Deconstructing the tradeoffs of a troubled media operator.
Welcome to People vs Algorithms #77.
I look for patterns in media, business and culture. My POV is informed by 30 years of leadership in media and advertising businesses.
Sometimes it’s nice to read in the browser.
More fun on this week’s podcast. Out Thursday, 8am EST.
Despite having spent many years of my life attempting to prove the contrary, my new theory is that much of digital media is just structurally imperiled. It has only sustained this long by an endless string of hacks and low cost capital. The “Great January Media Reckoning” (GJMR), now spilling into February, is more than a seasonal affair. It is the conclusion of something that was truly only ever temporal on account of the medium’s deep structural flaws.
My podcast friend, Alex Schleifer, wanted to know why things are so bad and who was to blame. Alex, bless him, tends to see media’s troubles as a fixable, if complex, product problem. For better or worse, I look at it from the perspective of the muddy, body-strewn trenches. In response, I insensitively called him “naive”, and shouldn’t have. We appreciate his “blue-flame” energy.
He’s certainly right about the problem — digital media has become a garbage heap of crappy user experience, broken monetization, gamed discovery, stale formats and click bait. Our current conundrum is the logical end point.
I was slightly annoyed by his relentless questioning and superficial “why nots”, partly because I didn't feel like rehashing the endless trade-offs facing media operators navigating a path to an uncertain future. And, partly because I didn’t have answers to what comes next.
I did jot down a quick list of who was to blame. That was the easy part. Depending on your perspective, there are plenty of targets:
Blame the platforms. Blame TikTok. Blame Zuck.
Blame Google and their stewardship of the open web.
Blame soulless content farms that work at their behest.
Blame advertisers. Or agencies. Blame the 24 year olds that personify their ineptitude.
Blame cookies. Blame banners. Just blame all of adtech and their machines that commoditized ad buying.
Blame our appetite for data. For proof.
Blame the myriad of ways you can buy attention outside of “media”.
Blame the “kids” that don’t read and don’t care about “good” content.
Blame the regulators. Especially those that put stupid opt-in buttons on every website.
Blame Amazon for indenturing publishers. While you are at it, blame retail media.
Blame the economy. Blame Biden.
Blame the red-pilled for weaponizing media, for destroying confidence in the practice of journalism, for undermining our trust in it. Blame them for caring more about their personal influence than the stability of a system.
Blame philanthropists. If they are so smart, why can’t they fix media.
Blame unions. Blame the woke mind virus. Blame DEI.
Blame Netflix. And the New York Times.
Blame private equity.
Blame The Messenger. Not the message.
Blame inept management. They deserve contempt.
Blame Anna or Roger or Brian or Ross or the Five Hour Energy Guy or Jim or Dr. Patrick Soon-Shiong or his daughter. Blame Bob. Definitely blame Shane. Don’t blame Jess. Not yet.
But, if you really want to blame anything, just blame the internet itself. It turned media upside down, shifting control from media owners to consumers, evaporating the scarcity model and its stable economic equilibrium. Its virtues, of limitless access and distribution, of content everywhere and niches super-served, have become media’s poison. The new generation of tech-powered media disruptors, its fallen soldiers.
Turn magazines and newspapers upside down and you get this fetid swamp of attention competition, legacy media structures fighting, well, everyone and everything else — selfies, enthusiasts, cunning arbitrageurs, AI, scam artists and Amazon. Turn cable upside down and you get streaming economics. Good for me and you. Good for the few that find the gravity of scale (Netflix). Bad for most others.
Media is the most fungible of industries, it's made anew each day. Two kinds of people tend to do well. The rare few with real media vision and the hackers. But as we are seeing, the hacks end. But, media always goes on.
All that said, I wanted Alex to appreciate the real executional tradeoffs that operators face.
So let’s consider some of the choices facing digital media (or any variety) in peril. As a starting point remember, today you have a business and with that you have immediate and ongoing daily obligations to 1) create a product 2) serve and preserve an audience 3) monetize that audience 4) pay your staff and shareholders. All while freeing enough resource and capital to invent and grow the next frontier.
Herein, is a list of some of your choices:
Change your cost structure.
Cost is people, mostly. Lay them off and take the charge. The union stuff will be messy but you’ve got no choice. Go deep so you don’t have to repeat it. But not too deep so as to compromise the revenue machine. Remember you are gonna need that money to invest in the next set of changes. No one gets to heaven by cutting costs.
Change who pays for your stuff.
Shift the burden from advertiser to the reader. Grow subs. Come up with innovative ways for people to pay (here’s a good interview that touches on this with WAPO Will Lewis).
For many, this may involve reconsideration of the core ad model. Subscription growth will obviously demand a product worthy of payment which usually means something unique, high quality and niche.
It will likely mean you have less resource to make the old stuff that paid the bills here-to-fore.
Ask yourself, do you have the cash, talent, scale and gravity to navigate change. Many brands don’t cut it as meaningful direct sub businesses. Ask Vogue or Paramount or Cosmo.
Everyone will look for a direct connection, via email authentication, as the first stop on this path. Social apps were here first. — we all have valuable authenticated relationships with them. There is only so much authenticated energy to go around. Platforms have a much easier time.
Change your relationships with advertisers.
In ad sales, you either sell the benefits of association and a promise of returns or you sell actual results. The former involves coercion and / or subjugation, the latter is a negotiation of the value of the tangible thing you deliver. Most rational people like performance. The catch is, it’s hard to do.
Between impressions and performance are a million ad product innovations involving data, formats, content, targeting, reassurances and guarantees. They are fine but only keep you in the same game.
The difference between selling impressions and performance is like the difference between talking about running a marathon and actually running one. It takes a lot of fortitude and training. Performance involves finding intent, qualifying it and selling it off. It changes your content. It demands new technology, data, new skills and new thinking.
All scalable advertising has performance at its core. So do this but get ready. It’s painful.
The closest most media companies get to selling performance is affiliate advertising. Affiliate is just performance by another name. You write about products, link to them and get paid when they sell. More broadly, you might become a market for buyers and sellers of products or services. This is rare and valuable position. Media with real gravity in a vertical has a good shot here.
Caveat… don’t get too dependent of content that sells stuff, or you might become something you don’t respect.
Related to the above. Stop selling impressions. Start selling stuff.
The idea of content to commerce was popular for a while. We liked the idea that a media brand had the power to drive purchase. Until that wasn’t really the case.
Selling stuff is hard. Commerce is about unit economics and the ruthless management of them. Media is marginal economics. Make once, sell as much as you can.
Commerce demands entire new competencies in product design, sourcing, retail partnerships, media buying, fulfillment, inventory management, customer service. Consumers will have to learn to trust you for something very different. Few brands / people have the true product alignment or power of persuasion.
My friend Chris at Milk Street has done this pretty well. Food52 is working on it. Epic Gardening sells nice planters. The Meat Eater sells lots of outdoor stuff. Mr Beast sells plenty of chocolate bars.
But marketplaces (selling other people’s stuff) are almost impossible in an Amazon world. Be careful.
Selling digital goods is really where you want to focus. Much easier. Your number one SKU is gonna be access to your content, your network, your world. Start here.
The far end of this is just sell your own media brand. This is licensing. Authentic Brands Group does it well. They own the Sports Illustrated brand. Check out what they do.
Change what you make.
Faced with diminishing returns on text in the late twenty teens digital media world, many turned to video for salvation. Kids like video! Advertisers do too. Again completely new skills and distribution channels.
A Netflix deal was the high water mark, only to reveal that becoming a production company for a distribution owner was wickedly competitive and low margin. Focusing on short video for YouTube and TikTok was pragmatic but hard to scale the money. At least you could own your content.
Maybe video is too hard. Audio was cool and much less cost intensive but podcasting is a boutique business for most. Vox did it pretty well.
Events seemed like a good strategy. Do that. Brands like events. Cut some heads in the content team and hire a few event people. Bustle seems to do good events. Remember it takes a few years to build a consumer paid event. Complex was one of the few that created one, ComplexCon. These are rare. Just do something for advertisers. Lexus will buy in. Invite influencers. They like parties.
Or just shift from commodity news and listicles to a content product that is more differentiated. Something voice-ier, deeper, more opinionated. This is media for God’s sake. You can evolve. Remember to get the balance between reach and focus right. But don’t worry too much, you can always lie until you get it right. Everybody lies in media.
Maybe you should make games. Or invent your own community / social platform. It would be great if the audience did some of the heavy lifting (see selling digital products above).
Careful cause it will take a real product mindset and tech capabilities. The list of successes is short.
FWIW, some media companies will benefit from technology investment, particularly when they have scale, leadership and cultural sensibility. Most will not and will instead benefit from avoiding the cost and complexity altogether. Fortunately we are now at a place when many of the components are available off the shelf. My advice if you are uncertain, put your money into your content experience and the marketing of it.
Change who makes what you sell.
The economics of social media look pretty good right now. Millions of creators, mostly unpaid. What if you could start to aggregate relevant voices inside of your brand and monetization machine. Seems sensible.
This has been tried many times in lots of variations. Success requires the delicate balance between your needs and those of your constituents. It also usually involves high risk investment in technology.
MCNs (multi channel networks) were a brief strategy to bring together YouTube creators. The strategy was briefly exciting to Disney who bought a rising MCN, Makers Studio, for some $500M in 2014. Sadly, it evaporated.
Forbes has found some success bringing thousands of enthusiast-journalists seeking its brand imprimatur under its wing. Sometimes this strategy attracts low-quality opportunists, but that can be fixed. The idea of a network of real experts connected to a brand and distribution system still feels modern.
ESPN may regret absorbing Pat McAfee’s YouTube show in a deal that gave McAfee creative control and $85M over five years. This is a bit different, but you get the idea. Connect one media vibe to another.
Net net, the umbrella strategy needs to cohere with your brand, but the biggest challenge is finding economics that work for everyone. Most creators don’t need your brand, they need your money.
Change how you create.
Again related to the above. Mostly concerns reducing costs and increasing speed. AI is particularly interesting here given its ability to make content creators more efficient, automate low value data-centric creation and personalize your experience.
To me the AI question is less of a moral quandary and a function of product quality. If it serves a consumer need, someone should do it.
This should be top of the agenda for everybody in media. Unfortunately it will not result in job growth or security. At least for a while.
The much harder question…
What does the next version look like?
A few thoughts.
If you were to believe Elon or the “All In” guys you might see a future where A) the media reporting process is completely disaggregated inside of the “commons”, B) dissected by experts and C) delivered inside of a platform like X. This seems unlikely. Many people want the trust, reassurance, reliability and convenience of a media brand. Especially in news.
Many see huge downsides in a world of massively “parallel realities” brought on by their absence.
You will notice that those who malign “mainstream media” are quick to reference it to support their talking points. Clearly it has a role to play.
AI will inevitably dent Google-sourced distribution. AI creation is already muddying up the gears of the open web, though I suspect, and hope, the open web will persist as the only remaining source of truly democratic digital distribution. Don’t abandon the web yet. We need it. It plays an important role.
Experts rise as AI automates the perfunctory roles in media.
These creators with rarified knowledge and a financial / marketing / social reason to proffer it, will shine across a constellation of touch points and will find their way to you however they can - email, social notifications, referrals and algorithms. Many will find good reason to pair up with like-minded folks inside of collectives that perform many of the functions of media brands of old, but structured to aggregate independents.
I like the innovation potential here. All of this stuff detaches from the low / mass CPM economics that forced so much of the media ecosystem to nefarious practices and bottom feeder behavior.
More and more of our information diet will be fed by informal communication circles inside of text threads, Reddit, and emergent community platforms. My podcast posse exchanges ideas and links twenty times of day inside of a dedicated chat stream. This is just media. Our media. Highly relevant. Personal and fun.
You will be surprised at the popularity of large, privileged “text group” communities inside of places like WhatsApp. This is powerful, community-based media. The elites are here.
Few will find the scale and executional sophistication to bundle mixed media content, community and interactivity in an app. This is the NYT’s singular achievement. CNN will chase it. Related, scale returns in streaming will be enormous. Only the biggest players can promote and monetize mass IP, especially in sport.
Netflix is on a path to own the pole position. The prize of rolling in interactivity (games) into this bundle merits a huge speculative P/E ratio. Interactivity is so hard and so valuable. The big get bigger.
As my friend Colleen likes to say, “Everyone wants to go to heaven but no one wants to die.” Media is deep in the hunt for a new divine equilibrium. Many will not survive this transition. Take comfort in the fact that the most curious and discriminating of media consumers are, and will be, better informed than ever. Admittedly, this is not a clean solution for everybody. We have yet to find that new magic place. It may just look like the fragmented and uncertain present with all the attendant downsides. I hope not.
When I see it more clearly, I will let you know…/ Troy
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