October 30, 2023

Six Things I Learned at the AMO Summit

Last Thursday may have been the single greatest day of my professional life. About 130 of you convened at the Paley Center for Media for the inaugural AMO Summit. Seeing a room full of AMO readers and getting to meet so many of you face-to-face was an unrivaled feeling. A friend asked me how I felt after the event and I said, “I feel an immense amount of relief, appreciation, and excitement.”

One of my favorite parts of the event was getting to sit and chat with over a dozen unbelievably smart individuals on stage. I could go on and on about these conversations (some may say I did below) and I will write future pieces about much of this. However, here are six things that I learned while I was on stage.

1. Fire bad subs

We started and ended the day talking to magazine operators. In the morning, Craig Fuller, CEO of Flying Media Group, took the stage to talk about the strategy behind this rapid portfolio growth plus the recently announced acquisition of the marine titles from Bonnier, which I wrote about here.

In a blog post, he had written about his intense distaste for magazine agents, talking about how the immediate priority after the Bonnier deal was to fire all of them. He also talked about how the newsstand is a serious problem for his business because you don’t know your audience. Who is actually buying the product? Not to mention, the financials aren’t all that great.

In a blog post soon after he bought Flying Magazine, he wrote:

To give you some context, for every issue Flying distributes through the newsstand, it generates $.11 in revenue. Yet, it costs $1.10 to print and fulfill. If issues aren’t sold at retail, the magazines are thrown away and the retailer is not out of money, but the publisher is. This seems nuts, but it’s a relic of a bygone era and was used by publishers as a subscriber acquisition strategy.

And so, much of the early work of getting the magazines to be more profitable is simply getting rid of inefficient distribution.

Neil Vogel, CEO of Dotdash Meredith, had much of the same to say. When Dotdash acquired Meredith, Vogel had been operating a pure-play digital operation. But taking over Meredith meant that there were numerous print products. While the team has pared down the number of magazines since the deal, they have no plans to get rid of print entirely.

One thing Dotdash Meredith has already done is gone through and fired all of the bad subscribers. In other words, any subscriber where they are losing money is simply not worth keeping around. That means there are fewer issues going out, but it also means the company is not losing so much money on subscribers. And that’s important for the longevity of these brands.

It’s a lesson for other print operators too. Understanding the true value of a subscriber and getting rid of subscribers that don’t make as much money for you can increase your margins and make you a healthier business. Furthermore, having the right subscribers can actually increase your ad rates because the spend is only being allocated to the target audience. So, fire your bad subs.

2. Scale communities by niching down

It might seem counterproductive, but one way to scale a community’s revenue is to actually get more focused. At least, that’s the advice from Scott Gerber, CEO of The Community Company. We used A Media Operator as an example.

On the surface, everyone who reads A Media Operator shares something in common: they own or work for a media company. And so, creating a really great community makes sense. However, within a media company, there are a number of different roles and functions that have to be done. And this, Gerber explained, is where you can increase opportunities considerably.

For example, what Chief Revenue Officers might care about is different than what heads of audience development need to know. And so, identifying the groups of people within the AMO community and niching down to support each of them would result in better engagement with each of those groups.

Gerber called it the 10×10. Identify the 10 groups that need to exist and then find 10 people to fill each of those groups. You can likely charge more for each of those people as part of a smaller group than you could charge 100 people in one group. You create more value for everyone and you generate more revenue along the way.

3. SaaSification of media only works for a while

We had Craig Fuller back, this time as CEO of FreightWaves, and Jason Yanowitz, co-founder of Blockworks on stage. Both are currently executing what I call the “SaaSification of media” strategy. In this model, you create some sort of a high-priced, sticky subscription product that is outside of the core content subscription. In the case of FreightWaves, it’s a data product called Sonar. And for Blockworks, it’s a research platform called Blockworks Research.

There are two reasons this is so valuable.

First, it unlocks an audience for you to promote the SaaS business to. In the case of Sonar, FreightWaves writes about the data on the site, exposing the platform to prospective clients. Because the site can also be monetized with ads, it introduces a concept known as negative CACs, where you are effectively earning money on the acquisition of new SaaS clients.

Second, early stage investors will give the collective business a higher multiple thanks to the SaaS product, even though the bulk of the revenue might be coming from media sources. This unlocks additional capital that can then go into growing the business without having to aggressively dilute the cap table.

However, those benefits only last so long. As Fuller explained, around the time that an entrepreneur is raising a Series C, the media business starts to hold the SaaS one back versus helping it. Fuller’s explanation was that early investors are typically VCs, who have more vision, compared to private equity investors in later rounds, who love their spreadsheets. And the reality is, a SaaS business carries a higher revenue and EBITDA multiple than a media one.

At this point, you get hit with a conglomerate discount. Since the business is not clean from a revenue perspective—aka it has multiple sources of differing revenue—the prospective investor or buyer has to apply a discount. To better value the business, it might reach a point where these assets have to be split into separate companies to ensure that the best value is being captured.

4. M&A markets are still cold

While there has been some warmth to the M&A markets, there is not much. Dennis Berman, formerly of Lazard, when asked the temperature of the markets said:

I’d say cold. I wouldn’t say ice cold. I would say a little chilly, make the bones in your feet a little achy. Right now there are a couple of things going on like people were saying earlier. Getting a fix on what is happening inside some of these businesses is a very difficult thing to do right now. But I think there are some fundamental questions about the true operating nature of many advertising and subscription supported businesses. It doesn’t mean businesses are bad or don’t have great futures, but it comes to the question of how that asset is priced.

Maureen Sullivan, partner at TCG, suggested that there’s a bit of a tale of two cities going on with companies that she’s looking at. She said:

For folks that have built a brand, that have real community and engaged audience, even if they haven’t completely nailed monetization or are struggling because they are overly dependent on the ads part of their business and it has been a very tough year on that front, I think they have a ton of momentum and there is always going to be interest. For those that haven’t and also have a more challenged business model, if it’s a mix of ad supported and low margin commerce, I think they find themselves in no-man’s land.

One thing that Endeavor Business Media CEO, Chris Ferrell, suggested is that there are going to be a number of big deals over the next year because of their private equity ownership. He said:

Most of the big b2b media companies that are private equity owned are really late in the hold period for their PE firms. A whole bunch of them are going to have to come to market over the next 12-18 months. There is going to be a sea change of ownership if they can find new buyers and it will be a really interesting question of who those buyers are. Are there PE firms, is there someone who is willing to make an investment and some of those things together? One of the things that is missing from the b2b media ecosystem is there is not a large strategic buyer in the US, other than the event companies.

As for the impact rising interest rates have had on the free cash flow profile of his business, Ferrell said that he is spending $4 million more this year on interest than he did last year and has only completed one M&A deal this year.

5. SGE’s theorized impact on traffic

Throughout the event, I spent time asking various speakers their thoughts on the impact of AI on their businesses because I know that it’s something many operators are thinking about. But I also had one panel dedicated to the topic. I invited Mike King, CEO of iPullRank, to talk about how AI might impact publishers. Here’s a snippet of our convo:

King: With something like SGE [Search Generative Experience], we don’t have proper data on how people are reacting to it yet. We’ve been doing a lot of analysis and collecting a lot of data on SGE to basically predict what the traffic loss might be. Media sites are the most impacted based on our projections and it’s looking like anywhere from 30-40% of your traffic might get lost.

Donnelly: How are you projecting that?

King: What we do have is data from when Google introduced the feature snippet, that answer box at the top of the search engine result page. When those rolled out, from actual data you can get from Similarweb and things like that, it was about 35% of the clicks went toward that. We modeled it out based on the different features because SGE has citations and the expectation is that maybe people will click on you if you’re in these citations.

30-40% of traffic would be a massive hit to publishers, especially those that have not built legitimate connections with their audience. However, these are simply estimates based on previous features that Google released. Neil Vogel, CEO of Dotdash Meredith, was clear that no one actually knows what’s going to happen. He said:

There is going to be some more stuff at the top of that page [SERPs]. I don’t know what that’s going to be. I do believe that this learned behavior that humans have to go to search isn’t going to change. They might go to Amazon search or something, but that’s the learned behavior. That real estate, if that replaces current real estate, maybe nothing happens. If that conversation gets credited and sourced, which they’re increasingly doing because they realize they need to ground their AI in facts, it could be good. If Food & Wine is the answer to everything and there’s a link to the full thing on Food & Wine, that’d be amazing.

It’s, ultimately, a very fair point because we don’t know what’s going to happen. Maybe more people search and that offsets any drop in clickthrough rates. Maybe Google does decide to keep all users on its site. The reality is, we’re still very much in the first innings of this.

6. Design allows you to punch above your weight

One thing I have long admired about b2b media company, Skift, is that it has always prioritized brand. Look at the sneakers CEO Rafat Ali wears on stage and you’ll see the Skift yellow on them. And design is fundamental to that.

And so, I asked Ali about that. Compared to so much b2b media, which is ugly, why had he prioritized design so heavily? He said:

As a small company, there is a fake till you make it type of mentality all of us have as we’re starting something. Design makes it feel like you’re serious, you’re different, you’re bigger than you are. When we started, we said “we’re going to make Northstar obsolete.” And who would have cared? Two people company versus a 100 year old company. Design is that non-verbal cue that helps you punch above your weight. Design is a proxy to building a premium brand. I would dare anyone in this world to say that their b2b media brand is more premium than ours. For us, everything is brand. We’ll sacrifice everything for that brand.

And it makes sense. Humans are visual creatures. And as much as we are told to not judge a book by its cover, we can’t help ourselves. Take two identical pieces of content and put one on a horrible looking site and one on a beautifully designed page and I suspect people will react more positively to the latter.

When talking about competitors that have been around for a long time, being able to close the gap gave it a chance to win. And it’s something that more of us should be thinking about. I’m not good at this. While we don’t need to invest tons of money in expensive brand exercises, being able to offer clean, high-quality experiences to our audience should be part of doing business.

And if we think about the previous section regarding Google and AI, we may have no choice. Brands are going to win. Vogel even suggested that the Meredith brands will likely do better than the Dotdash brands if these sorts of changes do take place. And so, investing in our brands now is important and will help determine our longevity.

There was so much more that I learned from this event, but the piece is already pushing far longer than any previous one has. So, let me end with a few final points.

First, thank you to everyone who came. Whether you were sponsoring, on stage, or in attendance, you being there truly means the world to me.

Second, the AMO Summit is 100% coming back next year. I am going to start venue searches in the next two weeks, so prepare October 2024 on your calendars (I will let you know the day as soon as possible).

Third, I will be releasing all of the footage for the AMO Summit in the next couple of weeks. This will be free for AMO Summit attendees, speakers, and sponsors, but will include a charge for everyone else.

And fourth, if you want early bird access to future AMO events, become an AMO Pro member today. Thanks for reading and hit reply if you have thoughts.

Six Things I Learned at the AMO Summit

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1. Fire bad subs

2. Scale communities by niching down

3. SaaSification of media only works for a while

4. M&A markets are still cold

5. SGE’s theorized impact on traffic

6. Design allows you to punch above your weight

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Six Things I Learned at the AMO Summit

Subscribe to our newsletter

1. Fire bad subs

2. Scale communities by niching down

3. SaaSification of media only works for a while

4. M&A markets are still cold

5. SGE’s theorized impact on traffic

6. Design allows you to punch above your weight

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You're on the list!