Business Models

Speaking at an event in London yesterday, Twitter co-founder Biz Stone said News Corp CEO Rupert Murdoch's plans to implement paywalls was doomed to fail, the Guardian (UK) reports.

Murdoch "should be looking at [the Web] as an opportunity to do something radically different and find out how to make a ton of money out of being radically open rather than some money by being ridiculously closed," Stone said.

LinkedIn co-founder Reid Hoffman, speaking at the same event, concurred: "I am sure that during the transition from horses to automobiles there were some people bemoaning the loss of horse transport."

News Corp CEO Rupert Murdoch has been making a lot of noise recently about how he's going to slap paywalls on the Web sites belonging to his media companies. But that didn't stop Digg CEO Jay Adelson from telling Murdoch's FOX Business—apparently only an hour after Murdoch himself was on the network—that users probably won't play ball.

"I don't think that my mom, grandma, people that I know and work with, expect to pay for news anymore," he said.

But someone has to pay, Adelson agreed, and he said Digg could help. Since Digg sends a lot of traffic to news sites, it can do more to help those sites understand who those visitors are, so the sites can do a better job of serving up targeted ads that might appeal to them.

Adelson also said Digg could help with a new advertising model that Digg itself is implementing.

Right now what we do is we go to these advertisers and try to convince them to create content as advertising. Instead of the standard billboard or whatever you read on the Internet, we're going to create ads—and we do create ads—that are literally content, so if you click on it, you read an interesting story or atrticle. And you put branding next to it. And we get literally get 100 times the clickthrough rate of what a typical ad would get, so that's good for advertisers.

Now if I can take that same concept and syndicate it and put it on a newspaper site and help them monetize it the same way, I can help them solve their problems.

In an interview with Sky News Australia over the weekend, Rupert Murdoch said that he might remove his newspapers from Google after he throws up pay walls and starts charging for content.

"The people who simply just pick up everything and run with it— steal our stories, we say they steal our stories—they just take them," Murdoch said. "That's Google, that's Microsoft, that's Ask.com, a whole lot of people ... they shouldn't have had it free all the time, and I think we've been asleep."

Taking the exact opposite point of view, in another interview over the weekend, Steven Brill, the founder of Journalism Online, which is creating tools to help publishers set up payment systems, told On the Media that he thinks search engines will actually be useful to paid content.

"Google actually can be and should be the best possible sales source for content online," he said. "You can set it up so that, you know, Google will still send people to those articles, but then they might be asked to pay."

Meanwhile, the Telegraph (UK) reports that Google released a statement reiterating the fact that any company that doesn't want its content indexed by search engines can do so with a simple code tweak.

"Publishers put their content on the web because they want it to be found, so very few choose not to include their material in Google News and web search," the statement said, according to the Telegraph. "But if they tell us not to include it, we don't."

Murdoch interview is below. Transcript of Brill interview is here.

Editor & Publisher reports that MediaNews Group is going to start experimenting with pay walls at two of its newspapers, possibly as early as the first quarter of 2010.

The two newspapers that will be getting the pay wall treatment are the Enterprise-Record in Chico, Ca., and the York (Pa.) Daily Record, with the San Jose Mercury News and the Denver Post following if the experiment is successful.

E&P quotes MediaNews CEO Dean Singleton as saying that not everything will be behind pay walls initially, just some content. And here's the interesting quote: "We have to condition readers that everything is not free."

When journalists talk about pay walls, one of the most frequently articulated points of view is that newspapers need to all throw them up at the same time or else they'll fail. MediaNews looks like it's taking a different approach: re-conditioning readers to expect to pay, the way iTunes, perhaps, conditioned music lovers to expect to pay for online music.

MediaNews' vice president for content development Howard Saltz told E&P they haven't decided what will go behind the pay wall. "In front of the wall, you want to remain competitive," he said. But "premium content" would require payment.

On Friday, we told you about the day-long "Startup School" held at the University of California, Berkeley on Saturday. Given the caliber of speakers, we thought it might be a good place for journalism entrepreneurs to learn a few tips and tricks.

Here are seven lessons from the sessions:

1. Be clear about what you're trying to do

"Not having a clear goal leads to death by a thousand compromises." -- Mark Pincus, Zynga co-founder (courtesy of Gabor Cselle, Gabor's Positive Thoughts)

2. Remember your user

"One thing we commonly see is startups with fabulous technology, but inability to clearly describe, 'who cares?'. Need to show there is market, people who will spend money on this product. Describe in business terms why people care." -- Greg McAdoo, partner, Sequoia Capital (Transcribed by Jason Kincaid, TechCrunch)

More, after the jump

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Are you a journalist with an idea for a new venture to make journalism work in this chaotic digital world we live in? Got the vision but no idea how to make it actually work in the rough-and-tumble world of balance sheets and venture funding? If so, you might want to tune in to the online broadcast of the UC Berkeley-hosted Startup School tomorrow.

The day-long event is focused on teaching tech people how to start their own companies. But given that techies are often as baffled by the business world as journos are, it will likely offer useful insights. Plus, it's being co-hosted by Mountain View-based early stage funder Y Combinator, which is funding two journalism startups this winter.

Speakers include Wired's Chris Anderson, FriendFeed founder Paul Bucheit, Zappos CEO Tony Hsieh, Twitter founders Biz Stone and Ev Williams, 37Signals founder Jason Fried, Facebook founder Mark Zuckerberg, Lotus founder and Kapor Capital partner Mitch Kapor, Zynga founder Mark Pincus, Sequoia Capital partner Greg McAdoo, and Y Combinator partner Paul Graham. The event is co-sponsored by the UC Berkeley Computer Science Undergraduate Association, Startup @ Berkeley, and the Business Association of Stanford Entrepreneurial Students.

Note: While the event is sold out, you can watch it for free online at Justin.TV. Starts at 9 am PT, Saturday October 24.

A Silicon Valley company that provides anti-piracy solutions to content publishers has proposed a fairly progressive set of guidelines for compensating content creators when their content is reused online.

According to the draft proposal by Redwood City-based Attributor, sites that reuse other sites' headlines (the way sites like Google News do) or that publish excerpts of their work should "compensate" the creators with attributions and links. Sites that reuse entire articles, however, should not only have to provide attribution and links, the guidelines suggest, but they should also have to license the content and share advertising revenue with the creator. Or, alternatively, they should remove advertising and remove their "reprints" from search results.

Where many news organizations have argued that sites like Google News, that sell advertising against links to original content, should share in the ad revenue earned against those links, Attributor's proposal, "Content Syndication and Management Guidelines v0.9", reflects an attitude that there's value in the link economy.

Attributor goes even further, describing something it calls the "Brand Economy." "Creators of content and their publishers have brands associated with their works and benefit from having their brands consistently visible and properly attributed," the guidelines say.

Chart excerpted from the guidelines.

More, after the jump.

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On Monday, Netflix announced the final winner of its $1 million competition to improve its recommendation engine and provide customers with better film suggestions.

The prize went to Bellkor's Pragmatic Chaos, a seven-man team including scientists from AT&T Research. But hundreds of teams from around the world and from all spheres participated—not just computer scientists, but artificial intelligence researchers, statisticians, and even a retired management consultant with degrees in psychology and operations research.

The prize-winning algorithm was spurred in particular by fierce competition from another team, Ensemble, which included, among others, PhDs in statistics and neural systems, a sound designer, an analytics consulting company, a Lockheed Martin engineer, a machine learning student in China, a computer science professor from Greece, and the head of chemistry at a pharmacueticals company.

A lot has been written about how the Netflix competition model (also used by the X Prize) can help companies make breakthroughs—and do so cost-effectively.

Indeed, as Netflix CEO Reed Hastings told the New York Times about the $1 million cost of the project: "You look at the cumulative hours and you're getting Ph.D.'s for a dollar an hour."

A lot of digital ink got spilled last week over Google's proposal for a micropayment system for newspaper Web sites. But according to TechDirt's Mike Masnick, the writers shouldn't have bothered.

The idea was offered in response to a request from the Newspaper Association of America for ideas on how to monetize online content. (It also came, incidentally, after Eric Schmidt's speech to the annual NAA convention, in which the Google CEO ruffled not a few feathers by telling attendees, as Silicon Alley Insider put it, to "quit whining and create a product readers want.")

Masnick says he thinks the 8-page document, which proposes adapting the Google Checkout system for newspaper sites, wasn't intended to be as helpful as it might have seemed.

My (admittedly cynical) take on it is that (a) with all the newspaper guys complaining so much about Google, the company felt it needed to offer something to show that it was "helping"; (b) that [this] "help" is really designed to just get newspapers to try a micropayment solution as soon as possible to learn how it's a monumentally bad idea. It's helping newspapers out of their misery, rather than helping them adapt.

Masnick made his comments in the smackdown going on over at PBS' MediaShift blog between Masnick and New York Times media columnist David Carr over the viability of paid content. It's not pretty. Check it out at:

Google CEO Eric Schmidt apparently gave a group of British broadcasting execs a lesson in basic microeconomics yesterday. There's too much free content available for newspapers to be able to convince readers it's worth paying for the general news they supply, he told the group via video link, according to Reuters. There is, however, he said, a different kind of content that could be monetizable.

In general [paid] models have not worked for general public consumption because there are enough free sources that the marginal value of paying is not justified based on the incremental value of quantity.

So my guess is for niche and specialist markets... it will be possible to do it but I think it is unlikely that you will be able to do it for all news.