"Media has become a platform of services," said David Liu, CEO of The Knot, during day one of Federation of International Periodical Publishers (FIPP) Digital Innovators Summit yesterday. During a session named, "Digital revenues: beyond the banner," Liu laid out how The Knot transformed itself from a handful of websites relying on national display advertisers for well over 50 percent of its revenues in the early 2000's to a network of over 280 sites with less than 20% reliance on display today. Publishers in unrelated markets can take these tactics and apply the lessons learned, focus on creating scale, segmenting readership and diversifying revenues by offering services.
The Knot competes with such industry stalwarts as Conde Nast and Hearst and has thrived in a highly competitive market in a severely challenged market by branching into e-commerce
, local advertising
, non-content subscription services, affiliate revenues, magazine publishing and now broadcast. The results are compelling:
- $24.7 MM in e-commerce
- $21.0 MM in online national display advertising
- $34.7 MM in online local advertising
- $10.0 MM in online registries
- $16.0 MM in Publishing and other related activities
Numbers provided by David Liu at FIPP Digital Innovators Summit
Services driving 35% of overall revenues
Liu caught his fellow publishes by surprise as he detailed The Knot's e-commerce business. While many publishers are selling their own books or acting as affiliates for other retailers, few are actually in the brick and mortar business of retail. Customers (i.e. readers) can order engraved invitations, personalized napkins, and other physical goods and services from The Knot directly, and the company fulfills the product from their own warehouse.
In addition to e-commerce, The Knot acts as an affiliate for retailers, taking a cut of any sales transaction that occurs as a result of click coming from a user's registry profile on The Knot. What's more, users can develop a register with The Knot and select products from multiple retailers (Macy's, Pottery Barn, Crate and Barrel, Target and Williams Sonoma) via The Knot's Gift Registry 360
(GR360). If you think convincing these retailers to join a registry collective was difficult, you're right. However, Liu says that by launching the product on Facebook. By allowing user actions (registering, adding products to the registry, purchases, etc.) to be pushed out to a user's network, GR360 has created a viral component to promote purchases and potentially drive the amount spent on those purchases higher. This social media marketing engine enables these retailers to capitalize on the explosive marketing potential of Facebook and the niche engagement of The Knot.
Building scale by going niche
While you may be familiar with theknot.com, thenest.com, and thebump.com, you may not be aware that The Knot has over 280 other sites. These sites focus on niche topics, including: green weddings, military weddings, Indian weddings, and local areas. This contrasts with Conde's portal during this period, where Brides.com was used primarily to drive paid print subscriptions. In the past decade, The Knot has successfully grown its revenue from $24.2 million in 2000 to over $100 million in 2009. The Knot's profits stood at $1.1 million after three quarters while Conde's troubles have been reported to be mounting to close to a $1 billion loss.
This network of sites allows The Knot to connect with women in various life stages with specific wedding interests. This niche-within-a-niche strategy leads to far greater segmentation, higher CPM
's from advertisers, and far superior marketing of their own goods and services. In effect, it creates a super-premium ad network that is able to target ads better than competing ad networks. It is this scale that creates the marketing power behind the marketing and user services that The Know provides.
What's most interesting about this strategy is that The Knot didn't adopt it due to competitive pressures but from recognition of the economics of U.S. media on the Internet
- Internet adoption has plateaued in U.S.
- Internet usage has plateaued in U.S.
- More competitors every day launching
eMedia Vitals previously covered this strategy in more detail in this piece, Go niche or die?
Clearly, it is working, as both the revenue and the traffic growth has been eclipsed The Knot's competitors (theknot.com is in green).
Lessons for media companies
- Scale: Your content creation process, technology solutions, and sales strategies must all recognize the strength in scale and pursue it relentlessly.
- Segmentation: Scale creates opportunity for segmentation. Create unique and difficult-to-replicate targeting and segmentation, capabilities that go beyond what ad networks can provide.
- Diversification: National display advertising is becoming commoditized. Think of your Web platform as a marketing engine that can be used for your customers or used by you to enter into new businesses. The Knot isn't the only company pursuing this strategy. F+W Media was able to grow its digital revenues 113 percent by adopting a similar strategy.