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Why Newspapers are Screwed, and How They Can Become Great Again.

There's been a lot of talk lately about how Newspapers are failing, and they in turn have enjoyed blaming the internet in general, and Google in particular for "stealing" their headlines. It's a funny argument seeing as Google sends them free traffic, but it remains popular amongst the old newspaper companies.

To see how ludicrous it is, let's journey back 15 years to the days before the internet. (If you used the internet 15 years ago, just go back further. Not much changed for many decades back then.)

Back then, when they wanted to sell a newspaper, they would write eye-catching headlines and then put them prominently on every newsstand and street corner. The headline was free, but if you wanted the story it would cost you a few quarters.

(Some people argue that the newspaper companies are hurting because they're losing the $0.xx/paper they charge. This is silly, since if you wanted to have a pound of blank paper delivered to your house every day it would cost a lot more than that. The newspapers can finally skip all the expenses of actually printing a paper. They should be happy.)

In those days, if a newsstand wasn't displaying the headlines prominently enough, the newspaper company would threaten the newsstand with horrible things if it didn't shape up. If you go back far enough, you'd have kids on the corner yelling "Extra! Extra! [Headline here]".

So back then using headlines to drive traffic to your paper was the whole idea. Now they want to sue the "virtual newsstand". They should be grateful for the free traffic but they're not. The fundamental reason they complain, is that they aren't making money off of web-pages with articles. It costs more to research the story than you can get paid from ads on it.

The secret is, a page with news was NEVER profitable, even when the page was physically paper.

The way newspapers made money back then, was selling ads for stuff that had very little to do with the news. Classifieds, announcements, job listings, automotive listings, real estate listings, movie times, and even government notices were all very profitable pages of the news paper.

If you'll recall back in those days, if you wanted to know when a movie was playing, you looked in the paper. There was a small table with the showtimes, and it was surrounded by ads. The content cost almost nothing to create, and the advertising was highly targeted to people who wanted to watch a movie.

These and the other "verticals" as they're called were like printing money for the papers. The companies used the news as an excuse to get into everyones home, and then provided all these profitable verticals to pay for it.

Of course today, if you want to buy a car, you go to vehix.com. Jobs are at monster.com. Classifieds are at craigslist.com. If you don't know where to look, there's Google. Most of what we used to use newspapers for is now on the internet.

Newspaper companies are getting slaughtered. They saw the internet coming, and did a pretty good job of moving their news online, but they forgot about the rest (i.e. money making part) of their business. There's no reason a newspaper company couldn't have turned their automotive section into vehix.com. Same with their classifieds, or movie listings.

Instead of creating an "internet worthy" set of vertical sites, they mearly reprinted the listings from their papers, usually with low quality graphics, or no pictures at all. No wonder someone swooped in and created monster.com. The internet enabled a better job hunting experience, but the newspaper companies didn't use their expertise in the area to make the best website.



The papers are in big trouble now because when I want to know movie times I ask Google or Fandango. Same with classifieds, home listings, and almost anything else. The only thing I still want from newspaper companies is news from their website. I certainly have no reason to buy a physical newspaper.

They can complain all they want, but they'll never get all those verticals back in their control. Their only options now are to go out of business, or figure out how to make money off the news.

There's lots of ideas for the latter, including micro-payments or subscriptions, but in the end there's going to exist free, ad supported news out there, so anything else is going to fail. That just leaves making more money from the ads. There's two ways to do that: Make the advertisers pay more per viewer, or get more page views. Ironically both of these viable solutions are exactly the things Google helps newspapers do.

There's still going to be a lot of shake out in the industry. For decades every newspaper has posted almost identical articles about everything. Usually these articles were bought from a pool like the AP, or Reuters. The internet doesn't need hundreds of identical articles for every story, and hundreds of newspapers aren't adding value any more. Those papers are going to fail in the internet age. Once the number of papers starts to fall, though, the power of the internet will finally do the impossible: With enough viewers, it will be profitable to put a news article on a page. And as we've seen from hundreds of companies, the profits on the internet can be huge.

Out of this newspaper apocalypse, there will emerge a few dozen papers who will have incredibly trusted brands, and will be known for their high quality news. They will write articles that are aimed primarily at internet readers. We demand immediate news, with updates that know what we've already read. We need multimedia that is interactive. We expect hyper-links to original sources and more information.

Each paper that succeeds at this transformation will get readership that was inconceivable 15 years ago: Tens or even Hundreds of Millions of readers! Advertisers will also be able to sell very targeted ads to these readers, and will pay far higher rates than they do today. The result will be record income. Free from having hundreds of staff writing up movie times, or running printing presses, these new "papers" will be able to spend more on real journalists, to write more articles. The magic of the internet will connect readers with articles about obscure topics. The result will further build the newspaper brand, and increase the number of pages and ads shown. This virtuous cycle will make these companies incredibly successful members of the internet age.


The question now is which papers will stop looking backwards, and start transforming themselves into the great news brands of the future.

The Ultimate Investor

Imagine if you will that you are the most powerful investor in the world. Imagine you're credit worthy for trillions of dollars. Imagine you could write laws that let you create any type of investment you dreamed. Imagine if you not only made money off your investments, but also made money off of any positive side effects of your investments.

In other words, imagine you are the US government.

Now, as the ultimate investor, what would you do if you could borrow a trillion dollars at <1% interest. The correct answer of course is borrow as much as they'll lend, and invest it in almost anything. Surely the payoff will be >>1%.

Imagine you had the ability to buy a deeply troubled bank, and in so doing transfer your credit worthiness upon it. Most investors worry the bank will go bankrupt, so the stock is worthless, but you can create a law where you lend the bank some money, and in the process it becomes yours. What a sweet deal! Now the bank won't fail because it's got secure backing, and when you go to sell the bank when the recession is over, it will be worth a fortune. Plus it STILL has to pay you back your initial investment.

What if millions of construction workers were getting laid off in the real estate business, and you owned thousands of civil projects that could use some work. Why not buy up all that cheap labor and invest now in these projects. Don't forget that not only do you get to build it cheap, you get 30% of your labor cost right back in taxes.

What if you could buy enough depressed assets to turn around the recession, thus un-depressing all your assets. It's better than printing money!!! (Which you can also do, by the way)

We're in a market situation where the world economy is screwed up. The government is the only player who has any money to invest, which drives down the price of everything. Conversely, people want to invest in the security of the government, so its borrowing rate has been driven close to nothing. If the government was an investor, it would borrow ridiculous amounts of money and buy anything is sight.

Don't look at the stimulus package as a trillion dollars wasted. It's a trillion dollar investment in a situation that will have an incredible return.

Is carbon-dioxide still a problem in 100 years?

Today of course, over abundance of carbon-dioxide in the atmosphere is the biggest concern facing the world. But will it still be in the future?

Carbon is an extremely useful element. It's in our food, our oil, and is the exclusive ingredient in diamonds. It's in wood furniture and houses, and it's in plastic. Even steel and stone contain lots of carbon.

So in 100 years, when we're building spaceships to travel to other planets, and buildings large enough to house dozens of billions of people, where are the resources for all this going to come from. Traditional sources of carbon like coal and graphite mines will be politically unnavigable and costly. Cutting down trees and crops will be seen as an incredibly inefficient use of water and land. But there will still be tons of carbon just floating around in the sky.

I predict that within a century there will be a large-scale industry that uses cheap power (Solar? Fission? Fusion? Dark-Anti-Matter??) and uses it to convert CO2 into C and O2. The oxygen obviously will find it's value as rocket fuel, or just for breathing. The purified Carbon will be collected and turned into carbon-fiber, nano-tubes, bucky-balls, or whatever other brilliant substance we've figure out how to make. This carbon will end up removed from the ecosystem as it travels to other planets, or is merely encased in materials that won't break down for millions of years.

Within a few years, the world government will have to step in and put limits on how much CO2 this industry can remove from the atmosphere in order to keep the air healthy for plants. They'll look back on the "Carbon Taxes" of the early century and laugh.

Computers will search for the earliest mention of this phenomenon and my blog entry will appear prescient.

---

Either that, or global warming will have killed us all...

Car Mechanics vs. IT

What if people were as ignorant about cars as they used to be about computers...

- Hello, this is XYZ car repair shop and my name is Carl. How can I help you today?

> Hi, my car's light won't stop flashing.

- Ok, can you tell me which light?

> I don't know which one! I'm not "a car person" so I don't know that much about it. I just know there's a light flashing.

- Hmm... Are you talking about a light on the dashboard?

> What's the dashboard?

- The dashboard is the area behind the steering wheel...

> What? Why do you have to use technical names like dashboard. Can't you just say behind the big hand wheel? And no the light's not there. I'm not in the car.

- Oh, so it's on the outside of the car. Is it on the front, or the back?

> Uhm, let's see. I think this is the end of the car that I look at when I'm driving...

- That would be the front then. Is the light yellow and on one corner of the car?

> Well I think it's orange.

- Ok, I think your turn signal is on.

> What's that.

- That's the light you're supposed to use to signal to other drivers when you're going to turn.

> Why would I need that? Can't they tell I'm turning by looking at me?

- Well, legally you're supposed to use it before you change lanes to warn other drivers.

> Stupid laws, making my car more complicated. Isn't it enough that I have to remember which pedal does what?

- Yeah, well I can help you turn the signal off.

> The signal? Oh yeah, you mean the light. You'll have to stop using those technical words.

- Sure thing. I need you to get in the car.

> Ok, just a second. I have to remember how this key thing works. Let's see I put it in, and turn it. Nope that didn't work, let me try the other way. There we go. Ok I'm sitting in the car.

- Ok, so the steering wheel is in front of you?

> What? You didn't tell me to get in /that/ door!

- Sorry, my fault. Could you please exit the vehicle and then reenter through the driver's door. That's the one with the steering wheel.

> Oh, I'll never figure out that key thing again. Let me just climb over the seat.......... Ok, there we go.

- Ok so you're at the steering wheel now?

> Yeah, but now there's another light flashing. This time it's on the Dishboard or whatever you called it.

- Yes, that's the turn signal indicator, telling you that your turn signal is on.

> Whoa!! That went way over my head. I just want to know how to turn it off.

- Uhm, sure. So behind the left side of the steering wheel you'll see a lever sticking out of the middle of the wheel. Do you see it?

> Uhm, no.

- ... Are you sure? Try putting your had just behind the wheel and feeling around.

> Uhm, my hand doesn't fit.

- ... Why not? There should be lots of space behind the wheel.

> Well the flowers are in the way.

- ... ... ... Flowers? Behind the steering wheel? There aren't supposed to be flowers there.

> My cousin put some pretty flowers on my steering wheel. He's "a car guy" so he said it would look better.

- Hmmm... So there's flowers covering your steering wheel. Is there a lever sticking out behind the flowers.

> Oh yeah, this thing. I hate it. It's always in my way and I keep running my hand into it. Is there a way to remove it.

- That's the lever for turning your signal on and off.

> Oh, is that what it's for I always wondered. So is there a way to remove it?

- Uhm, remember the law says you need to use it, so no, there's no way to remove it.

> That's dumb.

- Yeah, well let me teach you how to use it. When you want to turn left, just push down on the lever and will turn your signal on. When you want to turn right, push it up.

> Right is up and left is down? That seems like a really dumb design.

- I assure you it's pretty easy when you get used to it.

> Whatever. How do I turn it off.

- Well, after you turn, you should tap it back towards the center. So if you pushed it up to signal a right turn, push it down a little to turn the signal off.

> I though pushing it down signaled a left? I'm so confused.

- Well if you push it halfway down it goes back to normal. If you keep pushing it down it will signal a left.

> That seems way too complicated. Why did you car people design something so stupid?

- It's really easy once you get used to it.

> I don't even want this feature at all. Are you sure there's no way to remove it?

- I'm sorry, you'll just have to learn how the signal works.

> Man I hate cars. I'm never going to buy one again...


-----

People are dumb, I'm the first to admit it. And anytime you're making a product for "everyone" you're really making it for the dumbest person around. User interfaces are always a pull between easy to learn and easy to use.

Cars have been around a long time. The interface has changed over the years, but the current incarnation is pretty good, and the rate of change has certainly slowed. Initially cars were terribly hard to drive. You practically had to be a mechanic to figure out how one worked. Eventually the basic things were simplified with inventions like automatic starters, fuel injection, automatic transmissions and ABS. This has made the car more accessible to non-experts.

But at the same time we've added things: Dashboard gauges, turn signals, seat belts, radios. These have been great enhancements, but they've added complexity to the interface. We've been able to do this because the interface of the car has become part of our culture and because we've required a basic amount of training in order to get licensed to operate a car. All people understand the basics, and we've been able to move past the most simple interface towards a more useful one.

As we continue adding to cars with navigation systems, backup cameras, and eventually collision avoidance systems and even self-driving vehicles we will have to adjust the interface. At each step there will be a resistance to making things "more complicated" but the new features will slowly become common and eventually will get so ubiquitous that we forget that it isn't obvious how they work.


Computers are at a very early age of the same cycle. The invention of the GUI was the beginning of non-expert usage. Even then, there were still a lot of interface objects that weren't critical. Over the past few decades we've made great progress in simplifying the GUI. A first time computer owner no longer needs to understand things like the file system, function keys, control panel or video modes. This has been a great step forward in bringing computers to everyone.

But what now. We don't have to keep making computers simpler. Our culture has grown and adopted the computer interface. The mouse, icons, menus, and programs are concepts grasped by everyone. It's time to move on to making the interface more useful.

Most programmers and IT professionals don't use the GUI. We use the command line! It's a horribly archaic interface that requires the user to understand a thousand details about the computer before they begin. This interface hasn't been improved in decades. But it's powerful! A few keystrokes can do what a half hour of clicking never could.

Now that the "dumbest" user knows the basics of the GUI, it's time to start moving the most useful features of the "advanced interface" into the basic one. It will make things more complicated, but eventually it will make everyone more productive.

After all, we all figured out how the turn signal works, and I'm glad for that. :)

Does it make economic sense to treat your empoyees well?

So life at Google is great. The past week Deadra has been out of town so I've been spending a lot of time there. Three great meals a day (I've had lamb 3 times this week) and a midnight snack. Not that I'm working until midnight; I'm just playing board games with some of the other Googlers. On the days I'm not there so late I bring Chachi. Today the big discussions were the winter trip and the Christmas bonus. The bonus is two orders of magnitude better than any present I've received before. And my real bonus is still to come in March. The trip alas I can't go on this year because Dea is due so close to then, but it's a 3 day trip with a bunch of Googlers, traditionally to a ski hill but there's some different destinations this year. I've spent one day this week working on my own independent project. I also did a last minute interview so HR gave me a thank you certificate for a free hour long massage.

It's all kind of insane. Why would a company treat it's employees this well. Some think that Google somehow got lucky, made a bunch of cash, and now is spending it unwisely on ridiculous perks. They figure that the money will run out and either the perks will stop or the company will go bankrupt. Is this so?

Well, how much do these perks really cost? There's in the neighbourhood of 20K people in the company, including contractors, temps and interns. Give them all a nice salary somewhere in the 100s of thousands, toss in many 10s of thousands more for ridiculous perks, then add the costs of office space and computers and whatnotelse. Of course there's also potentially the stock options, but if the company is really going to run out of money those won't be worth anything anyway.

The way I see the math, the final compensation budget is somewhere around a few Billion dollars a year. That's a lot of money! Way more than I have, and in fact way more than many mid-size companies are worth. If you trimmed costs by 10% you'd have a few spare $100M per year. That's still a lot of money. Surely 10% trimming wouldn't hurt that much, right?

So what would a company like Google spend that cash on? How about another YouTube, or part of Facebook, or the next great thing that none of us has of heard yet. Google spends billions of dollars every year on these acquisitions. What do they typically get from these purchases? Software, Hardware and People. The Hardware is usually pretty minimal, and while the People are often great, they still demand salaries every day and big stock option grants so you're really only saving on their recruiting costs. That means that most of the value of these companies is in their software. Software can have value in two ways: It's complex software that would take a long time to reproduce, or it has users who wouldn't switch even if an identical product existed. Websites tend to have very little of the former, and lots of the latter (The first mover advantage).

So every year Google spends similar amounts on it's entire compensation budget and on buying companies that have first mover advantage. What if you could produce one more product in house per year, such that you then buy one less company. Well, that would save you Hundreds of Millions of Dollars, the same amount as all the crazy perks.

Most of these startups are created by a couple of guys in a garage working on crappy hardware with no job security. Surely if you took a few thousand really smart people, gave them all the perks in the world, great job security, the greatest computing infrastructure that exists, and a few days a month to brainstorm ideas, one great idea product would spring forth, right?

If all those perks cause one of thousands of Googlers to make one great product for Google then all the perks have been paid for.

When it costs the same amount to buy two guys in a garage as to keep tens of thousands of employees crazy happy it seems really dumb not to treat your employees well...

Second week on the new job

It's been a busy week. Google has a ton of training stuff for Nooglers. A lot of it consists of learning secret stuff that may never be spoken of with the outside world. Fun stuff. But I've been more impressed by the real difference in attitude developers have here.

Every company says "you should write unit tests for all your code". This is the first time I've actually had training on how to do such a thing. And there's tons of infrastructure to make writing these tests easy. Then, every time you want to check in code you have to get it code reviewed. This ensures that all coding standards are followed, and makes sure everything is unit tested. But more importantly it makes everyone feel a group responsibility for the code. It also ensures that everyone in the group knows how well everyone can program. This means the peer review process actually works.

I'm having a great time so far, although my mind is numb everyday from information overload. I suppose that's a good thing. I look forward to actually contributing in the near future.