How the South China Morning Post became a digital powerhouse

When the Alibaba Group announced its intention to buy the South China Morning Post (SCMP) in December 2015, the news immediately sparked concerns over the impact this new ownership could have on the state of freedom of expression in the former British territory.

by WAN-IFRA Staff | November 21, 2017

The Chinese e-commerce giant’s unexpected move – which echoed the buyout of The Washington Post by Amazon founder Jeff Bezos two years earlier – also triggered hope and curiosity about the capacity of tech companies to reinvent the news publishing business model.

The first statement that Joe Tsai, the powerful Executive Vice Chairman of the Alibaba Group, had made about the acquisition of the 113-year-old English-language, Hong Kong newspaper of record, back in 2015, had indeed helped feed such hopes: “Some say the newspaper industry is a sunset industry. We don’t see it that way,” he said. “We see it as an opportunity to use our technological expertise and our digital assets to distribute news in a way that has never been done before.”

In the same announcement however, Tsai said Alibaba’s first strategic decision, as the future owner of the South China Morning Post, would be to take down its paywall.

At a time when news publishers worldwide seemed to have finally acknowledged that digital journalism was not sustainable without audience revenues, tearing down one of Asia’s few successful paywalls sounded to many ears more counterintuitive than radically innovative.

On the other hand, the appointment of Gary Liu as SCMP’s new CEO in January 2017 was immediately perceived as an unequivocal sign of renewal in an industry that is still lagging in its digital transformation and struggle to attract young talents.

Gary LiuGary LiuA former Spotify executive, Liu was CEO of the New York-based news aggregator Digg, which he had established as an industry-leading content data and discovery platform. A California native and Harvard graduate, Liu is a recognized digital media influencer and innovator.

But far from being just a tech geek, Liu surprisingly comes across as first and foremost a passionate newsman: “My entry into the news industry was not accidental (…) I love the news industry,” says Liu. “And although it was not planned this way, my career in technology has always been in media technology. I’ve been at the very precise intersection of how to create, distribute and monetise media during the last 10-11 years.”

Independent journalism comes first

When asked what it means for SCMP to be owned by a tech company such as Alibaba, Liu addresses the issue of the newspaper’s editorial independence first.

“We actually operate very independently (from the Alibaba Group),” he says. “We do not report into the media division of Alibaba (…) and that was done on purpose because the independence of this newsroom is extremely important, not only obviously to us, but to our owners as well. Our governing structure is set up in a way which allows this separation,” he says.

The CEO of SCMP reports to an independent Board, which naturally includes Alibaba executives, but also other independent directors.

Whether this governance structure effectively guarantees the absence of any kind of pressure from its ownership on the Post’s newsroom is of course subject to controversy in the rather tense political climate that currently reigns in Hong Kong. But the Post’s CEO’s adherence to the values of independent journalism and his commitment to champion them sounds completely sincere.

“I feel very strongly and have been convinced for a very long time that the sanctity of the news industry is actually very important for the maintenance of global peace and prosperity, but also for the education of multiple generations.” – Gary Liu, CEO SCMP

The strict governance separation between SCMP and its mother company also means that, operationally, there is almost no integration either.

However, their data technologies and content technologies sit on Ali Cloud, Liu says. “We have to be on a cloud service so, effectively, our choice is between AWS and Ali Cloud. And Ali Cloud is significantly cheaper for us and also more scalable,” he says.

Focus on Big Data and AI

Other technical areas for which SCMP plans to rely on Alibaba expertise are Big Data and Artificial Intelligence. “They are so far ahead of practically any other player besides Baidu here in Asia,” says Liu. “And they are certainly far ahead of us. It makes no sense to try to develop on our own something that Alibaba may have already built,” he says.

Clearly, Big Data and AI are at the very heart of the digital transformation at work within SCMP: “I think about data in three ways,” says Liu: (1) “It helps us operate the company with more precision and efficiency, (2) it improves our user experience by making our products smarter, and (3) it contributes to a future of artificial intelligence.”

“The Fourth Industrial Revolution, as coined by Klaus Schwab the founder of the World Economic Forum, is being driven most by artificial intelligence,” Liu says. “AI will change practically every industry, and every job, including ours. When we think about AI at the SCMP, we’re planning for two things: NLP (natural language processing) and NLG (natural language generation).”

“NLP will allow users to discovery and consume SCMP news content in a myriad of new ways, for example through intelligent speakers (Google Home, Amazon Echo). It will also allow us to understand better the sentiment of the world, through the analysis of content data,” he says.

“NLG will allow us to ‘outsource’ commodity news creation (for example, financial reporting on indices, earnings, sports score/results, etc.) to machines, which are much faster and more accurate than us,” Liu says. “This will allow our journalists, who are infinitely more valuable than machines, and a limited resource, to focus on impact reporting: investigative, deep-dive journalism that elevates thought and understanding.”

From Hong Kong to the world

About the paywall issue, Liu is very straightforward: taking it down is closely aligned with SCMP’s ambitions to become a global news media.

“Our mission is to lead the global conversation about China,” he says. “We believe that the world needs to understand China better (…) because the mass populations around the world have a narrow understanding of what China is and, more importantly, of what China’s rise means for the rest of the world.”

“When I say, ‘understand China,’” Liu says, “I’m not just saying to see the good side of China. I’m saying see all sides of China. I will strongly defend that we have strong, objective coverage of the good and the bad of China. The enlightening and uplifting, and the weird. We have all the flavor and nuance in between.”

“This means that we, as a news organization, have to go from being the paper of record for Hong Kong to becoming a news organization that covers China for the world,” he says.

“Taking down the paywall has allowed our international traffic to grow exponentially,” he adds “Our digital traffic in the last 12 months has more than doubled, among the active users.”

Long term value of quality journalism

That said, Liu doesn’t rule out that SCMP could reintroduce some forms of paid subscriptions in the future, once its global presence is established.

“Fundamentally, I believe that a quality news industry, a quality news product should be paid for. Consumers should pay for a higher quality, thoughtful and objective journalism. Because it costs too much to create for not having value there of some sort.” – Gary Liu, CEO SCMP

“I also believe that digital advertising is not enough to sustain the news publishing industry. So a free product that is only monetized through ads is not sustainable. Which would lead to the conclusion that subscriptions are an important part of the news industry in the long term,” Liu says.

SCMP’s digital transformation strategy is articulated around three pillars, which Liu summarizes in concise words: “First, having a strong conviction of who we are, and what our purpose is. The second thing is to build new products – the right content with the right packaging and the right distribution channel. And the third thing is to launch and propagate them in new marketplaces,” he says, mentioning the USA and South-East Asia as the key markets to explore in short term.

Seizing collectively a unique momentum

For achieving these goals, Liu believes that there is currently a window of opportunity that news publishers must not miss.

“We are in a time when, suddenly, three things have coalesced,” he says.

“We now have senior leaders across all major news organizations who understand the digital world, who obviously believe in it, and who are no longer stuck in the legacy and the inertia of the past,” he adds “This is quite new.”

“We also have platforms who realized they have accountability,” he says. “Facebook is being the most public about it. We also know that Google understands they have accountability, and they are in the back being very active about it.”

“And the third element,” Liu says, “is our readers and consumers. They are realizing that the way they are consuming is putting blinders on them. We have readers seeking out high quality journalism, which is objective truth, which they are starting to be willing to pay for…”

In this context, Liu strongly believes that media leaders across the Asia Pacific region should speak to each other and collaborate so that a common understanding of how the digital world works and how to operate a news organization in this new digital world can emerge.

“I want us to come to a collective agreement on what this changing consumer behaviour and changing platform behaviour means for our industry,” Liu says.

“If we back down now and let these other constituents [the platforms] decide for us what we are going to do, that would be repeating the mistakes of the past. We have to participate and take advantage of this time,” he says.

This article first appeared as the cover story of WAN-IFRA’s Asian News Media Focus October/November 2017 edition on pages 8-9, which can be downloaded here.

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