Media defined by ads is suffering but business model innovation is the future of media… Content → Subscription, Commerce & Experiences
My morning ritual would not be the same without sitting down with a cup of tea to read the latest Lean Luxe, Goop and Girlboss newsletters. I often then turn to the larger publications but every day it seems like there’s another story about how the media business is dying. Some days it seems like the media can’t stop talking about its own inevitable demise.
Admittedly, there’s a lot to talk about. Newspapers across the country are being snapped up by large hedge funds, which then slash staff to cut costs and boost profits. Once-mighty publishing empires like Time Inc. are being acquired at fire sale prices. A recent Gallup and Knight Foundation survey found that people on both sides of the political spectrum trust all media outlets far less than they did just a few years ago.
Even well-funded digital media startups are feeling the heat. Last year, Mashable was sold for a fraction of its former value, while both Vice and Buzzfeed missed their revenue targets by 20 percent — and they’re doing better than most.
But just as a bear market can be a great way to find bargains on companies with intrinsic long-term value, this era of uncertainty is an excellent time to invest in media companies — provided you pick the right kinds of media companies.
Success in media isn’t about about churning out content to attract as many eyeballs as you possibly can. It never was. It’s about finding the right audience. It’s about building a community of common interest and then connecting its members to products and services. It’s quality, not quantity.
There are new types of media businesses that we all need to pay attention to.
Subscription — Content worth paying for
Content is a way of bringing similar minds together. However by now, virtually every publisher and broadcaster has realized that giving away content for free and trying to make up the difference by selling ads was a naive notion. Yet many digital media companies are reluctant to erect paywalls or adopt freemium models for fear of losing large portions of their audience. That’s their biggest mistake.
Charging for content means you will absolutely lose readers and viewers — and that’s a good thing. Because the ones you lose are the ones you didn’t really want in the first place. You want people who love your content so much they’d be happy to pay, and will encourage others to do the same.
The question you need to ask is, how much? And the only way to find out is to test, test, test, and then test some more. Surveying your readers is not enough. Asking people to hand over a credit card number is the surest way to find out if they’re the audience you really want. Cold hard cash speaks louder than any focus group.
I am lucky enough to work with one of the greatest content creators of our time, Lady Gaga, and however great her content is, she will not put something out without testing it first. She even has a name for those that she trusts enough to test on — Little Monsters. These Little Monsters give opinions but they vote with their wallet and spend money on Gaga’s latest song, her world tour and her soon to be Vegas residency. As you are figuring out what content to produce and what to charge for it, take a hard look at who your exact customers are and what they are willing to pay for.
Customers are most willing to pay for that content that speaks directly to them. I pay for WWD, Glossy and Business of Fashion because it is is specialized knowledge in a voice I respect. Perhaps you pay for The Information, The Atlantic or The Skimm because for you personally it is strong content and with a clear voice. Next generation is using media in smaller groups, they want to hear what friends have to say and have smaller experiences with closer friends. The question is not to think big but to think small and then ask “how do we make small scalable?”.
Commerce — With Community Built In
Once you’ve raised the quality of your audience, they will engage more with your content, and advertisers will want to reach them. But that’s not the ultimate goal. Your real objective should be to build a community of people with common beliefs and interests, and then guide them to products and services they will love.
For example, the Glossier, a successful cosmetics site, started out in 2010 as a beauty blog called Into The Gloss. After spending four years carefully developing its audience, the blog blossomed into an online store offering personalized recommendations to customers based on the articles they had read. In 2016 Glossier opened its first retail store in New York’s SoHo District; last May it opened a second one on Melrose Place in LA.
I’ve written about Goop before (yes, I am a Goopie) but the example fits. This lifestyle content and commerce company started out as an email newsletter from Gynweth Paltrow to some of her friends, offering recommendations for healthy recipes, products, and lifestyle advice. Now it’s a retail phenomenon. (Note: Lightspeed is one of Goop’s Series C funders.)
FabFitFun has built a tremendous business which started as content online and quickly moved into a quarterly subscription box company. However, they never lost sight of their media roots as you can still find a magazine in every box, a Community section on their website and now video content on FabFitFun TV. TV / YouTube is a tremendous opportunity in my mind.
IPSY is yet another good example and when we look at the differences between BirchBox and IPSY, I believe it was the way IPSY was steeped in content, creators and influencers that set it apart. It had media at its core, with co-founder Michelle Phan, and is still at the forefront of popular culture today. CEO, Marcelo Camberos knows that “it’s beauty bloggers and other creators that are controlling the conversation” and doesn’t lose sight of that.
Experiences — Leveraging Knowledge of your Customer
What these startups have in common is that they were able to connect with an audience, create a community around them, and use it to generate commerce. They also are now leveraging that content and community to better know their customer and create true experiences for her. Millennials say 52% of vacation spending goes on experiences over physical items vs. 39% for prior generations. There is a clear preference for experiences today.
One area this can be seen is in experiential Retail. Whether it’s Farfetch’s London store with a smart mirror and analytics platform, Tom’s VR headsets in 100 stores or WinkyLux’s Instagramable store, these brands are all thinking outside the box, quite literally, to leverage customer knowledge and build something unique.
“Retailers need a way to collect information about their customers while they are browsing in-store, just as they collect data from online searches” — José Neves
Experiences go beyond Retail. The Instagram factories such as Refinery 29’s 29rooms has been described as “a funhouse of style, culture and creativity”. Modern day media brands have an opportunity to build something that their customer really wants given how well they know the customer.
Girlboss has done a tremendous job of using its content to really drive a community and one with similar beliefs, values, wants and needs. It was not the digital product alone that achieved this but rather Sophia Amoruso’s vision of bringing the on and offline world’s together through the Girlboss Rally where users can attend in person or buy digital tickets to watch at home in their pajamas. Then Goop have experiences built into every store, whether it be cheese and wine tasting or a beautiful VIP dinner in a field under the stars. The opportunities are endless if you know your customer.
The Media Company of the Future
There isn’t just one way to generate revenue for a media business. Advertising revenue alone may not be the way forward but there are multiple other ways in which media founders are able to grow and monetize their customer bases.
We don’t yet know what the next technology platform will be but we do know that people in any community will continue to buy things (physical, digital and experiential). Companies will transcend across platforms if they have a true brand and a strong enough community.
I believe this is the archetype for successful media companies of the future.
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