Month: October 2011

The time has passed for revenue-enhancing digital products

A small B2B media company contacted me to talk about enhancing revenue by adding some new digital products to its portfolio. The company already offers a digital edition, business directory, email newsletters, web-seminars and a number of other digital B2B staples. Non-monetized but just as important, it has a reasonable Twitter following, a large group on LinkedIn and a Facebook page that is basically just a placeholder.

I’m sure there are more products the company could implement. It doesn’t have any mobile offerings to speak of, and its website represents first-generation internet thinking – a source of information but not of engagement and interaction. With a little bit of study and a few billable hours I could have made some recommendations.

Here’s what I told them instead: The opportunity to increase revenue by adding digital products has largely passed, and simply adding new products will probably hurt the business by:

  • spreading the editorial staff even thinner;
  • raising digital development costs;
  • over-running the sales force’s competence;
  • stressing customers, who don’t have more money to spend on new products and will be forced to decide which products to support and which to ignore.

In essence, trying to invigorate the company by adding more digital products is just going to lead to more fatigue for everyone – and at best provide only incremental revenue gains.

The real opportunity – and the only real option – is to use digital tools to increase the organization’s footprint and prominence.

Here’s the argument:

In B2B media, ad revenue and unit yields have been stagnant for a decade, and there is no reason to think that’s going to change for the better. As hard costs continue to rise, print circulations have been on a forced retreat. Publications that have maintained controlled circulation levels are doing so by cutting in other areas or – more likely – by winning market share and profits from other, lesser competitors. Neither is sustainable.

Given that it’s not economical to add print readers, the real value of a digital strategy is to present the brand to new people – either by expanding outside the magazine’s traditional market (taking a step upstream, toward the advertisers’ suppliers, for example) or its traditional geography (i.e. international).

That doesn’t mean simply launching a digital or iPad edition. These are passive – cool media in Marshall McLuhan’s lexicon.

But extended audiences demand hot media. They need to be actively engaged; they need learn for themselves how a media brand is valuable to them. Engagement at that level means creating a different kind of relationship based on interaction with community, expansiveness of content, and flexibility in the way content is applied. These are the strengths of digital tools – when those tools are skillfully and strategically applied.

In the real world, it probably means a pretty significant website overhaul and, more significantly, redeployment of staff and restructuring of sales compensation.

Editors have to stop thinking in terms transferring knowledge from experts to the readers – instead becoming moment-to-moment conduits for peer-to-peer communication. Less like network news anchors and more like a highly specialized cruise directors.

Sales strategy has to evolve too. It’s less about products and more about platform – how the media brand provides a fluid and organic conduit between the advertiser and the market.

These are not small changes to make, and this is not a short-term project. But it represents the difference between relevance, growth and prosperity on one hand; and retreat into a niche position or extinction on the other.

Don’t write off Murdoch’s paid iPad newspaper quite yet

Eight months after News Corp. launched the iPad only newspaper The Daily, some observers are claiming that – with only 80,000 paid subscribers – it isn’t doing very well. There are another 40,000 people currently on a free trial, according to reports.

At the time of its launch, News Corp. CEO Rupert Murdoch – who may be the world’s most aggressive evangelist for the concept of people actually paying for digital content – said he would consider The Daily to be successful when it has 500,000 subscribers.

Assuming The Daily maintains its average of 10,000 new subscribers per month, that puts it at its defined level of success in another 42 months – less than five years from startup.

For a big-deal project that utilizes new technology and depends on changing some of the most basic behaviors of its intended audience, that doesn’t sound like a bad ramp-up to me.

USA Today took far longer to become successful. Facebook became bigger faster, but it has never charged users and it took at least as long for the company to deploy a meaningful business model. Netflix expected to LOSE nearly 600,000 subscribers in 2011’s Q3 – simply because it removed DVD service as a cheap add-on for its paid digital (streamed) content. Compared to these, The Daily appears to be moving toward its goals very nicely.

The Daily also hasn’t expanded beyond the iPad platform, which has limited potential subscribers. If/when it’s made available for Droid devices and the new generation of e-readers, I expect that paid subscriptions will begin to increase beyond an average of 10,000 per month. By the time it has 250,000 or so subscribers, enough people will hear about The Daily in the course of their ordinary comings and goings that it will also pass a threshold of importance for a whole new audience of people who, at this moment, still refuse to spend money on a digital subscription.

Over time, the notion of paying for digital content will become normal; at that point, many of the media that are waiting for The Daily to fail will begin to benefit from the expensive groundwork that Murdoch’s company has chosen to undertake. They too will begin charging for their content; they too will struggle until reaching a level of critical mass. But they’ll have the luxury of doing that work without the scrutiny that The Daily is receiving now.

I’m saying all this without ever having read The Daily, as I’m not an iPad user. Perhaps it’s not a great product. Perhaps even people within News Corp. are disappointed that The Daily has just 80,000 paid subscriptions.

But I’ve learned over time that the toughest sell is the one that requires prospective buyers to change their behavior before spending money. At that, it sounds to me like The Daily is already successful.