The Business of Eyeballs: Publishing and Journalism
(or ‘What we’re doing here, part 2’)
Last post, I complained about my first job and how I had to push customer data uphill, both ways. And getting my hands dirty with that — how it taught me to do business in the 21st century. Data/marketing tech is one of my two professional fixations.
Now for the other one.
Today I’ll talk about my childhood dreams. One of them specifically. After I realized I couldn’t be a paleontologist or own a McDonald’s, I realized I wanted to be a journalist.
I’m not sure where this impulse came from, but somehow I had this idealistic goal by the end of high school and emailed the editorial staff at my college paper as an incoming freshman. With a student body of <1300, they weren’t exactly bursting at the seams with candidates. And so I started as News editor at the Westmont Horizon during the home stretch of the 2004 elections.
Fast forward 2 years into Communication Studies for undergrad; I was in Mass Comm class with one of my all-time favorite professors, Dr. Dunn, and was learning about the business of eyeballs. The economics and math of how journalists and other publishers make money.
Eyeballs as in “an audience.” Basically, media business models work one of two ways, both driven by the largest audience you can gather.
This holds true for any media business- no matter the media. Written content, Snapchats, online video, the model is basically the same.
- Content (stories/radio/tweets/YouTubes) is made available for free.
- User audience grows, content platform figures out how to boost engagement (time spent on page, articles read, etc) and audience count
- Content platform sells access to this audience to advertisers. Both directly, and through an ecosystem of third party agents. A premium paid tier may remove ads. Advertising brings in the $$.
- Content is made available for a subscription, bundle or a là carte fee. (Newsies selling papes, cable packages and Netflix). Sometimes the content might be exclusive to a platform, like Game of Thrones.
- The content platform tweaks pricing, expands the content, changes bundling, adds new features or just keeps doing what it’s doing to grow that paying customer base. The strength of the content offering and features is what brings in the $$.
Some businesses work as a combination of these 2 models (paywalls, premium tiers, etc). But largely your money is coming more from subscription, or more from advertisers.
And these businesses make a LOT of money. Youtube just revealed it makes more money than all major US TV networks put together in Alphabet’s latest earnings breakout. And then a few days after that, Instagram came out with $20bn in revenue, more even than Youtube. (These are both on that ad-supported model if that’s not clear).
You can make some good money being a writer, or actor, or YouTuber or broadcast/cable news personality if you’re at the very top of the pyramid. That’s the free market at work.
You make a lot more as Les Moonves, Mark Zuckerberg, Susan Wojcicki, etc. You have control over the economics, can set the editorial vision for the platform, can control payouts to your content creators. With mgmt level stock options (Wojcicki as President of Youtube at $GOOG) or even a giant ownership stake (Zuckerberg with 80% of voting shares at $FB) you can have a giant financial piece of the enterprise’s success and can extract economic rent in a way that your content creators, writers and newscasters can’t. That’s financialization at work.
If you’re a private equity firm, you spot a media business or app with a strong fundamental audience, and you see it for sale…you run the numbers. If it’s a customer base (enough views, paid subscribers, etc) that your quant jocks think can be squeezed for more ads or subscription $$, you consider buying. And you’re tempted to optimize for $$. That’s what you do better than anything else, right?
Private equity has a formula for this. And Facebook had a formula to become the next video streaming platform (aka the “pivot to video”). But why did the acquisition of Gizmodo media by private equity flame out so hard at Deadspin? And why did Facebook fail at becoming Facebook TV (even though they juiced the numbers on all video engagement on the way)?
How much is an audience really worth, and what is the best way to monetize it?
You could ask a similar question about customers when it comes to CRMs and marketing tech.
How much value accumulates in your data over time, as loyal customers are curated/retained and as uninterested customers age out?
That’s the common thread I’ll be discussing here. My next few posts will focus on the technology and math that makes digital campaigns work — how and why an audience gets leveraged to produce more revenue.
Peter out —
