Decoding the new economy

A non toxic form of midlife crisis — Audible CEO and founder Don Katz

In an interview with Decoding The New Economy, Katz describes a startup journey that covers all the bases.

“I had what my wife describes as non toxic form of midlife crisis,” says Don Katz of Audible, the company he founded in 1994 and remains CEO of today. In an interview with Decoding The New Economy, Katz describes a startup journey that covers all the bases.

As Rolling Stone’s European correspondent Katz was engaged to write a book in the early 1990s about how digital technologies were changing music and what he realised was the industry was about to go through a fundamental change.

“I had a wonderful career as a writer, I was a long form magazine writer in the glory days of ten thousand word articles,” Katz says of his life in journalism. A book commission lead him to research the future of digital distribution of written works.

Survival in the digital economy

One of the driving ideas was how creators can sustain themselves in the digital economy, “my content was already being ripped off on the Unix internet and I thought ‘how will the profession creative class sustain themselves if there’s no ability to control the distribution?'”

Having founded Audible in 1995 at a time when few people were downloading or even using the net, Katz was in the box seat of the first tech boom and subsequent tech wreck in 2001.

At the peak of the dot com boom Audible was floated on the NASDAQ stock market, “In 1999 good companies that were leading categories went public and got massive amounts of free capital.” Katz recalls, “It was one of those weird moments, there were 1500 publicly listed internet companies at the beginning of 2000 and there were 140 by 2003.”

Surviving the dot com bust

Katz puts the company’s survival during that period to a conservative attitude towards capital and the alliances he had created with the industry’s major players — at one stage Microsoft held a 37% share in the company and Katz was one of Steve Jobs’ confidants during the early development of the iPod.

Eventually one of those alliances became critical when Katz became bored with running a listed company, “it was an amazing adventure being a public company CEO for nine and a half years. It was very exciting and an honour to serve shareholders.”

Katz’s patience ran out with being a public company CEO when automated trading came to dominate the daily operations of management, “suddenly you had this metaphysical sense of ‘who are you working for if someone wants volatility?’ That suddenly got old.”

Audible already had a relationship with Amazon who had taken five percent of the business in 2000 in return for bundling audio book links on the ecommerce giant’s book pages. Katz also found Amazon founder Jeff Bezo’s long term view towards investment and returns a much more satisfying business model than the day to day grind of meeting short term shareholder demands.

In early 2008 Amazon bought Audible for $300 million and retained Katz as the company’s CEO.

Building new startups

For new startups, Katz advises “make an absolutely fearless inventory of what you know is true about this idea and what you’re good at and what you’re not good at.”

“You need to have people you can trust and believe in. Beyond that, be very sober about business models that are sustainable. There’s a lot mistakes that people make where you’re solving a problem in a piece of a value chain that isn’t sustainable. It’s easy to get confused about who the customer is.”

“Figure out who the real customer is. Sometime people overplay the fact that the customer is the capital, the capital will come if people have the innovation and the passion.”

Jeff Weiner and LinkedIn’s Chinese cultural struggle

LinkedIn’s move into China challenges the company’s values and its ambitions to be a content publishing platform

LinkedIn CEO Jeff Weiner believes the company’s culture and values are one of its most important competitive advantages, however moving into China has tested those strengths he told a conference in Sydney two weeks ago.

During the fireside chat Weiner went over the company’s development, the challenges he faced taking over from LinkedIn founder Reid Hoffman as CEO and the importance of the company’s ethical base.

“It’s important for companies to define what culture and values mean to them before they get to what the specific values and culture are,” Weiner said in an answer to an audience question.

Defining values and culture

“At LinkedIn we think culture is the collective personality of our organisation and it’s not only who we are but who we aspire to be and that aspirational component is really important,” Weiner continued.

“Oftentimes you’ll see company executives get onstage to introduce culture and values or talk about changing culture and values and it’s not necessarily something the company already does and it loses the trust of the employees and the audience when that material being presented because people know is not necessarily true.

“If you allow yourself to include this aspirational dimension when defining the culture it gives everyone an opportunity to play up to where your setting that bar and I think that’s important,” stated Weiner.

“Values are the first principles upon which we make day to day operating decisions, that’s how we make the distinction.”

Culture as a competitive advantage

“I think once an organisation has defined for itself what it means by culture and values it’s then obviously important to codify its culture and the pillars of the culture and the specific values that it operates with.

“Its not enough to codify it, we went to the trouble of defining it and then putting it in our public registration when we filed to go public and that’s a good start but all too often we see people talking the talk with regard to culture and values and not walking the walk.”

For Weiner, that commitment to the company’s culture is the company’s strength in the marketplace: “Today, I’ll tell you it’s our most important competitive advantage.”

The China Problem

LinkedIn’s culture though has been tested by its entry into the Chinese market where its aspirations of being a content publisher met the limitations of the country’s censors.

When asked by this writer about the quandary LinkedIn finds itself in the PRC, Weiner reconciled this with the company’s mission to connect the world’s professionals.

“China’s one of our largest opportunities in terms of the value we can create for members in China and for companies in China.”

“One in five knowledge workers and students reside in China so it’s a huge part of connecting the world’s professionals and to achieve that kind of scale so we can create value for people who are living in China it’s important that we’re able to do business there.”

“At times means complying with law that forces us to do things that are very challenging and difficult and we always knew the importance of operating in China and for us we wanted to be extremely thoughtful in terms of how we did that.”

Favoring freedom of expression

“Obviously we are very much against the idea of censorship and very much in favor of freedom of expression but in terms of operating there and creating economic opportunities for what could be potentially a 144 million people from time to time we may have to make some very difficult decisions. That’s the reality of doing business there.”

In being asked if this creates a struggle with the company’s culture, Weiner answered “that was one of the things we took so much time on.”

“From the time we decided we needed to be in China and how important it would be in creating the global platform and adding value for members and the time we entered into China with the local language version of the site it was of the order of 18 to 24 months.”

“Discussions took place among our executives asking some very difficult questions in terms of our culture, our values and where we would be willing to compromise and where we would draw hard and fast lines and that will continue to be an ongoing process.”

For LinkedIn and Jeff Weiner the challenge of being a trusted global publishing platform and a leader in the Chinese market raises some serious ethical questions; it’s a challenge that is going to test the company more in coming years.

The decline of Forbes magazine

The tale of Forbes Magazine’s downfall is a lesson to all publishers, both in the new and old media

A great piece by Michael Wolff in Town and Country describes how the Forbes family struggled with making their magazine work in the digital economy.

For the Forbes family, it was always going to be hard stepping into the shoes of the late Malcolm after he unexpectedly passed away in 1990 and unfortunately for them that happened to coincide with the end of the great era of publishing wealth.

Twenty five years later the family are largely removed from the publication which is a shadow of its former self with its best hope for survival lying with Asian investors who still see some value in the brand.

What’s particularly poignant about Wolff’s story is the Forbes family did nothing wrong — they embraced the new platforms, experimented with digital and tried to find a way to make their business work in the online marketplace.

As it turned out, the old advertising and publishing model was horribly and irredeemably broken.

Forbes Magazine’s decline is an important tale for the whole publishing industry, for both the brash new entrants and for the struggling established players.

The dreams of social media services

LinkedIn is trying to turn itself into a publishing platform, is it on the wrong side of history?

“LinkedIn is the world’s biggest publishing platform,” states Olivier Legrand.

Legrand, LinkedIn’s Head of Marketing Solutions for Asia Pacific & Japan, was speaking at the company’s Connectin Sydney conference where the service was demonstrating its credentials as a marketing and advertising service to Australia’s largest corporations.

The view that LinkedIn is a publishing platform is problematic for content creators — it creates a conflict for those using the service to distribute or publicise their work and again it shows social media services are not your friends.

It’s understandable LinkedIn wants to get corporate advertisers on board seeing the business’ stock currently trades at eighty-four times revenue, however a focus on becoming an advertising driven media company at a time when advertising driven media companies are heading the way of the wooly mammoth seems to be a risky strategy.

Another risk for LinkedIn as a publishing platform is that user generated services can, and will be, gamed resulting in a dramatic decline in quality and value in the site.

Every social media service now sees itself as a media company and it may turn out they are correct, however that future of publishing will be very different from last century’s newspaper and broadcast models they are trying to emulate.

Even if the dreams of social media services do come true, the advertising driven media industry, an the publishing world, will be very different to the world they hope to be part of.

Amazon learns that profits matter

One of the leaders of the disruptive economy, Amazon, feeling the heat as other deep pocketed rivals put pressure on its businesses.

It’s typical for a new businesses to go several years making losses but Amazon has barely made a profit over the last twenty years despite being valued at $150 billion by the stockmarket.

That luck could be running out though as the Amazon’s stock fell nearly 10% last week after the company announced it had slipped back into losses last quarter.

Amazon’s losses are largely due to Google starting a price war on web services which is a warning that other deep pocketed web giants are now lining up for the company.

Google’s actions in crippling Amazon are somewhat ironic given how Amazon disrupted the publishing industry by using its deep pockets to subsidise its loss making bookselling business.

Amazon’s problem is it operates in commoditised industries where deep pocketed players are prepared to challenge the company’s market position.

Companies like Google and Apple have incredibly profitable products like Adwords and the iPhone while Amazon relies on the largesse of investors hoping to turn a future profit, that is a clear weakness against strong, well funded businesses.

For a tech company, twenty years is clearly the future and now Amazon has to define exactly where the profits are in its business.

Sometimes, just being a disruptor isn’t enough.

Reinventing business in an online world

Buzzfeed founder Jonah Peretti has some important views on the future of business and online publishing

Jonah Peretti, the founder of Buzzfeed and formerly of the Huffington Post is widely thought of as one of the smartest thinkers in digital media.

In a long interview with the Felix Salmon, the former Reuters journalist and himself one of the savviest commentators on the online space, Peretti discusses the direction of both online publishing and business in general.

“Why do they need so much revenue?” is one of the questions Peretti poses about the recent New York Times’ innovation report and it’s a question worth posing of many organisations – particularly those that are in sectors with declining revenues and margins.

Reinventing organisations

As Yammer founder and now Microsoft employee Adam Pisoni told Decoding The New Economy last year, modern collaboration tools mean modern businesses don’t the need the management layers and staff numbers that older companies needed, this is something that has been lost on many modern media organisations.

Peretti’s views about communications and how stories turn viral is a worthwhile read in itself while his points about fundraising are very pertinent, particularly where he observes that venture capital investors have been reluctant to fund startups which pay writers.

What stands out in the interview is Peretti’s charitable view towards others in the industry, here’s his view on the New York Times’ innovation report.

I did read it. There were a lot of interesting things in it. I think in some places, they were a little bit overly critical of their tech and product team. When you look around the industry, The New York Times has a really great website. They’re building lots of things themselves and integrating them. It doesn’t feel like a Frankenstein website with things bolted on from millions of other places. I was a little surprised at the tone, how critical they were of their web products.

The key question Peretti asks is how do we re-imagine our industries: “What would this be if the readers and the publishers were not focused on making something similar to print?”

Reinventing industry

While Peretti’s question is asked of the newspaper industry, it’s a question that every business can ask itself as manufacturing, marketing and supply chains are being reinvented.

Following that point, Peretti points out the risks in focusing on simple metrics; too much emphasis on one figure can lead to perverse results in the publisher’s view and following a mission rather than chasing a number is a much better strategy to long term success.

As Salmon says in the introduction, there’s a lot to learn from Jonah Peretti about where the internet and digital media is taking the publishing industry and the business world in general.

Tag: publishing

A non toxic form of midlife crisis — Audible CEO and founder Don Katz

Survival in the digital economy

Surviving the dot com bust

Building new startups

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