Show Me the (Real) Money

As the eyes of old print, radio, and TV media turn to the internet for a bridge to take them across the current media business abyss, one troubling fact is becoming abundantly clear: The "real money" isn’t there yet. Top executives at TV networks, magazine companies, and even newspapers have known for a while that on-air minutes and print pages sell at much higher rates and produce more revenue in most cases than even the most ambitious digital models. No less a media mogul than NBC’s CEO Jeff Zucker warned about this conundrum earlier this year. Yes, his company was pursuing digital strategies aggressively and moving more of its content to web. However, he said, "Our challenge with all these ventures is to effectively monetize them so that we do not end up trading analog dollars for digital pennies." More recently, Zucker reiterated that the scale of spending online has not kept pace with expectations.

We talk ad nauseam about digital being the real "growth center" for media, but how can it be called growth without growing revenue? Media companies of all stripes that think their online businesses will compensate for dwindling offline media revenues are delusional. The internet has proven it can make money, but not on the scale that built old media empires. It built Google, to be sure, but that is a single company, dominating the space with mostly direct marketing dimes and dollars. Fifteen years into this "digital revolution," we still talk about the reticence of major product brands to dedicate serious pieces of their marketing budgets to digital. Outside of the auto industry, only a small percentage of the billions of ad dollars being spent online goes to the kinds of pricey display and brand campaigns that made publishers fat and happy. As an old B2B editor said to me recently, "It used to be that you rolled out of bed and made money in trade publishing."

Now, the pressure is on to thoroughly rethink the media business models so that digital is not only at its core but also proves to be a real cash cow. That is going to be much harder than simply getting a share of ad spend. Really, there aren’t a lot of choices.

First, reaggregate. If you can’t get the same dollars from the same audience online as you do offline, then extend your digital reach to get pennies from more people. Acquire, partner, co-opt, or otherwise network. Vertical ad and media networks from IDG and Forbes are trying this approach, while CBS and CondeNast have been acquiring companies and their audiences.

Second, charge advertisers more. Media execs now talk more publicly about the need to change the fee-structure of digital media so that advertisers pay at an offline scale. For B2B, lead generation is one place where web properties already do match some offline rates. The secret here will be more integrated deals across web, print, TV, out-of-home, and mobile. If media companies can establish multiplatform ubiquity and a careful coordination of platforms, they can exact a premium.

Third, go hybrid. Except for a handful of major media players attracting big advertising, you need customers to pay you for something somewhere. Expect more emphasis on fee-based models. Publishers such as Rodale make as much from online book sales as they do from digital advertising. Conservative political publisher actually makes most of its revenue from subscriptions to its financial and health advice newsletters.

Fourth, deal in data. Ultimately, online publishers are not selling advertising against content but against audiences. The database rules, so make it deeper at every opportunity. Understanding who your audience is, what they like, and what they do when they’re not on your site is the currency of interactive technologies. This point will be critical to making No. 2 work.

Fifth, create content on the cheap. The age of mass media is over, and with it goes the concentrations of advertising and capital that made expensive content empires possible. The money available for original content creation will shrink … permanently. Even without the deep recession, the economies of fragmentation (whatever they turn out to be) inevitably demand smaller, cheaper modes of production.

Believe me, as a writer, I’m sorry about that last one. But, you know, with the universe shifting and all, we should have seen it coming.