Murdoch Says the Web is the Future for News

“Just as people traditionally started their day with coffee and a newspaper, in the future I hope that the way they start their day online will be with coffee and our Web site.”
-- Rupert Murdoch 4/13/05

Ironically, I read this quote on a website while eating a bagel and drinking a green tea (I’ve never even tasted coffee). But that irony aside, and with all due respect, Mr. Murdoch is only half right. Yes, people will start their day online with coffee and a website, but it won’t be “just as people traditionally started their day,” because the web is different.

Newspapers have traditionally been a centralized, biased, flat, stale, push media. The web is different.

Centralized:
A centralized group of individuals, the editorial staff, decides what news their readers will get. They filter through all of the news and select what they believe is important. Then they rank that importance through the prominence given to each article. Does it get the 10 column inches on the front page or 2 column inches buried in the middle of the third section? Have you heard the phrase: “All the news that’s fit to print”? Don’t make that decision for me, I’ll do that myself, thank you very much. The web breaks this model. With RSS feeds, blogs, and news aggregation sites, people can select the news that interests them. Newspapers = centralized news filter; Web = decentralized and personalized news selection.

Biased:
Don’t even try to tell me news isn’t biased, of course it is. No two articles about the same event are identical. Even when presenting facts, there is bias. The bias begins with the questions asked; each writer introduces their slant on what is important by the direction of the questions. Then there is the issue of which facts are presented and which are not. This too introduces the writer’s or editor’s bias. Only a web neophyte would claim that the web is unbiased, actually it is more biased. But you can get both sides or multiple side of each story. You can read different versions of stories along with user feedback, and develop your own conclusions. Users can also seek out writers that consistently present a bias that aligns with that reader’s sensibilities. Newspapers = 1 bias per story; Web = multiple biases per story.

Flat:
No doubt there’s a better word for this, but what I mean by flat is that there aren’t links to supporting information. Every story is disconnected from the rest of the world’s body of knowledge. On the web, articles are richly linked. While reading about Terri Schiavo you can become your own researcher and develop your own opinions by following links to videos of Terri, information on her condition, links to what dehydration and starvation do to the human body, and more. The user can dig as deeply as they want to develop their own opinion. Newspaper = flat, articles stand on their own; Web = richly interlinked allowing the reader to dig as deeply as they want.

Stale:
Newspapers provide day-old news. We pay less for day-old bagels than fresh ones. But we pay more to get day-old news in the newspaper than we do for fresh news on the web, which is free. Does this make sense to you? Hey, they call it "news" it should be new, not stale. Newspaper = day-old paid news; Web = fresh free news.

Push:
Newspapers push their information, perspective and bias upon their readers. Information transfer is a one-way street. Users can’t respond in real-time and tell the author that he has his facts wrong or is ignoring history or whatever else. Sure the reader can respond in a letter to the editor, but that too goes through the centralized filter. The web is all about an exchange of information. The web is a place for conversation. People want to provide feedback, rank articles, share their rankings with friends, and more. Newspaper = one-way flow of information and insight, Web = a conversation with ranking, sharing, socializing, etc.

Now much of the benefits of the web are almost a given with the newspapers’ move to the web. The news will be fresher. By adding a few hyperlinks in each article, users will get the richer experience of the web. Newspapers need to break down the centralized filter and allow individuals to select what they want to read, not what the editors deem important.

To be successful newspapers need to make the news a conversation with the people, and foster a community. In the process, people will select the bias they prefer. Individuals will become attached to writers, wherever they reside, not newspapers they work for. People will essentially assemble their own newspaper by selected the news and news sources they prefer. This will really shake things up in newsrooms.

The bottom line is that newspapers no longer shape public opinion; they merely provide the people with access to articles that fits their profile. On the web you no longer have “readers” you’ll have “participants”. In other words Newspapers don’t shape opinion, individual writers and their audiences will shape public opinion. That is probably the most bitter pill for newspapers to swallow, but unless they take their medicine and act soon, the newspapers may themselves be recycled.

Social Networking Will Soon Become a Core Component of Commercial Websites

It is the talk of the industry; it is network enhanced word of mouth; it’s the booster rocket that launches websites into the atmosphere...social networking? Nope I’m talking about viral marketing circa 2000. (Or maybe I’m talking about MLM circa 1949 without the websites of course ;).

Back in the day, viral marketing was unique to a few websites, like Hotmail, and it powered them to fame and fortune. Now the tell-a-friend link to a canned email is a standard tool in every webmaster’s toolkit. Custom hyperlinks in signature files are also pretty common these days, especially with web affiliate marketing. Once these tools became common, they lost their ability to drive tremendous growth. In time, we’ll see the same thing happen with social networking.

At the moment, social networking is a fun, unique and powerful mechanism for growing the registered user base of websites. A year after its launch, MySpace—a generic social networking website—enjoys 23 million unique visitors a month and is one of the 20 busiest websites in the world. MySpace’s parent company has recently launched a gaming website that incorporates social networking called grab.com. Other companies have released websites that incorporate social networking in verticals like photography, schools, professional networking, chatting, movies, and more.

Critical mass, eyeballs, the tipping point, whatever term you prefer, all of these sites are using social networking to build a base of registered users, barriers to entry by competition and high switching costs for users. By encouraging people to recruit their friends, you get critical mass. Of course, critical mass and expanding networks create barriers to entry by competition. And once the users have set-up their networks of friends, they are loath to switch, meaning they have high switching costs or user lock-in. It’s a marketeer’s dream scenario.

Let me give you an example: Netflix has recently added social networking where you can link to friends who are also members of Netflix. Then you can share ratings with your network. If you find that you and a friend have common tastes in movies, and that friend highly recommends a movie you haven’t seen, you feel confident that you too would like that movie. The net result is that it creates additional switching costs, should you wish to move your business to Blockbuster Online or Walmart Online, barriers to entry by these folks and, as a side benefit, it promotes older DVDs versus new releases, which are in short supply.

Social networking is a great way to get to know someone online. People fall in love with people online without ever meeting the other person, by sharing hopes, desires, insights, favorite movies, books, etc. Remember Kip and Lafonda in Napolean Dynamite? Social networking has similar benefits. People publish the things that make them unique, their likes, dislikes, groups, friends, and they start linking to people through friends. This fosters a sense of community and trust between people.

Users of Tribe.net opened their homes to a woman they had “met” through tribe as she traveled from Florida to Berkeley. There’s a saying that “the eyes are the window to a person’s soul”. Well the modern day equivalent might be “the web profile is the window to a person’s soul”…or maybe it’s the blog.

But alas, like all good things, social networking will eventually become as common as prior differentiators like discussion forums, shopping carts and yes, viral marketing. Early adopters will ride social networking to fame and fortune, but eventually it will be ubiquitous. At some point, your social network will become portable to each site you visit. There’s an XML standard called FOAF—for Friend Of A Friend—that enables portable social networks. I’m sure that the folks running passport and browser development are hard at work incorporating social network portability as well. Some day, you’ll visit a travel site you’ve never been to and it will tell you the names of several friends, or friends of friends, who have used their services and rated them highly.

But, we aren’t there yet, so make hay while the sun is shining and ride social networking to fame and fortune now!

Social Networking & Classified Ads

Just in case you’re taking the SAT exam soon, remember this: social networking is to classified ads like peanut butter is to chocolate. The two complement each other so well, that it is one of those fabled 1+1=3 combinations (don’t use that in the SATs). Basically, the two need each other.

Social networking, as brought to us by Friendster, has been looking for the killer application to give it a raison d'être. Social networking is a powerful engine for generating large numbers of users and for developing a sense of trust and community, but it needs an application to turn that burgeoning community into a fountain of value.

Having used a number of social networking websites, I register, create links to people, use it for a while and then realize that it is devoid of any lasting value. Websites must provide a compelling and dynamic environment, above and beyond developing a social network, in order to maintain the ongoing interest of its users. Social networking needs a killer application with a sustainable business model.

We’ve seen social networking companies try applications like dating, gaming, photo sharing and social networking for its own sake. Are classified ads the perfect match for social networking? Absolutely.

Classified ads benefit from the law of increasing returns or Metcalfe’s Law, which states that the value of a network increases according to the square of the number of users. The more visitors a classified ad website gets the more appealing it is to post ads. The more users who post ads, the more appealing the site is to users. The more appealing the site is to users, the more visitors it gets…and the cycle feeds upon itself. This is also known as the virtuous cycle and it is the engine behind every successful technology company from Microsoft to eBay.

Classified ad websites need something to turn the crank, or initiate the virtuous cycle, and this is what social networking provides. Without social networking to jump start the virtuous cycle, a new classified ad website would have to spend millions or tens of millions to generate the critical mass needed to develop sufficiently liquidity and value to users. With social networking it can achieve that liquidity on a shoestring…until, of course, social networking becomes a common component of most commercial websites (see my next post). A good example of the marriage of social networking and classified ads (Friendster meets Craigslist) is Tribe.net.

Meta-Search Sites & Classified Ads

The recent introduction of Oogle raises the question of the role search will play in the market for classified ads. Will consumers find classified ads via an intermediary like Oogle, or any of the various local search engines? Will these search engines add sufficient value that they themselves become destinations? These are very interesting questions.

The rise of local search engines was a tremendous boon for local classified ads sites. These search engines need local data in order to provide value to their users. So they created algorithms to sift through the web using geolocation technology, zip code, address, phone information and mapping to categorize their web indexes into local slices of information.

As a result, the search engines became voracious consumers of local information. This works very well if you are looking for a bike path in Davis California. The local search engine can filter our websites talking about Geena Davis and Gray Davis, and give you information about bike paths specifically in Davis, CA. But what if you are looking to buy a bike in Davis California? In order to satisfy this query, the search engines need to start digging into local classified ad websites.

This situation results in a symbiotic relationship between local search and the classified ad websites, which are rich stores of local information. The classified ad websites need the search engines to direct consumers to their sites; while the search engines need the classified ad websites to provide more local value to their users.

But this too raises issues. When a user finds a classified ad via a search engine, they go directly to the item for sale, they don’t navigate through the classified ad’s website, so the consumer isn’t seeing their banner ads on those missed pages. This undermines the classified ad website’s revenue potential from advertising.

But more importantly, what happens when the search engines, which already cache information from the websites they spider, start adding value above and beyond the classified ad sites themselves? Google’s news site has started adding more value than the actual sources of the articles, because they offer multiple articles about the same story, giving people the ability to get the story’s details from multiple perspectives.

Now Oogle and others are starting to do the same thing to classified ad websites. Modeled after shopping sites like NexTag, Oogle provides superior navigation, searching and filtering the ads than some of the classified ad websites themselves. In essence, Oogle is using the classified ad sites as a mere data source.

The difference between classified ads and news is that classified ads are bi-directional. Consumers not only read classified ads, they also need the ability to publish them. Once Oogle and other classified ad search sites reach critical mass, they will, no doubt, want to provide a classified ad publishing model that is optimized for their data structure and UI. This is the classic “embrace and extend” perfected by Microsoft in the software world.

Another example of enhanced search of classified ads is the combination of Google maps and Craigslist classified ads. Paul Rademacher’s hack of Google Maps enables users to drill down into Craigslist listings on a map. I think you’ll see more applications like this being built on top of classified ad systems, in effect using them as a data source. And as they become more of a data source behind cool looking applications, they lose their interface to the consumer. The interface is how websites develop a relationship with consumers. If classified ad websites are relegated to being a data source behind another company’s interface, they will lose advertising revenue and they will lose the relationship with their customers, both of which are extremely important to any web-based business.

In summary, search engines and classified ad websites currently enjoy a symbiotic relationship. The classified ad sites need the search engines to drive users to their websites. The local search engines need the rich local content of the classified ad websites in order to provide a a superior local search solution. But the ultimate relationship between websites and the consumer is the browser interface. If classified ad search engines succeed at owning the interface between the user and the classified ad website, then the website becomes little more than a data source. They become invisible to the user. And on the Internet, invisibility = “replaceability”.

On The Other Hand: There is a Place for Specialty Sites in Employment

There is a category in which specialty classified ad websites may remain a viable alternative, namely employment. Not general employment, but more of a headhunting style of employment. Let me explain.

I tend to segment the employment market into a few categories. First, I segment it according to employee skill level: low, medium and highly skilled. Then I classify it according to active and passive job seekers. Finally I address the job openings that are either secret or for very high-level executives. Companies will need to use different approaches to appeal to these various segments.

Low Skill or Manual Labor Employees:
Newspapers will continue to appeal to low-skill or manual jobs (e.g. ditch digging) for some time, because of the low correlation of Internet access and computer skills among this group of employees.

Medium and Highly Skilled Employees:
Young educated people (e.g. college graduates) are very computer and Internet savvy. This group of people will turn to the Internet as their primary tool in job searching. Skilled employees in mid-level and executive-level positions will also turn increasingly to the Internet to find their jobs.

More interesting is the active versus passive job seeker classification. This classification is more interesting because this is where the specialty employment websites can earn their place in the classified ad ecosystem of the future.

Active Job Seekers:
This group of people, whether employed or unemployed, is actively looking for another job. They will scour the job listings on classified ad websites, individual company job listing web pages and employment search engines. Since these job seekers are in the market, they will go where they can find the jobs that fit their profile (location, job-type, etc.). One might argue that websites that specialize on a particular location or category of jobs will standout in this scenario. But as big-box classified ad websites add best of breed functionality to address location, category, etc., this advantage goes away.

Passive Job Seekers:
Passive job seekers are those people who are happily employed and aren’t looking for a new job. However, if their dream job is presented to them, they can be pried away from their current employer. This is the bread and butter for executive search professionals (AKA headhunters, executive recruiters). An employer comes to the headhunter and says that they want someone who fits a certain mold and might come from a specific list of companies. These companies might be the hiring company’s competitors. The headhunter then approaches these individuals and tries to pry them away from their employer.

I believe that specialized websites like LinkedIn can participate in this realm if they are able to mine links to approach target employees, validate their fit and present them to the employer. Clearly, they need a way of emulating the headhunter’s intermediary role. If they can address this opportunity, they can carve out a profitable niche in the employment world.

Secretive & Highest-Level Executive Positions:
When HP was looking for CEO to replace Carly Fiorina, they didn’t list it in Craigslist. This is not the type of position you list anywhere. This is such a critical hire, that it required a team of individuals comprised of people inside the company in partnership with high-level executive recruiters.

The same thing hold true for secretive positions. If the employer has not yet informed the executive that they are looking for someone to replace them, they they need to keep the search on the down-low. A targeted solution like the LinkedIn approach outlined above could work, but to ensure discretion the employer will probably still use an executive recruiter.

In summary, I envision the bulk of the employment listings moving to large classified ad websites. There is a role for specialty sites to target passive job seekers through relationships a la LinkedIn. And the highest-level executives and secret or sensitive job opportunities will remain the realm of executive recruiters.

Consolidation of Classified Ad Websites

In the old days people shopped for food at specialty stores. They went to the vegetable stand, butcher, bakery and dairy (or it was dropped at their doorstep). But now everyone goes to a supermarket. They prefer the convenience of a single location.

We've seen similar consolidation in "big box" stores like Walmart, Costco, Home Depot, Frys, etc. It just makes sense. People want to go to one place to buy a variety of things in a certain class of products.

But what about the Internet? Well, Amazon continues to grow their breadth of products. In fact, their pull down menu of product groups even has the catchall "everything else". In the world of auctions, we've seen the same thing with eBay, which promotes itself as "The World's Online Marketplace".

One could make an argument that on the Internet, a specialty store is just a click away so why is a big box webstore more convenient than these specialty shops? Very simple, every new webstore requires that the user register for an account, enter their billing, shipping and credit card information. It's a pain.

Webstores also improve with age. The more you use them, the more they get to know your interests, your preferred shipping method, your list of friends (from gifts you send them), and much more. This further streamlines the user's experience.

There is also the issue of trust. If you have a good experience buying a book, you'll trust them to sell you a DVD and ship it in a timely manner. Once a webstore earns your trust, you want to buy other stuff from them as well.

The bottom line is consumers want to be able to get everything they want in one place.

So, what does this mean for classified ads? Well right now, you have a few consolidated websites like Craigslist that address everything. But the majority of the classified activity is still on the vertical sites like Monster, HotJobs, Cars.com, Autotrader, etc. Why is this?

Well it's simple, the vertical websites provide a much more professional experience that is tailored to their specific vertical. When an advertiser enters information on the vertical websites, they do so using a form that is customized for that vertical. This approach has two distinct benefits: (a) by prompting the user, they elicit more complete information than a simple textbox; (b) the resulting data is now structured and searchable by field.

Let me illustrate the issues described above. Look at some of the car listings on Craigslist. Do they include the transmission type, interior material and color, a description of the stereo system? Most of the listings in Craigslist are incomplete. Compare this to the typical listing in any of the vertical automotive websites. The verticals are far more complete.

In addition, the verticals are easily searchable. You can search under "model" for the term "corvette" and the search results are all corvette cars. Try searching for the term corvette on Craigslist and you'll get parts, services, cars. You'll get some guy selling a Mustang who claims it is "faster than a corvette". This is because the information in Craigslist isn't structured.

Craigslist is great for people with what I call a high time-to-money-ratio. But on the other hand Craigslist does provide a cool single integrated solution that fosters cross-pollination between the various categories.

There is really no technical reason a site cannot be built that combines the single integrated classified ad experience of a Craigslist with the structure and context of specialty sites. I don't want to make this a commercial, but this is exactly what drove me to start my company.

This isn't to say that ZiXXo will dominate the classified ads business. I fully expect the newspapers, Craigslist, eBay and others to follow this same model. Hell, it just makes logical sense, why wouldn't they? My real premise here is that the vertical classified ad websites have a limited future if they remain standalone solutions. Either someone will pull an "InterActive Corp." on these sites and roll them all up into a single solution, and Yahoo has already started down that path, or they will be squashed by a company that delivers a big box environment with a vertically specialized user experience.

Classified Ads Fee or Free?

The classified ad market has witnessed steady price erosion as a result of competitive pressure from online solutions. The question is whether this will continue until classified ads are universally free, as many Internet classified ad solutions are today, or will fees remain a part of the classified ad landscape forever?

If you want a short answer, it is that Classified Ads will be free. But the actual future may be much more nuanced than that. A user might post a free classified ad and then opt to upgrade, for a fee, to add enhancements, like video, onsite promotion, cross-site promotion, ID verification, and the like. Along these lines you may see the creation of classes of ads, with a basic coach class being free, while the business class and first class charge fees for add-on services.

Future usage might also dictate that fees are required to avoid the tragedy of the commons, where the free common area is abused so regularly that it becomes useless for everyone else. Imagine a single worldwide free classified ads section. Each MLM businessperson would post their “amazing business opportunity” a hundred times a day in an effort to snag customers. It’s not unlike email, we would need to install filters. One such filter is to charge a nominal fee.

Craigslist, the grandfather of free classified ads, is using fees as a filter to avoid bad actors in the New York apartment rental market. Because rental agents were abusing the rental section of Craigslist in New York, the company plans to start charging. An alternate approach, albeit one that generates less revenue, would be to establish rules of conduct and then charge an ID verification fee. If the individual violates the rules of conduct they are warned and ultimately banished from the site. Under this scenario, posting ads remains free, but there is a one-time membership fee.

Another alternative scenario involves consumers settling on a small number of market leading classified ad solutions, an oligopoly, where these businesses find themselves in the position of being able to charge small fees for posting ads, without undermining their respective businesses. This is a very real possibility and the actions of Craigslist in charging for job posts in more locations and charging for rental posts in New York City indicate that this is an obvious possibility.

So, generally speaking, the basic classified ad, AKA the coach class, will become free over time. It is simply too hard to put that genie back in the bottle. But we may see business class and first class posting packages, with the requisite bells and whistles, that involve fees. And, of course, these same bells and whistles could be sold a la carte as well.

In the near-term, the various competitors will race to one-up each other in delivering more functionality for free in order to build critical mass of users. But in the long-term the market will stabilize and we will see free basic ads with upgrades fees, category-specific fees and membership fees being part of the mix.

Classified Ads Will Move Online…It's Just a Matter of Time

Newspaper vs. Internet Classified Ads 

The newspaper classified ad above cost $50, the Internet ad cost nothing...enough said? There's more. Here are some more advantages:

* Searchable (some services offer field-based searching)

* Pictures

* Advertiser ratings/feedback (some services)

* Email forwarding maintains the advertiser's anonymity

* Users can save a list of favorite ads (some services)

* No paper, printing or delivery costs

These are some of the more common capabilities available through Internet classified ad services. Once you've used Internet classified ads, you will instantly see the advantages. Newspapers still have critical mass and momentum, and not all users have Internet connectivity, but the trend is clearly against the printed editions of newspapers. This is not to say that newspapers will go away, but more and more their classified ads will go online!

Website Developer Pleads for Donations to Save His 5-Year Old Nephew's Life

Rainier


We've all received the scam emails asking us to send money for tsunami orphans and kids dying of cancer. They focus on kids because a story about a child in need really evokes sympathy. So, when website designer Rod Paulino heard that his nephew back in the Philippines urgently needed a $60,000 liver transplant because of a rare congenital disease, he thought he would take a page out of the scammers' playbook, but do it right. Rod created a website at www.helprainier.com to raise funds for his nephew.

Rod's nephew, 5-year old Rainier Carlos, was born with Biliary Atresia, a rare liver disease. People with this disease cannot make enough platelets, so they bleed profusely. Rainier bleeds from their nose, mouth and ears. In order to prevent little Rainier from bleeding to death, he's had all of his teeth removed and replaced with silver teeth. After fighting this terrible disease for 5 years, he has reached the point where he needs a liver transplant to survive. But unlike those in the U.S. who have Medicare and other forms of insurance, Rainier lives in the Philippines and his family has no health insurance. They've spent everything they have on Rainier's treatments and have nothing left to pay for his life-saving surgery.

Fortunately for Rainier, his uncle Rod is an accomplished website designer in the U.S. When Rod heard the news about Rainier's situation, he sprung into action and built a website to raise money through donations at www.helprainier.com. The website includes articles about Rainier, links to information about Biliary Atresia, pictures of Rainier and his family and a simple way to donate any amount with a credit card. Rod also included his email address and phone number in case you have any questions.

Rainier needs $60,000 to pay for the transplant. So the site has a thermometer that tracks the donations up to the $60,000 goal. It also has a running list of every donor and the amount they donated. And every donor receives a letter thanking them for the specific amount donated, so they can write it off against their taxes. Please visit www.helprainier.com and donate. And if you feel it in your heart to do so, please tell your friends to do the same. Rainier's life now hangs on your generosity. Thank you.