M.I.T.

Today was my last day of work at IDG Enterprise. It was tough saying goodbye -- I've worked with extremely talented people in all areas of the news business and made some great friends. I've learned a lot about technology and new media. There have been ups and downs, but on the whole it was an incredibly positive experience, and enabled me to grow my career in ways that I never anticipated when I began working at IDG in the late 1990s

Next month, I move onto the next chapter of my life: Full-time studies at MIT. I'm a member of the incoming class of the Sloan Fellows Program in Innovation and Global Leadership, which you can read about here. It's hard to get used to the idea that I'll soon be starting business school at one of the world's top centers for research and innovation, and will be interacting with some truly incredible faculty and classmates from all over the world. I'm very interested in focusing on the business challenges faced by the evolving news industry, but I'm leaving the door open to other areas of study. Aside from the core MBA requirements of the Sloan Fellows program, there is a lot of latitude to take business, science, and technology classes in areas that are totally new to me, or represent cutting-edge areas of research, and I truly intend to keep an open mind to the new experiences and ideas that I will encounter. I don't know exactly where it all will lead me, but that makes the journey all the more exciting ...

Image: MIT from the Prudential Tower, Willem van Bergen, creative commons generic 2.0 license


(Owing to time restrictions, my blogging will probably slow down or stop over the next few months. I may post shorter items from time to time, as well as videos on my MIT blog, but probably the best way to keep up with what I'm doing is by following my personal Twitter feed at @ilamont or my school-related Twitter feed at @sloanfellow)

Update: For more insights into the full-time Sloan Fellows program, please read the following posts.

• MIT Sloan Fellows: One semester down, two to go
• MIT Sloan Fellows program: Soft vs Hard
• An encounter with Tim Berners-Lee and the Semantic Web
• The missing constituency in climate change negotiations
• In case you're wondering what at MIT Sloan accounting exam looks like ...

Google's views of the news business: No magic bullet here

James Fallows, writing for The Atlantic, has published a fascinating but mistitled feature on Google's approach to the news industry ("How to save the news", June 2010 issue.)

I say "fascinating" because it's probably the most complete public airing of the company's views of the news industry to date. Fallows interviewed at least a half-dozen executives -- from engineers to senior news executives like Krishna Bharat and CEO Eric Schmidt -- about their views of news processes and advertising.

I say "mistitled," because judging by the account in The Atlantic, there are no convincing strategies or products in Google's pipeline that will save the news industry as we know it. As you'll see below, I think Google is missing (or underestimating) several key points about the nature of the news business.

The article is several thousand words long, and strangely contains not a single link or commenting interface. If you're pressed for time, there is a summary by AllThingsD's Peter Kafka located here. I've left the following comment on the AllThingsD article, relating to a few crucial elements that Fallows missed (or Google avoided discussing?) that I think are crucial to an understanding of the display advertising ecosystem and news:

I read the Atlantic piece, and was struck by a couple of things.

First, local business display advertising, which is an important part of many newspapers' revenue models, was not discussed. If local newspapers are counting on sufficient online display ad revenues, they (and Google) will need to address the problem that relatively few local businesses are savvy enough or sufficiently interested in online display advertising, even though Google (and Facebook, ESPN, etc.) have tried their darndest to make it easy for them.

Here's something else to consider: The only way most newspapers and other local publications including phone books and magazines have been able to sign up local businesses for local print campaigns is by employing boots on the ground to cold call and visit in person these companies, and pressure them into buying ads. That is not the Google way.

Another issue that I think the Atlantic author did not press Google on concerns the massive oversupply of online information sources for people to turn to, including media from all over the world, company websites, social networks, shopping sites, forums, etc. The increase in the amount of available pages on which to serve ads, combined with the decreased amount of time that people will spend on news sites because they are too busy updating their Facebook feeds or looking at Wikipedia, will depress the prices of news pages that contain display advertising.

One last thing: Eric Schmidt was quoted as saying the following:

"In the future model, you’ll have subscriptions to information sources that will have advertisements embedded in them, like a newspaper. You’ll just leave out the print part. I am quite sure that this will happen."

To me, this seems like a 1990s vision of the future of news -- basically duplicate online what newspapers are doing in print. While this is already happening, it's not working. Considering the two points listed above and the many other online trends working against the news industry, I am skeptical of Schmidt's vision as stated in Atlantic.

The "boots on the ground" reference is something I picked up when I talked to a few pros who've been working PR and marketing in the Boston area for years: Most local business ads are sold by salesmen working the phones or going door-to-door in neighborhoods. The commissions are low, so volume is key -- they work quickly and try to get as many sales as possible per day. It's apparently a point of frustration for restaurants, florists, boutiques and other stores -- they don't like the pestering or the costs and they can't easily recognize the value of most print campaigns. But they often give in. They recognize that they should be doing some marketing, to bring new business in the door or to be recognized as part of the community. While some are interested in trying out online ads or seeing people referred by Yelp, Foursquare, or Groupon, many others do not want to get involved in the technology or are not familiar with how online display advertising works or can benefit them. Some businesses are not keen on online because they have grown up with traditional marketing practices and/or think that their target market won't see them (I actually heard this from a national manufacturer that makes outdoor equipment a few years ago -- most of their customers are in their mid-40s or older, so why bother with online?).

Finally, while some traditional newspaper companies have tried hard to migrate local businesses to online advertisers, I still see some major failures in the marketplace, including the Boston Globe, which is owned by the New York Times company. Relatively few of their print advertising customers are converted to online display ad customers. Part of this could be reluctance on the part of vendors and local businesses to make the jump, but I also suspect that the sales organization still operates in a 20th-century frame of mind, where big commissions are tied to print and online is an afterthought.

Sources and research: Interviews with various Boston-area PR/marketing agencies, Boston.com, The Atlantic, AllThingsD, ilamont.blogspot.com

Associated Content: What is Yahoo thinking?

So Yahoo is buying Associated Content. The price tag? Rumors say it's between $90-$100 million.

A strategy based on low-quality, commodity content is bad for any brand, but because this product is tied so closely to SEO, it is really putting itself at the mercy of Google -- Yahoo's classic foe in the search arena. A fundamental change in Google's search algorithm or SERP design could really hurt Associated Content.

Plan Toys USA: Don't expect to be reimbursed for defective products

Green toys are all the rage these days among young parents, and one company that has capitalized on this trend is Plan Toys, a Thailand-based maker of wooden toys for preschoolers. Its website claims the wooden sets are made from "non-toxic, natural materials such as organic rubberwood" which "enable children to play, learn and become closer to nature."

I'll say. The Plan Toys garage set we received as a gift was packed with wood-boring beetles, who had eaten through several pieces of the toy (see video below). The box that the set came in had bits of wood and dead bugs inside.

The set was clearly defective, so I called Plan Toys USA's office in California to ask for a refund. No dice. The company will replace a bug-eaten set with another set, but flat out refused to issue a refund.

Caveat emptor.

Steve Jobs: Sorry kids, no Webkinz or Curious George games on the iPad for you!

My kids like Webkinz World, Ganz's kids-oriented virtual world that is based on the purchase of real-world stuffed toys. During a visit to my parents this morning, they said they wanted to play it on their older model Mac mini, and I was concerned it might not work (Webkinz technical problems have been problematic for us in the past).

But then it occurred to me: If it were an iPad, there would be no hope of Webkinz working at all. It requires Flash, which Steve Jobs does not want to see on his mobile devices, including the iPad, iPhone, and iPod touch.

That's excluding a lot of people. One estimate that I found a few months back puts the number of Webkinz users in the millions. And that made me wonder: What about all of the other kids-oriented sites that are out there? Is the iPad excluding these audiences as well?

I did a quick check on the Web. Club Penguin: Requires Flash Player 9. Games on Nick.com require Flash, too. I put the question out to Twitter about any other cases. @Atul asked about PBSkids.org. I checked. Sure enough, Curious George and many other games indeed require Flash to play.

The irony of Steve Jobs' anti-Flash mantra is that kids really do love the Apple's touch-enabled features. My kids love Cro-Mag, Bounce On, and Paper Toss on my iPod touch. I read with much interest this account from an EMC CTO, who describes his teenagers practically abandoning laptops and desktops for the iPad. Some kids-oriented brands (such as the SpongeBob franchise, which has Flash-only games on Nick.com) have branched out to the iPhone/iTouch /iPad platform with dedicated apps.

Is there any hope for Webkinz ever making it to the iPad? While the Apple-approved iPad app Cloud Browse allows a workaround, it is an imperfect and potentially risky solution.  

It's pretty clear that Jobs wants all rich Web applications to retool themselves to a new world order, in which sites conform to official Web standards or conform to the App Store standards dictated by Apple Inc. For companies like Ganz that have invested years in building up a complex suite of Flash-based games that play on most desktop PCs, neither option may be possible (does HTML 5 even support the sort of artwork and UIs that Ganz has for Webkinz?), or palatable, owing to the raw costs and rearchitecting that would be required. That's unfortunate for everyone involved -- Jobs, Ganz, and an audience of mostly young kids numbering in the tens of millions.

Or is it? This is exactly the sort of situation that could lead to an opportunity for a tablet maker or software partner that recognizes a compelling niche opportunity in an area which Apple doesn't want to play.

For-profit schools take a hit from Frontline

If you've had doubts about for-profit schools, many of your worst suspicions will be confirmed in the new Frontline documentary about for-profit higher education. I've embedded the video of "College, Inc." at the bottom of this post. It's about an hour long, with sections on the boom in for-profit education sparked by the success of the University of Phoenix, the high-pressure sales tactics used by some of universities, how regulators are treating the industry, and the huge problems students have encountered with student debt. Unfortunately, though, there's not a lot of discussion about teaching quality or job placement data.

Here are a few of the highlights and quotes, from the narrator and subjects interviewed on camera:

Why the industry has grown so rapidly:

• There are 30-50 million working American adults without a college diploma. In years past, this segment of the population could find good jobs with just a high school degree. Not anymore.
• "The demand is so great, community colleges can't keep up."
• Federal educational loans: "The taxpayers are essentially funding this industry." UOP gets something like 86% of its revenue from the federal government, through FAFSA loans.
• For-profit salespeople set up shop at job fairs
• 2.8 million students attending for profit schools

The University of Phoenix model and the boom it helped create:

• "They hired people on short-term contracts, to keep costs low."
• "They did away with tenure"
• For-profit schools cost as much as 5-6 times as a community college: $400-$550 per credit hour
• Profits have attracted Wall Street, which has boosted the number of players in the market. Investors, seeing the huge profits that Apollo Group/University of Phoenix made (the founder is a billionaire), are trying to scoop up small, failing local non-profit colleges and turn them into for-profit schools. Why? "If you can find an underperforming traditional school with regional accreditation, that's a very valuable property."
• Why not build a for-profit school from the ground up? "It costs 10 million dollars, 10 years, and a 50/50 chance of success, to obtain regional accreditation. … Once you have accreditation, you qualify for student loan program." (Fortunately, accrediting bodies have been increasing scrutiny of this sort of "flipping")

Marketing for-profit degrees:

• Grand Canyon college spent $25 million last year on marketing.
• University of Phoenix spent $130 million on marketing in just one year. This rivals what they spend on teaching.
• Former UOP exec: 1/4 of revenue spent on sales and marketing, about 20% on faculty

Online education:

• Grand Canyon college: 90% of GC students are logging in. About 40,000 students total, 35,000 online.
• Crucial to Grand Canyon's success: Physical campus helps build the brand, says the CEO
• Online education at some schools: Mostly instructor-led discussion groups
• "It is difficult to assess the quality of the degrees."
• Some students are happy with their education, and said so on camera.
• University of Illinois education expert: "The danger obviously is a kind of fast fooditization of higher education itself, where low cost, convenience and ease of finishing become values in themselves to the possible detriment to the things that can be accomplished slowly and over time."

Problems with for-profit schools:

• Argosy University and its parent company EDMC: Unaccredited in Dallas area, and are facing a lawsuit from former graduate students who said they were misled about job prospects.
• Everest College and parent Corinthian: 3 former vocational nursing students describing how their pediatric rotation took place in a daycare, and psych rotation took place in some sort of Scientology center. They paid more than $28,000 for their education, but haven't been able to get jobs in hospitals because their education did not include any hospital experience.
• Lobbyist for traditional universities believes for-profit student default rate could be as high as 50%
• High-pressure sales tactics described at about 21:30
• "On average, the debt load of for-profit students is more than twice that of students at traditional schools."
• When defaults happen, "The for-profit college … is not on the hook. It's the taxpayer. It's you and me. It's the federal government."

Frontline: College, Inc.:



At some point in the future, I hope to see Frontline or some other news organization take a hard look at both the good and bad when it comes to quality of instruction at for-profit and online education.

Update: Since writing this post, I have taken an online math class for credit, and have this to say about the online education experience:

• My online math class: Convenience gets an 'A,' but at what cost?

You may also be interested in reading my other posts about the University of Phoenix, online education, and other educational issues:

• SNL's "University of Westfield" ad: The reputation of online degrees takes another hit
• What's the value of a University of Phoenix degree?
• MBA math review
• Louis Menand and the American PhD problem
• Online education: A teacher speaks
• More distance education commentary from Harry Lewis, ClueHQ, and yours truly
• A giant step for ALM thesis research
• Follow-up: My online education experience
• Thoughts on academic publishing, electronic archives, and Scribd
• A final farewell to Randy Pausch