What’s that $19B about? WhatsApp at a glance.

Doc Searls provides an excellent summary of the implications for trends in marketing and consumer privacy related to FaceBook’s $19B acquisition of WhatsApp. Here’s my take on the deal terms:

We have to assume there is a lot of overlap between the FB and WhatsApp user base. And, regardless of what anecdotal information we have about how people pay for or use the service, the potential revenue from the WA user population remains purely speculative. So, what do we actually know?

FB values WA users based on their activity, which represents about one message per day per user at the highest level. They are slightly more engaged than FB users, with 70% daily usage rate vs. FB’s 63% of users active every day. They are paying $1 per message sent per user/day, or roughly $0.00273 per message sent over a year. That’s a manageable low cost of traffic acquisition, but because the payment is concentrated in time, the financial impact on FB’s business could be pronounced, though we must acknowledge there is downside risk to the deal, too.

CNN Money reports that FB sees revenue of approximately $1.72 per user globally. It’s much higher in the US and Canada, where revenue is about $4.85 per user/year. This means the combined company could make up to $0.72 per user in the first year, if they implement ads in WA. However, it is important to note that FB’s ARPU for the Rest of the World and Asia are sub-$1. If most WA users are in Asia and developing countries, which I’ve understood is the case, the deal loses money more often than not under current conditions.

I doubt people will pay for the WA service (it’s unproven now) and, if they were to pay $1 a year, the deal is only a break-even for those users who pay. If 10% pay, which is a typical “Freemium” conversion rate used in projection, there is not sufficient revenue to prevent WA from being mined as a source of user data and implied intentions. As WA is integrated into FB, notably to FB’s user surveillance regime, which is the core of the FB business, it will likely need to add ad or VRM revenue to make the deal worthwhile. And that puts the whole deal in jeopardy, since there is little to no switching cost for users.

My $0.02.

Turning reading into cross-examination

Be dismayed. Rather than using ebook technology to liberate readers to share and expand on works in the same way social media has expanded conversations (and shuttered many, too), ebook vendors are now returning detailed usage data to writers and, this NYT article misses, publishers, who will monetize the reader’s habits instead of exploring how to use the potential two-way dialog to open the door to new depths of reading experience.

It’s the misery of ever more predictable media, designed to speed your pulse and get to the end, when the mystery of a good read is the journey from start to finish, wherever it takes you. Dostoevsky would have ignored the visit to Ivan Karamozov if he’d been tuned into what the readers’ expected and reacted to. Art goes places that aren’t necessarily fast or profitable.

The inverse celebrity law of news sites

I suggest that a comprehensive analysis of the history of the CNN homepage (or of many news sites) would show that there is an surprising inverse relationship between the complexity of challenges faced by our country, or our species, and the incidence of celebrity news.  Where one would expect that as challenges mounted, such as amid the U.S. government shutdown, there would be less celebrity news on the homepage and more coverage of issues, there is in fact more celebrity news in times of crisis.

The celebrity news is canned, something waiting for consumption at any time. It should fall off the homepage in favor of enterprise reporting about the actual facts, beyond simply reporting on the controversy over the facts. Celebrity news is the corn syrup of media. Like many food producers who bulk us up on sweeteners and fillers, much of the media is failing its customers. Note the much longer on-page life of the celebrity stories, as well.

With that, the communications professor tugged at his frayed left cuff and tucked his hand into his tweed jacket pocket, stalking from the room with a failed elegance.

A Kindle book format complaint

Dear Amazon, I am a heavy annotator of books and have found that in many cases I cannot view all the highlights I make in books purchased in Kindle format. For example, in Sam Harris’ short Free Will, I am able to view only 78 of the 108 passages I highlighted. It happens with many other books, as well, because some publishers don’t want to allow more than an undisclosed portion of the book to be highlighted.

I did pay for the book and, except for republishing it, I should be able to do what I want with it. In a way, the Kindle book is less useful than a paper book, because I cannot view all my annotations in any one physical place, as I can within the pages of a paper book.

Please fix this. Use your influence with publishers to make the experience they deliver through your e-reader and Kindle books the best in publishing.

Thank you,

Mitch

News doesn’t have to important

There’s a great quote by Ernie Pyle in the new Columbia Journalism Review, from his time as a managing editor at The Washington Daily News, that every writer, let alone every journalist, should read each morning:

“You can hardly walk down the street, or chat with a bunch of friends, without running into the germ of something that may turn up an interesting story if you’re on the lookout for it. News doesn’t have to be important, but it has to be interesting. You can’t find interesting things if you’re not interested.”

Words to live by.

Mockeries of culture and patriotism

This week, “tax protesters” gathered across America to dump bagged tea into symbolic bodies of non-potable water and Ashton Kutcher challenged CNN to a Twitter follower showdown. I admire anyone who takes to the streets for their ideas and recognize the power of media, even when it is lowered to the level of counting masses of followers. Oprah followed me today. I have no idea why she did, other than to get followers, and that demonstrates a profound lack of understanding about social media.

First, the “teabaggers.” These folks are protesting taxes in the nation with the lowest taxes in the developed world. They are mimicking the actions of their forebears, who were protesting taxation without representation—less than six months after the most participated-in election in at least a generation. They are not idealists, nor do they have any idea what they are talking about, but talk away they should so that someone might engage them in discourse and collectively we learn something.

Ultimately, it costs more money to reinvest in a developed economy than in a growing first-generation industrial economy. That’s why we have taxes. The problem with our taxes is that, for the past 30 years they have been invested in the wealthy, which is why the United States and Great Britain, the forebears of Reagan-Thatcher top-down economic planning now suffer the largest wealth differentials between the average citizen and the richest one-percent of the population of any developed countries in the world. Instead of protesting taxes, these people should be protesting the indifference toward the middle class of the past 30 years and demanding even greater investment in schools, basic science and other seedings of future prosperity than the Obama Administration has imagined. That doesn’t mean lots more taxes—we could do the same by simply cutting wasteful stupid spending or returning half-way to the old top-income taxes of the past—it only means the priority becomes investment in the people, not a class that will save the people.

As for Mr. Kutcher, he seems like a nice enough guy. As a celebrity, he strikes me as the perfect attention zombie, stumbling through our screens to eat our brains. But the fact a television news network even bothered to compete with a B-grade actor over their popularity is a sign of how low we will stoop to conquer anything that can be defined as “high ground.” Now, with Oprah glomming on to Twitter, we are seeing spamming by celebrities desperate to retain their mass-media reputations. Oprah touts more than 100,000 followers in less than a day because so many people auto-follow, whether using a program to do so or simply because they are flattered by Oprah’s follow—that’s a spammer strategy.

In both cases, teabaggers and Twitter follower races, we’re seeing the aping of past behaviors, the Boston Tea Party and the popularity contests of high school and Entertainment Tonight!, turned into events that supposedly enact meaning, but are merely empty gestures. Tea baggers aren’t patriots, they are people convinced they are paying too much in taxes (just about the only obligation this country asks of its citizens), when the debate should be about how taxes are spent, what to cut and, if more money is needed to make the world a better place for our children, who among the current beneficiaries of that system should pay higher taxes.

As for Oprah, Ashton and Ev (Evan Williams, CEO of Twitter), I will not be following anyone who for all intents and purposes is a celebrity bot seeking to claw some of my attention away for themselves. I am sure that today marks Twitter’s high-water mark. Oprah’s endorsement is like being on the cover of Fortune, which, surely, Twitter and Mr. Williams will soon be. The utility of a social ecosystem is destroyed by false followers and other aggressive species that suck the air away from the genuine exchanges of ideas and information by individual members.

Let’s talk about the economics of great journalism

Responding to various recent postings about journalism, including Ethan Zuckerman, Seth Godin, Dan Gillmor, Amy Gahran and Lisa Williams. I think the economics of journalism and ethics are deeply related and we tend to talk about them separately, emphasizing the dying channels for distribution at the expense of understanding the net loss of reporting.

When I worked with the team that built the ON24 iFinancial Network, a personalized financial news network that delivered hundreds of long- and short-form investment news each day, we tried to grow on advertising. Even though we had several million viewers who spent an hour or more a day getting much deeper reports than other sources provided—complete coverage of conference calls, analyst reports, company statements and executive speeches—advertisers were slow to adopt the idea.

ON24’s news team operated on approximately $1.8 million a year at its peak, when it was producing 28 hours, and more, of programming a day, far below the cost at competitors like CNBC, which paid just one of their anchors almost as much as ON24’s news staff of 85 full-time employees. Such radical changes in the economics of news are always possible, especially now.

Media innovation cannot be dependent on advertisers, they will not take the risk. Innovation must find a foothold with people who demand that great news be available. The users of news have to support it to get it going. In the past, rich men made this investment and we got what they paid for. Are we going to pay for better news in the coming century? Are we going to pay for it now, when media is down and change can overwhelm the old controlled media that delivers more pabulum than hard news?

Having been in and around journalism, citizen journalism and publishing for a long time, let me suggest we stop talking about the ethics of providing complete and useful information to citizens of a democracy, which are barely changed by the requirements of social media and cloud computing technology, in isolation from the economics of journalism. If someone delivers great journalism on a regular basis, what does it cost to do it? What is it worth to you to get better news coverage of an important issue?

Let’s posit that if the journalism is “great” or even “good,” it will be ethical, and face the problem of paying for the change we want. Unethical reporting is not journalism.

Forget about advertising and the like as a means of support. What’s a solid source of useful reliable information worth to you? A dollar a month? Twenty dollars a year? I’d bet you’d pay more for great local coverage, whether your locality is geographic, including your own home town, or topical but global, such as global warming or eliminating pandemic disease.

For example, if you could count on someone to examine federal elections reporting for you and deliver all the articles you need to be fully informed about your reprsentatives’ potential conflicts of interest, as well as alerts via Twitter, Friendfeed or SMS, what would you pay? Or comprehensive coverage of your favorite baseball team in the context of the whole of Major League Baseball? Perhaps you’d like extensive research into the activity of the World Bank or the Department of Interior. How about your state legislature? Maybe you’d like grass-roots coverage of USAService.org projects in your region that included financial analysis of the use of funds—that costs money.

The cost of any of these specialties is a good living for someone doing the work, whether that is doled out in parts to members of a team or to a single individual. We can talk in terms of voluntary effort, but even that needs financial support and some organization and analysis that ties together all the bits and pieces, whomever might provide it. If the reporter makes their living some other way, the work of reporting becomes secondary and conditional—they can’t commit to deliver news no matter the time or cost if they have to work a day job.

The obvious potential bias of a “press” that can only work voluntarily, making it the playground of the wealthy, makes the benefits of a self-supporting independent media self-evident. The media that people complain about is the product of wealth investing in messages they would support. Any replacement of an egalitarian grass-roots funding with one rich man doling out largesse or investments will get you the same media we have today.

Let’s assume that a competent reporter delivering original reporting, not simply reworking other sources, is worth the same as a senior mid-level manager in a corporation, such as Microsoft or Google—they may make between $90,000 to $130,000 a year. We’re talking about a good source of information, someone that people find reliable and responsive to the community’s ideas. Remember, that could be $10,000 to nine to 13 people sharing the task of coverage or more to participants in a smaller team.

Of course, a smaller beat, such as a town or city’s government, might be less expensive to cover. These reporters working directly for the community could price the service any way they like. A kid covering Lakewood, Wash., where I live, might build a living that gives them a platform for covering the Washington State Legislature, a local industry or other “bigger,” more lucrative topic.

Good reporters have costs you might not envision when thinking of someone sitting at a desk, using the Internet to do research. For example, subscriptions to various publications and source of background information costs, at minimum, a few hundred dollars a month. Should the reporter need to travel to do any research, conduct interviews or collect information that is not available electronically, that’s a minimum of $1,500 per trip for airfare, plus a week’s food and lodging.

But, hold on, let’s say the reporter needs to file a Freedom of Information Act request? The last time I did it for a story on the National Security Agency, in the 1990s, it cost $7,500 to get the filing shepherded through the process and pushed to success by an attorney. A good reporter might also find themselves the subject to legal attacks or, if they cover a war, captured by insurgents—do you expect them to just languish unaided if they can’t deliver the news?

What isn’t necessary for the news to flow effortlessly these days is a big company to distribute articles and programming. They might be good at selling advertising, but that need not be part of the business of news, if we begin with the assumption that funding sources also have some influence over coverage—people reading and viewing may be carrying the freight.

The fully loaded cost of a great reporter doing great work, then, falls somewhere in the $180,000 range:

$130,000 salary and benefits
$4,800 a year in subscriptions and other information sources
$2,500 a month in travel
$1,250 a month in legal and insurance coverage
$179,800 total, and that’s before the cost of IT, telecom and office space

After salary and benefits, the average cost of supporting a reporter will range between $20,000 and $50,000 a year. This assumes they have no bonuses for great work or world-changing stories. Yes, they might write a book about that story to supplement their income, but this takes away from time that can be dedicated to uncovering the next story and contributes to the phenomenon of the celebrity journalist in sharp contrast to the beat writer. In short, if every other sector of the economy works best when people can compete for success and compensation, this one is going to take some incentives from readers/viewers and, even, collaborators and amplifiers who reblog, rewrite and extend the hard work of original research. It’s a system that the Creative Commons licenses could handily support.

How could we make this work? Obviously, legal, benefits and other general and administrative features of this process (such as getting bulk rates on travel and subscriptions), can be lowered by a distributed non-profit or cooperative organization. That entity could also handle distribution of compensation, handling the splitting of payments. This is critical, since it is most likely that supporters of reporting will want a collection of sources, not just one source. So, there might be a “Collective Press” feed on U.S. government, on the state of California, the auto industry, green energy, and so forth, the fees for which are split between many contributors.

Let’s also assume that the news should not be behind any kind of pay wall, that it should be freely accessible so that people can use and decide if they want to support the work. Added convenience or increased interaction would be the best way to reward supporting. My thought is to give supporters enhanced commenting, Twitter access to the reporter, and other benefits, such as forwarding with private discussion links.

In the simplest scenario, then, what does an independent journalism supported by the users of information, as compared to being designed to support the producer-of-information’s advertisers, look like?

How about this? Pay $1 a month or $12 a year to a reporter who has offered an online “contract” to deliver thorough coverage of a topic. They might ask for more, but they’d have to sell the idea, just as they do in editorial meetings today. In exchange, you’ll get alerts about new articles and comments by the writer through email, Twitter, Facebook, Friendfeed or SMS. Another feature would be a social page of your own, where your input to the feed is available, delivered to the reporter for their thoughts, and your own feeds to share with friends. The reporter benefits from these re-feeds by supporters as a form of marketing for their work.

Since this would likely be an entrepreneurial effort, reporters would have to start off building their communities, with the help of early supporters. We could rally around a reporter and get them started with commitments of $1 a month ($0.03 a day). A reporter offering to cover a major federal program that has significant impact on 500 companies and 5,000,000 people should be able to recruit 5,000 supporters after a few months.

Using the costs described above, the break-even point for a $130,000-salaried reporter would be 15,000 readers. That’s well within the realm of possibility for a reporter supported by a non-profit that lists their offerings and ensures payments will be fulfilled. Assuming that reporters will be subscribing to other reporters, some of this needs to be kick-started by the members of the “new press” finding one another.

I’ll commit right now to support 40 such reporters who will give me a unique, comprehensive and informed feed of information and analysis on subjects about which I want to keep apprised. The kind of quality and coverage I want is of higher quality than the momentary mentions of television and deeper than beat coverage in newspapers or magazines. And I want to discuss the topics I care about with informed reporters and other readers/viewers.

My Twitterscript of the debate tonight

Mitch I’m getting back to work on a project now…. debate over, Obama took this one.via Twitter – 7:37pm – Comment

Mitch “Our country’s business” is so much more than war, but that is all I hear McCain talk about when he talks about America: fighting.via Twitter – 7:34pm – Comment

Mitch Terry Scherry nodded to Obama at the end of Obama’s answer, suggesting he won that one with the questionner.via Twitter – 7:30pm – Comment

Mitch Obama’s “all the tools/scalpel” vs. McCain’s I’ll-take-hammer-to-it generalties is the story of this debate.via Twitter – 7:29pm – Comment
Continue reading “My Twitterscript of the debate tonight”

Palin meets Couric, again, with maverick back-up

I’m astonished that Senator McCain has to sit by his vice presidential candidate to defend her statements, blaming the press for Governor Palin’s clearly stated position about Pakistan, a contradiction to what McCain said in the debate Friday. McCain calls a question by a voter a “gotcha journalism” tactic.

Palin’s position, that cross-border strikes are necessary, is exactly what McCain condemned as naive and dangerous. Either she’s naive and dangerous or McCain’s characterization of Senator Obama is mere posturing.

We get to decide. Do you want these people running the country?