Wetpaint CEO Ben Elowitz on the Future of Digital Media
Tim Armstrong, AOL’s CEO, has rebooted AOL with a talk-track of branded destinations, A-level journalism and sizzling original content; and early Monday morning, a full week before Valentine’s Day, his romantic media vision was considerably enhanced, when Arianna Huffington announced that she was selling Huffington Post to AOL for $300 million in cash and $15 million in stock.
For the record, that’s quite a premium price – 10 x Huffington Post’s $31 million in revenues.
Despite the cost, however, Armstrong is a very lucky man, and he received a wonderful gift from Huffington, whose hugely successful and much-talked-about Web site is a perfect match that helps “complete” AOL.
Indeed, the relationship between Armstrong and Huffington comes not a minute too soon for AOL, which is finally bringing on real creative assets and talent – including Arianna Huffington, herself, as chief editorial taste-maker.
To be honest, the media industry has been wondering whether Armstrong could actually pull off a deal like this. (True Confession: I’ve been among the doubters.)
And there’s good reason for the skepticism.
The problem, in large part, has been strategic. Since he assumed the CEO’s post, Armstrong has talked with clarity about his vision for an AOL made up of destination media brands, the way Time Inc. and Conde Nast have built their portfolios. But to date, his build-out of this city on a hill has fallen short. Instead of buildings gilded with leading journalism that attracts fame and eyeballs, his properties have largely been constructed by plumbers and mechanics laying a foundation for search engine rankings.
That’s why AOL’s recently leaked master plan, “The AOL Way,” is heavily oriented toward users’ search queries. The playbook emphasizes volume of content, page-views per post, and production cost per-piece. And, while “The AOL Way” is punctuated by periodic reminders like “quality content at scale,” the reader of the plan is left with the distinct impression that quality is a guardrail, not a compass direction for the journey to ROI nirvana.
Indeed, without a voice or a purpose other than page-views, “The AOL Way” comes off as soulless. Instead of emphasizing audience interests, an editorial point of view, or premium differentiation, it’s a volume strategy: the plan calls for the number of stories to jump from 33,000 to 55,000 a month; with median performance to go from 1,512 page-views per article to 7,000 within the quarter; all while gross margins rocket from 35 percent to 50 percent.
This Google-ingratiating strategy, at least from my perspective, is wrong-headed and short-sighted. It doesn’t do anything to help build a unique and long-lasting brand that is meaningful for audiences. And, as a result, it does very little to encourage people to eagerly and voluntarily type “AOL.com” into their browser’s destination bar. With this playbook, consumers don’t go to AOL; they merely end up there.
There’s a solid lesson here for all of us.
AOL – like everybody else in the media business – is clearly jealous of Facebook’s gravity-defying results. But it takes time for a proper media brand to achieve such stratospheric numbers. The great brands – The New York Times, ESPN, CNN, Wall Street Journal – have shown us that you build audience loyalty one positive interaction, one ambitious story, and one rich consumer experience at a time. To be sure, Huffington Post has shown us that, building its audience to a reported 25 million uniques over a well-paced five years.
So, it doesn’t happen overnight, and it certainly doesn’t happen if you’re just playing for quick search engine results.
Looking forward, it will be interesting to see whether Huffington – a savvy and independent thought leader who has always leaned forward – chooses to embrace “The AOL Way.”
My sense is that she will continue to follow her well-honed consumer-focused instincts instead. She brings a strong point of view, a decidedly human nose for news, and a variety of social strategies for distribution – not to mention her considerable star power. And that’s a good thing for AOL.
It’s important to recognize Armstrong’s considerable achievements. He saw that AOL’s subscription model was a non-starter; he chose areas of core content concentration for AOL; and, unlike Yahoo!, for example, he pared AOL’s portfolio quite dramatically.
But the pre-Valentine’s Day courtship and consummation with Huffington will mean very little in the consumer marketplace if Armstrong doesn’t get rid of his seemingly unshakable Google obsession – and very soon.
Here’s hoping that Arianna can help nurture Tim’s AOL, and turn it into a true media destination.
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).
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 »
I had dinner recently with a friend at a big traditional magazine publishing house. We talked about the predicament of the majors: circulations in decline; ad rates falling; a reduction in the number of pages per issue. The traditional publishing model is hanging by a thread. And as we’ve all seen, blue-chip magazines are closing their doors as they can’t make ends meet in the new world of media.
My friend works in the online division, and has lots of exposure to senior company executives. And one thing he told me surprised me: When he talks with his higher-ups, they just plain don’t acknowledge that online is the future of their business. They’re too preoccupied trying to figure out how to save their bread and butter versus figuring out how it will morph to completely different model – an online one.
Now don’t get me wrong. I’m not saying that online is going to save the traditional magazine. It’s not. The economics of online publishing are arguably even worse than traditional publishing. But that doesn’t change the fact that consumption of content is moving rapidly and unstoppably from offline to the web and mobile web; and that means that the offline publishing business is in inevitable decline.
The options for an old-school publisher are simple: they can harvest their declining businesses; or begin the hard journey of building a new business to replace them. But what is very clear is that the two cannot be done at the same time. Inevitably, the companies that will succeed in the new digital economy are the ones that are willing to make sacrifices to their existing businesses.
My favorite example of a company that is committed to this sacrifice comes from the world of semiconductors. For years, Intel demonstrated the philosophy of obsolescing their own products by creating new ones – before their competitors did. Each generation of microprocessor they produced put the prior one – just a year or two old – out of business. This is a survival skill in a fast-changing industry like semiconductors.
But decades-old publishers, steeped in their own business heritage, act as though they their world is not changing; when in fact it is changing as fast as microprocessors themselves. Is it that they don’t know, or that they don’t care?