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"One of the most talked about companies for online news right now isn't a journalism outlet or a media conglomerate, but rather a small startup incubator and investor located in the heart of Manhattan's meatpacking district.\nBetaworks, which describes itself as \"a company that builds companies,\" has been in the news a lot lately for acquiring and developing media properties. In July, Betaworks bought the once-phenomenally popular social news site Digg for just $500,000 and re-launched it with a more visual design and human editors, helping to boost traffic. Earlier this year, the Digg team announced plans to release an alternative to the soon-to-be-retired Google Reader, and have since been crowdsourcing ideas from users to develop it. Last month, Betaworks bought a majority stake in Instapaper, a read-it-later app with an incredibly devoted following.\nSerendipity did play a significant part in some of these initiatives. It was Marco Arment, the founder of Instapaper, who reached out to Betaworks, not the other way around. Digg's team had plans to develop an RSS reader at some point this year, but Google's decision to kill off Google Reader prompted them to push this effort higher up on the agenda. Yet, each of these efforts tie into Betaworks' underlying goal to create an ecosystem of media products that improves the way readers discover and consume content online.\nThe man behind that mission is Betaworks CEO John Borthwick, a 46-year old originally from London, who previously ran the photo-sharing service Fotolog (which was acquired for $90 million) and served as SVP of technology and alliances at Time Warner. While at Time Warner in the late 90s, Borthwick says he first asked himself a question that would come to define Betaworks more than a decade later: What should a 21st century media company really look like?\n\"I think you can redefine a media company for this century,\" Borthwick told Mashable in an interview. \"We are trying to do that from the ground up.\"\nHe eventually settled on a few fundamental principles for such a company: It would be data-driven. It wouldn't need to own all the expensive assets that traditional media corporations do. It would be more focused on distribution, but not tied to a particular method of distribution. It would be, as he puts it, a \"loose federation of pieces.\"\nOver time, Borthwick and the staff at Betaworks would inject other ideas into the mix, but these principles served as the building blocks for what was to come.\nBuilding a Media Company For This Century\nJohn Borthwick (center) at Betaworks' office\nAfter launching in 2007, Betaworks initially focused on building analytics tools for enterprise use. These included companies like Bit.ly and Chartbeat, two of Betaworks' early breakouts, which help businesses and newsrooms track sharing data (in the case of Bit.ly) and web traffic (in the case of Chartbeat.) But about two years ago, Betaworks turned its attention to more consumer-facing media products.\n\"Our focus shifted to user-facing services and media for the social web, mostly driven by data,\" Borthwick explained in a shareholder letter released in January. \"These shifts have marked a new stage in the long-term evolution of betaworks from where we began \u2014 a hit-driven start-up factory \u2014 to what we dreamed to become \u2014 a data-driven media company capable of building and compounding value over time.\"\nIf you look at the companies Betaworks is currently developing or has large stakes in, you'll notice a suite of media consumption products, like Digg and Instapaper, as well as the recently launched Tapestry, which aims to create a better reading experience for short stories, and the soon-to-launch Google Reader alternative, not to mention other products in the pipeline.\nBorthwick refers to each of these as pieces of a puzzle, which collectively solve that question of creating a 21st century media company. \"The critical pieces here, when you think about it at the very high abstract level, are discovery, saving, slow reading and fast reading,\" Borthwick says. \"Then there's monetization pieces of the puzzle, which are yet to come, and then there's data pieces of the puzzle.\"\nAt the center of all that is Digg, which Borthwick says is the heart of Betaworks' media ecosystem \u2014 at least for right now \u2014 in the same way search is the heart of Google's ecosystem. Digg arguably satisfies two pieces of that puzzle \u2014 discovery and fast reading \u2014 and has the potential to serve as a powerful product that Betaworks can build around. It also happens to be the product that may make traditional media companies sweat the most.\nOn the same day that Betaworks acquired Instapaper, Digg published an article written by a member of its editorial team about one of the suspects in the Boston Marathon bombing. That might not have been a big deal for a different publication, but this marked the first original story produced in-house at Digg and it raised more than a few eyebrows in the media world.\nAndrew McLaughlin, CEO of Digg and a former executive at Tumblr and Google, says that the Digg team received plenty of phone calls after putting up that post. Some of those calls, he says, were likely the result of old media players getting nervous about the possibility of Digg competing with them on original content. \"I definitely think that's part of it,\" he told Mashable. \"People are rightly anxious about the declining business models of traditional journalism.\"\nWhile the Digg team is open to the possibility of producing more original content in the future, that's not the primary goal of Digg or Betaworks. \"I've given like zero thought to improving the content creation side,\" McLaughlin says. What McLaughlin and Borthwick have given lots of thought to, however, is improving the content consumption side.\nThe Big Picture\nWhen businesses talk about improving the way people consume content online, the focus is usually on two areas: putting out the best content and providing the best experience to access it across devices.\nDigg is trying to solve the first part of that puzzle by using a combination of algorithms and human editors to surface trending stories. The team at Digg, which consists of about 14 employees, most of whom are engineers, use data to determine which stories are about to take off and rely on a small number of editors to curate which stories should be featured on the site.\n\"We are using data aggresively to have a discovery tool and it works very well, but it's not just data on its own,\" Borthwick says. \"We experimented a lot with using pure algorithms and we migrated off that.\" The reason, he says, is that when you rely solely on data, it's too dry. \"There's not enough personality, not enough understanding of context.\"\nAt the same time, Betaworks is trying to improve the actual reading experience with Digg and products like Reader by adding more social components and, according to McLaughlin, more of an \"aesthetic sensibility.\" In fact, one entrepreneur-in-residence at Betaworks actually developed a game called Dots, which is partly intended to help Betaworks figure out how to make more engaging media products.\n\"One of the key things that we are learning in this is how to keep people engaged in the product and how to keep the experience enjoyable for them,\" Paul Murphy, SVP of products at Betaworks, told Mashable in an earlier interview about the game. \"That's something that we want to apply to Tapestry, to Digg, to any of our products and companies that want to maximize for engagement. Hopefully it will bring a different strength to the Betaworks products.\"\nBut Borthwick suggests there is a third key factor to improving content consumption beyond discovery and the reading experience: There also need to be tools that can figure out when and where you want to read that article or watch that video.\n\"I think what we're suffering from today is that there are so many tools for discovery out there. How can I find stuff that is really relevant to me and how can I package it in a way that I can read it, when I want to read it, in a context where I want to read it?\" he says.\nBorthwick believes that in time, smartphones \u2014 and wearable computing technologies like Google Glass \u2014 will know enough about us to let publishers recommend we read that lengthy feature story we bookmarked when we're sitting in the doctor's office for an hour or laying around at home on a Sunday morning. Of course, we're certainly not there yet.\nAnother big goal at Betaworks, according to McLaughlin, is to find ways to help publishers profit from having their content distributed through Betaworks' products. \"One of the things that is absolutely clear is that Digg Reader and Instapaper both need to be at the front of figuring out how to support publishers,\" he says. \"Publishers that have subscriptions should get more subscribers thanks to people encountering short snippets on Instapaper and Digg Reader.\"\nEventually, McLaughlin would like to see the option for a \"seamless transaction\" within the article snippet that would allow readers to pay for a full subscription, or perhaps even a more flexible per day or per article subscription. \"I don't think it's super hard technically; it's just a matter of whether you can get enough of an open standard and open ecosystem.\"\nCan They Make Money?\n\nIt's impossible to have a conversation about building a media company without confronting the issue of generating revenue. To date, Betaworks has made most of its money from returns on its investments in startups that were acquired, but as the company doubles down on its core group of media products, it will need to find ways to generate revenue from subscriptions and advertising.\nSome products out of Betaworks already have a monetization element in place. Bit.ly, Chartbeat and SocialFlow, the three analytics services, have premium offerings for businesses and had a combined annualized run rate of $9 million-$10 million last year, according to Borthwick. Instapaper is a paid app and was bringing in $1 million a year in profit prior to being acquired by Betaworks.\nBut what about Digg, the company that is supposed to be at the heart of this new media ecosystem? As of right now, the social news website is relying on a very limited form of sponsored content called Apps We Like, which promotes apps to the Digg audience. The goal, according to Borthwick, is to create ad units that are actually \"additive\" to the user experience, rather than neutral at best.\nDigg introduced these advertisements four months ago and Borthwick expects the news site will be profitable by the end of this year.\n\"We're pointed in the right direction, and we know how to plot the lines out,\" he says, seeming to allude to Betaworks' fondness for all things data. \"I'd like to get to that point, but it's like with any business, you have to pull the levers back and forth.\"\nImages courtesy of Betaworks"^^<http://www.w3.org/2001/XMLSchema#string>
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