Masaryk University Faculty of Informatics

(1)

Masaryk University Faculty of Informatics

Business Models and Technologies Used by the Publishers of Printed

Periodicals on the Internet

Master’s Diploma Thesis

2012 Jan Šedo

(2)

(3)

I

Declaration

Hereby I declare that this paper is my original authorial work, which I have worked out by my own. All sources, references and literature used or excerpted during elaboration of this work are properly cited and listed in complete reference to the due source.

Brno, May 20^th, 2012 Jan Šedo

(4)

II

Acknowledgement

I would like to thank the supervisor of my master thesis, Ing. RNDr. Barbora Bühnová, Ph.D., for leading and professional advice during the work on the thesis.

I thank also to my wife, Mgr. Kateřina Šedo, for her support during the time I was writing this thesis and at the same time undergoing the internship program in the publishing company in Germany eight hours a day.

I also thank Mgr. Ilona Blumová, Veronika Černíková and Matthew Maxwell for proofreading and language advice.

(5)

III

Abstract

The topic of decreasing interest in printed periodical has been discussed since the business model environment of their traditional business models started to change owing to the fact that internet was being used by general audience. There is still no answer to the question how publishers of these periodicals could deal with this situation. The book Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers was introduced in September 2010 and became very popular immediately. Therefore I decided to investigate whether ideas covered in this book could bring a new point of view to the previously mentioned topic.

The main objective of this thesis is to identify long-term profitable business models and technologies for Katolický týdeník (Catholic weekly news) in the new business model environment. The second is to contribute to the discussion around the question how publishers of printed periodicals could deal with the business model environment change caused by internet.

Keywords

print media, periodicals, business model, business model patterns, business model canvas, internet, web 2.0, HTML5, CSS3, cloud computing, new media devices, Submissions-Anzeiger, Katolický týdeník

(6)

IV

1 Introduction

1.1 History of periodicals

History of periodicals started 59 BC when Julius Caesar published Acta Diurna, the earliest recorded “newspaper”. The next big point in the history was 15 centuries later.

Johann Gutenberg invented printing press. Despite the fact that this big change allowed people to make copies more easily than before, periodicals started to spread massively not until they had their first own business model. Notizie scritte published by the Venetian government in 1556 were first periodical, for which readers paid a small coin.

Subscription model came short after that, but it was too expansive so only few people were able to afford it. Then better and cheaper postal service helped to expand periodicals. Also additional income – a paid advertisement or cheaper and quicker way to transport information (telegraph) have also influenced area of periodicals in the next centuries. [1], [2]

Periodicals faced three times to new types of competitors owing to technology progress during the 20^th century. For the first time it was the invention of broadcast radio in 1920's. Owing to that fact newspapers lost its position of society’s primary information provider. Editors of periodicals reacted with redesigning and emphasized the depth of the provided information that was hard for radio to offer. Subsequently television came and periodicals lost next part of their market share and the number of readers decreased. Some of them tried to respond with using color and “short, quick and to the point” stories. [1]

The last, but also the biggest technology change was the Internet that has become widely used mainly due to the World Wide Web and PCs. As a result of allowing easy and cheap access to information and the possibility to exchange and process them, the internet has changed not only media industry but also a lot of other industries including the way people work and plan and spent their free time. All of these changes and new technologies (e.g. web 2.0, new media devices…) that are coming every year caused that publishers of printing periodicals have been trying to solve the problem of decreasing number of readers. The authors of Business Model Generation called it that business model environment has changed. [3 p. 200] So the business model has to be reinvented.

(8)

2

1.2 Motivation

The topic of decreasing interest in printed periodical has been discussed since the business model environment of their traditional business models started to change owing to the fact that internet was being used by general audience. There is still no answer to the question how publishers of these periodicals could deal with this situation. The book Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers [3] (referred to as “Business Model Generation”) was introduced in September 2010 and became very popular immediately. Therefore I decided to investigate whether ideas covered in this book could bring a new point of view to the previously mentioned topic.

My personal motivation comes from an internship in Submissions-Anzeiger Verlag GmbH (Publisher of daily newspapers with public tenders in building constructions in Germany), where I have been since July 2011. The company is trying to solve the problem of decreasing number of subscriptions and build new business on their well- known brand.) Before internship, I had been working in Christian media area for long time and in autumn I had a discussion with people from Katolický týdeník, s. r. o.

(Catholic weekly newspapers in Czech Republic) about their strategy with new media and they did not have any. That is why I have chosen this topic. I believe that my research will help not only to Katolický týdeník, s. r. o. but it will also inspire other publishers in dealing with the change of business model environment.

1.2.1 Submissions-Anzeiger Verlag GmbH (referred to as “Submissions-Anzeiger”)

Submissions-Anzeiger publishes daily newspaper with the same name. Its content involves announcements of public tenders in Germany and its regular readers are building construction companies that are interested in this public tenders. History of this newspaper began in the 1898. [4] Despite the fact that since 1998 Submissions- Anzeiger has been offering also an online service (more than half of the amount of customers use this service nowadays), the number of subscriptions (online subscription included) is continuously decreasing from 1998 (source: internal statistics).

1.2.2 Katolický týdeník s. r. o.

(referred to as “Katolický týdeník”)

Katolický týdeník (Catholic weekly news) publishes weekly newspaper with news from Catholic Church in the Czech Republic, the main news from the worldwide Catholic

(9)

3 Church, the Czech Republic and the world and liturgical service. They have 2 regular supplements called Perspektivy (perspective) and Doma (at home). Those supplements rotate alternately in every second edition. Katolický týdeník continues in Katolické noviny – their history started in 1949. They were renamed after Velvet Revolution in the 1989.

[5] Katolický týdeník has inherent number of subscription cancelations. Problem is that the number of new subscription is continuously decreasing during the last ten years.

(source: internal statistics)

1.3 The Objectives of this Thesis

The main objective of this thesis is to identify long-term profitable business models and technologies for Katolický týdeník (Catholic weekly news) in the new business model environment. The second is to contribute to the discussion around the question how publishers of printed periodicals could deal with the business model environment change caused by internet.

1.4 Thesis Overview

The first chapter provides an insight into problems of publishers and my motivation and objectives in this topic.

Aim of the chapters Technologies and Business models is to define objectives for research in publishing area which is described in chapter 4.

Chapter 5 shows two case studies. The first study regarding Submissions-Anzeiger Verlag GmbH describes one particular experience with the process of designing new business model in publishing company. The second brings the practical result of this thesis. It specifies possibilities and my recommendations for using new technologies in the current business model of Katolický týdeník and suggests new business model ideas.

The last chapter contains a conclusion of the whole work, including information on possible continuation of this thesis in outline.

(10)

4

2 Technologies

This chapter deals with technologies that have become popular in web design community in the last years or that significantly changed way we are using internet now or way we will use internet in the near future.

Between 2004 and 2010, nearly every type of websites was challenged by the term Web 2.0. Many publishers of periodicals tried to include some form of blogging systems to their websites or to use other Web 2.0 technologies. Nowadays they are challenged by HTML5 and CSS3 mainly owing to the fact that new media devices bring the web to a new environment. Cloud computing is a new trend that allows website owner to focus only on the most important activities and let specialized services maintain the infrastructure, the platform or the software. Everyone can also provide one of these services.

2.1 Web 2.0

Web 2.0 is a term that was used to describe modern way to create websites and internet services roughly in years 2004-2010. This subchapter provides a brief summary of the most interesting technologies that support three key concepts of Web 2.0:

1. Rich Internet application (RIA) — defines the experience brought from desktop to browser whether it is from the graphical point of view or the usability point of view; [6]

2. Web-oriented architecture (WOA) — is a key piece in Web 2.0, which defines how Web 2.0 applications expose their functionality so that other applications can leverage and integrate the functionality providing a set of much richer applications; [6]

3. Social Web — defines how Web 2.0 tends to interact much more with the end user and make the end-user an integral part. [6]

2.1.1 Ajax and JavaScript frameworks

With Ajax, web applications can send data to, and retrieve data from, a server asynchronously (in the background) without interfering with the display and behavior of the existing page. [7] JavaScript frameworks like jQuery¹ and Prototype² together with

1 More about jQuery on http://jquery.com/

2 More about Prototype on http://www.prototypejs.org/

(11)

5 their graphical libraries like script.aculo.us³ and jQuery UI⁴ help programmers to use more sophisticated JavaScript code through solving inconsistencies between web browsers and prefabricated widgets that accomplish common tasks as picking a date from a calendar or autocompleter in search form-field. [6]

Ajax was one of technologies that have helped web pages to interact more with internet users and provide them comfort of web-based applications. It is because interaction based on Ajax is more comfortable than on reloading whole page (and that was far worse problem in the age when internet connection was not as quick as these days).

JavaScript frameworks help programmers to make more user-friendly (all graphical, usability and user-experience points of view) application. So also thanks to them web- based applications have become so popular and they also help with more interaction between websites and their users.

2.1.2 Web APIs

With Web 2.0, the use of the Application Programming Interfaces of web applications has also become popular. Some of the most popular web-APIs are for example Google Maps API, YouTube API, Facebook APIs. [8]

A mashup is a technique for building applications that combine data from multiple sources to create an integrated experience [9]. For example RMI's Oil Imports Map⁵ that shows all of the U.S.’s oil imports from 1973 on the map.

Web APIs changed the use of internet mainly through mashups. As a result, number of interesting and useful combinations of data were created, which would be almost impossible to create without Web APIs. Therefore the owner of service will never have such a big capacity to think about every idea how can be his service used or even if he has some ideas, he does not have so many resources to manage realization of them.

2.1.3 RSS

RSS is a family of web feed formats based on XML used to publish frequently updated works — such as blog entries, news headlines, audio, and video — in a standardized format. An RSS document (which is called a "feed", "web feed" or "channel") includes full or summarized text, plus metadata such as publishing dates and authorship. [10]

3 More about script.aculo.us on http://script.aculo.us/

4 More about jQuery UI on http://jqueryui.com/

5 The RMI's Oil Imports Map mashup is accesible on http://move.rmi.org/features/oilmap.html (checked on 2nd April 2012)

(12)

6

RSS has helped to promote an easy exchange of information between websites in XML format. So, programmers started to provide some information from other web-sites (e.g.

up-to-date news from some news-website) more often than before. That was additional value for all three parties – a programmer can offer additional value on his web, users has this additional value and a provider has an advertisement nearly for free.

2.1.4 Collaborative and participative technologies

There are a lot of technologies that support collaboration and participation technologies. Let me point out two of them: wikis and blogging software.

Wiki is a piece of server software that allows users to freely create and edit Web page content using any Web browser. Wiki supports hyperlinks and has a simple text syntax for creating new pages and crosslinks between internal pages on the fly. [11]

Blogging software is software designed to simplify creating and maintaining blogs⁶. [12]

Wiki that was popularized mainly thanks to Wikipedia project helped to spread the idea of letting people collaborate on content through the web. Blogging software helped common users to publish their work without technical skills on the web. All of these technologies have supported crowdsourcing⁷ on the internet and helped the original vision of the web as a collaborative media.

2.1.5 Social networking

Social networking technologies allow people to share interests, goals or concerns online.

The basic social networking technology concept is a connection of users, which influences behavior or information provided by a particular service.

Social networking technologies substantially contributed to bringing web application to the context of the user´s everyday life. For example, it was good to know that many people like a page and that the page is tagged by some tags that I am interested in it, but in real life, people also want to know if their friends or people that they respect like this page.

6 A blog (a portmanteau of the term web log) is a personal journal published on the World Wide Web consisting of discrete entries ("posts"). [46]

7 Crowdsourcing is a distributed problem-solving and production process that involves

outsourcing tasks to a network of people, also known as the crowd. This process can occur both online and offline. The difference between crowdsourcing and ordinary outsourcing is that a task or problem is outsourced to an undefined public rather than a specific other body. [47]

(13)

7

2.2 HTML5 and CSS3

HTML5 is slowly replacing the older version of HTML [13] and together with CSS3 has become synonym for modern way to code webpages and web-based applications in past two years. Currently, Microsoft Windows 8 supports programing application in HTML5 and CSS3 (together with JavaScript) in its Metro environment [14]. So they have become “not-web-only-use” technologies. On mobile platforms (such as iOS, Android etc.) they have become popular also thanks to the fact that they often do not support Adobe Flash platform which allowed programmers to make some interaction features and small applications (such as comfort video play, various games, multiple-file upload etc.) those was not possible to implement with the older version of HTML, CSS and JavaScript. Eventually we can say that HTML5 and CSS3 try to cover the most used techniques (such as some use of JavaScript and mentioned platform Adobe Flash) in themselves to let internet browsers (and not only browsers, but also other platforms – e.g.

Metro environment and maybe there will be another use of these technologies in the future) become independent on third party technologies and make HTML5 and CSS3 easier and more comfortable for programmers. [15]

Some of the new and most interesting features in HTML5 [15]:

• the <canvas> element for 2D drawing;

• the <video> and <audio> elements for media playback;

• support for local storage and application cache;

• new content-specific elements, like <article>, <footer>, <header>, <nav>, <section>

(that can help to more semantic web together with Microdata⁸);

• new form controls, like calendar, date, time, email, url, search;

• geolocation.

From my point of view, the most important aspects, how these technologies can affect the use of the internet, are:

• support for off-line browsing that can help mainly web-based application to become more stable on mainly mobile devices with unstable connection to the internet;

• geolocation that can help developers to deliver more context-specific services (mainly with connection to mobile devices);

8 More about microdata on http://www.w3.org/TR/microdata/

(14)

8

• the <canvas> element and SVG support for easy creation “non-text-only-based“

dynamic content;

• programmers can easily program standalone application (they do not have to be open in internet browser) that uses internet – for example in mentioned Metro environment or Google Chrome OS⁹.

2.3 Cloud computing technologies

Cloud computing technologies are technologies that allow providing internet services according to three fundamental models of cloud computing: Infrastructure as a service (IaaS), platform as a service (PaaS), and software as a service (SaaS). [16]

Thanks to rapidly increasing speed of the internet connections has become internet more used to access big amount of data (e.g. video) and work with them without downloading them on local hard drive before. Cloud is a term that has helped to promote and to explain this type of internet usage. Thanks to cloud computing technologies, users has access to software that would be too expensive to run on own infrastructure. Developers can care only about the key part of their software and they do not need to care about platform and/or infrastructure. That helps them to create software with high additional value and/or low costs. They also have access to platform/infrastructure that will be too expensive to manage only for their service.

2.4 New media devices

I have chosen 4 types of devices that have become very popular last years and very probably have changed how common people will use the internet in the future in areas which can touch the world of media.

2.4.1 E-ink readers

E-ink reader is a mobile electronic device that is designed primarily for the purpose of reading digital e-books and periodicals and uses electrophoretic ink¹⁰ technology for displaying content. The main advantages of this type of devices are better readability of their screens, especially in bright sunlight, and longer battery life. [17] E-ink readers have influenced book publishing area in past few years. The major share on it has Amazon.com Inc., which has introduced his first e-ink reader called Kindle in November 2007 [18] and in short time started to sell more e-books than hardcovers [19].

9 More about Google Chrome OS on http://en.wikipedia.org/wiki/Google_Chrome_OS

10 More about electrophoretic ink on http://en.wikipedia.org/wiki/E_Ink

(15)

9 For periodicals it is still an open question, because for example kindle publishing for periodicals¹¹ is still only in beta version (2012-03-04).

E-ink readers use internet as a content delivery platform and several of them has implemented a web browser. The interesting fact is that the most successful e-readers (e.g. Amazon Kindle, Barnes & Noble Nook) are connected to a big online bookstore in which user can simply buy a book (for example on Amazon.com it is possible to buy the book only with one click if you have stored your credit cards data in your Amazon account) and it is automatically delivered to the device or subscribe for a newspaper and they are also regularly automatically delivered to the e-reader. Some e-readers allow users to buy books and subscribe to periodicals directly in the device.

2.4.2 iPhone-like smartphones

The iPhone-like smartphones are devices that could be called new generation of smartphones (one big touchscreen and only few buttons) with the new generation of operating systems for mobile devices (designed mainly for mobile devices with big touchscreen – e.g. iOS, Android, Windows Phone [20]). This generation of mobile phones started to spread when Apple Inc. introduced their new mobile phone called iPhone in 2007 [21]. They are very often equipped with a camera, a video recorder, a GPS modul, a digital compass, Wi-Fi, a gyroscope and an accelerometer.

There are two main points for internet use. First is that these smartphones are able to display nearly any webpage (mainly without those based on Adobe Flash). That means that it is not necessary to create a special variant of webpage for this type of devices as in the past. Despite this, designers still make variants of webpages which are simpler to be more comfortable to use on device with small touchscreen. More popular approach to dealing with different display of internet devices has become Responsive web design that prefers to design only one site and specifies how it should appear on varied devices (e.g. with media queries in CSS3^12,13) rather than designing multiple sites for different-sized devices [22].

The second and more interesting fact is that mobile applications that use internet as a content delivery platform (e.g. various applications of publishers of newspapers –

11 More about kindle publishing for periodicals on

https://kindlepublishing.amazon.com/gp/vendor/kindlepubs/kpp/kpp-home

12 More about Media queries in CSS3 on http://www.w3.org/TR/css3-mediaqueries/

13 Example how to use CSS3 Media queries for Responsive web design on

http://webdesignerwall.com/tutorials/responsive-design-with-css3-media-queries

(16)

10

e.g. application MF Dnes by Mafra, a. s.¹⁴) or as a channel to communicate with internet services or/and save data there (e.g. virtual pinboard Pinterest¹⁵ or file hosting service Dropbox¹⁶) have become very popular on iPhone-like smartphones. The fact that people are willing to pay for these applications is also very interesting. The reason might be low prices of these applications and/or easy way to buy the applications (for example on iPhone you only need to click on the price at application profile in App Store and Apple Inc. will charge the money from your credit card without any additional effort because your credit cards data are stored under your Apple ID).

The differences of use between this type of internet devices and the common internet devices (PCs, laptops…) are that mobile phones can be used in very different cases – for example at the bus-stop while waiting a while for a bus as a “time-killer” or while jogging as a path-tracker to analyze altitude profile, speed… and to compare with another joggers.

2.4.3 “Post-PC” tablets

“Post-PC” tablets are like iPhone-like smartphones without calling functions and with bigger touchscreens. But these two “small” differences change a lot the way these devices are used. Nobody would high probably use tablets as a path-tracker while jogging, but reading a book or news in a bed in the evening will be more comfortable on tablets then on smartphones.

2.4.4 Smart TVs

We can simply describe smart TVs as TVs that are connected to the internet directly and has own operating system (e.g. based on iOS, Android, Linux). Some common TV can be turned to smart TV thanks to several set-top boxes. The main advantage of these devices is that many people know how TV works and how remote control works. The main disadvantages are that smart TVs are not widely used (in the Czech Republic) and that even if somebody has a smart TV, they often do not use its “smart” functions. We can expect improvements in the near future. There are speculations [23] about Apple Inc.

real TV (not only set-top box) and Google Inc is also experimenting in TV area with their Google TV¹⁷.

14 Application MF Dnes by Mafra, a. s. is available on http://itunes.apple.com/cz/app/mfdnes/id484913802

15 Application Pinterest is available on http://itunes.apple.com/us/app/pinterest/id429047995

16 Application Dropbox is available on http://itunes.apple.com/us/app/dropbox/id327630330

17 More about Google TV on http://www.google.com/tv/

(17)

11 The main difference comparing to other mentioned devices, smart TVs are not mobile devices and are often placed on one particular place for several years. So there is no such problem with electric source or shape, size and weight. Thanks to the fact that we can expect interaction through natural user interface using gestures or a more energy consuming equipment – e.g. 3D screens. On the other hand there is less privacy while using TV and due to often placement in the living room, others in the same room have to agree with your usage of the TV in the particular time. But it can be advantage, because it allows all of you to interact with this device – for example play games together.

(18)

12

3 Business models

A business model describes the rationale of how an organization creates, delivers, and captures value. [3 p. 14]. One way to describe Business model is Business model canvas that we use in this thesis. This tool was introduced by the authors of the book Business Model Generation [3] and since it then has become very popular in business modeling and service design area.

3.1 Business model canvas

Business model canvas is a tool to help in describing and think through the business model. It describes the logic how a company intends to make money through nine basic

“building blocks” which cover four main areas of a business: customers, offer, infrastructure, and financial viability. [3 p. 15]

Figure 3-1 The Business Model Canvas [3 p. 44]

3.1.1 Building blocks

Aim of this chapter is to describe the building blocks as they were introduced in the book Business Model Generation and demonstrate them on current business models of Submissions-Anzeiger and Katolický týdeník.

(19)

13 Customer Segments

The Customer Segments building block defines the different groups of people or organizations an enterprise aims to reach and serve. [3 p. 20]

Submissions-Anzeiger has two main customer segments: public authorities that make public tenders and building construction companies that are ready to compete in public tenders. Secondary customer segments are advertisers – companies that can offer products or services to building construction companies (for example rental of crane).

Katolický týdeník has one main customer segments: the members of the Catholic Church (especially old people and families) – referred to as readers. Secondary customer segment is advertisers – companies and organizations that are able to offer products or services to the main customer segments.

Value Propositions

The Value Propositions building block describes the bundle of products and services that create value for a specific customer segment. [3 p. 22]

Submissions-Anzeiger gives public authorities a chance to promote their tenders as they have to in order to German law and to have more competitors in the tender. For building constructions companies, it offers easier and more effective way how to have the overview of about every public tender in Germany in which they can potentially compete. For advertisers, it offers easy way to attract building construction companies.

Katolický týdeník offers for readers news about the Catholic Church, daily liturgical service, advices, opinions on topics from well-known members of the Catholic Church, interaction with other readers (for example announcements, classified advertisement). Every second week, it provides materials for children to play with and tips for parents how to educate their children. For advertisers, it offers easy way how to attract their potential customers.

Channels

The Channels building block describes how a company communicates with and reaches its Customer Segments to deliver a Value Proposition. [3 p. 26]

Submissions-Anzeiger communicates with public authorities and building construction companies through Handelskammer (Chamber of Commerce) – for example through sponsorships of conferences about writing public tenders (new politics etc.). It tries to attract people that are searching keywords related to public tenders on Google via Pay-

(20)

14

per-click advertisement. Public tender announcements are received via email and then distributed via own web based application and own daily newspaper delivered via postal service. With advertisers, it communicates through media agency.

Katolický týdeník communicates to its readers through churches and media partnerships of big Catholic events in the Czech Republic. Content is delivered via own weekly newspapers through post, distribution in churches, retail stores and a part of it via own website.

Customer Relationships

The Customer Relationships building block describes the types of relationships that a company establishes with specific Customer Segments. [3 p. 28]

Submissions-Anzeiger has only free of charge service hotline. It has been trying to set up a social network of craftsmen, but it did not succeed and last year it was canceled.

Katolický týdeník provides possibility to readers to write letters to the editorial office and some of them are regularly included in the newspapers. On website, there are also regularly discussions about topics connected to current issues.

Revenue Streams

The Revenue Streams building block represents the cash a company generates from each Customer Segment (costs must be subtracted from revenues to create earnings). [3 p. 30]

Submissions-Anzeiger offers monthly subscription to building construction companies.

Public authorities publish their announcement for free. Advertisers pay for placement of the advertisement in the newspapers.

Katolický týdeník offers several variants of subscription to readers. Readers can also pay for placement of the classified advertisements. Advertisers pay for placement of the advertisement into the newspapers.

Key Resources

The Key Resources building block describes the most important assets required to make a business model work. [3 p. 34]

For Submissions-Anzeiger, there are two key resources: brand (well-known and with history more than 100 years long) and publishing process supported by customized IT.

(21)

15 For Katolický týdeník, there are two key resources: brand and partnership with the Catholic Church.

Key Activities

The Key Activities building block describes the most important actions that a company must do to make its business model work. [3 p. 36]

For Submissions-Anzeiger, there are 4 key activities: collecting and editing of public tenders announcements, web-application maintenance, and subscription management.

For Katolický týdeník, there are two key activities: monitor current topics and writing articles about them.

Key Partnerships

The Key Partnerships building block describes the network of suppliers and partners that make the business model work. [3 p. 38]

Submissions-Anzeiger has 5 key partnerships – printing company, distributor, media agency, dedicated internet server provider, and public chambers.

Katolický týdeník has key partnerships – printing company, 3 companies which maintain subscription and deliver newspapers to readers, and the Catholic Church.

Cost Structure

The Cost Structure describes all costs incurred to operate a business model. [3 p. 40]

Salaries are the main part of the cost structure of Submissions-Anzeiger. Than printing and distribution are also significant costs, but these are variable¹⁸.

Katolický týdeník has the same cost structure as Submissions-Anzeiger.

3.1.2 Criticism

Business model canvas is criticized that it is not complex enough and that it does not include all important facts those should a holistic business model approach include. For example the canvas does not include critical success factors, key performance indicators etc. [24] We discuss missing aspects bellow every business model canvas in chapter 5.

18 Costs that vary proportionally with the volume of goods or services produced.

(22)

16

3.2 Patterns

This chapter aims to briefly introduce business model patterns¹⁹ which were identified by authors of the book Business Model Generation in important concepts in the business literature.

3.2.1 Unbundling Business Models

The concept of the “unbundled” corporation holds that there are three fundamentally different types of businesses: Customer Relationship Businesses, Product Innovation Businesses, and Infrastructure Businesses. Each type has different economic, competitive, and cultural imperatives. The three types may co-exist within a single corporation, but ideally they are “unbundled” into separate entities in order to avoid conflicts or undesirable trade-offs. [3 p. 57]

3.2.2 The Long Tail

The Long Tail business models are about selling less of more: They focus on offering a large number of niche products, each of which sells relatively infrequently. Aggregate sales of niche items can be as lucrative as the traditional model whereby a small number of bestsellers account for most revenues. The Long Tail business models require low inventory costs and strong platforms to make niche content readily available to interested buyers. [3 p. 67]

3.2.3 Multi-Sided Platforms

Multi-Sided Platforms bring together two or more distinct but interdependent groups of customers. Such platforms are of value to one group of customers only if the other groups of customers are also present. The platform creates value by facilitating interactions between the different groups. A multi-sided platform grows in value to the extent that it attracts more users, a phenomenon known as the network effect. [3 p. 77]

3.2.4 FREE as a Business Model

In the Free Business Model at least one substantial Customer Segment is able to continuously benefit from a free-of-charge offer. Different patterns make the free offer possible. Non-paying customers are financed by another part of the business model or by another Customer Segment. [3 p. 89]

19 Business model patterns – Similar characteristics, similar arrangements of business model building blocks, or similar behaviors. [3 p. 55]

(23)

17 3.2.5 Open Business Models

Open Business Models can be used by companies to create and capture value by systematically collaborating with outside partners. This may happen from the “outside- in” by exploiting external ideas within the firm, or from the “inside-out” by providing external parties with ideas or assets lying idle within the firm. [3 p. 109]

(24)

18

4 Research

The aim of this research is to identify common business models and technologies which are used by publishers of periodicals on the internet and point out innovative ideas.

Results of the research will be discussed in the case study of Submissions-Anzeiger Verlag GmbH and they will be used as the basic material for possibilities how to change business model of Katolický týdeník s. r. o. in the second case study.

4.1 Selection of publishing companies

Selection of publishing companies is subordinated to the purpose of the research.

Therefore this research is not representative for whole publishing of periodicals area.

Publishers were chosen from public lists of periodicals according to their activity on the internet. The basic criterion of activity on the internet was that they do not have only simple web, where they place some of their articles. Another criterion was that they offer more internet services than others or that they provide a unique service or they use a unique technology or business model. Some of the publishers of periodicals those are close to business of Submissions-Anzeiger Verlag GmbH or Katolický týdeník, s. r. o.

were chosen even if they do not match these criteria.

Especially publishers of professional magazines, publishers in building constructions area and German publishers were chosen according to discussion about Submissions- Anzeiger Verlag GmbH and Christian newspapers or Czech publishers according to potential possibilities for Katolický týdeník, s. r. o.

4.1.1 List of selected publishers

Czech publishers

There are more than 10000 registered periodicals in the Czech Republic. [25]

MAFRA, a. s. was chosen as the publisher with the largest number of real users on the internet. [26] The reason for choosing Economia, a. s. was that it has the largest number of the sold electronic issues. [27]

• Economia, a. s.

• MAFRA, a. s.

(25)

19 German publishers

There are more than 70 000 registered periodicals in Germany. [25] Axel Springer AG was chosen because it is one of the leading publishers in Germany and it increased its digital media revenues from 2% of total revenues in 2004 to 24% in 2010. In addition it has set up a goal of generating half of its total revenue from digital media channels. [28]

• Axel Springer AG

Publishers of professional/building construction periodicals

Bauverlag BV GmbH is well known publisher of building construction periodicals in Germany. EMAP Ltd is well known publisher of professional periodicals in Great Britain and it also produces one building construction periodical.

• Bauverlag BV GmbH

• EMAP Ltd

Publishers of Christian periodicals

The National Catholic Reporter Publishing Co. was chosen as a representative publisher from the USA. Spolok sv. Vojtecha – Vojtech, spol s r. o. was chosen as a publisher of very similar periodical in Slovakia, which is a country with market comparable to the Czech Republic. The Tablet Publishing Company Ltd. was chosen as a representative publisher from Great Britain.

• The National Catholic Reporter Publishing Co.

• Spolok sv. Vojtecha – Vojtech, spol s r. o.

• The Tablet Publishing Company Ltd.

4.2 Methodology

Basic information is found on the internet (website of the publisher, Wikipedia, Google) for each of chosen publishers. Then the necessary information is written down, especially customer segments (one of building block of the Business Model Canvas described in chapter 3.1 – referred to as BMC). Then services that are provided through internet are pointed out and they are also listed together with their value proposition (another building block of the BMC). If there are too many services, only those that seem to be core, unique or interesting (innovative business model, technologies or connected to the topic of this thesis) are pointed out.

Then business model patterns mentioned in chapter 3.2 are identified and list of revenue streams (another building block of the BMC) is made.

(26)

20

The technologies mentioned in chapter 2 the company uses are written down at the end. Chrome extension HTML5 Powered is used to identify if the analyzed site uses HTML5 and CSS3.

4.3 Results

4.3.1 Czech publishers

Figure 4-1 ihned.cz (Economia, a. s.) Figure 4-2 idnes.cz (MAFRA, a. s.)

Economia, a. s.

Economia is the largest publisher of economic and B2B periodicals in the Czech Republic. Readers are entrepreneurs, heads of small businesses and employees of economic departments or workers in particular profession area. Economia ranks among top five largest publishing companies in the Czech Republic. Economia publishes the Hospodářské noviny (Economics News daily) daily, monthly magazine Stavitel (Builder) and 18 other that are not discussed in this analysis. The magazine Respekt weekly published by the Respekt Publishing company, a common owner affiliate, is also included in the portfolio of these publications. The New Media Division of Economia operates the news server iHNed.cz and the recruitment server KarieraWeb.cz. Every periodical has a web with an online archive on subdomain of iHNed.cz. The division also provides an extensive documentation service, including the sale of news and photographs, and delivers news coverage to clients' websites. Economia also prepares diversified conferences and seminars for professionals of various fields. [29]

Main business model of Economia on the internet is based on Free as a Business Model pattern. All of iHNed.cz and its subdomains offer interesting information for free.

Economia has than income from these sources:

• advertisement;

• electronic subscription;

(27)

21

• paid content (via SMS or special credits);

• additional services (email service that every day sends an email with all articles about particular topic or about particular company etc.; researches).

Economia has tried to set up new business model – the human resource web www.karieraweb.cz, but according to low number of advertisement in database (14 advertisements on 2012-04-21), it does not seem to work. Economia has bought the web portal www.volny.cz with aim to create portal for small business and entrepreneurs, but now (nearly two years after announcement of the contract) there are no signs of any interesting service.

Economia uses common technologies (like traditional HTML, CSS, PHP) for its websites and online archives and JavaScript framework jQuery. It provides RSS feeds of new articles. It also uses API of AddThis sharing tool to let users share articles more easily on their social networks [30] and directly implements social buttons from Facebook, Twitter and Google+. It uses Scribd to easy display official documents [31]. For electronic subscriptions it use two main technologies – flash (Floowie application) and application for iPad (only for titles Hospodářské noviny, Ekonom and Respekt). They have also set up electronic version of Respekt for Amazon Kindle.

MAFRA, a. s.

Mafra is Czech media group. Its main title is daily newspaper Mladá fronta DNES. They also publish daily newspaper Lidové noviny (People’s News) and Czech edition of freesheet Metro. It owns TV music channel Óčko and the radio stations Expresradio and Rádio Classic FM. Mafra operates sites for various customer segments (e.g. alik.idnes.cz for children, hobby.cz for hobbyists etc.) in iDNES.cz family servers. Mafra operates also webs for each of their media (e.g. mfdnes.cz, metro.cz, ocko.idnes.cz). They provide infotainment, entertainment and services for common events in life (e.g. searching for job, new flat or vacation organized by travel agency etc.) to common people in the Czech Republic. Internet Trading division sells advertisement on this sites and operates business catalog TOPkontakt.cz and catalog of restaurants dobřesenajím.cz. Mafra also owns two printing plants. [32]

The main business model of Mafra on the internet is based on Free as a Business Model pattern. All of sites in iDNES.cz family servers offer interesting information for free.

Mafra has then income from these sources:

• advertisement (paid per view or click);

(28)

22

• fees for entry in catalogs;

• premium features²⁰;

• electronic subscriptions.

Mafra uses common technologies (like traditional HTML, CSS, and ASP.NET) for its websites. It uses also jQuery in several parts of the website. It provides RSS feeds of new articles. It also uses Google maps API on several sites to visualize information on the map (e. g. the location of a building to be bought on real estate web reality.idnes.cz) and Facebook social button. There is possibility for iDNES.cz users to set up own blog there through simple web application. Mafra uses email, Amazon Kindle, applications for mobile devices with iOS, Windows Phone and Android operating systems and Samsung Smart TV application for distribution news from iDNES.cz. There are also versions of sites in the iDNES.cz family servers that are optimized to devices with touchscreen and that use HTML5 and CSS3. For electronic subscriptions of MF DNES and Lidové noviny are used two main technologies – flash and application for devices running iOS operating system. There is also an 3^rd party application for devices with Android operation system that offers subscriptions of MF DNES, but it is not advertised on official MF DNES subscription web www.mfdnes.cz.

20 Only in iDNES.cz iOS application.

(29)

23 4.3.2 German publishers

Figure 4-3 abendblatt.de (Axel Springer AG) Figure 4-4 hamburg.de (Axel Springer AG)

Axel Springer AG

Axel Springer is a leading integrated multimedia company in Europe, a broad spectrum of print and digital media. With over 230 newspapers and magazines and over 160 online offerings as well as more than 120 apps, Axel Springer is active in 35 countries.

Axel Springer is Germany’s largest newspaper. [33] In this analysis I will concentrate only on Hamburger Abendblatt and online portal hamburg.de that is partially also owned by the city of Hamburg. Hamburger Abendblatt offers news about Hamburg and also about Germany and the whole world. Readers are mainly common inhabitants of the city. On its website abendblatt.de, it provides news, an online subscription, a catalog of companies, a classified advertisement, a jobs portal, ticket portal and a possibility to set up email at domain ichliebehamburg.de (it means “I love Hamburg”) for fans of Hamburg city. Hamburg.de provides useful information (e.g. culture, time tables, state chambers, statistics) about city for various groups – inhabitants of the city, visitors, entrepreneurs etc. They are accessible through website or through special application for mobile devices.

Basic business model concept is based on Free as a business model. Content delivered for subdomains immonet.abendblatt.de and stepstone.abendblatt.de is sign of Unbundling Business Model. Hamburger Abendblatt has then income from these sources:

• advertisement;

• subscriptions;

• email account;

• catalog entry;

• rent of subdomains (e.g. real estate portal, jobs portal);

• affiliate (e.g. ticket portal);

• custom applications (e.g. interactive guide through history of Hamburg);

(30)

24

• extension of applications (e.g. audio guide in the main hamburg.de application for iPhone).

Axel Springer uses common technologies (like traditional HTML and CSS) for its websites and jQuery as JavaScript framework. It provides RSS feeds of new articles. There is a possibility for hamburg.de users to set up their own blog or mail there through simple web application. Axel Springer uses applications for mobile devices with iOS operating systems for news distribution and for delivering additional services to their readers. There are also versions of sites that are optimized to devices with touchscreen and that use HTML5 and CSS3. For electronic subscriptions of Hamburger Abendblatt, there are two possibilities how to access it – through website (HTML or PDF) and through special application for iOS devices.

4.3.3 Publishers of professional/building construction periodicals

Figure 4-5 bauwelt.de (Bauverlag BV GmbH) Figure 4-6 cnplus.co.uk (EMAP Ltd)

Bauverlag BV GmbH

Bauverlag is the largest supplier of specialist information to the architecture and construction sectors in German-speaking areas. It produces 18 trade journals and numerous special publications. [34] Aim of these periodicals is to provide up-to-date information from reader’s area. Websites of these periodicals mainly show only basic information about a title and offers possibility to subscribe to this title. Sometimes there are useful services as the calendar of related trade shows etc.

Bauverlag does not seem to have any business model on the internet and websites are only way to subscribe periodicals online. The only exceptions are DBZ, Tab that provide possibility to subscribe their online versions.

Bauverlag uses common technologies (like traditional HTML, CSS, and PHP) for its websites. Only exception is web of AT recovery that uses HTML5 and CSS3. Bauverlag uses flash for its online subscriptions.

(31)

25 EMAP Ltd

EMAP is the publisher of 18 professional periodicals. One of them – Construction News provides construction professionals with national news coverage affecting the future of their industry. It publishes additional information and electronic form of analysis to subscribers on its web CNplus.co.uk. There is also a buy or sell service that allows readers to buy or sell plant, tools, machinery, services or materials to the construction industry. It also operates jobs board Careersinconstruction.com. [35]

Content on website is provided only for subscribers and additional sources of income are advertisement on website, in buy or sell service or in jobs board.

EMAP uses common technologies (like traditional HTML, CSS and ASP.NET) for its websites and jQuery as JavaScript framework. It provides RSS feeds of new articles.

4.3.4 Publishers of Christian periodicals

Figure 4-7 ncronline.org (The National Catholic Reporter

Publishing Co.)

Figure 4-8 katolickenoviny.sk (Spolok sv. Vojtecha –

Vojtech, spol. s r. o.)

Figure 4-9 thetablet.co.uk (The Tablet Publishing

Company Ltd.)

The National Catholic Reporter Publishing Co.

(referred to as NCR)

NCR is the publisher of National Catholic Reporter in the USA. It offers news and basic information about NCR on its web ncronline.org.

Business model of the web is based on Free as a business model. NCR has then income from these sources:

• advertisement;

• donation;

• subscription.

(32)

26

NCR uses common technologies (HTML, CSS and PHP) for their website and RSS with the latest news. NCR has special format for e-readers Amazon Kindle and Sony Reader for electronic subscription.

Spolok sv. Vojtecha – Vojtech, spol. s r. o.

(referred to as SsVV)

SsVV is the publisher of Katolické noviny (Catholic news) in Slovakia. On its web, it offers some of the news from printed newspaper and basic information about this newspaper.

SsVV does not seem to have any special business model on internet connected to its newspapers. It has only a common eshop, but it is a standalone project.

SsVV uses only common technologies (HTML, CSS and PHP) and RSS with last news.

The Tablet Publishing Company Ltd.

The Tablet is a British Catholic weekly journal. It reports on religion current affairs, politics, social issues, literature and the arts with a special emphasis on Roman Catholicism while remaining ecumenical. On its website it offers some of the news from the printed version and materials for students of Religious Studies. [36]

Basic concept is based on Free as a business model. The Tablet has than income from these sources:

• advertisement;

• subscriptions;

• eshop.

The Tablet uses common technologies (like traditional HTML, CSS and PHP) for its websites and jQuery as JavaScript framework. It offers RSS with last news from its website. It offers electronic subscription via application for devices with iOS or Android operating system. Readers of The Tablet have also access to online archive in Flash or in PDF.

4.4 Summary

4.4.1 Business models

Some publishers have or are trying to set up business models on the internet. Others still use internet only to have accessible basic data about their periodicals. On the set of

(33)

27 chosen publishers we can say that the more specific periodical is the more it uses the website only to present itself and not trying to set up business model on the internet for readers of the periodical. It is very probably caused by the low amount of readers for whom is not profitable to create more services. Every publisher uses internet as promotion of its printed periodicals. Some of them use their brand and amount of visitors on their websites and rent several parts of the website to other service provider (e.g. human resources agency).

Customer segments

Most of the publishers focus on the same target group on their websites as their periodicals. Only several of them focus a little bit more on the part of the group that is more technically skilled.

Value proposition

Publishers often offer only some news or partial information on their website.

Sometimes they provide all news, complete information and archive. Some of them extend this information with providing simple services to display some data connected to the content of the periodical (For example economic newspapers display main up-to- date currency rates and bourses indexes). Some of them try to provide services that the customer group might need (city newspaper provides mobile application with map of bicycle routes).

According to the second case study, we want to point out project of hamburg.de website that is partially official presentation of the city and partially set of commercial services for inhabitants, tourists or entrepreneurs.

Revenue streams

If publisher has any revenue stream from the internet, then the basic revenue stream is advertisement. Publishers often try to set up an electronic form of subscription with nearly the same content as in printed issues, but still it is more or less very low revenue stream comparing to the other revenue streams from internet or the subscription of printed periodicals. [27] Sometimes readers are offered to buy a single issue or short access to their archive, but it has two main problems – small payments are still too complicated (e.g. to pay 20 cents by credit card) or the revenue for publishers is not adequate. (e.g. reader pays for Premium SMS 50 cents and publisher get only 20 cents).

Very often there are additional sources coming from providing services well known from the printed periodicals – classified advertisement, especially jobs board. For long-

(34)

28

term advertisement, there are also services based on catalog pattern and customers pay for entry in them.

Revenue streams that are less common (or nearly unknown) in printed periodicals are rental (e.g. subdomains for some real estate agency) and affiliate (e.g. ticket portal).

Completely new potential revenue streams are internet services (e.g. email) or custom applications (e.g. historical guide through the city) and their extensions (e.g. audioguide to the historical guide application).

Donations are necessary for several smaller publishers. Some publishers run their own e-shop.

Business model patterns

The most used Free as a Business Model is successful thanks to low costs of providing information on the internet and income from advertisement, but when the amount of advertisement that publisher is able to sell is too low, it needs income from other sources. Several services on the internet are donated by printed subscriptions, but there are still gaps while providing for example premium features or other products that is known as Bait & Hook pattern. Bait & Hook refers to a business model pattern characterized by an attractive, inexpensive, or free initial offer that encourages continuing future purchase of related products or services. [3 p. 104]

Thanks to strength brands of most of publishers, they have also possibility to try some of Unbundling Business Models. Good example is rental of subdomains for human resources agency. Publisher provides its brand and visitors and agency delivers content and maintain infrastructure. The opposite way is that publisher provides content and some company maintain customer relationship and infrastructure (e.g. Seznam.cz, a. s. – well known internet company in the Czech republic has its news portal novinky.cz that has content from BORGIS, a.s., publisher of daily news Právo).

It seems to be easy set up The Long Tail business model by providing a blog system that allows readers to set up their own blogs and write articles. But its monetization is not so easy – readers do not want to have much advertisement on its personal blogs. There are problems also with quality of these blogs – there is often low motivation for good writers to produce their blog under publisher domain. Additional to this there is also amount of work with people those break the rules or law. Another long tail business model could be to allow readers to pay for small sets of articles, but there is still problem with small payments on the internet.

(35)

29 One project called Piano based on Multi-Sided Platform business model was set up in Slovakia one year ago. It is inspired by cable TV providers and brings this idea that customer is paying only one fee for using several services of different contractors in publishing industry. It covers 52 services (mainly access to paid content) from 11 publishers in Slovakia. [37] Digital reader payments are split between publications according to where a digital reader enrolls in the Piano system, how much time is spent on each publisher’s sites and the type of content consumed. [38] Another type of Multi- Sided Platform business model could be network based on various groups operating in the same business area that is main topic of the periodical.

There is a gap of implement Open Business Models pattern in publishing area. For example publishers can collect set of various services (e.g. application for mobile phones or tablets) developed by companies and individuals that will be provided with brand of the publisher and developers will have a fee for each purchase. Dark side of this model is reliability of continues development of these services by developer.

4.4.2 Technologies

Web 2.0

If publisher uses its website not only for basic information, it uses Ajax and JavaScript frameworks (mainly jQuery). Very often uses also Web APIs – very popular are social buttons and Google maps API. If publisher publish articles on the web, it also use RSS (question is how many readers it really uses, but while it is easy to maintain RSS channel it is not so important question).

Even if it seems to be cheap and easy for publishers to use some of collaborative and participative technologies, they are rarely used. Maybe the reason is that is hard to find way to monetize user generated content effectively and/or publishers cannot provide readers with motivation to create enough amount of valuable content. The way to motivate them could be to provide them platform of publishing hyperlocal news (from their part of city or their village) in short form (like tweets on Twitter) that will be displayed to people accessing website from neighborhood.

The only way to deal with social networks seems to be for publishers to support sharing and marking articles that readers like. Reasons could be that existing social networks are not spread enough across whole target group of periodicals or they do not have any idea how to use them. Example how to use them could be allowing user to sign in as an user of some of these network and customize content and advertisement directly to him

Masaryk University Faculty of Informatics