Quartz and The Economist on what makes a good media business today and tomorrow
This article is the first in a series looking at some of the key issues and topics which will feature in our Digital Media Strategies event next March.
Quartz and The Economist are two quite different businesses serving broadly similar audiences.
The Economist is a 171-year old print magazine that has a circulation across print and digital of more than 220,000 in the UK alone, complemented by both traditional and innovative digital and print ad formats and partnerships.
Quartz - despite being founded by equally venerable print magazine business Atlantic Media - is a two-year-old, digital-only, mobile-first startup focussed on social sharing and high-value native ads. Last month it hit an audience high of more than 10 million uniques.
Both are going after high-value professionals with a global outlook, but there's another similarity between the two publications. They are media brands that have business models seemingly suited to the current turbulent environment for publishing, and they also look like they're set up to keep growing, rather than slip into decline.
That position of strength makes them two case studies other media businesses should be able to learn from, so as part of our interview series with speakers for our forthcoming Digital Media Strategies event, TheMediaBriefing decided to speak to their presidents, The Economist media divisions's Paul Rossi and Quartz's Jay Lauf. While they have different angles on what makes a media business fit for the present day and the immediate future, there are also clear common themes.
Present sense
screen-shot-2014-11-20-at-12-07-20.pngPerhaps unsurprisingly for a man working for a company with a healthy and loyal paid customer base in print and online, Rossi (pictured right) believes the underlying economics of advertising mean it is vital to have a core product people value and are willing to pay for:
"That's the key differentiator. If you look at the long-term prognosis for [print and digital] advertising, it is going to decline. We're particularly seeing that as print moves to digital and within digital, the pressures of programmatic and price. But there's also the underlying issue, it's not a shift from print to digital it's a shift from scarcity to abundance."
Quartz doesn't currently have a paid option, though Lauf says it is something he would eventually like to see in some form. Instead, his take on the characteristics that make a strong modern media business involves structure, focus and belief.
For a start, he says it is important to avoid falling into the middle ground between true mass scale plays that let you monetise huge audiences, and the "laser focussed" approach that lets you target a particular audience or subject area effectively. Quartz, he says, falls more in the latter category, despite attracting a large audience.
jay-lauf-head-shot-1-.jpgLauf (pictured right) also says that one of the things that has enabled Quartz to build a sustainable media business is simply the fact it has been able to scale up its cost base in line with its audience and income, rather than having to service a big organisation and infrastructure built for a different time:
"One of the critical components of a strong media business is being absolutely right-sized on the cost side of the business. What you see a lot of the struggling legacy players dealing with now is trying to retro-fit their cost structures to a completely new paradigm.
"And I think that's one of the benefits for Quartz being able to explore a model that isn't the subscription model is that we've been built form the ground up, we don't have a lot of legacy cost and infrastructure to tear down, but can build scale to the opportunity."
He also believes that a "sense of purpose" is an often overlooked requirement for a modern media business.
"A reason for being, that helps you focus on who your audience is and how you serve them, is an often unstated part. Having a purpose or mission, rather than just aggregating the eyeballs. That’s a big piece of it."
Keeping ahead
Many media businesses have struggled to keep pace with technological change, shifting consumer behaviour and a volatile ad market.
Rossi describes The Economist as a "fast follower", taking best practice from other media businesses and different industries. That incorporates hiring from areas such as ad agencies, while instilling a culture across the business where staff are keeping an eye on what's going on:
"There’s not always a benefit in speed. We try and work out how you would do something in the context of The Economist brand. It’s about understanding what is going on in the markets and as much as anything it's about bringing in the right people. We are hiring agency people. We are hiring people who don’t necessarily come from media.
"I think it’s everybody’s job to keep track. On the editorial side we have people in the product development team who are actively talking to people about new technologies. How to deliver content, how to deliver video. We have dedicated resources internally. But I think on the commercial team everbody’s looking out the window. It comes from a realisation you've got to be experimenting and try stuff."
As part of that experimentation, Rossi says the Economist is prepared to invest in new products that might not be be big revenue generators on their own, but help expand the Economist brand and potentially drive subscriptions to the magazine. One product that looks like it will perform that role is The Economist's new Espresso daily roundup, which comes in app and email format and takes a few cues from Quartz's own successful daily briefings.
Hiring the right people is also a priority for Lauf, and he's similarly keen to bring in people who aren't blinkered and fit into a culture of experimentation:
"It's about ensuring you have a culture that is not afraid to take chances, to test and learn, fail fast. It very much gets down to the people, who are experimenters, who don’t have an ego about trying certain things, can move quickly."
However, he says Quartz is also benefiting from a relatively flat management structure and few dividing lines between different roles such as journalists and developers:
"The editors and developers sit next to each other. There is not a separate centralised team where you have to take a ticket to try something and told we'll have it in six months."
Round the corner
Future gazing is inevitably a risky past time in such a fast-changing industry, but then part of the job of the president of any media company, or indeed any company, is making some bets on what their business needs to look like a few years down the line.
What both Rossi and Lauf agree on is the need for media businesses of the future to have a diverse range of revenue streams.
While Rossi believes paid is a cornerstone of a strong business, it's clear from the way he splits his businesses priorities into "defend" and "grow" that diversificiation is a priority.
The "defend" part of that strategy involves making the most out of The Economist's core print business while also building digital subscriptions:
"I recognise money is coming out of print, the landscape within online is changing. We need to defend and maximise our revenue from those spaces, but not be denial about the structural changes that are happening in mobile and programmatic. Print is still a hugely important part of the business, it will decline but not to zero. We need to make sure we are not walking away from that faster than the market."
The "grow" part involves "four pillars": Content marketing in the form of client and Economist-branded content such as its work with General Electric, events in the form of global franchises such as The Economist Insights series, marketing services such as its TVC video PR unit, and other Economist brands such as Intelligent Life and it's MBA courses.
"Those are the growth pillars," says Rossi. "But you've also got to focus on defend because there's still growth in those markets."
For Lauf, it's a similar case of building a range of businesses, though inevitably they will be more heavily weighted towards digital - and especially mobile - as time goes on:
"I don’t think there’s any one model or solution that I could point to. I think there will be varieties of models that will be suited to different publishers. Those revenue streams will look different for every company. For The Economist, they have this rich history of being able to charge for this magazine, so for them that remains an important part of what their business may be. It may be a less important piece for someone like Quartz.
"Five years from now my hope is we will have some sort of revenue stream from the user. It's hard for me to say what that might be but I can say it won't make the contribution to the top or bottom line that it will for The Atlantic or The Economist. Every company will be different, but there's no question digital will have to become a large portion of the revenue stream for these companies to look solid in five years."
Rossi agrees:
"The Atlantic has diversified into events, but it's also diversified into Quartz. The Guardian is diversifiying with its membership model in the UK. We all have different versions of the same idea and some of those diversifications are more digital, but I think broadly we are all dealing with the same thing."
There's no guaruntee Quartz will grow into a sustainable business, or that The Economist won't see a precipitous drop in sales revenue that it's unable to replace.
But right now these two publications look better prepared than most of their peers to build businesses that will deliver growth over the next few years. For media, that's a pretty good outlook to have.
Paul Rossi and Jay Lauf will both feature at the Digital Media Strategies session What Follows the Revolution? Building a Business Model for the Long Term on 11 March 2015. You can find more details here.
