Can OnSwipe steal magazines back from Apple?February 25, 2011: 10:33 AM ET
Big media companies are grousing about Apple's 30% app tax. OnSwipe wants to convince readers—and publishers—there's another, better way.
By Chadwick Matlin, contributor
Last week, after a year of luring big media organizations onto the iPad, Apple sent out a press release, but they would have done just as well sending copies of the old board game Mouse Trap. The release said that publishers, like all app developers, would have to pay what amounts to a 30% tax on every purchase inside their apps -- including for content subscriptions, both print and digital. This, for publishers, was less than ideal.
Media companies want to be able send users to their own subscription systems, where they can collect valuable data about them, not to mention their credit card number and the full purchase price of whatever they subscribe to. The Vanity Fair app, for example, would like to send users to vanityfair.com to buy a digital subscription. But for Apple (AAPL), that's verboten. The Justice Department and Federal Trade Commission think Apple's strategy may not be entirely legal, but that's another story, for now.
Meanwhile! Halfway across the world in Barcelona, Apple's rivals assembled at the Mobile World Congress. Motorola's (MMI) Xoom, HTC's Flyer, LG's Optimus, and other tablets powered by Google's (GOOG) Android OS were on display. They're alternatives to the iPad, unproven and largely unknown. But if they—and Android tablets in general—take root the way Android phones have, they will be a huge platform on which publishers can sell their content. Yet Android might not be the panacea publishers are hoping for: Google, too, just cracked down on app that tried to circumvent its in-app purchase mechanism.
Amidst all of this, two guys in New York, Jason Baptiste and Andres Barreto, have raised $1 million from firms backed by super angel Ron Conway and ex-Yahooligans' (YHOO) firm Morado Ventures, and also from VC firm Spark Capital, known for its stakes in Twitter, Tumblr, Boxee and other new media darlings. Their startup, OnSwipe, exists to slay the app-store model when it comes to media. It circumvents app stores entirely. A publisher won't have to tell readers to download a special app and buy a special tablet subscription. They'll just tell them to go to their website. Because according to Baptiste and Barreto, the future of publishing looks far more like the last decade of publishing than anyone wants to believe.
Similarly, OnSwipe's tablet website templates are designed for today's touch screens—and all the robust capabilities they have, compared to yesterday's devices. (They'll work on touch screen phones too, but tablets are the focus.) At their cluttered desk—MacBook Airs, iPads, and Galaxy Tabs abound—in the back corner of a New York tech incubator workspace, Baptiste and Barreto showed me some early design mockups that look intuitively familiar. You can swipe from page to page and touch different stories on a larger home screen. Images are paramount, video pops off the screen, and commenting and sharing are hidden until the user taps a button. It feels like a website optimized for a tablet. Which is exactly the point.
Most importantly, a publication's editorial team won't have to do extra planning to make content swipeable. All of the existing content on the website will logically slot into the various templates. No matter the tablet. All of this, by the way, will be free.
Which is what makes OnSwipe's vision so alluring. It's an equal-opportunity platform, preparing for a heterogeneous future where the iPad is just one (major) voice in a larger constituency. That's a reasonable assumption, considering Android's market share is already at 22 percent, according to Strategy Analytics. And according to a different analyst, the tablet market will be worth $46 billion by 2014. HP (HPQ), for what it's worth, more or less agrees. One of its executive vice presidents says it'll create a $40 billion tablet market in the next few years.
But OnSwipe is nothing without publishers. Baptiste and Barreto promise to launch sometime this spring, with an estimated 20,000 partners. That's an impressive sounding but easy number to hit because OnSwipe will be integrated with blogging platforms like WordPress and Tumblr. (The whole idea eveolved out of a WordPress plugin the two developed.) For a site to use OnSwipe, it will just need its webmaster plug the service into its code. This is OnSwipe's greatest advantage: it brings publishers who don't have enough money to develop an app—let alone multiple apps for several different platforms—into the future.
OnSwipe also plans to bring publishers into money. Baptiste hates web ads, calling them "parasites on the content." So OnSwipe—like so many tech utopians—wants to make ads fun again. With earnestness, Baptiste says, "Kids growing up would rip out ads and put them on the wall." He wants to return to that magical—maybe apocryphal—time, when "advertising and editorial would work together."
OnSwipe will handle ads without all the whiz-bang of apps like The Daily. They'll essentially be print advertisements, with maybe a little GPS optimization and social networking built in. (Yes, social networking tools will work in OnSwipe's tablet templates, unlike in most current media apps.) The ads will pop up after a certain number of articles are read, a number that each publisher will self-determine. The ads will get into the system either through a publisher's own ad sales, or—and this is where OnSwipe's business model emerges—by using the ads OnSwipe sells.
The only problem: As of now, it doesn't have an ad staff. Nor will it launch with one. In a classic startup case of Deferred Monetization Disorder, OnSwipe doesn't yet know how it's going to sell all these ads that will be its—and its publishers'—salvation. And yet Baptiste and Barreto aren't worried. Former execs from AdMob and Quattro, two leading Web advertising technologies, sit on OnSwipe's board, and OnSwipe plans to lean on them heavily to figure out how to move forward.
That OnSwipe doesn't have an ad team won't be a problem for big national publishers. Periodicals like the the New York Times, Popular Science, and Wired have their own ads (and their own apps), and they'll want to keep using them if they sign up. OnSwipe, knowing these are the publishers who will legitimize its service, is more than happy to let them—it will take a smaller revenue cut out of the ads that originate outside its (still-nonexistent) network.
Signing these companies up, however, will be more difficult. They are the ones, after all, that have the resources to build an app of their own, or a web-enabled tablet template, if that's the way the marketplace starts to move. Middlemen need not apply. Nevertheless, Baptiste and Barreto say they'll launch with at least one or two marquee partners, who are under wraps for now.
But OnSwipe also thinks it can get by without the big guys. Baptiste and Barreto are convinced that enough mid-sized sites—from the size of, say, The Business Insider on down—need tablet strategies, but don't want to pay to develop their own. It's these sites, after all, that have brought us to this moment in the first place. They, along with Craigslist classifieds and a financial crash, have caused the media industry's existential crisis. OnSwipe wants to make sure the whole ecosystem—itself included—exists just a little bit longer.
Disclosure: The author served as a professional reference for a prospective OnSwipe employee, before reporting or researching this article.
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