One would not normally draw a connection from a company like Largan Precision (TPE:3008), a small Taiwanese component supplier, to the publishing industry.But it was a very insightful observation from another Taiwanese company’s CEO – Acer founder Stan Stih – about what he called the “Smiling Curve” that created the analogy in my mind.
Enter Facebook’s popular mobile app, which has captured greater amounts of time and, more remarkably, managed to fit a business model onto the small screen by providing extremely relevant advertising…the company has become the No. Yes, search from Google still creates inbound interest, and Twitter can spark attention, especially among media types, but when it comes to sheer tonnage of eyeballs, nothing rivals Facebook.Over time, as this cycle repeats itself and as people grow increasingly accustomed to getting most of their “news” from Facebook (or Google or Twitter), value moves to the ends, just like it did in the IT manufacturing industry or smartphone industry: On the right you have the content aggregators, names everyone is familiar with: Google ($369.7 billion), Facebook ($209.0 billion), Twitter ($26.4 billion), Pinterest (private). senior dating Herlev They are worth by far the most of anyone in this discussion.Gannett Company, the largest publisher in the United States, is worth $7.14 billion, but the vast majority of that value lies in their broadcast and digital advertising holdings; most of the newspapers are worthless.I recounted the problem for newspapers in Economic Power in the Age of Abundance: One of the great paradoxes for newspapers today is that their financial prospects are inversely correlated to their addressable market.
Single source publishing konzept
Acer and its merry band of 8 OEMs competed themselves to single digit margins and ultimately stagnant growth; there simply isn’t any money in the undifferentiated middle.Fortunately for Acer, their smartphone efforts have largely failed, so they are being spared the same cycle in mobile: Nokia is gone, Sony is bleeding money, and even mighty Samsung is getting hammered (and is in fact retreating to their component business ()).The general takeaway is that Google proved it was adding value to the publishers, but I have a different angle: the publisher’s demonstrated that they provide no value to their writers.See, Largan Precision doesn’t really care if their camera phone modules end up in i Phones or Galaxys or Lumias, or if they’re physically integrated by Foxconn or Quanta or Compal.From Wikipedia: A smiling curve is an illustration of value-adding potentials of different components of the value chain in an IT-related manufacturing industry…According to Shih’s observation, in the personal computer industry, both ends of the value chain command higher values added to the product than the middle part of the value chain.
If this phenomenon is presented in a graph with a Y-axis for value-added and an X-axis for value chain (stage of production), the resulting curve appears like a “smile”.
Even as advertising revenues have fallen off a cliff – adjusted for inflation, ad revenues are at the same level as the 1950s – newspapers are able to reach audiences not just in their hometowns but literally all over the world.
The problem for publishers, though, is that the free distribution provided by the Internet is not an exclusive. Moreover, it’s also available to publishers of any type, even bloggers like myself.
That Stratechery article, by the way, was about how German publishers were taking Google to court to demand compensation for article snippets that appeared on Google News.
Instead Google simply removed the snippets, which resulted in such a drop in traffic that the publishers this week came crawling back asking Google to re-add the snippets, no compensation required.