Denmark: Bloggers versus traditional media in "deep linking" problem
Ed: Living in the Stone Age.Posted by Rosemary D'Amour on November 24, 2008 at 1:49 PMA renewed effort by Danish newspaper publishers to stop search engines from linking to individual articles rather than a newspaper's homepage has sparked controversy with blogging journalists in the country.
"Deep linking" is a blogger's bread and butter--it's how users are directed to their sites--and search engines, such as Google News, are facing pressure from the Danish Association of Newspaper Publishers who only want homepage links to "better control the user experience."Currently, Google News in Denmark lists and links articles without paying newspapers royalties.
In 2006, Belgian newspapers sued Google News if they kept linking stories. In Denmark in 2002, web company Newsbooster was taken to court and eventually shut down for emailing links to news articles to customers.
Blogger Ricco Førgaard said that traditional media failed to "move beyond 1994," and understand that online newspaper traffic will finance the news, not royalties from search engines.
Kim Elmose, blog editor of Politiken newspaper, called resistance to deep linking "counterproductive," citing an irony that most journalists use Google as an intrinsic part of reporting.
Although financial news providers' audience numbers have shot up markedly since the global economic crisis erupted this fall, that hasn't reversed the downward slide of ad dollars. Now, more financial publishers are looking for a revenue boost to come from subscriptions, while those that already primarily rely on such fees are counting on partnerships to support rising audience demand for more content. Even premium products seem poised for growth as publishers seek to tap as many alternatives to the ad model as possible, an IHT piece suggests.
Surveying the burst of attraction financial content is getting from cable TV and website users—e.g., WSJ.com's uniques doubled to 40 million last month, while CNBC's Q3 daytime viewership rose 26 percent—IHT finds publishers like Financial Times' parent Pearson (NYSE: PSO) continuing to emphasize reducing its reliance on advertisers, as it has for the past year. So far, its plan seems to be working: less than one-third of FT Group's revenues now come from ad dollars. More after the jump.
-- Turning to subs, partners: Some of Pearson's actions include raising newsstand rates and selling some of its ancillary European newspaper holdings. In the meantime, it began buying companies that rely mainly on subscription fees, like M&A analyst Mergermarket. But subscriptions can only take content companies so far—for companies like Thomson Reuters (NASDAQ: TRIN) and Bloomberg, that start by relying mostly on subscriptions, revenue sharing with partners is becoming more of a focus.
-- Broadening coverage areas: But with the severe contraction in the financial industry—Lehman is gone and companies like Citigroup are deeply in crisis—David Anderson, director of Atradia Consulting, tells IHT that finance-focused content providers will suffer along with the companies they cover. Instead of concentrating on a dwindling number of subscribers to their respective terminals, Thomson Reuters and Bloomberg should hone in on providing data related to growth areas like risk-management. Or, as in the case of WSJ, News Corp (NYSE: NWS) chairman and CEO Rupert Murdoch has sought to broaden the financial paper's coverage beyond business to include politics and general news, which has helped it capture luxury marketers' ad dollars, which tended to flow mostly to NYT.
-- Premium content option: The idea of expanded coverage could also inspire publishers to try creating more premium content to sell to their readers. While some might hear "premium content" and "subscription wall" and think of the failed experiment that was NYT's TimesSelect, which provided access to the paper's online archives and columnists for an additional charge, the current climate demands that publishers try anything that could stand provide any revenue boost, however small. And it may be worth remembering that while TimesSelect had its drawbacks and detractors, NYTCo (NYSE: NYT) says it still brought in $10 million a year.
Guest post: Frédéric Filloux, editor of Monday Note, which covers media, tech and business models, explains why death reports of paid-for models on the Internet have been greatly exaggerated and how Facebook might need subscription fees to survive in the current economic climate.
Death reports of paid-for models on the Internet have been greatly exaggerated. Granted: the network's genome carries the "free" nucleotide. As in both freedom and free goods and services. Like it or not, its publicly funded origins (universities and the Pentagon) led to the emergence of widely adopted services such as search engines or Wikipedia. In turn, these have sealed the fate of the paid-for model as thedominant one. Right. I intentionally emphasize dominant. Because like everywhere else, hybrid forms are likely to emerge.
In the news media sector, we've seen many attempts to make readers pay for Internet content. From Slate to The New York Times, almost every publisher tested its own recipe. They all came back to free. Truth is: the fully paid-for model doesn't work online, unless it is: a) highly specialized (financial information and services, for instance), or b) provides unarguable value added (e.g. premium dating, tax or accounting services). Now the free model is facing a new hurdle: with this recession, advertising is suffering way more than expected. Further, alarming trends preceded the recession: click-through rates were falling, and the display ad system was labeled as a no-future thing. Now, the stream of ads is drying up quickly: double-digit drops are not uncommon. All business models built on advertising are now in grave peril.
Take Facebook. The tip of the iceberg is shines brightly: 100 million users, most of them active, a trillion page views per year, about two hours spent per month and per user. (Write down "engagement", a new word, soon to be the de rigueur metric.) As it turns out, this assiduous crowd loves photography: 300,000 images are uploaded every second, creating by far the biggest photo library in the world with more than 10 billion images, four times Flickr's.
Under the surface (the huge part of the iceberg, expenses), numbers are equally staggering:
• 13,000 servers were running few months ago, and analysts say the company will need 50,000 machines next year (no wonder why Rackable Systems, the leading provider of datacenter equipment enjoys a 44 percent growth for Q2 08 vs. Q3 07 -- it draws 17 percent of its revenue from Facebook)
• a $1m monthly electricity bill
• another half-million per month for bandwidth
• the 2 terabytes of data (mostly photos) uploaded every day require the purchase of one NetApp 3070 (a mammoth storage systems) each week
• maintaining this infrastructure, dealing with the output of a half-million developers, requires a big staff. For this activity only, Facebook 's headcount is between 700 and 800, costing about $80m a year.
In other words, Facebook is burning cash like a furnace.
What about the coal, you might ask? Good question. Advertising was supposed to feed the beast. Which leads us back to this note's item #2: a shrinking supply of ads, a superb ignorance of the target group (just look at your kids -- or yourself -- how often do you click on a banner?) As a result, the financial community keeps raising questions. Emarketer estimates the 2008 revenue of Facebook to be about $265m. Unlikely to be enough to cover expenses. According to Techcrunch, most of the $500m raised by Facebook is already gone, and the company would turn to Dubai investors to get a cash infusion.
Facebook is learning the hard way that eyeballs, once they are counted by millions, are expensive to serve. What's the solution?
The online magazine Slate came up with an interesting idea: charging people. In fact, a small fraction of them. Introducing another flavor of the hybrid model: a tiny proportion of users paying a fee that will subsidize the vast majority of non-paid ones. This is the idea outlined in the story "A Radical Business Plan for Facebook":"Judging from some of the folks in my social network," wrote Farhad Manjoo, "a sizable minority of Facebook users have hundreds of 'friends' and check in to the site multiple times a day--call them superactive users. Let's imagine that Facebook became a tiered service. A free plan would limit you to 200 friends, one status update per day, or some other non-Draconian combination of restrictions. But for $5 a month, the limits would be lifted. Certainly, many users would balk; tens of thousands would join Facebook groups to protest the new pay model. Let's assume that 95 percent of users will refuse to pay a dime. That still leaves 5 percent, or 5 million people, to pay $60 a year. That's $300 million in the bank."
Farjoo confesses to be inspired by David Heinemeier Hansson, a developer for 37signals, and advocate of the paid-for model.
Nothing quite new, in fact. In China, the software industry has been working that way for long: 80 percent is bootlegged versus 20 percent generating license fees, but the market is so huge that even a tiny monetized slice is sufficient to insure a sizable revenue stream for software makers (that goes also for entertainment products).
These are not the only examples where the free model can be a powerful commercial engine. Last week, at the Monaco Media Forum, Avinash Kaushik, Google Analytics' chief evangelist, mentioned the example of TurboTax, an American tax filing software and service company. For a limited period of time, TurboTax decided to give away its basic application. It has two effects: of course, taxpayers rushed to download the free version -- a zero-cost massive promotion campaign, since the production and delivery costs of the software are close to zero -- but more surprisingly, at the same time, the sales of the Deluxe version ($59.95) rose significantly. That was the free model as a sales engine.
To what extent the examples mentioned above could inspire the media industry is a complicated question. A part of the answers lies in the publishers' ability to conceive not only great news services but also clever applications and services that could draw an audience willing to pay for it, that will, in turn, subsidize the bulk of the readers/users enjoying free basic (and bait) content.