Data-Labor-Technology

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In a Q&A, Jonah Peretti, CEO of BuzzFeed, sees Facebook returning to its roots — and thinks that’s not a bad thing for BuzzFeed. Here’s our conversation, lightly edited.

As a media company that’s grown on Facebook’s back, you surprised some by taking a shot at the company. How should Facebook help publishers?
My big criticism of the strategy so far is all their revenue is generated in the news feed, and they only share revenue for new surfaces — Instant Articles or Watch — but don’t share any of the revenue from their main source of revenue, the news feed. There’s no way to influence what’s in the news feed if the algorithm is only about distribution. You’re not getting to the economics of the traffic production. So it’s in Facebook’s interest to share news feed revenue, not because it’s good for the world, but it allows Facebook to have some control of what’s showing up in the news feed. If they say they want local or trusted news, they say that will get more distribution and more revenue, so companies can produce more of it. It doesn’t need to be some carriage fee or a thing where the amount of traffic is directly related to the revenue. It could be that they have a metric for time well-spent, and you’re paid 2 cents per minute of time well-spent. Now, they don’t really have levers to influence it.

How do you think Facebook’s stronger focus on sharing will affect BuzzFeed?
Facebook is going back to their roots, and that got us excited. A lot of the stuff we make has a high level of comments. You post a Tasty video, and people post their own versions and use it as an excuse to get together with friends. So this shift is encouraging for companies that make content with a deep social DNA in it.

The pivot to video has seen a backlash this past year. What’s your view?
There’s a secular shift toward video, and I see that continuing. It’s the majority of our content views and revenue. I think sometimes people overplayed it a little bit. I don’t think text is going away. But video’s really important. What we realized is, video isn’t a discipline, it’s a way of communicating. We’ve cracked a lot of the formats. Tasty videos are short, sped up, have a lot of power, drive real-world activity, are very social. Then, we have shows like “Worth It” and “Unsolved” that are TV-like and air on YouTube. They’re appointment viewing. That’s replacing what basic cable was, with the added benefit of building community. We’ve started to develop longer stuff for subscription video-on-demand type of platforms.

BuzzFeed missed its growth target last year and ended up laying off people. What would you do over if you could?
The big thing would be staying more true to our social DNA and pushing with clients to make video that fits with what we know works with our audience. Having some clarity on formats, and give an advertiser something that works on social even if it takes longer to convince them. One of the things that happened was there was pressure to make video that looks like commercials that look like TV, and it’d be hard to do business and deliver. Sometimes, brands say [they] want a different format that we know doesn’t work.

Was going all-in on native a mistake in retrospect?
Not initially, but there was a point where it made sense to shift. We could have done it a little earlier. When we started, programmatic was a lot worse — ads loaded more slowly; companies doing it were startups and making ads that had lots of latency and often didn’t have good data privacy. When we did testing with a small percentage of our users, we found no negative impact and lots of revenue. We also saw positives in coordinating native and programmatic and the overhead of having lots of communication back and forth.

Are you still committed to news, and why?
I love our news business, and it’s very important to our strategy. It’s incredible, the year they’ve had, with the [Steele] dossier and Kevin Spacey story, and our U.K. team just broke a Brexit story. Their contribution to the company is manyfold. News does provide prestige and charisma to a company that has benefits. I think news is increasingly going to be important to the platforms; Facebook is saying it doesn’t want fake news on the platform.

But news is expensive, many advertisers don’t want to be around it, and it doesn’t share well on Facebook.
I think news is a better business than people think. In the short term, news is more expensive, and it takes time to build trust. But if you look at our cost structure compared to The New York Times or Washington Post, we have a lean cost structure and reach a large audience for the team we have. If you want to bet on the future of news, you want to bet on people doing quality news, digital-only, reaching a lot of people. There will be more models for news. I think Google and Facebook are going to do more to support news. If they don’t, they’ll be regulated.

Is there a subscription model in BuzzFeed News’ future?
It’s possible. A partial paywall could make sense. But it’s also important we educate and inform the broad public. If every news organization puts the majority of their content behind paywalls, it’s hard to have an informed electorate.

Did VCs have unrealistic expectations for digital publishing companies?
I take a long-term view, and companies like BuzzFeed are always going to set aggressive goals, and sometimes you hit them, and sometimes you don’t. In terms of the value of the company, if that’s your focus, you lose track of the actual business. The market cap shouldn’t matter that much if you continue to grow every year.

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Extra-extra, the robots are coming.

Two dozen Reuters journalists have tested the tool Reuters calls Lynx Insight that can write two-thirds of a story based on company earnings reports. But at least for now, robots aren’t replacing journalists. Lynx alerts reporters through email, messenger service or via reporters’ data terminals when it recognizes trends and anomalies in data. Reporters can also input a company or search term into the tool to surface insights. Market data is the focus for now, but in time, Reuters will roll the tool out to other sectors.

“We’ve recognized that the key thing is not to make a machine write in-depth stories, but to marry the strength of machines with the strengths of humans,” said Reg Chua, executive editor of editorial operations, data and innovation for Reuters. “Machines are tireless at sifting through data and detecting patterns; humans exercise judgment, provide context and gather quotes.”

According to Chua, Reuters has another dozen people on the technology side setting up the platform, analyzing the data and generating the language recognition.

Reuters has 2,500 reporters, and while not all of them will need to use Lynx Insight, saving short periods of time at this scale will have an impact. The tool’s purpose is to uncover insights that would otherwise take a long time to surface, while improving accuracy and efficiency.

Elsewhere, The Associated Press estimates that it’s freed up 20 percent of reporters’ time spent covering corporate earnings through automation. According to Reuters’ annual survey of digital leaders, which included nearly 200 publishing executives, 91 percent of respondents cited production efficiency as a very or quite important priority this year. The Washington Post, meanwhile, found new audiences through its homegrown artificial intelligence technology.

But measuring the impact of automation in newsrooms is difficult. In the future, Reuters will develop a feedback loop so that the tool knows which of its insights the reporter used and improves their value.

“We’re not looking at the volume of stories as a success metric,” Chua said. “Telling you what information you can dismiss quickly is already valuable. We’re in a speed race to make sure we can monitor company results and economic indicators.”

A financial benefit will be using Lynx Insight to unlock potential products to sell to other news sources so that a standard weekly football report for a Manchester, England, news publisher, for instance, always leads with stories about Manchester United, he said.

“Reuters is known for being early on stories,” said Dr. Janet Bastiman, chief science officer at AI platform StoryStream. “In the rush to get there first, it will only become more important to uncover stories faster. Being able to personalize it for paying clients will be absolutely critical.”

“Machines are only as good as you train them. Incorporating a feedback loop will improve it,” she added, “but ensuring there are no biases built in takes a lot of careful testing.”

Another tool, Reuters News Tracer, which surfaces and assigns a value to content on Twitter based on how likely it is to be true, gives reporters a head start on breaking news. It has helped break 50 major news stories and given journalists anywhere between an eight- and 60-minute head start, according to the company.

To encourage time-poor reporters to use Lynx Insight, it needs to be as easy as possible to use. “I don’t want to have to train people to use the telephone,” Chua said. “It should be able to understand that you are already writing about a company like Microsoft to avoid culture clash in the long term.”

Image courtesy of Reuters

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At the Big Ten basketball championship final at New York’s Madison Square Garden earlier this month, four rows of seats and dedicated space at Delta’s Sky360° VIP lounge were reserved for event sponsor SoFi. Most people using these facilities were not SoFi employees, but its customers, who occupied the front two rows and enjoyed complimentary cocktails and food at the lounge.

It’s all part of a VIP approach to keeping customers and adding new ones — a strategy the company said is worth the investment.

“Even for someone who has a great job and makes a nice living, it’s hard to imagine [customers] spending discretionary income on that — we want to treat our members,” said Libby Leffler, vice president of membership at SoFi. “The best way to build trust is through these community events; we’re seeing those members are referring people from their networks like their workplace or where they went to school.”

Read the full story on tearsheet.co

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Wunderman launched its artificial intelligence division last July with the purpose to help the agency’s clients retain their customers using what it calls “conversational technology.”

Now, it’s ready to start selling its AI solutions with Microsoft. The benefit here is that Microsoft will share Wunderman’s solutions, hopefully bringing in new clients. Wunderman’s AI division is located in the agency’s Seattle office, one of the agency’s 200 offices across 70 markets. According to the company, there are around 150 people — 100 data scientists and 50 consultants — working on designated AI projects.

The WPP agency already has a few clients that are interested, from telecommunications to consumer electronics companies, according to Seth Solomons, CEO of Wunderman North America.

Wunderman’s AI division focuses on using AI to create text-based or voice-activated chatbots and virtual assistants for its clients on four major platforms: Microsoft, Amazon Web Services, Google and IBM, according to Robbee Minicola, global lead of Wunderman AI and president of Wunderman Seattle. Wunderman’s interest in AI is tied to the growth of voice, said Minicola. In March, digital agency Rain and tech firms Voicebot and PullString released a study that found that 20 percent of the U.S. population owns a smart speaker.

Wunderman’s partnership with Microsoft spawns from Minicola’s own background. Minicola, left her post as director of global business development at Microsoft to create Wunderman’s AI division, first joining as president of the Seattle office in November 2016.

Right away, Minicola’s relationship with Microsoft paid off, and she secured a partnership with the company to build the agency’s first set of AI solutions for Cortana. Six months later, Wunderman’s AI service launched, and Minicola assumed the position as global lead of the division.

Today, the partnership with Microsoft remains strong and comes with perks. Minicola said Wunderman gets early insights into what Microsoft is building before it launches beta tests as well as the ability to test ideas on concepts within its AI platform.

“It’s super powerful because the space is moving so fast,” said Minicola. “If you’re not with the engineers that build the platform in the [beginning] phase, then what you’re building today is already outdated.”

Artificial intelligence is the newest shiny object marketers are chasing, with agencies launching their own services to help their clients navigate the technology

Minicola said Wunderman has invested “millions in resources and technology to deliver AI and machine learning solutions for its clients” and that AI is a “key component to Wunderman’s mandate of helping its clients to be ‘Future Ready.’” She claims Wunderman’s investment in AI and predictive analytics is “the largest of any agency.”

Despite such strong ties to Microsoft, Wunderman isn’t only interested in creating chatbots using only platforms’ own APIs. In fact, Wunderman views creating standalone skills for assistants like Cortana, Amazon Alexa and Google Assistant as counter to what it’s really trying to achieve for its clients, said Minicola.

“Building your voice business only on third-party platforms means that all of the knowledge is used and owned by that platform,” she said. “It would be like choosing to not have a brand website and allowing your web presence to only be on Facebook. Not a good idea.”

For this reason, Minicola said Wunderman also builds proprietary conversational tech that clients can then implement in third-party assistants like Alexa, Microsoft Cortana or the Google Assistant.

Naturally, the prices are significantly lower for conversational chatbots created for one of these platforms than those for proprietary tech. A chatbot for a dedicated campaign period costs less than a chatbot for customer service, but both are priced at $150,000 or less, according to Minicola. Creating a proprietary virtual assistant that builds on the chatbot foundation would cost the most, up to millions of dollars, said Minicola.

Minicola said the 9-month-old division has worked with 11 clients — most of which had worked with Wunderman in the past — so far, and all projects are still in the production phase. Wunderman cannot disclose its AI-specific clients, said Minicola, but the agency’s clients include Microsoft and T-Mobile.

Still, AI is so new that many clients are still figuring out how they should implement it, Solomons said. “Now that we’re in 2018, we’re taking a much more practical approach,” he said. “So, as opposed to trying to find new and interesting ways to deploy AI, it’s much more about solving real problems big and small.”

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The threat is real.

Consulting firms are ready to be taken seriously in the advertising game, having been dismissed by agency bosses. Marketing shifted from a cost center to a growth lever at many big brands in 2017, and consequently, a nontransparent, complex agency model was scrutinized by many of those same businesses. For consulting firms that have spent recent years understanding blockchain, martech and audience data, the shift couldn’t be more timely.

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A year after sneaker marketplace Stadium Goods opened in 2014, co-founder and CEO John McPheters had an eye-opening experience in his Soho store. It was late 2015, not long after the company’s first standalone retail store opened, when a Chinese customer purchased $10,000 worth of sneakers in cash. He told McPheters he planned to ship all he had bought back to China, where he would resell it.

“That was a real ‘What just happened?’ moment that caught my attention. I decided we had to find the right path to China, because we clearly had a customer there,” said McPheters.

Today, China is Stadium Goods’ second-largest country in terms of revenue, after the U.S. Tmall, the Alibaba-owned platform the company partnered with to launch in the region, is neck-and-neck with Amazon as the highest generator of revenue after the brand’s website. The retailer also works with eBay and Zolando. In 2017, Stadium Goods did an estimated $100 million in revenue, and McPheters said the company is shipping out about 200 to 300 pair of sneakers per day to be distributed through a network of partners in China. The company has a team of five that’s dedicated to growth and strategy in China, and it works with the Shanghai agency Magic Panda to plot localized campaigns and influencer work.

“We’ve barely scratched the surface. Over time, China could easily surpass the U.S. as the biggest country for e-commerce sales for us,” he said. “It’s astounding how much opportunity still exists and how much scale is possible. For now, we’ve built up a foundation: a good-sized audience and recognition for our brand. China has been a first mover for us, and we’re going to continue to invest.”

The trust factor
For Stadium Goods, which sells sneakers that are unworn and are being resold by private owners, the China opportunity is centered on building trust with an eager customer base. The prevalence of counterfeit products is an ongoing problem for Chinese customers, who do a majority of their shopping online.

“Counterfeiting is so common in China that these shoppers can’t even trust that a physical Nike store is selling legitimate products, let alone an online marketplace,” said McPheters.

That leaves a huge opportunity for a legitimate online seller in the streetwear space, as appetite for trends and brands in the region is growing. Overall, China’s highest-spending customer skews younger: millennials ages 25 to 34 account for 65 percent of total consumer growth, according to Boston Consulting Group, a percentage that’s expected to grow by 11 percent year over year between now and 2021. Globally, the streetwear market is worth $300 billion, while the sneaker resale market is worth $55 billion, according to Bain & Co.

And streetwear brands are among the most covetable for China’s young spenders, as the lines between street and luxury fashion blur. (In February, Stadium Goods received an undisclosed investment from LVMH Luxury Ventures.) Locally, the industry is growing: China’s Key Opinion Leaders (influencers) are frequently promoting local designers and brands in the space, like Babyghost, Li-Ning and CLOT. Yohood, a streetwear trade fair put on by magazine and lifestyle company Yoho, brought together 60,000 streetwear fans and 150 brands during a September event in Shanghai.

Tmall has been a “nurturing” partner to Stadium Goods, according to McPheters, and it’s in the company’s best interest. Tmall, along with local competitors like JD.com, has begun prioritizing the fashion that young customers are interested in buying on its massive platform, by building out the Tmall Fashion Pavilion and recruiting global luxury and streetwear brands alike to sell on the platform, as well as supporting local designers with data and distribution infrastructure.

“Fashion trends, before, would appear in New York or Milan, and then a year later, Chinese customers would get a sense of these new trends,” said Jessica Liu, Tmall’s director of fashion, in a previous Glossy interview. “But because of the way media works now, all trends simultaneously hit in China. A lot of young customers are really sensitive about being on top of these trends, so it’s necessary for us to enable immediate purchasing and gratification.”

Tmall emerged as the right partner for Stadium Goods not just for its reach, but because Alibaba has been rigorous with seller standards in the past few years in order to eliminate counterfeits, and the brand pages put creative control in the hands of the retailers. Visiting Stadium Goods’ Tmall site has the same look and feel of visiting its own website, and shoppers can browse sneakers, apparel and other items from brands like Supreme, Air Jordan, Nike, Palace and more. Overall, the catalogue has more than 5,000 products for sale through Stadium Goods.

Stadium Goods’ store on Tmall

Catering to the Chinese customer
McPheters said the inventory doesn’t differ too much from what’s available on platforms like Amazon and Stadium Goods’ website, but the company does pay attention to what’s trending among Chinese customers and plan accordingly. Right now, Nike basketball shoes, which aren’t currently super hot in the U.S., are selling like crazy in China, so the majority of the retailer’s inventory in that category is being sent there for now.

The strategy overall is to keep a large inventory selection on Tmall, and then raise brand awareness and push certain products through content series and influencer partnerships. That involves investing in video: Stadium Goods hosts a weekly broadcast that showcases new arrivals and trending sneakers out of the store in Soho, in Chinese and starring Chinese influencers like the actor Kris Wu. While these videos usually result in a sales spike, McPheters said the goal is equally to build trust with Tmall customers by grounding the Stadium Goods name in something tangible, like a New York City store. The videos run on the Tmall page as well as on Taobao, another Alibaba marketplace, and social platform Weibo.

“The Chinese customer is very open to watching retailer videos like that. They’re watching a lot of it on mobile devices, which is where the eyeballs are,” said McPheters. “Some of it’s very product-focused, around what’s new and what’s selling best, but it’s more about that awareness and trust factor.”

Sneakers available from Stadium Goods on Tmall

Expanding on the foundation
Overall, Tmall has been a supportive partner to Stadium Goods as the retailer ramps up its presence in China by helping connect it to logistics and distribution partners, and sharing detailed customer data — something that’s not reciprocated by Amazon. That direct support from the brand has let Stadium Goods experiment with different selling formats, like 24-hour flash sales and in-app “games” that fit in with the Chinese customer’s shopping behavior.

“Selling in China is not the easiest thing for an outsider; it’s difficult to figure out the ins and outs, but the difficulty is just in the learning process. Tmall was a huge help in that, and now we can pump a lot of volume through the channel.”

Up next, the retailers plans to set up a WeChat store (right now, the brand has a WeChat page, but transactions aren’t yet enabled), more influencer work (KOLs are a far greater revenue driver than their U.S. equivalents) and brand partnerships, according to McPheters. After spending time working with platform, agency and distribution partners in China, McPheters plans to use that knowledge to help individual brands launch in the region with new collections.

“It’s a big learning curve, and there are a lot of cool brands that the Chinese customer would love, but are relatively small and don’t have the resources to figure out the Chinese platform,” said McPheters. “I see that being a big opportunity for us.”

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