Many of us in the news biz -- most, probably -- can't stop talking about Jeff Bezos' purchase of the Washington Post. Our thinking generally is, 1) What the hell was he thinking and, 2) Sure hope he can pull it off.
What if he is smarter than the rest of us and knows exactly what he's doing?
All Bezos offers is his ability to make $30 billion by launching a business that has reshaped retail worldwide — and his oft-stated opinion that print will be dead within a few years.
Oh, and one more thing: the dominant e-publishing platform in the Kindle.
We’ve looked at the economics of traditional publishing a number of times here at PJM, always with one result: conventional print publishing is actually a manufacturing business, in the industry of making and selling large objects made of wood pulp and ink. The cost of printing the books, records, CDs, or papers completely dominates the costs of traditional publishing. The real money-making in newspaper publishing comes from advertising: reporters report, editors edit, type is set, and paper is printed to get advertising in front of people. In the advertising business, the saying has been that 90 percent of all advertising is wasted, but no one knows which 90 percent it is. A major part of the advertising business has been involved in “targeting” — directing advertising to narrower and narrower populations of people in the hope of making it more and more likely you reach people who will buy your product.
So now, let’s imagine publishing a “paper” to an electronic platform. In fact, let’s not be coy about it and imagine publishing to the Kindle. Here, we have a platform that can deliver text content almost instantly and update it automatically; that eliminates the cost of printing.
What’s more, if you have a Kindle, Amazon already knows what you like to read, and often what you buy — I’ve bought everything from health and beauty products to specialty groceries to furniture from Amazon.
And your Kindle knows where you are: the Kindle Fire has “location services” built in.
So here’s your new Washington Post: primarily delivered on Kindles, other Android platforms, and on Kindle apps on iPhone and iPad. Amazon applies your reading preferences and generates content with the selection optimized to what you like to read — my “front page” would have lots of politics, science, and foreign news; yours might have the sports pages and feature stories instead.
Amazon sells advertising much as Google does now with Adwords and Adsense — based on what it knows you like and are interested in — and it localizes some of that advertising down practically to your street address. A Pizza Hut ad will give the local phone number for pizza delivery whether you’re at home or at the Westin in the Chaoyang District of Beijing. By eliminating the paper products, Amazon can do this at internet prices — say, a dollar a month, $12 a year — versus $360 a year now, while eliminating the dominant cost of publishing a newspaper now.
What’s more, just as Amazon transformed book selling by becoming a central source for every book buyer worldwide, the Bezos Washington Post, with the localization and targeting offered by the platform, can become the first truly national newspaper, publishing local news stories for every metropolitan area that show up to people in those areas, or to people who have expressed an interest in an area. If you’re a Colorado fan in Oakland, you still get coverage of the Rockies.
News has always traveled on the back of advertising. All the speculation in the last few years has been about whether anybody can make a profit with a mass medium now that advertising is being narrowly tailored and no longer needs or wants broad circulation. Has Bezos found the answer? If I choose to feel optimistic, allow me to enjoy my momentary delusion while it lasts.
