Category — Online Media Basic Concepts

Changing contents formats and structure in order to create new and more “sellable” products is a possibility for incremental revenue generation we should follow up closely. Digital Newsbook Publishing Project is an attempt to standarize a format so that dynamic contents from newspapers can be brought into more “static” devices like e-readers. That means, trying to adapt contents to an additional user experience taking into account current multiplatform realities. This way of distributing contents, even when it could theoretically cannibalize part of our business is basically an incremental channel. It is similar to creating podcasts from texts.

There is a value creation adapting contents to different usages and platforms, this is widely known. Opening up to allow others to use contents to find new ways of selling them, for the moment, is the right thing to do to encourage research on contents monetization before doing things in-house. Allowing third parties to innovate with our contents is a way of fostering research in our business, and doing it together with our competitors’ just underline that coopetition and media convergence that we have repeatedly outlined. 

Getting more juice from our created contents is the only way of capitalizing (and demonstrating) our higher quality contents.

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By the way, after stop posting any original contents, I am back. I have been preparing my GMAT (I got 660 in my first attempt) and my TOEFL (still waiting for results).

When we talk about online content businesses, we rarely see metrics combining our costs and revenues just in terms of audience. We have ROI as a general metric for measuring a total investment cost against revenues.

Recently, I am hearing more people talking on  ROA: return on audience.  This concept is not yet in wikipedia, and it still has only 17 entries in google, although it was probably an old concept for finance departments or “traditional” media.

Real Media says: “We can segment audiences so that they deliver the most value to you, and give you a return on audience that will make your CFO smile.” You can also find Microsoft using this concept in “Five Ways Publishers Are Increasing Their ROA (Return on Audience)”.

Many may think that ROA adds no value to ROI, but I think otherwise. If we consider ROA, return on audience, as revenues per investment to build an audience (as suggested in this comment) then we get to a complementary metric that considers audience costs as well as revenues. A digital media may not get ROI right now, but having positive ROA shows a healthy future. Even ROA  is just an application of ROI, it is an interesting metric for measuring online media sustainability. We will probably read an increasing number of analysis based in ROA.

The Nieman Journalism Lab found a very interesting internal document from The New York Times that can give us a very quick and complete idea on all issues ar0und their worries and work progress in business sustainability. (I would love to access that document monthly ).

I would firstly like to point out a sentence that is really significant of a view on media sustainability,  and it is just the fact to assume our two sided business:

The end result must be that we serve the high expectations of our customers, both readers and advertisers.

It is a simple but clear statement and reminds us who pays our salaries, that’s all.

The document reviews:

- How they did  capitalized american elections. This part is just an ABC on how they: sold more printed newspaper, increased their online audience, spread their social networking, and empowered their heavier users by an event.

- What is going on with top advertisers

- The New York Times Store will sell grow around 30% to 40% YoY based on: memorabilia, fine arts, and also Obama merchandise. It is very helpful to understand their focus in The NYT Store by having a look to their spot: ( you can get the file here)

It is unusual to find internal documents on business execution in media companies and that is the reason why it is interesting.

Having a sustainable business is not always about growth, but it is always about change; adapting to a changing demand. A business has always two sides: supply and demand, and, in the long term, they will tend to be equal. What we have now is simply a lowering demand, and thus, supply must adapt because the market is asking us to allocate fewer resources into content production. The fact that newsrooms have to reduce costs and adjust to the new situation is something already assumed by media companies (we are just listening how hundreds of journalist and other media workers end up to be unemployed every month passing). It is a hard reality.

(This failure would be perfectly avoidable or reduced with an appropriate professional re-conversion)

With decreasing newsrooms, we have to increase economies of scale and specialization. In order to be sustainable, media business need to decrease the cost/content, cost/audience, because with growing competition, news are becoming increasingly a commodity and commodity prices tend to minimize marginal profit and it is difficult to add value (margin) in a commodity. Ok, yes, we know that some companies sell water at the price of expensive wine, but we all cannot do the same and customers able to pay for water the price of wine are a minority.

We have 2 complementary ways to reach economies of scale in content production:

- Increased Media concentration among channels and countries, in other words, some media companies merging with others so they can all share contents further exploiting them. If we got a huge group, journalists can specialize in some fields while exchanging contents in other fields. In fact, nowadays, media producing is more efficient in a big well managed communication group.

Since it has much political relevance, multinational integration has proved to have some limitations so far, but it is necessary to continue concentrating in order to adapt to the new situation.

- Empowered and more fluent licensing marketplace. We are talking of a b2b content licensing market. Of course, platforms like youtube, or integrated advertising platforms such as doubleclick or tradedoubler in a different way are already b2c solutions for content rewarding, but there is room for b2b content exchange tools. One difficulty of this approach is the lack of consensus on online media audience metrics as well as the complete lack of information systems integration in the different media companies. As Internet progress and audiences and content sources get fragmented, a healthy marketplace is definitely a growing need.

Business developers have a responsibility in getting a fluent licensing exchange to allow reducing content costs while increasing licensing revenues, but there are some established taboos coming from the content side that also need to be removed.

Developing a media marketplace is a kind of dream that some companies share and a growing need to adapt to the new situation of even smaller self-production of contents. New media can only be competitive if change its focus to: a bit of production and a lot of licensing. That is, we have to empower economies of scale; otherwise, content producers will be just buried by content aggregators. We do not need to become aggregators, because this is not our core and it would just be insane, but we have to change our focus becoming content producers, and content qualifiers, so we minimize the cost per unit of audience without reducing, but increasing, our quality standards.

Licensing exchange is nothing new; it has existed for decades and we carry a heavy legacy in that area. Therefore, this is not a matter of new development but of change management. It is in the hands of media to suffer a disruptive change and be out of the game (what seems to be happening so far) or to lead this change in its on favour.

To summarize,

1. We need to reduce cost/unit of audience

2. Solution A is to merge media globally so we arise economies of scale. This solution crashes with political interest but it will continue to be important.

3. Solution B is to empower licensing exchange so we can re-focus from purely content producers to producers+qualifiers.

A fluent licensing marketplace is a business development or a content issue? Nowadays, it is strategic for media companies as whole, and so, let’s make it happen working together.

In an article called The Web: Alarming, Appealing and a Challenge to Journalistic Values we find a study made with a survey and an analysis.

The financial crisis facing news organizations is so grave that it is now overshadowing
concerns about the quality of news coverage, the flagging credibility of the news media, and
other problems that have been very much on the minds of journalists over the past decade.

In other words, journalism sustainability is a key issue between jouranlists community.

Overall, 16% of national journalists – including 26% of those working
in print – cite the current business model for journalism, or the specific challenge of making a
profit from web journalism, as the most important problem facing journalism.

Despite of Internet being a “threat” to media status quo, journalist recognize how positve it is for communication. Jouranlists now embrace new technologies, they have no choice. They are able to work in multiple platforms and they recognize new information technologies as a chance to build more complete stories. BUT losing control in final product is a challenge for both: journalists in one side and media companies in the other. So, we are in front of a wonderful communcation tool that is a threat to today’s status quo.

Journalists tend to call control “quality”, because they join quality to control even they do not intend to do so. For them, seeing how so many people come to publish content online is a loss of quality (i. e. control). It is hard to accept and so, there is a conservative barrier that is difficult to jump for many. Here it comes where a media company should make a clear definition on what is business and where our newsroom begin. We cannot build up sustainable communication enterprises purely based in “quality” (in control), and, in fact, journalists are so scared with new realities that they know it. But, in the other hand, journalists do not accept easily allowing business people to get into what they consider their territory. At least, we cannot build up media business based in hard control, we have to move on clearly to soft control, soft power. (An this is something that other online business like eBay, which I knew from inside did from the begining).

A holistic approach to media management, in fact, has to approach media independence as a consequence and a reason (at the same time) to generating healthy revenues. What is at the service of what? Is revenue generation serving independent business, or is an independent business serving a considerable revenue stream? For sure, it is imposible to know what comes first. If there is something we know is that without final customers -both, readers and advertisers- private media are simply not sustainable.

Talking on united or separated newsrooms online/offline is a very hot topic among journalists these days. Not so much has been written on how revenue generation and newsroom should be related in a modern media business. Newsroom should concentrate in “soft power”, in values, leaving for revenue generators organizational and product management. Journalists concentrate in building and keeping long term credibility and business developers should concentrate in building financial sustainability.

I do not like to read dark statements when I go to personal blogs, and so, I am not going to be unclear: media business can only be sustainable if cost structure is decided AFTER we know how, and how many revenues we are going to generate. Demmand, i.e. audience and advertisers have to drive content creation and aggregation; it is not possible any more to drive content generation based in purely editorial criteria (top-down). At least, in the short term. In the long term, sustainability is based in a trustable, easy to recognize and solid editorial and credibility. It takes years to build credibility and it is impossible to do so by just a business sustainability focus.

A modern media business need to be based in long term editorial core values that cannot be changed and must be decided by journalists and editorial top management in an independent way. Those values have to be powerful and they have to move all the company. After those values are clearly settled and directed, everything else have to be decided with a business perspective by business managers who decide with a view in roi maximization but always taking values as their axis in decision making. As long as there is a clear core of values understood and judged with editorioal criteria, everything else is business.

This suggested division is what can allow us to be fast moving while capitalizing credibility. We have to move fast on managing our business this way or we will be soon eaten by those who are already doing it, and they are not exactly media (or content) business in a traditional way.

In communication, media (Singular: Medium) are the storage and transmission tools used to store and deliver information or data. It is often referred to as synonymous with mass media or news media, but may refer to a single medium used to communicate any data for any purpose. (wikipedia)

Following this definition that wikipedia borrowed from 3 different dictionaries, media is a set of tools to store and deliver information or data. But, more than merely data, media delivers data put into context, or, what Popper calls world 3 knowledge and Craig McDonald concretize in “statements”. Popper’s 3 worlds of knowledge are helpful to understand what is media. According to this cosmology we have 3 worlds of knowledge:

world 1: physical universe

world 2: subjective personal perceptions. Mental procedures to buid thinking.

world 3: statements. Those productions expressed through language, descriptions. Necessarily, statements are related to a context.

Therefore, media is something from worlds 1 and 2 that composed of world 3. The process through which media allows statements to be sent from one to another is communication. In order to have a complete communication, we need a common code of symbols and values. There may be lower levels of communication when there are less shared values and symbols. Therefore, communication is very much related to common values and symbols. Values and Symbols play a central role in Media.

Men lived in a world of direct communications centuries ago, then in a world of mediated oral communication through tales, leyends or songs… we lived later on a continuous technological improvement: ink, paper, printing… information technologies… we have reached more capacity to communicate (data) than ever. But communication remains to be the same, because what we are doing is just to put knowledge in common, statements, not just data. The fact that we can transfer more data in a given second does not necessarily mean we are transferring more meaningful information (statements), it may just mean that statements are more clearly defined or supported. Our business is more in statements than in data, or, to make it easier, in what we communicate than in how we communicate it.

It is of a great relevance in order to understand what is this business about, to have a clear idea of what is communication. Media exist because there is a need for communication, and so we need vehicles to communicate. The end, the goal, is to communicate statements. Producing a sustainable media, is a result of a successful communication process. Accordingly, media business developers are a medium, a resource, not a goal. Our goal as online media is to communicate as much as we can to as many people as we can, then, because there is a lot of communication going on, we monetize it making it a sustainable and profitable business.