Welcome to a Thanksgiving week edition of The Rebooting. This week, I wrote about the house of brands approach that’s winning out as publishing favors verticals, how the strong get stronger in crises, and overthinking the “multi-SKU” creator business model. As always, please share this newsletter with a friend or colleague if you think they’d find it valuable. And please email me at firstname.lastname@example.org with feedback and ideas.
Why the House of Brands won
A publishing company needs to determine what kind of brand architecture to adopt. There are three basic alternatives:
- The Branded House. This approach, where a master brand dominates, is typified by Bloomberg and The New York Times.
- The House of Brands. This is a classic publishing approach favored by magazine companies. Condé Nast is a classic house of brands, as is Vox Media and Complex.
- Endorsed. Many brands grow into this structure as they grow and acquire brands rather than try to subsume them. Think of Coca-Cola, which, in addition to Coke and offshoots like Diet Coke, has endorsed sub-brands in Sprite, Dasani and Fanta.
What we’re seeing now in the media industry is a gravitation to the House of Brands and Endorsed architectures as opposed to the popular portal approach -- Yahoo Finance, Yahoo Sports, Yahoo Autos, etc. Look at BuzzFeed, which began its life very much as a master brand. But as BuzzFeed grew, it needed to verticalize. Enter Tasty. The food brand grew into a juggernaut, and BuzzFeed added other brands like Nifty and now HuffPost alongside BuzzFeed News.
Verticalization is the way out of commoditization, lending itself to the House of Brands and Hybrid approaches. The flimsy era of scale has ended; now the key is building tight communities. It is hard to do that with a single brand. BuzzFeed Food, BuzzFeed News, BuzzFeed Home is an approach from the portal era. The success at Dotdash started by ditching that portal approach Neil Vogel and crew inherited with About.com. Instead, the company splintered into a House of Brands, with The Spruce (home), VeryWell (health), and so on. The approach allows for additions as Dotdash makes acquisitions, such as Byrdie (beauty), Serious Eats (food) and Liquor.com (booze).
If executed well, a House of brands strategy can solve a riddle. Sustainable media needs the efficiency that comes with a shared infrastructure, but it also needs brands that are specific to communities. At BuzzFeed, there will be one infrastructure that will eliminate a ton of costs. Slimming down and rationalizing the back end of media is critical.
One of the key decisions at Digiday was to move toward being a house of brands (with elements of endorsed brands) with the addition of Glossy, focused on fashion and subsequently beauty. An earlier effort at a new brand in fintech failed for a variety of reasons, but the most important one was the “circles” didn’t touch.
With subsequent brands, we fixed that. Glossy was incubated from within Digiday, focusing the approach initially on subject areas that overlapped with Digiday’s media coverage. As a standalone brand, Glossy expanded to cover a variety of issues -- sustainability, unisex sizing, runway diversity -- that didn’t fit in Digiday’s purview. This was the approach repeated with Modern Retail, again incubated within Digiday (and Glossy) before spinning out as a standalone brand. The key: the circles all touched.
The key for expansion was keeping a single infrastructure and editorial team, allowing each brand to assume its unique characteristics while not duplicating infrastructure. The risk of the House of Brands approach is the brands do not feel unique and are instead cookie cutter versions of each other. But the upside of a House of Brands is spreading the infrastructure costs across several markets while creating unique brands for each community.
Finding opportunity in crisis
Early on in the pandemic, I spoke to a lot of media veterans on the impact this would have in the industry. The consensus: The strong get stronger.
We are seeing that in the scramble for talent. The New York Times has poached the editorial founders of BuzzFeed, Recode and Vox (with the recent addition of Ezra Klein). On another level, Business Insider has added a bunch of talent with the addition of some of my former Digiday colleagues as well as the addition of Morning Brew. This crisis will pass, and those with strong balance sheets and solid business models will emerge stronger. Both the Times and BI have diversified business models with strong subscriptions components -- in the NYT’s case, a juggernaut on its way to 10 million subscribers.
The flip side is those publishers that have weaknesses in their business models -- a dependence on ads or events, for example -- will have a far tougher time emerging on the other side in a position to recapture momentum in what is shaping up to be a revived economy.
Make money lots of ways
Nothing is new in the media business. Similar ideas pop up again and again, often dressed up slightly differently. I thought of that when reading Hunter Walk’s advocacy of a “multi-SKU” approach for independent creators.
The biggest impact of someone like Casey [Newton] unbundling himself from The Vox is that he is now an entrepreneur with a product called Casey. His beachhead may very well be a paid newsletter (it’s very good by the way) but the newsletter is just one SKU. Maybe the SKU he cares most about. Maybe even the SKU that makes him the most money. But it doesn’t have to be the only SKU. There could be a podcast SKU. A speaking fee SKU. A book deal SKU. A consulting SKU. A guest columnist SKU. And so on. And if he does several of these over the next few years, it won’t be about the success or failure of Substack (for him) but a mix of creative, economic and lifestyle goals.
I nodded along, but also thought this is simply how you run a media business, whether as a Substacker, a micro-media company or BuzzFeed. It reminds me of intermittent fasting, which used to known as “skipping breakfast.” Being a modern media company means operating a lot like a band. There was a time when the business of music was more straightforward and simple, but those days are past. Now, making money involves live performances, merch, investments, brand deals, making a tequila, and so on. The best revenue source for publishing remains many sources.
The challenge for solo creators is…. this takes a lot of work. Very few are made out for the solo life that is filled with doing things other than The Main Thing. I’ve met few journalists who want to do marketing, product development, consulting, speaking and so on and so forth. Some absolutely want to do it all, and have a unique skillset to spread across all those areas in addition to creating great content. But they are the exception to the norm. Far more robust services will need to spring up to support independent creators if the Substack Revolution is to be more than a niche phenomenon.
Lies, damn lies, subscriber numbers
Big publishers like to boast of big subscription numbers. I’m reminded of when many of these publishers would come on the Digiday Podcast and boast of big video view numbers. Obviously, paying subscribers are more important. And they make for impressive charts like this one from Axios.
And yet these charts tell only part of the story. In the aftermath of the election and with Black Friday upon us, you will be able to scoop up a promotional subscription to most publications in the bargain bin. As my former colleague Jack Marshall noted, you can pick up a Times and WSJ sub for $4 a month for a year. There is nothing wrong with using promotional pricing as part of a subscription strategy — consumers expect it now — but these also goose the raw subscriber figures.
Things to check out
- Check out Trapital, a newsletter Dan Runcie writes about the business of hip hop. This week, Trapital covers the potential of Verzuz TV, a digital series featuring virtual DJ competitions.
- Rolling Stone is rolling out an invite-only membership program called the Culture Council that lets people publish on RollingStone.com, virtual events, networking and access to executive coaching. There is a big opportunity for publishers to take a page out of industry associations.
- BuzzFeed CEO Jonah Peretti is promising (again) profitability is coming. This has been a common refrain by digital media companies that have yet to prove they can reliably make money -- not just for a quarter but over a full year and then done repeatedly.
- Building companies is messy and involves a lot of missteps and shifts that aren’t neatly captured in most entrepornography. An exception: This detailed post on surviving “the messy middle” by Michael Katz, CEO of data platform mParticle.
Thanks for reading. Next week, I’m going to address publisher funnels.