As it did for many folks, 2020 brought unexpected change into my life. I will spare you the details of my personal journey but I did think it could be a good time to start sharing observations about media and other stuff that catches my attention. There's so much to process. And, I need to write. I am going to try to spit out one note each week. Hopefully you will find it worth your time.
My favorite starting point when looking at media is the lens of distribution. It shapes everything. Simply put, distribution is the way an idea or product finds its way to it's audience or customer. Lots of things amount to distribution - in the old days it was newspaper subscribers, a place on the TV dial, a cable wire into your home, a physical store. Intellectual property is another form of distribution as it amounts to a shortcut to attention. Of course the internet and social media changed all the rules here. And we are feeling the shift everyday, the latest Facebook whistleblower scandal an example of how we are scrambling to pinpoint a culprit and find a fix. More on this in a sec.
The great inversion
The internet democratized content distribution, upsetting a long standing equilibrium where the diffusion of ideas and information was controlled by a few and amplified through a small number of tightly controlled outlets. In this model media was "professionalized" which really meant it carried social responsibility and journalistic purpose, the spectrum of reporting and opinion was constrained and fact-checked.
Now anyone can publish, the gatekeepers have changed. Our new navigational mechanism is largely "on demand". The audience cherrypicks from an endless feed of stories shaped by people in their network. What shows up in that feed is governed by a set of rules because there's a vast amount of content to choose from now that everybody has the mic. We call these rules The Algorithm. Media people are obsessed with The Algorithm because it is the gatekeeper. Everybody feeding the feed wants to know the secrets of The Algorithm. Governments want those secrets too.
All distribution outlets have their own nuances driven by the creation and consumption model and ensuing human engagement behaviors. If you want to get your ideas to people, or succeed as a media maker, you need to understand each environment intimately and shape what you make accordingly.
People ask questions on Google. "How do I make a dirty martini?", "What is the best electric car?", "Should I get vaccinated?". Google prioritizes links that answer these questions against a set of well developed rules. Those that rank typically do better serving the user. This too is The Algorithm. Hewing to the Google machine is called Search Engine Optimization (SEO). This distribution model shapes the content strategy of virtually all media outlets and steers more than 50% of traffic to publisher sites. Google has kneecapped plenty of companies by changing the rules of how links are ordered or opportunistically absorbing their answers into the search results (movie listings, weather, flight information, shopping skus are a few examples). While there has been a lot of hand wringing on account of Google's hegemonic position here and lack of transparency, this has been managed with far less drama than the current Facebook crisis. The reason seems to be that helping the audience make a good martini is less disruptive than QAnon.
Google is very different from Facebook and Instagram. The latter began as publishing and communication platforms, feeding very different human needs in personal expression and connection rather than information retrieval, becoming important extensions of our physical identities. As they grew, media companies recognized their power as distribution platforms and they, in turn, evolved into important media outlets. Two things define content success for media here. One is its ability to pull attention from the feed, related is an ability to reinforce connection and identity. With social media, content and communication collapse. Media does well when it is personal, opinionated, unpolished and real, often sensational and importantly, the stuff we are talking about right now. And when what gets fed into the system is totally democratic and largely un-policed, well, we've seen what happens. It's tribal.
This is a model that inverts the traditional expert-led system. The people pick what's important and The Algorithm serves the people. Moreover, now the feedback loop is instantaneous. Distribution velocity follows the most base aspects of human behavior and the machine plays along. Shit gets Roman. When Facebook or Twitter intervenes in this process it gets very complex because platforms are meant to be neutral. Editorializing The Algorithm becomes a question of first amendment rights. This makes Section 230 the most complex and consequential legislation of our time. The Facebook noise is deafening right now. I liked the point made by Dylan Byers at Puck, "Facebook Faces the Media's Existential Crisis".
Perhaps this interminable cycle, where Facebook is repeatedly said to be facing an “existential crisis” is not only apocryphal but rather evidence of an existential crisis faced by the media itself—the crisis of cable news outlets and digital publications that traffic in drama and outrage to draw ratings and generate clicks, that prefer their reporter-pundits say something incendiary rather than informative. Ironically, it’s the same behavior that many say exists on Facebook.
Again, every environment changes the shape of content. These nuances are played out across all modern distribution platforms, each with its own rules - Snapchat, Pinterest, YouTube, Reddit, Discord, email, texting. How to master each is the subject of endless conversation among the media, activists and agitators. (Good related reading here from The Atlantic: "It’s Not Misinformation. It’s Amplified Propaganda", "The Supply of Disinformation Will Soon Be Infinite")
Admittedly this is just a restatement of our favorite McLuhanism, "The medium is the message" suggesting that a distribution channel is more important than the content it carries. I would modify it slightly to "The medium and monetization are the message".
Affiliate’s first big deal
Last week, digital media upstart DotDash led a successful bid to take over the nation's largest magazine publisher, Meredith. The move can be seen clearly through our distribution lens. DotDash was born from the ashes of About.com, a company whose core asset was millions of pages indexed on Google. Neil Vogel, DotDash's shrewd CEO and his talented team successfully turned this starting point into branded lifestyle verticals - modern versions of magazine media with the key difference that they are perfectly tuned for the Google spigot. Good move. An important development in the advertising ecosystem makes this an even better move.
Affiliate advertising has emerged as the first truly native digital text-based monetization model. Affiliate needs two things to work. First, the content needs to be positioned to address the problem the user is searching to solve. It has to carry intent. Second, the content (and brand) has to be helpful enough to inspire confidence and make a commercial decision easier to make. In short, the affiliate marketplace connects intent-based service content (Note: this is really not “news”. This brand of service content has always connected consumers to consumption) to products and ultimately delivers the first real performance ad solution for publishers.
Now the circle is complete. DotDash can merge a reliable distribution model and a consumer friendly money maker in affiliate fees. Importantly, performance advertising like this always has a buyer. Retailers are eager to pay for transactions. This is a highly liquid market.
Which means the financial math is good. Adding affiliate to existing display advertising mechanisms adds 20-50% in revenue per page and vital intent based data signal in terms of who buys what. These media businesses get much more profitable. Investors like it and paths open to bold acquisitive moves. This is where Meredith comes in.
While Meredith CEO Tom Hardy has done an admirable job of centering publishing on a down the middle female customer and adding material digital revenue, they didn't quite run fast enough and the Time Inc acquisition was a bear. DotDash and IAC see solid synergies in extracting affiliate value from the Meredith portfolio and, importantly, growing unmatched scale positions in food, home and health. The medium and monetization are the message. DotDash Meredith is born.
The commerce connection
The seminal moment in all of this change was probably the introduction of Amazon Prime, perhaps the most important product development of the last 50 years. Prime eviscerated friction in e-commerce and ultimately made the development of the affiliate ecosystem profitable for content creators. This single innovation dramatically changed the way publishers invest in content that moves product.
All of this positions media ever closer to commerce, rewriting the rules of how stuff is sold. Here too we see profound effects of distribution shifts. The internet has unlimited surface area and physical scarcity no longer insulates a retail business. Online, distribution really equals attention. As such we see a convergence of media and commerce. Product merchandising needs narrative and point-of-view. In fact, the best products carry stories as part of their DNA. And, as outlined above, content is a natural starting point for commercial behavior.
I spend a lot of time in this convergence space and a couple of my favorite examples here are Goop, Food52, Milk Street and Hodinkee. All of these are executing a new art that combines media muscle and merchandising in new ways. More on this in upcoming notes.
So where does this leave us. A few conclusions. Shifts in media distribution are changing society. I, like many, am concerned about the consequences. Our dialog was more civil and the country was easier to govern in before times. We will look back at the era of mass media nostalgically for sure. It feels like a fork in the road, either we find a set of rules to better govern this decentralized system or we head down a path that looks increasingly authoritarian, much like we are seeing in China.
Lastly, a few related shifts that I am watching.
The blockchain is the ultimate decentralizing force and adds additional complexity to everything I've commented on above. It will make its way into all aspects of media - rights and identity management, media gamification via NFTs', DAO (Decentralized Autonomous Organization) like structures centered on talent, and adtech.
We are seeing lots of new innovation in adtech as affiliate becomes a more central part of the digital advertising ecosystem. The SKU is the new ad unit, "intent" the new gold.
Ecommerce companies will struggle with the cost of customer acquisition without the persistence of physical location. Google plus content will be a major preoccupation but I suspect we will see a lot of innovation in areas of membership, club buying, loyalty structures. Ultimately we will see a big wave of consolidation.
Thanks for reading. Much love.../ Troy