During the past 18 months I have noticed a change of mind(set) in my work with traditional publishers, mostly from TV: Most of them do not consider digital some extension of their “real” business anymore, but finally start to prepare for a digital-only future. To many this may seem very late and trivial, but keep in mind that turnover and profits of traditional publishing in most cases are not a different ballpark, but a different sport, and although we can see first cracks in the iceberg, this will probably persist for a period of time to come. I like the ballpark/sports analogy, because I don’t believe in the term “digital transformation” in this case: Not only because everybody and their mothers suddenly became specialists in digital transformation, but also because in this special case, transforming TV or print into a digital business would mean they are the same sport, and in some time will meet at the same ballpark. I firmly believe that this is not the case; I am convinced that the mechanics and dynamics of digital publishing are so different to TV or print, that digital publishing has to be seen as a new, different, only somehow related industry, even if they are currently fighting over the same audiences and the same attention, and they are similar in the structure of their value chains.
I have been using this quote by Henry Blodget for years, and it still applies today:
What we have seen during the past five years, the tremendous impact of mobile / social / video, will continue for the years to come: Super-platforms that basically dictate the flow of audiences and make their way into the value chain of media companies, an increasing number of hardware and software platforms or completely closed ecosystems (think of messengers, voice, VR, wearables, truly smart TVs etc.) and the influence of data and tech, supercharged by machine learning, AI and the enormous amount of data that is generated, stored, analyzed and processed at ever decreasing cost. In the light of these dynamics I basically see three major strategic options for digital publishing companies, whether they are traditional media companies evolving into these or even media startups. Of course, there are enough shades of grey between the three for any approach, but I think that these three options will be suitable vantage points for any media company thinking of their future today:
The content company
A company that produces and/or aggregates content that is distributed and monetized by others. This can be an option for companies that we know as news agencies and TV productions today, as they invent shows or produce content and then license or sell it to TV stations (or others) who take over distribution and monetization. This can be purely creativity-based: There will always be room for storytellers if they are able to produce compelling and engaging content. But it can also be intelligent, tool & tech-based identification and aggregation of stories, for example Storyful.
Or it can use advanced and disruptive tech, like systematic crowd-investments in content ventures that will play out revenue to investors based on blockchain technology. But the baseline of this approach is to concentrate on the beginning of the value chain: the creation, aggregation or compilation of content. These companies do not need their own apps or websites, maybe not even own social media accounts, and can work greatly without any direct B2C contact at all. Many multichannel networks on Youtube run their business as a strict content company, leaving all other parts to Google.
The data company
Companies that focus on intelligent distribution of content. They may produce, aggregate or license content (so the first parts of that simplified value chain could be red, but that is not decisive to their approach), but what they do better than others is distribute it to the biggest audience possible. The core skill of such companies is to hack the algorithms of the super platforms, which currently would be Google and Facebook (and comes with great dependency on these). But there will be others, too. Companies that understand how to make Alexa choose their content instead of comparable pieces from competitors. Companies that understand how to bring VR pieces onto the glasses of as many users as possible – and so on. To do their job better than others, these companies have to understand data. About target groups, about content, about distribution platforms and the intersection of all three (therefore I believe that these companies should not rely on external distribution tools like Echobox and leave these to others who cover other parts of the value chain). Monetization for the data company lies in using third party offers, like Facebook’s instant articles or video ad breaks, or putting their data to work in order to create, but mainly distribute native or branded stories for advertisers. The biggest video publisher on Facebook is Unilad with nearly 3.5bn views on Facebook – in October 2017 alone.
Amazing that in the top 10, we don’t have any Disney, BBC, CNN or other traditional publishers – they have a different focus. By (in most cases) not running own destinations, these data companies seem like beautiful low touch companies as they simplify the value chain and concentrate on few areas of content generation (for example licensing, curating or producing) and on monetization (native/organic advertising or alternatively use the monetization from superplatforms), but will need some serious data infrastructure in order to do their job better than others. I also see Stoyo in this area, who see themselves as a data company, reaching more than a billion video views per month for their clients – but they applied an agency model to their media creation, working for advertisers directly. Their red part of the value chain would be “data”, which is applied to topic detection, production and social distribution.
The tech company
A company that produces or licenses content, and distributes and monetizes it on any channel available, including own destinations. This is the path that comes naturally to most traditional media companies as they have been running their own destinations for decades and desperately seek to move the brand impact they have from print or TV into the digital sphere. But what most do not have in their DNA to do so, and I am convinced it will be critical, is technology. When you want to cover most parts of this value chain and want to be as independent from third parties as possible in this, you have to shift your mindset away from magically appearing content (re-use of what print or TV produce anyway) and distributing this on own destinations, with Google and Facebook merely playing the role of audience supply.
These companies need to include the skills of the content and the data company, and add their own monetization, on own destinations and managed platforms. I see Buzzfeed, Business Insider, Vox Media or even smaller examples like Refinery29 as approaches in this area. This requires major scale in both publishing volume and audiences in order to introduce (and afford) the necessary technology along every step of the (simplified) value chain:
- Detection: Data driven detection of stories and “predictive analytics”-based assignment of resources to the production of stories; ideally, this is based on own data as the usage of third party tools like Spike is not exclusive for anyone.
- Distribution: Highly automated adaption of content pieces to algorithmic logics of super-platforms; this does not only apply to volume & timing of posts, but also to “packaging”, the different appearance of one and the same piece of content on different platforms with different audience behaviours, and can even include automated switches from 16:9, square and vertical video to one another. This also includes continuous and exhaustive testing of different variants of content and teaser appearances. On own destinations, this will also mean to create individually relevant selections of content for each user; in the age of mobile, this means the order of content in a scrolling sequence depending on every data we can get about the user, the behaviour of other users and the content available to display.
- Monetization: Publishers will need to go beyond letting software bid on banner placements or pre-roll spots; in order to monetize on three, four, maybe even more equally significant sources of revenues, publishers need to know their audiences a lot better than their ad servers do. From cross-device identification to individual preferences that can be matched against qualities of content, this knowledge can be turned into money not only, but also with sponsored or branded content. A CMS then needs to treat content the way an ad server treats banners: how long does a campaign run, how much of the promised / booked volume has been delivered, how was the visibility, can there be a third party verification, are there content frequency caps etc. And last but not least, maximizing the value of each hard-earned visit or impression, of every piece of attention that has been acquired, wll be a major technology task in order to lead an audience to a next best action and expose them to advertising (or, for that matter, convince them to pay for content).
- Data: All these four steps of the value chain are based on collecting, analyzing, processing and real-time-applying of data, and all these areas can only be optimized with heavy technology.
I do not know single “publisher stack” of technology that would facilitate all of these tasks. Maybe Arc Publishing by the Washington Post is closest, but then again, if everyone licenses their products, where do you end up?
I am deeply convinced that tech infrastructure will be the single most impactful source of competitive advantage for any of these, but especially for this third approach.
The “transformation” task that traditional publishers face when aiming for this approach is nothing less than building a full-scale digital media house from scratch. In a transitional period, this will contain content that is created by the – still: margin-leading and investments-covering – traditional media they are based on. Also, they have existing relations to advertisers, content licensers and can build on established brands, which should contribute to ease the transition and should give them a competitive edge over startups. But if you imagine a world without the “legacy”, most are not well prepared for the future with regards to technology. Transforming journalists into this new era of tech-driven media will be less hard than one might think, as their digital maturity as users increases and they will soon find that technology can massively support them in their storytelling. Transforming into a tech- and data-driven company in contrast is a Mount Everest climb (where startups greet from the top). Try and find the employees needed in a world where analysts and developers are on the better side of demand and supply. Try and convince a CEO of the necessary investments. Try and create a mindset that embraces change and sees technology as the one best weapon to win against competition. Maybe it can be a wiser choice to scale down and follow a phased approach, although counter-intuitive: become an excellent content or data company first, and then conquer the rest of the value chain. Because if there is a good news in all of this: It’s a marathon, not a sprint (as long as your cost structure allows you to run) – closing the article how it began, with another Blodget quote:
I still feel that we’re still in the early years of what digital will ultimately become. What has happened to print over the past 10 to 20 years will happen to television over the next 10 to 20. That will create a big opportunity for big digital brands to make inroads. Not to kill anybody — nobody ever gets killed in the media business, they just get niche-ified. But all this change should create opportunities for some companies to get much larger than some companies currently think.