What does 'digital first' really mean?
The chorus of “digital first” strategies from newspaper and magazine publishers is growing. Driven into our consciousness by the Journal Register Co.’s John Paton – who went so far as to christen the new parent company of JRC and Media News Group as Digital First Media – the mantra has since been adopted by a diverse group of publishers ranging from Atlantic Media to Ziff-Davis Enterprise.
“Digital first” is a great rallying cry for the struggling publishing industry – but what does it actually mean?
Some publishers appear to be making real progress with the transition. During a recent discussion at CUNY’s Tow-Knight Center for Entrepreneurial Journalism in New York, Paton said digital advertising revenue across his company’s local media properties has increased from 4-5% of total ad revenues in 2009 to between 18-20% this year. “By 2013, our goal is that more than half of our ad revenue will be from digital,” Paton told host Jeff Jarvis and the CUNY audience (full video below).
At Atlantic Media, a digital-first strategy has helped increase digital revenues for National Journal by 49% over the past year, while unique visitors to TheAtlantic.com have grown from 300,000 to 11 million over the past three and a half years.
Many other publishers, however, are not ready to head aggressively down the digital-first path. Some, despite their growing digital businesses, remain unconvinced that digital will ever bring in enough real revenue to unseat the print franchise.
Take Kiplinger, for example. The finance publisher has been lauded recently for its website growth and mobile initiatives. But Kiplinger’s head of digital business development, Wallace Ryland, resigned late last month, a decision he attributed partly to what he perceived as the company’s lack of urgency regarding digital.
“Kiplinger at its core is a print company,” Ryland said in a phone interview. “The company isn’t really set up to devote the resources required to develop new revenue channels for digital. We were very successful in a lot of areas, but I thought we could do more.”
Deploying ‘digital first’
So what does “digital first” actually mean, in practice? A digital-first strategy requires significant changes to three core elements of a publisher’s business: operations, products and culture.
Publishers pursuing a digital-first transformation must make tough decisions about disassembling the parts of their print-centric infrastructure that no longer make sense strategically. You need the right size and scale to support what will likely be a much smaller digital business.
“Two-thirds of our costs in the news business are things we don’t want to do – printing, distribution, overhead, trucks,” Paton said at the CUNY event. “Only one-third is used for creating content, R&D and sales. That’s a big anchor.”
Publishers must decide which back-office operations are important for driving digital growth – and consider outsourcing the rest.
In July, Morris Communications, announced that, as part of its digital first transition, it was forming a joint venture with outsourcing services provider NIIT Technologies. The spinoff, NIIT Media Technologies, takes over Morris’s IT infrastructure, applications and much of its IT staff. Morris, a privately held group of media companies whose holdings include 13 daily newspapers and numerous non-daily and free community papers, said the move would significantly reduce the costs of operations and services.
But digital-first is not just about downsizing. In October, Morris announced that it was integrating key pieces of Morris Digital Works, the publisher’s digital division, back into its newspaper operations. As part of the move, MDW President Michael Romaner was named executive vice president of digital for Morris Communications. "Integrating MDW's skilled personnel into the newspaper group will help to speed its digital transformation from the inside," Romaner said in a press release.
Similarly, the UK’s Guardian News & Media announced in June that as part of its digital-first transition it would shift more than $40 million in investments from print to digital over the next five years.
This re-allocation of resources is critical. Operationally, you need to invest in new initiatives to grow the digital business. Psychologically, you need to show your employees (and external stakeholders) that you’re serious about a new direction.
“You can’t grow digital audience and digital revenues unless you’re actually allocating appropriate resources to that,” Paton said at the CUNY event.
Shifting investments from print to digital will require re-allocation of employees as well. Most publishers re-orienting around digital have announced layoffs, although many are also aggressively hiring to fill new needs for digital sales, editorial and technical expertise.
The Roanoke Times announced on Monday that it was layoff off three staffers and reassigning four others as part of its digital transition. In a staff memo (posted by Poynter), Editor Carole Tarrant said the changes are part of a broader reorganization that will also include a new content management system, a site redesign and new mobile products. Tarrant added that the newsroom “will be investing considerable time and money in this digital expansion. Roles will undoubtedly change, and the reorganization we announce today reflects just the first wave in what will be an ongoing evolution.”
Digital-first publishers require a much broader portfolio of products and services for both readers and advertisers. Multi-platform delivery requires greater investment in particular in mobile apps and/or mobile-optimized websites.
Perhaps the greatest change, however, involves the programs and services a publisher offers to advertisers. This will likely require revamping your sales team and pricing structure to accommodate new offerings. The good news is that as product offerings get more sophisticated, digital programs will begin to deliver value that approaches historical print margins. This will, of course, require more investment in higher-value programs and the skills to deliver more advanced services.
“We’re completely getting out of the game of banners and buttons,” Atlantic Media CEO Justin Smith said at the SUNY event. Increasingly, Atlantic Media is assuming the role of a marketing services agency to secure bigger deals and higher CPMs, he said.
“We are literally customizing ideas and programs for clients that are digitally centered but can stretch across as many platforms as possible,” Smith said.
Many other publishers, including Meredith, Conde Nast, IDG, UBM TechWeb and are forming marketing services divisions to offer premium products and services to clients. The opportunity to develop innovative marketing services programs in the B2B publishing space is what attracted Ryland, the former Kiplinger executive, to his new role as “executive in residence” at Arden Operating Co., which publishes RCR Wireless News and TelecomCareers.com.
“A lot of B2B advertisers are looking for marketing services,” Ryland said. “Publishers can provide a lot of different services beyond just putting inventory in front of a demographic. That’s where B2B media is growing, and I wanted to be a part of that.”
At the Journal Register Co., the emphasis has been on building digital sales that are unbundled from print programs. In an interview with the New York Times, Paton said digital revenue is expected to reach $32 million this year, up from $6 million in 2009. In addition, 60 percent of those revenues are digital only sales, he said.
Culture is arguably the biggest hurdle to a successful digital-first strategy. Changing the collective mindset of an organization that has been structured and incentivized for decades to support print won’t happen overnight. A digital divide still exists within many media companies, creating significant friction between the “change agents” and proponents of the status quo.
Strong leadership is the key to minimizing these conflicts and ensuring that everyone understands the commitment to changing the business. “To effectively transition a company into digital, you really need buy-in on the plan from the top down,” said Ryland.
Beyond high-profile restructurings, there are many more subtle ways that leadership teams can begin changing the culture. Paton determined that a blog was the best way to articulate his vision; his frank posts, describing which parts of the publishing model were broken and the experiments required to fix them, provided employees with a high level of transparency into the plan.
Smith said that simply getting the workforce to focus on the parts of the business that have high growth potential can provide an important lift. “If you spend all your time looking at an arid desert landscape, you’ll be depressed,” he told Jarvis. “Everyone needs to embrace the fact that all the growth and much of the future is [in the digital] space. Psychologically, saying that we will chase high-growth markets is a very powerful thing.”