Wetpaint CEO Ben Elowitz on the Future of Digital Media
Despite their coveted value, the great brands of old media aren’t proving out to be much of an asset online. And to the extent old media is relying on the value of their brands to ensure a digital future, they are headed in the wrong direction.
For this new analysis for Digital Quarters, we measured audience and visits (from comScore) for sites across the major media categories, comparing the metrics of sites operated under old media brands (e.g. ABC, Entertainment Weekly) in each category to those of new upstarts. Over the past year old media brands lost share of online audience to new media in nearly all of the traditional magazine categories (TV, entertainment, business, fashion, tech, and teens), while the offline brands in the News category grew share during that same period. Although total visits were up 5% for old media, new media visits grew far faster — 10% — from April 2009 to April 2010, leading to share loss for old media in six out of the eight categories that we tracked.
Overall visit growth was positive in all media categories other than TV, but despite this, old media brands experienced an absolute visit decline in Entertainment News and Teens which are rapidly shifting towards new media sources.
Conventional wisdom has held that building a brand is a momentous challenge in developed spaces such as media; and that disproportionate returns accrue to the most established brands. But my new analysis shows that legacy brands are on the defensive, far more threatened by new entrants than the other way around. The upshot appears to be that upstarts’ execution is earning new audiences (and building their new brands), drawing audience on average away from more established players.
The reason for this shift, and the dominance of new media in categories such as Tech News is simply that the old media magazine model is ill equipped to compete with more nimble online competitors. For the most part, weekly and monthly publications are struggling to keep up with the new pace of information exchange and social interaction demanded on the web. Understandably, the value to consumers of days, weeks, or months-old “news” on fashion trends, celebrity gossip, and technology is far lower in the presence of up-to-the-minute coverage from new sites.
However, the success of offline brands in the News category offers hope for other old media brands. Companies such as The New York Times, BBC, and ABCNews have grown their online presence and are clearly investing in digital as core to their business. They are actively experimenting with rich media, social marketing, and engaging their audience. But while news outlets have always operated on a fast pace, magazines are at a particular disadvantage in that they are not structured to turn information around quickly. For old media magazine brands to maintain or grow share, they’ll need to go further by transforming their organizations, incentives, and sources and embracing the new definitions of publishing quality to provide the experiences that consumers are now seeking online. With online share falling — in some cases dramatically — now is the time for offline legacy publishers to take action and get their brands working harder before it’s too late.
Source: comScore panel-only visit data for April 2009, July 2009, September 2009 (panel only was unavailable for October), January 2010, and April 2010, including only properties with more than 500,000 monthly unique users. Properties were manually categorized into old media if they originated offline, and new media if they are entirely online or originated online (e.g. TMZ and MSNBC are considered new media). comScore category names: Business News/Research (Bus News); Entertainment – News (Ent News); Beauty/Fashion/Style (Fashion); Lifestyles; News/Information (News); and Technology – News (Tech News); Teens; Entertainment TV (TV).
It’s been a week of dancing for Apple and The New York Times as they played hokey pokey with an app that offers a new, fun way for consumers to experience media: First, Steve Jobs put the acclaimed Pulse News app into his Worldwide Developers Conference talk, then took it out of the app store, and then put it back in again, but only after the developers took The New York Times out of it.
But as fun as it is to watch them dance, I can’t help but notice that The New York Times missed the opportunity right in front of Sr. VP Martin Nisenholtz’s eyes: the Pulse team is exactly the kind of talent that the company should be acquiring, not shunting. The Pulse founders made an app with a great consumer experience for media, did it in just a few weeks, managed to get the attention of the premier technology tastemaker in the world, Steve Jobs, and even made some money.
Message to Martin: Instead of cutting them down and pushing them into someone else’s arms, make nice and go hire (or acquire) the Pulse team. Or, as my mother once said to my older brother when he was dating someone she actually liked, “There are better men out there than you: You better marry her before someone else does!”
If old-media traditionalists can be relied on for one thing as the world digitizes, it’s to bemoan the loss of what they call “quality.” In fact, the quality of published content has never been better. So why does traditional media get it wrong here? Because they’re using a definition of quality that made sense for the world of Publishing 1.0, from Gutenberg until 1995. But for Publishing 2.0, it’s about as useful as the cubit is in modern architecture.
The traditional-media definition of quality is based on four key criteria – and all of them have fundamentally changed and become invalid. Here they are, along with an explanation of why they’re no longer useful. Next week, I’ll do a follow-up piece on how quality should be defined in the digital era. Read the rest of this entry »
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?
At the 2010 Media Summit conference last week, Arthur Sulzberger and Janet Robinson talked more about their get-consumers-to-pay digital strategy. While they didn’t reveal any major new details, they did expose a couple of wrinkles by implying that there will be more apps and value-adds that they will look to upsell consumers on.
When I asked them about training consumers to pay for content, Arthur Sulzberger initially brushed it aside saying their “loyalists” are willing to pay for their intensive usage. I pressed further: what about getting the mass market of consumer audiences – not just the heavy users – to start opening their wallets? Sulzberger’s reply: no new behaviors are required.
Sulzberger got it wrong: getting consumers to habitually pay for content is certainly a change in behavior. James McQuivey at Forrester recently looked back on decades of media models and called it: “People don’t pay for content, and never have. They pay for access to content.”
But Arthur Sulzberger’s statement belied some of the actions that the New York Times is taking that are in synch with changing consumer behavior. Early this week, Damon Kiesow at Poynter.org reported that the New York Times will be “disaggregating” their book review – in order to charge for it a la carte in appetizer-sized portions.
Which makes me wonder: is bite-size the new way to get consumers to pay?
It has this going for it: between iPhone apps and iTunes songs, the bite-size purchase is absolutely the most successful model so far when it comes to changing consumer behavior en masse. It’s easy, it’s fast, and it’s economical. At about a buck, most importantly it’s stress-free and totally disposable. It removes much of the barrier of consideration from software and media purchases that is present in other consumer-pay models.
Regardless of what its leaders are saying in public, it looks like the New York Times is betting on big changes to how people consume and pay for content: and that will come in packages big and small.
This post appeared as a guest post on PaidContent on February 4, 2010.
It’s now abundantly clear that the ad model isn’t enough to support the New York Times’ online future—the company needs consumers to help pay the bills. Thus, its recent decision to go metered. But the plan to charge some subscribers is not the end solution, it’s more like one piece of the puzzle. The company needs to take a few other big steps to help ensure the financial viability of NYTimes.com.
To be fair, let’s start with the three things the NYT got right with its decision, before we look at three things it still needs to do. You can see the upsides of the metering decision more clearly when you actually crunch the numbers on how the new system will impact existing revenues and look more deeply at the costs of implementing other types of subscriber plans.
1) Preserving advertising revenue. As a public company, the last thing the Times Company can afford to do now is shrink its existing online revenues.
A freemium model with a cap of, say, 20 articles per month lets the NYT retain up to 50 percent of its ad impressions (based on Quantcast data)—but most importantly, the company is preserving the most valuable impressions. (Light users are actually more valuable per pageview since they don’t exceed frequency caps.) By always allowing access to premium pages like the home page and section index pages, the most lucrative placements on the site will be served to every reader.
And by maintaining open access to casual users, NYTimes.com can preserve its eight-figure reach, which is critical to winning deals from top advertisers and commanding a high price premium. (Had they gone members-only, even with equivalent subscription numbers to the Wall Street Journal’s 400,000, the NYT’s rank would plunge to #2,000 as a web publisher—hardly enough reach to matter.)
Bottom line: With this approach, the NYT will likely retain 80 percent to 90 percent of current ad revenues.
2) Segmenting customers. Every marketer knows the way to maximize customer revenues is price discrimination, charging different (and the maximum tolerable) rates for each customer. Currently, the New York Times (NYSE: NYT) scores a zero here: Content is free for every user.
The ideal program charges each person exactly what he or she’d be willing to pay. A metered system isn’t perfect, but it’s far better than the TimesSelect model, which according to my analysis cost the NYTimes.com half of its online revenues while alienating readers who weren’t going to pay much, if anything, anyway.
In this way, the metering plan helps create a smart foundation: A configurable platform supporting dynamic offers that will tap those willing to pay more to get more.
3) Fine-tuning the advertising-revenue/subscription-revenue mix. A paywall that cuts off the existing online revenue stream—even just temporarily in order to build subscriptions—would mean nearly tripling the holding company’s $40 million annual operating loss (see Excel modelhere). Even if the NYT were outstanding at converting users, this public company can’t stomach the interim revenue hit. If the NYT converted 3 percent of its monthly audience (similar to WSJ ratio) over three years it would suffer a quarter-of-a-billion dollar cumulative loss—and still not be in the black.
By implementing a metering system that is flexible and tuneable, rather than a straight paywall, the NYT will be able to turn the dials as needed. Quick test-and-iterate cycles will let them optimize the meter settings without jarring the advertising dollars they depend on. In a strict paywall, it would have to make the switch with its eyes closed and fingers crossed.
But these three accomplishments just aren’t enough. What the Times really needs to do is adopt a whole new architecture for its digital business. In particular, the goals should be to develop compelling new kinds of content, new experiences and new offers. These are the sorts of moves that will generate huge interest and huge premiums, and they result from discontinuous, not incremental, thinking.
How will we know when NYT has summoned the courage? We will be looking for these signs:
1) Acquisitions. What new products, business models, and accelerators can the Times add to its portfolio to create discontinuous innovation? Nothing says “strategic change” like M&A, and the NYT signaled its digital directive in 2005 by buying About.com for $410 million, shocking everyone at how deadly serious it was about building digital capability. Now it’s time to acquire sites like Associated Content or Mahalo to build a new, scalable sourcing model for additional non-premium content to supplement its top-tier journalism; or blog networks like Gawker to enter new vertical categories and gain experience with new labor models.
2) Product and content offering. The NYT is a premium media property. What new premium content and products can it offer to coax new consumer spending? While the NYT has explored many new ways to read and interact with the paper’s content, the desperate straits call for more dramatic action: reinventing the whole publishing model—lest otherpublishers and device manufacturers get there first. Each new and innovative experience is a chance to lead the revolution as well as a premium revenue opportunity.
3) Talent. The innovation needed at the Times is unlikely to come from inside its headquarters. What outside talent can it bring in to orchestrate major progress, beyond putting aninsider in charge of the new metered model? Erik Jorgensen and Scott Moore helped MSN break out of its rut with a whole new home page that weaves social media into the content experience. Jimmy Pitaro at Yahoo (NSDQ: YHOO) is demonstrating that he can create bold new programmingfor users. And Bill Wilson at AOL (NYSE: AOL) has created over six-dozen content destinations—and a marketplace for content—in his MediaGlow unit. These are the types of break-the-status-quo thinkers that could help Martin Nisenholtz bring the Times to find a new way.
And one final thing. Speed.
The NYT’s approach to the radical change in its business is anything but radical. It’s careful, considered, and incremental, and it’s missing an essential ingredient: speed. Breakthrough change doesn’t happen slowly.
In this era of “launch and learn,” it is a big mistake to wait until January 2011 to launch the new approach, as the company has said it will. Sure, technology needs to be built to handle subscription database ties, but that development can and should be done fast. The goal should be to deploy the system in 90 days and then tune the dials on the fly, developing and testing multiple products and offers to increase user spend. Every month they wait, another 12,000 subscribers may flee the core print business (based on its recent six-month circulation decline).
In the end, the challenge for the New York Times is not about consumer-payment mechanisms. The real challenge is to build something so great that consumers fall in love—and their credit card will be the surest sign of their devotion.
As we’ve all read about, the New York Times’ TimesSelect experiment of 2005-2007 was spun as quite successful even as it was cancelled, while those of us in the industry had a strong sense that it flopped.
While the NYT lauded the $10MM in annual revenue that the program created, what they didn’t mention was the cost. Based on traffic rebounds of 65% once the TimesSelect program was cancelled, the TimesSelect program cost NYT one-third of its traffic and likely almost as high a fraction of the site’s revenue.
At today’s monetization rates of $75 RPM (imputed from their Q3 2009 financials) on the 62MM suppressed pageviews of their traffic at the time, that’s making $10 million at the cost of $56 million a year. (Or maybe even more than that, as ad rates have fallen since then. If anyone has then-current CPM estimates for NYTimes.com, please leave me a comment.)
Relative to today’s estimated $110MM topline for NYTimes.com online ad revenues, that is a hefty price to pay at 50% of revenues.
Clearly, that was a subscription program gone wrong.
The stakes are high. This time, it’s no wonder NYT will need to take care to optimize take rates and retain advertising revenues.
(The Excel model for these estimates is posted here for those who want to play with the assumptions – and if you have any suggestions please leave me a comment.)
Charles Pelton, the former GM of Conferences and Events at the Washington Post, wrote a piece for PaidContent this week raising opportunities for journalists to create new revenue streams beyond traditional advertising. His message is important, and gives hope to journalists by reframing our opportunity to redefine the publishing industry.
Journalists are understandably fearful of the shakiness of the industry right now: 15,000 employees in the newspaper sector lost their jobs last year, and Silicon Alley Insider just published this dramatic chart of the day showing the steep cliff we are on.
But while Pelton mourns the loss of jobs, he also offers solutions, and they align with where the industry needs to head:
The point is to take the journalist’s knowledge, and package and present analysis in new, interesting and useful ways for paying audiences. In this case, there’s a subset of readers (IT vendors, for instance) who would pay a premium for insight about technology use by government…. Could a film critic or arts editor moderate a readers’ discussion—live or virtual, about a new movie—something actually sponsored by AMC Theaters? You bet!Indeed, product development should be part of a journalist’s job. Journalists should be working side by side with their business-side colleagues to create and monetize products—and should be evaluated, in part, on their ability to do just that.
These are great examples. Underneath them, they illustrate three things that need to happen for the media world to rise again to a new, profitable model:
These are not new themes. Top journalists like Kara Swisher and Walt Mossberg have been incredibly successful extending their skills and brands from journalism to a broader role in industry, running the Wall Street Journal’s D: All Things Digital conference since 2003. Another role model, Thomas Friedman of the New York Times has leveraged his journalism role into multiple books that have had a huge commercial impact. These journalists demonstrate that it can be done – while preserving top-tier journalistic integrity.
It’s not a brand new idea, but what we need now is to see it become a widespread idea. It’s time for those who write to go beyond the creation of words to the creation of results.