The Tend to Zero Risk

One of the reasons so many media companies are in trouble is the simultaneous crisis in all revenue streams.  It seems to many, that whatever strategy is deployed, the size of the potential revenue pot keeps falling. 

Back in the sixities, almost all business to business titles were paid for.  News about your industry was valuable and that value could be measured with money.  Today nobody charges for news.  In print, yields have been under pressure for some years.  Online display advertising with it’s transparent measurability has given advertisers a legitimate stick with which to beat media owners.   Where there has been success in selling online display the achieved CPM has been falling.  Too much traffic, too little of it useful or enaged, consequent poor click through rates mean that much inventory remains unsold – a growing proportion for many – and what does get sold is at rates that are falling.  Where once the choice advertisers had was limited by the number of titles in a market, today they are confused by so much choice.

We lost our way with recruitment.  Where we used to charge thousands of pounds for a page of advertising, the job board model now offers an ad £100.  In the recession prices here too are falling.

However we solve the current strategic conundrum, it seems pretty clear that unless we can push back the tide of prices tending to zero we don’t have a business.    The truth is, whilst there are things we can do to make a difference the price of a transaction in the new world is unlikely to reach the heady heights of the old world.  There are  four steps that all media companies must take:

1) Set the fixed cost base at a  level which is supportable by the new model.  This means attacking some sacred cows and stripping away layers of management costs.

2) Improve the value of your advertising proposition.  Seth Godin says,

“As long as your site is about something else and the ads are a distraction, you’ll see CPM rates drop. As soon as you (or the advertisers) figure out that creating online communities aligned with the advertising, where attendance is a choice by the consumer, then you’re creating genuine value.” 

In B2B that means making ads relevant and targeted.  Don’t give up on vertical search solutions.  Keep experimenting – there are riches ahead for the media company that gets it right.

3) Audit every activity that leaves the building and assess it for value.  Use that value audit to establish the prices that could be achieved.

4) Give up on the idea that you are going to survive by doing the stuff you used to do.  News products supported by advertising are going to be very small businesses.  Plan and implement a series of new product developments that will help you scale your business.  Buy some expertise to help you do it.

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Personalisation of Content as a Route to Revenue

Image via CrunchBase

In earlier discussions on this blog we have summarised the two big challenges facing business media in the online world as being user engagement and the development of an effective advertising model.   I recently had the pleasure of being introduced to Cognitive Match which goes some way to addressing both these issues.

Imagine that the publisher has a set of content parcels, each of which may be of interest to different parts of the community.  Let’s create a real example by pretending that we are the owners of a food and wine web site for for the catering trade.  Let’s imagine that we have written a series of wine reviews.  To keep it simple let’s assume we have written just four.  One is a review of fine champagne that sells at £50 a bottle.  The second is a good quality Merlot that sells for £25 a bottle.  The third is a dessert wine, a muscat perhaps and the fourth is a blended £5 a bottle Sauvignon.   Let us further imagine that we have cleverly sold relevant advertising against each of these wine types.

We are so excited by these wine reviews and our potential revenue (which has all been sold on a CTR basis) that we devote  a third of the site page area above the fold to it on every page of our site.  All we have to do is to decide which wine review to show at any given time to which user.   Now this where Cognitive Match gets clever.  Using some mathematics which I am not going to try to explain, the Cognitive Match engine collects annonymous informaion about each user and shows, on the fly, the content most likely to be of interest to that user.   A user looking at dessert ingredients content might be shown the Muscat, whilst someone who had looked at a job advertisement for sommelier in a Michelin star restaurant might be shown the Champagne.  As with all search solutions this is about probability mathematics.  If the probability that the content is relevant and personal to the individual user is increased the value of that engagement with the user is enhanced.

For retailers, Cognitive Match claim that the basket attrition rate will fall dramatically.  For business media companies, the ability to match content to user interests increases the chances of an ad click and is likely to encourage the user to spend some more time on the site.  It provides a key to unlocking profitable  CPA deals too.  We have all done CPA deals, but how many have exceeded our expectations?  Matching the right offer to the right user is clearly a useful approach.

Matching content to users is a famously hard trick to pull off.  Ask my team who built foundography (a vertical search engine) or anyone who has experimented with vertical semantic or intelligent search.  The Cognitive Match team appear to be close to a model which is easy to deploy for their clients.  It has an impressive academic team developing the application and an interesting pipeline of blue chip prosepective clients. I am promised a live demo in the near future.  I’ll keep you posted and let you know if it does what it says on the tin.