March 22, 2022

STAT and Applied XL Create Paid Product Around Structured Data

The majority of media companies are trying to identify possible paid products. The most straightforward answer, for many, is to throw up a paywall. But what if another product could complement that paywall.

But first… A message about our sponsor, Omeda.

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Now let’s jump in…

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In a press release announcing its latest round of funding, Applied XL wrote:

The latest round brings Applied XL’s total funds raised to date to $5 million in the last 12 months. The company will use the new funding to scale its first vertical serving pharma and biotech professionals, expanding its offerings for the life science analytics market, whose value is projected to reach $42 billion by 2025.

“Professionals in this sector are overwhelmed with an ever-growing amount of unstructured data, missing out on crucial information, and slowing down their decision-making. We are developing event detection algorithms that replicate the rigorous research process of biotech journalists in order to surface important signals and deprioritize noise,” said Applied XL’s CEO and co-founder, Francesco Marconi.

In January 2022, Applied XL partnered with STAT, the leading media company reporting on health, science, and medicine, to launch STAT Trials Pulse.

According to the STAT Trials Pulse website:

Last year, over 1.5 million changes occurred in the clinical trials space. Only 8% of them were relevant events. If you’re in investment, strategy or competitive intelligence, separating the relevant from the irrelevant can be hugely time-consuming. That’s where we come in.

I love this idea. A strategy for biotech investors is to anticipate which companies are likely to get approval for their drugs and invest accordingly. Naturally, these investors are reading STAT for daily news, but there is no way for STAT to cover everything.

This is where Applied XL comes into play. It has developed the technology to parse through all of this data; however, the “editorial-driven algorithms” make this impactful. Not all data matters. Without the right inputs (the algorithm), the AI can’t deliver the correct information. However, the AI can learn with the STAT team providing the framework.

I think more b2b media companies should be looking at this type of product. In May, I wrote about creating down-funnel subscriptions products that were not just news subscriptions.

At the core of it is identifying what type of information your readers need beyond just straight reporting and then trying to build that for them. While I zero in on data, it doesn’t have to be that. It could be in-depth research where analysts dig into specific topics, spend time with it, and provide something with more information than anything else available.

So, why don’t more media companies do this?

The simple answer is that it’s hard. Building that sort of a product takes vision and patience. While negative CACs are great, that doesn’t mean that you’re profitable from day one. You need a team of engineers, designers, product managers, and other roles to help to build this. When I spoke with Fuller in September, he admitted FreightWaves wasn’t profitable yet (though he was expecting to reach that point this year).

Even if you’re not dealing with the amount of data that Applied XL and STAT are, determine if there is any unstructured or disorganized information to which you can try and bring order.

One example that I am particularly fond of is The Block. The crypto publication has a data section that aggregates multiple sources. Some of the data come from their research team, but most are just piped in from 3rd-party APIs.

As a user, I could visit the individual sites to get that information. Or, I could go to The Block. But, in this case, The Block is not gating the data. Instead, it’s an ad play with each category having its own sponsor.

However, this fits their objective of bringing the right users to the site. The type of power user who wants all this disparate data is the same person who will likely pay the four to five figures for a license to the research platform. In this case, the data is a marketing and sponsorship tool.

But could The Block also acquire the data directly (rather than relying on 3rd parties) and then make it an additional part of the research subscription? Yes, it likely could. But the decision to do this should be grounded in how much competition there is. In the crypto space, everyone has a data product. Therefore, the better strategy is monetizing the 3rd-party data with advertising and then trying to convert the visitors to the research product. Users pay for data contextualization rather than the data directly.

Nevertheless, this is where I think more b2b operators should be spending some time. What sort of data aggregation can you do for your readers? Is it unstructured data like Applied XL and STAT are working with? Or is it simply creating a clean, single destination for power users to go and analyze? Identifying an opportunity here could be a substantial growth opportunity for niche operators.

Acquiring your job with a local newspaper

Poynter has an interesting story about how more people looking for a new journalism job should consider owning a small newspaper. This part jumps out to me:

Most weeklies have a staff of two to five, including lowly paid full-timers or part-timers. Just like at larger media companies, profit is in ownership. Jim Moser, president of Moser Community Media, estimates a newspaper in a rural Texas county of 15,000 people can bring in $450,000 a year in revenue. “A publisher at a larger weekly can make $85,000 a year, plus bonuses,” he said.

Those figures explain why Mike Hodges, executive director of the Texas Press Association, calls the succession gap a greater threat to Texas journalism than the downshifting economics of the newspaper industry. He said rural journalism is doing all right in the state, but he constantly gets calls from aging owners about to shut down their papers because they can’t find buyers.

I’ve never run a local newspaper like this, so I couldn’t comment on the costs; however, I guess the costs are nowhere near the $450k in revenue that the newspaper could make. You are effectively buying a journalism job that likely pays six figures.

But there’s a problem that many of these newspaper owners—and candidly, many small businesses—need to overcome. Many of these businesses are owned by people who are now trying to retire. And yet, no one wants to manage their assets. The first paragraph in the Poynter story lays it out perfectly:

Her family has owned the paper since the 1940s, and she took over as editor and publisher in 1993. Brown is ready to retire, but her son isn’t interested in pursuing the family business. So she keeps producing her award-winning paper (circulation 1,613) while trying to find someone who will care about her neighbors as much as she does.

These small business owners have two choices without succession plans: never retire or shut down the paper. That presents an exciting opportunity for those that want this to be their next stage in life. However, cobbling together the resources to buy one of these papers might be complicated.

There are a couple of options. The first is, naturally, an SBA loan. I am certainly not an expert on these, so I recommend talking with an SBA specialist. However, another option is something called seller financing.

Essentially, these newspaper owners want to stop working. And they want to fund their retirement, ideally with the sale of their newspaper. So you could treat these owners as the bank and effectively borrow the money from them to buy the asset.

For example, let’s say that a newspaper that generates $450k in revenue will sell for 2x revenue ($900k). Rather than forking over the complete $900k upfront, you could get the seller to finance a percentage of it with a low-interest rate. You now get to pay the seller back over time, but you now own an asset that is likely paying you much more than most journalism jobs.

I make it sound unbelievably easy here, and there is a ton that goes into buying a business, getting financing from the SBA and a seller, but it’s an option. When presented with either never retiring or having to shut down the paper, financing the sale of their publication might be a good strategy for many of these operators.

Jim Iovino, director of NewStart, was right when he told Poynter: “Everyone’s so focused on creating something new, going the startup route. What they don’t understand is it’s going to take them three to five years, probably, if not more, to get to the same level where these newspapers currently are in their community with the trust factor.”

Skipping those early years and buying your way into an opportunity may be better. This is worth exploring in more detail.

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