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Adding News to the Shopping Cart; Jeff Bezos’s expertise in harnessing customer feedback could be a boon to the newspaper industry

August 11, 2013, 6:10 p.m. ET

Adding News to the Shopping Cart

Jeff Bezos’s expertise in harnessing customer feedback could be a boon to the newspaper industry.

L. GORDON CROVITZ

Journalists these days relish gallows humor, like Andy Borowitz’s satire in the New Yorker, “Amazon Founder Says He Clicked on Washington Post WPO -0.85% by Mistake.” It’s a reminder of how anxious journalists remain about their industry—a good reason to welcome Mr. Bezos as a new kind of owner. His expertise at Amazon in focusing on consumers and using data to make them happier is just what the news industry needs.It is well known that the news business is in trouble, but it is less understood why. Newspapers have had to cut back on reporters because of a steep decline in advertising, which used to account for 80% of revenues and an even higher proportion of profits. Combined print and digital advertising revenues for newspapers are now one-third of their peak in 2000 as companies use online search and other more targeted forms of marketing. Adjusted for inflation, newspaper advertising revenue has fallen to 1950 levels.

But while advertising continues to decline for many publishers, online as well as in print, people are consuming more news than ever. Readers have responded well when their favorite news brands have offered “all access” paid subscriptions, which include all digital versions. (Disclosure: A company I co-founded, Press+, powers digital subscriptions for more than 400 publishers around the world and is now owned by RR Donnelley.) Circulation revenues for U.S. newspapers rose 5% last year, the first increase in a decade.

This is where Mr. Bezos and his experience at Amazon could make a big difference. In his annual Amazon shareholder letter in 2005, he wrote that many of the decisions at Amazon “can be made with data.” He added: “There is a right answer or a wrong answer, a better answer or a worse answer, and math tells us which is which.”

The result is that Amazon is king of consumer satisfaction, with 200 million people buying $60 billion worth of everything from books to dog food. Orders are often based on Amazon’s personalized, data-driven recommendations. Ten million people subscribe to Amazon Prime, which provides free second-day delivery, 40,000 movies and TV shows, and the ability to “borrow” 300,000 e-books.

Mr. Bezos changed how people read with the launch of the Kindle in 2007. Today, Amazon sells more e-books than printed ones. Even novelists are becoming more customer-friendly. Last year, Amazon evoked Charles Dickens when it launched subscriptions to serialized e-novels. Mr. Bezos told Fortune that “in Dickens’s day, he would take notice of the criticism of the prior installments and use it to his advantage.” Journalists would likewise benefit from more reader feedback, if Mr. Bezos can figure out new ways to enable it.

Surprisingly, newspapers historically haven’t focused on data about their readers, who until recently accounted for a low share of revenues. Now publishers track every page view by every reader on every digital device. Instead of chasing the occasional story that produces a lot of page views, which no longer generate incremental advertising revenues, publishers focus on increasing engagement—getting more people to come more often and read more articles. Publishers track what kinds of coverage are read by readers engaged enough to become paying subscribers.

Even the most cynical journalists should be cheered by the milestone reached by several news publishers of getting more revenues from readers than from advertisers. This includes the New York Times, whose successful digital-subscription initiative was cited by publisher Arthur Sulzberger Jr. to explain why the sale of the Washington Post didn’t alter his family’s intent to hold on to its newspaper.

This increasing reliance on readers creates a valuable feedback loop, helping editors invest in the most valued journalism. Newspapers around the U.S. have found that unique coverage of local government, sports and schools is a big driver of digital subscriptions.

Mr. Bezos might also be able to accelerate the personalization of news, which has been a goal of many publishers. An enormous “long tail” of products is available at Amazon, from out-of-print books to highly specialized grocery items. There is an analogy to news if Mr. Bezos can use technology to make it work: News about my town is fine, but news affecting my neighborhood is better and news affecting my block is best.

The once-cozy news industry was among the first to be roiled by the creative destruction of the Internet. It would be fitting for Mr. Bezos now to apply what he learned as one of the great digital disrupters to find new business models to bolster the best journalism.

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About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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