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.

Introducing a Digital Framework for Media Companies

We have collected our insights on the media landscape into a new model.

This is a revised version of the framework that we released on March, 19. Check the change notes at the end of the article.

Since releasing our Future of News Publishing report last year and since actually putting it together about two years ago, we have been observing the news publishing industry continually. Collecting weak signals, we were trying to spot the behaviors that seem to be helping publishers not only to survive but to move forward. Taking a step back, we saw similar patterns emerging again and again. So it was time to put them into a framework.

The purpose of this framework is to put the most important aspects of a publishing company in the digital world into a model1. It’s not a how-to guide for building a news publishing product. It’s a mental model how to think about and develop core parts of the business.

The Key Components

audience product business infrastructure

The model itself is simple. It’s a triangle that connects the three main areas of a media company from our (current) perspective and puts the audience in the middle.

1. Audience

Every media company needs to start with and evolve around its audience: the readers, viewers, listeners, commentators, community etc.

2. Product

This is not only all the content that is written, produced, recorded, filmed or created in any way. The editorial strategy and the “voice” (as in tonality) are part of this, too. It’s also the talent: the writers, the journalists, the photographers, the film crews, the fact checkers and researchers. Also the formats: articles, slideshows, listicles, quizzes, clips, interviews, op-eds etc.

We also include the frontend here – how the audience perceives the content: websites, apps, email newsletters, magazines, newspapers, PDFs, ebook readers, etc – the user experience. From our observation, it’s almost impossible to create a digital media product while distinguishing to strongly between the content and its delivery.

3. Business

All the ways that the company makes money. We’ve touched on a lot of the new possibilities and business models for media businesses to make money in the Future of News Publishing report. From advertising and sales to events to consulting and much more.

4. Infrastructure

These are the server, tools and systems that keep the company running. But it’s also where the content is created: the content management systems, the databases, the communications channels, the analytics dashboard, the tools and gadgets for reporting, writing, recording, maintaining and distributing.

The Key Insights

So far, nothing new. Most media businesses have always consisted of these aspects. So what’s the difference in a digital world? Here are the two main insights:

1. Collaboration

All three areas of the company and their connected departments must be not only constantly in contact but actually collaborating. The days when the product development was cut off from the newsroom and journalists never spent a thought on where their salary came from are gone.

Much has been said and written about the wall between the journalism side and the business side of news publishing entities also known as the divide between church and state. And we’re most certainly endorsing a transparent approach to native advertising and the likes. But in a time when fresh ideas are in desperate need, we think that too much is lost by people from the different departments not thinking and working together.

We think that one of the best ways to set up a media business for the digital world is to not separate the three aspects into different departments but to hire people who feel comfortable in two or more areas. The best way to avoid silos is to have them breached by individuals who have clear goals that span more than one area.

All three areas also need to be perpetually connected to the audience. Product needs to know what they are interested in, what’s their take on things and what’s helping them in their day/work/life. Business needs to know where the audience’s money is going, what they are willing to spend and how they value the content. Infrastructure needs to continuously update its understanding of the audience’s consumption behavior, their favorite tools and devices and how they prefer to pay.

Some of this means being in a continuous conversation with the audience. For other insights, it means looking a studies, reports and conducting individual research. A lot of it means just prototyping and testing.

2. Iteration

iteration of product, business, infrastructure

The complexity and rapid progression of the digital world makes it hard to just plan, implement and then run with a finished product. One of the core principles of the digital context is to have a small idea, test it, improve it, test it again, improve it again and so on. It’s all about perpetual iteration.

This insight is the biggest change of how media companies are working in the digital world. It’s also the part that current media companies and even a lot of the ones “born digital” struggle with.

Some media companies iterate their content. They try out new formats, writing styles, video story lines etc. Others are experimenting with new business models like opening up an event space, releasing special purpose apps or starting an agency business. But only very few media companies iterate in their infrastructure development like continuously working on making their websites work better and optimizing the CMS and the publishing process.

We think that to be successful as a publisher in the future, a company needs to iterate in all three areas of our model all the time. And it shouldn’t keep the iteration loops inside each area. Every iteration in one area should be shared with the other areas to inspire the iterations there. The result is a constant renewal of the whole company.

constant iteration

An example: A company comes up with a new idea for a content format. It will prototype it and test the idea with its audience. The audience feedback might also inform new ideas for business models that might go along with this format. If the company doesn’t have an in-house design-and-development team, this prototyping would be difficult and expensive. But if the project team consists of members who are connected to all three areas, they can iterate towards a viable new outcome rapidly.

That’s why we see a lot of good initial ideas fail. The technological development is outsourced and only involved until the launch. And we think that it is impossible to create a successful digital media product without iterating it constantly.

What’s next?

That is the basic concept of our framework for digital media companies. So what can you do with it right now?

  • Use it to analyze different media companies and see how they cover the different areas…or not.
  • Check the viability of your own (media) company and discover blind spots that you hadn’t thought about in this context yet.
  • Investigate the core digital paradigm of constant iteration and ask yourself what that means for your company and team structures, your processes, your project planning and your business model(s).

This introduction to the framework has only been one step for us. Next up is collecting lots of feedback and, of course, iterating the model. And we are writing more in-depth articles about all the different aspects of the framework.

If you have questions about or feedback for the framework, please get in contact.

Added on June, 24 2015

We’ve written an extended version of this articles with a lot more examples for the Tinius Trust Annual Report. Check it out over here: A framework for building media companies in the digital world

Change Notes v1.1 – March, 24 2015

It is a core principle of this model that the three areas are very closely connected and thus certainlty overlap in a lot of places. We took a first shot sorting aspects into the different areas. But Florian Steglich gave us some great feedback on how to rearrange a couple of things. Here’s his redrawing of our model.

  • We changed Content to Product and added all the frontend/user experience elements to this area.
  • We changed Product to Infrastructure.

Here is an in-between version that Johannes drew in a hotel room in Barcelona for his talk at the IAM 2015 conference. It said “technology” where it now says “infrastructure.” We changed it to infrastructure because we think that technology is an essential part of all three areas.

  1. We’re not talking about digital companies per se as in companies, which have a digital product. When we talk about the “digital world,” we mean a world that is heavily influenced by the characteristics of “the digital.” A media company might only sell a print product. But it still has to deal with “digital aspects” like growing complexity, shorter attention span, internal communications based on email and much more. In the digital world, every company is also a tech company. 

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.

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.