Online is not Print2.0 - Part 1 - The reach paradox

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A short presentation trying to highlight why the change from print to online business is not that easy to achieve. Part one takes care of the reach paradox.

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Online is not Print2.0 - Part 1 - The reach paradox

  1. 1. Martin Scholz Spring 2010
  2. 2. „If you can generate enough reach, become market leader in your segment, you will be profitable and successful (in print business!)“ Martin Scholz Online is not just Print 2.0 - Part I 2 (http://www.binomsc.com) Spring 2010
  3. 3. It has a direct influence of the (only) two revenue streams: Advertising Distribution & * Key performance indicator Martin Scholz Online is not just Print 2.0 - Part I 3 (http://www.binomsc.com) Spring 2010
  4. 4. Reach = copies sold x reader per copy The number of readers per copy is different for each product. However, it usually does not change. Martin Scholz Online is not just Print 2.0 - Part I 4 (http://www.binomsc.com) Spring 2010
  5. 5. It is rather obvious, that distribution revenues depend on the number of copies sold: Distribution Rev = copy price * copies sold More copies sold means more distribution revenues Martin Scholz Online is not just Print 2.0 - Part I 5 (http://www.binomsc.com) Spring 2010
  6. 6. Have a look at the distribution margin: Margin = copy price – production cost per copy The more copies are printed, the lower is the production cost per copy (“economy of scale”). Martin Scholz Online is not just Print 2.0 - Part I 6 (http://www.binomsc.com) Spring 2010
  7. 7. With other words: the more copies are printed (and sold), the more profitable is the distribtion margin per copy! Martin Scholz Online is not just Print 2.0 - Part I 7 (http://www.binomsc.com) Spring 2010
  8. 8. It is not that obvious, but advertising revenues depend on the number of copies sold, too: Ad Rev = number of ad pages * price per ad page No sold copies here, right? Martin Scholz Online is not just Print 2.0 - Part I 8 (http://www.binomsc.com) Spring 2010
  9. 9. Let’s have a closer look on the second variable! Price per ad page = average CPM* x number of contacts (in ‘000) Number of contacts is also called Reach. * CPM = cost per mille, price to contact 1.000 persons Martin Scholz Online is not just Print 2.0 - Part I 9 (http://www.binomsc.com) Spring 2010
  10. 10. Reach = copies sold x reader per copy The number of readers per copy is different for each product. However, it usually does not change. Martin Scholz Online is not just Print 2.0 - Part I 10 (http://www.binomsc.com) Spring 2010
  11. 11. So the full formula would look like this: Ad Rev = Ad pages per copy * CPM * readership per copy * copies sold And here they are again: copies sold. Martin Scholz Online is not just Print 2.0 - Part I 11 (http://www.binomsc.com) Spring 2010
  12. 12. Let’s check those variables again:   CPM is depending on the product (its target group) and won’t change much over time (except some inflation adjustments)   Thenumber of ad pages per copy is also rather stable and limited (except you print more pages or leave away content)   The readership per copy usually stays on a stable level, too. Sell more copies is to the (best) way to gain more advertising revenues Martin Scholz Online is not just Print 2.0 - Part I 12 (http://www.binomsc.com) Spring 2010
  13. 13. „If you build your online business concept (only) on reach, even if become market leader in your segment, you will lose money“ Martin Scholz Online is not just Print 2.0 - Part I 13 (http://www.binomsc.com) Spring 2010
  14. 14. Obviously, there are no “sold copies” in the internet. Reach is measured in (Unique) Visitors, (Unique) Visits and Page Impressions. * Key performance indicator Martin Scholz Online is not just Print 2.0 - Part I 14 (http://www.binomsc.com) Spring 2010
  15. 15. A “translation” to print measurements, even if it is not perfect, could be: ◦  Unique Visitor = Reader ◦  Unique Visits = number of occasions, when someone reads the magazine ◦  Page Impressions = number of magazine pages seen by the reader Martin Scholz Online is not just Print 2.0 - Part I 15 (http://www.binomsc.com) Spring 2010
  16. 16. Currently, many websites still compete to have the most page impressions ◦  Probably noone would compete who has the “most seen magazine pages” ◦  Huge PI per visit means “click-machine” – the user does not “see” the whole website! ◦  Better indicators: Unique Visitor, together with Visits per Visitor, PI per Visit, time spent on site Martin Scholz Online is not just Print 2.0 - Part I 16 (http://www.binomsc.com) Spring 2010
  17. 17.   In 1960ies: by number of branches and customers => until they realized that “more branches” did not mean “more revenues”   In 1970ies: by revenues => until it happend that for 1 DM they had spend 1+ DM costs (e.g. markting, additional rent or personal, lower prices etc.)   In 1980ies: by profit => until they found out that for 1 DM more profit they had to invest 100 DM (... any savings account was a better invest)   In 1990ies: by profitability => finally they realized that any money invested in their own company should be more profitably than investing in stocks, bonds or saving accounts Isn‘t it time to leave the 60ies when measure online success? Martin Scholz Online is not just Print 2.0 - Part I 17 (http://www.binomsc.com) Spring 2010
  18. 18. To extent reach websites usually do: ◦  Produce more (and sometimes even shady) content ◦  Buy traffic from Search engines or other traffic sources ◦  Add more features/functions to the website ◦  Use technical tricks or bad usability to “create” page impressions Martin Scholz Online is not just Print 2.0 - Part I 18 (http://www.binomsc.com) Spring 2010
  19. 19. “Translated” to Print it would mean: ◦  Print more pages / make thicker magazines & newspaper ◦  Pay somebody to read the print product ◦  Put gadgets on the product (like DVDs, toys, cosmetics) ◦  Made a bad design or split articles on more pages Martin Scholz Online is not just Print 2.0 - Part I 19 (http://www.binomsc.com) Spring 2010
  20. 20. Cost effects of gaining online reach: ◦  Produce more content raises editorial costs as well as costs for pictures etc. ◦  Buy traffic raises marketing costs ◦  Add more features/functions raises development costs & project/product management costs ◦  More traffic raises technology (hosting) costs – without gaining “distribution revenues”! Martin Scholz Online is not just Print 2.0 - Part I 20 (http://www.binomsc.com) Spring 2010
  21. 21. Yes, but the Ad revenues will grow!? - Not really! The online CPM in online is much lower than in print – and it is even going down since everybody extents Page Impressions... ...when supply grows and demand stays the same, the price falls! (BTW: additional page impressions are usually gained in the “long tail”, which has extremly low CPMs - if any. As a result, your average CPM is falling even more) Martin Scholz Online is not just Print 2.0 - Part I 21 (http://www.binomsc.com) Spring 2010
  22. 22. There are some very important differences between publishing in Print and Online: Print Online • Everybody can publish • Oligopoly of publisher • Limited number of ad pages • Unlimited number of ads • Fixed ad per page • Ads can change anytime Martin Scholz Online is not just Print 2.0 - Part I 22 (http://www.binomsc.com) Spring 2010
  23. 23. Gaining online reach usually leads to: ◦  Higher costs (content, marketing, technology) ◦  Lower ad prices (CPMs) ◦  Probably even lower total ad revenues (if decline in CPM is not covered by increase of ads booked) ◦  Most likely to lower EBITDA (or extend losses!) Martin Scholz Online is not just Print 2.0 - Part I 23 (http://www.binomsc.com) Spring 2010
  24. 24. Don‘t forget: in the internet ad response and result are measurable! ◦  People ignore display ads technically (ad blocker) or subconsciously (banner blindness) ◦  In opposite to print, TV or outdoor:   user behaviour can be tracked (analytics, heatmap,...)   user can immediately interact (inform, order, buy)   there is performance based marketing (CPC, PPC, affiliate) Martin Scholz Online is not just Print 2.0 - Part I 24 (http://www.binomsc.com) Spring 2010
  25. 25. Martin Scholz Online is not just Print 2.0 - Part I 25 (http://www.binomsc.com) Spring 2010
  26. 26. There will always be branding/image campaigns  Don’t offer just another banner – go and use the full possibilities of the internet for those! Some examples: sponsored blogs, special sections, cooperations for promo-activities (contests etc.), sweepstakes for users… Martin Scholz Online is not just Print 2.0 - Part I 26 (http://www.binomsc.com) Spring 2010
  27. 27. Open new revenue streams  Have a look at your product, your brand, your users and develop new income sources Some examples: cooperation with e-shops, online booking, price-comparision, other businesses where you get provisions Martin Scholz Online is not just Print 2.0 - Part I 27 (http://www.binomsc.com) Spring 2010
  28. 28. Focus on your USPs, e.g. on unique content  There is already (too?) much content online. Try to leverage this content by linking instead of reproducing it Martin Scholz Online is not just Print 2.0 - Part I 28 (http://www.binomsc.com) Spring 2010
  29. 29. Start on a low-cost level and test, test, test.  You get immediately feedback from users with analytic tools, user behaviour tracking tools etc. You do not need to have to “full” or “perfect” product. You simply can not have it. The market is to dynamic! Martin Scholz Online is not just Print 2.0 - Part I 29 (http://www.binomsc.com) Spring 2010
  30. 30. And never forget what your business goal is!  Don’t try to build the biggest reach but the relevant reach (relevant for generating revenues!)  Speak to your (ad) clients to learn which reach is relevant  Plan more (special) sales persons than content manager ;-) Martin Scholz Online is not just Print 2.0 - Part I 30 (http://www.binomsc.com) Spring 2010
  31. 31.   Why the homepage is not a coverpage   Content production vs. Journalism   Technology – just an enabler? Martin Scholz Online is not just Print 2.0 - Part I 31 (http://www.binomsc.com) Spring 2010
  32. 32. Thank you! Martin Scholz Consultant martin@binomsc.com http://www.binomsc.com http://www.twitter.com/binomsc Martin Scholz Online is not just Print 2.0 - Part I 32 (http://www.binomsc.com) Spring 2010

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