Tag Archives: business models

The failure of the single product business model

Starbucks, Baker Street
There's more than coffee at Starbucks, Baker Street, London, UK (© Copyright Gary Rogers and licensed for reuse under a Creative Commons Licence)

After a few months teaching online writing and multimedia narratives to journalists, I found out that their biggest question was never if links worked, how valuable video editing skills are, or why social networks have an impact in content distribution, they had already figured that out. Their biggest doubts were about how to make money with journalism. And I got some stunned reactions when I told them that was impossible.

My parents owned a business for 11 years, a small café, in the city centre,with a mixed clientele, from passing shoppers, bank workers, car mechanics, retired people and local fauna. In units, the product we sold more was expresso. If you ever been to Portugal you’ll know we love our shots of expresso throughout the day. But that was the cheapest product we had and without a great profit margin. So, if we relied our whole business on selling expressos, we would never make it.

And the clients changed according to the time of day, not only in type but also in needs: the working, early morning, breakfast yearning crowd had nothing to do with the late night binge drinking costumers. So we had different products for each one of those types: fresh bread and pastry in the morning, to go along with coffe and milk, and cold beer and spirits for an after dinner meet up over a football match on TV.

Key products for key types of clients. And that was just a local café. Take Starbucks for example: they will never be big in Portugal because they have already a huge competition in the coffee selling business and they have the worst and most expensive coffee  that you can find in that block, yet they attract lots of people due to two main reasons: an attractive brand (you see Starbucks in the movies and the TV shows with lots of young, attractive, intelligent people), and variety when it comes to all the things you can do with coffee. Even so, they had to adapt and find refuge in shopping malls, when they prefer to be out there in the street.

So they figured out who were their clients, where they should find them and offered them not the same product as everybody else but derivatives from it, supported by an appealing image. So why don’t media companies do the same?

Information is out there, replicated at the speed of light, so it’s not scarce. Quite the opposite, as we know it rages in volumes. And though points of view may vary, the basic info is out there. Cheap coffee on the go. Different types of audiences, at different times of the day, having different needs. Yet the strategy is to serve them all bread and butter. Of course, there’s specialized media for specific audiences – sports, economics, music, etc – but I’m talking about generalist brands.

What was their product? Articles, usually wrapped in paper, that costed more than the product itself. With the internet, they lost the wrapper and the product no longer came in a package, but in pieces. So some decided to put the product in a box and charge for a peek inside. From coffee in paper cups to coffee in digital, exclusive mugs. Still coffee though, and most of the times as good as the competition’s.

The solution is to have more products than coffee, or sell beverages based on the black stuff but that only you can make and charge for it – I bet Starbucks here sells more cappucinos than expressos.  This implies three things: new products, trained staff to make them, and  know who are their consumers and their needs.

Unfortunately, many media companies haven’t been able to identify their online audience, erroneously believing it’s the same as their paper audience, and feed them the same stuff but in a different container. Worse, with the need to create better, more demanding, high quality products, they’re firing the most experienced to hire cheap labour. It’s like turning a gourmet restaurant with a good chef into a McDonald’s. Yeah, people go to MacDonald’s but it’s crap anyway. And they have their business strategy better defined.

So let’s get back to basics: what are the core elements of the news business?

Information

The amount of products based on information goes well beyond the 500 word article, but here are just a few ideas to use information in a more valuable way:

We have data, specialized professionals with access to specific sources so why not sell special analysis for specific audiences?

Databases are also valuable – imagine offering full access to all the data in archive to all the football matches ever covered in the first league.

Thousands of images are taken everyday by photographers, why not open a photo bank where they could be sold cheaply for specific projects or make them easily available for sharing and create a new stream of visitors to the original story? Think of the long tail.

Go beyond your “natural” market and expand. Have versions in different languages (at least one more, believe me it works).

New languages for new devices, unique content, immersive content.

Stop selling ad space, sell ads that are fit to be published in your environment.

And the one item that must always be constant: high quality information. Fast food will kill you in a more demanding world.

People

They do not only get the information, they distribute it and create on top of it. Support that. It’s like having millions of newspaper boys shouting out your headlines.

Transform the online audience into real people in the offline world: get to know them, organize meetings, gatherings, conventions. Make them pay for what you offer them there.

People have needs, identify them. The Guardian has a dating site, you could have your own real estate or job agency, whatever people need the most in your market.

Observe how their informational needs vary over the course of the day and the week, and offer them options to adapt your content to their routine. Understanding how your audience consumes news will help you create the right contents for it.

Make information useful. Being just informed is so 1.0. People must have the chance to do something with it.

Stuff

Instead of giving away books or DVDs with the Sunday paper, sell them cheap on your website.

Stop selling ad-space, get commissions for selling products directly on your pages.

You have a brand, if you get people to identify with it they’ll buy what’s associated with it. I don’t go to Starbucks, but I like their mugs.

 

And if you want more ideas from me you’ll have to pay me as a consultant. I’m joking, but depending on the strengths of each company there are many different options to make more money than with just the news. You have to evaluate what kind of information based products you can create and see if there are any markets for them, and stop thinking that you’re only a newspaper, or a radio station, or whatever news company fits you. And you are dealing directly with your audience, so you must get the most out of it.

You are a place where people go for coffee but have the option to get pastries, have lunch or a nightcap, and that’s what keeps you afloat. Not the least expensive product on the list.

 

#fonwa: first meetup and how porn and news have the same problems

Last Monday I went to the Future of News meetup, West Midlands branch, organized by Philip John. It was a fun bit, and a chance to meet new people. I’m all for discussing and debating, come up with new ideas and go a bit crazy with them, or else it will be just like homework. Fortunately we were a relaxed group, and not even the classroom environment (gently provided by BCU) got in the way. Being too serious about anything is what keeps some good ideas in the dark, especially when we all have the same basic perspective on the subject.

Philip John posted a description of the meetup, and i won’t repeat it here, so go there and read it. Except  for this:

Then, without further ado, we split into three separate groups for a challenge. The brief that I gave to the groups was this; they are managing a start-up news operation with six month’s worth of funding. Their funders will not back them again after the six months is up so they need to find a viable business model within that timeframe. The funding will get them an office with all the necessities, two people (these could be journalists, or not) and kit (laptops, smartphones) for 3 people (i.e. you and your staff of two). There were no limits on what kind of news operation, what area (geographic or otherwise) to report or anything else – it was a very open brief.

(…)

The second group seemed to be obsessed with porn, interestingly, though there were some good suggestions. They came up with News Butler, a tailored news service which will take your preferences and then phone you each day to tell you the news that’s important to you. We were promised that Jon Hickman would be the guy on the other end of the phone – watch this space. There was also the news booth where you go and submit your own news. The most serious suggestion though, and one that really caught my attention was event journalism – providing reporting services for events. It was then that I filled everyone in on the last UK Future of News Group meetup where Not On The Wires launched their service after covering the G20 and Berlin Project.

I have to clarify one thing, since this was my group: we weren’t obsessed with porn, it just came up, and the group is not to blame, but me. The rest were respectable, wholesome, decent people, (well, most of them). Since I find that a bit boring I tend to stray a bit and, besides, news and porn are not that different:

The news business isn’t the only industry being upended by aggregators and amateurs online. Pornographers are suffering too — and newspapers could learn a thing or two from them. Here’s why:

Amateur content and “tube sites” (that’s industry-speak for free porn portals) have been eroding revenues in the porn industry, according to a story from Monday’s Los Angeles Times. But at least one porn company is embracing something every online news editor has grappled with quite a bit: Aggregation.

Frustratingly for porn producers and distributors in the Valley, none of these [aggregation] sites appears to be making much money. Suzann Knudsen, a marketing director for PornoTube, said the site’s parent, Adult Entertainment Broadcast Network, uses it to attract customers for paid video on demand.

“PornoTube isn’t a piggy bank,” she said. “Its true value is in traffic.”

in What Online Porn Can Teach Journalism (and Vice Versa), The Atlantic, Aug 13 2009

Yes, they both have similar problems, being the rise of the amateurs (so to speak…) the biggest one. Since news people take themselves too seriously, they usually forget to think out of the box. But that’s alright, more fun for me. Anyway, and so you know that the group had good ideas, me, Caroline Beavon and Dan Davies – who were also in the group – recorded a small podcast for the Online Journalism module about business models, that has most of the ideas we discussed in between the porn conversation.

The main idea is that there is not a single business model, but different ways to generate revenue. Small structures must find any means  in their reach to add value to their content so that it can be bought by users or major news outlets, and provide services useful for their local markets. If you have a news website you have copy and design expertise, that can be financially more accessible for local businesses than the average offer available in the market. I’ve gone through this in my other blog, there are lots of things a local news website can do to make money. And the news is not the biggest part of it, and it never was, most of the time.

Here’s the audio:

Other accounts on the meetup:

The Future of News?, by Kate Hughes

My notes from last night, Paul Hadley