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!