Lessons from the 2019 Digital Innovators Summit: Diversify & Invest in Quality Content

By Bob Sacks on April 07, 2019

William Ford Gibson is an American-Canadian writer who has been called the "noir prophet" of the cyberpunk subgenre of science fiction. It was Gibson who coined the term "cyberspace" in his short story Burning Chrome. He is also responsible for one of my favorite quotes, which I often used to open my lectures in the early 2000's, "The future is already here -- it's just not very evenly distributed."

In our industry nowhere is that more evident than at the Digital Innovators Summit (DIS) held each year in Berlin. I have had the privilege to attend it for seven years. In doing so I have witnessed the digital transformation of publishing media firsthand and with a global perspective. It is partly this experience that enables me to speak with authority about our industry and its future.

Publishers Are Finding Profits in Diversification

I think the most obvious takeaway from almost every presentation is that the crisis of confidence is over, and we are now in a better state than we were five years ago.

There is now overwhelming proof from multiple global sources that digital can supply revenue and profits. Subscriptions are real and readers, especially those that trend younger, are willing to pay. Parallel to that is the formula of: Quality + Specialization = Premium Pricing.

It was Stephanie Caspar, president of technology and data at Axel Springer, Germany, who opened the first day at DIS. She offered the theme that, "It is not only necessary for media companies to change their work cultures to fight for the future of journalism, but also the media industry needs to work closer together to change the collective culture of the publishing industry as a whole."

She suggested that we are finished with the cycle of uncertainty, and now there are three items to focus on: technology, the customers, and truly understanding the business model. She explained that Axel Springer has successfully turned itself in a media and tech company.

Stephanie also brought up the interesting phrase "customer eccentricity," by which I believe she means that each customer is different, and therefore we need to test our data as much as we can and use that data to create a better unique experience. This use of data was a theme which many speakers reflected on.

Stephanie said companies that have managed to build strong brands can diversify their revenue from paid content to e-commerce and events.

AIM Creates an Ecosystem of Solutions for Its Readers

The theme of diversified revenue was repeated many times over during the conference and none stated it better and showed more examples then Jonathan Dorn of Active Interest Media (AIM). (I have spoken many times of AIM as the perfect poster child of creative magazine media management.)

AIM drills down, looking into every nook and cranny to sniff out unexplored revenue opportunities. They do this with all their titles and divisions. Jonathan said AIM's mission statement was to inspire and enable passion and participation by surrounding customers with accessible content experiences and services.

Jonathan provided us with a few AIM mantras to demonstrate how this is accomplished:

  • Live the dream and hire people who share the vision
  • Be very niche and specific
  • Ignore convention
  • Embrace change; it's perhaps chaotic, so prove or disprove the case and move on. (This is very much like David Carey's "Fail Fast.")
  • Admit failure.

One case study that demonstrates this approach is AIM's Equestrian Division. Jonathan discussed how they built an equine ecosystem within that group which includes:

  • Several horse magazines
  • A marketplace to buy and sell horses
  • An online, on demand instructional Equine University at $160 per course
  • A horse care academy -- sponsored by brands
  • Dressage Today online subscription service with the revenue shared with the trainers
  • Roping Contests -- these are high margin and represent one of the biggest grossing events in Las Vegas
  • U.S. rider equestrian motor plan, which is a roadside assistance for people with horse trailers. The plan has 60,000 tow trucks available and 2,800 veterinarians on call. AIM charges between $129 to $329 dollars per year and has 40,105 subscribers with an 84% renewal rate.
  • Next up is smart speaker home technology with valid and coherent answers for their clients. "Alexa - my horse has colic. What should I do?"

This kind of creativity is what AIM is all about. My question to every publisher reading this is, are you doing the same? Are you inspiring and enabling your customers' passion? And are you surrounding your customers with accessible content, experiences, and services? This is a tough self-analysis. Other than AIM I have not yet met a publisher who couldn't do more with what they already have. I remember someone at the show saying, if you don't create alternative revenue streams, you have zombie momentum.

Innovation Powers Diversification

My friend Reed Phillips, president of Oaklins International and founder of Oaklins DeSilva+Phillips, was also in Berlin and discussed how mergers and acquisitions require and reward innovation. Reed stressed to the audience that, "Innovation is one of the most critical elements in a magazine exec's responsibilities." He went on to say, "Innovation is the introduction of something new."

I enjoyed Reed's remembrance of New York restaurants 15 years ago, giving examples of businesses that needed to adapt or die. He spoke of expensive restaurants my suppliers used to take me to in the days of irrational selling exuberance. He mentioned high profile French restaurants in New York City, which all went out of business over a period of a couple of years. Reed explained that this was because consumers had shifted away from formal restaurant experiences and wanted informal ones.

Reed also pointed to Pepsi as a smart innovator that diversified it's soda business into bottled water, ice tea, and more, providing the company double digit growth in cecent years.

Bringing it back to publishing, Reed outlined the valuation of media properties. "Print properties are the lowest, with digital media and events and information and data the highest. If you diversify your business, you will get a much higher valuation as you transition into more lucrative areas." Reed then pointed out several case studies from the magazine industry including Vice Media, ForbesHigh Times, and a few unnamed companies.

As former graduate of High Times I found it ironic that Reed picked the magazine as an innovator. He said that High Times transformed itself from being just a lifestyle magazine into a more valuable franchise. This was in part spurred by the growth of the cannabis market, but mainly because 71% of revenues come from cannabis events. The company has 20 million unique site visitors and is valued at $70 million, which is 5.5 times revenues.

I would agree that High Times was indeed an innovator, but I prefer the innovation of actually starting the magazine and creating a new genre of magazine altogether with unique battles to fight and win over an industry that didn't know what to do with it. It is still a remarkable success story and still mostly untold.

Another interesting idea from the conference was the idea of structure and how that can help or hinder innovation. Structure follows strategy. If you base your strategy on your existing structure, you limit your potential to what you've already done.

Readers Will Pay for Quality Content

Another speaker and another friend of mine is John Wilpers, author of Innovation in Magazines World Report, who summed up one of the main themes of the conference when he said, "There is so much crap content out there that people are willing to pay for excellence." He also pointed out that today's business environment is more of a Darwinian culling than an extinction. To that I agree.

John pointed out another consistent theme that, "unless you get people to pay for your products and services, you have no future in media." A sobor, pointed, and accurate position to take.

Another speaker was Katie Vanneck-Smith from Tortoise Media. She has a fascinating approach in today's highspeed media environment. She says everyone else is rushing to be the first. We want to slow down and try to understand the news. Not breaking the news, but rather what's driving it.

Tortoise Media is a membership model with no advertising. Katie says she believes that they are not a media brand. That is not just semantics she says, because the world doesn't need another news brand. News has become noise, and too many players are chasing the news and missing the story. Katie told us that Tortoise Media started with five stories a day. Their members wanted one story per day, so Tortoise Media reduced its coverage to just one story per day. 

Random thoughts and observations

Structure follows strategy. If you base your strategy on your existing structure, you limit your potential to what you've already done. 

Andy Brown, Kantar Media, UK

What irritates consumers about advertising? 

  • 70% see the same ad over and over again - it's too repetitive
  • Over-targeting - 54% object to being targeted as a result of their past online activity. What you can't see from your data is the damage you might be doing by re-targeting people endlessly with your products
  • The biggest challenge we have today is frequency, Because we don't do a good job as an ecosystem of capping frequency to consumers
  • Most consumers don't believe it's worth paying for something purely to avoid advertising . It might be a desirable bonus but it's not the key driver when consumers take out a subscription. 

Jessica Rovello, Arkadium,discussed a new mobile metric of cost per second rather than click throughs or other methods of charging for advertising 

Yaser Bishr, Al Jezeera,said we are in what he called a fight for mindshare and a fight for influence. He suggested that our audiences have become slaves to algorithms. 

Jennifer Brandel, Hearken,pointed out that the publishing process was built in the machine age, while the emerging process is built in the information age. 

Rouven Leuener, Neue Zürcher Zeitung NZZ, Switzerland

  • Never sell anything on a Saturday
  • Most users only buy a subscription in the morning if a previous offer is reduced
  • Content about local news and financial topics engages better over lunchtime
  • The growth in subscribers has also driven new ad revenue. The growth in paid circulation has become a huge selling point with advertisers. -Conde Nast Chief business officer Chris Mitchel
  • Hearst replaced an editor-driven paywall with one where readers, by their preferences and history, determine what content goes behind their paywall. New readers can read as much as they want. As the system detects their interests, those types of stories go behind the paywall. Those interests become the focus of their subscription offers.

 

Markus Reithwiesner, Haufe Group,saidthe rate of change is exponential. Innovate or die. Those that are at the top in the beginning of disruption are not at the top at the end of disruption. 

Old way        New way

Efficiency       Agility and Learning

Hierarchy      Agile Networks 

Nick Rockwell, The New York Times, USA.

The mission is rooted in the belief that, "We seek the truth and help people understand the world. We now have 3.4 million subscribers, and our ambition to reach 10 million subscribers. We hope to provide the foundation of a daily habit." 

In a panel discussion the following comments were made:

  • There is a whole generation now willing to pay for content.
  • There are going to be privacy and data laws in the US, perhaps not on a federal level but a state level. (California)
  • Advertisers have been asleep at the wheel while their ads have been running in terrible places
  • How quickly the attitudes are changing about Silicone valley and EU anti-trust discussions. In the US they were untouchable, but attitudes have changed.
  • And there are meaningful discussions now in Washington.

 

Marcus Brauchli, North Base Media, USA.

  • If you are an incumbent player in a disrupted market, it sucks."
  • Quality & Specialization = premium
  • There is experimentation going on to avoid platform dominance by FANG
  • There is coming a backlash to big platforms (FANG) 

Ling Fan, Tezign

  • Distrust leads to disuse - Over-trust leads to misuse
  • Industrial age - collective first - Digital age - individual first
  • Waste is a resource in the wrong place (Sigmund Freud)
  • Before the elevator humans could only go to the 6thfloor- -With an elevator we can go to 100 floors - The machine and AI will open up new areas of creativity

 

Sören Karlsson, United Robots

  • More relevant content with the help of personalization. Personalization is not the goal, relevancy is.
  • 50% increase in use and loyalty rate by using personalization 

There you have it. There was, of course, much more in the day and a half. I jotted down as much as this two-fingered typist was able.

This is always a terrific event. My hat is off to James, Cobus, Claire, Helen and the whole crew at FIPP. This is one of the best run conferences anywhere on the planet. The speakers each had a meaningful message and were willing to share their successes and plans for how to proceed.

 

Indeed, "The future is already here - it's just not very evenly distributed."



By Bob Sacks| April 07, 2019

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Bob Sacks

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