Wetpaint CEO Ben Elowitz on the Future of Digital Media
Despite the significant economic pressure they are under, it’s all too rare to see a print magazine let go of tradition and embrace a new model. So I was delighted to find that at least one Time Inc. magazine is doing just that.
Stephanie Clifford’s article about People StyleWatch in the New York Times last week shows what happens when offline executives adopt a digital mindset. Clifford points to a number of things that Susan Kaufman, People StyleWatch’s editor, is doing well, and notes the results: 8.6% circulation growth in the second half of 2009 and 130% growth in ad pages in the first quarter, easily besting a shrinking industry.
Although I wouldn’t call it top-tier journalism (does “Find Your Perfect T-Shirt Bra!” really merit an exclamation point?), People StyleWatch replaces an elitist, artistic view of its subject with a pragmatic appreciation of what their audience likes. It’s a habit learned online and applied offline.
Here are five lessons from online media that the publication is successfully bringing to print:
This is more than just flexing editorial styles to meet the expectations of web-addicted younger readers. The magazine is embracing a new business model with lower costs and more attractive content for advertisers that allows it to grow in an otherwise contracting space. They are hitting on one of the key success factors for Publishing 2.0, namely an adaptive business model. Time Inc. CEO Ann Moore, who has led the People brand for more than a decade in various roles, no doubt is taking notice.
Regardless of your personal opinions of the content, the results – in both readership and profitability – are hard to dispute.
With the recent announcement of the iAd advertising platform for iPhone/iPad applications, Apple is filling one of the last major gaps in content monetization. They now have a full spectrum of monetization options for their platform: ad-sponsored free content; free trials; “bite sized” in-app billing for impulse buys, premium apps, and subscription billing. Publishers can choose the revenue model that best suits their content and audience.
For consumers, the Apple model is remarkably easy. Granted, the initial iTunes account set-up is somewhat of a hassle, but once completed, consumers can painlessly make purchases thereafter. Apple solved the micropayment problem years ago in creating the iTunes store for selling songs, and has carried forward that same keep-it-simple philosophy for premium content and applications on the iPhone.
Here is my take on the magic formula for getting consumers to pay for content:
Desire + Relationship + Ease = Spend
Desire is straightforward: how much do consumers want your content? Desire is a function of the degree to which your content and experience are unique and compelling.
Relationship is a measure of your brand and the extent to which you’ve consistently delighted a customer (or their friends) in the past.
Ease is achieved by making it effortless to pay for content.
Apple has nailed all three of these drivers, resulting in substantial and growing spend from consumers. On desire, they’ve made a product and a content experience coveted by loyalists and consumers en masse. On relationship, their platform has proven itself with a billion consumer delights. And in ease, Apple has set a new standard with the 5-second purchase process consisting of a just a password.
Many publishers and app developers complain about Apple’s closed system (indeed, Adobe has reason to do so), but that same closed system allows a controlled – hence predictable – experience for consumers. Apple is reducing the friction to purchase by leveraging their relationship and making the purchase easy.
This leaves me to wonder however: why is Apple the only company to innovate a complete platform for content monetization? The result for publishers is that they are better served by jumping on the Apple bandwagon than by striking out on their own. But as Apple continues to amass share of eyeballs, the media industry will resist the premium that Apple charges.
Can publishers directly offer consumers such high levels of desire, relationship, and ease and crack the code on getting consumers to pay? That is their challenge; and if they do, the money- and their independence – will follow.
Recently I’ve written about why I think the Hulu Plus subscription model will be successful. Yesterday, Peter Kafka (@pkafka) wrote in AllThingsD that Hulu’s price point is both too high for consumers and too low to satisfy media companies. I respectfully disagree.
My prediction is that Hulu Plus will be driving more than $100 million in incremental revenue for the company in 2011. If Hulu grows modestly from its current 19.5 million monthly uniques in the U.S. according to comScore*, and they’re able to convert a small fraction of that audience at $9.95, the numbers are compelling even accounting for the likely double-digit monthly churn. I expect that the service will reach or exceed a million subscribers by the end of 2011. Meanwhile, 30% margin or $30+ million would be welcome for a company that only recently announced profitability, particularly if they’re able to avoid traffic cannibalization on their existing free, ad-sponsored streams.
Granted, most media companies are making more on their own sites, but this is largely upside to their existing online revenue. Meanwhile, a paid model preserves the “premium” value of the majority of their catalog.
Beyond the financial benefit, offering a paid subscription also provides several strategic benefits to Hulu:
Is $9.95 monthly too much for consumers to pay? When your content is exclusive, and more importantly, the experience is this compelling, I think a small but meaningful segment of customers will open up their wallets. Of course, that is assuming that Hulu’s subscription offer and experience demonstrate the same outstanding execution as their free service (and marketing) to date. Many services have failed at charging for video online, but Hulu is in a unique position to finally succeed.
* Footnote: Interestingly this is substantially less than the 43 million uniques announced by Hulu CEO Jason Kilar back in December, perhaps due to the comScore hybrid measurement debacle; I’m using the lower numbers to be conservative
Dawn Chmielewski and Meg James reported tonight that Hulu will begin testing a $9.95 “Hulu Plus” subscription offering as soon as May 24. According to their LA Times article, the Hulu Plus offering will open access for viewers to watch many more shows than are currently offered. (Hulu’s content license restrictions currently allow viewers access to only the five most recent episodes for most shows.)
Last month, I wrote that for Hulu, advertising won’t be enough. Tonight, I predict Hulu’s subscription program will be successful with consumers, and will be a business success for Hulu.
First, here’s why — unlike many other subscription programs — Hulu’s will work:
Net, this is an impressive combination. Unlike many of the subscription offerings being floated by others, which move information that can be found in many places behind a paywall, Hulu’s offering is unique enough and compelling enough that it’s worth consumers paying for.
As for the business benefit to Hulu, they are already receiving high monetization. At reported $100MM annualized revenues over comScore-reported 695MM pageviews per month, Hulu already monetizes at $12 per 1,000 pageviews. Even if subscribers view 10 times as many pages per month as average users, Hulu will still more than double its revenues from those customers.
With an outstanding value proposition and great monetization potential, this subscription program is a win-win for Hulu and its audience.
VentureBeat featured a guest-post from Transpond’s CEO Peter Yared yesterday, and editor Matt Marshall asked me to offer a comment for inclusion.
Peter presents an argument and five predictions as to the balance of power and profits between Hulu vs. its corporate constituents tilting back further towards the content owners:
Hulu sells ads on the video it streams, meaning that Hulu’s ad sales team competes with the networks’ own ad sales teams. Hulu’s sales pitch to the networks was, “let us compete with you on your new content and we will help you monetize your older assets”. But Hulu hasn’t been able to monetize the older TV shows it runs. Pull up any TV show over two years old on Hulu, and all of the ads are public service announcements.
But the original reason for Hulu was not that the networks thought they couldn’t monetize their inventory, but because they believed in the power of a single consumer destination with major network effects. And that is by and large working.
As I responded in the VentureBeat post, Hulu is working and it’s because they nail their consumer experience.
It is inevitable that in the digital future, consumers will watch what they want, when and where they want it.
After studying how top brands engage their consumers and outperform in key financial measures in the interactive EngagementDB report we co-authored with Charlene Li’s Altimeter Group last year (PDF available), CNBC asked me last week to put together a list of the top brands who are doing the most with Twitter… and getting the best results.
I sent my picks over and they put together this nifty slideshow.
The key to the success of every one of these brands is using Twitter as a grapevine for 2-way publishing: they amplify their (short but sweet!) messages and promotions to their consumers, and listen to what their consumers have to say. It’s working. These companies are scoring big revenue and loyalty wins with their customers.
No publisher wants to believe that content is a commodity. But by introducing a new web Travel Tips section powered by Demand Media, USA Today is taking the bold and necessary move in admitting just that.
It’s a turning point for the publishing industry to concede that not every column inch is vying for a Pulitzer, and to act accordingly. Let’s face it: certain types of content — in this case, detailed travel tips, deals, and the like — do not require nor merit the talents of their highly capable (and highly paid) editorial staff.
It’s also clear from Nat Ives’ report at AdAge that the new section is an opportunity for the USA Today brand to capitalize on search engine optimization (SEO) to capture prospective travelers who search for specific advice, such as “hotels with toddler pools in Maui”. Demand Media will analyze search trends and engage writers in its content marketplace to address topics with the greatest commercial potential. Meanwhile, USA Today lends their brand to the equation to generate new audiences from search engines and revenue for both parties. For USA Today, this solves the problem of how to add more to their user experience and grow their audience, with little to no cost.
It also solves Demand Media’s problem: they have a whole lot of content with no place to put it, and this deal opens up distribution for a broad new category. Demand Media clearly has its sites on ‘movin’ on up’, and they are dating up a tier on the social ladder with this deal, as it helps them move upscale into a more premium environment under the halo of the USA Today brand name. This provides further momentum on the heels of the news that CEO Richard Rosenblatt convinced online heavy-hitter Joanne Bradford to join Demand Media as chief revenue officer.
Will the content be up to the typical editorial standards of the USA Today? Almost certainly not. But travel tips don’t require particular expertise or training, so this category is an excellent candidate for commoditized content. Moreover, it’s important to understand that the primary consumer quite likely is not a current USA Today enthusiast. It is a web searcher who may or may not have any relationship with the brand. And given the topic, the value-add of a highly paid writer could easily be lost. One doesn’t need to wax poetically about a toddler pool after all.
Most publishers will turn their noses up at this as “farmed” content. But to do so would be foolish. This is a great example of a top brand recognizing where they do and do not make a difference, and focusing their investments where they matter.
For the USA Today online team, led by Jeff Webber, this is a smart move. Now, other publishers need to do what people in other industries have done for decades: focus on your core competencies and economize on those things that do not differentiate your product. The publishing world has been all too slow to recognize this Econ-101 reality, and it’s time for a wake-up call.
What are your thoughts on low cost, commodity content?
One of my favorite questions to ask recruiting candidates is: “What content sites have a unique and differentiated user experience?”
The usual answers are as tiresome as the state of web design: YouTube (yes, it is fun to keep clicking), Hulu (yes, they got the experience right for TV viewing), and lots of pauses and comments like “I don’t know, it’s kind of all the same.”
Let’s face it: publishers are formulaic herds. And the formulas are boring and tired for users. How bad the state of the art is when Huffington Post gets major props for going with a single full-screen hero shot on its home page – and that’s considered breakthrough!
So that’s why I’m incredibly impressed with what MSN’s Scott Moore and BermanBraun’s Lloyd Braun and Gail Berman have done with their newest creation, Glo. From logo to flow, the site’s design lets go of the old formulas, tries something new, and most importantly, takes risks. New layouts, new interactions, and new forms of content all create a feeling that this is not an ordinary website. Even more, they have defined their own style that is adventurously well-suited for their audience.
To start making money, publishers need to create consumer experiences that stand out. As MSN’s Scott Moore said in a post by Kara Swisher, “we see a lot of room to grow by offering something different and of higher quality.” These premium visceral experiences are exactly the path to profit in digital media: they will attract loyal audiences, premium advertising dollars, and over time create opportunities for upselling to consumers. And those premium experiences are, after all, the root reason why everyone is so excited about the iPad this week.
Apple doesn’t need to be the only one that can innovate. This kind of innovation is rare among publishers, and yet all too valuable.
For heaven’s sake, if MSN can do it, everyone can.