For Publishers, Digital Innovation Is the Solution, not the Problem.

Three things publishing companies need to get right in order to make the transition into digital.

Aaron Shapiro
August 27, 2009

In the old days, most of the value of a given media outlet came from controlling limited distribution and serving up great content. Media properties generally competed within a single distribution channel. So, while HGTV and a do-it-yourself magazine like This Old House provided similar content, they didn’t directly compete with each other.

Today, every media entity is putting its content online to join a limitless world of free content from bloggers, startups, and advertisers looking to build direct relationships with consumers. This Old House and other do-it-yourself magazines now have to worry about, Internet pure plays like, Home Depot’s own content offerings, hundreds of hobbyist blogs, and one another.

In this new environment, with virtually no barriers to entry and limitless shelf space, supply for advertising is rapidly outpacing demand, and CPMs (cost per thousand viewers) are plummeting. The fungible nature of aggregation makes the situation even more difficult: Ad networks can charge CPMs of less than a dollar to reach the same audience that leading media sites charge 10 to 20 times as much to reach. And while publishers could easily charge consumers for their wares on paper, vastly expanded shelf space has made it extremely difficult to charge for content online.

So media companies — and publishers in particular — are in a bind: It’s harder than ever to attract users online, with far more competition than they’re accustomed to; consumers as a rule will not pay for the content these companies produce; and advertisers place less value on the audience that digital properties attract. What’s the solution?

At Huge, we track successful media sites carefully — indeed, we’re fortunate enough to have designed many of them — and we have found three key ingredients that are crucial to success.

An Innovative Business Model.

Many Web properties think of the business model as an afterthought — if you get the traffic, money will follow. But in today’s environment, that’s not the case; witness, for example, the recent layoffs at MySpace. This means that companies must first develop an advertising model that works online and then look to alternative revenue streams such as mobile, digital readers, marketing services, and paid content.

The primary driver for advertising effectiveness is relevance: placing ads next to related content. Google’s search engine is famous for this, but other media companies are learning to do the same. For example, if you are an appliance manufacturer like Electrolux, it’s a very compelling proposition to be located next to an online article that showcases new kitchen designs. You know that everyone reading the article is close to making a purchase decision, and it’s a reasonable bet that your ad can influence a specific purchase at that moment.

The second strategy for effective digital advertising is the use of formats that provide an immersive brand experience that will also be embraced by fickle Web audiences. For example, consider Hulu, which is a big success in large part because of the way it handles ads: They appear as 15- second interstitials in the middle of a 30-minute TV show, with a countdown clock that lets viewers see how many seconds are left before the ad is over. In other words, Hulu is telling viewers that it knows the ads are annoying, but they will soon be over. It takes a very innovative media executive to agree to embrace that kind of ad model.

A Focus on Users.

Too often, we see publishers approach Web content the same way they would a magazine — with a focus on content they think readers would enjoy in the context of the captive environment of flipping through pages. But on the Web, users care about only one thing: getting content that meets their specific need.

This requires an entirely new editorial and design approach that is user-centric, analytics-driven, optimized for search, and accepting of the reality that users are not captive and have many sources for similar information. This presents a challenge, because many content sites are all covering the same things, with minor variations. For example, a surprising number of online news articles are simply rewrites of the Reuters and AP feed content. That business model is dead. Some sites embrace user-centricity by making editorial content more personal, forging an emotional connection between reader and writer. Others innovate purely through design. Take Wonderwall, a gossip site launched by Microsoft’s MSN. There’s nothing more commoditized than celebrity-oriented content, but Wonderwall found a way to make it interesting and fun. Overnight, the site gained millions of unique visitors, far more than many mainstream publishing sites have.

A Startup Mentality.

Many publishers say they want to be digital, but they are still print companies that dabble in the Web. You can’t merely put a magazine or newspaper online and think you’re going to automatically develop a profitable online business, just as you can’t put a magazine on television by creating an hourlong TV show in which every 30 seconds the page turns. No one would watch that show, yet most publishers are doing the equivalent on the Web.

Innovation starts with daring to think of your company as a startup. In the case of Hulu and other “corporate” Internet success stories, management gave a group of talented, creative people the license to take a risk, innovate, and do something great online. The team must have an entrepreneurial Web mentality; it can’t be encumbered by a day job of putting out a magazine or the need to preserve a legacy business. Management then needs to give the digital team the support it needs to succeed — and develop its own willingness to evolve more and more of the organization to the Web.

The Internet is an amazingly powerful platform for innovation. With mobile devices coming online, the proliferation of broadband, the emergence of alternative platforms, and the growth of the international audience, the majority of digital opportunities are still ahead of us. Publishers that dare to take risks can win big and be successful.

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