March 15, 2012

Decline in the U.S. newspaper industry in 3 charts

Filed under: journalism, newspapers — Rakesh Agrawal @ 10:10 am


This chart shows U.S. newspaper print revenue in nominal dollars.


Take the same data and adjust it for inflation. Now we’re nearly at 1950 levels. (2011 dollars)


Now take the inflation adjusted data and do a per capita calculation. Newspaper revenue is a tiny fraction of its peak and less than half of 1950 levels.

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November 18, 2011

NOT first! Where the heck is Rocky’s analysis of Yelp?

Filed under: journalism, newspapers, yelp — Rakesh Agrawal @ 9:23 pm

I had several people comment to me this week that they would like to see more timely updates in response to breaking news on companies. For example, the Yelp S-1 was released on Thursday and I probably won’t post my analysis until Monday.

So what’s up with that? No, it’s not because I’m lazy or slow.

For starters, I am not equipped to compete in the “first” game that the media like to play:

  • As much as I have formed a mutual admiration society with the folks at Bloomberg over the last five months, they haven’t (yet) comped me a Bloomberg terminal. I don’t get instant access to filings as they happen.
  • Even though it seems like it sometimes, this is not a full-time job for me. I’m usually juggling clients, briefings and other responsibilities. Unfortunately, I can’t drop everything else.

But, just as important, I don’t value the “first” game. If you strive to be first, more often than not, you end up regurgitating management’s story. To me, posting a leaked memo that management wants out is not a “get.” A “get” is posting critical analysis or information that management would rather not see published.

My renewed interest in financial journalism was sparked by a supposed local expert who was raving about what a great company Groupon is shortly after their initial S-1 filing. He clearly hadn’t read it and it just posted management’s talking points. Too many reporters don’t read the underlying documents that they’re reporting about.

Then there’s the fact that the information isn’t immediately actionable. Because Yelp is a private company that won’t be trading for at least a month or two, it doesn’t really matter if I don’t post until Monday. Given that dynamic, I’d rather do a more thorough analysis than make mistakes that need to be corrected later.

But in the meantime, if you want to read about Yelp, check out my five-part series on local search, specifically how Google Places is a strong competitor to Yelp.

November 14, 2011

What’s wrong with journalism today, part 1

Filed under: journalism, newspapers — Rakesh Agrawal @ 9:27 pm

One of the great innovators in online journalism, Jim Romenesko, resigned from his position at the Poynter Institute, a journalism think tank of sorts. Among journalists, Romenesko practically invented blogging. Some reporters who claimed to never had read a blog read Romenesko religiously. He aggregated links to some of the successes and excesses of journalists, while regularly driving traffic to original news sources. What tech blogs consider the slashdot effect, Romenesko provided to journalists.

Romenesko resigned after Poynter called out attribution errors in his work. He sometimes lifted passages from the original source without putting them in quotation marks. Although his intention was clearly not to plagiarize (he linked to original sources), the Poynter blog post on the subject left a bad odor.

I’m not going to rehash what happened here; many journalists have already done that.

I’m going to focus on what’s wrong with the state of journalism today.

A little background on me, for context: I majored in journalism at Northwestern University’s Medill School of Journalism. I did a number of reporting internships in college. I launched some of the first online newspapers. I also attended a leadership seminar at the Poynter Institute early in my career. (Which I thoroughly enjoyed and learned from.)

For the past five months, I’ve engaged my own form of journalism while covering Groupon and the lead up to its IPO. My own role doesn’t fit into conventional notions of journalism. I’ve done a lot more analysis than most reporters do and I’ve done a lot more original reporting than most analysts. When I’ve done media interviews, I’ve been variously labeled a blogger, business journalist, analyst, author, gadfly and artist.

Here are some of the things that I think are wrong with journalism, and especially financial journalism, today. I make no claims to knowing all the answers. I made my own mistakes in recent months and I will call those out too.

Focus on petty details over the big picture

Too many people in journalism focus on minor details instead of the big picture. This was the case with Romenesko. Would I do what Romenesko did? Probably not. I try to be very careful in my attribution and identify other people’s quotes. But Poynter’s reaction was way more aggressive than it needed to be. The fact that it was essentially a cover-your-ass move on Poynter’s part made its actions even worse.

The purpose of attribution is to ensure that the original author gets credit for their work. Romenesko certainly did that.

I see an emphasis on petty details in journalism all the time. Part of this is because that’s something that’s relatively easy to do. This correction from The New York Times is my favorite correction found while reading Groupon stories:

An article last Sunday about Groupon, the e-mail marketer, misidentified the heritage of Zeus, whose name the company’s writers invoke rather than mentioning God. He is part of Greek mythology, not Roman.

That correction, published on June 5, after the details of Groupon’s financials were made public, didn’t correct this statement: “Groupon is raking in more than a billion dollars a year from these featured businesses and is already profitable.

The trivial detail of which mythology Zeus belonged to is something that editors can easily check. The big picture of a massive IPO by a company losing hundreds of millions was a bit harder to nail down. To be fair, Groupon went to great lengths to obfuscate its financials — but that’s all the more reason for diligence among journalists.

Objectivity is a lie

For a profession that presents itself as among the most honest, one of its core tenets — objectivity — is a lie. The Associated Press, NPR and others would like you to believe that their reporters and the stories they present are entirely objective and dispassionate. That’s bullshit.

Although they try hard to be objective, humans will innately give into bias. Source selection and story selection alone can cause bias. It doesn’t matter if you prohibit your reporters from attending the Rally to Restore Sanity as NPR and other outlets did; the fact that they wanted to go is the point. By prohibiting their participation, all you’re doing is hiding their biases.

This comes up all the time as news organizations struggle to adapt to social media. News outlets create social media policies to preserve the appearance of objectivity. These social media policies are fundamentally dishonest — they don’t eliminate the biases, they just keep the public from knowing about them. In its policy, The Associated Press says, “A retweet with no comment of your own can easily be seen as a sign of approval of what you’re relaying.” One journalist suggested that reporters modify the way they retweet to indicate that they didn’t endorse the item they retweeted. But merely the selection of what someone retweets can reflect bias.

My view is that it’s better to have that information out in the open. If a reporter has a bias, let’s get it out there.

There’s a big difference between being objective and fair. My coverage of Groupon hasn’t been objective in the sense that journalists tout. Heck, one of my earlier pieces was titled “Why I Want Google Offers And The Entire Daily Deals Business To Die”. Everyone who has followed my work knows exactly where I stand.

But I also believe I’ve been fair. When I see positive uses of Groupon, I write about them or tweet them. When others smack down Groupon for reasons I think are unwarranted, I call it out.

Traditional journalism rewards a fake balance in the name of objectivity that in reality often distorts the truth. If 95% of the businesses I talk to had bad experiences, is it really right to quote one business who had a good experience and one that had a bad experience as traditional journalism would have you do? I don’t think so.

Objectivity also does a disservice to readers in another way: it robs readers of the expert opinion of those who are among the closest people to a story. A reporter who is on the same beat for years should gain enough knowledge to recognize bullshit when they hear it. And news outlets should allow them to do so.

Next up: Illnumeracy and lack of time.

The Poynter Institute is given express permission to republish this series, with or without attribution.

April 8, 2011

iPhone coming to Sprint — or, why the Washington Post needs a technology columnist

Filed under: journalism, newspapers — Rakesh Agrawal @ 3:00 am

The Washington Post’s technology columnist, Rob Pegoraro, announced yesterday that he is leaving his position.

The proximate cause is management deciding that the sort of review and analysis of technology that I’ve been doing for most of those 17 years is no longer part of the Post’s core mission. As I understand it, the paper places a high priority on covering Washington the city (as in, local news and sports) and Washington the story (politics), but other topics may not be assured of column inches or server space.

Instead, the Post seems to be focusing on providing news reports on policy by staffer Cecilia Kang and a TechCrunch-lite feed of technology news. Although Rob’s picture is on top of the latter, in recent months it has been dominated by briefs written by an inexperienced staffer. Few in the technology industry would find the feed valuable and few outside the industry would care about it.

Rob has worn a variety of hats in his current role. He has written about technology trends, reviewed new products, answered user questions and live-blogged Apple events. I’ve questioned why a paper like the Post would go to the expense of sending someone to live blog an Apple event, when it adds little value over what TechCrunch, engadget, Ars Technica and dozens of others provide. (Likely answer: writing about Apple is a surefire way to generate page views.)

Rob has also written about technology as it relates to public policy. That is where his contribution will really be missed. Technology is an increasingly important part of Washington (the story). Every day, it reaches deeper and deeper into our lives. As computers get faster, more mobile and more pervasive, their influence and the influence of the companies behind them gets stronger. Consider just some of the public policy issues:

  • Net neutrality. Can last-mile providers such as Comcast and Verizon discriminate among the types of traffic on their networks? Can they charge Netflix more to deliver its bits because they are worried about Netflix cutting into their television revenue? Or can they just block it altogether?
  • Privacy. Companies like Google and Facebook are building unparalleled databases full of our innermost thoughts and actions. Publishers are tracking our every move across the Web and selling them for fractions of a penny. (The Post’s home page has five different tracking cookies.)
  • Spectrum allocation. As wireless usage grows, the allocation of spectrum will become increasingly important.
  • Copyright. Congress’ near perpetual extension of copyright robs the shared experience of this country, despite the fact that many works have no commercial value even just five years after creation. Some content, like cable news, has little commercial value five days after creation.
  • Patents. Business method patents stifle innovation and increase costs for consumers. (I say this even though I’m an inventor on one such patent.)
  • Antitrust. Mega-mergers like the recently approved Comcast and NBC deal will reshape our culture. If approved, deals like AT&T/T-Mobile will raise consumer prices and stifle innovation.
  • Civil liberties. Many people don’t know that data stored in the cloud has much less legal protection from government searches than data on your hard drive on your laptop. Snakeoil salesmen from companies like Rapiscan and L-3 Communications conspire with government bureaucrats to digitally strip law abiding Americans.
  • Digital rights management. Companies are using DRM to constrain content sharing and consumption.

There are many more such issues, including the Universal Service Fund, ILEC termination charges and immigration. What they have in common is that they sit at the intersection of technology, economics and public policy. They are incredibly complex. Clear understanding of these issues is critical to our digital future.

One only needs to read the oral arguments in CITY OF ONTARIO, CALIFORNIA, ET AL. v. QUON to see how little our leaders understand technology. Rob’s columns were one way of educating them. Writing about technology policy isn’t going to generate a fraction of  the page views as completely unsubstantiated rumors about the iPhone coming to Sprint (you heard it here first!), but it is something that Washingtonians should care about. The nation needs them to.

Although I didn’t always agree with Rob’s views, he certainly understood the technologies and issues he was writing about. Too often, stories get undercovered because many journalists don’t understand technology. Likewise, some stories get blown out of proportion by journalists summoning the Internet bogeyman to chase ratings or politicians looking to grandstand.

To be sure, Rob isn’t the only one who writes about these issues. Om Malik does a terrific job of covering telecom-related issues. Danny Sullivan has strong views on privacy and civil liberties. (Oh, the crazy antics with the Newport Beach police!) Lawrence Lessig has written extensively about copyright and patents.

But Rob had a unique platform in the hometown paper of the nation’s decision makers.

These are undoubtedly tough times for the newspaper industry. As someone who has written extensively about the newspaper industry, I know that cuts have to be made. Most newspapers don’t need their own technology columnists (just as they don’t need TV or movie critics). But the Post does. Covering the business of Washington is core to the Post’s mission. And the business of technology is core to the business of Washington.

Disclosure: Rob is a friend and occasional drinking buddy. This post was written independently, without any consultation with Rob. I used to work at and have worked for Internet companies including Microsoft and AOL. My brother and numerous friends work for Google.

March 23, 2011

Adding Color to breaking news

Filed under: journalism, media, newspapers, photography — Rakesh Agrawal @ 9:10 pm

Today marks the launch of a groundbreaking new app called Color.

The app, available for iPhone and Android, has users automatically share pictures with those around them. Take a picture and people in close proximity can see them. No logins, no passwords, no need to build a social network — it’s automatically defined by your proximity to people. If you’re around people regularly, those people and their pictures will become sticky.

It’s a whole new dynamic in photo sharing. Not only is everything public, there is virtually zero latency.

While I’m trying to get my arm around what it will mean for sharing in general, there is one clear application for Color: breaking news.

Cell phone networks light up when news happens. If CalTrain hits a pedestrian, many people get on their cell phones to let their friends and family know that they will be late. That’s before any news outlet has even heard of the accident. By detecting unusual spikes, you can predict that something has happened — even if you don’t know what it is.

A few years ago, while I was stuck on a CalTrain that hit a pedestrian, I wrote about how Twitter would be used for breaking news:

There were lots of questions from the people on the train: What happened? Did we kill someone? How long are we going to be delayed? There were also a key question for others who use CalTrain: should I get on the train or find another way home?

Given the small number of people affected, this isn’t the type of thing that makes the local TV news. The Bay Area, being what it is, has a new answer: Twitter. An unofficial CalTrain account allows citizen journalists to share information about what’s going on. Readers can get the news on the Web or by text message.

Twitter could become the police scanner of our times. As Twitter becomes location aware, it would be possible to detect where something happened by looking for unusal spikes in activity around a location.

Although Twitter is often used for breaking news today, it doesn’t do a great job with geodata. It’s hard to tell tweets from people talking about the Japanese earthquake from those who are actually in Japan who are living in its wake. Undoubtedly, Color will be used to take pictures of breaking news. If the system is instrumented to process and normalize all of the geodata that it gets, it could not only show you where news was breaking, it would show you exactly what was happening there.

Networks like CNN have had features like iReport for a few years, but those require editors to manually process a lot of information and only work for really large events.

Color could take it to a new level and make it much more scalable by algorithmically determining what’s important based on where you are. Color would also allow an elastic view of “news”. A CalTrain wreck is news to a few hundred people. A giant earthquake and tsunami is news to billions. If you’re in Palo Alto standing at the CalTrain station, you’d see pictures from CalTrain. No matter where you were in the world, you’d see the Japan earthquake pictures.

Color comes from serial entrepreneur Bill Nguyen. It’s really incredible to see folks like Bill and Mike McCue creating tools that will revolutionize news and publishing.

While many have carped about Color having raised $41 million in financing, I’ll point out that The New York Times is reported to have spent $40-$50 million building a paywall digital subscription system that won’t work.

See also:

March 17, 2011

All the news thats fit to retweet

Filed under: journalism, media, newspapers — Rakesh Agrawal @ 1:28 pm

The New York Times today came out with its long awaited digital subscription pricing. Beginning immediately in Canada and March 28 in the United States and the rest of the world, heavy users of the New York Times will be asked to pay between $15 and $35 every four weeks for continued access.

Most people aren’t likely to hit the paywall. I consider myself a heavy news consumer and I value the NYT brand. But I had no idea how many stories I read a month. I checked my own usage and found that I read 18 stories in the last month.

The reality is that most traffic to news sites is already driven through search and social media. Those will remain free in the new model. Four years ago, only 20% of NYT visitors who viewed the front page. It’s likely a lot lower now. Bizarrely, the new model actually discourages people from going to the NYT home page directly.

For those who do hit the limit, there are numerous options aside from paying:

  • Stop reading.
  • Tweet “Psstt… buddy, can you tweet me a link?” If someone responds, you get free access to the story.
  • Follow @nytimes on Twitter and click on the links from there.
  • Go into your browser’s porn mode.
  • Clear out cookies.
  • Go to Google and search for keywords related to the story.
  • Find a summary of the story on and click through from there.

Print subscribers continue to have free access to, mobile applications and iPad apps.

Some commentators have pointed out that the pricing is out of line with the print edition. For $15 a month, you can get home delivery of the Sunday New York Times which includes all access to the online, mobile and tablet editions of the Times. To get the same access without the print paper costs $35 a month.

So the times is charging an extra $20 not to deliver the paper. In one case, you’ve got nearly zero incremental cost. In the other, you’ve got several dollars in hard costs of paper, printing and delivery.

What gives?

The point of the digital pricing is exactly to drive people to print subscriptions — even if they never read them and the papers pile up.

The ad rates the NYT can charge in print are much higher. On average, the NYT generates $600 in advertising per year per print subscriber and less than $10 per online user per year. If someone looks at the digital pricing and decides to get a paper subscription, that’s a huge win for the NYT because it gets to up its more valuable print subscription base. Of course, at some point advertisers will catch on that no one is reading that circulation.

As someone who cares about the environment, this saddens me. Chopping down trees, sending them across the country and then having diesel-guzzling trucks roaming around town all morning is just wasteful. (Not to mention the process of disposing of all this.) The Yellow Pages people, with once a year deliveries,  have nothing on newspapers.

I doubt that this new model will be an abject failure like TimesSelect. But it’s also unlikely to generate significant revenue for the NYT.

February 15, 2011

Why Apple is right on subscriptions

Filed under: apple, ipad, journalism, newspapers, publishing — Rakesh Agrawal @ 3:08 pm

Apple has built an incredibly valuable distribution platform. It’s perfectly reasonable for them to say “if you make money using our platform, we want a piece of it.”

Distribution costs money. Facebook charges developers on its platform 30% for using Facebook Credits. It’s not uncommon for distributors to take significantly more than Apple is taking. I’ve done deals where the other company does all of the heavy lifting and my company received more than half the revenue for bringing in customers. Google pays AdSense distributors 68% of the revenue it earns off content network ads. And that’s for no-name distributors. That number can be much higher for branded players.

Groupon has local businesses (which have hard costs for each person served) discount their product or service 50%, then takes 50% of that and sticks the business with 3% for processing. Merchants net 22% of what they would normally charge.

Retail gross margins are generally much higher than 30%. Would anyone argue that Apple should sell Microsoft Office in Apple stores at cost?

A seamless experience can benefit all parties. As a consumer, a key appeal of the App Store is that it’s seamless. I recently purchased two wonderful coffee table books on Vincent Van Gogh and Monet. These were quick and easy purchases. But I’ve resisted buying other products because I’ve just never been motivated enough to fill out all of my information again.

Game publishers such as Rovio (of Angry Birds) fame have been paying 30% for a long time. Apple is essentially closing a loophole that allowed some publishers to free ride on its platform.

We are still very early in the tablet content race. As popular as the iPad is, only a small portion of the population has one. If publishers believe that their content is so valuable and object to Apple’s terms, they should shun the iPad and develop for platforms with lower distribution costs. Heck, a brand name publisher like The New York Times could offer a platform provider an exclusive partnership in exchange for lower fees or even upfront payments or marketing support.

If their content is really that valuable, fewer people will buy iPads and Apple will be forced to lower its distribution fee. That’s how the free market works.

The sad reality is that publishers don’t have that kind of market power. If they opt out of iPad, it’s more likely that they’ll lose. That’s not Apple’s fault.

February 2, 2011

The Daily is a solid effort facing huge challenges

Filed under: apple, ipad, journalism, media, newspapers — Rakesh Agrawal @ 7:50 pm
Feature story on prison inmates making toys in The Daily.

This feature story on prison inmates making toys in The Daily looked promising; it turned out to be only a short video.

Today we saw the unveiling of Rupert Murdoch’s new iPad-based newspaper, The Daily.

It looks very different from apps from the Washington Post, New York Times, Wall Street Journal and USA Today. The impression is distinctly more of a magazine than a newspaper. My first reaction was “It sure is purty.”

While other apps, like the Journal’s and the Post’s, have bizarre navigation modes, navigating The Daily feels very natural. (With the exception of occasional stutters, likely caused by the app’s heavy use of graphics and animation.) Tabs are readily available to flip among sections.

The first issue was clearly designed as a showcase with numerous interactive elements such as user polls, timelines and quizzes. Multimedia elements include extensive use of photos, videos and even a gratuitous 360-degree photo to illustrate a story about Venice sinking into the sea. (Not exactly breaking news there.) A Super Bowl feature included an animation that explains a shovel pass. It would’ve been more useful if it also included a video.

The content is of mixed quality, though much of it is has the quality and depth of Parade Magazine. (Much of it is wire copy.) A feature on inmates in Louisiana making toys for kids with a “only in The Daily” starburst looked promising. It turned out just to be a short video clip.

There are print design conventions that some magazines use, such as two-page spreads. While that can be somewhat excused in shovelware magazines exported from inDesign, it’s hard to justify for a publication specifically designed for a tablet.

Fashion news in The Daily

I will never be interested in fashion news. I don't need to see it.

The Daily integrates with social networks, but it is clumsy. A feature on Rihanna has her Tweet stream embedded. Tweeting a story defaults to the oh-so-catchy “Check out this article from The Daily” instead of something that might actually inspire a click. The Facebook equivalent contains some information about the article, but only after generic text and HTML that Facebook doesn’t render.

The Daily suffers from several significant issues:

  • The content is vapid. It’s as if someone took a look at USA Today and said, “Whoa! This is too intellectual.”
  • It contains a lot of crap I don’t want. I’m not interested in women’s fashion or celebrity gossip. On the other hand, there’s not enough tech or business news. I’m not convinced that in 2011 it makes sense to program for an abstract general audience that doesn’t exist. News consumption is increasingly driven by friends and colleagues. The New York Times or the Post, with their long histories, have a chance (albeit slim) of using their editorial voices. Creating one from scratch seems like a Herculean challenge.
  • It’s not timely. Although they claim that there will be more frequent updates for big events, the bulk of the content will be updated only once a day. In 2011, The Daily might as well be The Fortnightly.
  • There is no interaction with reporters. Yes, reporters get things wrong. Just this week, David Pogue had an error in one of his columns. I tweeted the error to him, he responded and it was fixed in a few hours. The Daily doesn’t provide email addresses or Twitter handles of its contributors. There are no bios. These are things that most newspapers got right several years ago.
  • There is no way to dig deep. A story about data consumption on cell phones caught my eye. But it was one paragraph. Clicking on it did nothing. Even 140-character Tweets often contain links. A movie review for Cold Weather made me interested enough to want to know when it was playing. Sorry, you can’t do that here.
  • You can’t search. I wanted to tweet a story about Quora that I’d read. But there wasn’t an easy way for me to find it. I had to flip through every page, just like I would in a real newspaper. That’s ridiculous.
  • Update: Exploding content. Can’t read the news today? Too bad, it goes away tomorrow. My hard work on yesterday’s crossword was wiped away when I launched the app this morning. With physical newspapers you can at least keep things around and until you want to get rid of them.
Football animation.

This animation explains a shovel pass.

Despite its flaws, the bottom line is that The Daily is the best incarnation of an online newspaper I’ve seen. The question is how big is that market?

Estimates are that Murdoch is spending $500,000 a week for The Daily, or an annual budget of $26 million. While that’s tiny compared to traditional publishers, it’s gargantuan compared with funding that tech startups receive. Then there’s the $30 million already spent to get to launch.

Based on the proposed subscription price of $40/year and subtracting Apple’s cut, the venture would need to have about 930,000 subscribers to break even. As a print publication, that would make it the third largest paper in the country, behind the Journal and USA Today. Even if you assume that The Daily could make as much per user on advertising as it does on subscriptions, that’s 465,000 subs to break even. (For comparison, this assumption would also mean that The Daily makes more per user on advertising than the most successful Internet advertising company — Google.)

Those are huge numbers and I’m very skeptical that The Daily can do it.

Disclosure: I worked for from 1998-1999.

See also: Why iPad magazines aren’t selling well

November 30, 2010

Junk journalism: media flaming fear and irrationality

Filed under: journalism, media, newspapers — Rakesh Agrawal @ 4:44 pm

The Daily Beast’s Howard Kurtz recently took the media to task for spending too much time covering the TSA’s new procedures, referring to it as a “‘junk’ journalism epidemic.”

I’ve about had it with media types who insist on turning this into a junk story.

A government agency with more than a $7 billon budget that touches 2 million people a day (now sometimes literally) with little accountability? That’s exactly the kind of story that the media should be focused on.

Unfortunately, Howie is right in that while they’ve stayed on the story, the handling has largely been junk.

There are two biases in today’s media: laziness and sensationalism. They lazily do the standup at the airport with the grandma who says she’s happy to fly naked if it makes her safer. (Portland TV stations sent their reporters to Portland International Airport, even though the new procedures aren’t in place there.) They don’t bother to question whether it actually makes her safer.

They lazily interview John Pistole with his pat answers that admonish people that it’s all for their own good and to remember 9/11. Deference to official sources is just as strong as it was during the lead up to the Iraq war. Tough questions are few and far between. Official statements are treated as gospel. Even in Howie’s piece, he quotes Pistole as saying “Very few people actually get the pat-down at all … it’s a very, very small number.” That “very, very small number” is about 60,000 people a day.

They also interview security consultants, who have either worked for these same agencies or make their money by working for the companies that make the scanners or both. Former Homeland Security chief Michael Chertoff’s company worked on behalf of Rapiscan, one of the two suppliers of the devices.

They lazily quote polls from other news organizations without any understanding of what the poll asked or what the answer meant. The widely quoted CBS News poll was garbage.

For the most part, they don’t ask about whether the new procedures are effective or whether they can be worked around. They can — just insert the explosives into the rectum or vagina. That’s right, we have government employees fondling law-abiding citizens without cause, even though a terrorist can easily work around it. Even the companies that make the new imaging devices are uncertain whether they would have detected the underwear bomber.

They don’t bother to ask about all of the risks the TSA ignores while it puts on a show at the security checkpoint.

There’s also a bias to sensationalize. Some people are afraid to fly as it. The bogeyman of the Muslim terrorist plays well. We fear dying in a plane bombing because incidents that involve aircraft get a disproportionate amount of media attention. The media have a financial incentive to sensationalize: scared people watch TV to hear the “experts” talk about how to stay safe.

What the media don’t talk about is that flying is incredibly safe. 2 million people a day fly in the U.S. That’s more than 700 million people a year. In the last 9 years, there have been:

  • More than 300,000 deaths in car crashes.
  • More than 130,000 people murdered.
  • Exactly zero fatalities from aviation terrorism in the U.S.  6.6 billion passengers and zero fatalities.

Everything we do in life has a risk to it. Taking a shower, walking down the street, going to the mall.

I travel between 50,000 and 100,000 miles a year most years. I also travel on larger planes and to and from foreign countries. My risk of dying in a terrorism-related plane crash is much greater than that of the average American. (16% of Americans have never flown; another 37% fly less than once a year.) But I’m not worried because I know the risk is so unbelievably tiny it’s not worth worrying about. The TSA’s new procedures don’t reduce that already insignificant risk.

The Cinnabon at the airport food court is a bigger threat to your health and well being than a terrorist is. And, by the way, what the TSA doesn’t want you to know is that the guy working behind the counter at the Cinnabon didn’t have to go through security.

February 4, 2010

Chart of the day: journalistic innumeracy illustrated

Filed under: journalism, media, newspapers — Rakesh Agrawal @ 3:38 am

This Bloomberg graphic and its interpretation in the accompanying story is full of errors.

What would readers conclude after looking at the graph above?

  1. Best Buy sales have gone up at least 10 fold in the last 2 years. (Recession, what recession?)
  2. Best Buy’s monthly sales at the end of 2009 were roughly $22 million, at the peak of holiday season.
  3. Newegg is the #2 electronics retailer, after Best Buy. Amazon,, Walmart and Target aren’t players in electronics.

That’s what the graph says, but all of those conclusions are wrong.

In reality, Best Buy did $8.5 billion in revenue in December. In fiscal year 2009, Best Buy did $45 billion in revenue. $22 million in revenue is a rounding error.

What the graph really shows is how useless these data are for analyzing consumer spending by category.

The reporter apparently didn’t understand the methodology behind Mint’s data. Mint allows consumers to track their credit and debit transactions. Consumers enter their account information and mint pulls transaction data from their banks and presents it online. Here’s how that methodology leads to the above erroneous conclusions:

  1. The enormous growth in the graph likely represents the growth in’s user base. Mint launched in September 2007 and has grown to 1.8 million users. (Mint was recently acquired by personal-finance software maker Intuit for $170 million.) Best Buy’s comparable store sales were down for fiscal year 2009 and up marginally for fiscal 2008.
  2. Only transactions by Mint’s users are included in this number, accounting for the multibillion-dollar difference. Even then, those numbers may not be complete as not all users import all accounts.
  3. Newegg is the #2 dedicated electronics player as classified by Mint. Because Mint collects transaction level data, not item level data, it doesn’t know what to do with purchases from diversified retailers like Amazon, and Walmart. (Amazon wouldn’t even show up as a leading bookseller; on my Mint account, it shows up as “Shopping”.) By Best Buy’s own definitions, consumer electronics only account for 36% of its revenue.

There’s also zero justification in the Mint data to support the chart’s caption that Best Buy generated these huge returns by “offering discounts on laptops and flat-panel televisions.”

These kind of errors are rampant in our business news because many reporters don’t understand numbers or methodology. When I was in school at the Medill School of Journalism, most classmates took the minimal math and economics classes they could and still get a journalism degree.

One of the most frequent numerical mistakes by journalists is confusing percent increases with percentage point increases. If your credit card’s interest rate goes from 10% to 15%, it’s a 5 percentage point increase, but a 50% increase.

This journalistic innumeracy hurts us all. We can’t make informed decisions about what government is doing if people don’t understand the numbers. Even basics get confused: journalists frequently confuse millions with billions (via Paul Kedrosky).

Journalists are at least partly to blame for the dot com bubble and the housing crash. Not understanding the economics, they repeated the lines of “experts,” such as investment bank analysts and real estate agents — most of whom had clear incentives to keep pumping air into the bubbles. I read many stories about how exotic mortgages were making housing more affordable. What was actually happening was that the easy availability of credit and flood of otherwise unqualified buyers in the marketplace drove up price. Basic supply and demand.

Unfortunately this problem is only going to get worse. Many of the sharpest minds I know from the journalism business have left to go on to other careers for many reasons — the difference in pay (often 2x or more), instability and constant layoffs and backward thinking management.

Additional analysis of the data also takes time, which is becoming harder to come by as newsrooms across the nation shrink. The pressure to do more “quick hits” like charts of the day will lead to more sloppiness and misinformation.

More on: journalism, newspapers

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