Jeff Bezos Bought The Washington Post For One Thing: Distribution


By Gabe Stein

Co,Labs Fast Company

8-7-2013 9-42-05 AM

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.

Your Guide to the Leading Media Companies 2012

Revenue From Digital Jumped Nearly 20%

Largest Companies by Sector. Media 100 Total: $340 Billion, Up 4%
Internet-Media Employment Fuels Digital Job Growth
Sector Is Now Second Only to Newspapers in U.S.

U.S. media revenue for the 100 Leading Media Companies rose 4.0% in 2011, fueled by surging growth in digital. That represents a record $340 billion in net U.S. media revenue. However, last year’s percentage gain marked the lowest growth rate in a nonrecession year since Ad Age began this ranking in 1981. Digital revenue — mostly at digital pure plays such as Google and Facebook — jumped 19.7%. Remove digital from the equation, and Media 100 revenue rose only 2.8% in 2011.

The digital divide continues in 2012. U.S. revenue for the 100 largest media firms increased 4.3% in the first half of 2012, according to Ad Age DataCenter estimates. Digital pure plays climbed nearly 20%, driving year-to-date growth. Take them out of the mix, and Media 100 revenue edged up just 2.1% in the first half.

Source: Ad Age DataCenter estimates of net U.S. media revenue. Numbers rounded. See Methodology for additional notes: AdAge.com/100media2012. 1. Net media revenue shown pro forma to reflect acquisitions or divestitures.
Largest Companies by Sector. Media 100 Total: $340 Billion, Up 4%
Net U.S. media revenue in 2011. See expanded media-sector tables at AdAge.com/100media2012.

The cable-network sector was this report’s second-best performer, after digital, with 8.3% growth in 2011. Video/broadband providers — cable systems, satellite, telecom firms — generated a 5.5% increase in net U.S. media revenue. Newspaper revenue fell 5.0%. Magazine revenue decreased 1.7%. Radio rose 1.4%. Broadcast TV fell 3.9% in 2011, reflecting the lack of election and Winter Olympics advertising that boosted 2010 revenue. (This year gets the benefit of Summer Olympics and massive political spending.)

For deeper data on the largest media companies, 100 Leading National Advertisers and more than 800 agencies, subscribe to Ad Age’s DataCenter, where you can also see:

Comcast Corp. topped Ad Age’s ranking for the fourth year, capturing 13.2% of Media 100 revenue — one out of eight dollars. Coming in at No. 100: Wehco Media, a newspaper and cable firm with estimated media revenue of $340 million — just 0.1% of the total haul.

The ranking includes 14 pure-play digital companies, up from nine on last year’s list. Google took the No. 9 spot, cracking the top 10 for the first time.

Digital growth translates to jobs. Internet media this year became the media industry’s second-largest employment sector.Five digital companies are making their Media 100 debut: Bankrate (personal-finance-data publisher); eBay (e-commerce company with growing media revenue); Hulu (video content); LinkedIn (professional network); and TripAdvisor (ad-supported travel site). This year’s ranking includes three other newcomers: YP Holdings, Berkshire Hathaway and Halifax Media Group.

Source: Ad Age DataCenter. Fastest-growing Media 100 companies in 2011 based on estimated net U.S. media revenue.

YP Holdings was formed in May 2012 when AT&T sold a majority stake in its yellow-pages business.

Berkshire and Halifax Media are rolling up newspapers. Halifax Media started in 2010 with one Florida paper and then this year bought regional papers from The New York Times Co. and Freedom Communications.

Berkshire, the diversified holding company, made the list after Chairman-CEO Warren Buffett increased his daily newspaper holdings to 29 from one. Mr. Buffett snapped up his hometown Omaha World-Herald Co. and papers in the Southeast and Texas, betting on the viability of smaller-market newspapers and opportunities to grow digital.

“I read five newspapers daily,” Mr. Buffett told his publishers and editors. “Call me an addict.”

Berkshire is hardly overdosing on newspapers. The single daily it owned for the full year — The Buffalo News, bought in 1977 — accounted for 0.07% of Berkshire’s 2011 worldwide revenue, according to Ad Age DataCenter estimates. If Berkshire had owned its current roster of papers in all of 2011, newspapers would have accounted for an estimated 0.34% of worldwide revenue.