Month: January 2018

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Searching and not being able to find the perfect GIF to embed within a chat is the definition of a first-world problem. But it’s a real pain point, and something Emogi, which uses predictive technology to suggest contextually relevant emoji, stickers and GIFs within conversations, is able to solve for brands that want to get… Continue reading »

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“Data-Driven Thinking” is written by members of the media community and contains fresh ideas on the digital revolution in media. Today’s column is written by Jay Friedman, chief operating officer at Goodway Group. Already, 2018 is shaping up to be a very interesting year. Our industry is getting close to making real progress on some of… Continue reading »

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Here’s today’s AdExchanger.com news round-up… Want it by email? Sign up here. Happy New Year To those of you who enjoyed some downtime over the holidays, welcome back to work. 2017 brought many changes to digital advertising, and AdExchanger has recapped them over the past week. It was a year in which brand safety dominated the… Continue reading »

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In 2017, Neil Chase, executive editor of the Bay Area News Group, gave his Mercury News staff plastic funnels imprinted with the words “awareness, engagement, registration, subscription.” The Merc was about to roll out a new metered paywall, and Chase felt the company hadn’t focused on subscriptions enough. Apparently, the message has sunk in: Recently, a couple reporters were overheard bragging about their stories having the most reach that month.

“They were both claiming being at the top of the funnel,” Chase said.

It’s certainly a turnaround. A decade ago, the idea of restricting access to your journalism was anathema to newsrooms, then trained by the ad model to maximize traffic. The New York Times had to fight this attitude in 2005 when it launched TimesSelect, a two-year experiment that put columnists’ work behind a paywall; and then the sitewide paywall that followed in 2011.

“There were a lot of people who were concerned it would significantly impact our influence, our reach, it would really hurt the standing of the Times,” Cliff Levy, deputy managing editor at the Times, recalled of the paywall. “It was a radical thing we were doing. Even strong supporters of the paywall were nervous.”

Since then, the adoption of paywalls has accelerated as publishers realize digital news can’t live on advertising alone. There’s also safety in numbers. It’s hard to find a newsroom in the United States that doesn’t have some type of reader revenue program. Since launching its paywall, the Times has lowered the meter from 20 free articles a month to five and made it harder for people to cheat the paywall, and it now gets more revenue from readers than from advertising.

“The world has changed dramatically,” said Chase. He has firsthand experience — he worked at the Times during the TimesSelect effort, which the Times killed in 2007 after it only amassed 221,000 subscribers in two years. “It’s a business model people are more used to than they were before. There are enough people subscribing that you reach a significant audience.”

Attitudes are evolving
Still, the evolution is an ongoing process, given the bias among journalists to have their stories reach as wide an audience as possible.

“Until last year, I was a reporter, and as a reporter, God knows, I hated the ideas of paywalls,” said Jeffrey Goldberg, editor-in-chief of The Atlantic. “It would have bothered me a great deal to think people were being walled off. I also have a feeling of sadness for people who have been behind paywalls for years. There are some publications that simply are not in the game in the same way because they have very hard walls. Those writers are dying for readers.”

Some reporters at paywalled publications privately say they buy into the paywall and the notion that journalism should be paid for. They also admit feeling frustrated when they have a big story that’s trapped behind the paywall. “There are definitely some people in edit who would like to see more outside the paywall,” confided a former Wall Street Journal reporter, speaking of that publication.

Goldberg’s attitude, along with The Atlantic, is changing, though. The publication is launching a digital paywall, having started a premium membership program last year for hardcore fans.

“When I interview young journalists, or even among the 20-somethings on our staff, there is not the same knee-jerk resistance that maybe there once was that people aren’t going to see your story because they’re not paying for it,” Goldberg said.

For publications that were built around reader revenue from the start, the idea of a paywall is less foreign. At Stat, a health care industry news site started two years ago by Boston Globe Media Partners, the newsroom is highly aware of what kinds of stories drive its $299-a-year subscriptions.

“I’m finding myself telling reporters, ‘You drove subscriptions,’” said Rick Berke, Stat’s executive editor. “This is the new world we’re in. They like it. I don’t say, ‘Do this story because people will subscribe.’ You want them to think about the quality of what they’re doing and not get caught up in the numbers. But we’re looking at the data to see which are most popular.”

Measurement questions follow
As publishers put more focus on subscriptions, it’s inevitable that measurement will follow, though. Just as newsrooms used to measure and optimize to the stories that drove the most visits, now they’re starting to look into which stories get people to subscribe.

“There are publishers that have metrics on the value of a subscription and are watching carefully on what kind of journalism leads to subscriptions and higher renewal rates,” said Gordon Crovitz, former publisher of The Wall Street Journal and co-founder of News Guard, a startup that aims to rate news content for search and social media platforms. “I know of one newsroom that’s more likely to post stories that are of great interest to a small number of people, where the measure is engagement.”

What gets measured gets done, as the saying goes, and the question is whether optimizing to subscriptions will have unintended unwelcome consequences. There’s already an unspoken pressure to contribute to subscription growth, although that might be better than the old pressure to drive traffic.

Crovitz said he isn’t worried about subscription data being abused because experienced publishers know how to use it, and he believes it’s better to optimize to news that drives engagement than news that just drives traffic anyway. The bigger issue he sees is that there’s a shortage of data scientists in newsrooms to help them get the information in the first place.

Still, when it comes to data on what drives subscriptions, as it was with traffic, news executives have differing views on how much information to share with reporters. Levy said the Times is doing sophisticated analysis of what leads people to subscribe in general (seeing the breadth of content is one factor). He’s reluctant to go so far as to tell reporters that a particular story is more likely to get people to subscribe, though.

“I don’t think it’s helpful to tell journalists, ‘That story you did led people to subscribe,’ because what are they supposed to do with that information?” Levy said. “I’m worried about confusing people and having them saying, ‘Should I do my journalism differently?’ I don’t think you want to draw one-off conclusions from one story.”

Chase sees it somewhat differently. “Now, we’re saying to everybody, ‘We are the business side.’ Today, journalists are filling out fields, writing their own headlines. They’re more engaged with every step of the process now. The days of companies keeping information from people is over.”

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If the U.S. is leading the way in artificial intelligence, China is playing catch-up and quickly emerging as an AI hotbed thanks to its talent, government support and venture capital funding.

Chris Nicholson, a former Bloomberg news editor, co-founded artificial intelligence firm Skymind in San Francisco in 2014 and started expanding it outside the U.S. last year. Since Tencent is a big investor of his company, Nicholson assembled a team of four engineers in Fujian, a southeastern province in China, and plans to open another China office next year in Shenzhen, where Tencent is headquartered.

“We saw lots of interest in AI in China, and the sector is moving so fast in the country,” said Nicholson, CEO of Skymind. “Beijing supports AI, while Baidu, Alibaba and Tencent are all getting into AI. The U.S. still has the best AI talent, but there are many good engineers and AI researchers in China as well.”

It may not be surprising for Skymind, a Tencent-backed startup, to set up AI efforts in China. But other U.S. tech conglomerates are also eyeing AI opportunities in the country, like, for example, Google, which pulled its core businesses like search out of China a long time ago but opened an AI research center in Beijing this month. “China is home to many of the world’s top experts in AI and machine learning,” wrote Fei-Fei Li, chief scientist for Google, in a company blog post.

Talent is undoubtedly a major reason why China’s AI capabilities have drawn much attention from Western countries. U.S. tech conglomerates like Google, Microsoft and Amazon are all hiring entry-level AI engineers (including for algorithm engineering and software development functions) in China at lower salaries compared to the U.S. job market given the exchange rate, according to a 2018 campus recruitment list. The list shows that among those U.S. employers, Google offers the highest base salary of up to 560,000 yuan a year (around $85,000), followed by Microsoft (around $77,000) and Amazon (nearly $47,000 plus stock options). But the most senior AI engineers in China can often demand compensation of $1 million or $2 million, most of which is stock, according to Bloomberg.

“AI is such an engineering-centric activity, and the technology really spans geographical boundaries,” said Chris Wexler, svp and executive director of media for agency Cramer-Krasselt. “With the pure number and quality of engineers coming out of China today, it is no surprise that [the country] is — and will be — a major player in this space.”

The rapid growth of AI in China can also be partly attributed to government support. Beijing laid out a development plan in July to become a world leader in AI, aiming to build a domestic AI industry worth at least 1 trillion yuan (around $1.5 billion), according to a government document. Chirag Dekate, research director of high-performance computing for Gartner, thinks China is getting into AI for the long haul. “The U.S. is driving AI innovation across the spectrum, in software and hardware,” said Dekate in an interview with Investor’s Business Daily. “Early use cases and early adopters are happening more in the U.S. than any geography in the world. But China is looking at it from a marathon perspective.”

Meanwhile, venture capital funding seems to be streaming into AI startups in China. This year, research firm CB Insights selected seven Chinese startups — including English-teaching app Liulishuo and ByteDance, which is known as news aggregator Toutiao and recently acquired Musical.ly — for its AI 100 list, compared to four a year prior. The list is based on valuation, investor profile and business model, among other criteria.

Hans Tung, managing partner of GGV Capital, believes a lot of hype surrounds AI in China, with media and the government playing a role, but it ultimately needs VCs to provide money, he said. “AI is overblown in China. But in my opinion, pure AI research firms and providers are not as exciting as companies that offer consumers a real solution and add AI to personalize consumer experience. Pure AI startups are overhyped in my opinion,” said Tung. “If you look at our portfolio like Toutiao, Airbnb, Liulishuo and Didi [the Chinese equivalent of Uber], they have all added AI to serve the end consumer over the last couple of years. Google is also a search corporation with AI capabilities. Those companies are not pure AI solution providers.”

Tung also thinks it’s important for a VC to see if an AI company can get access to consumer data on its own because, essentially, companies need lots of data to train machines. “Chinese companies like Tencent, Baidu and JD have lots of data on hundreds of millions of users, so engineers working for those companies are increasingly experienced with data intelligence,” he said.

AI startups aside, big Chinese tech players are looking for resources in the U.S. to improve their AI offerings. Tencent, for instance, established an AI lab in Seattle in May, while Baidu set up an AI research center in Silicon Valley in 2014. Alibaba, meanwhile, is investing more than $15 billion in global research development over the next three years, focusing on machine learning, visual computing and natural language processing, among other areas. The initiative includes research centers across seven cities worldwide, including San Mateo, California, and Bellevue, Washington.

“You could say that AI is the new gold rush in China and all over the world because it’s a powerful technology,” said Nicholson.

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Last February, during an earnings call with investors, Facebook CEO Mark Zuckerberg outlined why his company was making significant investments in video: “I see video as a megatrend,” Zuckerberg said. “That’s why I’m going to keep putting video first across our family of apps.”

Heeding his word, Facebook ramped up the investment it was making in video throughout the year. Even more so than it did in 2016, when Facebook first started paying publishers and other video makers to create content, Facebook poured a lot of money into becoming a video destination that could rival existing giants such as YouTube and Netflix. In a wave that was reminiscent of how Verizon started cutting checks for its Go90 streaming service, Facebook bought a lot of original content to populate its new YouTube-esque video-viewing section Watch.

But as Verizon has learned with Go90 and Facebook itself learned with its failed efforts to make Facebook Live happen, just because you build something, it doesn’t mean viewers will come in droves. Plenty of Watch shows have the high view counts that the industry has become accustomed to thanks to Facebook’s three-second view metric, but a significant majority of these views are still happening within the news feed, according to multiple publishing sources. As much as Facebook wants users to go to Watch, users haven’t obliged — which has prompted Facebook to push for even bigger projects with bigger budgets for Watch.

But while Facebook has the money to spend — and reportedly plans to spend a billion dollars through 2018 to make its video dreams a reality — the checkbook alone doesn’t build a video-streaming platform. Zuckerberg might envision Facebook as a video-first company in the future, but how Facebook’s video efforts fare in 2018 will do a lot to decide what type of video company Facebook becomes.

Is Facebook trying to be YouTube? Or Netflix?
When Facebook first started licensing shows for Watch, it was primarily seeking short-form series — something Zuckerberg himself acknowledged during the same February earnings call. Facebook declined to specify how many shows it has funded, but it’s safe to say Facebook has commissioned well over a hundred shows from partners that include Attn, BuzzFeed, Group Nine Media, Mashable and Vox Media. A large majority of these shows broadly fit within the unscripted and lifestyle genres — formats that are cheap to produce and appear all over YouTube.

That approach hasn’t panned out for Facebook, which is now telling video sellers it wants bigger shows with bigger budgets in 2018.

“It was very clear that the goal was to kind of build a YouTube-esque video network off the back of the news feed — and that failed,” said a publishing executive at a Watch partner. “They confessed that they were working with a lot of people who did not know how to produce quality video. So now, it’s ‘we don’t want to build YouTube on the back of Facebook, we want to build Netflix on the back of Facebook’ — that’s a far more difficult proposition to be successful at, and it’s a hell of a lot more costly.”

More so than getting users to regularly go to the Watch section on their computers or smartphones, Facebook’s success in this area hinges on convincing people to fire up the Facebook app for connected TV devices. People still want to watch TV shows on TV-sized screens, and that is something they simply do not expect from Facebook right now.

“They are nowhere near being able to do that,” said another Watch partner. “But they definitely seem to be trying to figure out a video model that can support OTT and be the next version of something like a Hulu or Netflix.”

But how committed is Facebook, really?
Facebook has already said it doesn’t want to fund shows forever. During the same investors call in which Zuckerberg discussed his video ambitions, Facebook CFO David Wehner stressed that eventually Facebook would like to move to a revenue-sharing model for Watch content. A Wall Street Journal report in the fall said Facebook was willing to spend up to $1 billion on content through 2018, but there are no indications yet of whether Facebook would continue spending money on shows in 2019 and beyond.

Unsurprisingly, plenty of Watch partners expressed hope that Facebook would continue funding content, but also acknowledged that could change — just look at what happened to the Facebook news feed and Live licensing deals.

These moves have created a growing resentment among publishers that can’t completely quit Facebook but are at least considering pulling back on how much they publish to Facebook. One executive at a top news publisher that was part of the Live deals said his outlet plans to cut down how much it publishes to Facebook in 2018. Another executive at a major TV media company said outside of a couple of digital brands in his portfolio, he’s not thinking about Facebook too often.

“Facebook has to prove that they can launch a product that actually works for publishers,” said the TV executive. “[Because] right now, if you’re not making the amount of money that you should on doing content for Facebook, or if by being on Facebook it undercuts the value you get out of your [owned-and-operated platforms], then why are you publishing there?”

In 2018, Facebook video will be …
Ultimately, Facebook will be in the video business — but not necessarily with publishers as partners. Take, for instance, Facebook’s interest in live sports, which the company is reportedly willing to spend billions of dollars to stream. If Facebook scores a deal with the NFL or NBA, even if it’s on a nonexclusive basis — which is far more likely than Facebook setting up its own studio and broadcast operations — then Facebook will have the high-value video content that it can sell ads against at premium rates.

One group that will be left out of those deals? Publishers.

That’s why many of the publishers and studios making shows for Facebook today hope the company remains an original content buyer beyond 2018. But even here, as Facebook solicits projects that cost hundreds of thousands of dollars to a million dollars per episode, video makers will face a dilemma: Do you continue selling to Facebook and be satisfied with the production margin a producer can make on a show, or do you look to shop elsewhere (if there are even any places left to buy shows)?

“This is not going to happen overnight; it’s going to take years and Facebook willing to spend billions of dollars,” said a longtime Hollywood studio executive who has sold a show to Facebook. “I think Facebook is aware of that, and from what we’re hearing from their executives, they’re committed to this — until they’re not.”

All signs point to Facebook favoring a video business that allows Facebook to make money from video advertising. So far, Facebook has not allowed media companies to sell advertising against their shows. According to an ad buyer at a major agency, Facebook didn’t give him the ability to buy individual shows or publishers within Watch but instead wanted the agency to increase overall spend, some of which would be allocated toward Watch.

Recent reports suggest Facebook is willing to loosen its grip on ad slots within Watch. And some of the bigger TV networks and studios certainly have the clout to demand some form of ownership over the programming they make for Facebook.

But that only works if people go to Facebook to watch TV.

“It is a long road to teach people that there are 20-minute shows on this platform,” said the Hollywood executive. “It’s not the same thing as scrolling through your news feed and watching some prank video.”

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Publishers have a lot to gripe about when it comes to Facebook, from the platform choking off their referral traffic, dominating digital advertising and giving them whiplash with its constantly changing video strategy. But what if it got even worse?

In 2018, Facebook could take a step further and separate news from the news feed. It’s not a crazy idea. The platform tested a newsless news feed, called the Explore Feed, in six countries outside the U.S., causing a major publisher freakout. In the past year, Facebook also launched Watch, a TV-like video tab; and prioritized Facebook Groups, communities for people who share interests or characteristics — also underscoring the idea of separating user interaction from other media content.

Other platforms have made moves to separate users’ messages from media and brands’ content. Snapchat redesigned its app to separate users’ feeds from brands’ content. Instagram is testing a private messaging app, which would take peer-to-peer chat out of the main app. Twitter has its Moments tab, a dedicated home for news and entertainment stories.

Fundamental to the success of platforms like Twitter and Facebook is keeping users happy, and as such, they’re always running experiments to see if changes will get people to return more often and stay longer. Given a lot of news is negative or controversial, a feed with no news (unless it’s shared by a user) could be less contentious and more enjoyable for users. And another group that likes less controversy, of course, is another important Facebook constituency: advertisers.

“Sometimes people get really annoyed and confused when they’re reading about their cousin’s bar mitzvah or whatever and they see a very serious story afterward,” said Andrew Montalenti, CTO and co-founder of web analytics firm Parsely. “All of the platforms, what they’re really concerned about with fake news is that I think you kind of draw on a bank account of trust with the user. If you come across that stuff too much, you declare it to be a problem, and you stop using it. So they have to play this delicate balance — ‘We can’t show you too many ads or show you too much spammy content.’”

Another factor is the fake-news imbroglio that blew up in Facebook’s face in the past year, leading lawmakers to threaten regulation. Facebook responded by trying to police fake news, which has proved to be a challenge. Further de-emphasizing news or taking it out of the feed altogether is one way to deal with the problem.

Facebook said it didn’t plan to roll the Explore test out further, but that was cold comfort to those publishers who depend on the news feed to reach audiences. As much as Facebook has declined in reach, it’s still a significant source of traffic for many publishers, which have already seen their direct traffic from Facebook decline in recent months, if not years, as Facebook has prioritized users’ posts and video content in the news feed.

Some publishers whose audience strategy is closely tied to Facebook and follow the company closely are starting to consider the possibility of a newsless news feed. An executive at a traditional publishing company said this is “definitely on our minds” given the company gets a “ton of traffic from Facebook,” and it’s a risk the company has to think about in the next few years. “It would be seismic shift,” said another publishing exec.

“There’s good reason to be concerned if publishers’ content becomes separated out of the main news feed,” said Vivian Schiller, a former Twitter news executive. “Their criteria [for the Explore test] was about user experience. That’s their business. But it’s hard to imagine this not having a deleterious effect on publishers.”

There are other reasons for Facebook to go in this direction. Facebook could make an exception for publishers and other commercial content providers that pay to be in the news feed, which could mean more revenue for Facebook. Separating news from the feed also could give Facebook a way to test a potential new product, similar to how it took Messenger out of the site and made it its own app, Schiller said.

Of course, none of this is a fait accompli. There’s good reason to think Facebook will keep news in the feed. Scrolling through the news feed is the core daily habit for most Facebook users. It’s what Facebook uses to promote its many other products, like the Watch video tab and Marketplace. It’s hard to get people to toggle from the news feed to other places on Facebook.

That said, even if a newsless news feed doesn’t materialize, publishers have to adapt. Facebook, and Google, are here to stay, and Facebook has proven time and time again that it’s not always going to act in publishers’ interests. Publishers have to take matters into their own hands, and take advantage of other audience and revenue opportunities.

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