June 26, 2020
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The Best Opportunity in Media Today is B2B

Even before COVID-19 wrecked the media business, there were more negative pieces about the state of media than there were positive. With so many publishers losing their monopoly over the creation and distribution of content coupled with an over reliance on programmatic advertising controlled by other parties, the revenue opportunities in media have been getting smaller.

But there is a community of operators out there that, despite the pandemic, have remained profitable. They never scaled faster than made sense and were very disciplined with their business models (i.e. few if any are spending millions on video). I even know some that are expanding, taking this opportunity to move into related niches. If my subject line didn’t tip it off, I’m talking about b2b media companies.

There are a variety of reasons for this, but I believe there are two core ones.

First, unlike many of the larger publications out there that are trying to serve broad audiences at the same time, b2b publishers tend to have a very focused approach. They cover what their specific audience needs and that’s it. If the publication serves the solar industry, the topics important to those people are all that will be discussed.

Second, the most successful ones never made the mistake of giving up control of audience data. I was listening to Brian Morrisey from Digiday talk during their Publishing Summit earlier this week and he said:

I always said, I call it the original sin of internet media was separating the audience data from the media impression because it automatically, it inevitably commoditized ad inventory. When you can just chase a cookie around the internet, the pendulum swung too far to simply the audience data versus the media environment.

That didn’t happen to many of the successful b2b publishers because their ad products were based on their data rather than third party data. By keeping control of their data and it being robust—many collect multiple form fields when a user signs up—publishers could provide exact targeting to advertisers.

On that same point, the types of ad offerings were more focused. They were closer to the transaction, you could say, because their models were performance based. We’ve discussed this before, but the reason Facebook and Google control so much of the ad budget is because it’s easy for marketers to track ROI. The same is true with these b2b publishers; the demand generation business meant that b2b marketers would know if the program worked.

The thing is, there is a big divide between legacy b2b media and the newer, more nimble digital b2b that has popped up over the past 10-15 years.

Legacy b2b is stuck in a different era. There are still b2b media companies that have horrible mobile experiences. For many, they’re still working on those hefty print publications that used to generate great revenue. This comes with inherent fixed costs that make it difficult for them to adapt and be cash flow positive.

The other problem? Legacy b2b media often forgot about the digital aspect of the business and focused most of their energy on the events business. I’ve always been a fan of this model, but anytime a single source of revenue becomes the life blood of your business, you’re going to run into problems. Informa, for example, acquired dozens of these b2b companies, but they focused all their energy on growing the expo business. The digital aspects were forgotten about.

I was having a conversation with an operator last week and he said something that really spoke to the opportunity in b2b media:

So much of b2b is lazy… If you come in straight digital without legacy employees and assets, you can shake it up relatively quick. The old/established don’t change quickly based on my experience.

It’s true. I remember some early conversations in my career (and I’m not that old yet) where people were lamenting the good old days when we still published a reference book. Only after those people were pushed aside and an executive with a complete digital focus came in did the business start to turn around.

This is where the opportunity is. This is where an entrepreneurial operator should focus their efforts. Don’t look for scale media plays. Instead, find an industry that is interesting and growing—or already worth hundreds of billions if not trillions—and build a lean, digitally-focused publication.

And yet, I don’t see many people doing that. I have a sneaky suspicion why.

In my opinion, the formula for b2b media is very straightforward. Serve your target audience by covering their industry, collect data about them so you know more than just their email, sell advertising to companies targeting those people in that industry and then use that capital to further invest in serving the audience.

That takes a tremendous amount of discipline and focus. And in the early years, it can take a lot of time.

Compare that to many of the frothier media companies over the past decade, which have focused on vanity analytics like virality. Their focus was always top line audience growth. Revenue was all that mattered without a care for the cost of said revenue. It is easier to not have focus. But easy isn’t what wins in media.

Differentiating media

One of the problems I’ve found with much of legacy media is that their content is just not good. One of the bad raps that b2b media gets is that it just serves as a mouth piece for the industry. While I know this isn’t true explicitly, the soft reporting I see from many publishers focuses too much on what happened rather than digging deeper into why something matters.

I have found very few niches that are served by a media company that provides context to the reported news. The questions I’d want to see asked are:

  • Why does this news matter?
  • Who is impacted by it? Positively or negatively.
  • What are the long-term ramifications of the news

When it comes to charging people for content, it’s important to determine what differentiates your media from someone else’s. By helping people connect the dots and understand the bigger ramifications of a single piece of news, you suddenly are serving a different purpose for a person that is likely to pay for your content.

Although not truly b2b, I find Axios does a good job explaining why something is important. For any niche, if you can be part news/part analysis in your reporting, you’ll have a leg up on organizations that have just focused only on the basic reporting of what’s happened.

How I would launch a b2b media company

I imagine someday in the future, I will launch a b2b media company. I think of all the types of media, it’s the one that speaks to me the most. If I were to do it, this is how I would launch. Although this isn’t the only way to launch, I think it makes the most sense and is the most cost conscious out there.

Identifying the niche

Depending on whether you come from the content side or the business side likely dictates how you might identify a possible niche to move into. On the content side, it’s possible that you’ve already reported on the topic. I’ve seen journalists that have a niche beat at a large publication join a small publication dedicated to that niche.

However, you’re not just looking to identify a niche based on the content. There are a few other criteria that need to be identified.

First, is the industry growing? It’s unlikely that I would look to launch a media company covering horse and buggies (for an extreme example). However, if the industry is growing or is already very large and doesn’t appear to be shrinking, there’s an opportunity there.

Second, is it specific enough? It’s natural to want to identify a big niche, but I find that the smaller and tighter you go, the better the opportunity is. Remember, you’re going at this from a small cost structure perspective. Besides, if you perfect the first very specific niche, you can expand to other related industries. That’s what Aging Media did.

Third, is there an ad market already? I believe b2b ads make sense and is a huge opportunity for operators. Are there already companies that advertise in the space? It helps if there’s a legacy brand covering the industry because they probably have some advertisers that you know are looking to grow their business. Additionally, there are plenty of events out there that aren’t seeing any growth. Find all the sponsors there.

If you’ve got very specific, growing industry that appears to have a healthy marketing spend, you’ve got the right niche. Even if the ad market is small, if the industry is growing fast, there’s still an opportunity. Much of media is about keeping costs under control. You can grow with your industry, especially if you’re only a few people when you start off.

Launching the newsletter

I have not hidden my belief that every media company should start as a newsletter. In that piece, I wrote:

I believe that, to do a newsletter well, it’s important to think about it as its own standalone product. Said another way, if your audience could only engage with your newsletter, how would you create it?

This is actually how to think about launching a new media company. A newsletter is a standalone product that can be a good place to start, especially in the niche world. Let’s use an example…

You identify the cannabis business industry as a niche you want to enter. Rather than launching with journalists and a large team, you launch a weekly newsletter. We’ll call it NewCannabisWeekly.

In five minutes or less, you sum up the important news of the week and provide context. But because you don’t have anywhere to send them, you have to do a good job from start-to-finish keeping them engaged with the newsletter.

There are two benefits here.

First, you’re building a product that allows you to retain users. Unlike a news site, which publishes and is open to anyone, here you are actively acquiring users. That’ll give you a strong foundation to work with as you are starting to expand your media business.

Second, the product is inherently engaging. You know you’ve succeeded if the open rates stay consistently high. If they start dipping, you’ve got a problem that you probably want to identify and fix.

It’s certainly harder to build a newsletter without having the added benefit of a website that gets a bunch of traffic. However, by having that really deep focus, you can keep costs really tight.

At this point, there are likely one or two of you. If you’re on the content side, you can likely report and do the business operations. If you’re coming at it from my side, which is the business approach, you want to find an expert to handle the content side. While that’s going on, the business person should be marketing the newsletter in communities where your target audience exists and finding potential sponsors.

You want to start generating revenue at this point; it’s imperative.

Expanding

I believe that there is a right and wrong way to raise money for media. The wrong is to continue raising larger and larger rounds, thinking that it can get you to a scale where you can compete with the platforms. It can’t. That’s a losing game from the start.

The right way is to raise a single round to help you get the necessary resources so that you can then reach profitability in a few years. For the most part, we want to grow with cash flow, but that early round of money can be very helpful.

Back in December, I wrote a bit about this:

Let that last number sink in… Industry Dive raised less than $500,000 from angel investors. Seven years later, they sold at a supposed valuation of $70 million. It’s incredible.

What all of these companies did was raise a round once or twice, invested it in the business and focused on generating profits. They didn’t go back to the well for more drugs, I mean, capital.

I imagine the early years were difficult. Growth was likely slow. But year after year, they continued to build on the previous year’s successes. Skift does over $10 million in revenue. Morning Brew did $13-14 million in revenue this year. Industry Dive did over $22 million. All profitable ventures.

Find smart investors that you trust, raise a single round and then get to work. Use that money to push you to breakeven. It’s when you start going back to the well for more money—not because you want to but because you need to—that things turn bad.

In my opinion, this is the dream scenario. Raise enough money to give you a couple years and then fight like hell to get to break even. Obviously, every dollar you bring in after the fundraising event just lengthens your runway. Think about this investment as the fuel you need to get one place: profitable.

With that investment, I would want to expand the content team. Depending on how large the industry is, that could mean an additional reporter, an editor, or even a research analyst. Part of what is going to differentiate our media company is that we can both report on what happened and provide analysis on why it matters.

At this point, I can’t go any deeper. Once you’ve raised that money and you’re operating, each b2b company will be different. Some will find a ton of demand for advertising. Others might decide to lean into subscriptions earlier on. There’s no right or wrong answer so long as you don’t lean into any single revenue source exclusively. Diversification is the name of the game.

To sum up…

Unlike other sectors of media, b2b media remains relatively unchanged in the grand scheme of things. A lot of the larger publications are still dealing with large, fixed costs from when they were print publications. Some are still printing.

An operator that comes into it without all those liabilities can build a very cost-friendly business that has the ability to grow into something very profitable.

Although b2b media gets a bad reputation for being boring, I believe it is the best opportunity in media today. I can almost guarantee that when the time comes for me to launch my own media company, I’ll pick a very specific industry that is growing with some baked-in ad demand.

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