Interviews

Exclusive interview with Greg Golebiewski, President & CEO at Znak Inc.

Sunday 28 August 2011 | 12:30 PM CET

"The way publishers try to syndicate their digital content is far from optimum"

Znak Inc. is a Delaware corporation with its roots in Silicon Valley and development offices in Portugal and Poland. It was started in Feb 2008 by its current CEO Greg Golebiewski, a serial entrepreneur, graduate of Northwester University and IESE Business School. Znak Inc develops software-as-a-service (SaaS) and server-based solutions, designed to effectively curate and monetise premium content.

Znak Inc. was a two-time Silver Sponsor of Web 2.0 Expo in San Francisco and received a number of awards for its products, including a EUR 200,000 grant from the EU’s e-service development fund and the 2011 Florin Community Award given to innovative online transaction services by payment professionals and web users.

While there is no consensus yet on online publishers/content providers should charge for online content, it seems that technology companies manage to keep pace with current market demands, by offering paywalls, subscription-based or micropayment systems to help publishers generate revenues. What kind of business model does Znak it! follow?
Not many people remember that at the beginning of the WWW – then also called hypermedia – there were micropayments. At least this is how Ted Nelson, the author of hypertext and therefore one of the founders of the Web, explains the origins of his model for creating and using linked content. The Clinton-era information superhighway was also based in the principles of commerce and economy of scale where each user can be a potential provider of information and services but also a consumer. It was only with the emergence of “user farms” and the mistaken, mostly ideological stand that the Internet can “run on love" when micropayments become unfashionable, a taboo, really, and paid content or subscription plans were fought against as elitist “fenced gardens” and “paywalls.” I believe this period is over, though. For anyone who has ever tried to run an Internet-based business it must be clear now that “free” is not the answer and online advertising, however a great source of money, cannot pay for all quality content. Now even Google has its own micropayment solutions, OnePass, e-wallet, you name it.

The first version of Znak it! was created in 2007 and presented at the 2008 Web 2.0 Expo in San Francisco. From the beginning, we focused on a hybrid approach – given the diversity of the Web and its offerings – however, delivered and operated in one very easy to use, very flexible, always reliable and safe package. There is only one model that can deliver such results: it is based on the concept of pre-paid virtual tokens that can assume any exchangeable value. And, our Znaks are in fact such tokens. Not money or legal tender – rather, proofs of funds available for instant online transactions as small as USD 0.05. Thanks to this solution, the Web user can view, download or interact with desired piece of quality content of any format (text, video or audio clips, apps, etc.) with only two mouse clicks. The content provider earns up to 94% of the transaction’s value. Or, he can offer the content free of any charges or ask for a donation. Znak it! can also process social donations or political/membership contributions and thus help non-profits secure some serious support.

The newest version of Znak it! adds two new extremely powerful features without compromising the system’s simplicity. Now it allows users to skip registration and earn Znaks anonymously to access desired paid content by clicking on a third party’s promotional material or advertising. In a sense, Znak it! is a content monetisation platform that generates revenue and yet the content can be “free” to its users.

What made you decide to get into this business?
Znak it! is my third venture. The first one was a successful consulting business. Then, I started an online music services and social network BuyMyPlaylist. I think, I like solving problems, especially those deemed “impossible” to solve.

Could you briefly summarize the target user/market and customer demand/need Znak it! has been designed to satisfy?
Znak it! has been designed to help creators and publishers of premium content generate revenue regardless of the scale/traffic size and format of their digital assets. I emphazise “premium” because, obviously, not all content can be sold online. Still, the market is huge. The demand, too. Based on our research and a pilot project we ran last year, 8.2% of Web users paid on average USD 0.84 per a la carte access to content, ranging from stock photos to online crossword puzzles to blog/magazine articles, video clips, etc. We estimate that with the new “earn paid access” feature the newest version of Znak it! offers, the percentage of users willing to “pay” for online content can reach 20%.

What makes the company`s product different from other similar ones on the market and what advantages does it provide for both online publishers and web users?
Given the unique simplicity and universality of Znak it!, I would say there is no other content monetisation platform like it. There are excellent products that can deliver relatively quick and safe payments or even micropayments. There are also successful subscription models. Charging for content via tablet application or SMS technology seem to be popular or even very popular. But then one has to consider the installation and operational costs of these solutions or their technological limitations. The New York Times’ subscription-based meter has cost reportedly USD 40 million to develop, implement and now market it. How many publishers can afford such investment? Apple charges 30% of generated revenue and its iPad technology does not support flash. SMS operators charge up to 60%.

Znak it! is SaaS. It does not require any up-front development or installation costs. It is ready to use. It gives content creators an option of embedding our paid access link or widget directly on their websites or a third party’s site or to publish selected content on our Znakit Aganda portal. In other words, one does not have to have one’s own site to monetise one’s content. Also, unlike other pay systems, we give our content providers full, real-time access to their traffic and transaction data. Users’ aggregated data is also available, and it is available for free. For Web users, I would like to emphasize again the pay-as-you-go and “earn paid access” options. This is really unique for a payment platform. The fact that users have a choice of surfing the Net and accessing paid content not only “free” of charge but anonymously vis-à-vis the content provider makes Znak it! exceptional and… cool we think.

This year, Znak-it! won the 2011 Florin Transaction Service Innovation Award at the EPCA Conference for its outstanding innovations in the transaction services industry. Could you elaborate a bit on the degree of innovation your product delivers?
I just mentioned a number of unique features that address some of the most challenging problems both content providers and users face when it comes to content monetisation and online payments. We are really happy that our peers and customers recognized the innovative character of our services. But there is also the back-end and front-end technology. It takes a lot of sophistication to make a product very easy to use. The Znak it! platform has been built using Java and some proprietary tools developed by our team in Poland to make the system browser-based, plugin-less and operating in the cloud environment according to the highest safety standards. The technology is really outstanding. A patent application has been filed.

Does the company have products, plans or projects for mobile?
Yes, we do. We are working on it. Mobile is a buzzword now and a must for any content publisher. Mobile payments might, however, take some time to be adapted by consumers. There are some complicated legal and device standardization issues, but we are on it.

In your opinion, which are the challenges and opportunities associated with managing and monetising the online content ecosystem?
One of the biggest challenges is the wait-and-see attitude on part of the content providers. Even though now with the NYT’s successful sub scheme, many once-reluctant publishers and media experts seem to be warming up to the idea. Still, please note that the term “paywall” is derogatory and uncalled for. Nobody calls CNN a news organization behind a paywall, do they? Same is with the negative connotation of micropayments. For years some Internet experts have been telling us that micropayments would never work and that people “hate to be nickeled and dimed.” And, for years Web users have been paying for online content and virtual goods in spite of those claims, only hardly anyone was writing about it.

The opportunities are really huge, as the market is huge and vastly underserved. But like any complex structure with many players often with competing interests, it requires certain critical mass to become a true ecosystem. The good news is that products like Znak it! can greatly reduce the size of this necessary mass. On our site, www.znakit.com, we have a simple calculator showing how quickly paid content can become profitable comparing to the ad-supported model that requires a scale of millions of monthly uniques to generate any serious and sustainable revenue.

When it comes to paying for digital content, either online or via mobile, do consumers' attitudes differ (especially if we are talking about various regions and content types)?
Yes, the attitudes do differ, sometimes unreasonably. For example, I never understood why SMS-based models are considered preferred. They are very expensive and not as easy to use as other alternative payments, especially for online content. Once has to have both a telephone and a computer, make a phone call to get a unique passcode, then transcribe the code, enter it into the computer, confirm it… it is an unnecessarily long and fragmented process. The NFC and “bump” technologies make mobile payments a lot more intuitive, but still, there is the enormous cost per transaction. We all heard about the success of Safaricom’s M-pesa; in Slovakia a “national,” if you will, ISP-based payments for digital content seems to be working well. So, yes, different regions came up with different solutions. But what does it mean? Is it consumers’ attitude or simply the availability of one “forced” model? Certainly, it is not the case of people in one region or another suddenly knowing better. It is cultural rather than technology or organizational issue.

The problem in monetising digital content is that most publishers still struggle to find the best way to package, distribute and charge for their virtual content in a way that is easy and valuable for the customer and profitable for themselves. In your opinion, what are the most efficient ways to reconcile all the aforementioned issues?
Well, one way would be to abandon a mistaken perception that digital cannibalizes print. There is enough evidence from successful media, such as the Financial Time or Hearst Publications, that online content can drive more print readership. However, writing for and publishing online have to be different, richer, taking advantage of the multi-media technology and tailored to the expectations of the Web users. A simple conversion to a pdf document and publishing the entire magazine “as virtual now” is probably the least effective way to gain new readers. And yet lots of publishers do it, only to conclude that “digital” does not work for them.

The “silo” effect of long term subscription models should also be avoided. It is very tempting to capture hundreds of thousands of committed users who in addition tend to renew their subs automatically; advertisers seem to love it as well – in the long run, however, the strategy might backfire. In the digital age it is better to have 4 million monthly hits paying USD 0.50 each than 200,000 subscribers paying USD 10 a month, even if the revenue is the same.

I think the way publishers try to syndicate their digital content is also far from optimum. Thousands of smaller online publications and bloggers would pick up a story and reprint it (with appropriate credits) if such stories were available on demand and for a small fee, preferably paid afterwards, based on the actual number of generated views.

According to numerous surveys, when inquired about the reason for which they have never purchased virtual content, most respondents claim that “it is not worth the money”. In your opinion, what are the most important steps that developers should take in order to motivate consumers to spend more on digital items?
First, we all have to understand and admit that there is no such thing as a free lunch. Quality content and e-services require solid financial bases to cover technology and marketing costs. Content creators deserve a fair pay for their efforts.

Second, contrary to some earlier surveys – some of them done by the advocates of “free” – people do buy online music, games, including virtual goods, applications, financial information, etc. Online payments are the fastest growing segment of the overall alternative payment industry, which a recent study estimates to reach USD 2,700bn in revenues by 2015. It is a huge market. The most recent success of the New York Times’ and Wall Street Journal’s sub plans proves that large numbers of Web users are willing to pay also for news and magazine articles.

The payment mechanisms must, however, be frictionless and very safe, preferably separating information processing – the info on who, when and for what is paying, which must be done in real time – from the actual payment transactions, which can be aggregated and processed on a daily, weekly or monthly basis within the existing (yet better) banking system. In my opinion they should also be universal, that is, platform agnostic and on-demand. It seems unlikely that many Web users could afford paying for multiple long-term subscription plans. Hardy anyone needs to have access to the entire publication all the time.

In the coming years, online readers and content providers will see the rise of a plethora of pay models. In this context, the future for news media looks rather chaotic, because so many systems could contribute to confusion rather than general industry consensus. In your opinion, will paid online content will be the future or the end for news organisations?
Definitely, the future. Content is king and it will be king. As for a plethora of pay models, certainly in the coming years there will be some chaos and some spectacular failures. With time however, a winning model will emerge. It can be a hybrid model with some niche or regional variations; it will be offered by several large providers – but I believe in the principles of free market economy. Sooner rather than later, it will not be a question of which pay model works, but how to make it more efficient, how to maximize profits using the best model out there. It is always like that.

The future of online content monetization is…
...Znak it! of course, or to put it more humbly, any content curation and monetisation platform that is technologically advanced to process billions of nano- or even micro-transactions at once, in real time, and which is “two-click” easy to use, universal (platform agnostic), reliable and safe. Given the enormous advantages that the pre-paid virtual credit system brings, I am convinced that digital content will be monetised mainly using systems based in such credits or virtual redeemable tokens, including ones paid for by a third party or advertisers. Direct user payments and advertising do not need to be mutually exclusive. Online content monetization can provide fantastic opportunities for organisations to generate new and valuable streams of revenue. However, positive results can only be achieved if the implications associated with charging for content are considered.

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