| It's not hard to witness the challenging digital media | | | | reach out to them and are happy to tell you exactly |
| environment in which we are currently living. Layoffs, | | | | what they want. Having up-to-date quantitative data |
| companies going under, print businesses going all digital... | | | | on the details of your audience is vital in determining |
| and the list goes on. Inevitably, the conversation | | | | the overall strategy which includes the business model, |
| amongst digital media executives focuses on what the | | | | operations, and associated tactics. |
| right business model is in order to survive and drive | | | | Customer Segmentation - Once you do the |
| sustainable growth. | | | | appropriate research and data crunching you may find |
| Is advertising going to come back in vogue with higher | | | | that you have different types of customers and one |
| CPMs and material improvements in sell-through? | | | | business model may not be the best path to success. |
| Should digital media businesses listen to the strong | | | | For example, heavy (usually loyal) users of your |
| words from investors, board members, or Rupert | | | | products or services may be the appropriate folks to |
| Murdoch to charge for their content? | | | | test alternative business models. This is appropriate |
| I've spent most of my digital career (since the 90's) | | | | and yes, they do understand that good content and |
| working with some of the premier media brands (WSJ, | | | | tool sets cost real dollars. Speak with your customers |
| Time Magazine, United Media, NYTimes, Better Homes | | | | first and validate (quantitatively) if your business model |
| and Gardens, Ladies Home Journal, etc.) on these | | | | hypothesis make sense. |
| business model, content, and operational challenges. I | | | | Be Careful of Substitution Value as Rash Decisions |
| also ran a sizable digital subscription business for | | | | can be Costly - If you are planning to put-up a paid |
| Rodale Interactive (MensHealth.com, | | | | wall based upon your belief that your customers have |
| RunnersWorld.com, Prevention.com, | | | | such a deep relationship with your brand and content |
| SouthBeachDiet.com, etc.) and raised capital, | | | | and they will pay - I caution you. There are many |
| co-founded and launched my own digital business that | | | | consumers today that are willing to migrate (substitute) |
| relied on a hybrid digital business model. That said, I | | | | from brand to brand if they feel the substituting brand |
| thought it would be helpful if I shared my list of items | | | | has (somewhat) equal content and brand equity, and a |
| that executives need to be thinking about when | | | | free business model. There are several types of |
| evaluating their digital business model strategies. | | | | media content that may struggle here... general news, |
| Before I go through my list, it should be noted that I | | | | health, etc. |
| have a bias against a single business model. I've | | | | Opportunity Cost Equation - This is a basic commercial |
| witnessed the many iterations of digital businesses and | | | | concept (choose the most financially beneficial path,) |
| participated in think tanks and conferences on the topic | | | | yet critical when evaluating an overall business model. It |
| of digital business models. Net net, over time, the | | | | can also be keenly driven by the type of content, |
| pendulum swings in both directions (great advertising | | | | audience of users, and their commercial appeal to an |
| market and a poor ad market) and in order to | | | | advertiser. For example, if you are a web site that has |
| sustainably compete, media companies need to | | | | a large user base and traffic to crafts content, an |
| identify strategies and operational effectiveness that | | | | advertising model may be attractive given the scale of |
| allows for delivery and business model flexibility given | | | | the audience. However, what kinds of advertisers will |
| market conditions and macroeconomics. | | | | pay real dollars to get next to that audience? Likely not |
| Staff Teams with Smart Left - and Right-Brained | | | | a very lucrative path. In this example the web site |
| Thinkers - You will quickly find out that the secret | | | | executives may want to take a closer look at the |
| sauce for one media company's success is not likely | | | | craft-loving audience and identify tools or content |
| the secret sauce that will propel your business. You will | | | | offerings they are willing to pay micro-payments for. |
| need creative thinkers and quantitative experts | | | | On the contrary, a premier health destination site with |
| working together, challenging each other, to interpret | | | | significant user and traffic scale will likely have lots of |
| the data and test new thinking and execution. Success | | | | pharmaceutical companies willing to pay healthy CPMs |
| is achieved through synthesizing many variables... an | | | | to get in front of that audience. |
| art and a science. | | | | Make Your Switching Costs High - When evaluating |
| Incentivise Performance with Equity and Real Dollars - I | | | | entrepreneurial concepts for investment one of the |
| do not believe sales people are the only ones that get | | | | variables I like to see is high switching costs. It's the |
| motivated by financial incentives. That said, I am a fan | | | | measurement or impact cost a customer must endure |
| of a quantitative (some qualitative can be good as | | | | to leave one relationship and migrate to a competitor. |
| well) quarterly incentive plan that financially | | | | An example is if you were leaving an overseas |
| compensates effective thinking and successful | | | | back-up vendor to migrate to another overseas |
| execution. Please do not cap financial incentives. If your | | | | vendor that is $1 less per month. Since it is 'a pain' to |
| team over-delivers that is a great problem to have | | | | get back all of your data that is backed-up on the |
| and not something to use to discourage motivation. | | | | existing companies site you may just leave the current |
| Actually, use it to find better ways to give performers | | | | relationship in place and pay the higher per-month cost. |
| more cash for even better performance. | | | | This concept is healthy in determining an overall web |
| Build a Team Culture of Innovation - This concept is | | | | strategy and evaluating a business model. The |
| not unique to digital business models, yet super | | | | concept here is to use your brand and content |
| important and unfortunately typically overlooked. Digital | | | | expertise to customize an end consumer's experience |
| groups that work as self-directed teams with clear | | | | at your site so you are capturing and storing |
| objectives and goals usually perform well. Limiting | | | | personalized consumer data. These consumers will |
| corporate politics, promoting transparency and | | | | think hard (high switching costs) if your competitor |
| authenticity does great things for a positive work | | | | offers a similar service for slightly less money. |
| experience and overall motivation. When smart people | | | | Hard to go From Free to Paid --- Use the Smell Test - |
| work well together cross training happens and the | | | | It is important to remember the obvious variables when |
| focus clearly gets set on continuous improvement. | | | | determining business models. Just as media companies |
| One point to note here - quickly get rid of bad | | | | are trying to survive and grow so are consumers. |
| attitudes, even if they perform well. These folks can | | | | Managing family expenses for most consumers is a |
| spoil a team and become a cancer. | | | | challenge when household income is down. When |
| Weekly/Semimonthly Team Meetings and Quantitative | | | | choosing whether to pay for premium news services |
| Objectives - I am always amazed when meeting with | | | | or online gaming when these families are struggling to |
| individuals from a digital group that have limited | | | | pay for their kids school supplies - the decisions are |
| exposure to the metrics of the business. With limited | | | | obvious. Consumers are used to free on the Internet |
| staff, each resource needs to be clear how their | | | | and there must be a very compelling concept for them |
| contributions affect acquisition, retention, and overall | | | | to open their wallets. Don't just go from free to paid - |
| business model metrics. The metrics should not just be | | | | you will fail. Be strategic and make sure you first do |
| a report given to the financial person as that would be | | | | the research, analysis, and testing. Lastly, make sure it |
| a big mistake. I suggest weekly or semimonthly | | | | passes the smell test. It is a simple common sense |
| meetings with key cross-functional digital team | | | | test.. Does this strategy or price point seem right? |
| members to review historical metrics, understand | | | | No, An iPhone (or Android, or Palm, or Nokia, or |
| trends, formulate test plans, and strategically test ways | | | | BlackBerry, etc.) App is not Always the Right Answer |
| to improve the metrics. | | | | - There are instances where smartphone applications |
| Test Test Test - As I mentioned in #1, what is | | | | make perfect sense and have generated significant |
| successful in your market with your customers is likely | | | | brand, content distribution, and revenue growth for |
| to be different from others. Much of digital success | | | | media companies or entrepreneurs. However, I urge |
| can be attributed to effective direct marketing and this | | | | you to peel the layers off the onion before jumping to |
| means doing research, determining a strategy and | | | | invest in a smartphone application as there are many |
| tactics, testing effectiveness, reviewing results, making | | | | challenges. First and foremost, look at the data as it is |
| necessary changes, and testing some more. | | | | consistent with the carrier deck applications. Bottom |
| Do Research and Know Your Customer, Today - | | | | line, there are few success stories and many more |
| Another interesting point that frustrates me is how | | | | not. |
| media companies think they know their customer's | | | | In summary, I am a BIG fan of hybrid business models |
| wants, needs, and relationship to their brands because | | | | for digital businesses. The success is based upon |
| they did some research several years ago. | | | | analysis, good strategy/execution, and ongoing testing |
| Understanding your customers should be an ongoing | | | | and refinements. However, in my experience, the key |
| effort, especially as it relates to your acquisition and | | | | secret sauce to any successful digital endeavor is |
| retention efforts. This does not mean I suggest hiring a | | | | finding ways to build scale as that enables you to |
| Madison Avenue agency every six months to do | | | | translate a large quantity of users and traffic into |
| customer research. There are cost-effective ways | | | | multiple business models based upon quantitative data |
| (especially for digital businesses) to keep on top of | | | | analysis. |
| their current and prospective customer's wants/needs. | | | | What digital business model concepts works for you? |
| You will likely find that customers appreciate when you | | | | |