Blog Post Vision Mobile site. Title: Winners and Losers of the iPad Magazines battle [This is a guest post by Fabian Tilmant, Independant Consultant and Author who is writing a
handbook around tools and methods for Media, Entertainment and Telecom companies to
embrace current changes.]
Intro: 200 words (328). Title: N/A As early as when the first iPad was announced by Steve Jobs, all eyes were turned into traditional publishing corporations to see how they would be using this new tool to make a major move towards Digital Magazines. Some like Condé Nast (with Wired, among others) and Sports Illustrated (owned by TIME Warner), as well as Bonnier (famous before the launch of the iPad for their Mag+ concept, developed with the London agency Berg), experimented very early to embrace ultimately an (almost) ubiquitous strategy: being on any available platform. But surprisingly, the biggest buzz came from a start-­‐up based in Palo Alto, California: Flipboard. This "Social Magazine" was aggregating all articles shared by you and your friends through social networks like Facebook, Google Reader and Twitter and reached 4.5m+ downloads to date. It was also granted iPad App of the Year 2010 by Apple and recently moved to the iPhone with an impressive adapted User Interface. Everybody was seeing in Flipboard the future of magazines and unsurprisingly, Flipboard started signing deals with media corps like Condé Nast, BBC, USA Today, Lonely Planet, ABC Today, National Geographic, Rolling Stone… The current Kings of the Web followed closely all these evolutions and only recently made a big leap into the game. Amazon with an upgraded Kindle ecosystem, Apple with a move from the App Store to Newsstand as official distribution solution and Google with Currents and an unclear scope at this point. Now, almost 2 years after the initial announcement, we believe it is time to look at these current trends to see if tablets can really enable the magazines of tomorrow. And who will be the big winner(s). To do so, we have used 2 tools Fabian Tilmant created. One can be seen as an optimized Value Chain for Digital Media ecosystems. The other one can be seen as an optimized Sales Funnel. You can see the details on the analysis on his blog, defining 3 categories of Magazines. Innovative Magazine Apps: 250 words (335). Flipboard, for instance, aggregates article from multiple sources in an innovative User Interface. This app's signature is that these articles are taken from your social networks connections. But as an app (exclusive to iOS devices), its distribution is managed by Apple through the App Store, second aggregator of this ecosystem that manages the relationship with the user. It is the combination of this aggregation of content and the native application that defines the position of Innovative Magazine Apps in the ecosystem. This relatively low presence and the fact that these players rely on content from traditional publishers, don't allow them to disrupt the traditional model. Indeed, publishers are very conservative and won't allow a shake off of the current rules. True disruption could be achieved by true pure player initiatives like The Daily which publishes exclusive content. But no profitable Business Model has been found at this stage. A better performance in terms of reach (relying on tablet penetration) could improve the bottom line. A wider presence in the ecosystem, via tablet manufacturers and/or carriers partnerships could also be an interesting path for profit. No transactional relationship with their users as well as low information given explicitly or implicitly by them means that these Magazine Apps can't really capture much data from users and must rely on traditional advertising models such as display advertising (capturing Attention) or pay-­‐per-­‐click (capturing Engagement). Indeed, it is the second aggregator (the one taking care of distribution like the App Store or the Digital News Stand) that captures Credit Card as well as personal information. Usage data is not sufficient to go beyond traditional advertising models capturing Attention and Engagement. Especially since App Store and Digital News Stand owners are also OS corporations that can cross Usage Data of this particular App with Usage Data of all the other ones. Anyway, Flipboard's recent moves asking users to create a dedicated account and integrating e-­‐commerce catalogs show that the Palo Alto start-­‐up is aware monetization beyond traditional advertising mechanics is needed.
Traditional Editors: 250 words (326). This group is focussed on actors that already are succesful in another ecosystem (Internet Portal for AOL or Yahoo, traditional books retail for Barnes & Nobles...) and try to leverage these assets into an adjacent ecosystem. Digital Magazines in this case. We can now also add CNN as they recently bought Zite, a Flipboard-­‐like app that focusses more on content personalization than on social networks integration. Presence in this Digital Magazines ecosystem is similar to the first group. It is also apps that aggregate content from many sources. But here, the big difference is that other platform assets gained in these other ecosystems like billing, authentication, existing relationship with users or partners/publishers... can be used to strenghten or accelerate success of this new ecosystem. The other difference is that there is an historical relationship with content creators, via contracts and operational collaboration, that facilitates the relationship. Thanks to the link between these apps and an existing Customer Relationship, editors of these solutions can capitalize further Attention and Engagement, probably with a better rating card. Rich existing User profiles with possibly payment data allow them to authenticate and bill users, serving them high value personalized content and services and monetizing these new interfaces. Unfortunatly, CNN, AOL and Yahoo don't have existing purchase possibilities in their existing Business Lines (information to be confirmed, probably with people knowing these editors better, like someone in the US), which limit them on monetization. But the main problem is probably that none of them has succeed proposing content that a critical mass of people are ready to pay for (information to be confirmed, probably with people knowing these editors better, like someone in the US). If they're not capturing Money in their legacy ecosystems, they won't be able to leverage on this asset in this new ecosystem. Think how easy it is to purchase content on Amazon and Apple platforms in 1 click, sometimes without any password/PIN required to be entered. Strong Platforms: 250 words (325). The 3rd group is essentially actors that already rule more than one ecosystem. Often, they do so by stepping out of their traditional business and taking risk in new roles and/or new ecosystems. Apple redefined Digital Music and Smartphone ecosystems, Amazon revolutionized e-­‐commerce as well as digital books and enabled via heavy infrastructure investments the Cloud Computing Market, Google changed the way companies were advertising on the web and Facebook gave birth to a real social web. Currently, only Amazon and Apple have taken initiatives in this Digital Magazines ecosystem by creating their own walled garden. The iPad has recently seen, after months of experimentation and negotiation with Publishing Companies about Commissioning scheme and User Data ownership on an app model, a dedicated Newsstand for Digital Magazines. Amazon, on the other hand, extended their Kindle strategy to create a real tablet ecosystem including Hardware (the Kindle Fire), an Android-­‐based OS, Native apps in a dedicated Newsstand (can't find the tech spec of Newsstand though, any insight?) and a smart use of existing Technical Infrastructure and User Profiles.
As we've seen in Vision Mobile's Clash of the Ecosystems report conclusion (p.26), the main difference between the iPad and the Kindle Fire ecosystems is that : -
For Apple, the content offering drives device sales and profit margins. Amazon uses the device as a loss leader to drive its core content retail business. This difference in Strategy explains why the focus is, for Apple, on Design of the User Experience through a clean and seamless integration between the device, the OS and the Apps. On the other side, as recent reviews seem to highlight, Amazon's device is far from iPad's quality but is still a best seller thanks to its very low price tag. Customers probably see it as an upgraded Kindle rather than a real iPad competitor. But the strong point of both giants in this ecosystem is their heavy experience in retailing products close to what this Digital Magazines Newsstand proposes. By selling already music, books (both digitally and physically) and other goods, Amazon extends its store experience to new goods on a new screen. Apple only sell digital goods for the moment, but is leader in both Music and Apps distribution. Capitalizing on an existing User Experience.
It is interesting to notice that both retailers already have 1-­‐click-­‐purchase features on their existing platforms, already storing users' payment credentials. Also, by using users data to improve their shopping experience, they facilitate move from Relationship to Transaction in DICoDE Business Models. Visualising these trends (on DICoDE): 250 words (53). As you can see, it is the combination of a strong presence in the Digital Magazines ecosystem (specifically locking the aggregator/distributor and the credentials positions) as well as leveraging on an existing transactional relationship with customers that makes the difference. The latter being often a consequence of ruling an existing (and adjacent) ecosystem. Conclusion: 200 words (289). We see that actors that already rule adjacent ecosystem(s) have key advantages in a newly created ecosystem. An existing Relationship with Users, and preferably Customers (by owning payment info and having succesful purchasing history), is a very strong asset in enabling Transaction in this new ecosystem. Also, the role of trust is this existing relationship is certainly THE enabler of a success. Another interesting element, especially seeing how the device and the connectivity are important in this ecosystem, is the absence of Carriers and pure Device Manufacturers in this ecosystem. This will probably change in the coming months with release of first Windows 8 tablets and extension of existing partnerships between Android-­‐based smartphones manufacturers and Mobile Carriers. I don't believe they will leave Apple and Amazon such a big advantage seeing the recent history in the Smartphone/Apps ecosystem. They're losing another Holiday Season, traditionally important moment for sales of consumer electronics The main absents at this stage are Facebook, which has been already very slow releasing a native app for the iPad, and Google, who's Currents project seems to battle with Yahoo Livestand in the Traditional Editors group. The main problem of these giants is that they never really succeed billing users for their services, unlike Apple and Amazon. Which justifies their position in the second group. The most promising one in this trio being still Facebook thanks to its succesful experiments on virtual money with partners of its ecosystem and its growing presence on Mobile and Tablets where users are more ready to pay. They probably see this Digital Magazines ecosystem (too) far from their existing lines of business, but as I already stated, it's risks taken in new roles and/or new ecosystems that is often paying off!