The Economics of the iPad

An annotated version of a presentation delivered June 15, 2010 at the Power of the Tablet conference at the Poynter Institute of Media Studies. The conference attracted attendees from as far away as Dubai and Germany to learn about tablet publishing from Dr. Mario Garcia, The New York Times, Time magazine, USA Today, News Corp., Adobe, WoodWing and, well, me. Here's what they saw and heard:

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Introduction

It's still too early to know what will and won't make money on the iPad, but I'm here today to present one point of view, and recommendations based on my experiences since Apple announced its tablet in January. It's been a busy five months — blogging. consulting, strategizing, creating content and pursuing investment opportunities surrounding the iPad. It was bound to happen, considering the types of work we do at Joe Zeff Design:

We produce magazine covers . . .

. . . as well as advertising imagery, such as this computer-generated Porsche we produced at Joe Zeff Design at Splashlight . . .

. . . as well as information graphics like these, for Runners World and Rolling Stone . . .

. . . as well as animation, like this Nike running shoe (that spun onscreen but won't here):

For Joe Zeff Design, the iPad represents a place where our capabilities converge, and an opportunity to expand upon our existing relationships with newspapers, magazines, advertising agencies and corporations. But in order for us to make money, we needed to first understand how our clients were going to make money, so we could help them to make even more.

Everyone On The Same Page

The iPad forces all parties to come together as entrepreneurs. It is a joint venture between editorial, technology and business development, with a shared vision that is clearly focused on creating this:

Regardless of the quality of the effort, it is the business model that will ultimately determine success or failure. There must be sufficient value to drive revenues, and those revenues must exceed costs. A quick dissection of the variables that feed the business model:

Development costs vary depending on the level of customization. There are templated solutions like WoodWing's offering, and there are custom-built solutions that can be much more expensive to develop. Content can be repackaged or created from scratch; simliarly, production can be piggybacked onto existing workflows or independently pursued. Distribution is handled by Apple for a 30 percent premium, or through a browser for varying price points.

On the revenue side, it is important to note that advertising is but one of numerous potential streams. Inflows can also be realized through single-app sales, subscriptions, sponsorships and partnerships, commissions for helping to sell someone else's products and income from selling your own products.

Step 1: Choose your audience

The first of three steps toward developing a tablet publication with a reasonable expectation of profitablility is to define the audience for the product. What Apple has told us is that there is already a large and growing customer base.

Unfortunately, we have no idea who these people are.

There are no solid analytics at this point, and Apple is making it difficult for third parties to collect information about the iPad user base. It is in Apple's interest to keep that data to itself, as it has developed its own advertising platform, the iAd network. Meanwhile, publishers are forced to rely on anecdotal research to identify what demographics they're attempting to reach. One unscientific method: go to the local Apple Store and see who's clustered around the iPads.

But it's risky not to jump in this early.

As a publisher, you'll have to weigh the risks. You can leverage what you know about your print audience and the type of content you're able to deliver. Here are three possible approaches for delivering value to your potential customers:

Many publications are simply turning their print editions into pixels. In some cases, those newspapers and magazines are exported as PDFs and distributed through companies like Zinio, PixelMags and NewspaperDirect. Time and Wired have gone further, working with WoodWing and Adobe, respectively, to produce enhanced iPad versions with bonus content, interactivity and vertical and horizontal orientations. In its first issue, Wired sold nearly as many digital copies as traditional ones.

Another approach is to break up your publication and sell it in pieces. Instead of offering a $4.99 magazine, you might sell it a la carte — by the article, subject or even by the author — at a reduced price point. Many publications are offering free samples — Entertainment Weekly's Must List, New York Post Pix, and NYT Editor's Choice — to whet appetites for forthcoming paid apps. For newspapers, the real estate section would make a natural standalone app, easy for prospective buyers to carry along when house shopping. The iPad 3G's built-in GPS would help buyers identify nearby properties for sale, and provide a way to see inside a house without ever getting out of the car. Searchable fields by price, number of bedrooms, and days on market would add value, and make the app an attractive vehicle for advertising.

The Guardian Eyewitness leverages the crisp display of the iPad by publishing one incredible photograph every day. It is as simple as it gets, and one of the most popular apps available. (149,000 downloads, reports speaker Staci D. Kramer of paidContent). The Elements: A Visual Exploration brings the periodic table to life by presenting 360-degree imagery of rocks, metals and other objects. At $13.99, it is the highest grossing eBook in the App Store and an inspiration for any publication seeking to develop experiential content. Worth considering: a children's version of your publication, specifically for the iPad, to establish what may be a lifelong relationship with your future subscribers.

But don't stop there.

Step 3: Consider partnerships

Partnerships are a way to reduce risk while expanding the potential for success. Among the benefits:

Money: Consumers don't want to pay for content, but advertisers routinely pay for audience.

Reach: Your audience plus their audience equals a larger customer base.

Relevance: Expanded opportunities to become part of consumers' routines

Many thanks to the Poynter Institute of Media Studies and Dr. Mario Garcia of Garcia Media for organizing this important conference, likely the first of many. More transcripts from other speakers here.