Stanford University Digital Media Entrepreneurship VEWS Video News from all Views Vignesh Ramachandran Marcella De Laurentiis Stanley Tang Evan Moore 6/6/2012
VEWS: Video News from all Views Table of Contents Problem 3 Solution 4 Product 4 Business 4 Supporting Trends 5 Targeted Users 6 Marketing 6 Competition 7 Positive Impact 7 Timeline 8 Staff Plan 8 Team 10 Financial Projections 11 Prototype Image 12 2
VEWS Video News from all Views Introduction In Peter Thiel s Startup class at Stanford, he espouses that if you can answer the following question, you should move forward and build a business: Most people think X, but the truth is Y. His clever answer is Most people think answering this question is easy, but the truth is that it s very hard. We have our own answer, which has led us to build this venture: Most people think that Americans are either conservative or liberal, but the truth is that this dichotomy breaks down in the media consumption patterns of intellectual Americans. Many people want both sides of a debate. The Problem When news consumers seek out video news, they tend to go to the news outlets they trust - - outlets that often provide one side of the story. On Facebook and Twitter, we follow the news sources whose viewpoints match our own, rarely leaving our own filter bubble. But in order to have an informed public, the flow of information cannot be one- sided. A better informed public makes smarter decisions, so how do we help give people the information they need to form their own opinions on important issues? In our research, we found that those who follow political and policy news desire to hear multiple sides of the debate on topics of national interest. Right now, the political junkies that consume both literal and conservative media have to go out of their way to do so. If it was easier to get multiple perspectives in one place, they would use that service. Video news is particularly fragmented. The Huffington Post, Google News, and Drudge Report have aggregated news for years and aggregated it well- - creating spaces where stories from around the world are gathered in one place for easy access (even if not presenting multiple views). But if a news consumer wants to watch video on the latest news stories, however, they must travel to individual websites: ABC, FOX News, or Reuters, for example. To some extent, YouTube serves as a hub for video news, but it is not very effective in presenting news from numerous political viewpoints in an organized manner. 3
The Solution With the need for a video news aggregator that presents numerous sides of the debate in mind, we created VEWS to provide video news from all views. The VEWS app brings the latest video news to the ipad user s fingertips. You can browse the latest news stories of the day, perhaps first watching MSNBC s interpretation of a contentious subject, and then following it up with FOX News and Al Jazeera s. VEWS users can then click on the Join the Discussion icon and engage in a substantive discussion around the controversial topics. VEWS is unique in that it does not present information from one viewpoint, nor does it even provide well- rounded, unbiased coverage. Instead, VEWS shows different sides, in opposition. We conducted a survey recently where one responder made an interesting distinction: I don t want well rounded; I want both sides, in conflict. The public is able to clearly decipher the ways in which news media differ in their coverage of important topics, and can thereby make informed decisions about their stances on such topics as health care, unemployment, abortion, gay rights, and national security. The Product The first VEWS experience will be on the ipad. Users will be able to see the top stories of the day, and within each story several videos discussing the topic from different perspectives. The discussion feature aims to be more like Quora than typical blog comments - we are shooting for a substantive debate, where trolls are penalized and removed from the conversation, while insightful and authentic comments rise to the top. See the end of this document for an image of the prototype ipad app. VEWS features high- quality journalistic video content of existing news brands that consumers know and trust. A recent survey from the Pew Research Center s Project for Excellence in Journalism found that the reputation or brand of a news organization...is the most important factor in determining where consumers go for news, and that is even truer on mobile devices than on laptops or desktops. Part of the VEWS experience is also discovery: watching a video from a new source that may lend a refreshing perspective or angle to the topic. The Business VEWS for ipad will launch as a paid subscription service at $3.99 per month. We want to make sure we provide value to the user, and the best way to measure that is to see if users pay. At launch, we will use only freely available content, but shortly after launch we will begin discussing partnerships with news sources. The primary motivation for partnering with news organizations will be to provide the best possible user experience. Partnerships will give us access to more content and will allow us to try new things with that content, such as queuing up the videos to the perfect moment for the topic at hand, 4
and receiving automated feeds from content partners. We expect to pass revenue through to content providers on a market share basis, meaning partners are paid on the portion of activity within VEWS that comes from their content. We think this is the best model to align incentives between VEWS and partners. In modeling the business, we looked at The Daily and hulu Plus as examples of subscription media businesses with a strong mobile component. The Daily also launched on the ipad, and reached 80,000 subscriptions within the first year at a slightly higher price point. We project 30,000 subscribers by the end of our first year of operation (six months after launch). We expect a boost from the election cycle but don t have the promotional muscle of News Corp, of course. There are now more than twice as many ipad owners compared to when The Daily launched. Beyond passing a revenue share back to content partners, we can provide value to them by promoting their own mobile apps. In our second year we ll integrate an app referral feature for partners and charge them for the users we send to their apps. We ll begin testing this feature with select partners. We expect to reach break- even in our second year. The VEWS business is highly scalable editorial selection for the ipad app translates to all platforms as we roll out web and mobile interfaces. See detailed financial projections near the end of this document. Assumptions: 30% of app store subscription revenue goes to Apple 30% of VEWS subscription revenue will be passed on to content partners as licensing fees Average 30,000 monthly subscribers during the second half of year 1, and growth will continue but at a slower rate after the 2012 election. Cost- per- click on app referrals estimated at $0.20 There are about 20 million ipad users in the US (11% of Americans own tablets, ipad market share is around 60%) Our projections do not account for the growth of ipad use Supporting Trends With the growing prevalence of mobile devices, more and more people are turning to their ipads and tablets to stay informed. The Pew Research Center s State of the News Media 2012 report states that 17% of desktop/laptop news consumers also get news on a tablet and 27% of smartphone news consumers also get news on a tablet. Developing VEWS for the ipad engages people in an interactive, visual manner. Our original research on targeted users has shown the following encouraging statistics: 5
More users consume news on a tablet than on TV (45% vs. 29%) Users spend an average of 1 hour per week watching video on smartphones and tablets News is the most popular form of video watched on smartphones and tablets 89% of responders use their tablets while sitting around or lounging - an environment conducive to video consumption The launch of VEWS is timed with the 2012 election cycle. This year, as in 2008, more Americans will step out of their apathy and pay attention to national policy debates. Should the wealthy be taxed more heavily? Should gay marriage be legal? Should we cut national security spending? These debates will take place in VEWS. A longer- term trend in support of our mobile video aggregation strategy is the disruption of traditional, live TV. Targeted Users VEWS is for political junkies and thoughtful consumers. We re after intellectual, politically- engaged people who care about national issues and seek to form their own educated opinions. We strive to build a product that is adored by this niche and grow from there. Our users are politicos in DC who have CNN on in the background all day; they re business people who care about policy but don t have time to do their own legwork; they re journalists and bloggers who cover political issues. They span a large range of ages but share a common interest in the national debate. They are hard to reach but appreciate products that make efficient use of their time and are tech adopters. They talk about politics a lot - including where they get their news. The audience becomes much wider if you include the second tier need to know crowd people who aren t junkies but who want to stay updated on political issues. In an election season, this second audience grows dramatically. Our research shows that many users really do want to see both conservative and liberal news. comscore shows the following: Over 33% of Drudge's viewers also visited NYTimes in the past month (1.5M people) Over 25% of Fox News visitors also visited CNN (8.5M people) Marketing Marketing funds are reserved for research and user tests. VEWS subscribes to Lean Startup methodology, and therefore seeks to create a viral product before relying on marketing to grow traffic. To us, the task of marketing means proving our hypothesis of user value and iterating until users help 6
the product grow by word of mouth and viral means. In other words, marketing is a feature of the product. For example, we will include Facebook integration into the discussion system, so that when users comment, their comment is shared to Facebook/Twitter (at the choice of the user). We will experiment with integrating Facebook s Open Graph actions to show in real- time what VEWS users are watching. Recently, several mobile video apps (Viddy, Socialcam) have exploded in use due to the Facebook Open Graph channel for user acquisition, so this could end up being an important factor in VEWS growth. Competition Although there are the aforementioned news aggregators, as well as new ipad apps - - such as Flipboard and Pulse - - that provide aggregation of news, VEWS fills a void in news coverage. We have not found another service providing contrasting views next to each other via videos from reputable sources. The most significant competition comes not from other ipad apps but from other sources of news and media, including everything from print newspapers to cable TV. People are their own aggregators. We think we can do this job (presenting opposing views on important topics) better and faster than people can do it on their own. As VEWS expands to the web and other devices, it will compete more directly with popular news aggregators. We plan to focus on the core features that our most active users love rather than playing catch- up with other products. Positive Impact With expectations of television innovation from large players (like Apple) and the emergence of smart, web- connected TVs, we see the potential for VEWS to expand to these platforms. With partisan rhetoric dominating the airwaves, VEWS can shift the tone in the public discourse by stimulating civil discussion between conservatives, liberals and everyone in between. Currently, audiences are presented with an echo chamber of a viewpoint when turning toward one source. When presented with a full- range of opinions and the ability to engage in intelligent discussion, however, citizens can use these multiple perspectives to become better informed. The current fragmentation of video content provides a user experience that is hidebound in viewpoint. Searching for numerous viewpoints on the same subject can be incredibly time consuming. In the near future, VEWS can be the single destination for high- quality video journalism from multiple news brands and perspectives. 7
Timeline With an early- stage prototype ipad app already developed, we are excited to demonstrate viability of the idea within 3 months. As we continue to get user feedback, the prototype will undergo constant iteration. In Summer 2012, we plan to begin alpha testing of the app and platform. During this time, we will create workflows for day- to- day operation of our service. We ll plan our pitch to press outlets ahead of launch. Our goal is to launch the VEWS ios app on Apple s App Store in Fall 2012, in time to be a part of the peak discussion surrounding Election 2012 in the United States. Immediately after launch we ll begin iterating on our user interface in response to observed usage patterns. We ll also begin talking with content partners in more depth. Longer- term, we plan to build algorithms to automate and personalize the VEWS experience, and adjust the news sources based on user feedback. If VEWS grows as planned, we will also move into producing original content. We anticipate finding that some points of view are not represented or are not articulated well. We ll consider partnering with sponsors for our original content to create another profit center for the company. With no clear market leader in the video news aggregation space, we anticipate VEWS becoming the go- to destination for video political news. As more and more consumers adopt news consumption on mobile devices, this ipad app is the solution for content fragmentation in this arena. Next Step Right now, we seek to validate the product with customers. To reach our milestone of launching in the app store before the election we re looking for funding to pay for the backend development of the platform. If you re interested in helping us or just want to talk, feel free to contact us at the info provided below. Staff Editorial 2 editors determine the most stimulating and relevant topics each day and source videos from content sources. The editors are responsible for content management in the app. Over time we intend to rely increasingly on automated processes, so this team will not need to scale up. Technical The tech lead (CTO) will design the app and construct the platform. Over time the CTO will begin delegating engineering and design tasks to others. 8
1 backend engineer (part- time) is needed for year one to help build out the initial platform and content management system. In year two we will need to take this position full- time, and in year 3 we will need 2 backend engineers, as we scale up and build apps for additional platforms. We will hire an ios engineer half- way through the first year to work on ipad and iphone development along with the tech lead. A front end web engineer will build the web experience starting in the second half of year 1. Operations/Administration Comment moderation will be outsourced using ODesk or similar service. 1 Business Lead will be responsible for building and managing partnerships with content providers. 9
Our Team Stanley Tang stanleyt@stanford.edu Current Computer Science student at Stanford. Co- founder of BuzzBlaze and author of emillions. Stanley is an entrepreneur and a well- rounded designer/engineer with ios experience and will be working on Facebook s mobile team this summer. Evan Moore evan@evancharlesmoore.com - (312) 285-4328 Founding team member at VEVO, the second most watched online video service in the US with over 3.5 billion monthly video views worldwide. Evan brings experience growing a video business and partnering with media companies. Current student at the Stanford Graduate School of Business. Marcella De Laurentiis mdelaur@stanford.edu A current Stanford journalism graduate student with journalistic experience at ESPN Radio and FOX Chicago News. She is a graduate of the English program at the University of Chicago. Vignesh Ramachandran vram@stanford.edu A current Stanford journalism graduate student with journalistic experience at Denver s NBC affiliate, NBC s TODAY Show, Scripps Washington DC Bureau and at Ongo News (a news curator startup). He is a graduate of the broadcast journalism program at the University of Colorado at Boulder. 10
Financial Projections Year 1 Year 2 Year 3 REVENUE Subscriptions $1,005,480 $2,010,960 $3,351,600 App referrals $8,400 $21,600 Revenue before Expenses $1,005,480 $2,019,360 $3,373,200 EXPENSES SG&A Labor Backend engineer $30,000 $170,000 $170,000 ios engineer $170,000 $170,000 $170,000 Front-end engineer $150,000 $150,000 $150,000 Designer $80,000 $80,000 Tech lead $50,000 $80,000 $80,000 Business lead $50,000 $70,000 $70,000 Moderation services $5,000 $10,000 $10,000 Editorial team $60,000 $120,000 $120,000 Other SG&A Hosting $4,000 $8,000 $10,000 Demo ipads (for different ios versions) $3,200 $3,200 $3,200 Computer equipment $4,000 $4,000 $4,000 Software $2,600 $2,000 $2,000 Apple Developer program $100 $100 $100 Marketing/user acquisition $5,000 $10,000 $20,000 Legal services $10,000 $25,000 $25,000 Accounting $5,000 $5,000 $5,000 COGS Licensing fees $301,644 $603,288 $1,005,480 Total Expenses $850,544 $1,510,588 $1,924,780 Operating Income $154,936 $508,772 $1,448,420 Tax @ 30% $46,481 $152,632 $434,526 NOPAT $108,455 $356,140 $1,013,894 Net Margin 11% 18% 30% 11
Prototype Image: VEWS ipad App 12