German Media: Merkel Syndrom

Exploring the idea that the German media landscape has the Merkel Syndrom: Powerful, yet refusing to lead; profitable, yet only on defense.

NBC Universal invests 200 Million into Vox Media and 250 Million into Buzzfeed (still unconfirmed, but it’s a done deal). Valuing Vox at about 1 Billion and Buzzfeed at 1.5 Billion. The combined value of those two companies is now 2.5 Billion. Which is more than the Market Cap of The New York Times.

We’ve been asked by a client, who has been invited to attend the Blattkritik at Der Spiegel, to comment on the current issue, give examples of great journalistic work – especially in reporting about the technology market, as well as provide a general assessment of the current state of affairs in the media business. A Blattkritik is basically a sit down with the editorial team to discuss what could’ve been better in the previous issue. They invite previous contributors and outside experts to those meetings to get a broader perspective on their work. The client asked us to help them shape some of the topic points they can take to that meeting.

It turned out to be somewhat of a conundrum for us. While we do read German media, we have currently no subscription to a German daily or weekly. Neither Johannes nor I have picked up Der Spiegel in a while unless someone recommended us a specific article. In those cases, we end up reading only that specific article without paying much attention to the rest of the magazine. The question is: why?

We have currently two subscriptions at the office: The Economist and Bloomberg Businessweek. We read them both as carbon copy, despite the fact that our subscription give us access to all of the digital properties of both publications. Johannes is sometimes using The Economist’s feature where one can create a personalized podcast. Basically an audio version of the print magazine. Both The Economist and Bloomberg Businessweek provide a perspective on global affairs. They have overlapping audiences, but cater to them differently. While both magazines pride themselves being opinionated, probably no publication currently can claim to have such a clear voice as much as The Economist.

The question remains: why are two founders of a business consultancy based in Berlin, with a majority of clients in Germany not reading a German outlet, specifically the weekly with the largest circulation? And whenever we would need to pick one, we would still not end up picking Der Spiegel. Both of us agreed that it would either be Die Zeit or the weekend edition of Süddeutsche Zeitung (which Johannes used to subscribe to).

There are a couple of observation that I wanted to document in that context:

German Media in the era of Merkel

If there is one characteristic that can be applied to the German chancellor, it is the lack of leadership, the tendency only to act as a reaction. All opportunism, no courage. With approval ratings high, that behavior can not be easily discarded. It’s a reflection of Germany and it feels often times as if it applies to the German media as well.

On the business model side, we see very few things happening and the ones that do are mostly small, incremental changes that are based on the best cases that usually have been developed outside of Germany a while ago. Slow adaptation isn’t wrong per se, but the current pace surely can not compensate for the decline in print circulation.

But that alone isn’t the qualifier why German media doesn’t capture our attention as much as international outlets. It’s the content.

One aspect about The Economist and Bloomberg that came up in our conversation is that they attempt, at every step of the way, to help their readers navigate a complex, interwoven, networked world while German media, and specifically Der Siegel, often end up attempting to simplify complexity. Those are substantially different attempts to see the world and the former is one that is at the core of what Third Wave as a company attempts to do. We can not, we will not succeed figuring out some of the most drastic problems that humanity has faced with the Merkel way of leadership and with a media landscape that follows suit. An informed citizenry with the ability to deliberate and in a democratic process is what we need and neither our political parties nor many of this nation’s journalists seem to be capable of providing this.

This, certainly, is not a unique problem of Der Spiegel, it happens across the board. But being the market leader usually means that one would attempt to hold and / or expand that position. Now, I want to be honest, from a business perspective it probably makes sense to cater to only what the audience wants to hear. Der Spiegel doesn’t seem to pick topics based on their significants, it picks topics based on what they want to say to their large (yet shrinking) audience. This seems to mostly work out fine for them. Courage, experimentation, diving into complexity and challenging the national conversation can be both exhaustive and expensive. As so many before, market leaders tend to lose their edge and their lust for their new and rely on a strategy that is mostly about defense.

Die Abhängigkeit von Social Media Plattformen macht Verleger irrelevant

The following post is about the dependency of publishers on social media platforms in German, because it picks up on a post at Wired Germany.

In seiner letzten Kolumne für Wired Deutschland hat Johnny Häusler Zeitungsverlegern empfohlen die eigene Webseite abzuschalten und einfach dahin gehen wo die Leser sind.

Im Moment gibt es zwar noch ein paar (ältere) Leser, die täglich eine URL eintippen und die Startseite eines News-Portals oder Magazins nach den für sie interessanten Nachrichten, Fotostrecken oder Videoberichten durchsuchen. Doch die Zeiten, in denen Menschen dorthin gehen, wo die News sind, sind längst vorbei. Weshalb die Nachrichten dorthin gehen müssen, wo die Menschen sind.

Ich habe auf Twitter widersprochen, wir hatte eine nette Unterhaltung und einige andere haben sich mit in die Diskussion eingeschaltet.

Journalistische Relevanz sollte nicht anhand der Zahl der Klicks gemessen werden. Daher ist es umso zweifelhafter wenn Beispiele wie Snapchat Discovery als gute Möglichkeiten angebracht werden, um für Verlage neue Zielgruppen zu erschließen. Genau wie für Facebook, sind Verlage für Snapchat nichts anderes als Produzenten des Contents, den ihre Nutzer auf ihrer Plattform sehen werden. Die Produzenten bekommen ein immenses Regularium vorgelegt, nachdem sie ihren Content produzieren sollen. In einigen Fällen mischt sich Snapchats Editorial Team (denkt mal darüber nach warum sie eins haben und weiter aufbauen) sogar in die Produktion des Contents für die eigene Plattform ein. Das ist, laut dem WSJ, auch der Grund, warum sich Buzzfeed trotz vorheriger Ankündigung gegen eine Beteiligung an dem neuen Programm entschieden hat. Im Gegenzug dürfen Verleger den Distributionskanal – in dem Fall Snapchat – nutzen.

Jeder gegen Jeden: Nutzungszeit

Für Snapchat, geht es um die Steigerung ihrer Relevanz durch Erhöhung von Nutzungszeiten ihrer App. Höhere Nutzungszeiten bedeutet zwangsläufig, dass ihre Nutzer andere Apps oder mobile Webseiten nicht nutzen. Im digitalen Zeitalter, jedoch vor allem auf Smartphones, geht es nicht um die Konkurrenz im gleichen Marktsegment. Alle konkurrieren gegen einander um die Zeit, die der Nutzer mit seinem Telefon verbringt. Snapchats größter Konkurrent in der Hinsicht ist Facebook und die von Facebook gekauften Whatsapp und Instagram.

Die Erhöhung der Nutzungszeit ist allerdings kein Selbstzweck sondern eine Metrik, mit der Snapchat von Werbetreibenden höhere Erträge generieren kann. Während Snapchat Discovery zunächst primär Partner aus der Medien und Verlagsindustrie hat, um sowohl die Verhaltensmuster zu testen als auch um lukrative Inhalte zu haben, sollen in Zukunft natürlich auf der gleichen Ebene auch Inhalte von klassischen Werbetreibenden erscheinen.

Aus Sicht der Nutzer von Snapchat ist das ein Mehrwert. Doch diesen Mehrwert verbinden diese Nutzer vor allem mit Snapchat, nicht mit den Produzenten von Inhalten. Der Inhalt wird dort konsumiert, wo der Nutzer ist. Die Plattform ist noch sehr jung, signifikante Auswertungen wird es noch nicht geben. Meine Vermutung ist: die meisten Nutzer werden sich nicht daran sehr lange daran erinnern können, wer der Absender des Inhaltes war, den sie womöglich gemocht haben. Sie werden sich vor allem daran erinnern, dass sie diesen auf Snapchat Discovery gesehen haben.

Ähnliche Methodiken wendet Facebook an. Darüber habe ich in der Vergangenheit bereits geschrieben.

Verlegen ist mehr als Inhalte produzieren

Beide Unternehmen versuchen das Ökosystem (Bought-, Owned-, Earned-Media) aufzulösen. Die Owned-Media – für ein Medienhaus: TV, Zeitung, Webseite – sollen immer mehr in die Kontrolle der US-Plattformen abwandern. Facebook hat es bereits geschafft die Abhängigkeit der Medienhäuser von ihnen fast unzerstörbar zu machen, indem sie der mit Abstand größte Treiber für Referrer-Traffic geworden sind. Jetzt wollen sie die Nutzer nicht mehr irgendwohin schicken, sondern sie immer mehr auf der eigenen Plattform behalten. Aus Gründen, die ich weiter oben bereits beleuchtet habe.

Was bedeutet das für Verlage? Vor allem die mit journalistischen Ambitionen? Die Marginalisierung ihrer Relevanz. Für Journalismus hat auch vor dem Internet niemand bezahlt. Die Profitabilität von Verlagshäusern beruhte auf ihrer Kontrolle von Produktionsinstrumenten (Druckereien) und den Distributionswegen. Beides ist durch das Internet marginalisiert worden. Russell Davies, einer der Mitbegründer vom Newspaper Club, sagte:

We Have Broken Your Businesses, Now We Want Your Machines

Plattformen wie Snapchat und Facebook wollen nicht die Druckerpressen sondern die Leser und je mehr sich Verlagshäuser auf die Beschaffung der Leserschaft einzig und alleine aus dem Traffic / Metriken, den diese Plattformen ihnen zu Verfügung stellen verlassen, desto schneller werden sie das letzte verlieren was sie derzeit noch haben: die Bedeutung ihrer Marken und die Autorität die einen Content-Produzenten von einem Verleger unterscheidet.

Metrics matter

The decline of the view-based-metric model has not been exaggerated. The quest to find an alternative is difficult. An overview.

The ad-budget crunch is felt across the media / publishing industry. While there are differences between markets, the overall trend is the same: publishers struggle generating enough revenue from the classic ad-based business models.

AdBlock and robots

One aspect of the overall situation is the growing number of AdBlock users. Now the company behind AdBlock Plus is even providing administrators with a solution to install their product across a whole network.

On the other side of the aisle, advertisers have to deal with the fact that a significant number of views on their display advertising is generated by robots and not potential customers. The Financial Times reported about a Mercedes-Benz campaign that had up to 57% of fraudulent impressions.

In a sample of 365,000 ad impressions brokered by Rocket Fuel over three weeks, Telemetry found that 57 per cent were “viewed” by automated computer programs rather than real people.

Current state of affairs

What is required is an industry wide acceptance and adoption of a new metric. Without a clear alternative in place, the view-based metric is creating the following problems:

  • For a few years already, there is a significant inflation in the value of display ads.
  • Ad space becoming cheaper forces publishers without alternative business models / revenue streams to accept ever worsening deals from advertisers and placing more ads on their digital properties.
  • This leads to even more devaluation of display ads.
  • On top of that, this trend aggravates the user experiences and frustrates the editorial side of the business. It destroys both the brand loyalty of the readers and the trustworthiness of the publication.
  • Furthermore, the waining cash reserves slash the chance of those businesses adopting new business models, because that would require substantial investments.

For some, native advertising seems like a natural way to alleviate those pains, but only a few publishers have adopted those into their core product yet. Compared with overall ad budgets, Native is nothing more than a niche in the business and doesn’t provide conclusive data and insights for the industry to adopt at scale. Additionally, most native-ad products are, as of now, far to expensive for most advertisers.

Engagement to the rescue

A new, industry-wide metric is required to stop the devaluation of advertising as a viable (main) business model.

Some publishers are lobbying for an engagement based metric model. Most prominently: the Financial Times, The Economist, Medium and Upworthy (which is radically transforming its business).

upworhty1-700x419 (Source: Upworthy)

Medium has been outspoken about their commitment to engagement-based models. Some authors are no longer being paid on the basis of how many times their articles have been seen, but how long people spent reading them.

For example, some people are now paid not by clicks, but by the total time spent reading in their collection—another experiment that could change as we learn what effects it has on the types of stories it helps produce, and how people find and read them. – Evan Hansen, Editorial Director at Medium

The engagement based metric would also reduces the strong dependency of most publishers on various social platforms and most of all on Facebook as sources for traffic. While receiving referrals will remain important, publishers will have the ability to optimize not only for click-bait, but for quality. Editorial teams will be able to focus again on the actual story.

If you let it, Facebook will take it all

As things are today, news publishing, especially in the US, is very much dependent on services controlled by technology companies. When Google closed down Google News in Spain, the traffic of the publishers who lobbied against the tech giant collapsed. This is a symbolic way of how the publishing industry is trying to cope with their current state. Instead of developing alternatives that would decrease their dependency, the strategic focus is far too often on blaming the tech industry.

Facebook has an unprecedented control over the digital distribution and spread of news, but the social network is far from satisfied being in control of how people discover news. In its everlasting quest to become the internet itself, Mark Zuckerberg’s company has started switching to a model that will reduce publishers to sheer content producers. This can be seen with their push into video. Videos hosted on Facebook perform far better than the ones who are only linked to / embedded.

“What the Shift to Video Means,” theoretically, is that much of the benefit publishers have derived from Facebook over the last three years, which required only occasional and modest adherence to Facebook’s explicit and implicit guidance, will disappear for organizations that are not interested in ceasing to be publishers to become “creators,” or in replicating their operations on another company’s platform just because it’s the momentarily dominant channel on hundreds of millions of new machines with poorly understood potential.

It makes a huge difference, especially on mobile, where Facebook dominance is now even stronger than on the web. On mobile videos hosted on Facebook will start playing (muted) automatically. What sounds like a small difference will create a distorted outcome for businesses that are operating with a view-based metric. Facebook is planing to adopt the same approach to non-video-based content as well. Publishers will be facing the decision of hosting their articles on Facebook itself, thus making it more likely for the content to be seen, but less likely that it will create any lasting value for themselves. A classic case of the middleman becoming rich and powerful enough to take over the whole stack.

Diversified business models are becoming non-optional for the publishing industry. There are alternatives to switching to different metrics or native advertising, but it is now clear that a continuation of the current state can only be considered wishful thinking.

In the end, it all comes down to Campbell’s law.

The more any quantitative social indicator (or even some qualitative indicator) is used for social decision-making, the more subject it will be to corruption pressures and the more apt it will be to distort and corrupt the social processes it is intended to monitor.

TW Commentary: Why Apple Pay makes Mobile Commerce incredibly easy

Apple Pay will be as transformative for payment as Google Maps was for location services. Now anyone with an app can sell things.

What Google did is provide easy access to the best location and map data in a simple, easily integratable way. Without Google Maps, we wouldn’t have companies like Foursquare, Yelp, etc. They all would have needed to build their own mapping infrastructure or rely on a more expensive / less accurate one. With Google they just used the best possible solution, for free. It suited both sides. Google got a lot of data out of this symbiosis and achieved what it always wants: more data. And app developers didn’t have to worry about location data and just build the best possible services around it.

Apple just did the same for payment. By integrating a payment services on the OS level, they basically are taking care of the whole, extremely complex process that is required to authenticate payments. Now any developer out there can just use the Apple Pay API to integrate payment into their own application.

This can have tremendous consequences. One of which should be a very scary proposition for Amazon. The lesson here can be derived from another Ecommerce company: Alibaba. What Alibaba did is offer a way for millions of manufacturers to sell to anyone in China and then the whole world. They offered those manufacturers a way to present themselves and they took care of the infrastructure. Additionally, they managed the trust issue, by keeping the money until the customers received their satisfactory product from the manufacturer / merchant.

Simply put, they created a market where there was none before. There’s huge potential for the same thing happening with the introduction of Apple Pay. Imagine the proposition of building an application as an author of books and just selling your own content, without anyone in between, directly to your clients. Authors with a large enough audience could use this to establish a new source of revenue. Building those kind of applications isn’t expensive anymore. Most of the technology is already made and available as open-source. The hardest part is not reaching the audience, it’s managing the payment process. With Apple Pay this is not an issue anymore.

TW Reads: Mobile Payments

An excerpt from our reading list on the mobile payment industry.

As we’ve mentioned before, we’ve been involved in the mobile payment industry for quite a while. Since we’re keeping track of the most interesting things happening in the industry, we thought there is no reason why we shouldn’t be sharing some of the most interesting reads or announcements in this field with our readers.

Mobile Payment Today – Mobile wallets: will value actually drive adoption?

Despite the collective efforts of some of the largest companies in the world promoting their supposedly superior products, just 16% of mobile device owners have used their phone to make an in-store payment. That’s not exactly a ringing endorsement.

In light of possible announcement by Apple next Tuesday, it’s prudent to analyze why the collective effort of so many companies across continents and nations left so much to be desired when it comes to building a significant mobile payment solution. In an unusual turn of events, Mobile Payment Today – being so often just a press release portal for a similarly named industry – provides exactly that: a poignant analysis.

Link: Mobile Payments Today

Re/Code – Here’s How Amazon Might Take Over Brick-and-Mortar Retail

Broadly, they said the world’s largest online retailer aims to make it easy for a wider array of brick-and-mortar shops to sell on Amazon while giving Amazon shoppers another way to receive orders on the same day they are purchased.

Nothing has stirred up the mobile payment industry quite as much in the recent weeks as Amazon’s announcement to dive deeper into payments. Not only did they release a device and service that is a direct competitor to Square, Paypal and many others, they’re also attempting to do what they always do: compete through a better price. The device is cheaper, the rates are lower. Especially the last part will make it hard for store owners to resist the Amazon offer.

But there seems to be more than that. Jason Del Rey over at Re/Code has been a keen observer of everything Amazon. It almost feels as if he is for Amazon what Kara Swisher for to Yahoo. Always watching, always acquiring a new source. His analysis concludes that not only is Amazon going after Paypal’s business, it is actually all a ploy to get many of those brick & mortar shops onto their platform, enable them to participate in the glorious experience of ecommerce and enhance Amazon’s ability to make same-day deliveries of every-day products. This, obviously, seems somewhat far-fetched and yet not at all unlikely considering the Bezosnian appetite.

Link: Re/Code

Eater – OpenTable testing mobile payments

Restaurant reservations website OpenTable has officially launched a new payment feature on its mobile app that works at over 45 restaurants in New York City.

While OpenTable isn’t a huge operation in Germany, some restaurants still use it. It feels more like a gimmick here. Mostly because the way restaurants operate here and in the US is so different.

In the US on the other hand, OpenTable is a huge thing and they charge a lot, too. It became so bad that many restaurant owners are comparing it to the Mafia and having to pay protection money to the mafia. Effectively, if you’re not on the platform, people are significantly less likely to visit the restaurant. On the other hand, if you’re using OpenTable, they are suffocating you with the cost of using the service.

In this light, you might not hear that many restaurant owners rejoicing after the announcement that OpenTable is experimenting with payment solutions. Especially if you consider that while there are many, many other services in this field, not many are as likely to succeed in it as OpenTable. If they do, restaurant owners will only have to transfer a bigger cut to the service.

Link: Eater

Who is being shallow? How you should be thinking about Buzzfeed

The discussions around the latest financing round for Buzzfeed revealed, once again, that the company is still being misjudged. Here is why they’re the future of publishing.

In his latest column, David Carr writes about the uncertain future of spun-out print newspapers. At the same time, Andressen Horrowitz announces that they have invested 50 Million into Buzzfeed through a post that Chris Dixon, a partner in the firm, published on his private blog. They value the new-media firm at 850 Million dollars. If you have read any news about this, you’ve probably encountered the comparison to the price that Jeff Bezos paid for The Washington Post and how Buzzfeed’s value exceeds it by 600 Million.

The media landscape has been unraveling since the early 90s. No news here. News is, though, that so few journalist are able to report the fact that after all those years there is now a new breed of media companies that provide a plausible alternative to how media and news publishing companies have operated so far.

Technology is the backbone

For a venture capitalist, there is nominally little difference between Buzzfeed and Facebook or Twitter. They are investing into the technology capabilities of those companies, not into their editorial staff.

BuzzFeed has technology at its core. Its 100+ person tech team has created world-class systems for analytics, advertising, and content management. Engineers are 1st class citizens

There is a clear distinction here between Buzzfeed (or a Vox Media) and its predecessors. While traditional news organizations only involve themselves as much with technology as they feel necessary to accomplish their main objective (journalism), new media companies like Buzzfeed build technology that provides an abundance in scaling opportunities. That in turn makes them both profitable and susceptible to the interest of VCs and allows them, for now, to maintain an editorial stuff of 200, invest significant resources into investigative journalism and long-form reporting.

But there is more

As a media outlet, Buzzfeed is competing for the same advertising dollars as other media outlets, but they aren’t doing so with the same products. In his talk at the Guardian Media Summit a year ago, Jonah Peretti, Buzzfeed’s CEO, said that he considers display ads to be a historic mistake that soon will be corrected. While so many of us certainly can relate to the statement, I’m sure someone at Google and Yahoo will refer to how much money this “mistake” is making them. Fact is, Buzzfeed would never attempt to compromise the experience for the user by adding ads to its site. In fact, you don’t see any display advertising on the website whatsoever. Instead of charging advertisers money for displaying ads that nobody wants to see, Buzzfeed is charging advertisers for helping them to create content that both solve the communication need of the advertiser as well as ensuring that it creates value for the recipient. For Buzzfeed this means a better user experience and the luxury not to compete in a plummeting display ad market. Advertisers get a significantly better engagement on their marketing message. This way, Buzzfeed is both a media outlet as well as the advertising agency.

To round this up:

  • Buzzfeed created a technology that allows them to build the product that users want
  • Buzzfeed offers advertisers native advertising products by allowing them to use the same tech that their editorial stuff is using to create stories thus making the advertiser happy and themselves very profitable
  • This in turn allows them to produce the kind of content that is being asked for right now

buzzfeed explained

After years in which we have seen the validity of traditional media-business models erode, companies like Buzzfeed and Vox Media at least provide a viable alternative. One doesn’t have to agree fully with any of those approaches. Looking closely, one can find sufficient reason to be doubtful about the path those new companies are taking.

The core learning, on which so many in the traditional media landscape are focusing when debating Buzzfeed, is certainly not that one has to adopt listicals with funny cat photos or a subversively viral approach to formulating headlines. Those cursory observations are preventing an old industry from learning exactly what it needs to learn from those newcomers.

This is an exciting time to be involved in publishing, journalism and media. Here at Third Wave, we strongly disagree with the notion there is a lack of good content. In fact, the opposite is the case. The difference is that great content is out there, it’s just hard to find and even harder to finance. That too is not due to lack of financial resources. In the Netherlands, De Correspondent have raised 1.7 Million in a crowdfunding campaign to launch a new media entity, in Germany a less exciting project managed to raise over a Million. There are also smaller success stories such as Deca. Those projects prove that there is both money and willingness to pay for good content. Crowdfunding it itself isn’t a business model, nor should it ever be considered one. It might work for certain projects, but it won’t be enough to provide a scalable business model that will ensure the continued existence of the fourth estate.

There is a wonderful, long interview – published on Medium, of course – between Felix Salmon and Jonah Peretti (CEO of Buzzfeed). It’s personal. It provides context to understand why Peretti is able, so far, to navigate first The Huffington Post and now Buzzfeed to being such huge success in the media world.

Be of the net, not just on it.

–Emily Bell, Director of Tow Centre for Digital Journalism at Columbia J School

Buzzfeed certainly is.

Work Note – Back in the writing business

A big update after a long pause.

Clever strategy to first announce a massive change in how we want to approach publishing and than just stop writing all together.

Please don’t do this at home. Or at work, for that matter.

There are both professional as well as personal reasons that led to this particular (non-)execution of a strategy that we still want to test in the field.

Professionally, we have experienced a peak in work load. Not utterly unexpected, but mixed with the fact that I became a dad (it’s a girl!) a tiny bit earlier than estimated, it led to an unprecedented reshuffling of priorities, in which family and direct client work have top priority.

Practically speaking, while I was enjoying and easing into a family routine, Johannes successfully managed to juggle all project at once. The understanding and flexibility that all of our partners and clients showed to a sudden change of pace reminded us how privileged we are to be able to work with those people.

Now that I’m back, we returning to an old routine and this post is an attempt to get back to writing. In that sense, here is a run down of things that we have been up to.

Publishing, publishing … and publishing

In various capacities, we maintain our focus on the publishing industry and keep a very close eye on industry news and developments. In that context, we couldn’t avoid the leaked New York Times report and Amazon’s very public confrontation both with Hachette as well as Warner Bros.

NYT Report

It’s a rare gift to get access to an internal strategy document from one of the leading brands in the publishing industry. There are a couple of findings that sprang to mind, but overall I’d have to agree with BuzzFeed’s Jonah Peretti that they are very hard on themselves and especially on their digital team and not hard enough on the print people. Considering especially the scope of things in Germany, where the pinnacle of news innovation seems to be a crowd funding project by journalists, the NYT performs beyond what most other media organizations can offer.

On a side note: it was reinforcing to see some of the findings and business model adjustment suggestions that we made for a client in Moscow last year in a similar form in the NYT report.

Amazon vs Hachette vs Bornier vs Warner

In a remarkably public way, Amazon and Hachette (they apply similar mechanics with Bornier and Warner) decided to show the world how much both sides don’t care for each other. The mechanics that Amazon applies have been document fairly publicly and – probably not to a big surprise – not quite in the market places favor.

Despite the assumed premise that Amazon does everything with the consumer in mind, they do not seem to back off in highlight of all the negative PR. In this context, the only thing that we can now hope for is for a leaked report on how much business they lose. If any.

Be it for the consumer or not, the consumer is the one that made it possible for Amazon to pull this off. The “everything store” has created a cross-industries pull effect of unprecedented proportions. They fell comfortable enough to not provide the customer with the exact thing that they want, because they know that the same customer will come back to buy something else from them anyway. A book or two more not sold isn’t going to make a behemoth of that size flinch. At this point, it would need a cross-industries collaboration to back Amazon into the corner they so deserve to be in.

Mobile Payments

As for years now, we are still constantly involved in various projects about mobile payment.

There is an unravelling happening in the industry. Starting with Square. A company that went quickly from being the darling example of all innovators to a disputed, cash-burning entity that apparently can neither find a buyer because of its overblown valuation nor does have the balance sheet that would make an IPO possible.

Despite all that, Square’s solution was regarded as the benchmark of the industry. It has to say something that this very solution is shelved now.

Mobile Wallets don’t catch on, because they are build in a way that mostly benefits the maker of the wallet, not the user. Many, if not most, mobile wallets are made by companies outside of the finance business. The play is to take away some of the power from the companies who are making a profit on cash and credit. Banks, credit card issuers, etc.

Problem is: for now, mobile wallets can’t be designed in a way that assumes that they are the only way to pay out there. Which they aren’t. Cash and plastic aren’t going to go extinct any time soon. I see a bright future for companies who succeed in building a mobile wallet as part of a larger ecosystem of payment methods. There is plenty of money in that too.

That’s basically what we have been exploring in the field. What might this look like? Where is the market for such a venture? Making feature lists, discussing business plans. This is an ongoing project, expect us to talk more about some of the insights.

With that, I’m signing off after a long update.

Facebook readying itself to provide financial services in form of remittance and electronic money

Facebook will soon offer remittance and electronic money services. It’s another piece of the puzzle after the launch of and buying Whatsapp.

The authorisation from Ireland’s central bank to become an “e-money” institution would allow Facebook to issue units of stored monetary value that represent a claim against the company. This e-money would be valid throughout Europe via a process known as “passporting”.

This is just another piece of the puzzle that Facebook is executing with determination.

The devil is in the detail on this one, though. and buying Whatsapp have been clear plays towards the not-yet-developed world. Facebook can grow in the US and Europe by making ads more expensive per user. That works so far. Especially with organic reach approaching Zero. There is growth in optimization for the next few years. Especially now that Facebook seems to have understood how to work mobile.

But the growth that is needed to get to a distant future, one that might involve having bought Oculus, is only going to materialize by getting all those other internet users onto the platform. While that might not be a literal goal – there is no chance for them getting everybody –, this might not be as far from the vision that Mark Zuckerberg seems to pursue.

A big step towards that goal was the acquisition of Whatsapp and its presence and brand recognizability in said markets. While mobile is on its way to be king in our world, it already is in Africa and many parts of Asia. Feature phones still rule, but smartphones are on the rise. Especially with Huawei & Co. dumping cheap, reliable hardware powered by Android on everybody that holds a Nokia feature phone in their hands.

One, if not the, major application of mobile phones is those markets is dealing with money. It’s a big place and banks aren’t as accessible. Money is being managed, for years now, through services. Sending money (P2P/remittance)? Not a problem. Paying for groceries? Not a problem. Name a scenario that you wish would work here and it’s already an old thing in at least part of Africa.

Screen Shot 2014-04-14 at 15.57.24

That’s why it’s so interesting that Facebook is about to acquire a remittance license in Europe. tl;dr – it makes total sense.

We’ve been part of a project that involved building a payment service into / for Facebook since 2011. For the record, I do not know, if our client is in some way involved what Facebook seems to be doing right now, but I wouldn’t be surprised if they are. That being said, when we started I didn’t know much about how money transfer works. Things changed in the last 3 years.

Europe is a messy, extremely tightly regulated market for financial services and products. At least from the perspective of anybody with a banking license or with the desire to have one. Compared to other markets, it’s still a “if you can make it here, you can make it anywhere”-situation. Additionally, many not-yet-developed countries are using European knowledge to build regulation for themselves.

Another expect is that to provide good remittance services, one has to be present in the market from which the money will flow to somewhere. Since remittance is used predominantly by foreign workers who transfer their money from the place of their work to the place where they and their family live, it makes a lot of sense for Facebook to be present in Europe. Both because European citizens are moving quite often between countries to earn their money as well as foreign workers from Eastern Europe, Africa and Asia are coming here to make a living, often financing the life of their relatives in the places they came from.

As a strategy, it makes all perfect sense. Buy yourself the app that people use to communicate with each other on the devices that they use for communicating and banking, get yourself a “banking license” to one day connect everything inside one company (and possibly one application).

If successful, this will have catastrophic consequences for the open web. The tragic part, for me, is the eloquence and decisiveness of Facebook in the execution of a vision. I can’t help myself, but to admire that.

The economics of new media ventures like Vox

Key to the economical models of new media outlets is not journalism, but their technology. In this column, we are taking a closer look at the business model of Vox.

Just about every company with a reputation problem, for instance, should be jumping at the opportunity to be able to tell their story using Vox’s technology and platform.

In what is yet another masterful analysis of the news industry, Felix Salmon writes the quote above at the end of his article about, Ezra Klein and The Washington Post.

The rest of the article is great, but this part is fantastic. At least to me. I don’t hide my fascination with new outlets like Buzzfeed or Vox, but I wasn’t quite sure whether the economics behind those venture will work. While the current inflow of VC money into news organizations is paying for the current unraveling, I am still not sure if long-form, investigative journalism and VC money can work together. That being said, VC’s obviously do not invest into journalism, they always invested in the tech. It’s the only part of companies like Buzzfeed at Vox that is scalable at a rate that is remotely interesting to venture capitalist. My hesitation was that: if those companies don’t earn money quickly enough, it is not the developers who will be fired first.

But with that one bit of information in Salmon’s blog post, I got a missing piece of the information needed to understand the economics of a venture like Vox.

If you are active in the publishing and / or media industry, you will have heard of buzzwords like brands as publishers or native advertising.

Native advertising is now a proliferated instrument in the ad business. Facebook does it. Tumblr does it (somebody on Twitter said that Tumblr is Yahoo’s native advertising format, which is both funny and can be correct). does it. has build a piece of technology that, as Salmon mentions as well, allowed Ezra Klein to build a new news outlet in 15 weeks. 15 weeks! That’s nothing. That’s the time that the management of a German newspapers requires to decide whether or not to launch a new blog. If they are lucky and can bypass the print editorial team.

With flagship products like, The Verge and Polygon, Vox ensures that they can shape the market according to their needs and build the technology to power it.

Enter brands as publishers. Simply put: why should a brand spend money on advertising, if they can spend that money on creating their own content for their own properties? That’s something that very few brands pulled off successfully and it took most of them a decade to become good at it. Like Red Bull.

But if a company like can launch a whole news outlet in 15 weeks, I bet they can build – on top of their technology and distribution experience – a communication channel for a client that could generate them a mid-size six figure marketing budget. Something along the lines of what they just did for Intel. And here is the ultimate kicker. This is now burned money as it is with advertising. It doesn’t only take away the budget that Intel might have spent with a publisher like The Washington Post, it also ensures that they build something that will make Vox’s technology better and more competitive.

That’s why it scales.

Week 180

A few announcements about new projects and a talk at the Haus der Kulturen der Welt this upcoming Saturday.

We are happy to announce that we have been commissioned by Hoodie. Well, technically by The Hoodie Firm and we consider the setup to be more a collaboration than one of the usual commissions.

This is one of the special projects for us. First, it means working with people who’s work we think very highly of. Second, it’s a Berlin-based project. It’s nice to be able to meet for coffee and have a discussion without having to travel far as we usually do.

Hoodie operates on the fringes. They are working on technology that will enable people who are currently regarded as mere users on the network to become much more than that. Their foray into offline first application development has the potential to shape a zeitgeisty demand1. We couldn’t be more happy to support them as much as we can.

Talk at Literatur Digital

As announced on Twitter a couple of weeks back, we will be giving a talk with Elisabeth Ruge at the Literatur digital event at Haus der Kulturen der Welt. The event starts on Friday at 15:00. The opening event, as usual at HKW, is free to the public. Our session is on Saturday at 16:15. We would love to see you there.

We’ve been tasked with presenting the new and the unexplored in the digital publishing world. Since the focus is on literature, we will not be focusing on some of the exiting things happening in the news business right now.

Instead, our focus will be on projects and services that managed to attract large audiences, but not necessarily a functioning business model. Many in the industry measure success by the size of the audience attracted. We aim for helping publishing houses to find a balance between developing toward large audiences as well as generating revenue. In 2014, few publishing houses can afford large investments without knowing when and how they will make a return on their investment. I’m looking forward to the potentially lively discussion.

Elisabeth Ruge Agentur

As mentioned in one of the previous week notes, we started working with a new client from the publishing industry. Elisabeth Ruge, who recently launched a literary agency, commissioned us to be … well, strategic advisors. We are involved in the nitty-gritty stuff of setting up an agency as well as long sessions about business models. We also helped her pick the right person to design her website.


We all think that Jens did a great job on the first iteration of the website (you should hire him, too). Expect to see a constant transformation of the website over the coming months.

Similar to Hoodie, this became a collaboration. We are cooking something up that utilizes both Elisabeth’s long-standing experience in the German publishing world as well our knowledge of the digital. We’ll keep you posted.

  1. With what we learned over the last 12 month about the state of the internet, it is safe to say that being always on isn’t as desired or possible as it once was. We are already seeing many new applications that take that into account, provide services that do not require the cloud to operate.