Tech’s impact on business and culture in 2014

It would be impossible to capture the disruptive influence the latest digital technologies are currently having on the world in a single blog post. But what Zeitgeist has collated here are some thoughts and happenings showing the different ways technology is changing our lives – from the way we do business to the way we interact with others.

Last night saw a highly enjoyable occurrence. No, not the Academy Awards in general, which as ever moved at a glacial pace as it ticked off a list of predicted favourites. Rather, it was a specific moment in the ceremony itself, when host Ellen DeGeneres took a (seemingly) impromptu picture of herself with a cornucopia of stars, tweeting it instantly. The host declared she wanted the picture (above) to be the most retweeted post ever. The previous holder was none other than the President of the United States, Barack Obama, whose re-election message saw over 500k retweets. It took Zeitgeist but a few minutes to realise that Ellen’s post would skyrocket past this. Right now it has been retweeted 2.7m times. Corporate tactic on the part of Samsung though it may have been, Zeitgeist felt himself feeling much closer to the action – being able to see on his phone a photo the host had taken moments ago several thousand miles away – and the incident helped inject a brief air of spontaneity into the show’s proceedings. Super fun, and easy to get definitive results in this case on how many people were really engaging with the content. But can we quantify how much Samsung and Twitter really benefited from the move, beyond fuzzy marketing metrics? Talking heads on CNBC saw room for improvement (see below).

Former WSJ.com Managing Editor Kevin Delaney leads discussions on Samsung and Twitter’s presence at the Oscars last night (click to watch)

The big news of late in tech circles of course has been Facebook’s $19bn acquisition of messaging application Whatsapp. Many, many lines of editorial have been spilled on this deal already. In the mainstream media, many commentators have found the price of the deal staggering. So it’s worth reading more considered views such as Benedict Evans’, whose post on the deal Zeitgeist highly encourages you to read. Despite the seemingly large amount of money the company has been acquired for – especially considering Facebook’s purchase of Instagram for a ‘mere’ $1bn – Evans sagely points out that per user the deal is about the same as Google made in its valuation when it purchased YouTube. So perhaps not that crazy after all. The other key point that Evans makes is on Facebook’s dedicated pursuit to be the ‘next’ Facebook, or conversely to stop anyone else from becoming the next Facebook. With a meteoric rise in members (see image below, as it outstrips growth by both Facebook and Twitter), Whatsapp was certainly looking a little threatening.

Whatsapp’s number of active users skyrocketed to 450m in no time, outpacing both Facebook and Twitter (Source: The Economist)

The worry for investors is how Facebook will monetise this platform, when the founders have professed an aversion to advertising. Is merely ensuring that Facebook is the ‘next’ Facebook a good enough reason for such acquisitions? Barriers to entry and sustainable advantages will be few and far between going down this route. The Financial Times, in its analysis of the acquisition, points out that innovation is quickly nipping at the heels of Whatsapp. CalPal, for example, is one example of a mobile application that lets users message each other from within an app. In the markets, there has been a relatively sanguine response to the purchase, but only because of broader trends. As the FT points out,

“External forces have also helped to push the headline prices of deals such as WhatsApp into the stratosphere. A global excess of cheap money, along with a scarcity of alternatives for growth-hungry investors, has boosted the stock prices of companies such as Facebook and Google.”

One of the most visibly exciting developments in technology in recent years is the explosion of the wearable tech sector. But it is Google’s flagship product, Glass, that has met with much ire and distress. An excellent piece of analysis appearing in MIT Technology Review last month hit the nail on the head when it identified why Glass was having trouble winning people over. The article rightly identifies the significant shift in external appearance inherent in making the switch from a device that needs to be taken out of a pocket as makes it clear when it is being interacted with (you need to cover half your face with the product to talk to someone, for example). The article also details the savvy approach Google have taken to the distribution of their product. It’s always sensible to try and mobilise the part of your base likely to be evangelists anyway, so as to build advance buzz before a full-blown release. But to get them to pay for the privilege, as Google are doing with their excitable fans, dubbed Explorers, is a stroke of genius for them. However, the key issue, and what the article states is an “insurmountable problem”, is that “Google’s challenge in making the device a successful consumer product will be convincing the people around you to ignore it”. It is this fundamental aspect of social interaction that is worrying many, and now Google is worried too. As detailed in the FT, the company has acknowledged that the product can look “pretty weird”. Recognising it has a “long journey” to mainstream adoption, it published a list of Dos and Don’ts. Highlights include,

“Ask for permission. Standing alone in the corner of a room staring at people while recording them through Glass is not going to win you any friends… If you find yourself staring off into the prism for long periods of time you’re probably looking pretty weird to the people around you.”

It indicates that Google may have a significant ‘Glasshole‘ problem it needs to attend to. The case may be overstated though. One of the problems may just be that potential customers have yet to see any practical uses for it. This is beginning to change. Last week, Virgin Atlantic announced a six-week trial of both Glass and Sony smartwatches. The idea will be for check-in attendants to use the devices to scan limousine number plates so that passengers can be greeted by name and be instantly updated on their flight status.

In the arts, digital technology has inspired much innovative work, as well as helped broaden its audience. David Hockney, one of England’s greatest living artists, recently exhibited a series of works produced entirely on his iPad at London’s Royal Academy of Arts. He is far from alone. Last week’s anniversary issue of The New Yorker featured work from Jorge Colombo on its front cover, again produced entirely on an iPad. Such digital innovation allows for increased productivity as well as new aesthetics. When done well, art can also involve the viewer, encouraging interaction. Digital technology helps with this too. Earlier in the year The New York Times covered how the New York City Ballet redesigned part of their floor in a new scheme to attract new visitors to the ballet. The result, roughly life-size pictures of dancers arranged on the floor, has seen great success, and an explosion of content on social media platforms like Instagram, where users have taken to posing on the floor as if interacting with the images (see above). It’s a simple tactic that now reaches a far greater audience thanks to new digital technologies.

A recently published book, ‘Now I know who my comrades are: Voices from the Internet Undergound’, by Emily Parker, seeks to demonstrate the ways in which digital technology has made helped to coalesce and support important activism in regions such as China and Latin America. But, as The Economist points out in its review, the disappointing situation in Egypt puts pay to some of the author’s claims; there are limits to how productive and transformative technology can be. In business, these hurdles are plain to see.  A poll taken by McKinsey published last month shows that “45% of companies admit they have limited to no understanding on how their customers interact with them digitally“. This is staggering. For all executives’ talk of the power of Big Data, such technology is useless without the proper structures in place to successfully analyse it. We also perhaps need to think more about repercussions of increased technological advances and how they influence our social interactions. In the recently opened film Her (starring Joaquin Phoenix, pictured below), set in the very near future, a new operating system is so pervasive and seamless that it leads to fraught, thought-provoking questions on the nature and productivity of relationships. When does conversation – and more – with a simulacrum detract from interactions with the physical world? These considerations may seem lofty, but as we illustrated earlier, the germination of such thoughts are being echoed in discussions over Google Glass.

So technology in 2014 heralds some promise for the future. Wearable tech as a trend is merely the initial stage of a journey where our interaction with computing systems becomes seamless. It is on this journey though that we need to make sure that businesses are making the most of every opportunity to streamline costs and enhance customer service, and that individual early adopters do not leave the rest of us behind to deal with a bewildering and alarming new way of living. One of our favourite quotations, from the author William Gibson, is apt to end on: “The future’s already here, it’s just not very evenly distributed“.

The New News – Monetising journalism today

“What the Internet has done is made a million sources of information available. It’s only a click away… The Internet has disrupted many industries. The newspaper business has been destroyed. It’s beginning to happen, arguably, to television. Consumer behaviour is changing!”

– Henry Blodget, editor-in-chief, Business Insider

Great minds may think alike, but they’re now consuming media on a plethora of different devices. Legacy media companies have been struggling in recent years to protect old revenue streams as the onslaught of digital disruption has rendered previous business models less than adequate. Recently, though, there have been signs of hope.

In television, Hulu and Netflix are increasingly showing themselves to be lifesavers of the long-format viewing, in an era where we are being increasingly distracted with short-term fixes, evinced by the success of social gaming product from companies like King. Hulu added 1 million paying subscribers in Q1 of this year and streamed over a billion videos. Netflix, after bravely investing in producing its own content with House of Cards, recently reported it has already recouped the sizeable $100m investment it made in the first season. It’s interesting, reassuring and quite logical to note the news that when Netflix enters a new market, piracy in the region drops. Let’s hope that legacy media companies are finally recognising the oblique connection here (and ponder less the millions of dollars lost over the years to pirated content at the expense of no legitimate alternatives). Though Borders has disappeared and Barnes & Noble may be in trouble, the book business is doing well, with 2012 being a “record year” for the industry. Digital downloads were up 66%, with physical purchases down only 1%. In music, the industry is slowly embracing a future (now very much a present) that has been staring them in the face since the start of the century with Napster and its myrmidons; digital sales rose 9% last year, helping overall sales to rise for the first time in a decade (see The Economist’s chart below). In South Korea, a region traditionally awash with pirated content, startup KKBox has come up with innovative ways to get people to pay for music again. They emphasise a sense of community – much like the one users felt they belonged to on Napster – bringing subscribers “closer to the regional music scene… Users can listen in real time as music celebrities make playlists of their favourite songs. There is also a KKBox print magazine and an annual awards show and concert, and it sponsors regional music festivals”. In other words, the offering goes beyond simply providing product to be streamed; it creates a cohesive world around the product.

In 2012, music industry sales held steady for the first time in years. Digital sales continued to grow.

This cohesive world is in vogue at the moment; it represents most business justifications for investment in social media, and on a granular level again for investing in multiple networks, be they Facebook, Twitter, Pinterest, etc. This cohesiveness also allows for the exploitation of new revenue streams, something we’ve written about before. It’s a point that’s recognised by those in the newspaper industry. David Carey, head of the Hearst Magazines empire, has stated unequivocally that today “you need five or six revenue streams to make the business really successful”. It’s why companies like Monocle, which produces a high-end cultural magazine, has started a radio service that has been “profitable from the start, since normal commercial radio stations never deliver the kinds of listeners its high-end advertisers want”. And as advertising revenue dips below subscriber revenue, as it did recently at The New York Times and will do if it has not done so already at the Financial Times (FT), these new business models need to be set up and utilised, fast.

These discussions and others were up for debate at an event two weeks ago, hosted by the Media Society at the offices of the FT, examining the effects and implications of digital disruption. On a macro level, the problem has been with trying to get people to value content that is no longer physical. From the looks of it – not least from the evidence above -this is broadly starting to be achieved in the music, book and television industries. The problem, according to Laurie Benson, formerly of Bloomberg, was that the newspaper and magazine publishers took the genie out of the bottle, and “panicked”. For, unlike television content producers that seemingly buried their hand in the sand, those in the newspaper business immediately shoved all their content online, for free, in an effort / vain hope that advertising would continue to provide. Nic Newman, who spearheaded the BBC iPlayer initiative, said companies were still fundamentally struggling with mobile, which is especially important now it is considered “the first screen”. Moreover, social media, as well as providing an opportunity to construct a cohesive environment for the product being sold, has also, said Nic, hugely changed the way we find and discover news. The irony of his statement, given at the headquarters of the Financial Times, a paper with arguably the most opaque paywall in the industry – and with a zero-sum Facebook strategy – was not lost on Zeitgeist. On that note, Rob Grimshaw, managing director of FT.com, spoke up, saying he was “very comfortable” with the paywall as it currently was. He admitted he was “worried” about what Twitter would do to their model (the tense should perhaps be what it is doing). Rob mentioned Forbes, which is now allowing direct outside contribution. This obviously makes the platform somewhat more exciting, and certainly more accessible. But what does Forbes mean now as a publication; what is their editorial position, asked Rob. Though many interesting questions were posed, answers were few and far between at the conference, and few initiatives were proposed.

On a more granular level, what are businesses doing now to try and maximise revenue in print? We’ve discussed recommendations for print media before. Unsurprisingly, some of the more innovative – and perhaps controversial – models are coming from those publications outside the mainstream. Business Insider, and Vice, are two such examples. Insights into both publications (although defining these companies as only publications perhaps limits the perception of their offering) were covered in the same issue of The New Yorker last month.

Ken Auletta’s article about Business Insider, and its “disgraced Wall Street analyst”-turned editor, Henry Blodget, states that the blog “draws twenty-four million unique monthly users, more than CNBC”. Overhead is one clearly one of the main areas that such companies have over their legacy rivals, whose roots are in ink and paper; Business Insider could never hope to, nor would they wish to have 1,700 full-time staff, as the WSJ does. One of the innovative, intriguing and controversial things about the editorial of BI is it’s blending of hard news – “7 signs household finances are getting stronger” – with more off-the-wall, attention-grabbing, low-brow content – “3 teeth-whitening products that actually work”, “Here’s what NBA players looked like before they had stylists” and “The porn industry has already dreamed up some awesome ideas for Google Glass“. Blodget, who continues to write many stories himself, is seemingly as comfortable writing about budget-cliff negotiations with an accompanying eighteen charts, as he is writing about the experience of flying home economy class from Davos. Andrew Leonard, on Salon, called the latter “the stupidest article to be posted to the Internet in the year 2013 – and possibly the entire century”. The content may have indeed been questionable, but it’s part of an interesting strategy to cater to multiple mindsets of the same audience; Blodget says he wants to “put the fun back into business“. The New Yorker article describes how BI produces original content through research, including how Goldman Sachs lost the chance to be the lead under-writer in Facebook’s IPO, and questioning whether previously undisclosed emails showed that Zuckerberg really had stolen the idea for Facebook from the Winklevoss twins. A lot of the time though, BI links to reported news “and then adds its own commentary, as well as reactions from others”, what Blodget calls “halfways between broadcast and print… it’s conversational”. It’s also unquestionably lazy, but provocative, which is what – along with many slideshows, with each slide on a different page – earn the blog so many clicks. 85% of BI revenue comes from advertising, a dangerous ploy in a time when rates and interest in online platforms are either slipping or more generally failing to account for costs. Most of the rest of the pie comes from paid conferences, something that other publications – incumbent or otherwise – should take note of. People pay with their time, and sometimes money, for your expertise and opinion, so expanding this engagement into other adjacent opportunities is a wise move. To this point, the company has also hired analysts to create research reports on telco trends. The New Yorker comments, “The result is something like a private magazine that several thousand individuals and businesses receive, for $299 a year”. Other companies are experimenting with various monetisation methods. Andrew Sullivan’s publication The Dish is soon to be made subscriber-only, with no ads, as $20 a year. The good news is that people are starting to willingly pay for other digital content, such as books, music and film. But aside from BI’s small subscriber-based research section of the site – an exception on blogs – the greater worry is what the type of engagement we have with content online means for the type of content that is produced in order to cater for those tastes. Are we reaching the end of an era of nuance? The New Yorker again,

“Lengthy investigative pieces are rare on all-digital platforms. They are expensive to produce and, given a readership that has an average of four minutes to spare, not likely to attract a large audience. As economically beleaguered newspapers invest less in long-form reporting, digital publications are unlikely to invest more.”

Journalism for Vice means creating content to be reported on, rather than simply reacting to developing news

Lizzie Widdicombe’s article on Vice magazine shows there is far more innovation to be developed in the publishing industry, as long as one is willing to stop thinking of oneself as publisher. Vice is by no-means an upstart, at least in the magazine world, but recently found itself on the global stage after having the sheer tenacity to organise Dennis Rodman to go to North Korea for an exhibition basketball game, sitting alongside the Dear Leader himself Kim Jong Un. The story ran with the headline, “North Korea has a friend in Dennis Rodman and Vice”. Immediately we see the lines between reportage and editorial, between analysing events and creating them, begin to blur considerably. The headline looked particularly careless when shortly after the ‘basketball diplomacy’, North Korea “scrapped its 1953 armistice with South Korea and threatened preemptive nuclear attack on the United States”. The Vice article detailed the “epic feast” they were treated to, which again seemed callous given the generational malnutrition that has led to stunted growth in the North Korean population. Journalism stalwart Dan Rather called the whole episode “more Jackass than journalism”. This is a very different type of journalism indeed. The company has 35 offices in 18 countries, with websites, book and film divisions as well as an in-house ad agency. Since 2002 it has operated a record label with albums from the likes of Bloc Party. The New Yorker article says “these ventures are united by Vice’s ambitions to becomes a kind of global MTV on steroids, [but] unlike MTV – which broadcasts a monolithic American vision of youth culture – [the international aim is] to ‘localise’ their sensibility”. According to Shane Smith, Vice’s CEO, ‘The overall aim, the overall goal is to be the largest network for young people in the world… to make content that young people actually give a shit about'”. Vice employees sometimes refer to the brand as “the Time Warner of the streets”.

It has made significant forays into video, with a channel on YouTube that attracts more than a million subscribers. Like Business Insider, Vice also blends the highbrow with the lowbrow in terms of content. On YouTube, the New Yorker reports, videos range from ‘In Saddam’s Shadow: 10 Years After the Invasion’, to ‘Donkey Sex: The Most Bizarre Tradition’. The company’s revenues are estimated at $175m for 2012. In 2011, Vice was valued at $200m, “and last year Forbes speculated that the company might someday be worth as much as a billion dollars“. Its newest venture is a show on HBO (owned by Time Warner), with the tagline ‘News from the edge’. The show “takes on subjects from political assassinations in the Philippines to India’s nuclear standoff with Pakistan”. It engages in what it calls ‘immersionism’, where Vice employees are sent out to these locations and more or less told to engage in practices of varying degrees of danger. The New Yorker says this type of reporting harkens back to that of Hunter S. Thompson, who pioneered “participatory journalism… Vice claims to have a similar objective. Introductions to the HBO series announce that it’s out to examine ‘the absurdity of the human condition'”. One of the reasons companies like Time Warner, News Corp (see image below) and Conde Nast have all made the pilgrimage to Vice’s offices in Brooklyn is that they are all terribly envious of the way the company has managed to engage and monetise their audience. As well as the HBO show, Vice also create supplementary material fro HBO.com that shows how the show was made. Its Internet presence is diverse, and this is where the multiple revenue streams and advertising opportunities come in, as The New Yorker elaborates,

“Web sites, including Vice.com; an ad network; and its YouTube channel… Vice makes more than 85% of its revenue online, much of it through sponsored content… Besides selling banner displays and short ads that play before its videos, Vice offers it advertisers the option of funding an entire project in exchange for being listed as co-creator and having editorial input. Advertisers can pay for a single video, or, for a higher price – $1-5m for twelve episodes… – they can pay for an entire series, on a topic that dovetails with the company’s image… At the highest end of the sponsorship spectrum are [content] verticals, in which companies can sponsor entire websites.”

North Face, for example, partnered with Vice to sponsor ‘Far Out’, where Vice employees visited “the most remote places on Earth”. CNN is attempting similar feats, in an effort to legitimise the partnership – for example with Jaeger Le Coultre – by producing content that has a connection with company’s brand values. Some of Vice’s content verticals are softer than others, so that they can be more advertiser-friendly. It is seen by some at Vice of returning to the original soap opera days, when P&G would sponsor a serial show. This has led to some longtime fans declaring the publication has become too safe – gone are the early magazine covers featuring lines of cocaine, for example. The New Yorker comments the result “can feel like a strange beast, neither advertising nor regular content but something in between”. Vice also have a Creators Project, “devoted to the intersection of art and technology”. They partnered with Intel, and content has included an article on a cinema hackathon, as well as an event where a non-profit and VFX company partnered with techies to develop new forms of “interactive storytelling”. Intel sponsored the event, the video of the event, the blog post and the entire Creators Project website. Over three years, the company has paid Vice “tens of millions of dollars annually… to fund and publicise similar projects”. It is part of Intel’s attempt to have itself perceived as more of an experience brand, a la Disney and Apple. Said the CMO, “We want to see Intel coverage in Vanity Fair and Rolling Stone“. The video of the event is also put in YouTube, a company that is “crucial to Vice’s ability to expand” and which two years ago began paying Vice to make shows as part of a broader strategy to upend traditional TV – seen elsewhere in their recent Comedy Week. Such efforts from Vice form a feedback loop of good news that encourages investment from other individuals (such as former media mogul Tom Freston) and companies (such as Raine Group and advertising conglomerate WPP, a former employer of Zeitgeist). Vice is also planning a global, 24-hour news channel. Smith told The New Yorker, “Let’s say, hypothetically, you become the default source for news on YouTube. You get billions of video views, WPP monetises it. Then you are the next CNN“. This would be a dramatic shift in the way it makes its money now, from those sponsorships mentioned earlier. Quixotic efforts such as the North Korea trip, as well a recent bungling of a story on John McAfee, on the run from police, where Vice inadvertently gave his location away, would have to be curtailed. “If Vice does become a global news network, it might have to rethink some aspects of its prankster approach to reporting”.

Murdoch and other CEOs have much to learn from Vice’s business model

It’s becoming abundantly clear then that what news publishers need to do to survive is embrace a diversity of platforms. This will be a long road for legacy incumbents. The FT now produces a great deal of video content, but it is still largely lost on the app and on the website. There is no hub where videos are categorised in any way. Few if any publications allow someone, upon purchasing a hard copy of the newspaper / magazine, to have access to that same content online, if only temporarily. These are simple but fundamental things that companies like this must do if they want to present their audience with a cohesive experience. That’s about operations and user experience. From a content perspective, journalism also faces new challenges. Fareed Zakaria, who Zeitgeist has been an avid reader of since the reporter’s days writing for Newsweek International, says Vice’s TV show for HBO has “loosened the format” of television reporting, as it tries “to get a news audience interested in the world”.

What are the implications of such a loosening? Vice CEO Shane Smith defended the company’s North Korea trip to The New Yorker, going on to say, “Is it journalism? It depends on what the definition of journalism is”. Um, well, yes, quite. If we’re to maintain any distinction between content that is supported and promoted by advertising, editorial that has a particular bent, and unbiased news rather than sensationalist reportage, we need to start having a serious conversation about what journalism is. In particular we need to discuss what the balance is between the desire to entertain and the task of informing the populace. If the onus is truly on the latter, then it becomes a genuine public good that must, at worst, be subsidised by public money. The issue The New Yorker raises in its article on Business Insider crystallises the dilemma; the medium in which people consume news has changed, thus so have their habits. They are now less likely to dedicate time to reading long articles; so writing these kind of articles is increasingly an unprofitable exercise. An end to thorough investigative journalism would surely have dire consequences. While fears over the death of journalism have been greatly exaggerated, a dramatic shift is underway, and perhaps for the worse. And that’s true no matter what your definition of journalism is.