2013-08-06

Co.Labs

Jeff Bezos Bought The Washington Post For One Thing: Distribution

The nature of Amazon’s business is changing to reflect a new media landscape. What does Bezos see in the future of publishing that the rest of us don’t?



It’s not a coincidence that billionaires keep buying newspapers. Warren Buffett has been buying them up for the last year, and last week, Red Sox owner John Henry bought the Boston Globe.

Jeff Bezos didn’t buy the Washington Post yesterday to “re-invest in the infrastructure of our public intelligence,” as James Fallows wrote in the Atlantic, and he didn’t buy it for a propaganda machine.

He did it because he understands something about media the rest of us don’t: distribution. Having conquered long-form, evergreen content (also known as books), he’s now interested in distribution mechanisms for short-form, timely, and topical content. The fact that many before him have failed to find a workable business model for newspapers, the traditional delivery mechanism for this kind of content, only makes the challenge more interesting.

To understand his motivations, you should take another look at two 2011 Google+ posts by Steve Yegge, a former Amazon and current Google engineer. With no disregard meant toward our staff writer J.J. McCorvey, who wrote an excellent profile of Bezos in the latest issue of Fast Company, Yegge’s hilarious rants are probably the most insightful things ever written about the enigmatic Amazon CEO.

In his second post, a war story about presenting to Bezos, Yegge describes him as hyper-intelligent, constantly thinking years ahead of his executives:

I mean, imagine what it would be like to start off as an incredibly smart person, arguably a first-class genius, and then somehow wind up in a situation where you have a general’s view of the industry battlefield for ten years. Not only do you have more time than anyone else, and access to more information than anyone else, you also have this long-term eagle-eye perspective that only a handful of people in the world enjoy.

In some sense you wouldn’t even be human anymore. People like Jeff are better regarded as hyper-intelligent aliens with a tangential interest in human affairs . . .

Trust me folks, I saw this happen time and again, for years. Jeff Bezos has all these incredibly intelligent, experienced domain experts surrounding him at huge meetings, and on a daily basis he thinks of shit that they never saw coming. It’s a guaranteed facepalm fest.

In the original post, which was intended to be posted internally at Google but accidentally made public by Yegge and later pulled, we learn how Bezos applied this ability to think ahead to Amazon. One day, an edict came down that all engineering teams had to redesign their systems to be service-oriented. If you wanted to use another team’s data, you had to use their service interface. No internal-only APIs or database access. The result was Amazon Web Services, now one of its most profitable divisions. We understand why he did it now, of course, but this was 2002, back when Amazon was still just an e-commerce site. Amazon saw that e-commerce companies were quickly becoming infrastructure for smaller online vendors. Yegge says:

You wouldn't really think that an online bookstore needs to be an extensible, programmable platform. Would you?

Well, the first big thing Bezos realized is that the infrastructure they'd built for selling and shipping books and sundry could be transformed an excellent repurposable computing platform. So now they have the Amazon Elastic Compute Cloud, and the Amazon Elastic MapReduce, and the Amazon Relational Database Service, and a whole passel' o' other services browsable at aws.amazon.com. These services host the backends for some pretty successful companies, reddit being my personal favorite of the bunch.

The other big realization he had was that he can't always build the right thing . . .

I'm not really sure how Bezos came to this realization -- the insight that he can't build one product and have it be right for everyone. But it doesn't matter, because he gets it. There's actually a formal name for this phenomenon. It's called Accessibility, and it's the most important thing in the computing world.

Understanding Bezos in this way begs a tantalizing question: What does he see in the publishing industry? For that matter, what did Warren Buffett see in the several mid-sized daily newspapers he bought into? Bezos also invested in Business Insider earlier this year, so this isn’t a bet on just one title or brand--it’s a bet on the category.

When you look at these as capital investments in the context Yegge offers, you can start to think of the newspaper as a computing infrastructure for distributing information. The Washington Post has one of the best APIs of any newspaper; it’s a distribution mechanism for short-form content. (Although reportedly the team that developed the API was not sold to Bezos as part of the deal.) Purpose-built distribution networks for different kinds of content are beginning to solidify into infrastructure, just as e-commerce did 10 years ago. And if we’ve learned anything about Bezos, it’s that he loves to own his own infrastructure and leverage it into new kinds of business we can’t even imagine right now.

As our writer McCorvey says in this month’s issue, “Bezos may have proved himself the best CEO in the world at taking the long view.” Now that Steve Jobs has departed us, he’s vying for the position of most prescient living CEO. Only time will tell what he sees in newspapers, but it would be unwise to think that it’s just some good press or social goodwill.

[Image: Flickr user Rosscrawford1]




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14 Comments

  • bowerbird

    i'm not sure why people are befuddled by this.

    mr. bezos purchased a propaganda machine
    in the capital of the most powerful nation on
    the face of the entire planet, a machine that is
    cheaper than any lobbyists he might employ,
    because it'll _make_ money, not _cost_ money.

    and when he gives a complimentary subscription
    to everyone who owns a kindle, he'll sell kindles,
    to everyone in the city, who will have to keep up
    with the juggernaut that the paper will become,
    once everyone has to keep up with it, and this
    will allow him to collect information on the very
    same n.s.a. people collecting information on us!

    and when he starts delivering milk and diapers
    and alcohol along with the daily newspaper, he
    will know who drinks the booze, and how much.

    and once you know where the weak points are...

    -bowerbird

  • RichardLipscombe

    Thanks for this article Gabe....

    Move over world here comes Bezos Media. 

    It is impossible to predict what Jeff Bezos will do with the Washington Post but I can imagine what he might be tempted to try to do.  He knows that static content in the evolving C21st medium of web content is yesterday's news (paper?). 

    He might build multiple platforms that transform news delivery from static to interactive forms. This would be the equivalent of moving from silent to talkie movies.  Talkie movies demanded new talent in almost every aspect of production but
    especially within the ranks of its stars - the  actors.  Washington Post staff writers are surely fading stars from this day forward.  They will start to leave over the next year or so as they discover they no longer fit the business model.  They will be about as relevant as the White House Press Gallery since the arrival of Obama.

    Google could have done with Youtube some if not most of what I suspect Bezos will do
    with WP.  WP will become the springboard for facilitated content - news, opinions, chat, humour, games, film, etc.  The key is to bring the content alive and make it a really really tight fit with mobile devices because the Bezos Media audience is constantly on the move. 

    Bezos Media could become a combination of Facebook (connected social silos)
    Youtube (videos of all types and quality) Netflix (streaming films and series) Yammer (local social content) etc.  It could do what iTunes did for music - bring a business model that over-rides free pirated content.  It could b ring us all the Bezos Media equivalent of iPods and iPads (content magically married to a mobile device).

    Whatever Bezos Media becomes it will be disruptive to MSNBC and Fox because it
    will break their mould of talking heads streamed live and on podcast to a GroupThink consumer.

    Cheers, Richard.

  • RichardLipscombe

    Thanks for this article Gabe....

    Move over world here comes Bezos Media. 

    It is impossible to predict what Jeff Bezos will do with the Washington Post but I can imagine what he might be tempted to try to do.  He knows that static content in the evolving C21st medium of web content is yesterday's news (paper?). 

    He might build multiple platforms that transform news delivery from static to interactive forms. This would be the equivalent of moving from silent to talkie movies.  Talkie movies demanded new talent in almost every aspect of production but especially within the ranks of its stars - the  actors.  Washington Post staff writers are surely fading stars from this day forward.  They will start to leave over the next year or so as they discover they no longer fit the business model.  They will be about as relevant as the White House Press Gallery since the arrival of Obama.

    Google could have done with Youtube some if not most of what I suspect Bezos will do with WP.  WP will become the springboard for facilitated content - news, opinions, chat, humour, games, film, etc.  The key is to bring the content alive and make it a really really tight fit with mobile devices because the Bezos Media audience is constantly on the move. 

    Bezos Media could become a combination of Facebook (connected social silos) Youtube (videos of all types and quality) Netflix (streaming films and series) Yammer (local social content) etc.  It could do what iTunes did for music - bring a business model that over-rides free pirated content.  It could b ring us all the Bezos Media equivalent of iPods and iPads (content magically married to a mobile device).

    Whatever Bezos Media becomes it will be disruptive to MSNBC and Fox because it will break their mould of talking heads streamed live and on podcast to a GroupThink consumer.

    Cheers, Richard.

  • epantaleon

    What if it is for the non-virtual distribution network? You have to deliver the paper to many households everyday and that tiny detail may prove quite useful for some other purposes.

  • Steve Weiss

      Who knows what he'll
    do with it, but at that price--and given the size of his bankroll and
    the overall bullishness Warren Buffet has displayed toward
    newspapers--the acquisition makes for a good experiment.

    As an example, he amps up WaPo as a competitor to the New York Times
    online: they're both premium-news content providers for a large market
    of consumers with spendable income. But NYT has a pay model (recently
    re-configured to further limit access to complimentary content); Bezos
    could make WaPo even more feature-rich and content-rich than it is now,
    and offer it for free to anyone using a Kindle or the Kindle app.

    All user data goers back to Amazon; all ads the user sees are tailored
    to their profiles, and also cross-reference anything at all that you can
    buy from Amazon. Products, movies, TV series, books, text books, online
    learning, educational video, music, travel/vacation packages (do they
    sell those yet?), you name it, it can be cross-collateralized.
    Everything you read in the news has some sort of tie into something that
    Amazon can sell you.

    From there (after building this part of the business for a couple of
    years and continuing to watch local newspapers decline), Bezos could
    construct deals with local newspapers to stream their content into
    Amazon News; the state/local newspapers get a much-needed cut of the
    revenue that derives from page-driven sales, and (wait for it)....
    Amazon sells yet more stuff.

    And who knows, maybe he acquires a few more papers in there somewhere,
    as opportunity and local laws permit. Maybe not just US properties.

    As is the Amazon Way, all this time they will be trying new features,
    algorithms, anything their biz-dev and engineering teams can think of
    (and they've got a lot of smart people) to optimize for eventual revenue
    returns. They can afford to lose money for a long time before pulling
    the plug.

    It's an interesting opportunity.

  • jring281

    In my opinion, FWIW ---
    Jeff of Amazon did not buy a newspaper. 
    Jeff the intense Progressive bought a talent pool that can be turned into a vigorous cultural/political propaganda machine far outperforming the ones devised by Walter Lippman, Gen. Goebbels and David Axelrod. 
    The typical theory is --- "the masses" must be presented with a predetermined, pre-selected, pre-digested set of options, dictated by men of virtue.
    Beyond the Local Organizer is the Global Organizer.
    Notice that in addition to all the "journalists" already adept at perpetrating mass hypnosis, he also acquired the Kaplan education management facet of WaPo.

  • WMC

     Oh come on man... you are looking way into the future !!
    Are you friggen crazy ?? 

    (I think you nailed it)

  • Gabe Stein

    Except he didn't acquire Kaplan and he's only sort of progressive in the Silicon Valley quasi-libertarian sense.

  • jring281

    By 'facet' I mean a business relaionship, not ownership.
    I am unaware of your credentials for assessing the degree of dedication to the Progressive paradigm. Methinks thou protesteth too much.
    Anyway, thanks for the good article and fostering the various ideas regarding the posssible ramifications.

  • Anthony Reardon

    That's some pretty interesting perspective Gabe, that Bezos might be looking to leverage distribution infrastructure and mechanisms for content.

    It's an interesting challenge to see what traditional media companies are going to do to adapt to technology culture. The way I see it, we have been going through some revolutions, but traditional media has been slow to catch on. Remember the information age? There was this whole push onto the web, but mainly it was that your average Joe could publish- that the medium was now accessible as a level playing field with businesses. The print industry didn't find it that exciting because theirs is a business of selling advertising. The only other industry that got excited were the non-traditional advertising companies- the proponents of "digital" media. Their big differentiation at first was that web advertising was more cost-effective. Then as "social" media became popular, they started to back that up with numbers. However, all the while their value proposition has been to criticize the shortcomings of traditional media while competing for their business. Now what you see is a shift where traditional media companies are finally getting into the fight, and they're gearing up to bring it heavy. Non-traditionalists have had it easy thus far chipping away at the advertising industry pie, but it's going to be different now that those huge margins still claimed in traditional channels like network television, cable, and print get reinvested online.

    News companies do have a competitive advantage in the emerging social media environment. Think about it. You've got this established reader base- if your scope is "national news" and you were previously limited in reach by print you can expand big time on the web. You've got all this history of learning what people want and how. For one, quality content with journalistic integrity for instance. Perhaps even more importantly you have relationships within industry and the credibility to make new ones. Whether it be insight into leading stories or connections with big brand advertisers, who do you think is going to get the meetings? These kinds of relationships across the board are huge, require time, and major investments to break through. That's why you buy the WP instead of starting from scratch. You only fell off the Fortune 500 last year, are still one of the big 5, and at 250M you get a great deal compared to what it would cost to build from the ground up to that level of success.

    Another point here is "crème-of-crop" target marketing. You can see niching for top brand decision makers- the kinds of companies that are going to close on major deals like backend infrastructures. Big brands with a lot of skin in the game are going to tune into what's going on in Washington with special interest too. An organization like the WP is in good position to compete for those very small windows of attention.

    Ultimately, there is also the expanded marketing to be an online social media environment of choice for the broader consumer market. From what I read Bezos is orienting on the content categories people are passionate about, and then figuring to innovate off that. This is critical for competing for "advertising", but there's more to be had in terms of "marketing". The key is understanding consumers are right there "with you" instead of anonymous numbers at the other end of advertisements. I don't know if Bezos will get that, but concentrating on where the media and people meet is nonetheless going to be easier than trying to keep up in the device and platform spaces. Those things are just going to keep changing no matter how much money you throw at them, so advantages will be short lived as they come and go. Having a captive and loyal audience though, which if you think about it has become the goal of developers anyways, not as easy to buy, and once done essentially removes people from the competitive market.

    Best, Anthony 

  • Gabe Stein

    Thanks Anthony.

    That's a lot to unpack, so I'll just say this: I think you're right that that Bezos sees the value of a large "captured" audience, but you're wrong to think that once captured they're effectively out of the marketplace. That was the old model because advertisers had virtually no other way to reach these audiences, so once they bought newspaper ads in the paper with the largest circulation, they were done. Now, you can assemble the WaPo's exact same audience -- with total certainty -- on 10, 20, even 100 smaller, cheaper sites.

    So the question becomes what value does Bezos see in the captured audience plus the talent plus the distribution potential of the Post? And my bet is he sees something that most of us simply don't, yet, the same way he saw the rise of cloud computing and how Amazon, an e-commerce site, could be a major player in it way back in 2002.

  • Anthony Reardon

    Lol! Well if I were going to buy a company, it would probably be Mountain Dew ;)

    You could be right. He might see something most of us don't in captured audience plus talent plus distribution potential.

    However, I think you might be off. Don't discount "captured" audience as the old model on the basis of "exclusivity". The new model will be based on "selectivity". In other words, once people find a preferred place to get their news, whether loyal or lazy, they might simply be done. Yes there may be way cheaper advertising options, but which one demonstrates superior market intimacy- connects brands to consumers better?

    I bet he sees the Washington Post on Dew.

    -A