Cover Story: The Search for Profitable Publishing
The question of whether print-advertising revenue will return to pre-recession levels still looms over many publishers' heads (and many analysts predict that it will not). So publishers not only are striving to boost online revenue and develop creative partnerships with advertisers, but also to find other ways to help offset losses suffered during the past two years, and build new business models around their content and their audiences.
"When I did the Stanford University Publishing certification program, one of the things they taught is you have to diversify your offerings. Anyone in the market at this time with print-only will not survive," says Sheila Robinson, founder and publisher of Diversity Woman.
The fact is, there are dozens of ways publishers can generate revenue, from ad sales (print, online, e-newsletters, mobile, etc.) to paid circulation, conferences and expos, list rentals, paid or sponsored webinars and virtual events (and other lead-generation programs), online training courses, reprints sales and licensing, research/reports, and custom publishing, to name a few of the more common methods.
Today, many publishers are exploring virtually every possible revenue-generating source. Ogden Publications is selling repackaged publication content in CD-ROM and book formats (one of its largest revenue sources) and has created a line of Natural Home kitchen utensils and glassware (aligned with its Natural Home magazine brand), which is being sold through its Web sites and in Target stores. The company also launched a "green" radio program, "Mother Earth News Radio," last fall (tying in with its Mother Earth magazine brand).
Marketing & Technology Group—comprised of Meatingplace (Meatingplace.com), CarneTec (CarneTec.com) and Plate (PlateOnline.com)—is a b-to-b publisher serving the U.S. and Latin American meat processing, and U.S. foodservice industries, respectively. "All brands integrate print, … Web sites, and events," says Mark Lefens, Marketing & Technology Group's president. Lefens' company got a "nice bump in 2009 with a real old-school custom publishing idea to which we added an e-twist," he says. "Plate magazine, which has won six Neal Awards [from American Business Media], due in part to its beautiful, original photography, was asked to produce a printed calendar of Plate-[level] quality for a [commodity board, Idaho Potato Commission]. The printed calendar featured a recipe for every month with a photo of the dish," he explains. "We [loaded] the 12 recipes … into the recipe archives of PlateOnline.com as a 'sponsored recipe.' Whenever a chef searches for a dish … or ingredient to which the sponsor's product is related, the sponsor's recipe and photo from the calendar displays next to [the] chef's search results."
Lefens says his company often shies away from custom publishing projects that don't strengthen the company's own brands, but this project aligned well and "was worth it."
Others are trying to build on their strengths. Robinson is working to expand her annual conferences. "They're a perfect fit for my target audience of women. Women like that face-to-face interaction," she says.
"We're looking into doing more things to generate revenue," she says. Diversity Woman also produces sponsored webinars and e-newsletters.
Making Major Strategy Shifts
To help boost revenue, some companies also are evaluating current business practices to determine whether internal adjustments that better align with today's publishing environment are in order.
For Marketing and Technology Group's Meatingplace and CarneTec brands, 60 percent of the revenue comes from print, and 40 percent from online, says Lefens. "The Plate brand, with a relatively new Web site, has a higher print-to-Web revenue ratio." Overall, he says, "Revenue did not grow in 2009. It was flat, with all our brands gaining market share."
With "flat" being "the new up," Lefens believes his company fared relatively well during one of the worst recessions of our time—a fact which he attributes to "some relatively radical changes we made to our publishing model in 2006."
The company had experimented with its Meatingplace brand first, says Lefens, "because it had a very strong franchise based on daily news delivery. We moved all the 'tactical' content (news, technical articles and new product information) from Meatingplace magazine to Meatingplace.com. … This … allowed readers to get in and out of short articles quickly and to connect with advertisers immediately. It also allowed us to capture these metrics for our advertisers."
Meatingplace.com was focused on serving ads contextually on a pay-for-play basis. (Users register to access the company's Web sites.) "Certain ads generate hard leads and deliver full contact information in real-time. Metrics delivered to advertisers include the name, title and company of all buying influences who have seen each ad, clicked thru to their Web site, [and requested] more product information," Lefens explains.
The print magazine focused on "strategic," thought-provoking business journalism, Lefens explains. "We increased trim size, amount of original photography and paper quality to leverage the best of what print can offer. We now have four years of outside research showing a 10-percent increase in time readers spend with the magazine."
But the changes the company made went beyond content and Web strategy, and addressed what marketers today expect from publishing partners. "On the sales side, we dismantled our geographical territories," he notes. "Our best customers wanted the competitive advantage of rolling up fully integrated media programs containing print, Web, webinars and event sponsorship. But this is a complicated business. So we assigned our most consultative sales people to the 'A' customers and reduced the number of accounts these reps handle from around 200 to about 45," he says. "The rest of the sales staff, based on their abilities and seniority, handle the 'B' and 'C' accounts."
This year, Lefens says his company will test paid content for its U.S. and Latin American publications, Web sites and webinars. "Content-centric publishers with good metrics and strong reader franchises are in the best position to make the move, but everyone's waiting for the first guy to jump in the pool. The … industry should build a shrine to Rupert Murdoch for so publicly preparing the way."
Profiting From Partnerships
One way that consultant Lou Ann Sabatier, principal, Sabatier Consulting, suggests publishers venture into new revenue territories while minimizing risk is partnering with others—whether related publications or other media, organizations, retailers, advertisers, academic institutions, etc.
"Would you rather have 50 cents on a dollar [split with your partner] you never had … versus not having the 50 cents? It is the best way I can tell people to realistically bridge this gap into new revenue streams," she says.
"One of best case studies I have ever heard about … was when Hanley Wood partnered with Meredith—and again, this is on a big scale, but you can use the same tenets no matter what your size is," she says. "Hanley Wood said, 'We're the top b-to-b, home-builder trade publisher in the U.S. We talk about designing or building homes. Meredith talks about making a house a home.' So they partnered on a year-long project that I think had a print component, some kind of face-to-face event, and online. … They both were able to capture share of market in dollars that they wouldn't have been able to individually."
While pursuing new revenue sources to offset ad-revenue declines is one thing, Sabatier believes, "Diversification makes sense in a good economy, not just a bad economy. Because advertising is volatile, you're trying to minimize and spread your risk. This has been talked about for many years within b-to-b and consumer publishing. I think the climate is forcing the question to the top; it's not a choice anymore."
But diversification isn't something just to jump into head-first, sans strategy. First, Sabatier suggests, officially assess product opportunities and overall business performance. "'Official' doesn't have to be an outside consultant, but it needs to be a process you're committed to methodically, every year to 2 years. If you don't assess, you end up doing 'tactics' … [that] end up not tying to things, and you're not leveraging the company as a whole," Sabatier explains.
Before companies diversify, she suggests they ask themselves, "Diversify into what?"
Think about innovation as a process, "breaking outside the norm—whether … you go to people you normally wouldn't talk to, or talking to customers in a different way," she notes.
She cautions that diversification can mean something different to every business. "[It] can … mean … maybe your other revenue stream is data; it doesn't have to always be charging for content or [launching] an event. It may look very different based on what's going on in your niche."
How to Focus on the Best Ideas
"Our problem used to be having a lot of good ideas [from new products to operational-efficiency improvements] and trying to do them all," recalls Lefens. "Over the years, we've developed a method that allows us to consider even the wildest idea, but quickly get down to the ideas [with] the most potential."
The company holds a companywide meeting at least yearly, he explains, "where everyone is invited to throw out any idea, even if it has nothing to do with what we're presently involved in. Every idea is recorded. These ideas then go the executive committee (basically all the department vice presidents) … and are organized by category. … Each idea/category is discussed with an eye toward eliminating all but the most intriguing. When we have a short list, we ask, 'What do we need to know that we don't know now?' and a sub-committee is assigned to return with that information."
The company established criteria for judging each idea, largely based on the company's goals at the time. But, says Lefens, some of the criteria might be:
- Could it have a major impact on our company/industry?
- Do we have access to the necessary resources?
- What's the timeline to completion?
- How much more efficient will it make employees (for internal development)?
"For ideas that survive," he says, "we do a cost-benefit analysis and try to estimate ROI, which, at best, is an art. We eliminate those least likely to pay off. This leaves us with a list of large and short-term projects we have agreed to develop. We then prioritize them."
A key to what Lefens calls "our relatively high batting average" is that the company's top management spends a lot of time not only making these decisions, but executing them.
Innovation and Growth: Part of the Culture
With many companies in what could be called "panic mode," it can be tempting to look for fast revenue sources that may not be in the company's or publication's best long-term interest.
"I think sometimes people are looking for an easy way, but revenue diversification is a process. It's not the flavor of the day," says Sabatier. "… If you've got this process in place, you can continue to evolve and filter, but not just for change's sake."
Perhaps this is why Consumer Reports is faring better than most in one of the worst periods in magazine publishing history.
"We routinely develop a strategic plan, and we take a long-term view on that. We just finished one which covers the next several years," says John Sateja, executive vice president, Consumers Union/Consumer Reports. "It looks at what we need to do to grow the business and generate revenue, and then we try to apply that to looking at new ideas. We are always developing new things for our core products, especially on the Web [with traffic of more than 5 million/month to ConsumerReports.org, "slightly ahead of last year"] because that's constant," he says.
He may make it sound simple, but he says, "[The trick is] that you have to have the discipline to focus a percentage of your time on new initiatives."
In addition to Web development, Consumers Union also is "constantly trying to improve our [editorial] coverage," says Sateja.
"Print is not doing well for many, but for us it is," he notes. In August 2006, the organization launched ShopSmart—billed as "Consumer Reports' Quick and Easy Shopping Guide"—as a bimonthly, newsstand-only publication. Less than two years later, paid subscriptions were added, and last year, the frequency increased to 10 times per year.
"ShopSmart has really helped to bolster our print performance overall. Consumer Reports is still continuing to grow in circulation [its current paid, print circulation is more than 4 million], although slower than in the past," he says.
"[ShopSmart also] is working out quite well for us in attracting a new audience, mostly women. And it uses a new business model of being primarily online circulation-driven. First, subscriptions were made available through [Consumer Reports'] Web site, and then e-mail blasts [were sent] to outside lists," he says.
Always Looking at the Next Steps
While many other publications have cut editorial resources, Consumer Reports has increased its investment in creating more original content, says Sateja.
"We have increased the number of products we test and have added an online shopping application so consumers can link to retailers after they have done their product research," he says—again part of the organization's long-term strategy. "After you read the product reviews, the next step is to shop ... [so it's providing ways for consumers to do that]. We've been doing this for years, but you [now] can shop for products in the free area of ConsumerReports.org in addition to behind the pay wall, where you can see the ratings."
The organization also acquired The Consumerist blog site last year as an investment in social media. "Social media is an important part of our strategy, but we try to balance it with our core products. It's been generating a lot of traffic for us," says Sateja.
And, like many publishers, Consumer Reports is exploring mobile expansion. It was a pioneer in experimenting in the mobile space with product reviews, but Sateja says, "Mobile is a big area [where] you'll see a lot more from us. We're developing more mobile applications for shopping and reviews, and it will be a pretty significant step forward for us."
Recently, he says, Consumer Reports offered an application for smart phones for free buying advice. "But [now we're going to be offering more on the paid-content model]. We offer a mobile version of ConsumerReports.org. We're also looking at potential car-shopping applications, and consumer electronics and home products, which are core to ConsumerReports.org. We also have been constantly developing digital platforms for e-readers, like the Kindle," he says. "We're trying to be as relevant as we can in the marketplace."
"I think the interesting thing about revenue is that we want a sure hit [with a new venture] …," says Sabatier. "We want to make sure … that we don't lose money on it; and [not losing money] might happen in a custom-publishing situation (where you price that out the gate, where you don't go forward if your profit margin isn't in there) or when you do one-shots or one-offs in print—but other than that, there is some risk involved," she says.
"So, when you're looking at diversifying revenue or getting another income stream coming in … you need to ask yourself, 'What is my tolerance for failure? Can I afford to fail or not make the mark?' Part of where you go is what your risk tolerance is."
Sometimes it's as simple as cash flow, but Sabatier also suggests considering, "Can I take a hit if this doesn't work, but I will learn from moving forward rather than being paralyzed or going down in flames because I still only rely on advertising—that's your balance."