Digital-first prerequisite: A cultural makeover

For many publishers, the print-vs.-digital argument has morphed into a new phase: debating the best path to a digital-first strategy.

Some media companies choose strategic acquisitions as a way to quickly expand their core publishing business or to enter into new sectors, such as marketing services. Others choose to build their digital competencies organically, by transitioning existing personnel into digital-focused roles or hiring new talent to oversee new digital initiatives. Either option – buy or build – is likely to require a significant overhaul of a publisher’s culture.

Out with the old

Culture may be the biggest hurdle to a successful digital-first strategy, because a digital divide still exists within many media companies between proponents of the status quo and the so-called “change agents.” As the urgency to build digital revenues increases, media companies are on the lookout for new skills and competencies – and are less patient with “legacy” employees that can’t or won’t keep up with the transition to new business models.

“Three years ago, we decided to creatively destroy our own business,” David Nussbaum, chairman and CEO of enthusiast publisher F+W Media, said during a panel discussion at DeSilva + Phillips' Media Dealmakers Summit last week. “One day we chose to change the model completely, and the next day everybody came in and had a different job.”

F+W’s new model focused on e-commerce. The mission, Nussbaum said, was to become “the Amazon of passion markets,” which at F+W range from antiques and collectibles (Antique Trader) to firearms and knives (Blade magazine) to writing (Writer’s Digest).

“E-commerce is very different than selling advertising,” Nussbaum said. “So we decided to transition people out who had too much of a print background and hire people from outside media – e-commerce, SEO/SEM, database specialists, affiliate managers. They came from a web world and helped us transition the culture dramatically.”

F+W’s digital team has grown from 20 people in 2009 to 165, while total employee headcount (525) has remained about the same. “We’ve changed the business pretty dramatically,” Nussbaum said.

A change in mindset

Advantage Business Media faced a similar challenge when it purchased Reed Business Information's New Product Division in 2006. Advantage co-founders Richard Reiff and George Fox, with the backing of private equity firm Catalyst Investors, acquired a business that at the time was generating just 11 percent of its revenues from digital.

“We had to change the way we looked at the business from a monthly to a daily mindset,” Reiff said at the Dealmakers conference. “We changed the culture of the business by making a commitment to having relevant and fresh content, and also [generating digital revenues] through lead gen and ROI for our advertisers.”

Most of the existing staff, Reiff said, struggled with the transition to a daily mentality. The company has turned over about 70% of its journalists and salespeople in the five and a half years since the acquisition, he added. The new talent has given a boost to the digital business, which now accounts for 44% of total revenues.

Integrating new talent

Publishers that are investing heavily in digital talent – either through hiring or company acquisitions – are wary of messing with the digital-first mindsets that these people bring into their organizations.

“When we pursue acquisitions, investments or partnerships, we have to be very careful about tinkering with that creative culture in a way that’s counterproductive,” said John Zieser, chief development officer at Meredith Corp., which has acquired seven marketing services firms over the past five years, including The Hyperfactory, Genex and New Media Strategies.

“We’ll integrate everything we can integrate, but when it comes to the creative culture, we leave that alone unless something needs to be tweaked,” Zieser said at the Dealmakers Summit. “If the creative culture is working, trying to put limitations on it will be a big mistake.”

Not every media acquisition, of course, is motivated by human capital. Monday’s announcement by online marketer QuinStreet that it was acquiring the assets of Ziff Davis Enterprise, a tech publisher whose brands include eWeek.com and ChannelInsider.com, was a clear play for Ziff Davis’ extensive customer database, which QuinStreet can leverage for lead generation.

Retaining Ziff’s creative talent? Not so much; reports quickly circulated that QuinStreet plans to cut as much as 80 percent of Ziff’s 120 employees over the next several months.