Getting Deeper in an Industry for Better Monetization
By: Jacob Cohen Donnelly
In the world of b2b media, how we monetize our audiences hasn’t really changed in decades. Where it was once controlled circulation where you could sell ads in a print magazine or direct response advertising, it’s now lead generation and webinars. The few smart b2b publications that invest in content can charge a subscription. And, lest we forget, events have always been a staple of the industry.
And for many media companies, that’s totally fine. Monetizing your audience through marketing budgets—aka ads, lead gen, sponsorships—or by getting reader revenue—subscriptions, ticket sales—is a great business.
But it’s limiting. Everyone does it. And in some respects, it’s a bit surface level. I was texting with a speaker from last year’s AMO Summit, and he talked about the butterfly effect of speaking at the event (I’m going to anonymize people’s names):
Went to a pre-AMO dinner hosted by John. Sat next to Brian from [Media Company]. We stayed friends, and he invited me to come speak at [his upcoming event]. From that event, I opened up probably 4 significant client opportunities.
Did you get the full cut of that? No. But I tell you if I was not a startup founder right now, I would be attending AMO again just because of the butterfly effect that happens at events like that.
This isn’t meant to be an ad for the AMO Summit (though tickets are still on sale). The part that stuck out to me is him calling out that the economic impact was very low for AMO indirectly making this connection. That’s true for all publications. I could sell a ticket to a banker for $2,000 and if she sells a company she met at the event, she could make 100x that—and that’s on the low end.
In many respects, my thinking about how media companies monetize and the evolution of that is summed up in these two tweets from Skift CEO, Rafat Ali.
One of the most interesting bifurcations happening as we grow older: Skift’s existence as a travel industry company VS our functional existence as a media/information company. Increasingly, I think v little about latter and more focused on how we provide value, go deeper with services and grow our business as a travel industry company. It is liberating, I have to say.
While “media company” might be the official label, our company’s real essence and function are deeply embedded in the travel industry ecosystem. That allows us to think more broadly on services we offer, vs the limiting traditional role of media. That said I still aim for us always being an outsider-looking-in mentality for whatever we do now and in the future. Always an insurgent, always the troublemaker.
A couple of years ago, Skift launched its advisory business, which helped companies create go-to-market strategies. Last year, it bought Twenty31 to expand this business. In March, it launched its recruiting business to help travel companies find executives. Neither of these requires marketing spend or reader revenue in the traditional sense. In many respects, it unlocks net new budgets. As Ali said in the tweet, “that allows us to think more broadly on services we offer.”
Publications that have covered their industries for years have the deep expertise to advise companies and the audience that may want to find a job. Advisory and recruiting just makes sense.
Software as an option?
I have, historically, been against media companies building software products because their target customers were other media companies. The Washington Post had Arc XP, its CMS. Vox had Chorus. New York Media had its own CMS, which got shut down when Vox merged with it.
The problem here was two-fold. First, there was no benefit for any of them promoting to their audience that they had this software because the readers are general interest. Second, the cost to create software was unbelievably high and all of these companies have had struggles generating strong profit.
However, we are at an inflection point where creating software is getting cheaper thanks to AI. None of us is Amazon, but look at this tweet from the CEO back in August where he talks about how much time has been saved using AI.
The average time to upgrade an application to Java 17 plummeted from what’s typically 50 developer-days to just a few hours. We estimate this has saved us the equivalent of 4,500 developer-years of work (yes, that number is crazy but, real).
If an engineer costs $200,000 a year, that’s nearly $1 billion in developer work saved. Every person I know that builds software is using AI to help them ship code faster. That’s a big win for software engineers.
The outcome here is that a media company can maybe build a software business. Could AMO one day build its own customer data platform (CDP)? My audience is the target customer; I understand how to operate a media company, so I can build the features a media company needs; and the cost to create it would be lower than ever before.
Look at Every, which now offers three software products to its paying subscribers: Spiral, Lex, and Sparkle. All three products fit within Every’s coverage areas. This will result in an increase in net new subscribers and a reduction in churn.
Obviously, all of this is hard. And no, I’m not about to compete with my friends at Omeda and BlueConic on the CDP side. But it’s easier today to pull this off than it ever has been.
There are downsides
Media investors understand subscriptions, events, advertising, etc. They understand much less about recruiting, advisory, and software in the context of media companies. This additional complexity could make it more difficult to get a fair price from an M&A perspective. Skift’s Ali agreed. In a DM conversation that he said I could publish, he said:
Makes it difficult…BUT for me it is about how much more embedded we can get in the travel ecosystem, vs the exit. Honestly, it is a push and pull.
But also as a mostly bootstrapped company, [the] “whatever way we can get money” mentality, which has its pros and cons, is also at play here.
We know that what is best for prospective buyers is not always best for the media company. Investors like a clean narrative. It’s why News Corp trades at a discount; the market has assigned a conglomerate discount. But even when I think about AMO, which is a bootstrapped company, I have to balance the long-term valuation with shorter-term cash flow.
The other downside is the risk of diversification. The more things you do, the fewer things you can do well. You have to be intentional with your product expansion. But more media companies should explore it. Traditional marketing services, subscriptions, and events won’t go away. However, if you have a niche-specific audience, building software products or launching services could provide bigger upside.