Digital transformation: Need for speed

It’s not quite an industry-wide tipping point yet, but it’s getting closer. We’re seeing more examples of publishers increasing their investment in digital media initiatives and getting their business models and org structures better aligned to capture digital growth opportunities.

NBC announced on Sunday that it was taking over sole ownership of its digital media business, ending a 16-year partnership with Microsoft. NBC plans to combine all of the properties from the Msnbc Digital Network, which includes msnbc.com (rechristened NBCnews.com) and Today.com, into a new NBC News Digital division.

“It’s undeniable how big a part of all of our businesses the digital properties are going to be,” Steve Capus, the president of NBC News, told the New York Times. “We think we have a much better opportunity to shape them, and frankly grow the news division over all, if we have direct control over all of it.”

In a press release, NBC said it will continue to invest in the growth of its digital businesses, including a new “innovation center” in the Seattle area, where MSNBC was based, that “will focus on digital innovation and technology, and incubate new ideas for NBC News and NBCUniversal.”

The partnership won’t be easy to unwind, but NBC clearly felt the time was right to take ownership of its digital media products – anticipating, perhaps, that the returns from the digital properties can finally justify the increased investment required to run them.

Reorgs and digital investments

Other publishers are getting their digital ducks in order as well. Conde Nast last week announced some significant changes to its corporate sales division, most notably promoting digital sales VP Josh Stinchcomb to VP for corporate partnerships, which cuts across print, digital and mobile.

“Based on the paradigm shift that’s happening in the marketplace, they’re taking their strongest digital talent and putting them at the forefront of the business units,” Robin Steinberg, EVP at MediaVest, told Adweek.

Separately, American Media hired Joe Bilman as its first-ever chief digital officer to oversee a digital expansion that Ad Age said will include a $30 million investment over the next three years, along with the hiring of 60 employees,  including a chief revenue officer.

American Media, whose brands include National Enquirer, Star, Shape, Playboy and Men’s Fitness, earns just 3% of its revenues from digital, CEO David Pecker told Ad Age. "When I speak to other companies it's 10% plus, so we see that there's a big opportunity there," he said.

Some “opportunities” are more difficult to capture than others during this industry transition, as the owners and employees of the New Orleans Times-Picayune know too well. Call it the price of inaction, of relying too heavily, for too long, on a print model that is vanishing beneath them.

Don’t cut your way to profits

Publishers that try to cut their way to future profits without also investing in digital products and talent are more likely to be left with tarnished brands and a diminishing audience. This is not a great recipe for creating sustainable growth, but for some, it’s a needed first step out of the hole they find themselves in.

“I support [the Times-Picayune] because their industry is my industry and it will not survive without dramatic, difficult and bloody change,” Digital First Media CEO John Paton blogged last week. “And like them I am willing to do what it takes to make our businesses survive.”

Investing in low-quality journalism is probably not part of this equation, as the increasingly ugly Journatic debacle demonstrates. Mike Fourcher, Journatic’s head of editorial, resigned over the weekend, citing fundamental disagreements with Journatic’s senior leadership “about ethical and management issues as they relate to a successful news business.”

Fourcher later told Poynter, “What we’re seeing is the result of a misguided set of priorities. Writers and editors are implicitly discouraged from doing high quality work for the sake of efficiency and making more money.”

That’s not an outsourcing model worth pursuing, no matter the circumstances of your digital transformation.

External influencers

So what’s the right model? Publishers can look outside of traditional media for inspiration. Sites like LinkedIn, which started out as a community for job seekers, grew revenues by triple digits in 2011 on the backs of a highly targeted publishing platform that LinkedIn has turned into a daily destination for millions of professionals.

Alan Mutter says LinkedIn’s success offers four important lessons for publishers:  

Be targeted.  Rather than try to be all things to all people, LinkedIn serves a large, valuable, carefully selected and carefully cultivated audience. 

Be focused.  Where print and digital newspaper products pride themselves on carrying something for everyone, LinkedIn puts cycles only into things that will enrich the data it sells. 

Be interactive.  While newspaper websites for the most part are staff-produced, one-way media designed to serve essentially passive readers, LinkedIn is powered efficiently by users who continuously build – and, therefore, build the value of – its ever-growing database. 

Be viral.  Because LinkedIn explicitly is about networking, it is by definition viral.  By fulfilling the needs of its community, LinkedIn grows organically and inexpensively, reducing both  the costs of creating content and marketing its brand.

In a separate post, Mutter points out that to truly be innovative, publishers need to discard their naval-gazing cultures and start listening to the external parties who are really driving their business:

“Those of us worried about the future of journalism need to understand today’s marketplace on its own terms.  … That means listening to consumers, technologists, marketers, investors and others who form the many constituencies for whatever shape(s) journalism takes in the digital age.” 

Sound advice, but the transformation won’t be easy. Which path will you take?