Evan Rudowski: Web Transplant

Newsday’s Decision to Charge for Content is Desperate and Stupid

I began my career at Newsday in 1986 when I was hired at the age of 23 to work on some of their very first online services. I spent seven years working on online services there and got to know some fantastic people. My final presentation, before leaving in 1995, was an introduction to this new thing called HTML and linking. I haven’t been at Newsday for a while now, and its changed owners and management a few times, but somehow I still care about the place.

My company, SubHub, enables people to build subscription websites quickly and easily. So you’d think I’d be applauding Newsday’s move to such a model. But I’m not. It’s going to fail.

Charging for content works when the content is unique, actionable, highly targeted and from a trusted source. Newsday ticks perhaps two of the boxes – it’s a trusted source, and maybe some of the content is actionable (restaurant reviews, business news, etc.).

Charging does not work for commodity content, and that’s mostly what Newsday has. National and international news is readily available elsewhere. Sports coverage, syndicated features – all available elsewhere. Movie reviews, music reviews – virtually everywhere.

Newsday’s knowledge of its local market is more unique and valuable, but even that too is available in general news coverage from numerous online and offline competitors.

In short, Newsday has little to charge for. This doesn’t mean it couldn’t create some online content that meets the criteria for charging successfully. The Wall Street Journal keeps coming up with new online packages it can get audiences to pay for. But I haven’t heard that Newsday plans to do this.

Just putting the existing stuff behind a firewall isn’t going to help. Bundling it with programming from parent Cablevision – well what’s that all about? Is Cablevision going to create new local video content that people would pay for? Or does access to Newsday online just become another throwaway incentive to buy a cable subscription?

Putting Newsday’s existing content behind a firewall is just a way to deprive it of oxygen and kill it. Unfortunately, the kind of creative thinking necessary to create content that people will pay for is not likely to come from a cash-starved newspaper company or its cable operator owners. It’s more likely to come from the smaller players and individual entrepreneurs, like the ones we see at SubHub.

Newspapers are crashing and burning all around us now, and Newsday and its owners have found another way to do it. I wish them well, but I’m glad I’m not on the online team there anymore.

Why Facebook Will Eventually Go Premium

There's more bad news for Facebook as it seeks to justify its huge valuation -- the world's largest advertiser is not finding Facebook to be fertile ground, according to Randall Stross in The New York Times.

The most successful effort that Procter & Gamble was willing to point to on Facebook was a 2006 page for Crest Whitestrips, which attracted 14,000 fans at its peak -- many apparently lured by free giveaways such as concert tickets. Out of Facebook's 130 million users that's not a rousing success.

That the Crest Whitestrips experiment left a funny taste in P&G's mouth was reinforced by the comments of a senior P&G marketing executive, who said, "I really don't want to buy any more banner ads in Facebook."

(The article also brought me a bit of deja vu when it described P&G's "America's Favorite Stains" campaign for Tide detergent on Facebook. This took me back to a meeting I participated in with P&G for Excite about 12 years ago, when they eagerly described their desire to have an online stain finder application on Excite -- an idea that as a product guardian made me feel a bit dirty. Apparently P&G persists in its noble quest to bring stain information to the world online. I felt vindicated to learn the Facebook version had attracted only 18 comments.)

There is further evidence of problems at Facebook when we consider the news that Facebook CFO Gideon Yu was in Dubai in October seeking to raise additional funding. Why Dubai? Because U.S. investors weren't interested at the proposed valuation, the reports said. And seemingly Dubai investors weren't either, as we've yet to learn of any recent new investment.

There was more bad news last week when it was reported that Facebook cancelled plans to allow employees to sell some of their shares at a $4 billion valuation. Why? Because potential purchasers were balking at the valuation.

It's not difficult to understand why this is happening. Facebook is the latest to apply the classic Silicon Valley model which says build a big audience first, and then figure out how to monetize it. Investors, meanwhile, pile on in hopes of enjoying a big payout once monetization happens.

But, oops, monetization looks like it's going to be very difficult on social networks such as Facebook. At least, it will be if it's dependent on advertising. Investors are looking for some evidence that Facebook is succeeding in leveraging its vast audience to generate advertising revenues, and so far the evidence is scant.

The many of us who use Facebook addictively can certainly attest to its value in our lives. However we can also probably attest to just how irrelevant advertising is to us on Facebook. That's Facebook's problem, and it's a huge one.

The solution? Start charging a premium for access to certain Facebook features. The basic Facebook membership would continue to be free, but enhancements would be extra. This might include photo and video storage beyond a certain limit, or sharing of certain data, or friends beyond a certain amount. I'm just guessing at the ideas. But given how essential Facebook has become for so many of us, it's easy to envision many users paying a monthly or annual fee for an enhanced membership.

At 130 million members, if 10 percent paid $5 per month for enhanced memberships, Facebook would be clearing $65 million per month or $780 million per year. There are other revenue streams to develop too.

That's not enough to justify an overly inflated valuation, but it's a pretty good start. And it's likely a lot better than they're going to do helping P&G teach young people about stains.

So watch this space. Subscription is increasingly the future, and Facebook will eventually join the bandwagon.

Oodle Gets Facebook Classifieds

Oodle announced today that it will take over the running of Facebook Classifieds, adding to its roster of deals which includes MySpace as well.

This is a great move for Oodle, founded by some of my ex-Excite colleagues including CEO Craig Donato.

It's also an acknowledgement by Facebook that it cannot do everything and expect to do it well. Rather than run its own classifieds service, it outsources to a specialist. What they give up in revenue sharing they should make up in increased activity.

This is especially true for classifieds which depends for success on having a critical mass of listings. A neutral player, aggregating listings across multiple networks, will have a more robust database than individual networks would have if they took the silo approach and built it themselves.

But even in general it always seems to take forever for the big network players to come around to realize they'd often be better off outsourcing than owning. Again and again their impulse is to own and control it all.

So suddenly you have telco executives who fancy themselves to be content programmers or advertising salespeople. Or you have social networking sites who think they can do classifieds. Or mobile operators who think they can run a "walled garden" portal that will somehow satisfy their surfers.

We already own the customer relationship, the logic goes. We already own the billing relationship. So let's extend it by giving them great programming. And why share revenues -- let's just do it ourselves.

Often years and millions of dollars later, they finally realize that outsourcing to specialists is not a bad idea. Of course, at many of these companies there is no collective memory to learn from as executives get moved from one position to the next, never able to apply learnings. So someone else comes along and makes the same mistakes again.

At least Facebook has a bit of Silicon Valley culture, which typically means a willingness and ability to learn lessons more readily and adapt more quickly. Probably this has not been a costly lesson for them to learn. The Oodle deal now provides some upside opportunity.

The challenge now for Oodle is to generate enough activity to make its classifieds database broad and robust enough in an increasingly fragmented classifieds marketplace. But certainly, landing some of the prime beachfront real estate, on Facebook and MySpace, is going to help.

Who Decides What You View?

In today's New York Times Magazine, Jeffrey Rosen asks who decides what content we can view over the Internet.

Increasingly it's Google, with its vast and global search engine reach as well as its dominance of online video via YouTube.

Somewhat disconcertingly, we learn that the first line of arbitration at YouTube is a corps of twenty-somethings who rule on individual requests to find certain videos unacceptable. If it gets too tricky for them, they bump it upstairs to Google headquarters where a cadre of lapsed journalists-cum-attorneys try to strike a thoughtful balance between local law and free speech.

Not so easy when the laws vary so much from country to country and when the volume of content is increasing nearly exponentially. Even the Google-istas admit their current model is unsustainable.

And what happens if Google and other companies choose in the future to weight their decisions more in favor of commercial considerations than free speech objectives?

Worth reading.

Who's Mentally Disabled?

The BBC tonight is all over the story of today's awful suicide bombing in Baghdad in which more than 70 people were killed.

The Beeb is particularly playing up the angle that the female bombers were "mentally disabled," leading tonight's ten o'clock news with the story.

The New York Times isn't so sure, noting that:

Maj. Gen. Abdul Kareem al-Ezzi, a senior officer in the Ministry of Interior police commandos, said officials at the Ghazil market had scrutinized the suicide bomber’s head and concluded that she had Downs Syndrome. However Iraqi officials have made similar claims in the past, and other witnesses said her head could have been distorted by the blast.

My question for the BBC is: aren't all suicide bombers, by definition, mentally disabled?

Breaking Bhutto

I'm sitting here in New York with a computer in my lap and with CNN on the television. The news of the assassination of Benazir Bhutto broke about an hour ago and I got it within moments on the NYTimes.com home page, which I happened to be visiting.

I'm of the generation that became accustomed to getting its breaking news from the television, when an announcer would solemnly intone: "We interrupt this broadcast for a special report . . ." We would stop everything and wait until one of the networks told us, for the first time, what was happening.

We can all remember (even if not yet born) Walter Cronkite wiping his eyes as he announced the death of President Kennedy, or the shooting of Lee Harvey Oswald a few days later by Jack Ruby on live television. In my lifetime I can remember the Challenger disaster, the Lockerbie bombing and -- as a young boy -- the announcer on WOR-TV in New York scarily breaking in to say "Gil Hodges is dead" -- the New York Mets manager having just expired.

Now CNN and others are reduced to blabbering away, repeatedly showing the same footage of Bhutto stepping into her car moments before her killing. I have just watched a CNN reporter read to me various random anonymous blog comments that I could have read myself. I'm sure I will be able to get the footage of her assassination, if I want to, from YouTube before CNN can or will show it.

And forget about newspapers. By the time tomorrow's Newsday is delivered to me here on Long Island, with the certain front-page cover story on the assassination, I will have read and digested far more than the newspaper could ever deliver.

The internet is where news breaks now, and traditional media can only follow.