Power shifting once more to aggregators in their duel with news publishers

On Wednesday, Recode.net published a story suggesting Twitter is in talks to acquire the news aggregator app Flipboard. The article cites Flipboard’s stagnant growth and Twitter’s inability to satisfy the continual cycle of product innovation demanded by Wall Street as the key drivers for the move. On the face of it this sounds like good news for consumers – a proven product development team, compelling content, a personalised user experience and deep analytics to drive relevant advertising. But as yet another aggregator looms on the horizon, publishers will be wary that their control of the reading experience may once again be slipping away.

‘News’ has become somewhat of a commoditised product, with premiums only attainable by those few publishers who achieve scale to sell eyeballs (e.g. Mail Online, Buzzfeed) or who focus on specialised content that can command a price tag (e.g. FT, Economist). For the majority of publishers who fall between these two pillars, one of the fundamental problems facing the industry is the increasing atomisation of content – i.e. the unbundling of the traditional newspaper into individual articles that have to stand up on their own merit without the benefit of a ‘package’ sell.

Aggregation platforms and social networks have played an important role in helping these publishers to find an audience in the digital world. Flipboard is a great example of this:  a beautifully crafted product that launched at a time when publishers lacked the skills to build compelling digital product themselves, winning Apple’s iPad App of the Year in 2010. As a personal fan of Flipboard’s personalised recommendations, I can’t imagine my morning commute without it. And for the first publishers who launched on the platform, it allowed them to build an audience on mobile.

But content syndication only works while the publisher’s share of value they see exceeds what they could earn from going it alone. As Flipboard placed greater emphasis on monetisation, their relationship with publishers became strained (which in 2012, led to the suspension of ad sales by the New Yorker and Wired on the platform). And as any aggregator knows, a beautiful product is nothing without compelling content to fuel it.

By contrast, social networks are now a requirement for most publishers as a vehicle to drive traffic [although you would be right to question how many of those readers remain on the publisher’s website once they’ve read the article they were referred to]. Figures from Shareaholic for December 2014 state that 31.2% of publisher traffic was referred from the top 8 social media sites, 1.4x higher than Dec 2013. And the significant majority of this is from Facebook, which refers 1 in every 4 readers hitting a publisher’s website. Like Flipboard in 2010, publishers can no longer ignore the value of working with Facebook.

But again like Flipboard, for all the traffic benefits Facebook brings publishers, its motivation to continually deliver an improved user experience is pushing it to make changes to the product that starts to challenge their relationship with publishers. As reported by the The New York Times in March, Facebook is in discussions with a number of publishers to embed articles directly into the Facebook news feed, avoiding the need to click-thru to the publisher’s website. All of a sudden the economics of the publisher-Facebook relationship have shifted – Facebook is trying to ‘own’ the news reading experience and pull readers away from the publisher’s website.

I’m not close enough to the specifics, which is why when I read that The New York Times, National Geographic and Buzzfeed have signed up as initial partners I was led to believe I’m probably being overly critical of Facebook’s intentions.

The key point is this… The ‘push-pull’ dynamic that lifted Flipboard to acclaimed success before losing its trust amongst the content providers that fuelled it highlights how fragile these relationships are. One cannot live without the other, which is why Facebook will need to tread carefully if publishers start to feel they losing control of the relationship with the reader.

The difficulty of working with aggregation platforms is that they create a focused point of access that commands significant power in the value chain. Aggregators tend to focus on volume and breadth as tools to satisfy the needs of consumers, but as the number of providers supplying the aggregator increases, so the bargaining power of each supplier is eroded.

Television by comparison is starting to see these effects too:  like publishing, TV shows are increasingly becoming atomised where viewers browse for individual titles across linear, PVR or on demand, rather than allowing the broadcaster to entertain through a channel ‘playlist’. But unlike publishing, TV was able to defend against the rise of aggregators like YouTube because they retained a powerful presence on the main television screen.

But recent data from BARB points to an overwhelming shift among younger viewers from the television set to online (and YouTube in particular). Between 2010 and 2013, viewership in the age range 16-24 years old declined 17% on the BBC and 19% on Channel 4. The danger for broadcasters is that as these audiences become accustomed to the ubiquity of content available on aggregation platforms like YouTube and Netflix, it becomes difficult to revert back to single supply channels (i.e. Channel 4 only offering Channel 4 content). Played out to the extreme, does the separation of content production from distribution relegate the creators to ‘supplier’ status?

Twitter, by contrast, offers a very different proposition for publishers. Twitter is a minnow in its traffic referral capability, clocking in at only 0.82% in Dec 2014 compared to 24.63% from Facebook. In other words, Facebook drives 5x more referrals per user than Twitter!

But where Facebook is focused on providing a means to access the same publisher content via a different means, Twitter aims to build a conversation and discussion around the content. Because of its inherent broadcast nature, Twitter enables the onward sharing of articles and encourages readers to offer their own commentary, analysis and opinion, fostering a level of engagement that seems to evade most publishers. Not only does this create a richer and more fulfilling experience for those readers who want to participate, but it also (in theory at least) helps to reassert the publisher as the originator of the content.

Combining the best of Twitter with Flipboard’s skill in product design could create a beautifully crafted platform that acts as a ‘showpiece’ for publisher content – an environment that encourages conversation and discussion among readers, generating a rich data stream that publishers could not obtain themselves. A win-win for both parties… in theory.

Sadly I’m not that optimistic… The reality of any Twitter-Flipboard tie-up will be one that looks to appease Wall Street by demonstrating an uplift in revenue from the eyeballs it attracts, and it’s far easier to monetise readers on the platform (once acquired) than referring them somewhere else. This puts the platform firmly in the category of ‘aggregator’ where individual pieces of publisher content are atomised once again.

Publishers find themselves in a difficult position – increasingly dependant on the traffic driven from social sites, but terrified of what that might mean longer term to their ‘ownership’ of the reader. Where publishers retain the upper hand is that aggregators can do little without content to fuel their platforms – focusing on quality journalism, promoting their trusted brand, and continuing to evolve their understanding of what the reader wants.

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