web | Paul Wallbank - Communications Professional

Who will build the next Barnes and Noble?

The rise and fall of US bookseller Barnes & Noble shows describes the changes in our society and the urge to join online and real world communities.

As US bookseller Barnes and Noble shrinks its store network, Mark Athitakis has a tribute to the once ubiquitous chain in The New Republic.

Barnes and Noble was never popular among US independent booksellers because of the perception, probably true, that the chain drove locally owned stores out of business.

What it offered though was a safe, comfortable place for booklovers to gather in suburban shopping malls. As Mark points out, it created a community.

Its stores were designed to keep people parked for a while, for children’s story time, for coffee klatches, for sitting around and browsing. That was a business decision—more time spent in the store, more money spent when you left it—but it had a cultural effect. It brought literary culture to pockets of the country that lacked them.

In recent years that community moved to coffee shops, in the United States B&N’s role was taken by Starbucks, at the same time our reading habits changed and the business of selling books and magazines became tougher.

Now that community is changing again, as the online societies like blogs, Facebook and Twitter become important, the coffee shops have responded with free wi-fi which is a perfect example of how the online and offline world come together.

That need to create communities, either physically or online, is a driving human urge.

Online that role is being catered to with social media platforms and sites like food, mommy or tech blogs where like minded people can gather.

Down at the mall, Barnes and Noble catered for that need in the 1980s and Starbucks in the 1990s. What will follow them may be the next big success in the retail or hospitality industry.

Image courtesy of Brenda76 on SXC

Can Yahoo! disrupt the disruptors?

Business partnerships require bringing something of value to the relationship, Yahoo first has to define its strengths before searching for partners.

Yahoo! CEO Marissa Mayer packed out the room for her interview at the World Economic Forum this week where she spoke about some of the challenges her and the company face.

One of the areas she sees for Yahoo! is in collaborating with other tech industry giants.

Mayer also is making a point of collaborating with companies such as Apple Inc., Google and Facebook, instead of competing.

“It ultimately means there’s really an opportunity for strong partnerships,” she said.

The problem for Yahoo! is that it doesn’t have a lot to offer companies like Apple, Google or Facebook – they are steaming along on their own and have moved ahead of the areas which Yahoo! dominated a decade ago.

Generally in the tech industry partnerships are more the result of the sector’s also-ran coming together in the hope that their combined might will overcome the leader’s advantages.

It’s the same philosophy that thinks tying the third and fourth placed runners legs together will make them faster than the winner.

A good example of this is Microsoft’s tie up with Nokia over the Windows Phone. If anything, the net effect has put Windows Phone and Nokia even further behind Apple and Google in the handset market.

Even when two tech companies have united to exploit their individual strengths, the results usually end in tears. Probably the best example of this was the IBM and Microsoft joint venture to develop the OS/2 operating system which eventually sank under IBM’s bureaucrat incompetence and Microsoft’s disingenuous management.

Those two examples show how partnerships only work when each party has something valuable to contribute and all sides are committed to the venture.

Marissa Mayer’s task is to find Yahoo!’s strengths and build on them, then she’ll be in a position to enter partnerships on an equal basis.

Whether its worth entering into partnerships with the big players though is another question. It may well be that Yahoo! has more to offer smaller businesses and disruptive startups.

Entering into a desperate alliance with Apple or Facebook could possibly be the worst thing Yahoo! could do, the company is no longer a leader and now needs to be a challenger or a disruptor.

Facebook’s locking competitors out of data feeds is an example of how complacent the big four internet giants are becoming, Yahoo! are in the position to upset that comfortable club.

The value of partnerships is that we all have weaknesses and strengths, a properly thought out venture builds on the various parties’ strengths and covers their weak spots. Right now Yahoo! has more weaknesses than strengths.

PayPal struggles with the Soviet customer service model

Just as Silicon Valley’s new businesses has challenged a whole range of incumbent operators, they too are at risk from upstarts who value their customers. This is something PayPal’s management has to face.

CNN reports that internet payment giant PayPal is looking at an “aggressive changes” to its fraud detection systems which see thousands of customers accounts frozen every year.

PayPal’s announcement follows last year’s promise by CEO David Marcus to institute a “culture change” at the company,

Our intention has always been to protect our customers. Not to mess around with our merchants.
I want to share two things with all of you:

#1 — there’s a massive culture change happening at PayPal right now. If we suck at something, we now face it, and we do something about it.

#2 — you have my commitment to make this company GREAT again. We’re reinventing how we work, our products, our platforms, our APIs, and our policies. This WILL change, and we won’t rest until you all see it. The first installments are due very soon. So stay tuned…

Screwing around merchants and buyers has become synonymous with PayPal and their parent company eBay who together are the poster children for the Silicon Valley Soviet Customer Service Model.

Reader comments to the CNN article cited at the beginning of this post give a taste of just how bad the problem is at PayPal.

Once your business attracts the attention of PayPal’s algorithms, you’re locked into a Kafkaesque maze of dead ends and arbitrary, made up rules.

To be fair to PayPal and eBay this problem isn’t just theirs, it’s shared by Google, Amazon and almost every major online company. Their view of customer service is to shoot first and ask no questions, they certainly won’t answer anything from their victim beyond a trite passive-aggressive corporate statement.

Part of the current Silicon Valley mania around web and app based services is that, along with providing free content, users will provide support for each other and that customer service is an unnecessary overhead which should be kept to a minimum.

In this respect, many of these new businesses are little different from the legacy airlines, telcos and declining department stores who have spent the last thirty years stripping away customer service with the result of locking them into shrinking commodity markets.

That failure to value customer service is the biggest weakness for companies like eBay, Amazon and Google. The very forces that favour them, the reduction of the entry barriers, also makes it easier for more customer orientated businesses to grab market share.

Can media salespeople think digital?

The future of journalism is bleak if sales teams can’t figure out how to sell ads on news sites.

The future of journalism is bleak if sales teams can’t figure out how to sell ads on news sites.

Eighteen months ago News Limited, the Australian print arm of News Corporation, put out the first indications that content was going behind a paywall.

This was always going to be controversial so a softening up process was put in place including the then head of News Digital Media, Richard Freudenstein, speaking at various conferences.

Inviting bloggers to a briefing on News Limited’s online future was another strategy which, predictably, resulted in varying views on the prospects from attendees like Laurel Papworth and Ross Dawson.

Another part of the process was Freudenstein penning the odd article for The Australian describing the rationale behind the paywall.

“And we will have completely solved how to sell advertising across print, tablet and digital.” Freudenstein said at both the end of his Australian article and a later Q&A at the Mumbrella 360 Conference.

Sadly this appears not to have been the case, a year later News was struggling with digital revenues.

This is not just a problem for News Limited or Australian publications, The Economist looked at the struggles of print media in 2012 and cited a graph from Reflections Of A Newsosaur showing how newspapers’ digital revenues have been flat lining for nearly a decade while their print revenues collapse.

One of the reasons for traditional media’s stagnation is their salespeople have been bought up selling newspaper display ads, are locked into antiquated KPI’s and have commission structures that reward print over digital.

This was bought home to me a few weeks after News Limited started its charm offensive at a presentation by Cumberland Press, News Limited’s suburban division, where the salesman told a room of small business owners about the range of print advertising products available in the local newspapers.

Not once was True Local, News Limited’s Google Places competitor, mentioned. When I asked about it, the salesman waved the idea away and said he’d throw in an annual sub if I took out a week’s worth of quarter page display ads in the Manly Daily.

Many of the small business owners in the room thought that was a good deal, which shows its not just newspaper managers who are having a digital steamroller running over their revenues – but that’s a post for another time.

As The Economist and Newsosuar shows, News Limited’s experience in selling digital advertising is the norm and it’s genuinely shocking that newspapers’ digital revenues have flatlined while the revenues of Google and other online advertisers soar.

When News Limited announced its new strategy they also announced a community site to discuss the issues of digital news gathering and online advertising. They called it The Future of Journalism.

Just over a year later The Future of Journalism site looks like this;

That’s a dismal view of the future of journalism but it’s pretty accurate if somebody can’t figure out how to sell ads on news sites and break newspapers out of their online advertising stagnation.

Pennies for Apps – how Apple and Google dominate online income

Apple and Google dominate our online revenues while the creators of content fight over pennies. Is this a passing phase?

“App Store tops 40 billion downloads” trumpets Apple in a media release curiously timed to coincide with the opening of the Consumer Electronics Show.

While impressive, those figures aren’t great for developers. As writer Ed Bott points out they are getting 17.5 cents per download.

Making things worse, that return is trending downwards. Tech site Giga Om put the return at 20 cents a year earlier.

Giga Om also points out App Store returns are skewed towards the big successful game apps, meaning the majority of app developers are scratching for pennies.

This phenomenon is also happening with online advertising as Google Adsense partners find their income dwindling for pay for click adverts.

On top of declining revenues, there’s the cut that Google and Apple take. In the App Store, Apple’s take is 30% while Google pocket over 50% of Adsense revenue.

Working for pennies has become the norm for for creators like musicians, writers and app developers in the digital economy. The long tail is fine, but it barely pays the bills for all but a few outliers. Everyone else needs a day job.

In some respects this isn’t new – writers, poets, musicians and painters have generally starved in their garrets throughout history – but the Twentieth Century model of intellectual property, record labels and broadcast empires offered at least a decent living to many.

Right now the 21st Century model seems to be that creators can go back to starving, while the big four online conglomerates make the profits previously shared around by the movie studios, record labels and book publishers.

Maybe though the rivers of gold which are making Apple and Google’s managers rich may turn out to be just as vulnerable as those of the newspapers they’ve displaced.

It may well be that the current dominance of the App Store and Adsense are a transition effect as we move to other business models. It’s difficult to see right now, but we can’t rule it out.

On being evil

Microsoft learn what its like to be the weakest kid on the block while Google consider a future of being evil.

“Don’t be evil” are the opening words of Google’s corporate code.

When it was framed in the late 1990s there was one company in particular everyone in the tech industry thought of when the word ‘evil’ was being used.

At the time Microsoft defined evil in the technology industry. The main reason was their crushing of real or potential competitors like Netscape, Java or the troubled IBM joint venture of OS/2.

Topping everything though was Microsoft’s tactic of fake error messages designed to scare customers away from the competing DR-DOS system in the early 1990s.

So it’s rather delicious that Microsoft seems to be getting a taste of its own medicine twenty years later as Google Maps returns an error message on Windows Phones.

This is particularly galling for Microsoft as Windows Phone is essential for the company’s resurgence and, as Apple have learned, maps are a critical feature for smart phone users.

It’s too early to accuse Google of having become evil as Microsoft did during their period of dominance as Tim Wu discusses in Why Does Everyone Think Google Beat The FTC but the search giant is flexing its muscles on many fronts.

For Microsoft, they are learning what life’s like when you’re not the toughest, meanest kid on the block.

Karma can be a real bitch.

Customer lock in as a business asset

Barnes and Noble’s problems show how high the stakes are when locking customers into an online business.

US booksellers Barnes and Noble has been struggling for years and things aren’t getting better reports the New York Times.

An important part of the New York Times story is the quote from a Forrester industry analyst,

“The problem is not whether or not the Nook is good,” said James L. McQuivey, a media analyst for Forrester Research. “What matters is whether you are locked into a Kindle library or an iTunes library or a Nook library. In the end, who holds the content that you value?”

Locking in customers lies at the heart of the Kindle and iTunes business model. Once users have a substantial investment in their book or music collections on one platform it’s unlikely they will go elsewhere as the costs, and risks, of moving are too great.

This doesn’t always end well for the customer and it gives online businesses great power which they often misuse.

Every online business tries to lock their customers into their ecosystem – Google, Amazon, Facebook and Apple are the most successful but every single social media and cloud service tries to make it hard for users take their business elsewhere.

In some respects this is no different to the phone company or bank which have historically tried to lock customers into their services, but the online social media, cloud computing and e-commerce platforms make a much more ambitious grab for their users’ data and assets like music and book collections.

The New York Times article illustrates just how critical that user lock in is to the success of online businesses. The question for us as consumers is how much we want to be locked inside the web’s walled gardens.

Yelp’s problem with activists

Yelp and other online review sites have a problem when the Internet mob gets stirred up.

It’s been a bad couple of years for James Knight, a dentist in Fort Dodge, Iowa.

First his wife found some text messages he’d exchanged with Melissa, his attractive assistant who’d been with his practice for ten years.

Then James’ spouse demands Melissa is fired.

James then has what was no doubt a difficult conversation with Melissa’s husband explaining why she’s been sacked.

Then Melissa sues him for discrimination. He wins the case.

Melissa appeals to the state’s Supreme Court and loses there as well however the case now has national attention.

This attracts the ire of the Internet mob, who start posting bad reviews about James on Yelp despite most of them not even living in Fort Dodge, let alone using his service.

For Yelp, the rabble descending on James Knight’s review page is as much their problem as it is his.

Yelp is one of the leading customer review sites which are changing the way small business operates and getting “smashed on Yelp” isn’t good for one’s reputation.

Recently a builder also attracted the ire of the online lynch mob when he threatened to sue a customer over a poor Yelp review.

As consequence, his Yelp page was overwhelmed with negative reviews by people who’d never used his business. The service had to delete 65 of those reviews which clearly had nothing to do with the quality of service the builder provided.

The problem for Yelp, an other online review sites like Tripadvisor, is that for their sites to be trusted the reviews have to be reasonably accurate – self righteous internet mob skewing results is going to damage the service’s credibility as much as the targeted businesses.

What this means for Yelp is that the low cost online business model doesn’t work, for the site to be relevant and credible there has to be administrators checking reviews and dealing with these situations.

There’s also a lesson for all of us using the web – mindlessly joining online lynch mobs creates more damage than it fixes.

Picking on a mid-Western dentist because he appears to be a pussy whipped jerk isn’t really solving humanity’s problems – we can all find causes that are a better use of our time.

Transferring risk to the customer

The business model of many web startups transfers unacceptable risks to their users.

AirBnB is one of the poster children for the “collaborative consumption” model of internet businesses where people can put their spare resources, in this case rooms, out into the marketplace.

Like most web based businesses though the customer service is poor and the proprietors try to push responsibility for the platform’s use back onto the site’s users.

A good example of this is an article this week in the New York Times where AirBnB hosts risk fines and eviction for breaching their leases or local accommodation laws.

When Nigel Warren rented out his New York apartment while he was out of town, he returned to find he was facing eviction and up to $40,000 in fines. Fortunately he avoided both but AirBnB did little to help him except to point him in the direction of the terms and conditions which required him to obey all local laws.

The New York Times asked AirBnB for comment and received corporate platitudes about how their service helps struggling home owners but no real response to the risks of falling foul to local government, landlords, building owners or insurance problems by sub-letting their residences.

Failing the customer service test is not just AirBnB’s problem, Vlad Gurovich was scammed by a buyer on eBay and now he finds PayPal is chasing him for outstanding money.

This is a pretty typical problem for PayPal and eBay customers – as Vlad has found, the various seller protections often prove to be useless when dispute resolution favours scammersand PayPal’s philosophy of shutting down accounts unilaterally and without appeal exposes sellers to substantial risks.

Interestingly, PayPal’s president David Marcus claimed earlier this year that he was trying to change this culture within the company. It seems that’s not going well.

PayPal, eBay and AirBnB are alone in this of Soviet customer support model – Amazon, Google and most web2.0 businesses have this culture.

In many ways it’s understandable as dealing with customers is hard. In the view of the modern business world, cutting deals is glamorous while looking after customers is a grubby, low level task that should be outsourced whenever possible.

Pushing the risks onto users also makes sense from a business perspective, that makes the billion dollar valuations of these services look even better.

For the founders of these services, none of this is a problem. By the time the true costs and risks are understood, the founders have made their exit and the greater fools who bought the businesses have to deal with the mess.

While the greater fools can afford to carry the costs, the real concern is for users who may found themselves out of money and out of a place to live.

That’s why the founders of these businesses need to be called to account for their ethical lapses.

702 Sydney mornings – watching TV on the net

How is the Internet changing the way we watch TV?

On 702Sydney Mornings this month with Linda Mottram, we’re looking at at how the Internet is changing the way we watch TV.

How much do you use ABC’s iView? Okay it’s not every program for forever but it’s a godsend when you’re time poor – and who isn’t these days. So you can catch up with the programs on ABC TV you’ve missed or you knew you couldn’t watch it live.

We’d love to hear from you if you’re now watching TV programs – ANY TV programs – primarily on the Net, through your internet browser rather than sitting in front of a telly.

Aside from catch-up services like iView, ABC is already providing programs LIVE. If you log on to ABC News 24 website, you’ll be watching a live TV news straight away. And then of course there’re a number of avenues for pay–per-view services.”

Some of the things we’ll be discussing are;

Differences between different services and how they work and how much they cost.
Free-to-air or Pay-per-view. Just how much is available for free and how much isn’t?
Limitations of catch-up services. How long are programs kept, how comprehensive is their collection?
Limitations caused by copyright laws. Some overseas programs are either very difficult to view or impossible to view online. Will the technology advance mean these limitations will be irrelevant soon if not already?
Nobody wants to squint at smartphones to watch nature documentaries do they? Is the quality really up to scratch? Alternatively, what do YOU as a computer/smartphone/tablet user need to know that your viewing experience is as enjoyable as possible?
While catchup services are becoming more popular than ever, take up of internet based TV (IPTV) remains very low. Will this ever change? What will cause the change?
If the catchup services’ popularity continues to grow – and there’s nothing to suggest it’ll slow down – wouldn’t commercial television need to re-examine their advertising based business models seriously?
Main takeups of TV-watching on the net will be younger audiences, but it is quite often more mature and older audience who complain about the permeating advertising. What will it take older audience to flee further and significantly to Net-TV?

Some of the material we’ll be referring to in the program is the ACMA report on Online Video Content Services in Australia and Screen Australia’s What to Watch in an Online World.

Join us on 702 Sydney from shortly after 9.30am. We’ll probably take some calls on 1300 222 702 and we’d like to hear your views, comments or questions.

Disrupting the education ripoff

Old established ripoffs are being disrupted as technology and the economy changes.

British Columbia’s government has announced they are going to make most undergraduate textbooks free online or printed at low cost as part of their BC Campus program.

One of the first lessons for university students is that they are going to be robbed at the campus bookshop – text books are one of the greatest rorts on the planet.

This scam takes several forms with faculties stipulating the latest editions as course material through to individual professors having a nice little earner in demanding their, often poorly written and out-of-date, textbooks being essential reading for any unfortunate student taking their classes.

Naturally all of these books are sold at eye wateringly high prices far in excess of what equivalent texts are selling for outside the university bookshop.

Given all of this it’s no coincidence that the publishers who specialise in academic texts have been the least affected by the online models that have undermined the business models of the mainstream book sellers.

Over the years there’s been a range of business ideas to setup exchanges to circumvent this legally sanctioned extortion racket and most have failed as the universities and faculty members have protected their cash cows with various tricks to prevent students from buying reasonably priced textbooks.

That British Columbia’s government now sees that this is a barrier for cash strapped and debt ridden students is an encouraging sign and one that recognises the 1990s model of treating students – particularly international students – as easy money is over.

For the Canadian and Australian education sectors which had come to depend upon an expensive “bums on seat” model of financing their faculties, the waves of change and competition is now threatening them.

Probably the biggest threat to this model is from the top tier universities offering courses online. This is radically changing higher education as it’s making it easier for poorer people to access the best institutions.

For the second rate institutions, this means they have to be providing real value for the fees they charge. A certificate purporting to be a degree is not going to be good enough.

While it’s too early to call the end of the textbook ripoff – people don’t let juicy little rorts go easily – its days are numbered. Although we may find the old scams replaced by something DRM related.

Image from Visual Notes of Honourable John Yap’s announcement at #opened12 / Giulia Forsythe / CC BY-NC-SA

Posting without permissions

Facebook’s groups feature can be dangerous if you don’t check before adding people.

A client of mine once had a angry worker scream at him when she found out he’d posted photographs of all his staff on the company’s website.

“My ex is a psycho, he doesn’t know where I live or work. If he finds this, he might come around here and kill us all,” she cried.

The photos went down immediately and Kevin made sure he got explicit consent before he posted any details of his staff onto the website.

It was a valuable lesson on why you shouldn’t just post people’s details online without first asking them. We all have reasons why we’d like to keep certain facts out of the public light.

A Texan gay choir’s organiser posting the details of members onto Facebook is another reminder of why it’s a bad idea to put someone else’s details online without asking them first.

For two members of the Queer Chorus at the University of Texas, having their sexual orientation pasted on their Facebook feeds caused terrible damage with their families and it should serve as lesson to every manager, business owner or community group leader that this stuff matters.

One of the worrying features with Facebook is how other people can add you to groups without your permission – almost certainly a recipe for misunderstanding and mischief.

What’s even more unforgivable with Facebook’s conduct is the privacy settings for those groups overrides an individual’s own privacy settings.

As one of the victims said in the Wall Street Journal of when his father saw the status update, “I have him hidden from my updates, but he saw this,” she said. “He saw it.”

So even though both the individuals had chosen to lock their profiles away from public view, Facebook and the organiser of the group decided they knew better.

We shouldn’t let the administrator of the Facebook off the hook on this lapse, Christopher Acosta decided to make the group open and public. “I was so gung-ho about the chorus being unashamedly loud and proud,” he’s quoted as saying.

That’s nice when you have a tolerant family and you’re from a liberal community but for others that ‘transparency’ can lead to damaging family relations for years, if not lifetimes. In some communities the consequences could be far worse.

“I do take some responsibility,” says Mr Acosta. Which is a nice way of accepting you might have screwed somebody’s life up by doing something you didn’t understand.

Ultimately responsibility lies with the person who presses the button which causes the email or status post to be published. In this case Christopher Acosta was responsible.

To be fair to Mr Acosta, the ability to add people to Facebook groups without their permission is a deeply flawed as are those groups’ setting overriding an individual’s privacy preferences.

Facebook have to understand there are real life consequences to ‘transparency’ which can ruin careers and even cost the lives of people. The damage to families and communities can be immense.

Coming from a secure upper middle class white background, Mark Zuckerberg probably doesn’t quite understand the risks his company’s policies pose to people in vulnerable situations, hopefully some of his older and wiser advisers will explain why ‘transparency’ and ‘openness’ are not always a good idea.