Coin Labs Weekly: Publishers, Consumers and Misaligned Incentives

Welcome to Issue 5. Last week, 47% of CLW members opened the newsletter with 30% of clicks going to t
Don Richard
Coin Labs Weekly: Publishers, Consumers and Misaligned Incentives
By Don Richard • Issue #5 • View online
Welcome to Issue 5. Last week, 47% of CLW members opened the newsletter with 30% of clicks going to this article on Amazon and Walmart’s acquisition strategies. Each issue contains my weekly article, my top 5 fintech and mobile commerce reads from the past week, and a past Coin Labs article that I think you’ll enjoy. If you enjoy the newsletter, please forward this email to 5 of your colleagues and friends who might enjoy it too. 

Publishers, Consumers and Misaligned Incentives
The Verge recently reported that publishers are beginning to leave Facebook’s Instant Articles en masse. Casey Newton of the Verge paints a very disappointing picture of the entire affair:
In discussions with Facebook executives, former employees, publishers, and industry observers, a portrait emerges of a product that never lived up to the expectations of the social media giant, or media companies. After scrambling to rebuild their workflows around Instant Articles, large publishers were left with a system that failed to grow audiences or revenues.
When it launched in 2015, Instant Articles presented publishers with the vision of a new way to acquire new readers and grow revenues — all within Facebook’s walled garden. Though it sounded too good to be true given Facebook’s rocky past as a distribution channel, many large publishers signed up on the promise of Facebook’s vision. This was a reasonable decision to make when you take into account the power of native content formats in increasing engagement, as I detailed in The Curious Product-Market Fit:
These native content formats serve two purposes:
(1) They create an enjoyable user experience that increases user engagement, and 
(2) They create native content that can only be consumed on that specific service, giving the service leverage against publishers and brands looking to engage with the platform’s users via ads.
These two purposes work in tandem creating a flywheel where users engage with the service, publishers follow users and advertising dollars flow into the service’s pocket. Rinse and repeat.
Unfortunately for publishers, the benefits of native content formats naturally accrue to the platform first, followed by users who are benefiting from an optimized user experience. In theory, publishers should benefit in this flywheel, but in practice the nature of social networks creates misaligned incentives between publishers and users.
The Struggle is Real
It seems that in the struggle for news organizations to find a reliable business model on social networks, no one asks a simple question — why do users even share links to New York Times, WSJ, etc. in the first place? What’s the motivation behind that user activity? The first reaction to this activity never seems to contemplate this question — whether it’s Facebook or publishers. The initial response is usually “How do we increase sharing?”
New formats and user experiences optimize link-sharing and consumption, but sharing and consumption are just expressions of some underlying motivations. Publishers and Facebook should be thinking deeply about why users are motivated to share and consume news on the social network.
My years in sales and business developments taught me about the importance of understanding customer motivations. Motivations are best determined by focusing on the “Why’s” — Why does this person need to do this task? Why my solution? Why now? — in order to offer a solution that will reliably and repeatably meet a customer’s need.
Understanding User Motivations
In order to dig into the user motivations for sharing and consuming news, we need to understand that differences from between traditional newspapers, news websites and social networks. Traditionally, reading newspapers was a regional experience, where consumers went to their local papers in search of information and entertainment. We’ll call this the consumer-pull dynamic.
After the advent of the internet, and Google specifically, news consumption became global and more competitive among publishers, but consumers still sought out news and information. It was still fundamentally consumer pull dynamic. This is why Google Amp is fairing much better than Instant Articles. Using Google AMP (Accelerated Mobile Pages), publishers have been more successful because the incentives for publishers and consumers are still aligned around seeking out and consuming information. Google AMP can offer publishers better ad revenue opportunities and consumer subscription onboarding because Google is focused on being the best way for consumers to gather information, not a mechanism for platform lock-in and user engagement.
Social networks (especially, Facebook and Twitter) introduced a pull and push dynamic (by users and the networks) into the equation. Not only were users using social networks to find and share content, network feeds were pushing content to consumers, removing friction in the user experience and increasing engagement in the process. New user incentives were formed.
Because of the in-network and public nature of social platforms, sharing links and content consumption became a form of signaling and tribal affiliation. What you read has always been form of social capital and class identification. Social networks might have heightened this signaling aspect of human nature.
The Misfortune of Misalignment
Due to the far-ranging effects of the internet and social networks, user incentives and motivations have shifted from local and regional to global networks where quality of signal out-values quality of content. To understand the motivations of users of social networks is to see the misalignment of incentives between publishers and users. Content is only as valuable as its signal. Text-heavy professional content competes with other content types (e.g. user-generated content and video). New formats or user experience won’t change that.
Platform business models require an alignment of incentives between products, platform and consumers. As it stands now, Facebook and users misaligned with publishers. Unfortunately for publishers, that most likely requires restructuring around the platform and user motivations, not the other way around.
This Week's Top 5 Fintech and Mobile Commerce Reads
Key Point: So, how would the entry of Walmart—and, presumably, other non-financial companies that are interested in entering banking—fit into that system of prudential regulation? The crucial concept is that the “Walmart Bank” that would provide banking services to the public would be organized as a separate subsidiary of the parent Walmart company.
Key Point: Ethereum tokens are simply digital assets that are being built on top of the Ethereum blockchain. They benefit from Ethereum’s existing infrastructure instead of developers having to build an entirely new blockchain. 
Key Point: The device, which we unlock over 200X every day, is always within arm’s reach — 24 hours a day, seven days a week. And while mobile influenced over $500 billion in retail sales in 2016 — with $140 billion of those sales made entirely on a smartphone — a sizeable percentage of U.S. consumers have yet to make a purchase using only a mobile device.
Key Point: The differences between a digitally native vertical brand and an ecommerce brand are profound. In addition to differentiation in the economics of the businesses and their growth trajectories, there are subtleties in the ways that v-commerce brands shape their identities to inspire consumers.
Key Point: The Chinese economy is cooling somewhat as it matures, and Alibaba appears to be trying to boost its cloud computing and entertainment divisions as avenues to future growth. Over the long term, though, the shift to a consumption-based economy provides Alibaba with opportunities, according to Alibaba Group Executive Vice Chairman Joe Tsai.
Coin Labs Vault
Key Point: Unlocking mobile commerce’s next great opportunities are less obvious than solving discovery and conversion workflows. The next great mobile commerce opportunities will create new markets, not just expand old ones. These nascent opportunities will unlock big, valuable and addressable consumer behaviors around interests, experiences, media and community.
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