated guesses. It should make the next interface leap that helps us leave the thumbs behind. And, it should be a digital companion that picks up on environmental cues and helps me live my digital life. Siri has opened our imagination; but Google has amazing voice recognition, algorithmic and platform strength to accomplish these things. Now it sorely needs to understand people. That’s the most pressing — and most problematic — task for Larry Page and his team in 2012.
Amazon (AMZN): Fully bridge digital media and commerce.
If Facebook is the ultimate platform for social connectivity, it’s pretty clear that Amazon should be the ultimate platform for media and commerce. Amazon has already made amazing progress in redefining itself. It started as a bookseller, became a retailer, began representing other retailers and, most importantly, has morphed into a media and device company. And, as if that’s not enough, its Web Services power tons of other companies that make the Internet fascinating.
That said, a scattershot approach won’t help Amazon become the single defining platform that bridges digital media and commerce. Amazon has tremendous assets in its catalogue, in terms of both physical and digital goods. And it also has devices that give it a unique channel to the consumer — for the time being, at least. But to fulfill its true potential, Amazon needs to extend its platform all the way to commercial transactions, wherever they happen.
Beyond digital goods, Amazon should be working on digital currency and customer management; an acquisition of Square would be a tremendous accelerator here, and it would ultimately help Jeff Bezos and his team power transactions wherever in the world they take place. What Facebook is to our social transactions, Amazon should be to our commercial ones — an OS for commerce. Indeed, Amazon has the opportunity to provide OpenTable-like services, for all commerce, not just for the restaurant industry. It’s already got the goods and the customer relationships. <ow it just needs the focus on the bigger opportunity.
Yahoo (YHOO): Decide what the brand really stands for.
On one hand, Yahoo is the most impressive all-digital media company there is. It has tremendous access to a huge audience of consumers, a broad product portfolio, an unrivaled heritage as a first-generation superstar and a unique reach into Asia. And yet, it’s also the most disappointing digital media company in the marketplace, so much so that its brand increasingly stands for nothing in particular to most of its audience.
Of late, attention has been focused on Yahoo from a financial point of view. But whoever eventually buys the company must look beyond integration, splitting and cost cutting. Instead, the acquirer will have to figure out what to do with Yahoo’s core. And it all comes down to one key question: What can Yahoo provide to its audience to earn their attention every day?
To date, the hook has been email. Yahoo Mail is responsible for about 75% of Yahoo’s media traffic. But Yahoo Mail isn’t growing. In the last year, it shrank slightly (<1 %), according to data from comScore. So, for Yahoo, the choices are to innovate in communication to leapfrog Gmail, Skype, and the lot; or else to do the hard work and start figuring out again what Yahoo really stands for. The company has great roots. It has a natural brand for serendipitous discovery, for fun and interesting news to make your day. The bottom line is that Yahoo should be able to execute on both the options listed above, hopefully without waiting for the financial dust to settle.
Washington Post (WPO): Re-inventing media’s most ravaged category.
If we had to name the most ravaged sector of media, it would certainly have to be newspapers. Don Graham recently said the industry is “collapsing.” But, he’s not just watching it happen; he’s actively and energetically intervening. I’ve been incredibly impressed by the way Graham and his team are up for re-inventing the category, especially as I’ve talked to other organizations that are nearly paralyzed. Instead, WaPo is applying the greatest growth trend of the Internet — social media — to its business. With its inordinately valuable and trusted brand at stake in the Washington Post, the risks are clearly high. Rather than acting out of fear, Don and his Chief Digital Officer, Vijay Ravindran, are taking aggressive advantage of opportunities to engage, grow and retain their core audience. At the same time, they’re downshifting to the younger audience that just isn’t buying newspapers. The Washington Post Social Reader is the flagship example, and it’s a bold move to jump ahead of the consumer and create a new experience for people that they didn’t know they needed, all on the social Web. [Full disclosure: My company Wetpaint works with the Post.]
We will see other awesome and amazing talents emerge in digital media over the next decade. These greats-in-the-making will help build on the staggering changes that technological change has wrought.
1) The multi-functional capability. Buy a Kindle and you get… a reader. Another dedicated device to carry. Buy an iPad, and you get a whole new companion that can do pretty much anything. Games, movies, browsing, documents, and more—all in one. And zillions of iPhone apps. It’s sooooo much more than a reader, it’s a whole-life device.
2) The screen. Full color, multi-touch screen, gestures, and more. It’s a pleasure to look at it – and we all can rely on Steve Jobs’ aesthetics to know that it’s a pleasure to hold as well.
3) The compatibility. iPad supports ePub out of the box, overcoming publishers’ resistance to having to support a proprietary format such as Kindle’s; and creating compatibility with books sold through a leading standard format through any channel. (Something tells me Amazon will be making an announcement about ePub support real soon…)
4) The iBooks store. Apple has captured the magic of shopping. Once again, whereas Amazon does great with the functional needs of buying a book, Apple goes beyond to create an experience.
5) The experience. The Kindle provides a good functional experience for readers—in a very Bezosian way, it meets all our needs. But Apple’s creation goes beyond, to make the experience fun and cool. You can swipe through pages on an iPad. On the Kindle, you have to dutifully click a button.
6) The economics. Publishers have been deeply concerned about price erosion with Amazon’s $9.99 pricing—and have been up in arms over Amazon’s 70% revenue share take. Though Amazon has reversed the revenue share (to match Apple’s reported offer at 30%), it would require publishers to cut prices and offer deep discounts. Considering the threat the publishing industry is under, the last thing that publishers want in a time of transition is to have their revenues crammed down further by Jeff Bezos.
7) The apps. In a digital age, a book is (finally!) becoming more than just words on a page. But the Kindle has been slow to recognize this. With the iPad, out of the gate publishers can create whole experiences. Want to create something unique in the market to draw consumers? Publishers can go beyond e-books, and create an app using one of the world’s most popular SDK platforms.
8) The marketplace. Apple’s iBook and App Store marketplaces will instantly be a must-attend venue for publishers. The anticipated sales of the iPad will mean exposure to so many more consumers than Kindle; and Apple already has 125 million consumer store accounts with 12 billion products already downloaded. Amazon won’t even release the number of Kindles sold, because the number of consumers buying its device pales next to Apple’s reach.
9) The price. For $10 more than a Kindle DX, consumers get an incredible ebook reader, and so much more: a device that they can use for, well, pretty much anything. The options, consumer experience, and flexibility for that $10 are a no-brainer.
10) The Apple factor (a.k.a. “sexy”). Let’s face it, Apple is a brand people want to be affiliated with. It has a cool factor. Even those of us who are smart enough to know better still fall in love with Apple products, and carry them with pride. Amazon just doesn’t have that. As Jason Kottke says, “the iPad makes the Kindle look like it’s from the 1980’s”.
Apple has upped the game for Amazon. Jeff Bezos and his team better start a clean sheet of design if they want Kindle to catch up again and play as a leader with consumers.
It’s clear that Amazon is already scared: witness their recent moves in the last few days running up to Apple’s announcement. Just this month, they’ve announced an app frameworkand a new royalty structure to be more attractive to publishers – and both moves are clearly defensive catch-up plays to respond to the threat of the iPad. Amazon is even trying to win love by giving away free Kindles to their best customers.
But the best plan for Amazon isn’t to try to buy customers or try to match Apple’s approach. Rather, they’ll need to re-think their consumer experience from start to finish. They’ve done a great job so far of digitizing books, but now if they want to compete with Steve Jobs’ inventiveness, they’ll have to step up to be a must-have device in consumers’ digital lives. Of course, they can also just surrender and continue to sell books through their existing iPhone app, which should be compatible with the iPad like all the other apps in the App Store.