Go West – In the quest for digital-age prosperity, legacy newsrooms are making pilgrimages to Silicon Valley

This article first appeared the Columbia Journalism Review Magazine.


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November 1, 2013
by Alison Langley

In March 2012, the nation’s public broadcasters gathered in Austin, TX, for the annual meeting of the Integrated Media Association, a public-service broadcaster group dedicated to smoothing the transition to the digital age. At the front of the room, Jake Shapiro, the chief executive of Public Radio Exchange (PRX) in Boston, and John Bracken, director of media innovation at the Knight Foundation, announced that they had formed an accelerator for start-up companies. The project would marry Silicon Valley innovation with the mission and values of public-service broadcasting.

“We can overcome public media’s innovation and talent gap by becoming a magnet for these efforts,” Shapiro reportedly told the crowd.

John Boland, president of California’s KQED, nearly jumped out of his seat when he heard Shapiro. “This was exactly what we were looking to do,” he says. “We weren’t sure what part, but we just knew if this was happening in our own backyard we wanted to be involved.”

Boland had just spent the previous months working with KQED’s management, staff, and board of directors to craft a strategic plan for California’s largest public media organization. Their conclusion was dramatic: They needed to rebuild their ship while it was still floating in the water.

KQED’s business model—deliver high-quality content for free and then ask those who can afford to contribute—was still sound. Voluntary contributions from individuals, which account for nearly 50 percent of revenues, have been stable over the past five years. Total revenues in 2012 were at an all-time high. But the station’s TV audience is aging, and its radio listeners are only a little younger. The youngest and fastest-growing portion of KQED’s audience is online, and the station had to figure out how to tailor its product to their needs. “People want more on digital platforms. They still want their radio and television, but they want more on their digital platforms,” Boland says. “Now is the time for big changes.”

Boland nabbed Shapiro and Bracken when the conference session was over. He wanted into the incubator. By December 2012, Matter Ventures—a partnership between KQED, Knight, PRX, and Matter managing partner Corey Ford—was born.

Matter is one of a handful of so-called accelerators, venture-capital operations organized by legacy media outlets to help carefully selected entrepreneurs launch their start-ups. It’s symbiotic: The young entrepreneurs want to turn their ideas into viable businesses, and in return the legacy outlets get a stake in the start-ups—which, if the start-ups succeed, will provide much-needed revenue. But more important, the legacy outlets hope that the products that emerge will help them adapt and thrive in the digital age. There is no guarantee of success. Although figures vary widely, one Harvard Business School study estimates that 75 percent of start-ups will fail. “We are not counting on any financial return for this,” Boland says. “However, if any of them should become the next Facebook, we would have a very large endowment.”

Accelerator camps—which focus not just on journalism but on commerce, technology, and other areas—are so in vogue these days that tech sites advise young entrepreneurs on how to choose the best ones. There are four main media accelerators, three of which started this year. In Germany, Axel Springer AG signed a joint venture with Plug and Play Tech Center to help digital-media entrepreneurs in Europe. Matter focuses solely on public media and journalism. Turner Broadcasting/Warner Bros Media Camp and BBC Worldwide Labs, founded in 2012, target entrepreneurs who can specifically help their companies. That contrasts with Matter and Springer Plug and Play, which offer their entrepreneurs independence.

Not long after Boland glimpsed the future in Texas, top executives of Axel Springer were touring Silicon Valley, in search of their own inspiration. The executives from Germany’s second-largest media conglomerate were tired of scrambling to keep up with the aggregators, search engines, and blogs that continually disrupted their once-successful business model.

While Springer’s digital segment already contributes 39 percent of company revenues, and that number is rising, its legacy segment is losing ground. By the company’s own calculations, revenues collected by all German publishers combined from online banner ads are a mere tenth of what Google Germany collects in search ads. “We didn’t have a product in place,” says Christoph Keese, an executive vice president at Springer. “Why? Because we weren’t looking. This should never happen again.”

They met with a who’s who of Silicon Valley: designers, hackers, heads of Palo Alto’s biggest companies, professors, and financiers like Plug and Play Tech Center. These middle-aged Germans even listened to a teenage whiz kid who was already getting his master’s degree at Stanford—then they hired him as an intern.

In March 2013, Springer announced a new corporate strategy. It would introduce digital subscriptions for its news sites, radically change its corporate culture, and start its own media incubator. The company already has purchased or started online classified-ad sites across Europe for jobs, cars, and real estate. It was the first in Germany to add apps for tablets and smartphones, and to erect paywalls. It lobbied for—and won—a change in the nation’s copyright law so that curators and aggregators must now pay for any content they use.

But that wasn’t enough. Springer decided to sell a slew of magazines and regional papers, including the Hamburger Abendblatt, the first daily founded by Axel Springer in 1948. Its daily print holdings in France were jettisoned, too. It set up a permanent presence in Palo Alto, where Springer managers will learn from digital giants in a visiting fellows program. Before the fellows program began, Kai Diekmann, editor in chief ofBild, Germany’s largest-circulation tabloid, led a team of three Springer executives who spent a year in California. “I learned never to ask your secretary to get a coffee . . . And do your emails on your own,” Diekmann, 49, joked in a YouTube video recorded at a party in California October 1, 2012.

Before he spent his year abroad, clean-shaven Diekmann slicked back his curly, strawberry-blonde hair with gel and wore casual chic in the office. He has since abandoned the hair gel but still wears jeans, chucks, and a hoodie over a buttondown shirt. Impish by nature, Diekmann shows off his pair of Google glasses, one of only two known to exist in Germany. But that is not the only thing he gained during his California sojourn. He conducts all editorial meetings standing up; he’s changed workflows and challenges his staff to experiment. “It’s part of a change in attitude, change in culture,” he says. “I love this DIY attitude.”

Back home in Germany, though, he acknowledges some cultural differences. Europeans do not embrace all the technological advances that come out of California, especially if they infringe on a deeply held desire to protect privacy. His company also was trashed in the press for trying to sell its regional papers, accused of selling out to digital fluff. Springer tried to defuse the criticism with a series of tongue-in-cheek videos. One proclaims Springer’s real roots were in a Silicon Valley garage. It did not go over well. The critics howled that the videos proved their point.

Diekmann remains unapologetic. Just as founder Axel Springer was the first to introduce large-format photo tabloids to Germany, the company will remain innovative, he says. Springer will invest in a new newsroom for Die Welt, its respected national daily, and build a digital-media campus to house its growing stable of digital subsidiaries on a lot across the street from Springer headquarters in Berlin that used to be behind the Berlin Wall. When finished, the campus also will be the home for its accelerator. For now, Axel Springer Plug and Play is a few blocks away from the Springer offices, encompassing the entire second floor of a nondescript 1960s office block. Its walls are spraypainted with red and black graffiti. Tables with laminate tops and folding chairs stand in the middle.

For Thilo Konzok, Torsten Stüber, Eiko Gerten, and Nico Kutschenko, the space is a perfect spot to start their company. “We wanted to do this seriously. We needed some kind of structure,” Kutschenko says. “We needed money and we needed office space. A living room is just not professional.”

The four had first met in February 2013 at a workshop in Düsseldorf, where they had been thrown together to develop a concept for a digital start-up. After 60 hours, they had one: track the trending items that people are reading about online, and offer those items for sale on a website.

By the time they heard about the Axel Springer Plug and Play accelerator, they had a name, Asuum (sounds like awesome), and the website up and running. Asuum got €25,000 ($33,400), office space, and mentoring for three months in exchange for giving the accelerator a 5 percent stake in the company.

For the first time, the four partners could concentrate solely on their site. They squeezed into a tiny apartment to cut costs, and the Axel Springer workshop gave Kutschenko some credibility with his mother, who he says wasn’t thrilled with his decision to further delay a job search after five years of university. “I could say to her, ‘At least Axel Springer believes in our idea,’  ” he says.

Life was looking good until their first mentoring session at the end of the first month of accelerator camp. It took them nearly 45 minutes to explain their concept before the two mentors finally got it. “They more or less said, ‘Give it up,’ ” says Eiko Gerten.

They were devastated. “I didn’t want to believe what the mentor said,” says Torsten Stüber, a developer who had left his job at the Dresden University of Technology to pursue his dream. “I said, ‘We just have to keep going. Just have to develop the idea and it will be good.’ I was a little bit desperate.”

It was tense. For two days. Then Kutschenko had an idea: Rather than target consumers, why not bring their idea directly to media companies? The technology can scan articles and offer products to fit the content. So why not sell directly to news sites that can use it to offer native advertising?

Stüber set to work perfecting the technology. Konzok designed ads that would fit inside an article without annoying the reader. Kutschenko identified media customers and Gerten found advertisers. They worked from nine in the morning until well past midnight. At their next mentoring session, it took just 15 minutes to explain the concept. The mentors liked it.

Asuum works like this: People reading an article about Miley Cyrus twerking might find, discretely underneath a photo caption, a small button that recommends downloading her latest hit from iTunes or purchasing an MP3 player from Amazon. Asuum and the news site share a commission if the reader actually buys a product.

Asuum’s technology is distinct because it finds the right product for each story. This impressed Diekmann. “The last thing you want is to be offering ads for kitchen knives next to a story about a brutal stabbing,” he says.

Its affiliation with Axel Springer didn’t only soothe Kutschenko’s mother, it helped Asuum get an audience with potential clients. “As soon as publishers heard the Axel Springer name, they would say, ‘Oh, yeah, come on by,’ ” Kutschenko says.

Three months into their new iteration, Asuum’s tailor-made native ads are on the sites of most major publishers in Germany, and are expanding throughout the continent. They expect to break even in December. The partners didn’t even have to wait for demo day to secure their first round of financing; they received it from their mentors.

Nearly 6,000 miles away, Jesse Shapins, Kara Oehler, and James Burns, three longtime friends, had moved from Boston to California. In February 2013, they joined five other start-ups at Matter’s boot camp run by Corey Ford, a former producer at Frontlineturned Stanford lecturer turned venture capitalist. Ford, 35, is a clean-cut guy with a baby face who uses phrases like “user-centered, prototype-driven models” three times in the space of a half hour.

At the boot camp, Ford extolled his philosophy, honed during his time at Stanford’s d.school (that’s California-speak for design school), of what it takes to make a winning business. The technology must focus on the user. And designers must continually iterate, quickly, and learn from failures. Cross-pollination is creative: The product dreamed up by a hacker, a business dude, and a storyteller will be more rewarding than one designed by technology nerds alone.

The six companies Matter accepted got $50,000 and five months of coaching. They sat cheek-by-jowl in what is essentially a large garage in the trendy South of Market neighborhood of San Francisco. Mostly they worked on their own, but twice a week they sat together. Tuesdays, they heard from a variety of speakers, usually successful entrepreneurs, designers, hackers, marketing folks, businesspeople, and investors. Fridays the campers shared their successes and problems with one another.

Once a month they rehearsed their pitches for demo day, when they hoped to secure the funding they need to survive. Throughout, they were encouraged to test their prototypes on real end users, like KQED.

Shapins, Oehler, and Burns’ company, called Zeega, mashes sound with visuals to create a new interactive storytelling format. Initially it was designed for professional clients like PRX. During their time at camp, though, they made two significant decisions: First, they wanted to simplify the technology so that anyone with a smartphone can make a Zeega. Second, they dropped the videos, at least for now.

The three founders want Zeega to be the creative person’s Twitter. “Creating a Zeega is not the same as making a video. It’s not the same as making a radio story. There are ways in which the medium itself is very appropriate for how we use media today,” says Shapins, the CEO.

KQED teamed up with Zeega as part of the radio’s “The Making of” series, a yearlong collaboration with independent producers to create the public-radio content of the future. Boland says he likes Zeega’s simplicity; its technology allows someone to tell a multimedia story with the help of a developer.

In August, National Public Radio mixed vintage photos and grainy video clips from the 1963 March on Washington with oral reminiscences from organizers 50 years later. “We really were jumping up and down; most of all because of the quality,” Shapins says. “What made us most excited was how NPR did the creative work themselves.”

In addition to Zeega, KQED is working with ChannelMeter, another graduate of Matter’s first camp, which ended in June. ChannelMeter helps companies analyze how and what videos viewers watch online. It monitors the top 50,000 YouTube channels on an hourly basis. That’s about 25 million videos every day.

Eugene Lee, 31, and Nimi Wariboko Jr., 21, the brains behind the company, hope to be tracking 10 times that number of videos in a year. From late winter through September of this year, they attended not one but two accelerator camps, where they got access to executives from The New York Times, Google News, News Corp, The Wall Street Journal, and Time magazine. What they learned is that publishers often were blindly uploading videos without knowing anything more than how many views each got.

But that YouTube number beneath the video is deceiving. It doesn’t divulge, for instance, whether someone watched for a few seconds or the whole four minutes. Nor did it disclose how the viewer found the video—via a Google search, a Facebook recommendation, or Twitter feed. “There was no strategy or planning,” Lee says. “What made it worse, they weren’t spending the time looking at the data.”

Online videos are going to be integral to news sites, but also to the future of television, and rating systems are important for advertisers and media alike. ChannelMeter’s goal is to be the gold standard of video analytics. Their data gives videos a grade based on how quickly people viewed the video, whether they watched the whole video, and whether they shared or commented on it. KQED discovered that people stayed to watch their science videos and restaurant reviews more than any other genre, and that has helped editors make staffing and resource decisions. “We learned that KQED has more video and video views than any other public broadcaster,” Boland says. “Even more than PBS. We wouldn’t have known that.”

It has been less than two years since Boland’s a-ha moment in Texas, and in that time KQED has gone from just another public-radio operation fretting about its future to a new-media pioneer that is helping solve the digital-age problems that confront all legacy outlets. It was the first to offer pledge-free streaming for subscribers who contributed $45 or more. The station is even letting Zeega squat in the KQED headquarters until the young entrepreneurs can permanently settle in San Francisco. “There’s a kind of synergy and working together that is just helpful,” Boland says. “Being a partner in an accelerator is way outside of what an American public broadcaster would do. But it made a lot of sense for KQED, and it’s paid off.”