Where'd the Cheese Go?
How "hard distribution" advantage became soft. What to do inside modern media's relentless zero-sum game.
Welcome to People vs Algorithms #57.
I look for patterns in media, business and culture. My POV is informed by 30 years of leadership in media and advertising businesses, most recently as global President of Hearst Magazines, one of the largest publishers in the world.
Last week’s reflections on a digital media industry desperately stuck between two worlds and the resulting valuation conundrum seemed to resonate. Let’s do more of this.
Media models were in the back of my mind all week. This morning I am thinking about other things that fit together and satisfy like a fresh tomato slice on a bacon, egg, and cheese bagel. I have found the tomato part a bit controversial, even if not of huge consequence. The BEC works fine with or without. But insist on the cheese… mmm… American cheese.
On to the BEC we call digital media…
Soft vs hard distribution advantage
Perhaps we can start with the obvious recognition that SOME KIND OF SEMI-PERMANENT OR RELIABLE DISTRIBUTION is the glue that makes any media work well. Without it you are a production company and platform panhandler. Many digital media companies have been reduced to this state. It’s ok. Some protection is afforded to those with unique IP in the form of brand, talent, data, format etc., which distinguishes your process or content, something you should always aspire to have or you are begging to be marginalized. Everything ends. Without distribution leverage, everything ends faster.
“Traditional media” had distribution resilience and that was great and made for long lunches with martinis and all that stuff. Sadly… long gone. Let’s be nostalgic and call this nirvana “hard-wired distribution advantage.” It was great because with it you had God-like power to do all kinds of things including supercharge your media brand across the cultural landscape and in the brains of consumers, also enabling what I would call “soft distribution advantage,” in the form of valuable, instantly recognizable media brands, repeatable formats, and all that good stuff. Like how MTV had the spot on the TV dial and with it, rock and roll stardom, low-cost formats, a great fucking brand, and well-paid hosts… all until the internet killed the cable star.
Hard advantage died when the internet was born. Today you are fortunate to have the soft stuff.
With that as context, let’s contrast two types of modern media businesses and look at how they seek to prosper when your a soft distribution advantage is all you have to protect yourself.
Two approaches, two very different businesses
Take, for example, the Daily Wire, a highly profitable right-wing media juggernaut approaching $200M of subscription-led revenue, diversified via TV and movie production, edutainment, children's programming, and podcasting. About a million subscribers pay $8-$14 per month for a personality-driven mix of right-wing “counter-culture” point-of-view, and community. Ben Shapiro, Jordan Peterson, Dennis Prager lead a merry band of unapologetic provocateurs.
Text content is the marketing, not the media engine. Advertising is present but opportunistic. Here soft distribution equals direct subscriber relationships. This seems like a terrific future-looking model. The internet has set the stage for its expansive media footprint. The brand’s connection to a communities nuclear core provides the fuel.
The company made noise this week when its $50 million, 4-year offer to absorb the other great next-gen node on the right-wing media spectrum, Steven Crowder ended in an ugly public spat that right-wing outlets seem to revel in. The point is, some media continues to put down big-dollar talent offers even as lucrative cable infrastructure that used to have the money to pay talent, crumbles. The trick… phat soft distribution dollars paid for by a rabid base.
Let’s contrast this with a kinder, gentler category of lifestyle media, the type that used to be dominated by magazines and, to a lesser extent, cable television — nice advertising-friendly things like fashion and home and beauty and food and, well, life! Not to pick on anyone, but because it’s top of mind and the CEO (who I know quite well) thinks deeply about media futures, let’s use Bustle as an example. The announcement this week that it was shuttering Gawker, trimming staff, and reorienting the business to more effectively serve advertisers suggests a couple of things about this moment.
The soft distribution formula that served the category for the past decade or so — search and social positions and content to match — has just become too unreliable, as has the monetization formula that turned those impressions into dollars. The solution, according to Goldberg, prioritize the slightly harder and more own-able distribution substrate of email, seek refuge by providing ever more complex and differentiated services to advertisers.
The services trap
Brian Morrissey calls this space of agency-like services in media companies, the “Service Trap.” It’s not all bad… a little like finding that the oil wells you invested in don’t pump much oil. Some decide the better option is to support the other drillers around you (ie: Vox becomes an ad network or a media platform supplier). In the end you might decide it’s easier to be an attendant at the local gas station, or even better, purchase your own station franchise.
The soft distribution advantage in the Bustle example is the media brand, its aspirational connection to an audience, and the influential stars in its orbit, specifically to the extent that you can sell the benefit of these assets to an advertiser in a way that differentiates you from a run of the mill marketing services company.
One critical thing to remember here. My friend Chris Kimball at Milk Street made the money point about this after last week’s note: “I still ask the question, ‘What does a media brand offer that nobody else can?’ The answer is, I think, a special personal relationship with its customers in the context of the brand offering guidance about lifestyle/buying decisions. The problem is that the brand has to be able to sway consumer buying habits for this to work. Most brands have a hard time doing that.”
Here’s how I think about this….. start by assuming that most marketing agency solutions, be it a single shop or more likely a constellation of media and creative offerings (creative, media buying, PR, etc.), exist along a continuum, from creative development on one side to media buying on the other. These services combine to create an advertiser’s marketing strategy and execute the plan to efficiently deliver a message to a target consumer. A whole bunch of competencies work together to make this possible — research, account planning, client services, creative development, media planning and buying.
What can a media brand do that the legions of creative services cannot? Presumedly combine the ingredients from the aforementioned services with the cred of a media brand, its data and insights about an audience, nimble and inexpensive content creation, social distribution, the connection to talent, and the associative value the media brand provides. In other words, all of the things that make a media brand valuable to an audience. Once you lose that stuff, your premiums evaporate and you become just another services company.
Inevitably this forces a company like Bustle into the gray area that has long been the domain of lifestyle media — the ability to navigate the intersectional needs of the audience and the advertisers, with a dexterity where all of the ambiguities, conflicts and competencies contained therein become just a part of going to work every day. It’s alignment, but this is the case the true north is the advertiser and their needs. Be very sure of that.
However you go, it's good to have alignment. Things work much better when a single idea unifies a media org; the brand, how value is created, the audience strategy, and, vitally, expectations of the talent that makes the product.
When you don’t have alignment, you get the kind of dissonance we saw at Red Ventures this week. RV is an admirable company, one that I would characterize as a high-margin, “business-to-content” media business. Here, content creation follows a clear business objective, the primary structure of any affiliate-first media business. It’s not the case that the content is “sold” to an advertiser, influenced or compromised by their objectives. The content is made precisely to sell a product, sitting between a consumer seeking a solution through a Google query, and a merchant or service provider on the other end looking to make a deal. Ain’t no shame.
But to be clear, the name of the game is selling something and everybody understands that. Naturally, you work to serve the consumer and not misrepresent. But, I assure you, the separation of church and state is about as clean as televangelist Tammy Faye Bakker’s makeup.
The model runs counter to a “content-to-business” media structure, the classic editorial use case, in which editors are given some semblance of independence to make content and render opinions in a hope of building audience and trust with the audience, and through that bond generate revenue, be it advertising, subscription or both.
CNET, now owned by RV, is the later, most of RV’s other cash comes from the former (Bank Rate, Points Guy, CreditCards.com, Slumber Yard). Naturally, people conditioned to this model are going to be sympathetic to bending the rules to accomplish a business objective. Misalignment inside the house. Misalignment with consumers that expect a different kind of editorial independence outside of affiliate. Worlds collide.
Bustle too shows challenges of alignment. Gawker’s brand of offbeat, irreverent, and confrontational reporting doesn’t fit particularly well inside of a soft and cuddly, advertising-anchored proposition that propels the rest of the Bustle portfolio (you may want to check out an old fav on majors and minors that talks about this). A mid-sized media company can only do so many things at once. One side brings them up (Bustle, Nylon, Zoe Report, W), the other tears them down. This may be about divergent cultural and editorial expectations inside of one company, but the bigger issue is the business model. Ultimately the Gawker side has to be paid by consumers, like the Daily Wire. The other is all-ads-all-the-time. Faced with a tougher economic environment, the company had to make a choice.
In the end, the distribution advantage of a modern media brand is thin and fleeting. Ultimately distribution (or attention) is a zero-sum game. And on the internet, you are fighting against everyone in the world who lays some small claim to it. The preferred position is obviously to have this locked in a subscription relationship. These are almost always anchored in personality, IP, and deep vertical relevancy. Platforms are very different beasts, the rare successes lock in positions with enduring utility and the network effects that they spawn.
Barring all of that, you take what you can get by offering consumers access to free content, live within the constraints of other people's platforms and work very hard to have advertisers benefit from those relationships.
You may not have struck media gold, but at least you have good parties to go to.
Have a great weekend…/ Troy
The state of optimism
The year’s bleakest month offers a good moment to reflect on optimism (BTW, yesterday was surely one of the coldest, most unpleasant days ever in NYC). New podcast, same three dudes. Listen here.
Where the cheese?
Let’s finish with media’s Q1 theme song.