October 8, 2019

The Case for Journalists Understanding the Business

Matt Skibinski over at The Lenfest Institute asked an important question. If you had to pick one new digital subscriber or 48,000 pageviews, which would you choose?

Ultimately, he broke down why journalists need to understand the “unit economics” of digital news.

What they don’t know are the answers to some important questions, like: How much revenue does a typical article I write generate from advertising? What if it goes viral? Is it better for my article to get lots of page views or for it to attract digital subscribers? How do those two goals relate? After all, the coverage that generates the most clicks may by completely different from the stories that attract subscribers.

It’s time for the news industry to have a clear grasp on the unit economics of journalism content. And while we don’t yet have all of the answers, some of the research and metrics we’ve gathered to date can point us in the right direction. 

If these discussions happened, I would wager that most of the coverage that comes out of these media companies would be drastically different. The only way to circulate this conversation, though, is to really understand the value of a user. This is a lot easier said than done, especially when you’re looking at revenue channels in a competitive rather than complementary fashion.

How do you determine the answer? Skibinksi shared this case study that’s worth breaking down:


Over the course of a subscriber’s life, Publisher A will earn $345 simply from the subscription. The RPM of programmatic ads on the site is $7.16. Therefore, if Publisher A can get one new subscriber for every 48,000 page views—a 0.0021% conversion rate—the publisher has reached break even.

When looking at the above slide, you would obviously prioritize getting subscriptions rather than advertising. Yet, many don’t do this. Why?

It’s hard.

Think about the media companies that have raised hundreds of millions in venture capital. They did that on the back of scale. Most VCs wouldn’t be excited about 4,000 PVs per article. But if you can get 100,000, that’s exciting.

Unfortunately, that becomes a race to the bottom. The type of content people are willing to pay for is vastly different than the content people are simply willing to read. And when it’s the difference between getting that next big round or having to go through the day-to-day slog of running a media business, it’s easier to prioritize articles that get a ton of pageviews.

Back in August, I talked about The Shorenstein Center’s report called the Digital Pay-Meter Playbook (which these findings also come from) and discussed how people were willing to pay for primary news. First from the report:

According the publishers surveyed, users who view local news appear to be 2-5 times more likely to subscribe than those who view national and wire-sourced stories. Of news organizations studied, publishers that produce more local (and non-wire-sourced) stories tended to generate greater subscription sales.

And then from me:

This is actually an interesting piece of information that gives me hope for local publications. Many media companies, in their quest to chase the almighty ad dollar, prioritized a greater number of articles rather than focusing in on quality reporting. And if you think about the publishers that have done a good job building a thriving subscription business, it’s those that invest heavily in journalists.

If a journalist writes another story about the impeachment of Donald Trump, it might get pageviews. Politics always gets pageviews. However, every media company is writing about that story, so it’s unlikely that there will be too much that’s unique.

On the other hand, if a journalist writes an important story that is local or more niche, it’ll get fewer readers, but those readers will value that content far more. Valuing content is the key for a reader to want to open their wallets, but they’re only going to value the content that is 10x better.

I would recommend reading the entire piece from Skibinski because it’s definitely worth it. I want to focus on how to get everyone bought in.

Uniting your organization

We now agree that subscriptions are more important and we understand the best way to build a subscription business is to focus in on high-quality primary news rather than reporting on what everyone else reports on.

Why, then, don’t more journalists understand how the business is doing?

In my opinion, this has to do with the whole wall between editorial and the business side. To be clear, that wall represents the ethical standards of journalists and we shouldn’t be trying to tear it down.

However, we have to go back and think about what that wall is meant to stand for. Journalists should be reporting on stories without interference from important advertising partners. As a reader, how can we trust a story if we know the advertising partner was able to manipulate the journalist because of the business relationship?

The wall doesn’t have to mean that journalists don’t know anything about how the business is doing. Sometimes I think publishers are a little too paternalistic with journalists and forget that we’re all rationale adults. We should be sharing how the business is doing—is ad revenue up or down, how many new subscribers did we get, how did that event do, etc.

Yet, having that conversation has to be done correctly because we don’t want to jeopardize those ethics. Here’s how I’d do it. Focus on delivering data that is focused on the type of revenue rather than which company or person is individually responsible.

Have your analytics team build out a few dashboards.

Subscriber vs. Advertiser Dashboard:

  • Value of a subscription
  • Ad yield from 1,000 pageviews
  • Average # of pageviews per article
  • # of Required pageviews to equal 1 subscriber

Subscriber Growth by day or week:

  • Gross new subscribers and where on the site
  • Churned subscribers
  • Net new subscribers

Subscriber Engagement:

  • What stories subscribers are most engaged with total pageviews
  • What stories subscribers are least engaged with total pageviews

None of this data says anything that would interfere in the journalist’s ability to ethically do their job. However, what this data would show is the type of stories audiences really do care about and over time, we’d see more of those and less of the rehashed impeachment stories no one wants to read about.

This is similar to how The Athletic does it (minus the advertising). A primary metric that they track is the number of subscribers following a specific team that read a story about a specific team. If it’s high, it’s likely an engaging story. Caring about what your subscribers are interested in is key to the entire organization doing its job appropriately.

But the only way this can be done is if the entire organization buys in. Your head of revenue needs to understand the true value of a user and prioritize what maximizes revenue. And the journalists should be encouraged to write for subscribers since that will likely produce the best outcome for the business.

Quartz losing money

The New York Times did a story on the “shake-up” at Quartz where Kevin Delaney was stepping down as CEO and Zach Seward was stepping up.

But what really jumped out was how much money Quartz is losing:

According to financial filings, Quartz lost more than $16 million on nearly $12 million in revenue through the first six months of this year, partly because of difficulties in the online ad market. Google and Facebook together take more than 60 percent of all online advertising dollars, making it difficult for digital publishers, even those with robust readerships, to succeed.

I think it’s easy to blame this on Google and Facebook, but there’s a deeper problem here.

When Quartz launched in 2012, it was really innovative. Every other publisher was packing their site with little, IAB-approved advertisements. Quartz said no to that and rolled out beautiful, high-impact advertisements. It also invested in its custom content studio and did a good job of blending that into the experience so that readers were aware of what they were reading and partners got a good ROI.

Fast forward to today and none of that is unique anymore. Vox has taken that high-impact advertising and made it into a scale business with its Concert product. And every publisher and their mother has an in-house studio to produce custom content for partners.

Where once Quartz was innovative, it now was in the same position that most medium-sized publishers that generated cash from advertising.

Quartz did what a lot of other publishers are trying and introduced a paywall, but that apparently hasn’t been going well. Business Insider did a piece on the membership strategy last month:

Some insiders said the membership program felt rushed, that they were unclear on the strategy, and that the criteria for which articles would be free and which members-only felt arbitrary. New Field Guides came out each week and tackled diverse subjects from the future of vaping to the rise of China, which is fine for a general-interest business publication, but raised doubts about whether the content was specific enough to compel people to subscribe.

Emphasis mine. But I think it is an important emphasis. To encourage a user to subscribe, you have to offer something that is 10x better than everyone else. (Not my line. I heard it from Jessica Lessin over at The Information.) Doing generalist, consumer business news isn’t enough to get people to fork over cash. I said it above: what a user is willing to pay for is different than what they’re willing to invest time in reading.

The other problem that Business Insider reported on was that pricing was too aggressive. Quartz viewed itself in the same category as top-tier business publications and priced itself accordingly:

Quartz set its price close to that of premium-priced The New York Times and The New Yorker and double that of its former sister publication The Atlantic, which just launched an annual subscription for $50 a year, and five times what Vanity Fair and Wired charged at launch.

“Because it’s not B2B and not robust enough like the Times, it was caught in this limbo,” one insider said.

Quartz’s parent company, Uzabase, said it intends on investing an additional $18 million into growing the business. Since Uzabase releases public results, we’ll be able to easily follow along.

Group Nine buys Popsugar

As we all predicted, Group Nine Media is buying PopSugar, reported by The Wall Street Journal.

The all-stock deal values PopSugar at more than $300 million, according to people familiar with the matter, and will give its shareholders more than 30% ownership of the combined company, which will keep the Group Nine Media name. Group Nine’s shareholders will own the rest.

Group Nine—whose properties include The Dodo, a digital outlet focused on animal stories and videos, and news destination NowThis—was valued at more than $600 million in the deal, the people said. … The combined company is worth about $1 billion, according to a person familiar with the matter.

According to The Wall Street Journal, PopSugar was expected to have revenue of $100 million this year, so was acquired at the low range of the 3-7x multiple that has typically been the case.

The argument for these deals is that additional scale is required to reach profitability. According to the memo Ben Lerer, CEO of Group Nine, sent, PopSugar is profitable (not sure how much), which is rare for any of the companies being bought these days. If you add in some corporate synergies—reduction in infrastructure costs is what they say—and suddenly the combined entity should be profitable according to their logic.

But what is most interesting to me is that this is the third week in a row where two media companies joined together with mostly stock as the purchasing currency. Shareholders are trading in their shares of PopSugar for shares of Group Nine Media and hoping that there is a liquidation event on the horizon for this larger media company.

Investors are just kicking the can down the road. At some point, investors are going to want to see some sort of a liquidation event. They’re going to want their cash back one way or the other.

The problem should be obvious. The massive media conglomerates are not looking to buy money-losing digital media businesses. The buyers tend to be public companies and it’s hard to tell shareholders that you’re going to spend over a billion dollars on something that is losing money.

More so, why buy today what you can buy tomorrow for far cheaper? It is definitely a buyer’s market right now and that’s not going to change for some time.

What comes next?

All eyes are now on Buzzfeed. Despite Jonah Peretti being the one to really push the idea of consolidation, Buzzfeed has been quiet. I am curious to see what they purchase.

I am also curious what comes next. When Buzzfeed was riding high a couple years ago, there were talks that they might try to go public. As these companies merge, does that become a possibility? The public markets have clearly cooled to the idea of money-losing enterprises, but maybe these mergers can help them get profitable? Is it enough to justify billion dollar valuations? There are a lot of unknowns.

Hopefully media executives have learned that using venture capital to rapidly scale a media business is probably not the best course of action. But let’s be real… In a few years, when all of this is forgotten, greed will take over and we’ll have a new slew of high-flying media businesses.