Thursday, July 19, 2007

Retail and publishing merge

A version of this piece was published in Marketing in 2007

For as long as anyone can remember, publishing’s been a business with two principal sources of revenue.  You sold advertising and sponsorship to companies who wanted to promote themselves to your audience, and in some cases, you charged that audience to view your content. 

Then along came the web.  Those media owners who had been used to charging their audience suddenly found that they couldn’t. 

Each extra newspaper printed costs money, and with rising newsprint costs this has been a major pressure in newspaper production costs.  But the economics of web distribution are different to print media, as each extra reader is gained at a zero marginal cost.  Consequently, so much free content was available online that consumers were simply unwilling to pay.

Culturally, this was hard to accept for many in the business.

Simon Kellner, at the time editor of the Independent, told the ISBA annual conference that it was wrong not to charge for content, that journalism had value and that it shouldn’t be given away on the web.

Martin Sorrell speaking at Google’s Zeitgeist conference in 2006, echoed this thought when he noted that he advised media clients not to give their content away for free.

Clearly, both ITV and Metro have managed to make viable media businesses out of giving away their content, so ‘free’ is nothing new.  But this focus on charging audiences for content belied a lack of imagination about the true commercial value of that audience.  As some publishers have discovered, there are other ways to monetise audience – and as they do so, the boundaries between what is considered ‘publishing’ and ‘retail’ are becoming increasingly blurred.

Online-only media owners were quickest to exploit this, untrammelled as they were by historic notions of how to make money.  A quick look at MSN’s site shows editorial about the best deals available in various financial services – but look at their credit card recommendations, and you can click to apply there and then.  An article about jet-set luggage in the travel channel carries a link to buy suitcases from MSN shopping.

AOL’s music channel sells you iTunes downloads, their travel channel sells you flights.  Yahoo will find you a house to buy and Lycos will rent you a car.

All of these transactions are handled and fulfilled by partners of these portals, and although there are often tenancy agreements in place, a large portion of the deal is often on a revenue-share basis.

These publishers are adopting some of the transactional risk, on the basis that by doing so they generate greater spend by the advertiser/supplier than they might do if they were simply pitching for ad budgets.  In this way, they’ve branched out from advertising to become part of those marketers’ distribution strategy.

It isn’t just the online pure-plays that have grasped this. makes most of its money from advertising.  But a third of their revenue comes from runners registering to participate in running events – Natmags keeps a percentage of each transaction.

The Sun makes substantial revenue from Sun Bingo online – using both the print and online editions to drive traffic into the game.   The new football season will see Sun readers paying to download premier league goals to their mobiles, in addition to the Page 3 videos they can already buy.

This spread into retail from the publisher side has been mirrored by retailers, who are increasingly understanding that content sells.

The best of these is undoubtedly, a fashion site selling premium brands from Jimmy Choo to Miu Miu.  High-quality magazine content and engaging style has led to an average order value of over £500 and very high levels of repeat purchase. 

The internet is a marketing channel (media), but it’s also a channel to market (distribution).  So whilst those who view it purely as ‘media’ will continue to limit their own potential, those who understand this new marriage of what Net-a-Porter founder Natalie Massenet calls ‘content fused with commerce’ are tapping a rich seam.

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