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- 16 May 2011
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The Glaring Gap Between Online Commerce & Digital Publishing

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An image from Gilt Groupe featuring Marni accessories


Pundits at Adweek and the Wall Street Journal might not be convinced that Gilt Groupe is worth its newly calculated $1 billion valuation but there is no denying that luxury e-commerce is getting a major boost thanks to companies following the Gilt model.

Besides their growing influence in designer showrooms, online flash sale sites are also fast becoming highly coveted investments in the boardroom.  

To wit, American Express just entered a 50/50 joint venture with Vente-privee.com and last month Ideeli.com raised $40 million of Series C funding.  As the Financial Times’s fashion editor quipped, “you know what they say: three examples of anything is a trend. Welcome to the new internet investment bubble: shopping!”

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The buying offices of Vente-Privee.com


But, ironically, what the recent popularity of flash sales sites – and indeed the unbridled enthusiasm for online retail in general – underscores most is that there is still a glaring gap between selling online and publishing in a digital format.  Especially for the tablet device which was meant to reignite the publishing industry and revitalize content for consumers of luxury goods.

According to a piece in Women’s Wear Daily, despite the long-awaited news that both Hearst and Condé Nast finally signed those all-important subscription deals with Apple for titles on the iPad, “[publishing company] executives aren’t exactly doing backflips.”

 A whopping 30% of the money generated from the download of a magazine’s iPad app will go to Apple 

Why?  First and foremost, it’s down to profit incentive.   WWD revealed that a Condé Nast insider told them that a whopping 30% of the money generated from the download of a magazine’s iPad version will go back to Apple.  What’s more, it appears that the publishers had to concede to sharing their consumer data with Apple as well, which was a longstanding point of contention.

As a result, the mood among editors canvassed by the trade publication concluded that, at least for the next six months, no one seems able to answer whether the tablet market will take off or not.  

The response of American Marie Clarie’s editor-in-chief, Joanna Coles, was typical:  “I really don’t think anyone knows yet,” she said.  Stefano Tonchi, editor-in-chief of W magazine agreed: “I’m very much into the wait-and-see.”  And while Bob Sauerberg, president of Condé Nast, was decidedly cautious, others like Justin Smith, president of the Atlantic Media Group, were far from optimistic.


A flick through the June 2011 issue of Vogue on the iPad


As if the continued confusion over tablet publishing weren’t enough to keep executives on edge, an article on the state of digital journalism in the New York Times might make many more downright nervous.

The report, issued by Columbia University concludes not only that publishers need to rethink their online business models but that their journalists need a much better understanding of the business side of publishing.   The NYT’s author was unequivocal in his view:

“To have a journalism school, especially one as esteemed as Columbia’s, studying ad rate cards and the online coupon craze might seem unconventional. But it is an outgrowth of academia’s growing interest in the economic foundations of journalism at a time when those foundations appear unstable.”

If accurate, the report is perhaps even more worrying because of the distinction it makes between the value that readers put on advertising in print media, which is relatively high, and advertising in digital formats, which is remarkably low by comparison.

Bill Grueskin, the academic dean for the journalism school at Columbia and co-author of the report put it succinctly:  “If you ever watch somebody reading a copy of Vanity Fair, they spend as much time looking at the ads as they spend looking at the content,” he said, “because the ads are actually useful for readers.”  

What’s more, the fact that most journalists and editors don’t recognise the value of conventional advertising beyond the revenues they generate is, in itself, another challenge going forward.  Until that happens, he suggests, digital models will continue to underwhelm readers and underperform in terms of sales.

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A few iPad launches at the luxury end over the past year (including the New Yorker which went live on Monday)