Twice in recent weeks I’ve had conversations with fellow journalists that settled on the old advertising-versus-subscription myth: “There are just two types of revenue for news organizations – advertising and audience.”
Each time, I told them that split is too simplistic – and doesn’t match how The Bosses have historically managed the business.
I’m usually willing to cut slack on this issue – I was basically stupid about news-industry finances until I left the newsroom. But given its increasing importance, I want to elaborate on those conversations and weave in some stuff from my business-of-journalism class.
Don’t think about “advertising” or “audience” revenue. Think about why people are willing to pay you; what they are actually paying for;Â and how you organize to serve those customers.
(Credit-where-due note: This piece borrows heavily from the late Tom O’Malia at USC and the inestimable Clay Christensen at Harvard Business School.)
For our examples, let’s take the largest revenue category at most shops – advertising. The very notion of it as a monolith masks the “why” and “what” questions above: The problems of, say, car dealers differ radically from those of cell-phone companies. So let’s throw out the framework of “advertisers” and instead think of separate groups of customers, and their different needs.
The “how” question? Let’s build our internal organization structure around “lines of business” – or the specialized teams (sales people, designers, product managers) who serve particular groups of customers.
Tom used to illustrate the concept like this:
The customer may seem self-explanatory: “The advertiser.” Nope. Get more granular: Used-car dealers versus human-resources recruiters. Ad buyers at Target and Best Buy seeking distribution for their Sunday sales circulars versus your neighbors publicizing their garage sale.
That job is not “exposure to my audience.” Remember: No one wakes up in a cold sweat at 5 a.m. thinking, “My God! I have to buy an ad in the morning!” But lots of business owners wake up in a cold sweat thinking “Where am I going to get some new customers?” – or “How am I going to find that left-handed Django engineer?” or myriad other problems.
You need to understand your customers’ problems – and how your products can help fix those problems. Those solutions can (and should) stretch far beyond mere publicity. The live-events line of business is often about making direct introductions between sponsors and certain attendees; the digital classifieds business (car sales, help-wanted postings) has evolved well beyond mere listings to using algorithms to matching specific shoppers with specific listings. A used-car dealer trying to move a lime-green Honda Civic doesn’t really care about people looking for brand-new minivans.
The sales channel is how you connect the dots – how you convince the customer that you have a product that can solve their problem – that you can deliver value to them.
In other words, don’t think of a single bucket of revenue called “advertising” – think of it as six, seven or eight different buckets, each with its own unique value to the paying customer, each requiring its own measurement and management.
Print and digital ads sold to local retailers to promote their wares? Let’s call that local display, and let’s have a dedicated team of sales reps who spent most of their days out of the office working with those clients.
The same kinds of ads sold to national cell-phone companies and really big local advertisers like the big hospitals? Let’s call that major accounts – retail, and have them work closely with our sales team in New York.
Garage sales and other general listings tucked back in the want ads? Let’s call that classifieds – other – and since most of those customers only buy a couple ads a year, let’s keep the costs way down by handling all those business over the telephone and via email.
And so on, through categories like “help wanted” and “automotive.” You could tell how seriously each line of business was being taken by The Bosses: You just looked at the quality of the managers assigned to the category. General classifieds (the garage sale and lost-pet ads) almost always had the youngest managers, and the sales teams never left the building. They sat at a phone bank with headsets on, waiting for the phone to the ring.
In theory, the best leaders and sales people got promoted over time to the biggest and toughest accounts – major local retail and the car dealers. (Theory isn’t always practice, of course: I remember flummoxing one allegedly senior rep when I kept asking why her account, the largest health-care and hospital group in town, was down 30 percent year over year in their spending with us. Have they changed their strategy? Do they have a new leader who hates our company? Are they shifting everything to radio and TV? Time after time, her only answer was “I don’t know!” until finally she yelled at me: “Look, all I know is that no insertion orders have come out of the fax machine!” No wonder that sales team had the reputation for being mere order takers, better suited to work at McDonald’s. My buddy Bill eventually fixed that.)
Thinking in terms of “lines of business” also allows you to spot new opportunities. For years, the newspaper industry treated subscriptions the way grocery stores treat milk: A loss leader. Those 99-cents-for-13-weeks circulation come-ons did not make a dime of profit. (In fact, on balance, it cost about 25 to 50 cents per copy to simply print and deliver each day’s edition; the subscription fee typically didn’t even cover those costs.) The real profits were in the advertising.
When ad revenues started plummeting in 2006-07, it took counter-intuitive thinking, and heavy-lifting analysis at The New York Times to figure out the digital-subscription puzzle: Very few people are willing to pay anything for news. But a smaller, passionate group of super-users values us so much that they will pay a lot. Hence the nearly-universal metered-wall – which a lot of people (me included) though was the height of stupidity when The Times launched it in 2009. (Tim, I apologize for all those nasty things I said.)
The point of all of this: Don’t fall into the trap of limiting your thinking to the traditional notions of “advertising” or “audience revenue.”
Instead, think of “specific jobs my organization can do to solve a problem for someone who is willing to pay us for it.” Examples? That’s another long post for another day – but here’s a hint.
If you’re able to shift your organization thinking, you – and your journalism – will be better off for it.
Got a question? Want to argue a point? Ask in the comments below.
When a colleague and I first negotiated a YouTube syndication/revenue share agreement back in 2007, most of the media world treated YouTube as a novelty, a place for keyboard cats and 14-year-olds’ rants. Certainly it would never be a venue for serious content, or for real ad dollars.
Today? Media companies are falling over themselves to expand their YT presence. Talent is flocking to its burgeoning content channels. A knowing acquaintance talks of regularly cashing $10,000-a-month revenue-share checks from YouTube for his guerrilla content operation – and of people he knows who often add a zero to that figure. (Why no link? I’m respecting a confidence, folks.)
Local TV makes strong revenues (and high rates) because of its oligopoly power over geographically targeted video ads – and because there are inherent limits on its ad inventory (only 24 hours a day, only certain hours during the day with high viewership around local content, only x minutes of ads per hour). To media companies, those both feel like protection against the sort of collapse that roiled the newspaper business.
And I just saw my first-ever LOCAL business running a pre-roll on YouTube. Something is afoot when local businesses in the sleepy backwater of Nielsen DMA 43 start changing their ad-buying patterns.
I’m not predicting an imminent collapse in broadcast revenues. (Ad dollars do follow the audience – but usually much more slowly than new ventures would like.) But YouTube has nearly unlimited ad inventory, and breathtaking targeting abilities. Change is coming.
At its core, the role is about representing the customers (note the plural, please) in all decisions – designing a site, deciding what functions a mobile app should have, figuring out what forms of content and advertising a new digital venture should have.
Years ago, when I first started developing new products, I was struck by the similarity of product management to  the role great section editors play – especially over how to allocate your staff and what the highest priority was at the moment.
In other words, if you’re inquisitive, smart and decisive, you can be a great product manager.
Many of the great ones I’ve known and worked with started their careers in newsrooms. They’re always asking questions. They’re voracious readers of anything related to the topic at hand. They know what the competition is up to. And they’re always, always pitching new ideas.
I’m not the only one who has latched onto that analogy. Matt Sokoloff – a long-time product manager for the Orlando Sentinel and Tribune Interactive, now a Reynolds Journalism Institute fellow at Missouri, uses it with students all the time.
“A good journalist can write a good article. But a great journalist can write a great story,” he says. In the same way, “a great product manager can build a great product.â€
A couple caveats – both around the idea that you can’t simply waltz into the job and play everything by ear.
Section editors and street reporters tend to rely on experience and intuition (at least they did back in that other century, when I had those jobs).
Product managers risk disaster if that’s their main research tool. They need to use real data – and if none exists, run tests to generate some. (See Eric Ries’ excellent The Lean Startupfor more.)
Second, about that plural noted above: Almost every product has multiple customers – and the ones who actually pay are highly important. For most news media, that means the advertisers, not just the audience. And even those segments have sub-segments that you must understand.
Understanding all those nuances takes enormous work. But then being good at a beat, or running the best features section in the state takes work, too.
Leftover stuff:
It’s worth noting that both of the blog posts that prompted me to finish this screed tie back to perhaps the most-brilliant piece of the year about entrepreneurial journalism: David Skok and James Allerton’s remarkably thorough three-part discussion with Harvard Prof. Clayton Christensen.
The piece takes Christensen’s groundbreaking research on disruptive technology and applies it to the business side of news. It’s a true must-read for anyone interested in the future of our business – and it’ll be required reading for the next group of students I’ll be teaching at AU.
Finally, if you want a condensed, rigorous look at those ideas, get your boss to send you to API’s upcoming session on disruptive innovation for news, part of its Transformation Tour.
I love tools that allow writers and producers to create digital-native content in a hurry. One of my new favorites is Qwiki – a video-generating platform that gets several things right:
* It recognizes that digital devices are non-linear, and benefit greatly from annotation.
* Unlike, say, Final Cut Pro, it is stupid easy to learn.
(I’d show you the first Qwiki I created – it took only 20 minutes – but I built it by annotating a simple speech. (Hey, the video was laying around, so I grabbed it.) Here’s a much better use case, from fashion blogger Shea Marie:
I just spent 45 minutes showing the tool to some colleagues from around PBS. I think it’s safe to say you’ll see some interesting tests in the coming weeks (and for once, nothing bad will happen to poor Beaker. I think).
(Edited to fix a typo. H/T to Dani Abraham @Qwiki for the catch. Hey, I was a line editor, and always grateful the copy editors were behind me.)
I’ve been having interesting conversations with a number of folks lately around a basic premise:
Webinars suck.
They seem a useful way to disseminate information to a large audience at once. But the format isn’t terribly engaging – and as a friend always reminds people, on the Internet, porn your email is just one click away.
I’ve conducted webinars that seemed engaging – yet when I looked back at the dashboard later, I’d see that at any given moment (even during my best jokes!) a third of the audience or more had some other app at the front of their screen. (Yes, the webinar system spies on you.)
So what’s better? Well, I’m playing around with that, and I’ll share results when I know more.
But along the way, a couple interesting free/low-cost tools:
– Have a PowerPoint that you really need turned into an embeddable video? Yeah, the latest versions of PPT will do that for free – but if you’re using PowerPoint 2007 or earlier, try Brainshark. (Free to try; as little as $10 a month per prezo to get rid of the nagware and open up the full feature set.)
Here’s a sample (one that happens to emphasize how cheap digital technology has democratized content):
* And speaking of video, I’m especially intrigued at how people are using overlays to add hyperlinks to video content. It reminds me of the first days of (quotes imply irony here)Â “hot links.” (Or, to date myself even more, HyperCard).
Video is on the verge of becoming a non-linear, ever-extensible story-telling form … and my obsession of the moment is Qwiki. Play with it and you’ll probably see why. (And your reactions are welcomed in the comments.)
We set out to be intentionally provocative, because Bill and I have seen too many great ideas for projects and products turn into smoldering wreckage because of miscommunication between journalists and business folks. (OK, and partly because Bill and I just like being provocative.)
So we taught it as if it were a master’s level business-school class. We used case studies about interesting media start-ups. We taught the ABCs of financial statements (yes: We made journalists look at numbers) and the grandular details of different revenue models. And we required every student to pitch a sustainable news-and-information venture.
We heard some terrific ideas. But as Tom O’Malia*, a serial entrepreneur and director emeritus of the Lloyd Grief Center for Entrepreneurial Studies at USC, reminds anyone who will listen: Ideas are cheap.
Entrepreneurial ideas are only useful if they can be refined into a workable business concept – one that has real, paying customers, and delivers clear value to those customers.
Tricky distinction, especially for reporters.
No, your audience is usually not a paying customer. (We won’t get into the tiresome paid-content discussion here – but even at newspapers and magazines, subscription fees from the audience are a small portion of revenues, and an even tinier portion of the profits. The real paying customers are the advertisers.)
We were gratified at how quickly the group caught on.
Many of the ideas were terrific, and got only better by the final pitch session. We’re going to be intentionally vague about the specifics – several folks are still working on their ideas with an eye towards actually executing them in the real world. Suffice to say our interest was piqued by proposals to:
Mine rich internal archives of entertainment reviews at a major media company
Connect reporters and people who have compelling information to, um, share. (“Leak†is such a loaded word, wouldn’t you agree?)
Attack a classified-advertising niche that has largely – and strangely – been left untouched. So far, anyway.
Over just two months, those weak ideas got better. From vague beginnings emerged sharp proposals to create:
A unique alliance around a hyperlocal site to provide modest, yet stable, funding that doesn’t rely on local ad dollars.
Community and hobby-driven sites that focus on narrow, but attractive, niches. (All I’ll say about one of those niches: The hobbyists scraped together $15 million to construct a building for their pastime?!? That’s a niche I’d like to capture.)
A clever blending of non-profit status, cheap technology and Internet cafes to support women in West Africa.
The point here is not that all of these ideas will work. Perhaps none will.
The point is that 18 young people – hard-core traditionalists, inexperienced cubs, even some NGO and government types – innovated. They combined creativity, perseverance and some basic business principles to develop concepts that are worth testing in the marketplace.
And therein lies the future of journalism: Smaller, nimbler, more creative.
*(As an aside: Bill and I owe a huge debt to Tom for graciously sharing his curriculum and research.)
The very interesting social-media curation tool Storify was released in private beta on Tuesday at TechCrunch’s Disrupt conference. It neatly twists the idea behind Flipboard.
Flipboard automatically generates a list of stories that might interest you, based on links suggested by people you follow on Twitter or your Facebook friends. Storify reverses the flow – it allows you to easily curate a list of readings you recommend, based on your own (or others’) social-media postings.
It’s still early-release stuff – the UI, while clean, is a bit obscure (especially the flow to save, then edit, a Storify “story.”) And, like all new tools, it’ll take a few weeks for the collective “us” to figure out how to best use it. But it’s a neat mashup of technology and journalism, and it’s worth watching.
Why? Tools like this are part of the emerging news ecosystem – how can we tap the experts out there to surface smart stories on important niche topics? It’s a problem – and opportunity – my skunk-works team at PBS is thinking about a lot.
A sample – which I ginned up in all of three minutes based on the intertwined riffs of newspaper brain drains and the reinvention of what Washington journalism can be:
OK, so a raw feed of pertinent tweets isn’t a “story” in a traditional sense. But marry this with a quick text introduction (which I, um, was a bit too lazy to write) and you’ve got the makings of useful information.
A side note: The smart folks at Storify deserve all the kudos. But I’ll point out that my friends at the Knight Fellowships at Stanford can claim godparent status: co-founder Burt Herman spent the last year as a Knight Fellow, thinking about ways to use technology to reinvent journalism.)
And a big hat-tip to MediaBug‘s Scott Rosenberg for the blog post that tipped me to Storify.
The National Journal is making a major effort to revamp its websites, and it just made a brilliant hire, my old friend and colleague David Beard.
The Journal’s gain, of course, is someone’s loss – the Boston Globe‘s.
Sadly, this is another example of the continuing brain drain of smart digital leaders from traditional newspaper newsrooms. Many who have left talk about the exciting new opportunities at their new organization.
Dave does that – but, as usual, he’s also far more honest about another motivation: “I just didn’t want to live my life managing decline.”
Too true.
Lest we get too maudlin, however: Congrats to Dave for brilliant service to the Boston community for a dozen years, and best wishes on his new adventure.
My friends at the Online News Association put together a terrific program at the University of Alabama-Birmingham for entrepreneurial journalists and others interested in starting news and information sites. (Thanks to the Gannett Foundation for the necessary financial support.)Â
I spoke a bit about emerging business models to support these kinds of sites (and – plug warning – the work of my partners at GrowthSpur).
You should search on Twitter for the #ONAUAB hash for some of the fascinating discussions that grew out of the sessions. Less fascinating, perhaps, was my presentation – but for those who asked for it, it’s here.
Also: Here’s Robert Hernandez‘s excellent presentation on how journalists can use social media tools (both to build audience, and to be better reporters).
And @DannySanchez’s informative riff on free tools doesn’t have a perfect online analog – but he writes about nearly all of those tools (and even more) on his blog, Journalistopia.com.
When you check out Tigers.com this morning, you see video of a brilliant catch … but not of a badly botched call that cost a team a perfect game.
Similarly, if you check out TwinsBaseball.com, you see video of home runs … but not an equally botched call that cost the Twins (disclosure: my favorite team) the game.
All credit to MLB Advanced Media: The glaring videos are available on the sites. You just have to hunt for them. (The Tiggers’ video is on the story-level page; the Twins/Mariners’ um, “infield single” is utterly buried on the site’s video ghetto.) Frankly, YouTube was easier. (Wondering if MLBAM has take-down notices flying this morning.)
A small thing, perhaps, in a world where cellphone and surveillance video is used as a publicity weapon in an international incident, and a major oil company is behaving like Keystone Kops in the Gulf – but one more tiny example of odd results when the economics of publishing change.
Play the Qwiki: 5 Easy Summer Hair Styles to Try
