Bad Results Must Lead to New Future

There is a raft of results announcements due, with Reed Elsevier already reported and announcing  a £100m+ restruture of reed Business Information, Centaur issuing their first ever profit warning on the back of a heavy fall in recruitment advertising so none of it is going to make pretty reading.

In The Times at the weekend an article pushes the view that business media companies are still overvalued despite the steep decline in share prices (Reed Elsevier being a notably robust exception).   Meanwhile I was wondering what a turnround strategy might look like based on the arguments we have already been dicussing in this blog.  Every traditional media company should have a clear strategy for each of the following:

1) Build low cost magazines with content explicit for the printed format.

2) Operate a web first news strategy for online and develop tools widgets and features that create measurable reader engagement.

3) Identify the key decisions made by readers and build data and content that is  rich, complex and important to those decisions.

4) Focus on building lead generation solutions for advertisers.

5) Develop ultra niche experiences for advertisers and readers in both read media and face to face media.

6) Kill off or sell failing assets to enable managements to take an axe to overheads.

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The Arrogance of Google

Google’s arrogance sometimes beggars belief.  According to an article on Press Gazettes site, the Google God in Britain, called Brittin told the Telegraph that,

“In the last three months of last year we gave away $1.4bn (£970m) of revenue to publishing partners for adverts on their sites.”  Gave away!  On whose site did you place the ads?  Who paid for and wrote the content, paid for the hosting, built the audience and traffic?

How much of the revenue did Google keep?  Is Google keeping a bigger or smaller proportion of the revenue than it did two years ago? Explain why when I have tripled my traffic my Google revenue has halved?

Google is a vital cog in the web machine (too vital some might argue) but if Google really believes that it is doing us a favour by “giving away” what it appears to see as a proportion of its own revenue, then it has lost the plot.  I use Google as a sales representative.  They work for me, not the other way around.  And I make more money per thousand from almost everyone else.

Google should be thanking us for building their revenues on the back of our audiences and letting them keep as much of the revenue as they like -usually without telling us – their media partners – what the deal is.

Deals and Outlook

The busy folk at Fusion produce a regular and interesting summary newsletter of deals in the media industry here.  Expomedia, the torubled international trade show organiser as gone into administration and then rescued by its directors, ITE and Tarsus both express caution about their 2009 outlook.  The newsletter also notes the NExus sale of its remaining magazines to Metropolis

The Value of Information Model

Lets Try a poll

The Right Answer to the Wrong Question is Still the Wrong Answer

If you ask the right questions there is chance you will find the right answers. Is it possible that in business media we are asking the wrong questions?  Many business media companies are asking themselves how they can manage the migration from print to online and how they can maximise the cash generated from the legacy business in the meantime.  The right answer to the wrong question won’t build the new model we are striving for and my contention is that this is the wrong question.

The problem with the question as phrased, is that it leads managers to replicate the offline model in the online world.   Content sourcing and selection is done in the same way as for magazines.  We try to sell display advertising with display advertising arguments and metrics.  In the legacy business we manage our magazines as cash cows, driving out costs but plugging away with the same failing model.

There is an old cliche that if you are hitting your head against a wall and are discovering that your head is hurting, the best answer is to stop hitting your head against the wall.

Let’s use that analogy as as starting point to rephrase the question.  Let’s begin by thinking about our aims.  We want to build a new model for offline publising that will deliver sustained growh over the long term.  In addtion we want to make new profits by using the distribution medium of the Internet.  If these are our aims then the question we have to answer is different.  What does a successful business magazine look like in a world where news and comment is consumed via a screen?  What service can we provide online that will lock in targetted groups of decision makers and how can we help suppliers convey their marketing messages to those prospects in a way which leads our customers to increased sales?

Now that sounds like a more interesting way of thinking about the problem.  Let’s think about the magzine question first.  What do we know?  We know that readership has fallen over time.  We know that much of the news we publish in our magazines is out of date before it reaches the reader.  We know that classified and recruitment advertising is being eroded by job boards and other online solutions.  We know that declining readership means declining reponse and lower  advertising yields.   We know that as we cut costs our competence to write credibly about our markets is being undermined.

What do we know about online publishing for b2b communities?  We know that building traffic is possible.  We have discovered that our target readers are butterflys using search engines seek out nuggets of information.  We know that sophisticated Internet users are as likely to read our content in RSS feed as they are to read it in our livery.  We know that when readers come to our sites they will often consume only a few pages. Two or three is not unusual before they vanish off to some other information source.  We know that b2b advertisers don’t understand how to use our audience to make money and the devices we give them often offer disappointing returns with low CTR.

Ok.  So that is not comprehensive and isn’t even universally 100% true, but wouldn’t you agree that as a broad description of our world it rings some bells?  So lets try and tackle the issues at the heart of this argument.  In magazine publishing we need to produce titles which are worth reading even when news is available on the net.  We need to construct the content on a lower cost base than before.   We need to do this without thinking about migration, but rather do it for its own sake.  If we try and migrate then we risk being out thought by nimbler  online only providers.  There are many ways we could do this and there is not a single right answer to content construction, but this is one approach that might be interesting.

1) Abandon the idea of writing breaking news or seeking scoops.  Instead act as a summariser and aggregator of all that has happened this week in your niche.  Think “The Week”. For those whose RSS feeders are full, or who worry they might have missed a key story  or event, what better than to have an experet (a b2B editor) sift, summarise and edit the most important stuff of the week and put it in one place.

2) Tear up your exisiting features plan.  You almost certainly can’t afford to produce it to the standard you would like.  Decide to publish fewer features but make them longer.  Long articles are not easy to present well on the web.  (One comment left on this site noted how much easier to read my rather long winded writing style would be  if it was properly laid out in a magzine) and are better presented on a dead tree.

3) Source your features from new sources.  Don’t depend on journalists.  Tragically in the new era model you can’t afford to hire many of them anyway.  Instead recuit a cadre of expert witnesses in your niche and get them to write about the key flexion points in your niche.  The test of a good feature in the new model is how useful is it to the target niche in helping them make better decisions.

4) Think about all the things you can do in a magazine that you can’t do on the web and then do those.  Examples? You have time, so write longer.  Paper is cheap and distribution costs are not weight driven so make it look beautiful.  If the web is about instant access to every document on earth, read ephemerally,  make the magazine about slow considered, thoughtful and essential matters that will be read repeatedly.  If you want someone to read a magzine it has to be essential.  Examine every article and really ask yourself, if I didn’t publish this, would it matter?  (If you want help with this do call me).  Write about what’s on the web. Provide lists of sources of further reading.  Look at experimenting with QR codes, run series of articles which mean that once you have read the first you will want to read the next (Thackray’s glib sayng of the day, “the purpose of this edition of the magazine is to get people to read the next edition.”)

5) Think about the ultra niche concept.  Writing an article about Gordon Ramsay is entirely different if the audience is hotel General Managers or Chefs.  The best magazines, we used to say, had the readers name on them, (The Grocer, Farmers Weekly, Fleet Car Buyer, Hairdressers Journal, Personnel Management).  Think the same way today, but define the grouping more narrowly.  By all means have more than one grouping.

5) Never, ever re write a press release and publish it as a story.

So much for magazines.  There is more but the answer will be different for each magazine and is a longer project than I can do justice to in a post.  What do you about circualtion policy? How do you re engage the enthusasm of advertisers and will it make money are all important lines of enquiry.

In the next post, we will have a look at answering the second part of the question.

What service can we provide online that will lock in targetted groups of decision makers and how can we help suppliers convey their marketing messages to those prospects in a way which leads our customers to increased sales?

As little primer for that discussion if we know a little more about what a feature in magazine is, what is a feature online?  An interesting perspective on this from an RBI inmate at his blog here .  Tip of the hat to Adam Tinworth who re tweeted this and brought it to my attention.

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Net Revenues Too Small to Support Newsrooms

Caroline Little, the head honcho for GMG in the United States said this in an interview with the Australian media,
“internet advertising revenues were unlikely ever to grow large enough to support the current print media business model. She said newspapers would need to develop new revenue streams tailored for niche audiences to prosper. “

What is true for newspapers is true for business media.

Cultivating Reader Engagement

In the last few days we have looked at some of the key issues facing b2b journalism and b2b sales.  We also looked at the subject of pricing.  There are lots of aspects to all these issues which will be themes for future posts.  This post is a discussion about one element of business media in our new era.  It is the concept of reader engagement.

Magazine publishers worry about this only rarely.  I remember being told that sign of a magazine that was really engaged with its readers was the size of its mailbag and the quality of its letters page.  I think with the hindsight that all this was a sign of was a large mailbag and a good letters page.

Many magazines struggle with letters page.  I remember one editor who wrote letters to himself from fictitious readers in the forlorn belief that the made up letters would spawn some real ones.  The reality was that for most magazines the concept of being a communications medium meant treating readers as communicants.  We wrote, we sent it to readers and then we wrote some more.

Making the transition from thinking of readers as communicants to thinking of them as equal partners in a conversation is a difficult cultural hurdle for most traditionally trained media execs.  Perhaps one of the reasons traditional media companies have struggled with the digital challenge is that it is often led by traditional media execs.  There have been some notable converts (John Welsh at UBM and Jim Muttram at RBI being two of several I could mention) but most, at least most that I meet, just don’t get it.

Succeeding in the new era will involve making this cultural leap.  Success in cultivating reader engagement will enhance the value of those readers to advertisers and increase the probability that you can monetise the relationship through information sales, tempting them to events, even absorbing advertising.

On our www.worldtravelguide.net site, where we have just enjoyed our highest traffic month ever with more than 4m page views, we have just launched our first sign up newsletter.  It is the beginning of a long journey towards reader engagement.  Our site began as an online iteration of an offline directory that was once the bible of the travel agent community.  Now its audience is almost entirely consumer.  Although the site has become one of the best trafficked travel information sits in the UK and is growing revenue and traffic at a good rate and is pretty profitable, we know we are only scratching the surface of what can be achieved with reader engagement.

Global Warming and A New Home for Business Media

I have been thinking for some time about the concept of the ultra niche publisher as a route to building a new model for business media.  I am not claiming an original thought here.  Indeed, just a couple of days ago John Welsh was referencing something similar as he explored the counter intuitive nature of web publishing.

The toughest job for the traditional business media sector is stop thinking about the traditional business media sector.  There was a cracking article in the Sunday Times magazine yesterday looking at the future of the Maldives.  Their new president is rightly worried about global warming.  Even a small increase in sea levels will see his nation of atolls under water.  His plan? Well he has concluded that forces of nature cannot be beaten and that he must save money to buy his citizens a new plot of land somewhere safe.  (the efficacy of  his plan only slightly spoilt by the paltry $2m a year his nation can save).  He could of course just plead for help, or build houses on longer stilts, or just hope that global warming will stop.  As unpalatable as it is, he has concluded that he needs a new home for his people.

That is where we have got to with business media.  The systemic change in media consumption is undeniable.  The delcline of our old model is palpable and wishing it was not so will not solve the problem.  We tried building houses on taller stillts (think web 1.0 – doing what we did before but doing it online). Now, we have for the most part decided to go to a new home.  A home of multimedia solutions with a web centre.  We embraced the idea of Web 2.0 and although most b2b web sites are not more than Web 1.0, we look forward to web 3.0 even though we don’t know what that means either.  So far so Maldives.  Being rather attached to our old home though, we don’t really want to let it go, so for the most part have underinvested and innovated too little.

For the citizens of the Maldives their new home will be stranger, less beautiful, less isolated, harder to live in than their Indian Ocean idyll. So too for business media companies.  Hoping that even in our new home, that all things will be the same is foolish.

What has this somewhat over blown analogy to do with “ultra niche”.  Well, I want to argue that the old home model of taking a business vertical, catering, aviation, agriculture, medicine, law, marketing, power generation, transport  or whatever and then building a portal brand to serve its needs is a misplaced idea.  It worked for magazine publishing because information choices for readers were few, distribution and targeting was constrained by the print and postage process, and the advertisers were grateful for what they received.

The modern business publisher must think differently.  Just as John argues on his excellent blog,

“the more you focus on a niche than a whole community, the quicker your traffic will rise”.

Now that’s what I call an insight.  To achieve online standout you need to be more focussed on the precise information needs of your audience than ever before.  A vague generic portal for people in the hospitality indistry, or the grocery trade or anything else may make a useful outlet for the kind of content we have hitherto produced in magazines.  It might even attract traffic but as most of us have discovered it doesn’t make a business model.

To be the centre of a community, to get the right people engaged in what John Battelle calls “conversational marketing” requires a different approach.  So two thoughts on what you might do:

1) Identify an interest group who would genuinely value being connected with one another.  (so business media geeks is good, all media execs is bad).

2) Treat your community like guests at party. Invite them to come, introduce them to other folk, tell them interesting things, ask them about themselves.  In practice that means doing all the things you have resisted in the past. It means learning about social networking/professional networking on the web (a theme I will come back to), experimenting with twitter and facebook and linkedin.  It means allowing expert witnesses access to your audience and to write for you even when, perhaps especially when, they are not journalists.  It means pointing your guests to content that might not be yours, just because it is useful even when it is produced by one of your growing list of information competitors. (This is a whole topic of its own – the concept of vertical search and ediscovery where I have some scar tissue which I will tell you about on another occasion).  The new publishing model is about the interchange of experiences not the preaching of information.

If you think you know what you are doing, then you are missing something. New tools are being developed all the time.  Take a look at Amazee as an example.  Its a project collaboration tool.  It is definitely part of business media and it is targeted at ultra niche markets.  It most certainly is not news and features on the web (says Neil as he signs off another feature on the Web!).

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Its February and Time to Think About the Price of Ads and Everything Else

A thought on the subject of pricing.  When I first started in the business I joined from being a professional campaign fundraiser  for a national charity.  Everything was accountable.  When I submitted my mileage claim someone checked to see if I had used the shortest route.  I had targets for everything; number of appointments made,  conversion of appointments to fundraising visits, number of people attending a fundraising talk, the number of people participating in the fundraising event I was running, the money raised per head spoken to etc.  If I missed any one of the targets my pay was reduced.

Imagine my shock when I disovered that media sales people can set any price they like.  Within days of starting in media I was discounting 60% off the rate card; thousands of pounds given away and n0body seemed to mind at all.

There are only three methods of setting a price.  The first, and the most common in media, is to make it up.  The second is to take a cost+ markup approach.  The third is to price things on the basis of their value to the customer.  Only the third way will maximise profit.

I can also tell you that discounting in a downturn is almost certain to lead to ruin.  I am indebted to the price guru John Winkler for this example.  Imagine you are running a media business with a 10% margin.  The turnover is 100 and the profit is therefore 10.  Let’s pretend that 60% of yor costs are fixed (people, offices, finance department and so on) and 40% of your costs are variable.  Let us now imagine a downturn.  In media they are rarely modest.  Hands up all those who think a 10% decline would not be overly pessimistic.  Yes I thought so!

As this downturn bites the sales director comes to see you and says, “Hey boss, its getting really rough out there.  Everyone is cutting their budgets and our rival is cutting prices and winning market share.  I know you don’t like it, but you have to let me cut our prices a bit otherwise we are going to get crucified on market share.”  You think about it for a while and reluctantly agree to allow the sales director to soften his yield by a modest 5%.

What happens?  Well, the market fall wipes 10 from your revenue, leaving you with 90. Your fixed costs stay the same and your variable costs drop by 10%.  So total revenue is now 90 and costs are 60+(30-10%)=87 leaving you with a profit of 90-87=3.   Now watch your sales director lop five percent off the price.  He is doing this, remember to hang on to his market share.  So lets assume the strategy works and sales volumes stay the same.  Revenue will fall from 90 to 85.5.  Fixed and variable costs stay the same so profit is now (Revenue 85.5)- (costs 87)= -1.5!

So in one small pricing decision you have turned a profitable business with a 10% margin in a modest downturn into one where you are losing money. And that’s the effect when the strategy works!

This is not of course unique to media.  Its just Grade 1 maths.  However what it shows is that if your strategy for dealing with the downturn is to prop up your business with discounting then it is almost certainly doomed to failure.  There are a couple of strategic circumstances when this isn’t the case, but they are rare and not likely to be relevant to our current malaise.

Well that’s all well and good, I hear you cry, but you can’t seriously be suggesting that in a recession I should increase my rate card are you?  My answer is, not necessarily. And it isn’t as simple as that.  What if I could show you how to get an increase in yield without increasing any prices at all?  That would be cool wouldn’t it?  It can be done with magazines, events, online, information sales.

To succeed in doing this requires some effort and some work.  Firstly there is relearning to be done about how pricing works in driving profit.  Secondly rafts of people in your organisation need to be involved in the plan because the answer is not one panacea but a plethora of intitiatives which can change your business for ever.

I can’t do justice to this theme in a blog post but I will leave this post with two of many experiments you could try to get you thinking.  Pull off the accounting system all sales orders for the last week.  Look at how many of those orders have final agreed prices that end in a zero, or two zeros or really scary, three zeros. What does this tell you?  If you haven’t got many that end in zeros do the maths another way.  Look at how many agreed prices are round percentage discounts from the rate card price (i.e. 20%, 50%, 60%.) .

I can still remember that back in 1983 the price of a 1/4 page in Computer weekly was £1470 and that a 60% discount left us with a net price of £588.  We did it so often and habitually I still remember the numbers. I promise you I didn’t have to look it up or work it out.  What could you do about all this?

Try this second piece of investigation.  This works for mags and online.  Take a look at your forward advertising orders for February.  Calculate the current page yield for February if it’s a magazine or the agreed CPM if it’s online. Now compare that number to your budget.  Are you surprised by how much higher it is than budget? Today is the second of the month, so we have lots of time.  Are you happy that your sales teams, or you if you are a sales person, are going to spend the rest of the month destroying the profitability of the business so you can get down to your budget yield? What could you do about this?

Low yields are institutionalised in  the budget process.  When we write the budget we too often take the average yield for last year (which is not high enough) and add 3% to it (or some such number).  Sales people will exceed or miss almost any target you give them, but they somehow always come close to hitting the yield target.  Why?  Because all they have to do is discount to get there.

I am not pretending that tackling pricing is an easy fix. It involves a lot of work but the impact is huge.  Without boring you with the maths, and again I am indebted to John Winkler for this gloriously simple observation (if you are feeling keen you can try and prove it for yourself) would you be surprised to learn that in a business with a 10% margin if you cut your costs by 1%, improve your sales productivity by 1% and increase your yield by 1% your profits would grow by 25%?  Oh and the biggest effect is from price and yield.

One other job for the day.  Go and find the person responsible for event sponsorship sales and ask him or her for the price of the most expensive sponsorship they sell.  I will bet you a small brown beer that the price will end in at least two zeros.  I will bet you another brown beer that when you ask them why the price is what it is the answer will not be based anything rational.

Enjoy the snow.  It’s free.