The X Prizes for news (and media)

A conversation with our Knight Foundation friends at Aspen inspired me to think through what an X Prize for news could accomplish. Then this week’s report in the New York Times about the awarding of the NetFlix X Prize – and the far greater value it created, not just for NetFlix, but for its participants and others – inspired me to buckle down and open that conversation here (and at the NewsInnovation site).

I’m not asking idly. With the right structure, I’d seek funding to administer such a prize at CUNY and we can hope that smart companies, organizations, and patrons will see that an X Prize could be a way to innovate aggressively and openly. Or is it?

We must start with a question: What is the core problem the prize is trying to solve? It can’t be just about getting more revenue for existing companies or thinking of another way to tell a story or, Lord knows, making something cool. The best expression of the problem will yield solutions that must be groundbreaking and new, quantum leaps undertaken on daring, hope, and hubris. Innovation won’t come from incremental changes to an existing structure. We know that too well.

Another key question is how success is measured – tangibly, metrically, from a distance, not emotionally. In something as amorphous as news, that’s going to be hard.

Next, we have to define news carefully – that is, broadly. News shouldn’t be defined as we do today, for the winners of the prize may create something we haven’t seen yet. Our definition of news is probably just about a community informing itself – better informed individuals and society (“better” as defined by them).

Finally, we have to recognize that the problems to solve are centered more on business issues than product issues – on sustainability – but that is not to say that the product should not be radically rethought as part of this process.

I see three key problems to solve for news (which I’ll make conveniently alliterative):

1. Engagement. In our most recent phase of the New Business Models for News at CUNY (funded by Knight), we used the sinfully low industry standard for engagement with newspaper sites: 12 pageviews per user per month. Facebook users have that much interaction with the service every day. Time spent online in social sites and blogs accounted for 17% of time overall – vs. 0.5% for newspaper sites, according to separate estimates (and advertising on social sites doubled while it plummeted for newspapers). For God’s sake, if news services were truly of their communities, they would have many times more interaction with many times more people in those communities and interaction would go far beyond reading.

Engagement is a core business problem. If you plug in higher numbers into our NewBizNews models – and we will, in our blow-out cases – you’d see much better businesses able to support much more news. You’d see news as a very profitable industry again.

So let’s say the first challenge is to multiply a community’s engagement with news. How is that to be done? Surprise me. Shock me. Invent entirely new ways, new platforms, means, and media to gather and share news.

How do we measure engagement? I would not measure by pageviews – in great part because I do not want contestants to just assume that it’s a site they’re inventing. See one more time Marissa Mayer on hyperpersonal news streams and me on hyperdistribution. News has to go where the community is and we no longer expect the community to come to it. It has to be of and among the community. Time is a slightly better measure of engagement but it, too, is shallow and can be manipulated with tricks.

No, engagement is more about ownership: people believing that and acting as if they owned this thing. It’s theirs – as Wikipedia’s and craigslist’s communities believe they own those properties and as each of us believes we own our Facebook pages or Twitter feeds or blogs. But an opposite danger lies there as well. One shouldn’t measure engagement by contribution (as many of us did in the early days of the web). Go to Wikipedia’s 1 percent rule.

So I’d say the measurement has to be made by a combination of metrics – say, time combined and attitudes: Take a baseline a survey of users of news sites today against certain beliefs – “My makes me part of the community of news”; “ is a member of my community of news just as I am”; “I feel a stake of ownership in”; “I feel a measure of control over”; “I feel a responsibility for”; “I am better informed with”. Then require that the new thing multiple some index of these factors by an impressive amount. If Facebook is 30 times more engaging than a newspaper site, then how about 10 times, even five times – that would make a huge difference in the business of news.

2. Effectiveness. This is effectiveness for media’s other customers, its paying customers: advertisers, or perhaps we should say marketers (to include ecommerce and not limit the business relationship).

News sites – like most media sites – are still selling what they used to sell in their old media: space, time, eyeballs, scarcity. Google won business away from them by selling something else: performance. Google thus takes on risk on behalf of advertisers – if Google doesn’t deliver relevance and you don’t click, it doesn’t get paid – and so its interests are now aligned with its advertisers’. And because Google created an auction marketplace that takes advantage of abundance – there is no scarcity on the internet – then prices are lower. For an advertiser, what’s not to love? That’s why I roll my eyes when old media people complain that Google stole their money. No, Google competed and saved advertisers their money.

At the same time, I believe that news and media will be supported primarily by advertising and so they had best figure out new ways to serve advertisers – even as advertising shrinks. For purposes of sustaining news, I think it’s best to concentrate on local advertising, because – in the U.S., at least – most journalistic resource is expended locally, much of government is local, there is opportunity to grow there, and the crisis in the news industry is primarily local.

The solution cannot be about increasing clickthroughs to banners. That merely extends the bullshit online media are selling. No, it has to be about much richer ways to measurably improve merchants’ businesses: to add value.

Ah, but measuring it is the tough part for that itself sets the shape of the invention: Is it more people to a web site, more people to a door, more sales of particular merchandise, better brand awareness, better relationships? Help! What do you think?

At CUNY, with additonal funding, we soon hope to do more research with local merchants for NewBizNews to get a better sense of their needs. But then again, they may not know it until they see it. I’ve spoken with advertisers who still don’t understand why a customer’s Google search matters to them.

So for the sake of discussion, let’s say that one could take a test group of merchants and used the methods and means created by a contestant to utilize a relationship with online media of some form (that is, advertising) to improve their sales by N percent over N period with at least an N return on investment. In the end, it’s simply about improving their businesses, isn’t it?

Any multiple of this effectiveness would also have a profound impact on the sustainability and profitability of news (so long as it’s a news entity that makes it possible). In our New Business Models for News, we used what we believed – though some disagree – was a conservative $12 CPM ad rate. It was also conservative to presume old ad models: i.e., banners. But then Google’s Marissa Mayer turned around and talked about hyperpersonal news streams, emphasizing the business potential: If you know that much about people to be hyperpersonal and if you are incredible good at targeting – at discerning intent and delivering relevance – then the efficiency, effectiveness, and value of marketing there would skyrocket. An X Prize winner would think this way.

3. Efficiency. This is to say cost. What does it cost to produce news, to gather and share what a community knows? The closer that marginal cost can be brought to zero, the more news we can afford. That’s good for society.

That may not sound good for professional journalists, I know. And employment of journalists has been the default measurement of the health of news. (This is why I have quibbled with BusinessWeek’s Michael Mandel’s analysis, here and here.) But I’m not suggesting that there are necessarily fewer reporters (there will be fewer production people). Indeed, in our New Business Models for News, we ended up with a equivalent number of people doing journalism in our hypothetical market, only they weren’t all in a single newsroom. Most worked in entrepreneurial ventures that many of them owned, and they as a group devoted far more of their time to reporting. The net result, we believe is more journalism because it is more efficient journalism.

So I’m suggesting that journalists be made as efficient as possible and the way to do that is to make them highly collaborative and to take advantage of the work people are willing to do just because they care – the hundreds of millions of dollars people contribute to Wikipedia, adding value to it and making it both supremely efficient and incredibly valuable.

So I suggest this prize start with the goal of maximizing the journalism, finding the best ways to get the most relevant news to the most people at the lowest cost: the best way to make the most people feel well-informed from a sustainable venture. Once again, we must be cautious about the definition of news, not limiting it to the broccoli served cold currently. What do people want to know and need to know and how can we get that? What is the news that isn’t shared that has to be reported and investigated and why and how do we get that? So I might start by finding communities and having them define news and what it means to be informed, what they need to run themselves. Of course, we also need to define quality. This needs to be reliable and useful information.

How do you make a measurable contest out of that? I’m not sure. Perhaps we find a community and find out how many people want to know about, say, their school board and town board and tow events and then measure what they want to know now. Then the winners made their community better informed by the greatest margin at the lowest cost while still not losing money.

In the end, if we can find new and daring solutions to these problems of engagement (formerly known as audience), effectiveness (advertising), and efficiency (operations), we can improve news as a product (and process), its relationship with its public, its value to its customers, and its sustainability. That’s the goal. It’s going to take new thinking and experimentation to get there. An X Prize is one way to get that.

What do you think?

  • How would you define a “news site?”

    I’d argue that this prize would be extraneous because these problems have been solved already by sites that you yourself mention in this post.

    If you’re really just looking for engaging, effective, sustainable, efficient sites that deliver news and information to people, look no further than Facebook, Twitter and Google Search.

    If the unspoken goal of this is to offer a prize to anyone who can match the metrics of those sites with a site full of originally reported text articles, then I think you’ve kind of pinpointed the problem already.

    • Already solved? Yes, there’s great development. But nothing is ever solved. We can always do better. The solutions here may be using Facebook, Twitter, and Google in the service of news. Note that I don’t want to talk about a new site. I want news to go to the people where they are using such tools. So, yes, we want to approach their metrics in news.

  • JJ

    Maybe new site should do “small news” that people don’t have to read big posts and get a fast look on what is happening in world.

  • Fascinating idea, Jeff. But the X Prize analogy feels off to me.

    Those prizes have been big money for endeavors that typically require entrants to put up a major investment of their own, in capital or talent or both. The reason those prizes have been so tantalyzing is that the barrier to entry is so high.

    The barrier to entry in media is zero. As you and others have noted, there’s an enormous amount of innovation taking place right now. We don’t need any further incentives — just look around at everything that’s happening.

    Besides, this seems to imply silver-bullet solutions to things that will need lots of partial answers that add up to high societal value.

    • Dan,
      There’s no single silver bullet.
      But we do need more invention and innovation.
      And we need it in the areas I listed.
      The problem with much of the work so far is that it advances cool journalism.
      We must make journalism sustainable.
      Why not try?

      • Jeff, we don’t disagree on the basic point, the need to make journalism sustainable. And while a great deal of the work so far has been, as you say, on the journalistic side, we’re also seeing a nontrivial amount of activity on the business side — in for-profit and not-for-profit journalism/information ventures alike.

        We’ve had a market failure for monopoly newspapers (which were themselves a market failure; just ask people who were either advertisers or who couldn’t get their issues covered fairly if at all). The market is now failing for oligopoly broadcasting. Doesn’t mean the market is failing for journalism, as so many have been discussing.

        The separation of advertising from journalism means that, as you and Clay and others have pointed out, we’re in for a messy time ahead. But that mess will contain tons of innovation, because people will smell opportunity. That strikes me as a better, and more sustainable, incentive system than X-Prize-like things.

        I’m not opposed to initiatives that try to jump-start work that no one would try otherwise. But, again,I don’t share your (apparent) view that people *aren’t* trying much in this arena.

        • Dan,
          We do disagree then. We need much, much more business innovation and I point you back to the three areas I list. Where’s the great increase in engagement in news? I am by no means ready to give up on news linked to and supported by advertising and to make that work we must increase effectiveness. And I see precious little of news organizations acting as platforms and networks, which is what my efficiency point is all about. Fine, don’t enter. But I say we cannot have enough innovation and invention. Why throw a wet rag on it?

        • Not at all throwing a wet rag, Jeff. I’m just saying there are already huge incentives in all of these areas — and a fair amount of progress to show already.

          I’m happy to endorse Big Prizes for something here. But I see some problems, and I’m guessing there’s a better way to do it.

          One problem is that the metric for winning is going to be very hard to define. The areas you’ve highlighted are easy to agree with conceptually. But they’re fuzzy to measure in a way that would not severely constrain the contest entrants (or so it seems to me).

          The X Prizes and related spinoffs are aimed at getting extremely specific (and expensive to try) things done — e.g. suborbital and orbital space flights; an algorithm that improves the Netflix recommendation system (boy, would I like to bring that one into journalism); the Energy Dept.’s light-bulb contest; etc.

          So, again: My hesitation is not AT ALL about the need for more innovation on the business side. I absolutely, totally, unequivocally agree on that. It’s about the X Prize analogy.

          If someone puts the money up for these, I’ll probably get a team together and enter. I’m sure you will, too. (We should collaborate…)

          But I’d much rather see $5 million or $10 million go into a pot for startups in a venture funding system. Imagine a Knight News Challenge where the foundation got equity instead of just giving away the money. That, I’d endorse in a heartbeat, because in a field with essentially no barrier to entry we’d see an astonishing amount of action — and innovation.

        • That’s better: a discussion of how to do it.

          Once again, we clearly disagree. I do not think there is nearly enough progress in the areas I outlined. Please give a list of where you see exponential growth in community engagement in news, in value added to advertisers, and in low-cost and high-collaboration networked methods of gathering news at scale. And I repeat: When do you have enough such innovation?

          The reason I posted this, though, as I said, was to get discussion going on the specifics of the how: the measurements and goals. That’s what I’m trying to tackle and that’s the conversation I’d value. How does one measure engagement? What can one imagine being invented to radically change the engagement communities feel with their means of gathering and sharing news (to get news from its paltry current level anywhere to Facebook level: to a community level)? And so on….. I’d value your specific thoughts and ideas there.

          And, of course, we don’t disagree about money in venture funding. But we already do see that with Knight. And we don’t need a foundation to do that and take equity. That’s venture capitalism. We need venture capitalists to do that. That is when we will get real money.

          And what’s stopping it? We circle back to the prize, Dan. What’s stopping it is that VCs see a dying business with no hope for multiplied returns, an industry without the radical innovation needed. If VCs saw the potential for increasing engagement 5 or 10 fold, then they would leap in to give the level of investment you want in the marketplace. The reason for the prize is to try to crack that nut once and for everyone.

          If someone comes and with such a challenge invents, say, the hyperpersonal news stream that Marissa Mayer talks about and shows how people are engaged with it constantly in a day and how its targeting yields much greater effectiveness, then every news organization can take advantage of that experience and every news organization that does can increase its value and suddenly news is a better investment.

          There’s a method to my madness and a reason I am proposing this and that’s it. I want to feed not foundation funding for news – that well is shallow and will go dry – but news as a sustainable, growth industry, rebuilt with new measures of success.

  • Hunter College Student

    What happened to CUNY’s Kempton Award New Media Business Challenge – $1,000 Prize?

  • While the engagement, effectiveness and efficiency criteria all represent ‘good’ things, they are not unrelated. For example, we only need enough effectiveness to pay for efficiency. A super-efficient entrant does not need to be as effective.An effective entrant does not need to be as efficient. High engagement would presumably mean greater effectiveness, but might cost efficiency.

    Perhaps a better and more measurable test is simply whether the entrant is still around in five years without subsequent venture capital.

    • Precisely and well-said, Ben. They are quite intertwined.

  • Jeff, we do disagree in big ways, it seems. You see grossly insufficient progress in those areas. I see an amazing start given how early we are in the process of this shift. New things are happening literally every day. The commenter on your other blog noted, for example, that P&G is moving its marketing money solely toward engagement. That’ll help, I’d guess…

    Our basic area of disagreement remains. I still don’t see how to reduce the the nut(s) you want to crack to a single winner, as the X-Prizes do by definition. This still feels to me like a Big Solution to a problem that has many small answers. So if I were looking for ways to give out big money in the areas you list as the most needful of help, I’d have a structure in which lots of people can get what would still feel like big money individually. (There are others nuts to crack in the emerging mediasphere that I do think could benefit from your approach, BTW, most of them centering around trust and credibility; I’ll be doing a blog post about that soon.)

    We both want the market to work. You think it needs more help than I think it needs.

    • Dan,
      Why not let many flowers bloom – here’s another one.
      I see progress in some areas but not in the areas I listed.
      I’m not suggesting there’s one big solution to one big problem. But I do firmly believe what I list are big problems without solutions on the horizon. If this motivates people to tackle very hard problems like the ones I list, what’s the harm. I just don’t understand why you’d try to shoot this down anymore than I’d shoot down the entrepreneurial work your or my students do. We need more innovation and development and investment. Sorry you don’t like this method. But please don’t step on the daisies.

  • Lisa

    Jeff: How do you imagine this X Prize would differ from the Knight News Challenge?

    • The Knight News Challenge funds a host of great ideas – the best of those submitted. This puts forward a specific challenge and says the winner who meets that challenge gets the prize. Different ways to skin the cat, highly complementary.

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  • Looks like Knight is thinking along the lines I’ve suggested, i.e. potentially taking an equity stake in the ventures they fund. It’s the right approach. They can take bigger risks than any VC would take, for now, because they don’t need a 10x return on their funds.

    The VCs (who aren’t exactly absent — witness the investment in Talking Points Memo) will leap in when the herd instinct kicks in, especially when they see some other people’s investments start to pay off. I’m betting it’ll happen regardless of whether there are big prizes or not.

    • Yes, that’s yet another model. Knight can become in essence a social entrepreneurial VC taking equity stakes. That would be good. The X prize remains another alternative. And grants to nonprofits remain another alternative, each valid in different circumstances with different goals.

  • The triple criteria (engagement, effectiveness and efficiency) IMO is really just an extension of efficiency too narrowly defined. It’s all for the objective of getting results for advertisers so they will spend money to support journalism and news, and the real owners of production and distribution can derive excellent profits.

    What is the value of news in and of itself?

    If the answer to that is unobtainable, then all this debate about how to extract value from it is useless from a citizen’s POV.

    As a citizen of society, quality of life matters to me. Quality of life is generated through a myriad of interlocking systems of relationships: economics, social, governance, environment, health, education, the commons, etc. News organizations have done a poor job of providing context for explaining and analyzing quality of life. They have instead pandered to us by presenting an array of disconnected events they call news that we ought to care about or be interested in. They measure their success (read value provided to consumers) based upon audience size attracted and time spent consuming what they produce. In other words, they assume because people consumed it, it must have been good and valuable. So, they just continue to produce more of the same within this endless feedback loop. And that is because the measurement supports the arbitrage of audience attention for ad dollars without regard for real value delivered to the audience.

    Advertising intrinsically is a poor communication medium and horribly inefficient. Almost all of it provides very little value directly to consumers. It’s the equivalent of flooding the city to fill bathtubs. When I consider that Consumer’s Union on an annual operating budget of $250M delivers more value to citizens like me than the $285B (100+ times more) spent on advertising, then I have to conclude that the news orgs have created a system that supports their profit model, but does little to create value for the rest of us.

    I have every expectation as a citizen, that if you have information (news included) that can help me make sense of this world within the context of quality of life, then I will pay for it just like I pay for a car, house, a book, or electricity, because it provides a true utility for me.

    How can you reframe this to address the real value of news?

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