Wetpaint CEO Ben Elowitz on the Future of Digital Media
This follows my recent post about how a new TV interface from Apple could decimate the television landscape.
Even though Steve Jobs never talked about changing the face of search with Siri, its natural language interface.
But doing so would certainly be a riveting Hollywood screenplay in which Jobs, the uber-innovative, uber-inventive CEO, ultimately gets revenge on a corporate rival he views as a “copy cat.”
In this fictional script, that rival would be Eric Schmidt, one of the top executives at search giant Google. It’s Google, after all, that’s breathing down Apple’s neck with its rapidly expanding Android phone platform – a platform that, according to Jobs and his lawyers, mimics Apple’s breakthrough iPhone technology.
Putting this Oscar dream aside, there’s intensifying competition heating up between Apple and Google, even though Jobs is –sadly – no longer on the scene.
Indeed, even though Google has had voice-enabled search for some time on iOS and Android devices, Schmidt has said it’s possible that Siri could be a real and radical game-changer.
Schmidt may be right. And if he is, then Google will be facing a serious threat as Apple reinvents Google’s home turf of search.
With a “personality” that displays a unique understanding of humanity, Siri’s digital chromosomes enrich the user’s experience. This sets it apart from Google’s more mechanical offerings, and shows why Apple’s consumer-obsessed culture is so different from Google’s corporate DNA, which is as robotic and algorithmic as the “Android” name suggests.
There is rich irony here, as Apple disintermediates the greatest disintermediator of all time. When Google’s superior search service started, it practically single-handedly reduced the brand-driven experience that consumers had thereto relied on with directories and a fully editorialized Web. Google replaced those channels and home pages with 10 blue links. And in the process, became users’ destination of first resort 13 times per day.
And Apple has always been a curator extraordinaire – developing collections and exercising famous (and occasionally notorious) judgment to determine who deserves to be in its directories of songs and apps.
In all fairness, Page and his team are now trying hard to enrich the user experience by aligning their YouTube brand with media companies like Disney, and doling out big dollars for proprietary programming. The hope here is that YouTube can create dozens of lucrative user-friendly / user-favorite Web channels featuring comedians, sports stars, musicians and other entertainers. The company is building stocks of its ‘own’ media weapons in preparation for the coming war.
But, as always, it will be hard for Google to win the hearts of consumers when it comes to content; and it will be especially daunting because Apple is already so completely connected to users.
Meanwhile, with its enviable consumer connection, Apple will undoubtedly extract a toll from media companies, who still want to bathe in the warm digital light that emanates from the inviting and engaging brand Jobs built. And, as it has in every other media category, Apple stands to capture an outsize share of profits for delivering content into a magical consumer experience.
Jealous much, Google?
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.
As you know, I’m obsessed with figuring out the future of digital media. And to do that, there’s nothing better than putting stakes in the ground – based on the best available information and sharpest analysis I can muster – and then checking back to see how they held up.
In the last couple of weeks, two of the calls I made have come true; and that offers us a great opportunity to re-visit them, and see what we can learn from them.
Hulu Plus: Great Experiences Worth Paying For
First, Hulu Plus, which is thriving with over 1 million consumer subscriptions.
A year ago, when success seemed far from likely, I went out on a limb and estimated that Hulu Plus would have huge traction with consumers, surpassing $100 million in revenue in 2011. As it turns out, Hulu’s growth with its subscription product has been even faster than I expected – albeit with lower revenue per customer, given to CEO Jason Kilar’s smartly aggressive pricing, and the resulting much higher consumer adoption. The result has been substantial corporate revenues that have helped make Hulu market itself, enticing suitors to break it free of its complicated parent-company structure.
Content licensing agreements may still represent the greatest complexity of Hulu’s business under any ownership scenario, but what’s been a fascinating expectation exceeder is that by delivering the most desirable content and consumer experience, Hulu has gotten consumers to open their wallets in droves. That’s something that we can all learn from.
PayPal Acquires Zong: Making Payments Easier
And second, EBay’s PayPal, which recently bought mobile payment company Zong for $240 million.
Back in June 2010, I strongly recommended this deal and pointed out its many advantages. Indeed, Zong’s payment system makes it easy for consumers to pay – leveraging the addictive relationships people have with their mobile phones.
As my newsletter readers know, I recently updated my formula for consumer spending on digital media.
The Consumer Media Spending Formula:
(Desire + Relationship + Ease) X Scarcity = Spend
Now both of these transactions are reinforcing it for me.
The Future of Consumer Paid Media
Beyond that, these two announcements also tell us something important about the rapidly approaching future of digital media: increasingly, the industry will be relying on consumers to contribute toward its profitability.
Now it’s up to us to create great content and meaningful experiences that are worthy.
A Bonus Prediction: Apple Versus Facebook in 2012
And that’s why I’ll take this opportunity to make a bonus prediction.
By this time next year, we will be in the early stages of what will later become an all-out war over who will be the master payment and currency provider for digital media. Even as Paypal has made significant upgrades with the Zong acquisition, they won’t be enough to ignite Paypal as the leader in the key venues: on the social networks and in mobile applications. Instead, this online conflagration will, I believe, be waged primarily between Apple and Facebook Credits.
What do you think? And what’s your favorite digital media prediction for 2012?
There are plenty of naysayers who point out that Rupert Murdoch’s new initiative The Daily — the first major-media publication created expressly for tablet computers like the iPad — is an expensive and risky bet.
But here are four reasons why Rupert is right:
1) Rupert knows the ad model of publishing is doomed. Print and broadcast command the heftiest premiums, and both are at risk of price and volume erosion as consumers cut their ties to offline media. In the digital environment, online advertising is highly commoditized: the explosion of content publishers is outpacing the shift in demand, while technologies target audience ever more efficiently. Advertisers have plentiful ways to reach a consumer.
For his part, Rupert knows that his offline publications are at risk from decreasing ad revenues, and web-advertising models are hardly an adequate solution. Whether it’s out of desperation or vision, Rupert is willing to break through — and lose money in the short term — in pursuit of a better model.
2) Rupert can afford a long-shot bet — and can’t afford not to make one. He’s leveraging his considerable influence by putting something out there that can be truly cutting-edge. A $30 million investment may seem ridiculous for a new publication — and it is. But even with that hefty price tag, this is an insignificant bet relative to the industry and consumer behavior Rupert is trying to move. Throwing money at this is OK, because the possibilities are so great; if The Daily succeeds — or even provides the key insights so his next venture can succeed — it will be worth billions.
3) Rupert has influence to change consumer and industry behavior. He beat his drum loudly last year to get paywalls on the agendas of other publishers’ boardrooms. And it’s worked; just look at The New York Times’ pending move to a metered system. This is what I love about Rupert: Unlike other leaders in publishing, he uses his voice — and his treasury — to influence the industry and consumer behavior. He’s all about trying to get to a more successful model.
4) Rupert has a friend in Steve. Steve Jobs has a lot riding on this, too. Is Apple (NSDQ: AAPL) in the device business or the media business? To date, the lion’s share of its revenue and growth has come from the sales of ever-more-advanced devices. But as device categories mature, Jobs knows growth will get harder to come by: iPod sales grew at just 2% for Apple in 2010, as the venerable device line nears saturation.
In a world where mobile devices are ubiquitous and fiercely competitive, the fat margins of media revenue-share arrangements can powerfully fuel profits. But even more attractive is the tremendous expanse of the pool: Apple’s media revenues are currently around $5 billion — a paltry sum compared to the global media and entertainment market that PricewaterhouseCoopers pegs at $1.3 trillion.
Apple has already proven that in its remarkably successful closed media ecosystem, the company’s store can earn an estimated 30% of the top-line for media sales — without having to produce any media. This happens when Apple creates compelling devices, exciting user-experience platforms, and fresh marketplaces. For Steve, the upside here is huge. And so he should be happy to tie that upside with anyone who is as crazy-aggressive as he is about getting legions of consumers in the habit of paying for media. And that list has just one name on it: Rupert Murdoch.
A fresh start and a new division — with a new concept and a new design for a new platform — is the only way someone like Rupert can have the freedom he needs to reinvent media for a new age. And only Rupert can do this — without falling into the ruts of compatibility with existing businesses or holdover assumptions from old models.
Kudos to Mr. Murdoch for summoning up the courage, and putting up the money.
It’s been a week of dancing for Apple and The New York Times as they played hokey pokey with an app that offers a new, fun way for consumers to experience media: First, Steve Jobs put the acclaimed Pulse News app into his Worldwide Developers Conference talk, then took it out of the app store, and then put it back in again, but only after the developers took The New York Times out of it.
But as fun as it is to watch them dance, I can’t help but notice that The New York Times missed the opportunity right in front of Sr. VP Martin Nisenholtz’s eyes: the Pulse team is exactly the kind of talent that the company should be acquiring, not shunting. The Pulse founders made an app with a great consumer experience for media, did it in just a few weeks, managed to get the attention of the premier technology tastemaker in the world, Steve Jobs, and even made some money.
Message to Martin: Instead of cutting them down and pushing them into someone else’s arms, make nice and go hire (or acquire) the Pulse team. Or, as my mother once said to my older brother when he was dating someone she actually liked, “There are better men out there than you: You better marry her before someone else does!”
With the recent announcement of the iAd advertising platform for iPhone/iPad applications, Apple is filling one of the last major gaps in content monetization. They now have a full spectrum of monetization options for their platform: ad-sponsored free content; free trials; “bite sized” in-app billing for impulse buys, premium apps, and subscription billing. Publishers can choose the revenue model that best suits their content and audience.
For consumers, the Apple model is remarkably easy. Granted, the initial iTunes account set-up is somewhat of a hassle, but once completed, consumers can painlessly make purchases thereafter. Apple solved the micropayment problem years ago in creating the iTunes store for selling songs, and has carried forward that same keep-it-simple philosophy for premium content and applications on the iPhone.
Here is my take on the magic formula for getting consumers to pay for content:
Desire + Relationship + Ease = Spend
Desire is straightforward: how much do consumers want your content? Desire is a function of the degree to which your content and experience are unique and compelling.
Relationship is a measure of your brand and the extent to which you’ve consistently delighted a customer (or their friends) in the past.
Ease is achieved by making it effortless to pay for content.
Apple has nailed all three of these drivers, resulting in substantial and growing spend from consumers. On desire, they’ve made a product and a content experience coveted by loyalists and consumers en masse. On relationship, their platform has proven itself with a billion consumer delights. And in ease, Apple has set a new standard with the 5-second purchase process consisting of a just a password.
Many publishers and app developers complain about Apple’s closed system (indeed, Adobe has reason to do so), but that same closed system allows a controlled – hence predictable – experience for consumers. Apple is reducing the friction to purchase by leveraging their relationship and making the purchase easy.
This leaves me to wonder however: why is Apple the only company to innovate a complete platform for content monetization? The result for publishers is that they are better served by jumping on the Apple bandwagon than by striking out on their own. But as Apple continues to amass share of eyeballs, the media industry will resist the premium that Apple charges.
Can publishers directly offer consumers such high levels of desire, relationship, and ease and crack the code on getting consumers to pay? That is their challenge; and if they do, the money- and their independence – will follow.
One of my favorite questions to ask recruiting candidates is: “What content sites have a unique and differentiated user experience?”
The usual answers are as tiresome as the state of web design: YouTube (yes, it is fun to keep clicking), Hulu (yes, they got the experience right for TV viewing), and lots of pauses and comments like “I don’t know, it’s kind of all the same.”
Let’s face it: publishers are formulaic herds. And the formulas are boring and tired for users. How bad the state of the art is when Huffington Post gets major props for going with a single full-screen hero shot on its home page – and that’s considered breakthrough!
So that’s why I’m incredibly impressed with what MSN’s Scott Moore and BermanBraun’s Lloyd Braun and Gail Berman have done with their newest creation, Glo. From logo to flow, the site’s design lets go of the old formulas, tries something new, and most importantly, takes risks. New layouts, new interactions, and new forms of content all create a feeling that this is not an ordinary website. Even more, they have defined their own style that is adventurously well-suited for their audience.
To start making money, publishers need to create consumer experiences that stand out. As MSN’s Scott Moore said in a post by Kara Swisher, “we see a lot of room to grow by offering something different and of higher quality.” These premium visceral experiences are exactly the path to profit in digital media: they will attract loyal audiences, premium advertising dollars, and over time create opportunities for upselling to consumers. And those premium experiences are, after all, the root reason why everyone is so excited about the iPad this week.
Apple doesn’t need to be the only one that can innovate. This kind of innovation is rare among publishers, and yet all too valuable.
For heaven’s sake, if MSN can do it, everyone can.