With Publish2 News Exchange, we’ve created what the AP should have become, but can’t because of a classic Innovator’s Dilemma. The New AP is an open, efficient, scalable news distribution platform. We’re enabling newspapers to benefit for the first time from the disruptive power of the Web, and from the efficiency of content production on the Web.

Read more about the New AP at the Publish2 Blog now.

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Fast Flip is a new package for news.

The publishing business has always been about packaging content. Newspapers. Magazines. Newsletters

In digital media, on the web, the news package is now a function of software — which is why Google is innovating precisely where publishers are not.

Fast Flip is, more accurately, an attempt to create a new UI for news — a better way to consume publishers’ content than publishers provide on their own sites.

Most publishers are focused on how to charge for news. But there’s very little talk about how to innovate the packaging of news, much less a new UI for news. There’s very little talk about how people consume news on the web, about the value of aggregating articles from multiple sources, about solving consumers’ problems rather than publishers’ problems.

That’s why Google is taking the lead on figuring out how to create the new news package, and why they will continue to control the lucrative front end of distribution, while publishers are left with far less profitable back end of content creation.

Google is sharing revenue with publishers because Fast Flip goes way beyond linking to actually partially reproducing entire web pages. And publishers will have to be content with the revenue that Google shares.

Unless they finally decide to compete on the real playing field that will determine the future of news and publishing.

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Google isn’t stealing content from newspapers and other media companies. It’s stealing their control over distribution, which has always been the engine of profits in media. Google makes more money than any other media company on the web because it has near monopoly control over content distribution (i.e. like a metro newspaper in the pre web era).

Those who argue that Google is a friend to content owners because it sends them traffic overlook the basic law of supply and demand. The value of “traffic” is entirely relative. The more content there is on the web, the less value that content has — because of the surfeit of ad inventory and abundance of free alternatives to paid content — and thus the less value “traffic” has.

The more content there is on the web, the less money every content creator makes, and the more money Google makes by taking a piece of that transaction.

Nick Carr sums up the problem well:

What Google doesn’t mention is that the billions of clicks and the millions of ad dollars are so fragmented among so many thousands of sites that no one site earns enough to have a decent online business. Where the real money ends up is at the one point in the system where traffic is concentrated: the Google search engine. Google’s overriding interest is to (a) maximize the amount and velocity of the traffic flowing through the web and (b) ensure that as large a percentage of that traffic as possible goes through its search engine and is exposed to its ads.

The debate over whether Google’s excerpting content on its search result pages is a violation of copyright law, i.e. whether Google is effectively stealing content, overlooks the much more valuable asset that Google is appropriating. Google makes money less by its ability to display that snipet of content and much more by its ability to know that snipet of content is relevant to what the content consumer is looking for — it makes money by its ability to efficiently distribute that content.

And just how does Google know what content is most relevant, trustworthy, and valuable? How does Google know where to send the traffic that yields such diminishing returns?

Everyone talks about Google’s algorithms as if it were some giant artificial intelligence that had its own ability to judge the value of content.

The greatest irony of the web content economy is that Google by itself doesn’t have a clue what content is good or bad. Google is able to deliver relevant search results only because every site on the web helps them figure it out.

Google’s algorithm is based on reading “links” as votes for content. Every time a website links to another website, Google reads that link as a vote. The brilliance of the Google algorithm is its ability to figure out which votes should count more.

But without those links, without those “votes,” Google has nothing.

What Google “steals” from every website isn’t the content — it’s the links.

It’s the links, stupid. And everyone gives Google their links to read — for free!!

Google doesn’t really need your content, because there’s plenty more where it came from. What Google really needs is your links, i.e. your votes for content — it needs your help separating the wheat from the chaff on the web.

The backlash against URL shorteners and site framing (e.g. DiggBar) is all about who controls the links, and which links Google is going to read and credit.

The key to Google’s monopoly control over content distribution on the web is its ability to judge what’s most relevant in an increasingly large sea of content.

If media companies want to compete with Google, they need to look at the source of its power — judging good content, which enables Google to be the most efficient and effective distributor of content. They also need to look at Google’s fundamental limitation — its judgment is dependent on OTHER people expressing their judgment of content in the form of links. Above all, they need to look at sources of content judgment that Google currently can’t access, because they are not yet expressed as links on the web.

The balance of power on the web can shift — but only by understanding what the real sources of power are.

UPDATE

Just to clarify,  the use of “steal” and “stole’ is in the sense of “stole the game.” The point of this post is to explain how Google won, and not at all to suggest that they didn’t deserve to win. Google’s success is a direct reflection of how much value they create, i.e. A LOT — they solved a problem in the market that nobody else figure out how to solve or even recognized as the huge opportunity in the market. This post is also intended to help media companies understand better how Google works so that they can better compete in the web content marketplace, not to justify any feelings of “sour grapes.”

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The old syndication model in the old content economy just won’t work today when all the world needs is one copy of a story up in the cloud with links to it. Today, the more links that article can get, the more valuable it is. So sharing value with those who send links to it only makes sense.

An AP representative commented:

We believe AP news is a critical ingredient for all news reports, both directly and as a foundation for many other sources of news. Breaking news from AP journalists around the world and in the United States, for example, serves as the origin for stories pursued by both AP members and many other news organizations.

AP still plays an important role in producing original reporting, but it’s now just one of many sources of original reporting that newspapers can tap into, as the Star Ledger did:

New Jersey’s Star-Ledger today put out an entire edition without anything from the Associated Press within. The sharp-eyed reader will notice lots of local news by staff plus articles from other papers–Washington Post, LA Times, McClatchy, the Glouceseter County Times–and content from online services such as Sportsticker.

AP publishes all of their original content on Google and Yahoo — on the web, any news site can link to that content, without having to license it. AND, they are not limited to linking to AP — they can link to any original reporting on the web.

A commenter on responded to the AP rep:

But Paul, how will the AP retain it’s value when
1. The web is a pretty good newswire and it’s free.
2. When, like Jeff said, you only need one copy of a story online and everyone else can just link to it.
3. When, even if the shared content model works in print, it is actually worse than useless online – and everyone’s moving online?

The web is already a “pretty good newswire” — and with collaborative tools that enable newsrooms to discover, share, and publish links to the best content, it can be even better.

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There’s no such thing as a local website.

Think about it for a minute.

There are websites that publish CONTENT pertaining to a particular locality — but a local WEBsite is an oxymoron, because all websites exist on the WORLD WIDE web, i.e. any website can be accessed (barring censorship) anywhere in the world.

A local newspaper, in contrast, is only distributed in a limited geographic region. Before the web, if a local newspaper reported a story of national significance, there were two ways for that story to get national distribution:

1. A wire service distributed and/or rewrote the story
2. A national news brand re-reported (and/or rewrote) the story

That was the solution to the problem of physical distribution — but now, local news content published on the web by a local news brand can be accessed anywhere in the world.

And yet it isn’t — because now the distribution problem isn’t a physical limitation, but instead a problem with ATTENTION. There is no way for that story to get attention on the web outside of the audience who already visits the local news brand’s website because they know the brand locally.

But what if there were a way for a local story on a local news brand’s website to get national attention?

And what if there were a way to do it without the help of Google, Yahoo, Microsoft, AOL, New York Times, or any other national brand?

Well, there is way…

A local news brand’s content could get national attention on the web if every other local news brand linked to it on their websites.

Huh?

Let me take a step back to explain. I’ve been writing a lot about link journalism, a way that journalists can enhance their original reporting and even create a new type of original editorial content by linking to other content on the web.

Because journalists don’t link to anything, they are completely disenfranchised from the web’s link driven distribution system.

But what if journalists did start to link… to each other.

Bloggers have been doing this for years, which is why some top bloggers have better distribution on the web than many journalists.

Ryan Sholin has a list of top blogs that journalists should emulate in their effort to become web-native reporters — most of Ryan’s suggestions are masters of link blogging.

Now imagine if 1,000 newspapers where actively link blogging about issues of local importance — and linking to each other’s reporting on the same issues as part of their link journalism effort.

For example, take the killings at Northern Illinois University, a tragedy of national interest. This event happened in Rockford Register Star’s backyard, and they reported the story from a unique local perspective.

Now imagine if local news brands around the country, as part of their coverage, linked to Rockford’s reporting — and to reporting by the Daily Chronicle in Dekalb, and reporting from other Illinois papers.

If enough newspaper sites around the country did this, the original reporting by these local news brands could have effectively gotten national distribution.

Here’s a less dramatic example. Let’s say you’re a local journalist assigned to report on concerns about local water quality. A simple search on Google news reveals local stories on water quality from across the country, fodder for a great link journalism piece to complement original reporting on how the issue presents in your locality.

But the result would be that your link journalism drives traffic to other local sites — put another way, your journalism would contributing to the national distribution of the reporting by those other local journalists, on the issue of water quality.

It’s national distribution, using a distributed model, i.e. distributing content across hundreds of localities adds up to national distribution. (Yeah, it takes a while to wrap your brain around that.)

But not only is it national distribution, it’s content targeted distribution — you’re directing people interested in a topic to other content on that topic.

This is just scratching the surface, but here’s the key — local newspapers need to reinvent their business model. And the current business model is failing because it’s based on a shrinking distribution model.

So how do you reinvent the business model?

First you need to reinvent the distribution model.

(Shameless plug: Imagine if there were an easy way for journalists to share with each other links to their best reporting, and to vote up the best local reporting on issues of common interest, kind of a Digg for journalists, editors, and newsrooms, where they could combine the power of their links and create a new distribution network — then local news brands could really drive large quantities of traffic to each other’s reporting.)

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This idea jives with a provocative article in Fast Company about a new disruptive Duncan Watts theory. After last year debunking the “wisdom of the crowds” using the theory of cumulative advantage, Watts is back, this time debunking the idea that there is a class of “influentials” who is more likely than others to spread ideas, trends, product endorsements, or anything else that can be spread virally. The existence of unique classes of influencers was the premise behind Malcolm Gladwell’s The Tipping Point. But Watts, a Columbia professor doing work for Yahoo Research, says it’s all bunk.

The more Watts examined the theory of Influentials, the less sense it made to him. The problem, he explains over lunch in a Midtown restaurant, is that it’s incredibly vague. None of its proponents ever clearly explain how an Influential actually influences.

“It sort of sounds cool,” Watts says, tucking into his salad. “But it’s wonderfully persuasive only for as long as you don’t think about it.” For example, in The Influentials, Keller and Berry argue that trendsetters draw their social power from being active in their communities. Their peers naturally turn to them for advice. Need to buy a new car or navigate city hall? Everyone knows whom to trust. Gladwell, for his part, argues that trends spread like diseases; Influentials are the vectors who amplify and propagate the infection.

Fair enough, as a top-down view. But it’s murky, and for Watts, this is a critical flaw, because precision matters when you’re trying to explain highly social epidemics. Merely arguing that influence spreads like a disease isn’t enough, because, he says, diseases spread in very different ways. Some require multiple exposures; some don’t. Some reward “superspreaders,” and some don’t. (SARS broke out in Hong Kong not because the first victim was a superspreader but because a doctor mistakenly hooked him up to an aspirator–ventilating SARS-infected breath into the hospital air.)

This got me thinking about the dynamics of influence on the web, where in the age of Google PageRank, inline linking, and social applications, the link is the principal driver of “network efforts” and influence.

The reason Google’s search results often contain more blogs than traditional media content is that blogs were the first to harness the power of the link. Blogs linked to other blogs, while traditional media brands remained disconnected silos. Savvy web users — many college age or early 20s — pooled their links on Digg and developed the power to drive server-crashing volumes of traffic, forcing traditional media sites, who still lack such influence, to plaster themselves with Digg This buttons.

Embedding YouTube videos is a form of linking that allowed MySpace users and bloggers to drive the online video revolution. NYTimes.com users leverage the power of links in emailed articles to create a list of most emailed articles whose influence arguably rivals the NYTimes.com homepage.

One reason the emergent Twitter network is becoming so powerful is the widespread sharing of links. Twitter users are not influential because they have influential personalities, but because they are early tech adopters who are excel at figuring out how to use new web technologies to influence and create link-driven networks.

You can explain the power of social networks and the “social graphs” in terms of links — every Facebook profile has links to other Facebook profiles. Same with MySpace. And LINKEDin — get it?

Journalists and PR professionals, the influence brokers of traditional media, have lost a huge degree of influence on the web in large part because they don’t link to anything. While traditional media brands are still powerful channels on the web, they are losing influence everyday to the link-driven web network — journalists and PR professionals can no longer depend on controlling these former monopoly channels to exert influence online.

Whenever I give talks to traditional publishers who have been afraid to link to other sites because it will “send people away” instead of keeping them trapped in the publisher’s own content, my now standard response is to say that there’s a site that does nothing but link to other sites — all it does is send people away. And yet remarkably, people keep coming back. So much so, that this strategy has translated into $10 billion+ in advertising revenue. (Yes, Google of course.)

Anyone can become influential on the web simply by setting up a blog or an account on a social network or social bookmarking site and linking to people and content that interests them. Anyone who is influential offline and wants to retain that influence online needs to start linking — and to leverage those links in a large network.

Influence on the web is all about connectivity — the larger the network, the more powerful the links.

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I found this video embedded on a Google News page, as part of their trial of this feature with a number of video content producers, including CBS, who have syndication deals with YouTube:

Lastly, read these wise words from CBS about their strategy to broadly syndicate their video content rather than wait for people to show up at CBS.com (which wasn’t happening):

“CBS’s ability to partner with leading next-generation interactive platforms is the best way for CBS to evolve from a content company to an audience company,” said Quincy Smith, President, CBS Interactive. “It’s really all about the user and in building the CBS Interactive Audience Network, we are bringing our content to each unique platform of their choice. In remaining open to all online distributors and community builders – big and small – we can learn more about our existing audience, be exposed to new ones, and flexibly cater to their changing consumption habits.”

It’s not clear to me whether YouTube is part of CBS’s Interactive Audience Network syndication deals, but CBS is clearly using the same philosophy to rationalize having a YouTube distribution channel and, as extension of that, participating in the new Google News video feature.

CBS’s deal with YouTube might not be as good as the deals they cut through their own network, but having their own network gives them leverage, so I’d be surprised if their wasn’t revenue sharing involved with YouTube deal, if not now then in the near future.

The reality for video content producers is that they can’t depend on viewers to come to their sites — they need to syndicate their content to where their viewers are. The key to successful syndication is being able to monetize the content wherever it appears, as WSJ did with a pre-roll ad on a video from the All Things D conference that I embedded here (the ad is gone now).

Donna Bogatin gets unnecessarily bent out of shape about the new Google News video feature, siding with Sam Zell’s theory of Google exploitation:

The days when Google News apologists can ridicule Sam Zell’s indictment of Google News’ Google-centric exploitation of the content of others are numbered; The erroneous assumption of a Google News “fair trade” link barter economy is being exposed, step by Google step.

Is Google paying CBS, Reuters, Hearst for its for profit use of their proprietary, copyright videos? Unlikely, as the Google News video insertions come via Google’s no-need-to-pay-for-the-content-of-others-DMCA-fueled “business model” YouTube.

As I’ve demonstrated with the video embed above, it makes no sense to compare the video feature to the core Google news story links because the videos being embedded on Google News via YouTube are videos that are available to be embedded ANYWHERE, not just on Google News.

With the inclusion of videos in Google News, Google has significantly expanded the distribution it is offering content companies with YouTube distribution deals — whether those deals have sufficient revenue sharing on any ads that are syndicated with the video is an entirely separate issue.

The Google News video feature is no different really than Digg’s video pages — the only videos that can actually be played on the Digg site are videos that are published in embeddable players like YouTube, i.e. videos that are intended to be syndicated and played anywhere and everywhere.

For video content producers, rationalizing all of the available distribution channels should ultimately be a matter of dollars and cents. CBS is smart to focus on audience — because that’s how content producers can best value their content in a distributed media world. Ultimately, CBS will sell the audience they reach through Google News as part of their overall audience — and they’ll have to decide whether the deal they have with YouTube allows them to sufficiently monetize this extension of their audience.

UPDATE

Hmmm, what a “coincidence” — right on cue, the news comes out that Google is introducing a new InVideo ad format, which as appears as a teaser at the bottom of the video 15 seconds in. You can click to view the ad in a smaller pop-up viewer, then go right back to your video. (via Marketing Pilgrim)

Here’s an ad for the movie “Hairspray” in an ad that features, well, hairspray:

It’s certainly an interesting alternative to completely interruptive pre-roll ads and forgotten at the end post-roll — but the teaser that appears at the bottom is interruptive to some degree, and I can see it being annoying in some instances. But then, no advertising is perfect — certainly, it’s a worthy experiment.

UPDATE #2

As of this moment, the “Hairspray” ad has mysteriously vanished from the video above. The New York Times also used this as an example of the new video ad format — OOPS! Maybe it will be back later.

UPDATE #3

Ah, it seems that when you view the video a second time, the ad does not appears — let me know if you can see it in the clip above.

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All these content owners are right to be focused on distribution. The lesson of the web is — get your content out there. CBS’s deal is particularly notable because it gives consumers who want CBS’ content a lot of options for where and how to get it.

But what about people who don’t know that they want CBS’s content? Some of them will stumble upon it when they visit one of CBS’s distribution partners. Bring your content to where people already are — this is another big lesson of the web.

But all of these distribution deals, from a consumer perspective, are rather arbitrary. Your chance of finding video content that you really like is largely a function of who cut a distribution deal with whom.

Google, of course, is the grand daddy of distribution — AdSense is the largest network of websites on the planet. And there’s evidence that Google is going to use that network to distribute more than just ads. The example below is a promotion for Gmail, but it’s not hard to imagine such widget ads used for content distribution. (Not sure how long this embed will continue to work — I found it on the Google Operating System blog.)

Google’s contextual relevancy system works pretty well for putting text ads in places where they are likely to be relevant, but how well is this going to work with video? Will their be enough metadata for Google’s prodigious algorithms to handle it? Or will it require human intervention?

YouTube has worked well enough for video content discovery, but it’s not the killer app because, like old media, it needs to “own” the content, i.e. the content has to be uploaded on YouTube. Not a very Web 2.0 platform from that perspective. If the companies that own massive amounts of video content refuse to play with YouTube, Google will be far from having the online video game sown up.

Whoever figures out a scalable, networked, distributed, Web 2.0-compliant solution to the online video discovery problem may find themselves in the rare position to compete with Google.

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Mr. Chernin said Google Chief Executive Eric Schmidt called yesterday and said Google will consider signing on as a distribution partner. A Google spokesman confirmed a call took place, but declined to comment on what was discussed.

After spending $1.65 billion on YouTube, that must have been a tough call to make.

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You’re looking at the new media business. It’s not longer about creating content — we’re drowning in content. No, it’s about creating platforms for content on the network, then letting the network do its thing.

Everyone is of course focusing on whether NBC and News Corp are going to allow “user-generated content” or just “premium content” — but the reality is, IT DOESN’T MATTER. It’s just one big mass of content along a spectrum from great to crappy. And there’s more of it than anyone knows what to do with.

No, the business here is about platforms and distribution.

From the conference call:

Extending offer to other distribution partners, wants to work with everyone.

we want ubiquitous distribution

this is a web distribution venture

When there’s an overabundance of content and not enough consumer attention to go around, the value creation opportunity is in connecting consumers with content — it’s in aggregation, distribution, and filtering. Google gets it. The big media companies get it.

So when I say the content business is dying, I don’t mean you can’t make money off of content creation anymore. I just mean you can’t make a lot of money.

Want to see the future of media? Follow the money.

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I was struck by this quote from a music business manager in the WSJ article about the complete collapse of CD sales:

Jeff Rabhan, who manages artists and music producers including Jermaine Dupri, Kelis and Elliott Yamin, says CDs have become little more than advertisements for more-lucrative goods like concert tickets and T-shirts. “Sales are so down and so off that, as a manager, I look at a CD as part of the marketing of an artist, more than as an income stream,” says Mr. Rabhan. “It’s the vehicle that drives the tour, the merchandise, building the brand, and that’s it. There’s no money.”

No money. The content that used to be at the center of the music industry has been reduced to a loss-leading marketing platform for the real business, which is live entertainment and related merchandise sales. Apple’s iTunes is not really a platform for selling music but rather for selling hardware.

It seems in recent years that as the music industry goes, so goes the rest of the media industry. Is there reason to believe that other forms of content will suffer the same fate as music? There’s one critical commonality to what the Internet and digitization has done to all content that would support this theory: disaggregation

All the focus on the digitization and online distribution of music — and now video — has been on piracy. But what if that’s just a red herring?

You could argue that the most striking consequence of digitizing media and distributing it online is that all content is now available in a discrete, granual form. Music file. Article page. Video clip. Podcast. Photo. There are very few places on the web that require you to buy a whole package in order to get one item.

This is a radical transformation of the content business. Think about it.

How many CDs have you bought for just one song? How many magazines have you bought just to read one article? How many cable channels do you subscribe to in order to watch just one channel? How many radio stations have you kept on in the car because you heard one song that you liked? How many newspapers have you bought just to read one section?

The media business has always been about selling you content that you don’t really want by stapling it (literally or figuratively) to the content that you do want. The digitization of media on the network has obliterated this model. What if music is just the canary in the coal mine?

There’s already one high-profile instance of this trend in the video content business. TV clips on YouTube. I’ve heard a thousand times the argument that media companies should embrace YouTube as a “free promotional channel.” Let users upload clips of your shows — don’t sue YouTube– it’s free promotion.

This argument has bothered me every time I’ve hear it, and now I know why — because it’s following the pattern of music sales in the quote I cited above. Can’t make money off the content in one channel? Use it to promote your other channel. BUT, that assumes that the other channel is not, in fact, being eaten alive by the channel you’ve written off as free promotion.

Henry Blodget posted a dialectic about whether Google is the “King of Media,” which was based on this assumption:

For the purposes of this debate, I’m going to assume that to be “King of All Media” one can’t just be a distributor.

I would assume just the opposite — that content distribution businesses, or more accurately in digital network terms, content platform and content aggregation businesses (think Google, YouTube, MySpace, Facebook, Digg) are the only real media businesses left.

Oh well. If Google has its way, maybe the content business can transform itself into a direct marketing business.

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In the few months since Google paid $1.65 billion to acquire YouTube, both companies have tried to come up with a formula to turn the hugely popular online video site into a moneymaking venture.

Turns out, it’s not easy.

YouTube’s value proposition to average web user is tremendous — we’ll host any video content for free, and you can distribute it anywhere you want through simple embed code. For media companies, the free hosting is nice, but they can afford their own hosting infrastructure. The embed feature is now a commodity — all video platforms will have it if they don’t already, so the mechanism of viral distribution will be universal.

So the only real value YouTube has left to offer is content discovery — more people go to YouTube to find videos than anywhere else, whether through search, channels, community, or because the millions of syndicated YouTube clips drew them back to the mother site. A near monopoly on content discovery, i.e. search, is of course what drove Google’s eye-popping success.

But YouTube won’t have a monopoly on video content discovery forever. It’s only a matter of time before there are dedicated video search destinations that cover the entire web, not just one site (paging Google). Other content discovery platforms, such as social news sites (e.g. Digg), will increasingly be destinations for video content discovery.

YouTube will likely always be a great destination for video content discovery, but it won’t have anything resembling a monopoly, which has made most media companies question whether they need to share any revenue with YouTube.

The argument goes that media companies should want their clips on YouTube as a form of promotion, and so long as YouTube dominates video content discovery, that makes sense. But as the options for video content discovery proliferate, media companies will no longer be beholden to YouTube and the revenue sharing terms it has put on the table.

The other problem for YouTube is that some significant portion of its value to average users has been the ability to upload and find mainstream media content. If users can no longer do so on their own terms, YouTube will lose another big chunk of its value proposition.

What’s great about YouTube for online media observers is that it’s an excellent test case for how the dynamics of content hosting, distribution, and discovery will play out on the web.

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