John Battelle Founder & Chairman Federated Media Publishing

John Battelle Federated Media Publishing MPA December 2005 SEARCH, WEB 2.0, BLOGS, AND ALL THAT: THE ROLE OF MAGAZINES IN AN INTENT-DRIVEN WORLD

WHO IS THIS GUY?

Agenda…. What is a publication, really? Where are we now, how did we get here? Web 1.0: What we did right, what we did wrong Web 2.0: The opportunity, the threat The Magazine Assets: Well Positioned to Thrive The Role of Search Why The Magazine is the model

What is a publication, really?

Where are we now, how did we get here?

Web 1.0: What we did right, what we did wrong

Web 2.0: The opportunity, the threat

The Magazine Assets: Well Positioned to Thrive

The Role of Search

Why The Magazine is the model

What Defines a Publication? A conversation between three parties: Author, Audience, and Advertiser; facilitated by a fourth: the Publisher Each has different roles, but the best pubs foster and nurture a conversation on a subject for which all parties share a passion The best have marketers as participants, they are readers and advertisers, endemic The best are driven by great voices and point of view, and are leaders/arbiters in their field Author Marketer Audience Publisher

A conversation between three parties: Author, Audience, and Advertiser; facilitated by a fourth: the Publisher

Each has different roles, but the best pubs foster and nurture a conversation on a subject for which all parties share a passion

The best have marketers as participants, they are readers and advertisers, endemic

The best are driven by great voices and point of view, and are leaders/arbiters in their field

What Does NOT Define a Publication? The medium in which it is delivered Magazines should not be equated with print Magazines are bigger than one medium Until the Web 2.0, we just didn’t have a better medium Now we do….

The medium in which it is delivered

Magazines should not be equated with print

Magazines are bigger than one medium

Until the Web 2.0, we just didn’t have a better medium

Now we do….

What’s Different Now? Web 1.0 (1994-2001) Was about “getting on the web” A lot of shovelware - literally and figuratively No real business model traction, advertising failed to reach critical mass Web 2.0 (2002 on….) Building web native magazines Focusing on the true mission of your publication Real business models and vastly different economic realities….

Web 1.0 (1994-2001)

Was about “getting on the web”

A lot of shovelware - literally and figuratively

No real business model traction, advertising failed to reach critical mass

Web 2.0 (2002 on….)

Building web native magazines

Focusing on the true mission of your publication

Real business models and vastly different economic realities….

A Brief Web 2.0 Primer Version 1.0 of the Internet: Long on vision, short on execution, shorter on profits; market & tech immature Version 2.0: Long on execution, long on profits, even longer on vision; platform is maturing

Version 1.0 of the Internet: Long on vision, short on execution, shorter on profits; market & tech immature

Version 2.0: Long on execution, long on profits, even longer on vision; platform is maturing

THE RISE OF WEB 2.0 Mid-Late 90s - we thought it was a battle for the window into computing : Netscape v. MSFT. Instead, it became about the content and services , not the window Web itself became a robust development platform Sites also became platforms: Amazon, Google, Yahoo!, eBay, etc And entrepreneurs began to build on the platforms, creating new approaches to established markets - like media….

Mid-Late 90s - we thought it was a battle for the window into computing : Netscape v. MSFT.

Instead, it became about the content and services , not the window

Web itself became a robust development platform

Sites also became platforms: Amazon, Google, Yahoo!, eBay, etc

And entrepreneurs began to build on the platforms, creating new approaches to established markets - like media….

Web 2.0 Principles: THE WEB IS A PLATFORM Building on the lessons of the 1990s Open source, cheap processing/storage/bandwidth opens new economic realities Ten years in: Net hit critical mass of usage Platform sites embrace the open: data, access, portability Best sites are search driven Join the “Point to Economy”

Building on the lessons of the 1990s

Open source, cheap processing/storage/bandwidth opens new economic realities

Ten years in: Net hit critical mass of usage

Platform sites embrace the open: data, access, portability

Best sites are search driven

Join the “Point to Economy”

Web 2.0 Principles: THE ARCHITECTURE OF PARTICIPATION Leverage user-generated content & the force of many to create advantage and build network effects The remix culture: the best sites are mixes of other sites’ APIs, data feeds: Prosumer rising Linux

Leverage user-generated content & the force of many to create advantage and build network effects

The remix culture: the best sites are mixes of other sites’ APIs, data feeds: Prosumer rising

Web 2.0 Principles: INNOVATION IN ASSEMBLY Aggregate, manage, analyze complexity The essence of the “content business” Dell, Spikesource, SimplestShop.com, Topix, MyYahoo, Technorati/Feedster

Aggregate, manage, analyze complexity

The essence of the “content business”

Dell, Spikesource, SimplestShop.com, Topix, MyYahoo, Technorati/Feedster

Web 2.0 Principles: LIGHTWEIGHT BUSINESS MODELS The Web as Platform plus AoP = new generation of “lightweight” competitors Google/Yahoo News & Craigslist/Blogs v. Newspapers Tivo/NetFlix/VideoIP v. Comcast/cable Federated Media v. Primedia

The Web as Platform plus AoP = new generation of “lightweight” competitors

Google/Yahoo News & Craigslist/Blogs v. Newspapers

Tivo/NetFlix/VideoIP v. Comcast/cable

Federated Media v. Primedia

Web 2.0 Principles: THE POWER OF THE TAIL The force of many: 1 million sites with 1000 readers is far larger than 100 sites with a million readers Adsense/AdCenter/YPN 100,000 bands selling 5000 albums, not 50 bands selling 1 million albums Blogging is this dis/re aggregation phenom for web publishing

The force of many: 1 million sites with 1000 readers is far larger than 100 sites with a million readers

Adsense/AdCenter/YPN

100,000 bands selling 5000 albums, not 50 bands selling 1 million albums

Blogging is this dis/re aggregation phenom for web publishing

Web 2.0 Principles: SEARCH RULES The driver of Web 2.0 businesses Search heralds a new “Web OS” Our culture’s point of inquiry, the spade with which we turn the web’s soil, the artifact of a new culture A new reality for all forms of traditional business Barely begun to realize its impact…

The driver of Web 2.0 businesses

Search heralds a new “Web OS”

Our culture’s point of inquiry, the spade with which we turn the web’s soil, the artifact of a new culture

A new reality for all forms of traditional business

Barely begun to realize its impact…

HERE’S WHY SEARCH RULES Piper Jaffray

THE PAID SEARCH MARKET Piper: 5x growth in 5 years 59% of money is coming from other media budgets On average 12-15% of all clicks are paid clicks Average CPC on Google: 54 cents, avg rev/query = 9 cents Latency: 25% of those who click on paid CE search, buy, but 92% of them buy offline

Piper: 5x growth in 5 years

59% of money is coming from other media budgets

On average 12-15% of all clicks are paid clicks

Average CPC on Google: 54 cents, avg rev/query = 9 cents

Latency: 25% of those who click on paid CE search, buy, but 92% of them buy offline

Gap Between Net Ad Spend and Usage Morgan Stanley

NEW MEDIA WAS NOT THAT NEW MSM model: Publisher hires content creators, attaches advertising to content, subscription follows (First) new media model: Publisher hires content creators, attaches advertising to content, hopes subscription follows MSM model: Create a “thing” (magazine, newspaper, TV show), fight tooth and nail to build and defend an audience. Spend millions. (First) new media model:Create a “thing” (“website”), fight tooth and nail to build and defend an audience. Spend millions. Is this “site-based”/packaged goods model really new? Search gave us the answer…

MSM model: Publisher hires content creators, attaches advertising to content, subscription follows

(First) new media model: Publisher hires content creators, attaches advertising to content, hopes subscription follows

MSM model: Create a “thing” (magazine, newspaper, TV show), fight tooth and nail to build and defend an audience. Spend millions.

(First) new media model:Create a “thing” (“website”), fight tooth and nail to build and defend an audience. Spend millions.

Is this “site-based”/packaged goods model really new?

Search gave us the answer…

MARKETING IN POST SEARCH WORLD: INTENT BEFORE CONTENT Before Search: Content as proxy for audience After Search: Audience declares intent, then content finds audience In the Web 2.0 publishing world, intent drives content… …and content disaggregates As intent became a proxy for audience, paid search took off…

Before Search: Content as proxy for audience

After Search: Audience declares intent, then content finds audience

In the Web 2.0 publishing world, intent drives content…

…and content disaggregates

As intent became a proxy for audience, paid search took off…

DISRUPTING FORCES … and Publishers freaked out Ad models shifting to intent Marketing becomes a sales channel Google et al seem to be dis-intermediating traditional media models Search, RSS, and Blogging are redefining content models The rise of the “point to” economy If you are not in the conversation, you’re not in the Index… Is this going too far? What about branding? “ Corporate marketing represents the last bastion of unaccountable spending in corporate America.” - Google CEO Eric Schmidt

… and Publishers freaked out

Ad models shifting to intent

Marketing becomes a sales channel

Google et al seem to be dis-intermediating traditional media models

Search, RSS, and Blogging are redefining content models

The rise of the “point to” economy

If you are not in the conversation, you’re not in the Index…

Is this going too far? What about branding?

Save our old model! Search undermines content-attached models Ad can be sold at point of intent, my content is threatened Regard search companies with suspicion The Internet is stealing my content Forbid deep linking, raise the registration drawbridge… Keep your content in safe containers… And if that doesn’t work…sue your customers! REACTION OF MAINSTREAM MEDIA BUSINESS “ Google is a brand killer…if you must sleep with the enemy, make sure you use protection and make sure you get paid". - Publisher of Economist.com.

Save our old model!

Search undermines content-attached models

Ad can be sold at point of intent, my content is threatened

Regard search companies with suspicion

The Internet is stealing my content

Forbid deep linking, raise the registration drawbridge…

Keep your content in safe containers…

And if that doesn’t work…sue your customers!

“ Google is a brand killer…if you must sleep with the enemy, make sure you use protection and make sure you get paid".

- Publisher of Economist.com.

Authoritative content, deep archives Talented authors and editors Community driven conversations in focused areas Strong advertiser relationships All perfect for search! So join the point to economy and trust your content will drive value to your door online… And branding it NOT dead, it’s just forced to justify its target more precisely… … which is precisely what great online publications can do BUT MAGAZINES ARE PERFECT FOR A SEARCH DRIVEN WORLD!

Authoritative content, deep archives

Talented authors and editors

Community driven conversations in focused areas

Strong advertiser relationships

All perfect for search!

So join the point to economy and trust your content will drive value to your door online…

And branding it NOT dead, it’s just forced to justify its target more precisely…

… which is precisely what great online publications can do

Print ain’t dead, but online is forcing justification of its economic model For some print based models, it’s all over save the yelling Many Local papers, much of the B2B market For others, it means shifting the print product National papers, service based magazines, context specific pubs For still others, print remains the best medium Fashion, shelter, travel Here’s a medium term problem to solve: The insanely wasteful magazine manufacturing and distribution infrastructure… Long term: It may not matter. When paper-quality readers hit the sub $100 price point…. It’s all magazines, baby. But now with online goodness! ( hey …is he saying print is dead?)

Print ain’t dead, but online is forcing justification of its economic model

For some print based models, it’s all over save the yelling

Many Local papers, much of the B2B market

For others, it means shifting the print product

National papers, service based magazines, context specific pubs

For still others, print remains the best medium

Fashion, shelter, travel

Here’s a medium term problem to solve: The insanely wasteful magazine manufacturing and distribution infrastructure…

Long term: It may not matter. When paper-quality readers hit the sub $100 price point….

It’s all magazines, baby. But now with online goodness!

CONTENT DRIVEN, NOT DISTRIBUTION DRIVEN We must evolve old models while embracing new realities Media pre web: Huge capital and customer acquisition/retention costs Huge advertising revenues Moderate content creation costs Distribution lock out driven Huge profits Media post web: Limited capital and customer acquisition/retention costs Moderate advertising revenues Moderate content creation costs No distribution lock out: Content driven Healthy but distributed profits…

We must evolve old models while embracing new realities

Media pre web:

Huge capital and customer acquisition/retention costs

Huge advertising revenues

Moderate content creation costs

Distribution lock out driven

Huge profits

Media post web:

Limited capital and customer acquisition/retention costs

Moderate advertising revenues

Moderate content creation costs

No distribution lock out: Content driven

Healthy but distributed profits…

WEB 2.0 PUBLISHING MODELS (it really is different online…) The Disaggregation of Publisher role Ad Networks erode sales relationships Professional Weblogs advance author role A web blog is a Web 2 publication: Lightweight model, innovates in assembly, lives down tail Good blogger is a good editor/filter, conversational, leader in community, influencer Hybrid Magazines rethink traditional approaches How might you start a national magazine when you don’t have $5-10 million in risk capital? When your audience is mostly online? In Web 1.0, the publisher played the dominant role….

The Disaggregation of Publisher role

Ad Networks erode sales relationships

Professional Weblogs advance author role

A web blog is a Web 2 publication: Lightweight model, innovates in assembly, lives down tail

Good blogger is a good editor/filter, conversational, leader in community, influencer

Hybrid Magazines rethink traditional approaches

How might you start a national magazine when you don’t have $5-10 million in risk capital?

When your audience is mostly online?

In Web 1.0, the publisher played the dominant role….

…And the Author Was Held Apart Publisher retains authors to gather Audience (content-driven) Marketer goes through Publisher to reach Audience Ideally, Audience then begins conversation with Marketer But, the conversation is limited and the author is marginalized And leads to publishers being driven more by the marketer, and less by the audience Publisher Marketer Audience Authors

Publisher retains authors to gather Audience (content-driven)

Marketer goes through Publisher to reach Audience

Ideally, Audience then begins conversation with Marketer

But, the conversation is limited and the author is marginalized

And leads to publishers being driven more by the marketer, and less by the audience

The Web 2.0 Publishing Model …But in Web 2.0, the publisher plays a facilitator’s role And the author is a more equal conversant (and often, the author and the audience are one and the same….) Author Marketer Audience Publisher

…But in Web 2.0, the publisher plays a facilitator’s role

And the author is a more equal conversant

(and often, the author and the audience are one and the same….)

Example: Make Idea: Popular Mechanics for the Digital Life Problem: Publisher was not a magazine house Solution: Leverage Book channel/contacts, viral marketing/blogs, “Makers,” Amazon Results: 70,000 circ. In first year with no DM, at a $50 price point - 7x expectations Profitable in year one 500K/mo online readers Extremely efficient cost structure

Idea: Popular Mechanics for the Digital Life

Problem: Publisher was not a magazine house

Solution: Leverage Book channel/contacts, viral marketing/blogs, “Makers,” Amazon

Results: 70,000 circ. In first year with no DM, at a $50 price point - 7x expectations

Profitable in year one

500K/mo online readers

Extremely efficient cost structure

Example: FM Blogs are difficult to buy at scale Bundle an ecology of sites together - 10-20 per category, each site vetted for quality Aggregate audience in the millions, views in the tens of millions Focus on appropriate advertising, messaging for each site Reporting and analysis for both Marketer and Author, meta-site/feed for Audience and BD Authors federate under FM, yet each owns/operates their site: FM is like label or book imprint Marketers gain efficient and appropriate access to robust, passionate conversations The model scales from sector to sector without traditional publisher constraints Authors Audience Marketer

Blogs are difficult to buy at scale

Bundle an ecology of sites together - 10-20 per category, each site vetted for quality

Aggregate audience in the millions, views in the tens of millions

Focus on appropriate advertising, messaging for each site

Reporting and analysis for both Marketer and Author, meta-site/feed for Audience and BD

Authors federate under FM, yet each owns/operates their site: FM is like label or book imprint

Marketers gain efficient and appropriate access to robust, passionate conversations

The model scales from sector to sector without traditional publisher constraints

So What’s Your Advice, BlogMan? Train your editors/writers/authors to be web native, and hire natives - focus your talent and investment on the web Online, media is driven more by conversation, less by packages/interruption/show Content should invite conversation, not demand attention Employ your customers in creating new products, content Criticism is OK, in fact, how you respond to it can build your brand Media is no longer ruled by distributors, it’s ruled by attention. However, there are now distributors of attention, so… Search rules, but not just paid search: Search is how content - and audience - is found. Join the point to economy. Your brand is your editors/authors/audience, not the print product. Online, media is performance art, not packaged goods

Train your editors/writers/authors to be web native, and hire natives - focus your talent and investment on the web

Online, media is driven more by conversation, less by packages/interruption/show

Content should invite conversation, not demand attention

Employ your customers in creating new products, content

Criticism is OK, in fact, how you respond to it can build your brand

Media is no longer ruled by distributors, it’s ruled by attention. However, there are now distributors of attention, so…

Search rules, but not just paid search: Search is how content - and audience - is found.

Join the point to economy.

Your brand is your editors/authors/audience, not the print product.

Online, media is performance art, not packaged goods

So What’s Your Advice, BlogMan? A magazine is not a form factor, it is a conversation Join it via the web! If you have the means…invest in properties that have critical mass, or build them Find the best authors/audiences online, and cultivate them… Magazines are not dead - they’re moving into a great new phase!

A magazine is not a form factor, it is a conversation

Join it via the web!

If you have the means…invest in properties that have critical mass, or build them

Find the best authors/audiences online, and cultivate them…

Magazines are not dead - they’re moving into a great new phase!

THANK YOU! [email_address] John Battelle Federated Media Publishing MPA December 2005 SEARCH, WEB 2.0, BLOGS, AND ALL THAT: THE ROLE OF MAGAZINES IN AN INTENT-DRIVEN WORLD