Media Companies Recognize Key to Profitability
A popular narrative today regarding media companies, and especially newspapers, is that they are dying. Newsrooms are shrinking, contracts are being bought out, and hedge funds are now the drivers of the national conversation. While that narrative does have a case to be made with the consistent diminishing revenues of media publications in various metro areas, it turns out that a new narrative should be introduced into the conversation: media publications are evolving, and they will not go so quietly into the night.
Forward thinking publications are actually growing; the New York Times surpassed over four million subscribers; the Boston Globe has over 100,000 subscribers and are revenue positive; and the Washington Post has actually hired journalists and increased the size of the newsroom. Beyond this, new digitally minded publications that have started just recently are growing exponentially such as The Information, a tech publication in Silicon Valley, and The Athletic, an upstart sports media company. These companies are all successful, and it is because they have one thing in common: They all have shifted their focus from eyeballs to engagement. As I’ll discuss below, the key to media companies succeeding in the current digital environment is to begin treating their content as a product to be sold rather than a product to be offered.
The Current Situation
Anyone who’s in the business of profiting from selling a product or service understands the general rule of thumb is “Know us. Like us. Trust us.” Once a consumer trusts a brand, they’re more likely to purchase their product. Brands create this relationship with a potential consumer by providing content describing who they are as a brand and the product they are selling. Smart brands are data driven — finding potential consumers based on data of previous consumers and market research — and effectively targeting them through various marketing tactics that ultimately lead to a purchase. These various marketing tactics include traditional media advertisements, social media advertisements, newsletters, and promotions, all of which hit potential consumers from all sides with a persuasive argument that they not only want this product, but that they need this product.
Newspapers, traditionally, never followed this model. Whether it was because they were the only game in town, or they didn’t feel the need to convince their readers they provided value, they offered their product (their content) at a below-market rate and subsidized their revenue with advertising. Even before television or radio was the newspaper, and the newspaper said to brands: “We have the eyeballs and we have the audience so you need us.” For the longest time, anyone who provided content — whether they were print, radio, or television — effectively had a monopoly over their own audience. As it was their audience, they could charge what they wanted to for advertising, with no rhyme or reason as to why one ad cost $1000 and another cost $2500. They cost what they cost, and brands were forced to pay if they wanted to reach those potential consumers.
As media companies became more and more digital oriented, their profit decreased as they lost control over their own revenue streams. With fewer people reading the paper (where they could set their own advertising prices), and turning to digital instead, fewer brands wanted to advertise for the price they set. Media companies could either charge less or receive fewer ad buys; on the digital end, since it would be too expensive for a media publication to create their own advertising platform, they turned to Google AdSense. There are two issues for a media publication when relying on a third party advertising network: First, they are no longer able to set the price they want to — in fact, the goal of any ad buyer on Google’s network is to pay the lowest amount possible. Secondly, after there is a race to the bottom to pay the lowest amount for an ad placement, Google then takes 32% of the revenue they do generate. So to recap: Media companies were essentially forced to opt into a revenue model in which they generated less revenue overall, and of the revenue they did generate, they were only allowed to keep two-thirds.
The Clickbait Death Spiral
As more and more of publishers’ ad revenue originated from Google AdSense, the more publishers focused on eyeballs and pageviews. If you’re making pennies for every pageview, that means you need a lot of pageviews; and thus the concept of clickbait emerged. Headlines such as “You’ll Never Believe What Happened Next!” and “Find Out What Made This 7 Year-Old Girl Cry Here” were commonplace while more energy was dedicated to slide shows and lists rather than long form content.
Short content that was easily digestible was the name of the game. However, because the content was lower quality, the pageviews decreased and the eyeballs went elsewhere; with fewer pageviews, they generated less revenue, and then came the budget cuts; budget cuts led to contract buy-outs, layoffs, and even the sale of entire publications to hedge funds and private equity firms, thus leading publishers to be considered even less trustworthy than they were before. As fewer consumers trusted those news outlets, the less they engaged with them, increasing the eventual closure of long standing metro media outlets, publications, and the growth of news deserts.
We could all dread the day that our trusted publishers finally go out of business and we’re stuck with the likes of basement bloggers, but thankfully we won’t have to as publishers are getting ahead of the curve and finding the key to their profitability: their content.
As I just described, publishers have utilized their content in order to garner an audience, and then leveraged that audience into selling advertisements; this model essentially treated the content as an afterthought — something to be presented simply for the ability to place an advertisement in front of the reader. Now, with that model no longer proving profitable, forward thinking publishers are realizing that the solution is not to provide a higher quantity of content, but rather to provide a higher quality of content, and require people to pay for the privilege of engaging.
Some publishers have always valued their content, and required a paywall to access the majority of it such as the Wall Street Journal; other publishers have thrived off the pageviews/advertising model such as Buzzfeed; but with the constant changing of the algorithms, and the shift towards mindful, quality content, it’s the WSJ that’s thriving while Buzzfeed continues to hemorrhage cash and layoff employees. Most publishers have fallen somewhere in the middle. Some publishers have utilized the “freemium” model — allowing a reader to view a finite number of articles over a given time, and then require them to subscribe. Other publishers have instituted a more curated approach — the editor decides which content will be available freely, and which content will be put behind the paywall. Another is the use of the “meter,” in which there is an algorithm that determines whether, after viewing a certain number of articles, the readers should be required to subscribe to continue. Regardless of which model a publisher uses, the point is that more and more publishers are starting to view their content less as an avenue to product purchasing on their site through advertisements, and starting to view their content as the product itself.
When publishers start to view their content as the product their selling, two things happen. The first is that publishers focus on delivering higher quality content because if the publisher is going to convince a reader to become a paying subscriber, then the publisher must ensure to the reader that their content is worth paying for. The second thing that happens is publishers now realize they have to create a sales funnel, and abide by the “Know us. Like us. Trust us.” anthem. When a publisher transfers its energy from driving as much traffic as possible to driving as much engaged traffic as possible, publishers can no longer play the “spaghetti against the wall” game. They have to focus on being data driven, audience oriented, and rebuild their relationship with the reader in order to convince them to turn from reader into subscriber.
As publishers focus more on delivering higher quality content in order to drive subscriptions rather than pageviews, their overall traffic might decrease, but their overall cost margin actually decreases as well, leading to higher margins and the ability to reinvest in more contributors, thus flipping the clickbait death spiral on its head.
Retention is Paramount
No different than a company like Dollar Shave Club or Blue Apron, publishers need to focus on retaining those they’ve converted into subscribers and reduce their churn rate. Box oriented companies like Stitch Fix and Bespoke need to consistently prove their value to their consumer every month in order to incentivize them to keep their subscription; publishers are no different — they need to provide value on a consistent basis to their subscribers in order to showcase that subscribing holds value. In order to convince a reader to evolve into a subscriber, there should be at least five, ten, or even fifteen touch points per month depending on how the publishing company determines the number of free articles (if any) they allow a reader. However, that also means that the publishing company needs to continue to touch the subscriber consistently to keep the consumer and reduce the possibility they cancel their subscription. More so than proving their value to the subscriber, they need to provide so much value that they encourage their subscriber to recommend to their friends to try a subscription as well.
Here’s the problem: the current social media platforms available do not create an environment for publishers to create this very important “Readership Experience Funnel” — the funnel that turns the occasional reader into an publisher advocate. The main social media platforms are neither designed nor incentivized to create an environment that benefits publishers.
To begin, there is not a single social media platform whose algorithm rewards content that leads users off their site; every platform requires users to post natively in order to keep users on the platform and continue to scroll. Beyond that, there is no natural platform designed for publishers to consistently engage their community. Facebook continues to punish publishers’ organic reach, requiring more and more dollars to be spent on boosting their content to their own Followers or paying for an advertisement outright; Instagram is not a social media platform that users go to for news or long form content; LinkedIn could’ve been designed more for publishers and a location for high quality industry oriented content, but has instead opted for a more social route focused on user generated content; Twitter, while still not optimized for publishers, is the best place for them to create engagement with their community. Although 40% of users say they go to Twitter for breaking news, an equal amount say they go there to find news in general. However, Twitter still has no incentive to reward content that takes users off site, and focuses more on commentary than it does on long form content. It is in the best interest of publishers to support a platform that believes in the value of providing a location for long form content that can increase their organic engagement enough to 1) convert readers into subscribers, 2) retain that subscriber on a month over month basis, and 3) reduce their customer acquisition costs.
Deshyo, as a non-algorithmic based content distribution platform can, and will, be that platform. Deshyo is designed to encourage users to discover new content creators, regardless of their medium, and more importantly engage with their content on a consistent basis. With self-curated feeds, users will be able to regularly engage with those they build the greatest relationship. If publishing companies turn their attention away from platforms like Facebook and Twitter, and shift their focus towards Deshyo, which rewards contributors for their long form content and drives traffic to the publishers’ site, publishers will not only increase their touchpoints (thus increasing the probability of readers becoming subscribers) but they will also decrease their customer acquisition costs, and improve their overall bottom line.
Any successful company knows when it’s time to move away from old and unsuccessful practices and towards new and profitable ones, no matter how big or institutionalized they may be. SEARS, once a corporate giant in this country for decades, has filed for bankruptcy, doing so because they did not invest heavily enough in the future; similarly institutionalized companies such as Walmart and Target did so after seeing the tide rise against them and, reacting accordingly, they continue to grow. Media and publishing companies are no different. New media companies such as The Athletic and The Information have decided to bet heavily on people’s desires to find and engage high quality content and their willingness to pay for the privilege of doing so. Publishers who have tried to manage the battle between traffic and subscriptions are starting to trend more and more towards the latter because of the opportunities that lay with increasing subscribers and building community. They see higher profits grow from leveraging their growing communities into alternative revenue streams such as e-commerce and special events only available to subscribers.
It’s preached to any who will listen, that no matter what kind of company you are — whether fashion, finance, or food — you should be a tech company; and if you aren’t, or don’t believe you should be, then you won’t be a company for very long. Publishing companies have come to realize they are no different. They can no longer simply be just a publishing company, allowing their contributors to decide what is important and chastising their audience for leaving because they don’t agree. They must now be technology companies as well — driven by data that examines what’s important to the reader and respond appropriately. The times are changing, and one of the greatest institutions this country has to offer — the American media — is finally catching up, and Deshyo is excited to be there to support them.