No. 320: It’s Not An Antitrust Problem

The New York Times recently published a report [1] that suggested that Google made $4,700,000,000 on the backs of local news publishers in 2018. This figure has since come under fire but, regardless of its accuracy, the figure frames an argument that you’ll see more of. Are Google and Facebook to blame for digital media’s decline? The answer isn’t as direct as you’d anticipate. And will solutions like HR 2054 properly address the concerns of traditional media? That answer is no.

The HR 2054 bill: To provide a temporary safe harbor for the publishers of online content to collectively negotiate with dominant online platforms regarding the terms on which their content may be distributed.

For the old guard, the problem is technological. But not in the way that they’re thinking. Consider the number of clicks between discovery and a confirmed subscription for a publisher like the Atlanta Journal-Constitution (no seriously, try it). The number ranges between 11 and 17 total clicks. The typical eCommerce site accomplishes the same transaction in 2-5 clicks. Google and Facebook are not the culprits here. Understanding modern commerce ecosystem is the problem.

Digital publishing CEO Erika Nardini has gone on record as saying that, for Barstool Sports, she hires employees that are digital-natives. The idea of being from the internet, not on the internet is a concept that is, in itself, revolutionary. These digital native individuals tend to see things differently, according to Nardini. Certain ideals and processes are native to them. And it enhances their business: Barstool has between 5-7 revenue streams at any given time. This basic understanding of modern media and consumerism can be the difference between seeing FAANG (Facebook, Amazon, Apple, Netflix, and Google) as allies or as the threats.

The digital-native publisher optimizes their offering, in partnership with these platforms, to grow their reach. But this far different than blindly relying upon them for traffic or search juice. But for every Bleacher Report, The Athletic, or Barstool Sports, there is a media company that’s failed to discern a suitable path forward. For digital media, it isn’t solely about reach, it’s more than ever about depth. Depth, more so than reach, is how publishers are rewarded today. Bleacher Report’s growth doesn’t happen without FAANG, the same platforms that traditional publishers decry as the culprit of their shrinking revenues. Look no further than Bleacher Report’s social media statistics. The sports news site uses social media as a value-add rather than the traditional means for social in the media industry: an RSS feed.

2PM Data: Bleacher Report and FAANG

Most popular Twitter accounts worldwide as of February 2019 | Source: Axios, Crowdtangle
Leading brands in the United States on social media in 2018 | Source: Shareablee
Leading brands in the United States on social media in 2018, based on user engagement on owned video content | Source: Shareablee

In a recent report, Digiday estimated that Bleacher Report is due to generate over $200 million in revenue in 2019. Led by new CEO Howard Mittman, Bleacher Report (B/R) has methodically adopted a linear commerce strategy to differentiate themselves from others in the market. Here’s a key paragraph from the Digiday report [2]:

Bleacher Report is weaving in commerce with custom apparel and other merchandise that the company sells to fans both online and through its events. For the upcoming FIFA Women’s World Cup, Bleacher Report is working with female artists to design nine unisex soccer jerseys, which people will be able to purchase on Bleacher Report’s site. Bleacher Report’s commerce business is still in its early stages, with revenue up 500% year over year, said the spokesperson.

Though Mittman is against paywalling content, the Turner Broadcasting-owned Bleacher Report has introduced a growing number of opportunities for readers to transact through the company’s channels. A key to these commerce opportunities? Maintaining brand presences wherever their target demographic’s attention is held. In this way, Google and Facebook have become assets rather than liabilities. This is a common refrain amongst digitally-native media companies and the legacy-publishers who’ve adopted these best practices.

Old Dogs, New Tricks

The New York Times leads in this category. Though the 2016 election cycle garners a lot of the attention for the publisher’s subscription performance, growth began before these key election months and has far-exceeded expectations through 2018 and into 2019. If nothing else, this shows that old dogs can learn new tricks.

Number of paid subscribers to New York Times Company’s digital only news product, Q1 2014 to Q1 2019 | Source: New York Times
While some publishers decry Google and Facebook’s presence as barriers to their survival, The New York Times has fostered a cross-promotional catalogue of high-visibility media experiences, brand statements, and enhanced utilities. This has helped to elevate the publisher to a KPI beyond eyeballs and clicks, alone. NYT has developed a level of digital brand affinity that, in turn, has grown the company’s revenue verticals. In short, the Times deemphasized reach, alone, in favor of fostering a readership that sought a deeper consumer relationships with their publisher.

From: Linear Commerce

The digital economy rewards the companies that work along the line that separates traditional digital media and traditional eCommerce.A great product needs an organic and impassioned audience. Captive audiences need products and services to offer the community. Linear commerce is the understanding that digital media and traditional online retail will eventually meet at the center – along the line – the most efficient path for growth.

So why do other publishers seem to ignore this shift? In a recent conversation with CNN, the Editor of the Atlanta Journal Constitution (AJC) made a striking statement; he cites reach, he ignores depth. Here’s Kevin Riley on his concerns:

At the Atlanta Journal-Constitution, our audience has never been larger than it is today. And I think that is true of many, many newspapers when you combine the print audience and the massive digital audience that we can all garner in our markets. So does it make sense, that at a time when our audience is at our biggest point, our financial difficulties are at their most difficult point. To me that doesn’t make sense.

But it does make sense. And it explains the broader disconnect that exists in business, as a whole. Publishers, like many in retail, view their legacy products as dutiful purchases rather than market-driven, affinity-based products. Ben Thompson wrote a brilliant antitrust breakdown in “Tech and Antitrust.” Thompson concluded with the following thoughts on the potential of Facebook or Amazon experiencing legitimate antitrust scrutiny:

At the end of the day tech companies are powerful because consumers like them, not because they are the only option. Consumer welfare still matters, both in a court of law and in the court of public opinion.

Below is a comparison between a newspaper in a top 20 market (blue) and an independent publisher in the same market (orange). The difference couldn’t be more striking, the orange company optimizes for brand affinity, utility, and captive attention. The blue company optimizes for tradition-driven utility.

Web Smith on Twitter

Blue (legacy to digital): 1/ two revenue sources: display, subscriptions 2/ employs 200+ 3/ ownership group is public and trading at historical lows. Orange (digitally-native): 1/ four revenue sources: display, native, affiliate, DTC 2/ employs ~12 3/ privately-held

Across America’s second tier of metropolitan areas, legacy publishers like the Atlanta Journal-Constitution or Ohio’s Columbus Dispatch market to potential customers in a lackluster manner, at best. Like many news bureaus across the country, the contributions of these publishers are critical to the good of the public. As such, the typical value proposition seems to be duty to, rather than affinity for the publisher.

True, the dance between commerce and local news is different than what you’d find in sports or lifestyle but that doesn’t mean that the principles don’t apply. The New York Times has done a masterful job of reducing purchase friction (CRO), for instance. A casual reader can subscribe in 3-5 clicks. The publisher has also taken measures to widen and shorten their marketing funnels while staying true to their core mission. Consumers can learn about their product and convert in a much shorter time.

Traditional newspapers must begin to incorporate the ideas of digitally-native thinkers or viewership, clicks, and subscriptions will continue to suffer. The first step would be to examine their own platforms before dissecting the merits of another. Attacking Google, Facebook, Apple in the name of antitrust scrutiny distracts publishers from the KPIs that will determine present and future. They must operate as affinity-based businesses, now. Duty to newspapers perished with broadband access. But that doesn’t mean that business has to perish with it. What these editors and publishing executives will find is that the truth is less the 17 clicks away.

Read the No. 320 curation here.

Report by Web Smith | About 2PM

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