The start-up world has kept me hopping these past few weeks and I've been a very bad blogger. Time to get posting again! And I'm starting with the keynote presentation I delivered to the Atlantic Community Newspaper Association on May 13th.
Slide-by-slide commentary is below the SlideShare.
1. Title
2. My name is Judy Sims and my day-job is as the COO of a Toronto Internet start-up called CanSport LIVE where I’m busy revolutionizing the business of amateur sports.
3. But up until 2009, I worked at the Toronto Star where as VP Digital media, I was responsible for thestar.com and also launched 4 digital products in 2 years. Though my day-job is no longer in the newspaper industry, I keep a toe in the water as a member of the PostMedia Digital Board of Advisors. I’m going to set the stage for our conversation today with a few slides on the new economics of media. My apologies, there will be some charts and graphs, but I’m a nerd and I can’t help myself. But the truth is, I find that talking in scientific terms, rather than emotional ones is the most effective way to begin discussing change.
4. What we’ve seen happening over the past 15 years is a fundamental shift in the way the economics of media work. The root of that shift is the move from a world where media content was relatively scarce to one where content is very abundant. The barriers to entry are down and anyone can become a publisher.
5. And not only is there a lot more content available, that content has become “atomized”. Media is now consumed in smaller and smaller chunks across a wider and wider range of media sources. The average YouTube video is only 3.5 minutes compared to a 30 to 60 minute TV show. A blog post is only 3 to 10 paragraphs verses 20 or more in a newspaper or magazine article. Twitter has reduced this even further to only 140 characters.
6. And now we’re even seeing this happening in the advertising world. Ads have become unbundled from news. Flyers are becoming daily deals.
7. Workopolis, Kijiji, Autotrader, Flyerland, Craigslist – the ads are the content. They’re the prime attraction.
8. The result of this atomization is that economics of this new media world are the inverse of the old media world. Where content was once scarce and attention was abundant.
9. Now content is abundant and attention is scarce.
10. Okay, here we go with the charts. The economics of media, like the economics of any product or service are based upon supply and demand. Where supply is low, demand is high and where demand is low, supply is high. Where the two curves intersect determines the balanced market – the quantity produced and price it sells for. This applies to the cost of a newspaper or movie or the cost of advertising.
11. This is what supply and demand for media looked like before the Internet. Because there were significant barriers to entry as a media company, i.e. you needed a printing press or a TV studio or movie camera, supply was relatively limited and demand was relatively high. Thus prices were high. In our case, that meant that we were able to charge high rates to our advertisers. Looks good doesn’t it? We could even do a little marketing or increase circulation by moving into a new town or subdivision and we could even grow our demand and increase the price we charge advertisers. It was awesome.
12. This is Umair Haque. He’s an Oxford-trained economist who has been studying the impact of the Internet on various industries. He defines this media 1.0 world as the Age of the Blockbuster. The blockbuster resulted in very high revenues and profits for media companies for decades.
13. But Media 2.0 changed all that. Reduced barriers to entry have increased media supply exponentially. All this new content has made it easier for us to find what we like online so we actually consume more of it, shifting the demand curve out. Good news right? Well, the problem is that the demand curve hasn’t shifted out nearly as much as the supply curve. The result is a hyper-deflation of media prices.
14. And we are in fact seeing this in action in the online world where supply of advertising inventory is much higher than demand. And, technologies are being created everyday that make the purchase of advertising inventory increasingly efficient and increasingly complex. As a result, there has been downward pressure on advertising rates both online and offline.
15. Umair Haque believes that we are witnessing the end of the Blockbuster Age
17. Snowballs are pieces of micro-content: a blog or single blog post, a niche content website, a YouTube video or even an RSS feed from a mainstream media company. This is where the Internet has become such a game changer. If a new media product is high quality, its popularity within a niche will grow as it is consumed. It will be linked to, tagged and aggregated.
18. And Haque identifies three types of online entities that help create the snowball effect. Aggregators, micro-platforms and re-constructors. And this is why we’re seeing the rise of a new kind of media site.
19. In a blockbuster economy, the value curve looks like this. It starts pretty high and then you see some small incremental increases. Here’s what the Toronto Star’s value curve looked like in the blockbuster economy.
20. In a snowball world, the value curve is the complete inverse of the blockbuster world. Content starts small and then grows bigger as it gets linked to by a greater number of increasingly larger sites and platforms.
21. Many of you may recognize this guy. Tim Ferriss, author of the four-hour work week figured out how to use the snowball effect to promote his book, using a single blog post to push his book to best-seller status.
22. But snowballs wouldn’t be possible without the user engagement and community created by social media. Users, and especially those under 35 are no longer satisfied with a one-way media experience.
23. NYU professor and author Clay Shirky tells us that the Internet is less a source of information and more a site of coordination. Digital natives expect to interact with, contribute to, organize and share the media they consume.
24. And here’s the real beauty of the snowball effect. It shifts the Media 2.0 demand curve. It reduces demand for blockbusters and increases demand for niche content. This new s-shaped curve actually increases prices.
25. The revolutionary thing that is going on is that where in the Blockbuster economy, value came from being a closed, dominant portal, in the Snowball economy it comes from being open and distributing and coordinating content and allowing snowballs to grow. It comes from community and engagement. Haque believes that failing to understand this will be the single biggest cause of fatal strategic errors committed by mass media companies.
26. Haque arrives at two competitive advantages in Media 2.0.
27. Quantity: Deliver more of what your readers and advertisers want. Become a curator by bringing the outside in, linking to other websites, inviting local bloggers and professionals to become a part of your network. Become the ultimate destination for news, information and connectivity in your marketplace.
28. Quality: Make it super relevant. Make it local and on mobile devices, make it location-based. Narrowly focus on the issues and topics that are most important in your city, town or neighborhood. Determine the kind of content that you and only you can deliver. On the Internet, you are always competing globally. What can you be the best in the world at?
29. If you focus on delivering quantity and quality, you will create a high level of user engagement. And user engagement will drive return on investment for your advertisers. And high ROI means higher CPM’s, which will lead to a higher percent of your revenue coming from the digital side of your business. And that means a faster transition to becoming a true new media business. And that means your business has a future.
30. But to get there, you’ll need to do these nine things (at least).
31. First and foremost, you need to structure for the company you’re becoming, not the one you’ve been. You can’t mandate print people to start innovating in the digital world. You can’t committee it. The most remarkable innovations in the new media world are far more likely to come from people who are passionate about the Internet.
32. The evidence shows that the best structure for digital transformation is to completely separate the print and digital sides of the business. This is a slide from a presentation recently given by Clark Gilbert, CEO of the Deseret News Company in Salt Lake City. The chart is difficult to read, but the underlying message is quite clear. Using data from Borrell and Associates, the chart reveals that regardless of market size, those local media outlets with a 40% or higher share of online advertising dollars in their marketplaces had the following characteristics. Separate physical location of print and digital teams. Separate P&L. Separate direct sales teams. Separate content, product and technology teams. Separate management structure.
33. I know that many of you aren’t in a position to create a separate digital business in a separate location. One thing you can do though is separate your print and digital sales forces. Borrell and Associates’ most recent local advertising report shows that companies achieving 15% to 20% of their revenue from digital have dedicated digital sales teams. The papers that are underachieving on the digital side still rely on legacy sales staff to sell digital as well.
34. Which brings me to point number two. Find great digital talent. Then let them run things. Newspapers often don’t have senior digital talent, or they’re losing it to the pure play world. Waiting for print people to develop great digital talent will slow you down considerably. Getting good digital talent will be very difficult. Offer them control over their products and time. Create a separate working environment for them and if you can, give them a piece of equity. Then deliver what you promised them. If you try to integrate them into the print organization, they will walk.
35. Matthew Ingram and Kathy Vey are two of Canada’s most talented, connected and well-known digital journalists. Matthew left the Globe to write for pure-play GigaOm and Kathy left the Star to become managing editor at a Toronto news start-up called OpenFile. It would take some convincing to get either of them to return to a large media company, but it’s possible. But only if you’re willing to give them the freedom they need to make a digital success.
36. And that is point number three. Don’t kill innovation. Don’t require several levels of approval to get things done. Empower your people to move quickly in response to market changes. Don’t demand ROI too early. The truth is, it is very difficult to predict things online. It’s better to follow a fail-fast strategy than to make decisions based on forecasts based on guesses and wishes. Don’t become obsessed with sticking to the plan. Your digital team will need to learn the art of the pivot. Once in market, they will figure out what’s working and what’s not and will need to quickly change strategies in light of new information. Do allow them to keep evolving. The Internet changes so quickly.
37. And that brings me to point four. Start experimenting with mobile. Even if you don’t really know where it’s going.
38. I will admit that mobile has been a long time coming. Every year since 2005 has been declared to be “the year of mobile”.
39. 2010 will, be the Real Year of Mobile…
40. Nope, 2011…. Oh wait…no, it looks like we’ll have to wait for 2012.
41. But, we’ve never seen a technology grow as quickly as the Internet enabled mobile device.
42. Though still relatively small, mobile revenues in Canada are growing rapidly from $1.1 million in 2006 to an estimated $51 million in 2010.
43. With mobile, it’s all about location, location, location. Community newspapers are perfectly positioned to provide the location-based content and ads that will become the killer apps of mobile technology.
44. The National Post is using Four-square to engage users where they are. They provide tips and tidbits and invite conversations. Here you see them asking voters to check-in and say who they voted for. They’ve also don a guide to the Toronto International Film Festival and restaurant reviews.
45. Toronto start-up Push-a-Deal pushes ads to your mobile device as you walk by a relevant store or restaurant location.
46. I know experimentation is costly, particularly in the case of mobile when we really don’t know where it’s all going. But it’s necessary for your digital transformation. Which is why point five is so important. Do more with less. And that means cutting costs. A lot. Determine what you do best. Outsource everything else.
47. John Paton, president of the Journal Register Company in the North Eastern United States recently experimented with something called the Ben Franklin Project. One of their newspapers used online tools available on the Internet for free to create, publish and distribute news content online and in print.
48. This isn’t the only place that John made cuts. He made the decision to invest in content, sales and disruption and sold and outsourced everything else. He did his homework and then made difficult decisions to outsource the IT, delivery, prepress, printing and mailroom functions. The result was nothing short of astounding. JRC went from bankruptcy in 2009 to a $41 million dollar profit in 2010.
49. Which brings me to point six. Set big goals. Train your people, give them the right tools and create incentive programs to get them going. It’s astounding how quickly you can grow your business if you do.
50. As a part of his digital first strategy, John Paton set some big goals. 25% of his sales were to come from digital media in 3 years and 50% of his revenue would be digital in 5 years. JRC is well on its way. In Q1 of 2011, digital revenue grew 70% over Q1 of 2010. Over at Deseret News in Salt Lake City, Clark Gilbert’s team is seeing even better results. His year over year digital sales growth was 75% in 2010 and in 2011 his digital sales surpassed 50% of his total revenue.
51. Dramatic shifts in revenue can be achieved when there is a fundamental shift in focus from selling space – lines and columns and banners and big boxes to selling ROI and service. And that’s point seven.
52. Local advertisers in Canada are not particularly web-savvy. In fact, only half of Canada’s 2 million businesses have websites. Google.ca knows this. Just last month they launched GYBO.ca where businesses can get a free website and .ca domain.
53. You too can help local advertisers navigate this new space. Gannetlocal.com creates print and digital campaigns for small businesses. Tribune’s 435Digital.com offers courses, SEO, web design and development, social media strategy and management. And it’s not just the big guys doing this. 1100 Broadway is a product of the Tennessean Media Group and offers a wide range of services to local businesses.
54. Though the daily deals space is quickly becoming very crowded, I believe there remains an opportunity for community newspapers to succeed there by focusing on hyper-local, super relevant deals.
55. Advertisers are complaining that many of their daily deal customers come buy once and then disappear or that the discount does more damage to their brands than good. Help them devise strategies to create repeat sales. As you build your email lists, build potential advertiser ROI by offering users a chance to register for vertical channels such as deals for families, restaurant offers, spas, beauty and fitness deals. Etc. Advertisers are also complaining about the economic realities of daily deal programs. Groupon won’t let advertisers cap the number of deals sold. Most daily deals sites take 50% of every deal sold. The offer itself must be 50% off. This leaves the advertiser with only 25% of the value of the product or service. Some advertisers are starting to complain. Offer them a better deal.
56. Build a new revenue stream through events. Last year the Seattle Times launched Seattle Restaurant week. Restaurants paid to be a part of the program and a number of sponsorships were sold to both local and national advertisers.
57. Increase your advertising inventory by partnering with other local sites and blogs. Separate blogs into vertical content groups to improve ROI for appropriate advertisers. Food blogs, political blogs, parenting, business…
58. And while we’re on the topic of community blogs, let’s talk about point eight, Reflect, Affect, Connect. This is the job of community newspapers and I believe that you are surrendering this role by not being more active online.
59. The web provides a way for community newspapers to become a platform for discussion and action around the most important issues and things in a community.
60. Find bloggers, experts, academics, politicians, amateur sports administrators etc and invite them to come together to discuss local obsessions such as minor hockey or real estate valuations or to solve big problems such as education, school bullying and transportation. When you do this, you become of the Internet rather than merely residing on it.
61. MidDay, a daily paper in Mumbai, India rallied an entire city when they tackled the issue of taxi’s refusing to take passengers on short distance trips. It started as an editorial effort, but the community soon became involved in reporting taxi drivers who were breaking the law. In the first two weeks of the program, over 1,000 cabs were fined. By week four, it dropped to 154 because the drivers had already changed their behaviour.
62. The Deseret news identified six areas of focus: The family, financial responsibility, faith in the community, excellence in education, care for the poor and values for media.
63. The last issue was addressed with the creation of the Family Media Guide where movies are rated based on their suitability for family viewing.
64. Curate. You don’t have to own every piece of content on your site. Curation is a cost effective way to become the go-to place for news and information in your community.
65. Create a network of local bloggers, link to other mainstream media sites and help your readers navigate the web by finding what’s good. TBD.com in Washington DC has a network of 223 blogs. TBD.com editors regularly feature this external blog content on their site.
66. While the stories can appear anywhere on the site including the home page, they also appear in the community network section.
67. Stop broadcasting and start communicating.
68. Encourage your journalists, executives and sales people to tweet, blog and use other social media tools. Don’t give them a rulebook; just tell them to be their best selves online. This builds loyalty, engagement and is an excellent tool for lead generation and finding sources. Use your company Facebook page to engage readers in conversations.
69. The Register Citizen in Torrington Connecticut has created a newsroom café where they actually allow citizens to drop by their news meetings, have a coffee and make suggestions. This is all streamed live with live chat. Though attended primarily by a small group of senior citizens, the project is said to have created “immeasurable goodwill” in the community.
70. And now for my last recommendation. Number nine. And this may be the toughest one for you to swallow. Develop a deep understanding of the thing that is disrupting you. You may be able to intellectualize what’s happening on the Internet, but until you experience it, you won’t truly know it. You won’t truly get it.
71. Start a blog, see who comments, watch your daily traffic, see who’s linking to you and learn which kinds of things hit a nerve and which don’t.
72. Start a Twitter account, sent out some Tweets, send out some links. Find out who to follow, see if they follow you. Retweet what they say and wait desperately to see if anyone retweets you. Begin to realize that you learn about more breaking news from Twitter than you do from mainstream media sites. Get to know and even make friends with people you are unlikely to ever meet in person. Or, finally meeting them in real life and discover that you have indeed made a real friend.
73. Get active on LinkedIn and use it to find your new ultra-talented digital employees. Use it to prospect new clients and to keep up with the ever-evolving second careers of former newspaper industry colleagues.
74. Be surprised by the sheer amount of content that flows through Facebook everyday. Be astounded by how it can be used to organize people from around the world around a single cause.
75. If you still want to learn more, stop by Quora to ask a few questions and then marvel at the generosity of the incredibly intelligent people who take the time to answer them.
76. If you’re really adventurous, lurk on Reddit and learn how Internet memes are formed, rise to the public consciousness and then fade away.
77. If you don’t know what a meme is, then allow me to demonstrate. Here’s the now famous shot of the White House situation room two Sundays ago.
78. And here it is with the cranky bridesmaid from the royal wedding.
79. And here’s Obama playing Playstation
80. Everyone wearing the Princess Beatrice fascinator hat, again from the royal wedding.
81. Everyone’s Obama.
82. Every Internet meme ever invented. So yes, the Internet can be a silly place. It can also be a dangerous place and a cold and inhospitable one. But it can also be a wonderful place where connections are made and good things happen. When you get to know it a little better, then the Internet will stop looking so much like a problem, a destroyer of value.
83. And maybe you’ll see how beautiful a place it can be, how astounding it is and how ultimately by creating a more connected society, it is changing all of our lives for the better, even if dangers still lurk there.
84. Thank you for having me. Here’s how you can find me. Now, are there any questions?
Great blog Judy, but its very lengthy, still enjoyed reading your blog.
Posted by: Mukesoft | 12/11/2012 at 06:30 AM