January 7, 2020

What I See Happening In 2020

Happy New Year, operators! There is a real luxury in taking a couple weeks to recharge, refocus and prepare for a new year. I spent a lot of time thinking about A Media Operator as well, which I’ll be talking about over the next few weeks. If you’re really interested, I’ll give a quick outline at the end of the issue.

Although the concept of the year ending on December 31st being a monumental thing has always been a bit bizarre to me—what’s so significant about that?—it’s interesting to think about what’s going to happen in these 365 days.

I have three specific predictions that I expect to see in 2020.

A lot more niche newsletters are coming

At least, not peak good newsletter. Mark over at Revue asked for my thoughts for the Newsletter Predictions 2020 and this is part of what I offered:

Although it’s in vogue to say we’ve reached peak newsletter, I believe 2020 will see far more newsletters launch, many of which will go on to be successful brands. The not-so-secret secret to all of these new newsletters is that they will all be niche. And many of them will be paid. As media in the center of the barbell continues to tighten, we’ll see additional reporters take the first entrepreneurial step and launch. They’ll be successful specifically because the newsletter is the only way they can engage with their audience. At the same time, we’ll see open rates on many mainstream publisher’s newsletters remain weak because they’re treated as an afterthought. 2020 is the year of dozens of additional niche, expert-led solo newsletters.

Easy for me to say now, especially with platforms like Substack that make launching a newsletter unbelievably easy, but I’d like to expand on it.

I believe that every media company should start as a newsletter for two reasons. First, it’s a relatively low cost way to learn the industry. Second, it allows you to start building a following. But unlike most flyby traffic that might hit your website, these are engaged people.

If you one day launch a bigger media company, perhaps expanding into events or premium content, you’ve got an email list that you’re able to start selling to almost immediately. That means that when your costs start going up—team members, office space, hosting and other types of software, etc.—you’ve also got potential revenue right from the start.

The primary participant in this space will be the entrepreneurial journalists. They will have seen what others have done and decide they have a large enough following to launch their own newsletter.

I also imagine we’ll see a couple of the early ones start to expand, adding a couple of team members to their team. It obviously depends on what niche you’re in, but I see real opportunity for these solo entrepreneur writers to expand into multi-person operations with additional lines of business.

The second path, which I would love to see, is established publishers starting to incubate these newsletters. If your top journalist comes to you and says she’s going to leave because she want to launch a paid newsletter on Substack, wouldn’t it be better to try and keep her and her newsletter?

Essentially, you’d be going into business with an employee. The newsletter becomes almost co-owned by the media company and the journalist. The journalist provides the expertise and the writing; the publisher provides the operational support and a far larger audience. You split the revenue.

I haven’t fully fleshed out this idea, but if the concept of work is evolving and everyone has a side hustle, why can’t your side hustle be connected to your full time job? I know it’s not a normal way to think about side hustles and work, but I don’t think it’s good for publishers to see their entrepreneurial writers leave.

This would serve publishers well because I believe many newsletters are still pretty awful. For the publishers that still think of newsletters as an afterthought—if you’re still using an RSS feed, I imagine you’re not spending much time thinking about your newsletters—open rates and engagement will be weak.

Pubs will get more intelligent about commerce

Publishers have been getting more excited about commerce revenue for a while now and I don’t see that slowing down.

On the contrary, for those that have been focused on commerce for a while, the time has come for them to get a lot smarter about their commerce plans. There are a couple of steps to this process.

Step 1: Go from 3rd party affiliate marketing to 1st party

Currently, many pubs rely on middlemen to handle their affiliate marketing. It’s incredibly easy to put Skimlinks (for example) onto your site and then pretty quickly start generating affiliate revenue.

This is passive, though. And how much of the revenue is Skimlinks getting?

What pubs will start to do is diving deep into the data. They’ll look at what products are selling and what pages are doing the most business. They’ll then reach out to those companies and negotiate exclusive rates. And, at the same time, these publishers will produce even more content that drive the most revenue.

Let’s say that through an affiliate network, there’s a 15% commission earned. The publisher is only getting 60% of that whereas the network gets the other 40%. When you’re small, this is how you’re able to get a lot of different products on your site.

But as you grow and start generating serious revenue for these partners, you’re then able to go back to them and work out opportunities for direct, attributable revenue. Maybe the 15% goes directly to you now rather than being split.

This is what BuzzFeed is doing. In his blog post about revenue, Jonah Peretti said:

The two most important players in this chain are the publisher who inspired a consumer to take action and the companies that actually deliver the product, in this case the hotel and airline. But most of the profit is captured by digital middlemen who didn’t create much value.

In graphic form, it looks like this:


The publisher does the work, but Google and, in this case, the online travel agency make the money. How is that fair?

Instead, by working out deals directly with the vendors, you’re able to cut out the middleman and make much more money. Here’s what that looks like from Peretti:


But the most intelligent publishers won’t stop here.

Step 2: Create your own products

Here is where the publisher can actually partner with product companies to create white labeled versions. Again, BuzzFeed has done a great job here. In his blog post, Peretti wrote:

Our audience can buy the Tasty line of McCormick spices featured in our videos. Scott’s Miracle-Gro now has a direct relationship with its consumer thanks to Lunarly, a plant subscription service we developed together during a sprint.

BuzzFeed isn’t the only one already doing this. Complex has had tremendous success with its “Hot Ones” franchise.

According to Digiday, hot sauce is a huge business for Complex:

Currently, First We Feast has three hot sauces available for purchase through a partnership with Heatonist: “The Last Dab Reduxx,” “Los Calientes” and “The Classic.” Between these three sauces and others that have been rotated in and out of sale, Complex Networks is on track to do more than $7 million in hot sauce sales in 2018, according to Rich Antoniello, CEO of Complex Networks. This does not include revenue from sales of other show merchandise such as host Sean Evans-inspired “Spice Lord” t-shirts.

While this is obviously difficult to do and takes considerable time, as you start to learn more about what your audience is buying and what they want, you’re in a place to start creating your own goods for them to buy.

Possible Part 3: Could publishers be buyers of DTC?

I don’t know if this is going to happen in 2020, but with customer acquisition costs continuing to increase for many DTC brands, I wonder at what point we will start to see some of these businesses begin failing.

Could some of the larger, commerce-driven publishers pick up one of these DTC brands? Give it a rebrand tied more to the publisher and then drive your audience to it. Customer acquisition costs should be much lower, which could help an unprofitable commerce business become profitable.

Again, this is a stretch and I don’t have a formula on why you’d want to buy rather than build, but it’s certainly an interesting thing to think about.

If you want to spend more time reading about this type of business, read this piece by David Perell and Austin Rief from Morning Brew.

Subscriptions are going to start weakening

Subscription revenue was seriously the topic of 2019. Everyone wanted to know how they could start generating more revenue from their users.

For many publishers, especially the largest and the nichiest, there was real opportunity to be had.

But I think that across the board, we’re going to see some subscriptions begin to struggle for a variety of reasons. It boils down to two reasons:

  1. Publishers offered cheap rates for first year subscribers, but second year rates will shock consumers.
  2. People have so many subscriptions, they’re going to start getting pickier.

Take, for example, The New York Times. It had a special where new subs only needed to pay $1/week for an entire year. If, suddenly, that jumps to the regular rate of $15, are people going to be comfortable paying nearly 4x more? It’s hard to say.

Then there are the number of subs. In my opinion, there are really only three or four media subscriptions that a person needs:

  1. National news: The New York Times, The Wall Street Journal, Financial Times and Washington Post will win the most here.
  2. Work news: This is a publication that is related to your work. It goes on your corporate card and helps keep you informed.
  3. Hobby subscription: I like the Knicks, so I subscribe to The Athletic. It’s a hobby, so I’m comfortable paying $60/year.

Depending on if a local area has a good news source will dictate if a subscriber adds a fourth subscription to the mix. As a quick aside, I think there’s an opportunity here for really strong, local newsletters.

Beyond this, how many other subscriptions are people going to pay for? In case you’re curious, there’s a reason I continue coming back to b2b media companies as the most interesting opportunity in media today. If we know a third of subscriptions will be related to work, there’s an opportunity to build a business there.

Let’s sum it up…

In 2020, I believe three things are going to happen.

We’re going to see dozens, if not hundreds, of newsletters launch that are focused on specific audiences. We’re a long way from being at peak newsletter and, honestly, I don’t believe we’ll ever hit it so long as there are writers who are covering their industry in the right way.

We’re going to see publishers start to get much smarter with their commerce. If they’re not already doing it, they’ll start working out exclusive deals with brands that are selling particularly well with their audiences. And more are going to start launching their own products.

Finally, subscriptions are going to struggle. As these first year subscriptions start to renew, we’re going to see increased churn. There are only so many subscriptions that one person needs and frankly, not enough publishers are thinking about how to make their subscription a must have.

What do you think? What do you expect to happen this year in media. Hit reply and let me know your thoughts.