You still don’t understand today’s media industry
Introducing “The Four Winds of Modern Media,” your new playbook for a new era.
Earlier this year, Ben Wolford published a Medium Series that focused on [what he considers] a big problem for the media industry: Venture capital’s continued crush on intermediaries who don’t actually produce journalism. 😘 According to Ben, these return-seeking investors are diverting capital away from the real value in media’s supply chain:
Nobody’s paying for [real journalism] these days. And part of the problem is Silicon Valley raining money onto some stupid new app that rips other people’s work and ignoring companies ACTUALLY MAKING JOURNALISM. You’re not solving the business model problem by reinventing Flipboard 12 times.
Now, I actually agree with a kernel of that, but it’s important to unpack the whole excerpt, because some of that chronically mischaracterizes the problems facing journalism — and these are popular misconceptions. Journalism and media have real problems, but understanding what’s really broken is fundamental to fixing the industry. Furthermore, this is all particularly instructive given Medium’s ongoing search for product/market fit.
Let’s make this interactive, not just for me and Ben, but for you, the readers, too. Please weigh-in as we go…
Originally, Ben and I engaged on Twitter to start a dialogue:
Good series, but this is consensus. The bigger issue is that most of the time is spent talking about the problem, not solution. So what’s your solution? I’m sure Latterly is a bottom-up contribution to your idea of a fix (right?), but how about top-down too?
—@ AnthPB (paraphrased from shorthand)
Ben dutifully responded:
Thanks for reading. The top-down solution would be for large news organizations and funders to launch and support projects like Latterly. In other words, I’d like to see the industry enable more bottom-up experimentation. Problem is, there’s a lot of risk… And the whole paradigm is still “how can we sell our readers’ attention to corporations.”
What @ev understands is that’s a broken paradigm, and he’s the only wealthy person who seems interested in fixing it. But he’s still trying to jam the thing through, top-down. Medium memberships is a failure. They should’ve kept trying to empower publishers.
—@ BenWolford
There’s a lot for me to address there, so to keep the ball rolling, I’m taking the conversation from Twitter back to Medium herein. So, without further ado, Ben identifies two primary problems that I’d like to discuss, including:
- Attention merchants;
- Medium Memberships are already a failure and Medium should revert back to empowering publishers
1. Attention Merchants
Throughout history, anything that’s successfully harnessed attention at scale has monetized with advertising. The only exceptions I can think of were beholden to communist states. That’s not to say that advertising’s critics or media’s idealists are communists; rather, it’s merely an indication that advertising is an inextricable feature of capitalism — often the just desserts for persons who are lucky enough to attract a lot of attention.
While ads are not inherently bad, I can conceive of two legitimate complaints about modern advertising — only when each is taken to its extreme:
- The surveillance state:
For example, user data isn’t anonymized, enabling bad actors to track and target their opponents. The preeminent concern is, of course, the state targeting citizens, rooting-out dissent, and stifling First Amendment rights.
SOLUTION: Regulation should mandate the anonymization of user data (especially for 3rd party use). - Media misinscentives:
For example, since CPM is what ad-based business models optimize for, media prioritizes clicks over content, resulting in idiocracy, fake news, and/or an agency problem.
SOLUTION: I’ve written at length about why exogenous intervention isn’t necessary or desirable here. But, if you don’t trust the market to self-correct and you have your arms around intervention’s counterfactuals, then your answer is FCC regulation. After all, these issues are simply censorship, false advertising, and fair disclosure (respectively) by another name. Those all fall under the purview of the FCC.
If those are your real concerns about attention merchants, neither of their top-down solutions has anything to do with media organizations themselves — not their business models, Ev Williams, nor billionaires launching projects (as you suggest). After all, the media industry is acting rationally, albeit under the yoke of moral hazard. It’s somewhat like the banking system precrisis: if a media org doesn’t take advantage of regulatory arbitrage, they lose out to competitors who do; so clickbait and extremism become the ante.
In other words, if you’re going to call attention merchants a problem, don’t hate the players (media), hate the game (capitalism); and there’s only way to change game (regulation).
In contrast, you say your “top-down solution would be for large news organizations and funders to launch and support projects like Latterly.” But, why should The New York Times ($1.6B in revenue) reallocate its scarce free cash flow ($0) toward a relatively small opportunity?
You also say “part of the problem is Silicon Valley raining money onto some stupid new app [while] ignoring companies ACTUALLY MAKING JOURNALISM.” But, given high required rates of return and limited bandwidth, why should a VC fund these opportunities?
You’re trying to jam square pegs into a round hole. Large news organizations and VCs are not journalism’s top down problem-solvers, nor its problem-creators. It doesn’t make structural, logistical, or financial sense for either to fund the kind of projects you’re talking about.
If you’re really in search of solutions for the industry, the truth is that the industry needs to better understand itself. It needs to better understand the disruption and the innovators dilemma that handcuff it. The only savior for the media industry is the media industry itself. This dovetails nicely with a strategic analysis of Medium and its place within media’s broader ecosystem…
2. Medium Pivots
I would agree that Medium’s pivot to subscriptions lacks imagination and will likely fail, as described at length below. However, Ben, advising them to continue down the path of ‘empowering publishers’ is wrongheaded.
Publishers have never been more empowered than they are today. That’s part of the problem — not the solution. This is the age of creation, with media in an era of abundance. An infinite supply of content is chasing finite consumer demand. Media is infinite; attention is scarce. It used to be the other way around, so most of the industry is still operating under obsolete assumptions.
If anything, publishers are too empowered. There’s no friction and no barrier-to-entry, therefore those who are not highly differentiated are indefensible. Accordingly, here are the ways to survive in an age of abundant media…
There are four loci of value pictured therein, let’s call them the “Four Winds of Modern Media,” which comprise a new framework for understanding strategy in a new industry paradigm…
- Huge scale on the supply side:
e.g. The New York Times/Washington Post
These are the major content production factories. Incumbents who have managed to survive had already reached critical mass relative to their contemporaries, and now they’re working on reducing legacy cost structure to right-size for the age of abundance. - Niche focus on the supply side:
e.g. Stratechery/The Information/Latterly 😇
These include freelancers, analysts, researchers, reporters in narrow verticals, etc. More entrepreneurs and journalists need to embrace the huge opportunity in small and middle-market media production. Institutional capital isn’t interested in these non-unicorn businesses — nor should it be. But, there’s still a huge void waiting to be filled by such “lifestyle” businesses. The industry-at-large remains too distracted by the mass market. That thinking applied to the way things used to be, when high fixed costs required daily publishing, reach, and the aggregation of a one-stop-shop — with the Sports page in the same paper as the Home & Garden section. In contrast, specialization is a premium product since it’s highly differentiated, and the internet allows publishers to reach incredibly specific interest groups at high ARPUs, relatively low fixed costs, and effectively zero marginal costs. - Huge scale on the demand side:
e.g. Google/Facebook
These are the audience aggregators. Incumbents have supernova scale that’s an unassailable competitive advantage. They’ve already won the first mover advantage/race to scale, so they’re now expanding horizontally and vertically to integrate more of the value chain. - Niche focus on the demand side:
e.g. Pinterest/theSkimm/Annotote 😇
These are the products and services that specific consumers use to accomplish specific jobs. Upstarts in this space must deliver tangible value that’s compelling enough for users to add it to their regimen. I do agree with Ben that, henceforth, “reinventing Flipboard 12 times” is a non-starter — building better attention mousetraps is unsustainable and indefensible. To compete against or coexist alongside the Facebook/Google duopoly, new entrants have to provide experiences that are both 10x better than incumbents’ mass market offerings and highly targeted to specific consumer wants/needs. They either facilitate or enhance the experience enough to shake-loose users from preexisting, generic solutions that are usually available for free. The highly targeted nature not only helps find passionate, paying users, but also starts small enough that the giants won’t bother copying or squashing it.
If you’ve already won with either huge scale or niche focus, you can then try to creep down or up in scale to grow. If you’ve already won with either supply or demand, you can then try to creep downstream or upstream along the supply chain to grow. But, you cannot start in the middle of either spectrum and grow out, because your competitive disadvantages let your rivals squash you from the outside-in.
“…journalism’s ‘middle ground’ has eroded as new products have appeared at either end of the market for news and information. At the low end, products and services like Metro and Twitter are serving consumers whose need is simply ‘Help me fill this 10 minutes right now’… At the other end of the spectrum, for the job of ‘[I have] four hours, and I want to be intellectually stimulated,’ sites like Longreads and tools like Instapaper and Pocket…” (Breaking News: Mastering the Art of Disruptive Innovation in Journalism)
Ironically, Medium is stuck in that medium — that dreaded limbo — trying to grow out in all four directions. For example:
- Medium can’t compete with supermassive publications:
Incumbents like NYT and WaPo have high fixed costs, spread across their massive reach, which is predicated on comprehensiveness. They are one-stop-shops. How would Medium publish all of the current events needed to achieve such encompassing coverage? User generated content won’t fill all the gaps. They’d need to hire a ton of staff writers. Ignoring the capital-intensity of that ramp, Medium would face an agency problem, given all the new content being created by its own staff: a choice between promoting all stories meritocratically or giving its own content primacy.
In the midst of Medium ramping, why would readers, en masse, be compelled to keep reading Medium when NYT/WaPo are already greater “everything stores”?
Finally, I have to ask, ‘to what end?!’ Is Ev’s mission really to build a monolith in the vision of traditional media? - Medium can’t compete against specialized freelancers:
Hypothetically, say I want Ben Thompson’s analyses at the specific intersection of tech, business, and strategy. Mr. Thompson’s Stratechery subscription costs $100/year, and I’ll gladly pay that to access the very specific niche that indulges my very specific tastes. If Stratechery moves its premium content onto Medium, that wouldn’t change anything for me; I’d be happy to keep paying the same $100. If Medium incorporated Stratechery in its Membership bundle, maybe I’d even pay a bit more, say $120, considering the other premium content I’d get from other authors across other niches. But, that’s the ceiling. My content budget is finite. I only have so much time and money to indulge this very specific itch that Stratechery scratches. The other content in the bundle is extraneous. I could take it or leave it; and I can definitely substitute it with other entertainment.
That right there is the thing about all the content outside our most specific interests: the stuff we don’t want or need is perfectly substitutable; it’s fungible; and therefore it can usually be replaced with something free of charge — assuming we even have the bandwidth for it in the first place.
Back to my hypothetical, there’s a fundamental problem with that bundle. Say Stratechery gets its full $100 cut out of my $120 Medium Membership. Is the remaining $20 enough to sustain both Medium and all the other authors in the bundle through the entire calendar year? Certainly not. On the other hand, of course I’d pay Medium’s current $60 fare for standalone access to Stratechery — but there’s no way Ben Thompson would accept a deep discount like that. It either gouges his revenue or changes his incentives: he needs to increase his subscriber count by 40% just to close the revenue gap, which means he needs to adapt his incredibly niche content into something more conducive to a wider audience, which recursively marginalizes his product. - Medium can’t compete with supermassive content aggregators:
As a content junkie, why would I limit myself to Medium’s island when I have the entire universe curated for me by the major aggregators? Google is everything I ask for, and Facebook is everything that asks for me. What else is there?
If I’m a content producer, why do I need Medium? The duopoly have more data, more reach, and access to the entire population of digital ad spend. - Medium can’t compete against specialized platforms:
For example, theSkimm will always provide better curation for urban, millennial, working women than Medium, because the former is not only dogmatically focused on that specific niche, but also pulling-from the entire universe of content to serve them. In contrast, Medium is trying to serve everyone across every interest with highly personalized curation, yet it’s only feeding them fodder from its own, little, long-form island.
Even as a writer trying to target urban millennial women, why would you publish to Medium? Whether your goal is eyeballs or a living wage, there are better platforms for attaining each.
In trying to provide sustainably defensible value via its subscription model, Medium faces the unenviable trade-off between optimizing for a handful of core users and cutting-loose bevies of non-core users.
Scale cannot be created through sheer force of will, yet at the same time there’s no room for an intermediary between paying readers and sustaining niche producers. That eliminates options #1, #2, and #3 for someone endowed as Medium is.
Consequently, this late in the game Medium almost has no choice but to pivot into the #4 locus of value described above: “niche focus on the demand side [like] products and services that specific consumers use to accomplish specific jobs.” Thereafter, monetization is simply a question of: ‘what can we offer that’s scarce and who wants access to it?’ They could answer all of that as follows:
‘Medium gives the world’s thought leaders a community where they can convene to enact progress — not only defining their causes, but also deploying solutions into the real world. Medium is the intersection of thought and action, helping the rubber-meet-the-road.’
Let me explain that. Medium’s greatest success stories have nothing to do with pageviews or vanity metrics. Rather, Medium’s crowning achievements have an impact that’s manifest in the real world. They’re instances of bits affecting atoms, ranging from the obvious (politicians pandering about policy) to the subtle (entrepreneurs documenting their new startup); from public (citizens rallying in support of migrants) to private (everyman sharing his/her fight with cancer). We read those stories; we highlight them; recommend them; comment; share; etc. Those stories’ underlying causes are real world constructs, and a certain percentage of their readership passionately supports them.
Rallying support around a cause is the specific job that specific Medium’s core users are trying to accomplish, and that’s where the rubber-meets-the-road: a policy push needs funding; a startup launch needs funding; migrant aid needs funding; a cancer battle needs funding. Medium should be in the business of converting content into funding, which is a fitting outlet considering what’s effectively a mission statement just posted by Medium itself:
“Medium is an open platform for authentic voices to share their thoughts and experiences, and through conversation move us towards greater understanding.
“We believe in the power of words to create, build up, inform, nourish, and repair. [Medium] seeks to foster original writing that entertains, informs and educates, expresses truths boldly, and seeks ways forward thoughtfully and inclusively.”
Medium has built a platform with an enviable combination of characteristics. It features no barriers-to-entry for publishing plus a highly motivated, educated, qualified readership who highly scrutinize that user-generated-content. Medium’s authors and readers frequently engage because they’re seeking or espousing truth, which has redeemable value for someone. Authors often choose Medium because engaging its audience is like an acid test for ideas: if anything remains after an idea has been chewed-up and spit-out, it can (and should) provide some form of value to someone… and that’s usually where the conversation ends…. but it doesn’t have to. I mentioned the potential for Medium to be ‘the intersection of thought and action, where the rubber-meets-the-road.’ Some of the valuable ideas that make it through Medium’s gauntlet are actually actionable, and that’s where Medium should be monetizing.
Were Medium to make inroads into crowdfunding as such, it would enhance the user experience without encumbering it the way subscriptions do. (It reminds me of Google’s original search ads, which were literally direct responses that helped users find what they were looking for.) This would be a win-win-win for every Medium stakeholder, with everyone’s incentives aligned. It would make Medium a true platform, creating more value than it extracts. At the same time, it would also remain a democratizing platform for all of its users.
That democratizing potential is something once promised by every property on the free and open web, but the ad-based business model required to sustain “free and open” naturally accrues to the scale advantage. It would be a crowning achievement for Ev were he to find the product/market fit that not only sustained Medium, but also preserved its free and open nature. That’s the happy medium that’s been missing from the media that Medium has always hoped to mediate. 😏
What differentiates Medium from crowdfunding’s newly minted stalwarts? Kickstarter is organized around verticals — products and services. It’s structurally a “pull” approach that asks funders to know what they’re looking for or spend time finding it. If Kickstarter’s “pull” approach is the Google of crowdfunding, Medium is equipped to launch the “push” approach a la Facebook. Crucially, Medium is already part of its readers’ daily habits. They come here ritualistically to be entertained or to learn something, and Medium does a decent job leveraging users’ interest graphs to “push” them content that’s personalized to their tastes. Since user demographics are skewed toward affluence and social awareness, crowdfunding would be a good parlay, pushing unto every reader actionable, tangible value that affects him/her personally, with the potential for conversion.
Patreon is another potential competitor in this space, but they’re targeting the creative class. Patreon’s crowdfunders use media as their means and their end — whereas Medium authors would use media as a means-to-an-end. Patreon is for writers who make a living off their words, but Medium would be for writers whose words are merely their best-foot-forward. Patreon is for artists, but Medium would be for entrepreneurs, social activists, etc.
When I started writing this, I intended to argue that Medium Memberships were not a failure. But, I wanted to be intellectually honest, so this article has been a null hypothesis test, of sorts, through which I’ve realized that Medium’s subscriptions, as such, cannot sustain. After all, this recent comment from Ev Williams (Medium, Cofounder + CEO) defies all the logic laid out above:
“We are steadfastly focused on building a subscription-based publishing model, where quality content (from individual authors and publications) gets rewarded based on its value to readers.
“If remuneration is not part of the equation for why you publish, I can’t imagine a stand-alone web site serving you better than Medium in terms of cost, simplicity, and, most importantly, reaching an audience.
“If remuneration is part of your equation, you’re also in the right place, as long as you’re not looking to build an advertising-funded site.”
Even more recently, Medium announced a Clap-based system for paying authors. It’s another tweak that won’t work, again for all the logic described above. (Plus, it optimizes for engagement as the key performance indicator — a degenerative misincentive, breeding clickbait, extremism, fake news, etc., as evidenced by social media.)
C’mon Medium, replace the “Clap” button with a “Contribute” button.
Writers who want to push their idle thoughts out into the world would still be able to do so on Medium 2.0. But, that’s a commodity. Content producers can do that anywhere, with the same cost, simplicity, and audience that Ev cites as his [facile] value propositions.
Writers who are moonlighting part-timers or inspired one-timers might be able to eek-out a few shekels from some generous readers by activating the Contribute button on their Medium 2.0 stories. That’s gravy. More power to them. A good story deserves a good reward, and a few bucks never hurt anyone. But, that won’t sustain full-time journalists, publications, or Medium itself.
Finally, writers who demonstrate dedication to clearly defined causes that activate a community would find Medium 2.0 and its flagship Contribute button indispensable. That’s product/market fit — a business model that doesn’t add friction to the experience, but rather facilitates it for all stakeholders.
These conclusions are all likely rather inconvenient for Ev’s Medium to read, but as I mentioned above:
More entrepreneurs… need to embrace the huge opportunity in small and middle-market media... Institutional capital isn’t interested in these non-unicorn businesses — nor should it be. But, there’s still a huge void waiting to be filled by such ‘lifestyle’ businesses. The industry-at-large remains too distracted by the mass market.
Medium is unlikely to ever justify the venture dollars that have been sunk into it, but it can still be a good business with respectable revenue and much lower cost structure!
Those are all of my chips, all on the table, including the problems, my solutions, and my rationale. There’s a lot there, so to make it easy to respond, I’ll ask these specific questions of Ben, Ev, et al:
- Do you have specific complaints about “how… we sell our readers’ attention to corporations”?
If so, how would you fix them? - How exactly did Medium “empower publishers” once upon a time?
How much can Medium itself monetize from the value that empowerment once created?
How can publishers?
How was that value creation sustainably defensible for Medium as a going business concern? - How can Medium sustainably empower publishers en masse better than the major attention aggregators, Google and Facebook?
- How am I wrong about large news orgs and VCs funding industry-changing projects?
About media’s abundance and innovator’s dilemma?
About modern media’s opportunities? - What would you do differently?
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