Month: August 2009

Dissecting AP's Descent Into Madness

As more details and outrage seep out about the plans by the Associated Press into what looks like a slow descent into madness, I think there may just be some method to it. Since I am trying to wrap up thngs before I head for a much-needed vacation, I'll post my comments as points:

1. AP, probably, sees a very bleak future for itself in its current form. The old agency model is increasingly becoming non-sustainable as they don't generate enough unique content, thus, not justifying the costs incurred in having them in large news organizations that already employs a lot of reporters.

For the smaller organizations, even without the downturn in both the global economy and the media, AP is often not an affordable option. Seen from that perspective, future growth avenues for AP is near-zero and it may become a business that faces imminent terminal decline if media as a segment continues to hurtle downward, as it is doing now, in the years to come.

2. in its Annual Report, AP mentions that for 2008 actual revenue growth (at 3.2%) was lesser than the actual growth of expenses (at 4.7%) over 2007. Looking at the current ground reality, it is unlikely that this equation is going to change for foreseeable future. It is a bit of a nasty spiral of death for them. To find new avenues of growth, AP must spend a lot more while its revenues will only dwindle even more.

Even during the best year in recent times for the organization, in 2007, the top line for the company was $83.4 million EBITDA and operating profit stood at $45.8 million. It is a decently profitable business and the organization carries no debt on its books. But, most importantly, the business as it stands now has no potential for a larger scale even if the years to come are as good as 2007.

We may think of it as crazy, but in a declining traditional news publication environment, AP may not have much of a choice than to pre-empt a slow a terminal decline that is affecting the businesses that fund the organization itself in the first place.

3. More than anyone else, I think AP can themselves visualize a world without AP as an agency. The BBC has, for a while now, limited using footage from sporting events, replacing them with still photographs. This does not seem to have created a significant problem for the BBC. For news organizations trying to cut cost, this may start to become more of a favoured option with time, eating into AP's ability to sell multiple products to the same organization.

All over the world, the character of news, how it is procured, published and consumed, is undergoing a drastic change. If AP goes, it will be missed a bit, but the news won't come to a stop and my gut feeling is that the folks at AP realizes this and are trying to create some unique value for themselves, even if they are going about in the most boneheaded manner possible — by trying to transform itself into a destination site on the sly.

4. It is important here to make a passing mention of the http://hosted.ap.org product. With the hosted model, publications can outsource the entire business of running a news website to AP who will skin the site with the publication's design. This is probably the earliest implementation of a SAAS model in mainstream media. It would be interesting to see how the new changes will affect the direction of the hosted product in the long run.

5. In more efforts aimed at cutting cost, major publications may themselves be looking at various sharing and peering arrangement for non-unique events ranging from reportage to infrastructure. If done right, this can drive down costs to a level where AP cannot compete. Adding the affiliate model to the mix can only make this even worse for AP.

6. Apparently, one of the things being attempted by AP is to gain topical relevance in the online domain. In normal terms, this is quite a silly attempt at replicating a Wikipedia-like persona/reputation for AP's content. The irony in all of it is that Wikipedia's success has much to do with hassle-free linking its useful content, which is unlike some of the crazy guidelines and costs that AP has come out with for linking to their content.

Normally, subscribers linking to content like AP's is usually governed by syndication contracts. It will be very hard for publications to sustain a situation wherein they are paying for non-unique content (cost) and also drive traffic to unique content on AP (indirect cost). It is a nice way to describe a link farm, but calling a link farm by another name does not make it something else.

Filed under: Misc

Guilt Tripping Start Ups: The Facebook-Friendfeed Union

Facebook's supposed hoard of cash must really be starting to get restless these days. In acquiring an overwhelming ability to do a real-time of Robert Scoble's life, otherwise known as Friendfeed, Facebook has made a major stride into defeating Twitter… um.. no.. Google..um.. well.. I don't know, defeating someone or something? Our extreme analytical perspective has gleaned it that maybe Facebook has figured it out that it is cheaper to get Friendfeed developers on-board than to copy them feature-for-feature in the longer run. Makes sense Zuck, it really does.

So, the story goes something like this. Once upon a time Facebook wanted to bed Twitter. The latter did not find the overture sweet enough, so they turned the former down. Having been declined ever-so-harshly, Facebook had to do something and decided to acquire Friendfeed, in the process probably surprising Friendfeed itself. As the classic 'who, me?' prom night moment played out, Scoble teared up, Techmeme shook for a wee bit, the folks at Twitter observed a two-minute silence to max-lulz at the news and rest of the world did not care or notice.

Filed under: Misc

Missing the boat edition: Delicious, Tr.im

After the latest fracas on the tech blogs about Joshua Schahter's indignation about the Twitter-integration at Delicious, I was left wondering about how did the product get to where it is these days. In its early days, the product was widely used, it was the de-facto standard for social bookmarking and it had a growing user base. The future is not all that rosy for the product. It is one of those platforms that has languished since its acquisition by Yahoo!. What is rather interesting is that the site features almost zero Yahoo! branding. Could it be one of the next big jewels that Bartz is about to sell off in the quest to recast Yahoo! as a different company, compared to Google or Microsoft?

There are a couple of reasons why Yahoo! could want to get rid of the property. The first is that there is a definite progression among some of the significant players to move towards synchronized bookmarks, that will soon be stored and shared through the cloud. Google is already known to be working on something in that direction and the same is the case with Mozilla. Even a smaller player like Opera already does this with Opera Link. It is fairly trivial for any of these services to offer the 'social' feature as an add on at a later stage.

The second problem for Delicious is that it has seen little by means of product innovation. Ever since Twitter kicked off the micro content revolution in its full glory, URL shorteners, which was niche market, has taken off. As shown by the untimely demise of Tr.im, the URL shortener by the Nambu Network, these products have little possibility of prospering as a standalones. But, a URL shortener is something that makes absolutely great sense for Delicious, as a companion activity. It could have added massive bidirectional value to both Delicious and the users if they had rolled it out, but they have not.

There are lessons to be learnt in the story of Delicious and Tr.im for everyone. The first is that you have to stay agile, even if you are the market leader. The second is that the value built around the Twitter ecosystem is very flimsy and non-unique, built mostly around optimism than actuals. It won't be soon before we will start seeing the same fate befall some of the Twitter clients too. These have no model to create revenue (other than the mobile clients, which have unique value propositions that are not easily replaced) and will only keep going for as long as the hype can be sustained.

Filed under: Misc