How do you create something people will pay for when everything around you is free?

Imagine this: I plunk down two versions of essentially the same thing on a table in front of you and ask you to pick between the two. One is free, and limitless. The other is better than the first one, but it costs money. Not that much money to be fair, but still, money.

Additionally you can pick the free one up right now and walk away with it. If you pick the one that costs money, you’ve got to fill out a form with 12 boxes of information before you can walk away.

Which one do you pick?

To their credit, a decent number of people pick the better one. But a much, much larger group of people – myself included – tend to pick the free one and walk away.

The thinking is something like this: sure better is always nice, but good enough is good enough, and free good enough… well that beats better. And that form and all of the friction that introduces – forget it! I just want to have my thing and walk away. I don’t want to fill out a form. Just give me the thing and let me get on with it. So keep your better thing, I’ll just make do over here with my free, frictionless, maybe-not-as-good but also totally limitless thing, thank you.

That is the scenario for digital news these days. And if you’re in the business of trying to sell a better version of the digital news, you very often find yourself on the wrong end of that buyer’s decision.

The thing is that for a huge chunk of readers (and my guess is that this gets more true as the readers in question get younger), ‘good enough, free and frictionless’ beats ‘better but costs money and has friction’. Even if the cost is nearly nothing.

Even if the cost is nearly nothing, in a world where there are free alternatives, the choice becomes binary: costs nothing versus costs something.

And the friction introduced by the cost – the friction of the transaction, of inputting your information into a form, of keeping track of the fact that you’re spending money – might even be a bigger deterrent than the actual cost itself.

So what to make of that? Should all news be free and advertising-supported? I don’t think so. As I said before, a fully advertising-supported news model tends to optimize over time toward worse news – news that is created primarily to get eyeballs, not to be a great news experience. That’s not really the news people want (though it IS often the news they choose).

I think what news organizations that want to charge for their digital news need to be doing is creating offerings that are different altogether than the free versions out there. Not simply better, but different. Create news products and offerings that have no free equivalent. And then don’t give those things away with ten free clicks before you have to sign up or whatever your paywall rule is.

That breaks this binary choice problem that paid digital news finds itself in. The choice is no longer between two things that are essentially the same, with one free and the other not, but between two things that are solidly different.

Netflix was worried about their sustainability when they were only offering licensed content – how long could they hold up against competitors who would undercut them continually, as streaming movies became more and more a commodity? Their answer was to create House of Cards, Orange Is The New Black, etc – experiences you can’t get anywhere else, great experiences, experiences you want, and that you have to pay Netflix for. Problem solved.

Of course you have to create something that is not only different, but something people want or need and will pay money for. That’s the hard part, right? Different is easy. Different that I want is hard.

Luckily that’s what people in product and media live for. So it is a hard problem, but one that people in the digital news industry should be throwing themselves into right now if they want to create products that people will pay for.

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Innovation at The New York Times: The Opportunity

Last week I wrote about how the culture at The Times is quickly becoming more focused on rapid iteration, measured testing of ideas, and other processes commonly associated with start-ups, and how, looking back over my first eight months here, that’s been great to see.

But there is still a challenge ahead of us – and along with that challenge there is also a big opportunity.

Where we are right now, in March of 2014, is that we have upgraded the company’s innovation culture quite a bit, to the point where people are thinking in the terms I mentioned in my last post, teams are working pretty well on new ideas cross-functionally, and everyone (everyone!) is embracing innovation and trying out new ideas – even knowing full well that they involve the risk of failure. The company is getting ready to launch some new products in 2014, and I have no way of knowing, but I personally believe that some of those will deliver some measure of the success they were created to find.

So that’s all great.

What we’re not yet doing though is innovating at a level that changes the game around us.

(I should clarify: when I say “we”, I am specifically talking about the digital business side of things. I think the news and editorial side has a long history of innovating and sometimes changing the game.)

I point this out because I believe we could be doing just that – it is presently within our reach.

I don’t want to undersell innovation that doesn’t change the game. That’s critical to the survival of any company. Companies that can’t do that will fade away sooner or later – and more likely sooner than later, the way things move these days. So non-game-changing innovation (or “adjacent innovation” as I recently saw it referred to in an HBR article) is crucial. And The Times is doing that pretty well. Better and better, I’d say.

But the opportunity we have currently is to develop the capacity for truly game changing innovation.

To get there, I think we as a company have to mostly do one thing: learn to become comfortable launching and supporting some products and ideas that don’t have an immediate ROI. Be comfortable launching products where the ROI is several years off (and maybe even fuzzy), because they operate in markets that don’t even really exist yet, and are just beginning to take shape. If you can do that, then you allow yourselves to explore greener pastures, go where the space isn’t so crowded, because the market hasn’t even been fully hashed out. And that’s where game changing innovation happens.

It’s not that we should be comfortable doing that with all products – we shouldn’t be. Most products should have clear goals for near-term returns at the outset. But we need to be comfortable doing this with some products, some of the time.

I have a friend who I talk to about innovation at big companies. We were talking about funnels and gates, how you evaluate a multitude of ideas against each other to determine which ones to move forward and which ones to kill. I was going on and on about determining market size, etc etc. His reply was, “I have a friend at Nike. She says a way they sometimes determine which ideas to give a green light to there is that someone stands up in the room and says “I think this idea is going to blow people’s fucking minds.” That’s their metric – the “blow people’s fucking minds” metric. That’s the metric that says “This idea is so crazy, so big, so new, that we can’t just pop it into the funnel along with all of the other ideas. This idea could be game changing.”

We don’t have that metric yet at The Times. But we should. And I feel like we could be on the brink of getting there, getting comfortable with that.

And if we can get there, I could see The Times becoming one of those companies, like Nike, that people point to and say “that company really knows how to innovate.”

Will we get there? I can’t say. It’s such a big point to get to that it’s almost like we can’t just decide to do it, we have to evolve to it as an organization.

And my point, I guess, is that it feels like we could be on the brink of that kind of evolution.

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The Times Is Acting More And More Like A Startup Right Before My Eyes

I’ve been at The Times going on eight months now. Still the blink of an eye really, especially in a company where you’re still considered “new” two years in. But in those seven plus months, I’m fairly amazed at how much the company’s mindset seems to have shifted.

When I arrived at The Times, one of the first things I did was create an “our values” doc, based around what I thought the New Products team’s values should be. Standard startup stuff, like: think of product ideas as hypotheses instead of actual product, use metrics to answer questions and solve debates, etc. I created it because I wasn’t sure that anyone was following these ideas. I actually went over it point by point with each person who came onto my team, worried that otherwise they wouldn’t grasp these things at all.

Now, several months later, that doc feels totally redundant. There’s nobody working around me who doesn’t think in terms of hypothesis, who isn’t metric driven, who isn’t thinking about how to do things faster, leaner, how to apply lessons from failure, etc.

True story: when I first got to The Times, there was a joke about how you would go from meeting to meeting, and get a new Powerpoint doc print out at each, and at the end of the day you would be collapsing under the weight of all of the Powerpoints you were carrying around. And there was some truth to that. But I was just thinking the other day how long it’s been since I’ve been handed a PPT printout. A long time. What happened? The Times culture shifted. Away from PPT printouts, toward… standing meetings… presentations without handouts… one-page summaries…

Mind you this is all happening at a fairly big company, all in the space of seven and a half months. It’s pretty amazing watching the change happen that quickly.

I don’t think anyone really perceives this – everybody is too busy working. Certainly nobody other than me is reflecting on it. And it’s not to say that we’re totally where we need to be in terms of innovation capacity (we’re not yet). But it’s impressive. It makes me wonder where we’ll be in eight more months. If things continue at this pace (and I’ll be one of those pushing to help make sure they do) I think it will be increasingly interesting to watch.

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Should News Be Free?

My team has been running an online survey for a while about a new product we’re building. At the end of the survey there’s a space for open-ended feedback.  “Anything else you’d like to say?”  I love reading the comments in that section, people have some great ideas and it’s fun to see where the resonances are. 

One thing that always surprises me though is how many people write in that space “news should be free” or “news wants to be free” or some variant of that idea – still, in 2013.

I think some of these people have a misunderstanding of what online advertising pays these days, and imagine it to be a river of plenty that news websites can just tap into and walk away from.  Others may not consider how much time and expertise goes into making good news and what the costs are for that.

But regardless of the source, one thing this sentiment totally misses is this: when news is offered for “free”, it pushes the quality of that news down over the long run. And conversely, when news is paid for – done correctly – it pushes the quality up over time.

How does that work?

“Free” news is of course news that relies on advertising to pay the bills.  When your whole revenue stream is based on online advertising, your revenue equation looks roughly like this:

revenue = (number of eyeballs x price per ad view) – cost to produce news

As with all businesses, the desire is always to maximize that number on the left.  To do that, you have to fine tune the equation on the right. The one thing that is out of your control to change in that equation is price per ad view – that’s set by the marketplace (and it’s low!).  So if you’re a business producing news, you’ve got two vectors to work with to increase revenue: number of eyeballs and cost to produce news.  The winning strategy, revenue-wise, is to get as many eyeballs as humanly possible, while cutting the cost of production to zero, or as close as possible.

Taken to the logical conclusion, the result is news that costs nothing to make and follows a formula to capture as many millions of people as possible.  Here’s the headline from the top of this morning’s news section of BuzzFeed, for example:  This Russian Police Choir Cover Of ‘Get Lucky’ Is Delightfully Bizarre.  What it is: a video discovered on YouTube, given a catchy title and reposted to BuzzFeed as news.  That’s the best, most profitable news in the free news world. It cost almost nothing to make and it’s going to get a lot of eyeballs.  That’s what the “free news” revenue equation pushes you toward.

When people pay for news on the other hand, the equation looks like this:

revenue = (price consumer pays for news x number of consumers) – cost to produce news (plus additional ad revenue if relevant)

Here it might seem like there’s the same temptation to cut production costs to zero, but in fact there isn’t, because the vastly overriding concern is that if the product is not good enough the customer wont pay us anything at all.  The result here is an ever-continuing conversation within the organization about how to make the news better without making it more expensive to produce.  Not how to make it stickier, but how to make it something people will open up their wallets for.  That creates a cycle of improvement that continues over time.

So on one hand you get “how do I make this for less while getting more people to click on it” while on the other hand you get “how do I make this good enough that more and more people will pay me some of their hard-earned money for it”.  These are two simple feedback loops that drive news in very different directions over time.  And they’re the two questions being played out across the internet right now in the news world. 

So the answer to the question “should news be free?” is: it depends on what kind of news you want. Ultimately both kinds of news have a healthy place in the world. But which path your news organization goes down, and which one you consume yourself, determines what kind of news you’re getting at the end of the day.

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What Is The New Digital Products Team at the New York Times?

I mentioned last week that I recently joined the New York Times on the New Digital Products Team (and that we are hiring developers). I thought I should follow up with a bit about what the New Digital Products team is and what we’re doing.

New Digital Products is a new team, started this year. It’s a small team – I believe I was the first external hire made for it. And i’s growing fairly quickly. We on the team are charged with creating new products from scratch, building on the Times’ existing assets, to add value to the company in a concrete, measurable way.

I want to say that the New Digital Products team is reinventing the Times, but that would be unfair because in my three months here I’ve come to understand that literally everyone, in some way or other, is reinventing the Times. That’s what it is to work at the Times in 2013 – a continual, top-to-bottom/bottom-to-top process of reinvention. In a positive, determined way, not the negative, panicked way that often goes on in big companies that realize they’ve got to change.

What makes New Digital Products different from all of the other reinvention going on here is that part about “adding value in a measurable way”. The New Digital Products team is focused on building new products and experiences that generate measurable revenue for the business in the near-term. And we ourselves will be measured to a large degree by how well we meet that objective. This sets it apart labs, new ideas teams and so forth you find at many companies. This is not blue sky ideation, this is new business development, begun internally at seed stage. It is quite a bit more like starting startups internally – same objectives, same approach, same criteria for success/failure.

And as I said last week, the top management has the wisdom to avoid micromanaging the process, instead playing the role of board of directors – staying in the conversation and stepping in for the major decisions, but giving the day-to-day decision-making power to the teams themselves.

That makes it a pretty fascinating job, at least for someone like me who loves starting new things.

That’s about all I can say about it right now. You can read a bit more about it in this NY Mag article published this summer.

And again: we’re looking for great devs. Primarily iOS and full-stack web. Drop me a line at john at johngeraci.com with any questions.

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Come Work as a Developer for the New York Times’ New Digital Products Team

I’ve been at the New York Times for three months now as Director of New Digital Products. That’s enough time for me to get over the “wow” factor of being at the Times (and there is quite a wow factor when you first get here). And it’s enough time for me to say with a clear, level head: the New Digital Products team is an amazing entity and a rare occurrence in the world.

New Digital Products is a still-small, newly-formed team charged with creating new products from scratch, iterating on them, launching them, and making them successes. Sound a lot like a startup? It is. But here’s the thing: at most companies as big as the Times (or even a quarter the size of the Times), you would be doing this with all sorts of interference from upper management and other departments, and that would basically kill whatever you came up with long before it got out of the gate. Amazingly, the Times, with New Digital Products, has created a situation where upper management doesn’t do this, and where teams are truly empowered to build in the direction they think will yield the biggest rewards. And within those teams, team members are also empowered to make the decisions they think will have the biggest impact. Of course upper management is fully involved in the process, but their role is more like that of investor/board member, evaluating progress, checking milestones, giving input and controlling the purse strings.

That makes the New Digital Products team a unique opportunity for anyone looking to work in a start-up atmosphere while also working at a big and amazing company that has real impact on the world.

Which brings us to why I’m writing this: the New Digital Products Team is looking to hire several developers for the products we’re currently working on.

Specifically we’re looking for iOS developers and full-stack developers.

We want of course great devs who are totally fluent in what they do. We also want people who are “start-up native” – who fully get the process of working on something from stage one through launch and beyond, and understand the flexibility, sustained focus, and tenaciousness that requires.

And we want team players, who can impact the dynamic of the team they’re on and help move the product as a whole from good to great.

If you’re one of those people and you think it would be interesting to do this for the New York Times, write to me at john at johngeraci.com or tweet me @johngeraci for more details.

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A TechCrunch Post I Wrote on Amazon.com: The Hidden Empire

I wrote to the editors of TechCrunch last week suggesting they write a piece on faberNovel’s update of their “most favorited” Slideshare presentation, Amazon.com: The Hidden Empire. They wrote back and asked me to write the post for them myself!

So here it is. Nothing long or deep, but fun to write something for TechCrunch.

Amazon’s Jeff Bezos Doesn’t Want An Empire, He Wants The World.

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A Business Insider Post I Wrote on Valve

Here is a guest post I wrote on Business Insider, about the gaming company Valve and their unusual and awesome company culture.

I hope I get the opportunity to start a company like this at some point.

A Company With No Hierarchy Makes More Money Per Employee Than Google, Amazon Or Microsoft

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My TEDxBigApple Talk [Video]

Here is the talk I gave at TEDxBigApple a few weeks ago, The Disruptive Future of Cities.

I had a great time giving this talk. Would love to do more like this one.

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Read This Article To Understand What 2012 Is Going To Be About

Have you read this month’s Wired article on YouTube fame seekers?

If not, please read it now.

I think it may be the most eye-opening article I’ve read this year.

What it describes is a growing group of 20-somethings living in Los Angeles trying to make it as stars of their own YouTube shows.

What it’s about is the new, creator-empowered culture of production built on top of the Internet that is (finally) coming of age and is going to change everything.

Here’s a snippet from the article:

Most people move to Hollywood with the hope of making it big, but Zonday is helping show the way to something strange and new: making it small… A narrow, lucrative fame is the path that has opened up for him and for the thousands of others like him. After going viral, they’ve figured out how—against all expectation—to stay viral.

Going viral, staying viral, and making that work for you without a studio – that’s the name of the game these people are playing.

The article goes on to describe a company that has sprouted up to help these creators out, and how it operates, what its business model is, etc. Great read.

Almost makes me wish I was living in Hollywood.

But of course the implications here are much bigger than just how video content gets made. You could take the topic of video in the article and replace it with anything: writing, music, software production, physical products – anything – and the article would work to describe the new model of creation and production that is now taking root around the world.

And among other things, this is what 2012 is going to be about – seeing this new type of production begin to grow into maturity, and seeing what that does to industries everywhere.

It should be an interesting year.

Happy New Year, see you in 2012…

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