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February 27 2012

Business models to monetize publishing in the digital era

At TOC, you're as likely to run into media professionals, entrepreneurs and innovators as you are publishers, booksellers and others working in traditional publishing. This, in turn, makes the underlying themes as varying and diverse as the attendees. This is the second in a series, taking a look at five themes that permeated interviews, sessions and/or keynotes at this year's show. The complete series will be posted here.


As traditional publishing is more and more disrupted in the digital era and deeper and deeper discounts in digital publishing become the norm, big questions about revenues — and where they'll come from — arise. Monetization was a major theme at this year's Tools of Change for Publishing conference. Discussions covered a variety of business models suited to monetize content, including subscription/access, freemium, and ad-based models, and models for moving the focus away from the books themselves to monetizing services, experiences and relationships with customers and readers.

In a keynote address, Andrew Savikas, CEO at Safari Books Online, talked about lessons learned at Safari and why digital subscriptions and access models matter for publishers.

"There are two reasons why subscriptions matter now for books more than they did 10 years ago when Safari first got started: First, we all know readers are much more comfortable with digital reading and other digital media. The percent of adults who own an ereader or a tablet doubled this Christmas — nearly 48% of adults in the U.S. own a tablet, an ereader, or both.

The second reason subscriptions matter more today has to with something Kevin Kelly talked about last year — the shift toward streams of information ... Streaming models are an important alternative and complement to purchase models, and consumers are growing more comfortable with them ... There's a growing product and service economy around access and membership models that reduce the up-front costs associated with things like buying a car; hiring an assistant; or buying enough music, movies or books to build a great library. In addition to reducing the up-front costs, subscription access models also offer on-demand convenience."

Savikas talked about what ebook subscription models look like and with what kinds of books such models work best. He said the model will work with more kinds of books than it's currently used and outlined three reasons publishers should consider the subscription/access model:

SafariSlide

He broke down the payment model and explained how — and why — it can be profitable. He said, "When a book is sold at retail, the publisher and the author get the same amount whether the book is read once, twice or 100 times. In a usage-based model, the publisher is paid only for what people actually read — but, they're paid every single time that page or book is read." Savikas said that at Safari, it's rare for readers to read books cover to cover, but pointed out that it's the aggregate behavior that matters and that brings in the revenue.

Savikas' presentation slides can be found here, and his entire keynote can be viewed in the following video:

Justo Hidalgo, co-founder of 24symbols, addressed the issue of monetization from a freemium model standpoint in the session "New Ways to Sell — Aggregated Content, Paywalls, Subscriptions, and More." He argued that just having free content or paid content alone is not enough — people aren't going to pay for content, he said, unless you have "extremely high-quality, differentiated content," as the Financial Times has, or you have "impressive brand recognition," as the New York Times has.

JustoSlide1

With a freemium content model, the reader gets something for free with the opportunity to get more content, services or a better experience for a price. Hidalgo shared an example from his company's model:

JustoSlide2

Hidalgo's presentation slides can be found here, and more of his thoughts on freemium, paywalls and subscription models can be found in this TOC interview.

The panel session "The Future of the Cookbook" addressed monetization specifically from a cookbook-genre standpoint, but the overall points could easily apply to other areas of publishing. Some monetization ideas that came out of the session included allowing advertising inside ebooks and finding sponsors or co-branding books, and also included subscription-based possibilities, as Andrew Savikas discussed in his keynote. Here are some of the major points the session addressed in the area of monetization:

CookbookSlide

The ideas of chunking — in this case, selling individual recipes — and bundling could be monetized in many genres of publishing. And as Savikas noted in his keynote, the subscription/access model can be applied broadly across publishing sectors.

The slides from "The Future of the Cookbook" session can be found here, and session panelist Adam Salomone, associate publisher at The Harvard Common Press, has further discussions on monetization, ad revenues and the importance of staying flexible in this TOC Podcast interview and in a post at Publisher's Weekly.

Literary entrepreneur Praveen Madan turned the monetization discussion away from content and books and toward partnerships, relationships and experiences in his session "Kepler's 2020: Building the Community Bookstore of the 21st Century." Madan, who is currently working with The Kepler's 2020 Project, said selling memberships isn't anything new but is a very important source of revenue today and an important way to engage a community around a local bookstore. He talked about diversifying the traditional revenue model, moving away from a focus on selling print books and toward a model based on selling memberships, services and experiences, such as charging small ticket prices for author events and educational classes. His monetization discussion revolved around four core principles:

KeplerSlide

Madan elaborated on the first principle and talked about separating the bookstore business into two business — one for-profit and one non-profit:

"More and more, what we find is all the excellent public education programming that bookstores do is really a non-profit activity, and it belongs in a non-profit organization. The community partnerships program — these 120 community partnerships Kepler's has, schools that they're raising money from — that's a money-losing activity. There are about six people on Kepler's staff who do that work all the time. I looked at that and thought, this is really a non-profit organization, but it's stuck inside a for-profit organization, and it's losing money. So, let's just take it out, call it a non-profit and run it separately and fund it separately."

More information on Madan's session can be found here, and a video with further details about Kepler's 2020 Project can be found here.


If you couldn't make it to TOC, or you missed a session you wanted to see, sign up for the TOC 2012 Complete Video Compilation and check out our archive of free keynotes and interviews.


Related:

February 16 2012

Commerce Weekly: Google defends its Wallet

Here are some of the news stories that caught my eye this week.

Google says its Wallet is still safer than your leather one

Google WalletGoogle's mobile commerce team spent the week doing damage control after the revelation of security flaws. Last week, it was widely reported that engineers at Zvelo, which provides web-categorization services, had found vulnerabilities in Google Wallet that allowed an app they had written to expose the PIN and tap prepaid funds in the wallet. Google's initial response was to advise users not to run Google Wallet on rooted phones, and be sure to have the screenlock on. But further work, as reported by Zvelo engineer Joshua Rubin, suggests that the hack requires root access, but not necessarily a pre-rooted phone: "While it is true that this PIN vulnerability requires root privileges to succeed, it does not require that the device be rooted previously." Rubin's post and a nice summary by Neil J. Rubenking at PCMag give a good picture of the vulnerability.

Security flaws like this feel inevitable to those accustomed to the ups and downs of web start-ups and the public bugs that accompany any release-early, release-often philosophy. They are, however, more alarming to those who work with banks, merchants, and anyone else who has experience moving money around. Bank Technology News captured the split between the two attitudes and cited Aaron McPherson, a practice director with IDC Financial Insights saying the recent security problem demonstrates "an almost cavalier attitude by non-payments companies toward protecting consumer security."

Google wasn't cowed by the charges, responding with a calm coolness and an insistence that, despite any flaws in its payments system, it's still better than what everyone else is doing:

"Mobile payments are going to become more common in the coming years and we will learn much more as we continue to develop Google Wallet. In the meantime, you can be confident that the digital wallet you carry provides defenses that plastic and leather simply don't."

X.commerce harnesses the technologies of eBay, PayPal and Magento to create the first end-to-end multi-channel commerce technology platform. Our vision is to enable merchants of every size, service providers and developers to thrive in a marketplace where in-store, online, mobile and social selling are all mission critical to business success. Learn more at x.com.

Buck enters the one-click mobile payment fray

Buck (previously Billing Revolution) announced a one-click credit card checkout for goods this week. Entering your credit card information once in the app allows you to buy with a single click at participating online merchants — providing you want to buy from Glamour magazine, Papaya Mobile's social gaming network, or any of the other (relatively few) merchants now offering Buck.

If, on the other hand, you're at your local Starbucks, you'll want to pay with one click by unlocking your Starbucks mobile payment option, generating a 2D barcode, and holding it up for the cashier to scan. But suppose you were feeling too groovy for Starbucks this morning and you stopped at your local independent coffee house? Then you might want to pay with a single click with Square's Card Case, providing your indie coffee guy has signed up for that. At Home Depot, you'll want to use PayPal, at Macy's you can tap-and-pay with Google Wallet, and you might need to pay with American Express to get the Foursquare deal that your local eatery is offering.

Mobile payment is exhausting in its current, fragmented state, but it will be interesting to see which systems gain critical mass. Recent web history offers some clues. It was not too long ago that a half dozen search engines, including AltaVista, Yahoo and AskJeeves competed for your searches until one company offered a simpler way with more effective results. And five years ago there were a handful of social network sites competing for our profiles, including MySpace, Orkut, and Friendster, until Facebook rose on a platform of sharing photos, social games, and an easy interface. So which mobile-payments option will find the right combination of security, usability and adoption first?

Adele scorns freemium model

Freemium may be the up-and-coming dominant model in mobile apps — particularly in games — but not everyone is in love with the concept. Adele, who just took home six Grammy awards, declined Spotify's request to stream her award-winning album "21" on its service. According to Austin Carr on Fast Company, the reason is that Spotify offers two tiers of service: a free ad-supported service and a premium one without ads. Adele was willing to let "21" stream to Spotify's paying customers, but not to those riding for free. Spotify, which doesn't offer different libraries for its two tiers, couldn't accommodate the request. So while you could buy "21" on iTunes or hear it on Rhapsody (where everyone pays to stream), you can't hear it on Spotify. But, as Carr points out, with a 20% conversion rate of free subscribers to paying ones, who can second-guess Spotify?

Got news?

News tips and suggestions are always welcome, so please send them along.


If you're interested in learning more about the commerce space, check out DevZone on x.com, a collaboration between O'Reilly and X.commerce.


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February 10 2012

O'Reilly Radar Show 2/10/12: The 5 trends that will shape the data world

Below you'll find the script and associated links from the February 10, 2012 episode of O'Reilly Radar. An archive of past shows is available through O'Reilly Media's YouTube channel and you can subscribe to episodes of O'Reilly Radar via iTunes.


Introduction

There are five major trends that will shape the data world in the months to come. Strata Conference chair Edd Dumbill reveals them in this episode of O'Reilly Radar. [Starts 12 seconds in.]

Also in this episode: We revisit a conversation with Wired's Kevin Kelly in which he discusses freemium models and why digital rights management will likely persist in some form or another. [Interview begins at 11:04.]

Radar posts of note

[This segment begins at the 10:06 mark.]

For now, legislators have backed off of the Stop Online Piracy Act and the Protect IP Act, but the friction between media companies and online piracy persists. In his piece "SOPA and PIPA are bad industrial policy," Tim O'Reilly explains why these efforts — and those sure to emerge down the road — hold back innovative business models that grow the overall market.

It's the hot trend in software right now, but what does big data mean, and how can you exploit it? In "What is big data?," Strata chair Edd Dumbill presents an introduction and orientation to the big data landscape.

Finally, books, publishing processes and readers have all made the jump to digital, and that's creating considerable opportunities for publishing startups. Justo Hidalgo explores the digital shift in his piece, "Three reasons why we're in a golden age of publishing entrepreneurship."

As always, links to these stories and other resources mentioned during this episode are available at radar.oreilly.com/show.

Radar video spotlight

At the 2011 Tools of Change for Publishing conference I had a chance to interview Wired's Kevin Kelly about two topics that continue to play big roles in the content world: the freemium model and digital rights management.

As you'll see in the following video, Kelly has a unique, long-view perspective on both of these issues.

[Interview begins at 11:04.]

Closing

Just a reminder that you can always catch episodes of O'Reilly Radar at youtube.com/oreillymedia and subscribe to episodes through iTunes.

All of the links and resources mentioned during this episode are posted at radar.oreilly.com/show.

That's all we have for this episode. Thanks for joining us and we'll see you again soon.

January 19 2012

Commerce Weekly: Slow in-app purchasers are worth the wait

Here are a few of the commerce-related items that caught my eye this week.

Report: Don't rush in-app purchases

Mighty Eagle from Angry BirdsIt's no surprise that app developers are betting on in-app purchases to generate revenue in the year ahead. Last summer, Flurry Analytics was already reporting that in-app purchases accounted for 65% of revenue in Apple's App Store and last week IHS Screen Digest said it expects to see the same trend across all platforms by 2015.

Now, developers want to know which users are most likely to make those purchases and who among them are most valuable. Localytics has dug a bit deeper to try to identify successful patterns in the freemium formula, and its findings are interesting and maybe slightly counterintuitive. Long-term engagement is more valuable over time, and it looks like those who engage too quickly are also less likely to stick around. In other words, it's better to let the hook sink in a bit. Localytics found that users who purchased quickly were less likely to stick with the app: of users who made a purchase on their first use of the app, only 16% go on to engage with the app 10 or more times — significantly lower than the 26% average. On average, users had the app at least 12 days before making a purchase, and 44% of all users who made an in-app purchase did so after interacting with the app at least 10 times.

When I think about mobile games, 12 days feels about right. Remember your second day on "Cut the Rope"? Still playing? It's fascinating to compare this to the durability of more complex games: "World of Warcraft" holds players for years, and some of us are known to every so often dust off games that are years older. (I'm looking at you, "Call of Duty II.")

X.commerce harnesses the technologies of eBay, PayPal and Magento to create the first end-to-end multi-channel commerce technology platform. Our vision is to enable merchants of every size, service providers and developers to thrive in a marketplace where in-store, online, mobile and social selling are all mission critical to business success. Learn more at x.com.

Bankers show interest in Bitcoin

BitcoinBitcoin is becoming increasingly mainstream — at least awareness of it, if not actual use. In addition to last fall's New Yorker profile that attempted to identify the real identity of Bitcoin creator Satoshi Nakamoto, a recent episode of the CBS drama "The Good Wife" focused on a court case in which the U.S. government was suing to get one of the attorneys to give up the identity of Bitcoin's (fictitious) creator.

Bankers being who they are, all this attention has led them to wonder (as they do with all things), "How can we profit from this?" A recent article in American Banker attempts to help them through their thinking. After explaining that the digital currency "was conceived as a rebellion against the banking system," it then goes on to say "it may also present business opportunities for banks that can get comfortable with the risks." The article does a nice job of laying out the pros (offering exchange services, accepting deposits) and cons (limited growth of the currency by design, slow uptake so far among merchants and consumers).

PayPal expands Home Depot trial

PayPal is expanding its point-of-sale trial at Home Depot. Just a few weeks after announcing a trial at five stores near PayPal's home base in Silicon Valley, the experiment will scale out to 51 Home Depot stores: one in Atlanta, six in Omaha, and 44 in the San Francisco Bay Area. All are expected to be online by March.

Customers can tap their PayPal accounts for all their DIY needs in a couple ways: swipe a PayPal card (available online) or, if you don't have one, you can get a pin to accompany your mobile number and use that to draw funds from whatever source your PayPal account is linked to.

Anuj Nayar, PayPal's chief spokesperson, told American Banker that PayPal needed to ramp up quickly to build momentum — and to meet the company's predicted $7 billion in mobile transactions this year. Early in 2011, PayPal predicted it would move $1.5 billion through its mobile channels. It didn't have any trouble beating that number, eventually overseeing nearly $4 billion in transactions by the end of 2011.

Got news?

News tips and suggestions are always welcome, so please send them along.


If you're interested in learning more about the commerce space, check out DevZone on x.com, a collaboration between O'Reilly and X.commerce.


Related:

September 14 2011

Promoting free downloads to increase revenue

This post is part of the TOC podcast series, which we'll be featuring here on Radar in the coming months.


In a recent interview with O'Reilly publisher Joe Wikert, Nelson Saba, CEO of Immersion Digital, talked about his company's Glo Bible app. The app has a free version and a $49.99 upgrade to a premium version. Saba said he was pleasantly surprised at the upgrade conversion success, saying that they experience a 7 to 13% conversion rate, and that the freemium model isn't as much of a struggle as publishers might think.

When you get very good conversion ratios, all of a sudden you find yourself in the business of promoting free downloads, which is much easier than selling a product ... Conversion ratios are a function of platform, country, price point — for each country in a certain platform, by adjusting the price you can get good conversion ratios ... you also should have multiple in-app upgrades because different upgrades will resonate more with different platforms. Once you hit a conversion ratio that you like, you can bet that that's going to stay steady despite the volume of downloads ... but it varies a lot from platform to platform. [Discussed at the 6:10 mark.]

For more on the success of the Glo Bible app and how modern technology can be used to enhance even timeless content, you can view the interview below.


TOC Frankfurt 2011 — Being held on Tuesday, Oct. 11, 2011, TOC Frankfurt will feature a full day of cutting-edge keynotes and panel discussions by key figures in the worlds of publishing and technology.



Save 100€ off the regular admission price with code TOC2011OR


Related:


  • What ebook designers can learn from Bible-reading software
  • The iPad's ripple effect
  • What publishing can learn from tech startups

  • August 18 2011

    Leaky paywalls and ads: What publishers can learn from the New York Times

    This post originally appeared on Joe Wikert's Publishing 2020 Blog ("Porous Paywalls and Book Publishing"). It's republished with permission.


    Felix Salmon recently wrote an article talking about how the New York Times paywall is working because it's porous. He contrasts that to other paywalled sites that haven't enjoyed the same success as the Times. As I read Salmon's article I was thinking less about porous vs. rigid paywalls and more about DRM'd vs. DRM-free books.

    There are definitely some similarities here. At O'Reilly we believe in a DRM-free world because we trust our customers and we believe they value our content enough to pay for it rather than steal it. It would be naive of us to think this philosophy totally eliminates the illegal sharing of content though. We just happen to believe those situations shouldn't cause you to penalize all your customers. Shoplifting happens from time to time at your local grocery store but that doesn't mean the store manager should put everything under lock and key.

    But it was only when I read Fred Wilson's follow-up post to Salmon's article that I realized what other connection this has to book publishing: advertising, sponsorship and other revenue streams. As Fred points out, the Times doesn't necessarily have to charge for each online page view since they run ads on every page served.

    I'm not suggesting we can suddenly give away book content and make the exact same amount of revenue with advertisements. But what I am saying is that advertising and its close cousin, sponsorship (e.g., "This book brought to you in part by..."), can and will play a role in the future of book publishing. Every publisher won't necessarily experiment with that model, but many will.

    TOC Frankfurt 2011 — Being held on Tuesday, Oct. 11, 2011, TOC Frankfurt will feature a full day of cutting-edge keynotes and panel discussions by key figures in the worlds of publishing and technology.

    Save 100€ off the regular admission price with code TOC2011OR

    24symbols is a great example of how this can work. The company offers both freemium (free, ad-supported content accessible only while online) and premium (for-pay, without ads and can be read offline) models. The customer decides which option they prefer. That last point is critical. 24symbols isn't just serving up free content and hoping that alone will somehow create a successful business model. They're also offering an ad-free offline option that some number of users will upgrade to. They key is to make the premium service feature set compelling enough that customers want to pay for the it.

    Kindle with special offersWill 24symbols be successful? It's too early to say (although I'm a huge fan of Justo Hidalgo and what he's doing with 24symbols; if you missed it, check out his presentation at our TOC Sneak Peek from earlier this year). But I'm convinced the future will bring more advertising-based book publishing experiments, not fewer. And as I've said before, I can see a future where Amazon offers two versions of many (if not all) Kindle titles: an ad-free version with pricing similar to today's models and a second one with ads but at a lower price. Amazon has taken the first step with the hardware itself by offering the lower-priced "Kindle with Special Offers." As Jeff Bezos mentioned in the seventh paragraph of Amazon's most recent earnings announcement, "Kindle 3G with Special Offers has quickly become our bestselling Kindle."

    Customers are already voting with their wallets and overwhelmingly choosing the advertising-subsidized version of the device itself. These results will undoubtedly encourage Amazon to start experimenting with ad-subsidized content as well.

    Services like 24symbols and the Kindle platform are one thing, but the next logical step after that is for publishers to expose more of their content to the major search engines. How long will it be before some of the current New York Times bestsellers are fully and freely readable online with ads? If the stories are good enough and the premium alternative offers a significantly better reading experience (e.g., no ads, can be read offline, includes other features/services, etc.), some number of customers will upgrade, just like they're doing with Times subscriptions.

    Associated photo on home and category pages: Black Mountains, Wales: rock wall by markhillary, on Flickr

    Related:

    October 14 2010

    Four short links: 14 October 2010

    1. Google Creates New Inflation Measure (The Guardian) -- The Google Price Index will be based on the cost of goods sold online and could use real-time search data to forecast official figures. Clever use of unique data, but can the GPI findings be reproduced by another agency? I do like the idea of moving national statistical measures into real-time.
    2. How To Break The Trust of Your Customers In Just One Day -- some horrifying revelations about how freemium worked for Chargify and their customers: Over the past year, we discovered that the customer that never paid had the highest support load. [...] Everyone’s always talking about freemium, but very few people actually use it, and we discovered this in looking at our customers for the past year. The reality was that less than 0.4% of customers had any sizeable number of free customers on their accounts. (via Hacker News)
    3. Annotated Backbone.js -- very readable literate programming. (via Simon Willison)
    4. Carrot2 -- open source results clustering engine.

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