January 30, 2024

WaPo CEO Should Go Local to Succeed

I’m unsure if I have any freelance writers that read AMO, but if you do and you’re interested in writing about the media business, hit reply. I am looking for people who have some reporting experience, but I am not looking for scoops either. If you’re interested, let me know. Okay, let’s jump in.

There are big changes coming for pubs that send more than 5,000 emails per day. Starting in February, both Google and Yahoo are going to require a number of changes in an effort to cut down on spam. 

Are you ready? 

This is where Omeda has you covered. In their newly released white paper, Omeda breaks down all of the necessary steps to ensure that your emails don’t immediately go to spam. Even with these changes, publishers also need to start thinking hard about how many people mark them as spam because it could have a massive impact on your deliverability. 

Download the full white paper here and then set up time to chat with Omeda. Their reporting can give you a leg up as you continue to scale.

WaPo has a unique local play opportunity

Ben Smith over at Semafor published an in-depth interview with the Washington Post’s new CEO, Sir Will Lewis. He said some things that were certainly unique, such as the “subscription-based model is now waning,” which I disagree with.

But one part worth digging into is when he talked about local news and aggregation. He said:

One of the many things we’re blessed with is that we’re probably one of the few mastheads in America that can help other news organizations and can think about aggregation. The fundamental challenge for the news industry is how, how do you deliver ever more specific verticals — people really, really want to know about the widget industry, but there’s only 1000 of them. How do I charge them enough? This is the fundamental challenge we’re facing and no one’s cracked it yet. We can play at an aggregation level.

A critical part of content strategy in a sophisticated subscription offering is local. So we’re going to have to find ever more innovative ways of not just in D.C., but elsewhere across America, of enabling that to be part of what we do and we’re very early, but we’ll be working with colleagues on how we do that. We’ve had a little innovation project underway out of Kansas, which gave us a bit of a taste of how we could do something significant at scale in local.

It’s nice of him to recognize this because I completely agree. For any number of reasons, the Washington Post could not keep up with The New York Times in its quest to acquire subscribers. While the Post has stagnated, the Times continues to grow quarter after quarter. There’s a good analysis to be done about how The Times effectively recreated the newspaper in digital (games, sports, news), but that’s for another time.

However, the point that Lewis makes in the bolded part is true because WaPo has something most other media companies don’t: Arc XP. This is the CMS that the company has built over the years that it licenses to numerous media companies around the world. And so, the same technology that WaPo uses to run its site is also what many other publishers use. And so Arc XP is how WaPo can play locally.

But what’s the strategy?

In mid-2020, Tony Haile, founding CEO of Chartbeat, wrote a piece for Columbia Journalism Review that has stuck with me since I read it. The problem statement of the piece was this paragraph:

Here’s the Times in 2020: it added 587,000 new subscribers in the first quarter. That’s almost three times the number of total subscribers to the Los Angeles Times. It’s more than 70 percent of the total cumulative subscribers to Gannett’s 260 media properties. The New York Times has more digital subscribers in Dallas–Fort Worth than the Dallas Morning News, more digital subscribers in Seattle than the Seattle Times, more digital subscribers in California than the LA Times or the San Francisco Chronicle

In other words, the Times is gobbling up the vast majority of the people willing to get a subscription. According to the Reuters Institute, there exists a “winner takes most dynamic” in most markets. Since Haile wrote that piece, the median number of subscriptions in the United States went from one to two, which is good. But the reality is, The Times is taking a large percentage of these, leaving the rest for all other pubs.

And we can see that with the additional data point that only 19% of those subscribe to regional/local titles in the United States. There are a lot of reasons that local is dying, but few people paying for subscriptions is one of them.

A big reason is because of perceived value. For $25 every four weeks, you can get The New York Times, Games, Cooking, Wirecutter, and The Athletic. Compare that to a publication like The Dallas Morning News (DMN). For “99¢/day,” you can get a digital subscription. In other words, for ~$30/month, you’re getting news about Dallas. Is it any wonder that The Times is winning?

What Haile ultimately proposes is the creation of a hub-and-spoke network of “skinny bundles” where WaPo acts as the hub and each local publication is a spoke. This brings together two things that NYT does not have the resources to accomplish: local and national news at scale.

Take Dallas, for example. If you live there, you may want to know what’s going on in your city. You may also want to know national news. With a single “skinny bundle” subscription, you’d get access to both DMN and WaPo’s content. It’s called a skinny bundle because it’s not a bundle of all local content; instead, it’s just the publications that matter to you.

You can then take this and spread it to every other local publication out there. LA Times and WaPo could be one subscription. San Francisco Chronicle and WaPo could be another subscription. In every city, WaPo could do a deal whereby it creates another skinny bundle subscription.

Both parties win here. On their own, neither provides comparable value to The New York Times. They may try, but they don’t. However, by working together, each of these local pubs can offer subscribers a bigger bang for their buck. Now when Dallas Morning News promotes its subscription, it can talk about how you’ll get both WaPo and DMN. Put that up against The Times and a prospective subscriber may have to think twice.

And this is why Arc XP is such a pivotal part of this discussion. Since both sites run on this CMS, the transfer of content and subscription management could, theoretically, be much easier. It also makes the value add of using Arc XP stronger because I suspect more local publishers would want to do this sort of skinny bundle. And as more spokes are added to the network, WaPo has more resources to invest in additional reporting, which then serves the entire network.

WaPo’s Will Lewis is going to have a lot of ideas on ways to build the business. And some of it might be to try and go head-to-head with The New York Times on coverage alone. However, if he’s serious about leaning into that concept of aggregation and being a “help to other news organizations,” I think there’s a play that could be helpful to both parties.

Hey, taking a quick break from the newsletter to let you know that on February 29th, I’m heading down to New Orleans for BIMS 2024—a great b2b media event with operators from some of the leading b2b media companies. This event brings together various companies, including Active Interest Media, Endeavor Business Media, FreightWaves, and more. 

If you want to grab your ticket, head to BIMS’ website and pick one up. But hurry… the team tells me tickets are moving fast.

Recurrent’s challenges

Adweek had a really good story last week about Recurrent Ventures and the $300 million it raised from Blackstone. Why, if it had so much money, has it been selling properties, letting people go, and making very few moves?

The crux of the issue is this:

Recurrent Ventures has struggled because the $300 million investment was not structured as a lump sum, but as a line of credit that it could draw down to fund acquisitions, according to four people familiar with its finances. 

But as the economy began to deteriorate that summer, interest rates increased and Recurrent Ventures’ business declined, according to four sources. The shift triggered a series of events, including the restructuring of the two parties’ financial agreement, leaving Recurrent Ventures without functional access to capital.

In other words, it has $300 million, but its hands are so tied that it can’t actually use it. That’s the worst position to be in. However, its issue is a financial one rather than an operational one at first glance. In other words, it can’t continue its core strategy of acquiring brands with the goal of reaching a certain level of scale. Instead, it has to make do with what it has.

But it’s not all negative news. According to one source who spoke on the condition of anonymity, Recurrent generated $80 million in revenue last year and was profitable.

The question for Recurrent is where it goes from here. And without being able to acquire additional brands into its five core categories, it can’t grow. And sure, while it’s profitable, organic growth is going to take time, which is always a problem when you’re private equity owned.

Where I struggle with this business is that it’s unclear what Recurrent’s strategy actually is. It runs a number of home-related brands, which clearly have concrete high-intent advertising potential. It also has a photography-related site, which has a clear buyer profile. But then it runs Futurism and Popular Science, which are interesting, but I suspect are much harder to monetize. Sure, they have traffic, but is that enough?

If I were running this operation, I’d narrow the focus. Are there other interesting acquisition targets in their strongest categories? Identify those and then sell off the other assets. If Blackstone is going to inhibit the brand’s ability to grow through M&A, it needs to get creative. It may not be what Recurrent initially set out to do, but its hands are tied. That’s a tough place to be.

Newsletter will need to transition to web publishing

There is a growing realization amongst newsletter operators that an exclusively sponsorship business has its limits. Launching the “Morning Brew for X” can only work for so long before there is an oversupply of available inventory, pushing ad rates down.

Couple that with the fact that newsletter ads are, in many respects, very basic products and b2b marketers will be able to get better performance from other sources. And so, if these newsletters want to keep up, they’re going to need to focus on capturing both declarative data—who the user is—and behavioral data—what they consume.

Here’s the problem… email is really bad at capturing behavioral data because open rates are irrelevant now. So, how do you get that data? You publish content to a website and drive users to it.

We published a piece about this on Friday for AMO Pro members. If you’re building a newsletter and thinking about the long-term of your business, this piece is for you.

Become an AMO Pro member today to read the full piece.

Thanks so much for reading this week’s AMO. If you have thoughts, hit reply or become an AMO Pro member to join the members-only Slack. Have a wonderful rest of your week.