Archive for the ‘Premium Content’ Category

by Ben Elowitz

With yesterday’s announcement of the acquisition of Associated Content, Yahoo CEO Carol Bartz has sent a loud message:  Yahoo is investing in becoming a new kind of digital media company for the new age of digital media.   Cheers to Yahoo for recognizing that their “1.0” model needs an upgrade to be more effective in a 2.0 world.  The only problem is that this move gets Yahoo just one step toward where it needs to go.  It could be a powerful first step to add content and audience to their network, but will only be strategically valuable for Yahoo if it is layered with additional new investments to build true destination media sites with premium positioning.

Let’s explore what Yahoo gets from AC first, and then cover what Yahoo must do from here if it is serious about winning in media.

1. Yahoo gets commodity content at commodity cost. With Associated Content’s marketplace, first and foremost Yahoo can source commodity content – i.e. the kind of content that doesn’t need a particularly differentiated author, original reporting, or other hard-to-find talent – cost effectively.

2. Yahoo can improve time (and value) on network. In this age of deteriorating portal power, users come to portals primarily for one reason:  mail.  (According to data from comScore, 73% of Yahoo’s viewers of its most valuable real estate – the home page – are Yahoo Mail users.)  Once they arrive, however, there is far more money to be made by vectoring them to networked media properties like Yahoo Finance, Sports, and Entertainment than by serving additional pages of poorly-monetizing email.  So, by beefing up the available content in the network, Yahoo receives the benefit of extending visits at low cost.

3. Yahoo increases its audience by drawing traffic from Google. Yahoo’s made the strategic decision to move its focus out of the search game and onto media.  And so rather than just feeding them from mail and search, Yahoo needs its content properties to draw audience on their own.   The AC content marketplace can produce thousands of pages per day of content – each one baiting more search engine traffic, and all produced at modest cost.  A recent EConsultancy interview with CEO Patrick Keane revealed that the bulk-buy strategy works:  “80-90% of our audience is driven through natural search,” and according to comScore data, nearly 50% of the traffic that AC’s content sees each month is incremental to Yahoo’s core audience that comes for mail most days.

All three of these improvements have financial benefits to Yahoo – both in increasing revenues with greater reach and traffic; and in bringing down average cost of content. But they miss out on the strategic positioning that Yahoo absolutely must own if it wants to ensure a leader as a top digital media company:

Yahoo needs to be a premium destination; and the AC acquisition message undermines that positioning. Read the rest of this entry »

by Ben Elowitz

Hulu Plus SubscriptionRecently 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:

  • Gives them a path to move off the desktop and onto mobile and the TV.   The media companies are adamant that consumers not be trained that video content is “free” on mobile as they’ve become accustomed to online.
  • Opens up the service to new content providers including cable, and a much larger catalog of content from their existing partners

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

by Ben Elowitz

Tug of WarViacom this week told Hulu that it is pulling its content out of the video site because they couldn’t reach economic terms that value The Daily Show and Steven Colbert to Viacom’s satisfaction.  Brian Stelter reported the story for the New York Times this week, quoting me with reference to the ‘game of chicken’ that Viacom has been playing with Hulu.  This game plays to chairman Sumner Redstone’s strengths, as he’s already presided over the protracted “off-again, off-again” conversations by which Viacom’s sister-company CBS has held out from Hulu.

But these negotiations over how to divide the pie miss the opportunity altogether.  Against all odds, Hulu has surprisingly created  a successful consumer destination.  With a great consumer experience, Hulu has become *the* destination for “official” TV video.  While media executives fret the impending decline of television, the future has already begun to gel at the site with an audience of 30 million,  advertiser demand, and premium monetization.

The shame is that Hulu CEO Jason Kilar and his team have their efforts drained by brinkmanship negotiations with the industry.  What a waste of time!   Instead, what would benefit all parties — Hulu, its equity partners, and  the industry at large —  is for Hulu to spend time on improving the consumer experience, enticing audiences, and monetizing.  Further, Hulu may be in the best position of any media venture to command premium and subscription pricing from consumers — so additional content and scale could help make digital video more profitable. Unlike the drain of the power games that Viacom is playing, these constructive investments would have the prospect of lifting the fortunes of the media industry for everyone’s benefit.

While Hulu offers hope for the industry, Viacom crushes it.

by Ben Elowitz

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.Number of jobs in newspaper sector (Silicon Alley Insider)

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:

  • Beyond just content. To draw audiences and create new revenues, publishers need to go beyond just creating traditional content.  The idea of creating events, research insights, forums, and more is a great way to get outside the box.
  • Role. Instead of looking at themselves as a cost center — just a journalist on the payroll — to build a new model, we need everyone to align themselves with the goals of financial success — which is vital to long-term success of both the art and the commerce of journalism.
  • Premium experiences. What is notable about these vehicles are that they create exclusive, premium experiences for their audiences — instead of just more words in the same old vehicles.  Those premium experiences can drive premium revenues.

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.

Yahoo Bets on Video

11 Jan
2010

by Ben Elowitz

Last week, Yahoo announced that it will be working with Ben Silverman and his new firm Electus to develop original video content.  Notably, this video content will be designed from the get go to appeal to advertisers.

For Yahoo, this is a smart move that demonstrates they are willing to double down on the short-form video programming category.  And with good reason:

  • Video is the fastest growing segment of advertising demand. Many publishers are finding more demand for video than supply, and more importantly, for Yahoo to have a full package to meet advertisers’ needs and secure the best premium campaign opportunities, they’ll need plenty of video inventory.
  • The CPMs are high – although pricing for video ads depends on the format and placing, the average CPM is over 10x that of normal banners.
  • Because premium programmed video is still a relatively immature category, Yahoo (or others) may be able to stake a claim with various short-form video programs.  (The major networks and Hulu are covering their traditional broadcast long-form shows; while YouTube is great the great unwashed of 100,000,000 videos — a small pecentage of which are valuable.  But the middle is open territory.)
  • Yahoo is reporting success with programs like Prime Time in No Time (which Yahoo claims to be the most watched original internet program in history) and Yahoo Sports Minute.  Great to see them build on successful experiments with more.

Yahoo is smart to leave the reservation for a new effort like this:  after all, the key to the success of any new program will be establishing them as destinations with consumers.

If these are just another node in the Yahoo network, promoted from the home page, they will fail to provide any strategic value.  To succeed, Yahoo will need to temporarily ignore the pulls of the various existing Yahoo content properties in order to create a new one with its own audience.

And if freedom is the requirement, what better way to embrace it than to turn to an outside agency, which won’t have any of the overt or subtle pressures that an internal group will.  Plus, it lets Yahoo be more bold and risk-share with a partner, again a plus to advance Yahoo’s strategy.

The big watchout to Yahoo:  they had better do as well appealing to consumers as to advertisers.  To be a financial viable initiative, they’ll not only need the big dollars of brand sponsorships, but to build and sustain an audience.  Otherwise, it will end up looking great in the design and business reviews, but never really getting traction, like Google Video which failed with its premium content while YouTube flourished; and MySpace’s initial efforts to create premium sponsorable content channels in 2007.

by Ben Elowitz

Gawker Media has for years frustrated the stalwarts of journalism by paying its writers (gasp!) for the results theycreate.  Now, founder Nick Denton is going one step further to move his staff toward economic success.

With a new compensation program rolled out this week, as described in a memo from Nick published by The Awl, Gawker is updating its compensation to pay for audience growth, not just pageviews.

Why is he doing it?  Because another unique visitor is worth so much more than another pageview from someone you’ve seen before.  While this is true for all publishers, it’s especially true in Gawker’s case:

About a year ago, Gawker ditched ad networks in favor of displaying “Gawker Artists” in unsold inventory.  Chris Batty, head of sales at Gawker, explained that the program was “for the purpose of better engaging their readers, helping artists and maybe even themselves in the process — by draining the network swamp and getting hard to work on creating online marketing experiences valuable enough to cover the cost of original content creation.”

So Gawker’s price umbrella is standing tall; but without remnant, they are running short on fill.  Samples over various days in the last few weeks indicate that four out of five page views on Gawker properties are unmonetized, either with Gawker artist banners or no ads at all — a much lower fill rate than most publishers target.  (In research, we were hard pressed to hit a frequency over 2, no matter how much we clicked around the Gawker family of sites.)

The problem, of course, is the frequency cap.  And Nick has the right workaround:  he is focusing on growing his audience, not just his intensity of usage.

That will pay off.  Already, by focusing on premium advertisers like Blackberry and Cisco, Batty and his team are still able to make several times more money than a model where every impression is given to a network.  And the more he grows his audience – and gives his writers the right incentives to do so – the more premium advertisers he can attract.  So Gawker now has aligned incentives, motivating writers to draw in unique visitors creates an inventory pool that lends itself perfectly to high-dollar, frequency capped deals with top advertisers.

And as a second factor, it indicates real smarts about building the Gawker business to be stronger.  While it’s easy to game extra pageviews with flashy content features that draw clicks and layout changes that split content onto multiple pages, these often make the user experience worse rather than better.  By focusing on high value ad buys and featuring artists in unsold spaces, Gawker encourages behaviors that build great customer experience – which not only attract new audience members, but create an impression that draws them back time after time.

Contrast Gawker’s focus and reporting with old media:  where those who write the content scarcely hear a word about how it performed.

I have one friend who contributes to the New York Times from time to time.  I asked her what kind of performance data they provide to help her tune her writing.  Her answer:  “None at all.”  Shame!

In an industry whose executives are always complaining about the failing economics, what’s so bad about increasing the economic incentives?

by Ben Elowitz

Time Warner has set one of the best examples of a media company willing to break with old habits in order to find a path to a better place:  Not only have they initiated an industry joint venture, but they did it the right way.

Now, they’re showing some early fruits of those decisions to bust loose, in this demo video of the prototype they developed with Wonderfactory, the agency hired for product concepting and development of the tablet.

Let’s look at some of the things that Time Warner has done right.  These can be something of a cheat sheet for other companies who are willing to take big risks.

  • They didn’t wait. They saw how successful Kindle is based on all the buzz, and realized that it demonstrates an opportunity area.
  • They freed it from constraints. They broke off into a separate organization with a separate charter, to break free of existing course-of-business requirements.
  • They went off the reservation. To get truly “no constraints” thinking, they turned to an outside agency.  Smart move, since startup-within-a-BigCo projects can be hampered by all kinds of unstated — and false — assumptions from old “lessons learned” that no longer apply; and from an implicit imperative that new efforts should align with the old.

And, most importantly:

  • They are creating a new experience for consumers. More and more, content, like it or not, is a commodity.  But experiences are unique and irreplicable.  That makes them rise above, and gives consumers a reason to be excited, to buy, to use, and to come back again and again.

Whether or not the device is successful itself, this will give Time Warner an organizational advantage:  they are demonstrating not accepting the false constraints of maintaining old paradigms or riding the curve down.  That DNA impact is enormous, as it creates the license for others at that company to take risks.

Ultimately, the publishing industry is facing the problem that their “content” is relatively undifferentiated.  Time Warner has shown that they’re willing to take the risks to create a new experience that is worth noticing for consumers.

And Time Warner is further separating itself from the other media companies who are too frozen to do what it takes to try creating breakthrough consumer experiences.  Those companies will ultimately suffer, since the best path to a thriving audience — and new revenue streams — is by winning consumers over.


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