Digital Age

Digital Media Companies Are Headed For A Crash

By: Eric Johnson

Carey says advertising-dependent web publishers remind him of Buzz Lightyear in “Toy Story” — and that’s not a compliment.


Two-thirds of the profits at Hearst Magazines are still coming from print. And unlike other magazine publishers, David Carey says he’s in no rush to change that.

“We reject this notion of ‘digital first,’ because we think that denigrates the core business,” said Carey, the president of Hearst Magazines, on the latest episode of Recode Media with Peter Kafka. “We think there’s a lot of money to be made in the print business.”

Media businesses need a “moat” to protect themselves, Carey explained — Hearst’s is its collection of influential and credible brands, such as Cosmopolitan. And it’s becoming clear that some cash-burning web publishers don’t have much protecting them from failure, he said.

“I think you guys have got a great company here, and real expertise,” he said. “My son and three of his friends can start a competitor tomorrow. You don’t worry about my son and his friends, you worry about the 5,000 versions of my son and his friends, because it only costs them $5,000 and they’re in business.”

Carey’s no Luddite — he led Hearst’s flirtation with iPad magazines, and when that fizzled out, struck a partnership with Snap to get Cosmo and other magazines featured on Snapchat Discover, which he says now was an easy decision.

But on the new podcast, he questioned the durability of digital media companies that have historically been reliant on advertising. To last, these companies would need at least 25 percent of their revenue to come from non-advertising sources such as live events, data or e-commerce.

“These businesses that have been, early on, gaming the ad system to show 20 to 30 percent growth on small numbers — that’s kind of easy,” Carey said. “The degree of difficulty of running a money-losing digital business is like zero.”

“I’m reminded of one of the great scenes from ‘Toy Story,’” he added. “Buzz says he’s going to fly and Woody says, ‘No Buzz, that’s not flying, that’s falling with style.’ I think for some of these companies that have lost a huge amount of money, by going back to their investors, have been falling with style. In 2018, the rubber meets the road.”

Author: Eric Johnson

Source: URL:

Young Subscribers Flock to Old Media

By: Jason Schwartz


As President Donald Trump wages daily war against the press, millennials are subscribing to legacy news publications in record numbers—and at a growth rate, data suggests, far outpacing any other age group.

Since November's election, the New Yorker, for instance, has seen its number of new millennial subscribers more than double from over the same period a year earlier. According to the magazine's figures, it has 106 percent more new subscribers in the 18-34 age range and 129 percent more from 25-34.

The Atlantic has a similar story: since the election, its number of new subscribers aged 18-24 jumped 130 percent for print and digital subscriptions combined over the same period a year earlier, while 18-44 went up 70 percent.

Newspapers like The Washington Post and The New York Times typically do not share specific subscriber data, but according to a Post spokesperson, its subscriber growth rate is highest among millennials. A New York Times representative relayed that the paper was “seeing similar trends” in subscriptions and pointed to public data on digital traffic that showed its online reach among millennials to be up 9 percent from the same period a year ago.

Even The Wall Street Journal—not a paper usually known for being left around dorm rooms—said that it has doubled its student subscribers in the last year. And a spokesperson for the famously staid Economist reported, “We are seeing that the 18-24 and 25-34 age groups have been key drivers of new subscriptions.”

Oft derided as pampered, avocado-toast-eating layabouts, millennials have long been seen as unlikely to pay for news.

“Information wants to be free,” the cliché went, and, not long ago, headlines like, “Why Millennials Still Won't Pay Much For The News” were easy enough to find. But according to Nic Newman, the lead author of the 2017 edition of the Reuters Institute’s Digital News Report, two major things have changed.

The first is that subscription streaming services like Netflix, Hulu and Spotify have conditioned young people to be more willing to pay for quality content.

The second is Trump.

According to the Reuters Institute report, which surveyed more than 70,000 people in 36 countries and was published last summer, the United States was the only country studied that over the last year saw a major increase in the proportion of people who paid for online news, jumping from 9 percent in 2016 to 16 percent in 2017—and millennials were a big part of the reason.

Between 2016 and 2017, the share of Americans aged 18-24 who paid for online news vaulted from 4 percent to 18 percent, the study said; the age group 25-34 rose from 8 percent to 20 percent. Those two age groups, Newman said, collectively represent about 30 percent of the market.

To be sure, the “Trump bump” has existed across all age groups—the New Yorker reports 100 percent year-over-year increases in new subscribers for every demographic—but, in the Reuters Institute study, the millennial age brackets grew at a rate three times greater than any others, and no other age group boasted as high a percentage of people paying for news online.

“The big boost we saw in subscriptions in the U.S.,” Newman said, “is driven by people on the left and younger people are more likely to be on the left. That is really a lot of what’s driving it: young people who don’t like Trump who subscribe to news organizations that they see as being a bulwark against him.”

Newman said that 29 percent of Americans responded to the survey that their reason for paying for news was, “wanting to help support or fund journalism,” which was twice the average for all countries included in the study. Americans on the political left were four times more likely than those on the right to cite supporting journalism as their reason for paying, Newman said.

According to Sam Rosen, the Head of Growth for the Atlantic, the magazine has seen steady growth in millennial engagement over the last four years, but numbers surged after the election. Last July, Rosen ran a survey on the magazine and was struck by the results. “I noticed a really strong engagement in terms of enthusiasm for the brand among the 25-34 year old demo, as well as 18-24. And it was striking to me, because from a print standpoint, typically the Atlantic skews a bit older,” he said.

That brand identification is important, according to Stephanie Edgerly, a professor at Northwestern’s Medill School of Journalism who has studied how young people engage with news. “This is why the NPR tote bag is a big deal, this is why the New Yorker had a tote bag that was viewed as a hot commodity,” she said. “News is a brand and it stands for certain types of values you want to associate yourself with and that becomes even more important in this political climate.”

“By values I don’t want to just mean liberal, conservative, Democrat, Republican,” she continued. “It’s a lot more complex than that. These stand for lifestyle values, this stands for how you see yourself, whether you want to be identified as a socially conscious intellectual who value the arts or a snarky contrarian who knows obscure political arguments.”

Rosen, from the Atlantic, said that, for younger people, he’s seen this type of broadcasting on social media networks like Facebook and Twitter. “We’ve heard from even high schoolers who share Atlantic content on social media that, when they share the Atlantic, they know that they’re signaling that they’re thinking more deeply and critically about the world,” he said.

That signaling can also be a stand against Trump. Dwayne Sheppard, the vice president of consumer marketing at Condé Nast, which owns the New Yorker, said that he’s also observed a sense of brand identification—but said that, for millennials, it extends beyond social media and into the real world. Those subscribing to the New Yorker can choose between a print and digital subscription or a less expensive digital-only option; Millennials, he said, are opting for print at a rate 10 percent higher than older demographics.

“Millennials are choosing print overwhelmingly, or digital and print,” he said. “It’s a physical manifestation of the relationship. You’re on the subway or you’re in the airport and you’re carrying your New Yorker, that’s another signal of what you care about and what you choose to read.”

In the age of Trump, a dog-eared New Yorker or Atlantic may serve as a small token of resistance, but the question remains whether this trend of younger people paying for news is sustainable. Newman, from the Reuters Institute, said that even when the Trump effect wears off, millennials’ embrace of subscription services is a positive sign for the industry.

There was a strong correlation in his study, he said, between people willing to pay for streaming services for music and video and those willing to pay for news. “Other online services have basically given people the grammar by they can understand what subscription is,” he said, in terms of offering different levels of subscriptions and various types of insider benefits. (Newman acknowledged, though, that part of the connection was simply having disposable income).

Both Rosen and Sheppard are bullish that the trend will continue. Shortly after the election and around Trump’s inauguration represented the biggest surge, but “We’re not seeing a downshift or a quieting of interest in subscriptions,” Rosen said.

For all the good news, the truth remains that those willing to pay for journalism still represent a relatively small group—according to the Reuters Institute study, 84 percent of Americans do not pay for online news. Subscriptions are not cheap, and Newman pointed out that there is danger in quality journalism becoming an increasingly elite product. “The danger is that you get a two-tiered system,” he said.

Still, for an industry that has been pummeled for more than a decade by terrible financial news and, for the last 10 months, by the President of the United States, the growing willingness of millennials to open their wallets is welcome news.

“It’s not going to save journalism,” Newman said of the past year’s millennial surge, “but it’s a hopeful sign that people are prepared to pay for quality.”

Author: Jason Schwartz

Source: URL:

3 Reasons Marketers Can't Depend on Data Alone

By: Patrick Kirby


When it comes to data-based marketing, everyone wants to be like Netflix.

At the 4A’s recent Strategy Festival in September, the trade association outlined how Netflix uses statistical modeling to gauge how big its homegrown shows are going to be and to figure out the optimal marketing approach. Netflix also makes an estimated $1 billion in revenues per year from its recommendation engine, which is based on data analysis.

Its product, entertainment, has more intrinsic social media value than, say, paper towels, so Netflix has more data to draw from.

But not everyone can be like Netflix. A lot of businesses are messier. Netflix doesn’t have to deal with brick-and-mortar stores and direct customer service (unless someone calls its help line), for instance. Its product, entertainment, has more intrinsic social media value than, say, paper towels, so Netflix has more data to draw from. So for many businesses, while better use of data will definitely help, it won’t necessarily be an overall fix. Here are three reasons why the industry is overselling the promise of data:

1. Data Doesn’t Capture Emotion.

As any good salesman knows, we buy emotionally and then justify it logically. Some 95% of our buying decisions take place unconsciously. Data is good for predicting the probability of an event, but when emotion is involved, all bets are off. A good portion of selling is storytelling, which appeals to a different part of the brain than the part that analyzes information. As Daniel Kahneman’s 2011 book Thinking Fast and Slow illustrates, we often make decisions by using heuristics — simpler queries that stand in for more complex questions. If we are contemplating buying a new car then we might ask ourselves, “How does the image of me in this car make me feel about myself?” If that image evokes a strong positive emotion, then features and price are secondary. Evoking such emotions is integral to successful advertising and can’t be plotted in a spreadsheet.

As ad guru Kevin Roberts has written, “Big data needs big emotion, because algorithms will never read and respond to humans the way humans do.” Data has yet to accurately predict virality, for instance, because virality occurs when stories tap high-arousal emotions like anger or happiness or low-dominance emotions like fear where people feel limited control. Social sharing, meanwhile, happens when consumers feel inspired or feel admiration. These emotions can only be evoked by tapping into something that has emotional resonance and that is beyond the capability of machines and can’t be predicted by data.

2. Data Is Based On Past Events.

Therefore, data will only tell you about the past. As stock traders know, that kind of information has limited value. While some consumer purchases are predictable, they can be influenced by variables ranging from whether they used a basket while they shopped to whether they’ve seen customer reviews. Ideally, buys should be based on a knowledge of a consumer’s real-time exposure to various stimuli plus historical data.

The biggest proof of the gulf between historical data and actual events is modern polling. While some pollsters predicted Hillary Clinton’s victory in the 2016 presidential election with a certainty as high as 99%, those estimates collapsed on election day. After the election, polls blamed everything from the lower-than-expected turnout of Democrats to the fact that Trump voters were suspicious of pollsters’ motives. That wasn’t the only time that the polls failed. Most polls also wrongly predicted the outcome of the UK’s Brexit vote and a 2016 peace agreement in Colombia. The lesson: past performance is no prediction of future events, something investors know all too well.

3. You Don’t Need Data To Offer Great Customer Service.

Imagine you were looking to buy a new computer. So you go to Best Buy and the salesperson asks you what you’re looking for, what you like about your current computer and what your price range is. You are then directed to a model that is likely to fit your needs. This kind of customer service has been around forever and the salesperson got all the info he needed about you by asking questions. Similarly, when you call Verizon because your FIOS router isn’t working, the tech admin doesn’t need to know everything about you, just what you need in that moment.

In a time when customer service levels haven’t improved in 40 years, merely providing better-than-average service is a differentiator. Zappos, for instance, earned a reputation for customer service that prompted Amazon to buy it for $1.2 billion. Aside from customer service, there was nothing that differentiated Zappos from all the other companies selling shoes on the Internet. Zappos’ strategy wasn’t based on data, but on offering an attribute missing in the market.

Author: Patrick Kirby

Source: URL: