Jeff Bezos Letter to Staff Hints at Changes He’ll Make at the Washington Post
Jeff Bezos sends a letter to the employees of the Washington Post, in which he alludes to some of the changes he’ll make at the paper:
There will, of course, be change at The Post over the coming years. That’s essential and would have happened with or without new ownership. The Internet is transforming almost every element of the news business: shortening news cycles, eroding long-reliable revenue sources, and enabling new kinds of competition, some of which bear little or no news-gathering costs. There is no map, and charting a path ahead will not be easy. We will need to invent, which means we will need to experiment. Our touchstone will be readers, understanding what they care about – government, local leaders, restaurant openings, scout troops, businesses, charities, governors, sports – and working backwards from there. I’m excited and optimistic about the opportunity for invention.
Bezos built Amazon by having an incredible set of programming moles in the basement who were experts at data mining customers’ interests, and connecting them with products they were willing to buy. He is no doubt excited about the prospect of bringing that skill set to the Washington Post.
The Post runs an article today about the Bezos purchase, anticipating such changes:
If someone is interested only in Washington Nationals coverage and education policy news, for example, Amazon technology could easily deliver a customized home page built around those topics.
But what happens when the moles come back and tell him that, just as the Huffington Post found, the thing readers “care about” is celebrity boob jobs? That celebrity gossip and light porn are huge traffic drivers which bequeath a pretty respectable new reader retention rate to the news division?
With more data about the newspaper’s readers, its advertisers could better target consumers and be willing to pay a premium for those ads, said Tim Bajarin, head of technology research and consulting firm Creative Strategies.
It appears that one of Bezos’ goals is to increase revenues. He mentions that the internet is “eroding long-reliable revenue sources” and “enabling new kinds of competition, some of which bear little or no news-gathering costs.”
If Bezos intends to wring those revenues out of online advertising — the only growing segment of the Post’s revenue stream — he’s going to come up against the Google monopoly, as I mentioned yesterday.
Analysts estimate that Amazon generated $609.9 million in digital advertising in 2012, a 45.5% increase from the previous year. So Bezos is no doubt familiar with the impact that the Google monopoly has on advertising revenues.
Google now has “trading desks” in the major advertising agencies with enormous incentives to drive traffic through their system, some of them questionable. What happens during the next Presidential election cycle, if candidates and/or political parties sign exclusive deals with Google, and Bezos is forced to either let Google skim a huge chunk of the Post’s advertising revenues, or watch as they drive ads to competing sites at a cheaper price?
Some, like Reuters’ Jack Schaefer, have speculated that Bezos will use the Post’s dead tree delivery system for a same day delivery service he envisioned at Amazon. That seems awfully ambitious, and outside the core competency of the paper.
Others like John Cassidy at the New Yorker believe Bezos will use the Post as a political tool to keep regulators from going after Amazon’s own monopolistic tendencies, a theory tend I to agree with. Jon Walker argues that the price of the Post is a bargain for someone like Bezos sheerly for the political influence it wields.
But unquestionably, Bezos will attempt to increase traffic and expand readership by innovating and giving consumers what they want, as he says in his statement. Higher traffic, however, will not lead a paper into the black if you can’t monetize it, as many publishers before him have found over the years.
The Google online advertising monopoly will always limit the advertising revenue Bezos can hope to derive both from Amazon and from the Post. Fortunately for the Post, Bezos has the deep pockets to keep the paper afloat regardless.
But if Bezos ever tires of watching the Post be a money pit, he’ll have to take aim at Google.
Update: Felix Salmon notes that the lean-and-mean management style Bezos employs at Amazon may be in conflict with the Post’s “star journalist” model. It will certainly be interesting to see where Bezos thinks there is fat to be trimmed.
Elsewhere, the Wall Street Journal says that Bezos could look to ecommerce to boost WaPo revenues. While there’s nothing wrong with deriving revenue from, say, linking a book revue to an Amazon page that allows you to buy the book, they would have to fundamentally change the entire structure of the Post in order to derive enough revenue to make it financially viable. A risky venture that could potentially threaten the value of the brand itself. I don’t see it, but I’m not Jeff Bezos.