Technology of the Week: Group 35
In the wake of the digital revolution, it has been the print media publishers who have suffered the most in keeping up with other forms of media content providers, in terms of retaining a large user base. This week, we bring you two such digital services, Flipboard and Blendle, who have been doing their bit to ensure that publishers find an attractive platform to reach their target segment. Flipboard, one of the most successful apple apps ever (I-Pad app of the year, 2010) allows the users to create their own customized magazine based on their interests. Its feature of running full page ads has made it highly popular with advertisers and publishers alike. On the other hand, Blendle is an upcoming Dutch start-up which works on a pay-per-view model. It is similar to how I-tunes operates and is an attractive proposition for price sensitive users.
Flipboard relies on positive network externalities to boost its profits. It subsidizes its customized service offering to end users and thus ensures that price is not a barrier when trying to attract new customers. This has gained it its 100 miliion user base worldwide and made it a favourite channel for advertisers to reach a diverse user base. Advertisers also favour the fact that they get to run full page ads which are usually more eye catching and not considered a distraction like the banner ads. Hence, Flipboard has currently an elite list of advertisement partners who pay a premium which more than offsets the costs of collecting and distributing information for free, thus making it an economically profitable model. But in the quest to win the clickbait race, Flipboard must guard against compromising on content quality.
Blendle’s model of pay only what you read is bound to find a lot of takers in the occasional readers category. Usually the subscription charges by reputed journals is above the reservation price of a one-time user. But through its novel technique, Blendle ensures that readers get more value of the nominal amount they pay upfront. Currently the pricing power is given to the publisher and the €0.2 price per article ensures that that the cost per article is recovered by the publisher by selling an efficient number “N” of articles. The only challenge with this that publishers should be wary of losing bargaining power as had happened with the music owners in the case of i-tunes. Also, many users differ in their valuations for information as per their need, so a per-use pricing might prove economically inefficient during low-value periods.
Overall, we believe that both these technologies have reduced transaction costs for readers and publishers. The key challenge is to fight declining ad revenues in the wake of stiff competition. Compromising on quality of articles should be a strict no. To tackle this, we propose a gradual shift towards video ads which not only ensure a premium price but are also more popular with users. This will ensure long term sustainability of these innovative business models.