Puck's subs + ads formula

Welcome back. The week after Labor Day is always an in-between time, much like my conception of the media business at this moment.

A few programming notes:

• I’ll be publishing three times a week in the fall. I want to test out shorter emails and also add a new format that focuses more on tactics of building sustainable media businesses. Feedback is always welcome. Just hit reply.
• I’m joining a webinar with A Media Operator’s Jacob Donnelly and BlueConic’s Patrick Crane to discuss the impact AI search will have on the media industry. Join us on Sept 12 at 1pmET. Register here.
• The Rebooting is kicking off its dinner series later this month in New York City, with a gathering of top revenue leaders to discuss the evolution of their direct-sold ad businesses. Thanks to Permutive for sponsoring. We’ll have several more of these dinners in the fall. Fill out this short form if you want more information on the dinners and to receive invites (or sponsor them).

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Puck’s Jon Kelly on why ads are still be a good business

For the last several years, the remarkable resurgence of The New York Times has set the narrative that the future of the media business lies in subscriptions. In part, that’s true, yet for all the success of subscription models, advertising remains a critical part of most of these business models.

Look no further than Puck, one of a clutch of newcomers to the media business that’s now two years old. When Puck launched in 2021, it was heralded, in the Times of course, as “Vanity Fair for the Substack Era.” In part that was due to its approach of leaning on “journalists as influencers,” but it was also due to its launch with subscriptions at the core of its business model.

Yet two years in, advertising is a large part of the business, likely bigger than subscriptions, although Jon Kelly, Puck’s co-founder and my guest on this week’s episode of The Rebooting Show, wouldn’t say exactly. He did allow that the initial thesis of going “direct to consumer” also yielded opportunities to offer premium advertising to what amounts to rich niches.

“What we found is that if you create an excellent product for a highly engaged audience and you have no disintermediation, you have incredible first-party data, then you can build a really successful advertising business on top of that,” Jon told me.

The ad market is not a monolith. The relentless pressure exerted by Google, Facebook, Amazon and now every retailer and consumer tech company possible doesn’t affect all categories equally. B2B advertising, for instance, is mostly protected from such pressures, other than LinkedIn. It’s no different in areas like the For Your Consideration ads that Jay Penske has successfully targeted.Even better are the corporate affairs ads that power Politico, Axios, Punchbowl and others. Tech companies are usually among the biggest customers rather than the competition.

Puck is able to do well in both areas, thanks to what I think of as its strongest vertical in Hollywood, led by Matt Belloni, as well as its Washington coverage, with Tara Palmieri and Julia Ioffe. Those are endemic ad categories, as Jon points out, not more fickle, broad-brush mass advertising like consumer packaged goods or automotive.

The other upside: You can have a leaner sales infrastructure to serve endemic categories versus the massive sales infrastructure many digital media companies built up that are now albatrosses in a more-with-less era.

“You can build small but really impactful teams of salespeople to build relationships and grow them over time,” Jon said. “I think that the collapse of that generation of media really made people freak out for a couple years, maybe unnecessarily, and we're seeing the rebirth of [digital advertising].”

A few other highlights from our conversation:

On what ails legacy publishing models

“For legacy businesses, going direct to consumer was often seen as antithetical to the business interests of the advertising business. I've worked at companies like that. You can even see how un-confident they were in implementing the subscription business. They'd have these paywalls in place for like 20 articles or 10 articles, basically an expression of how little confidence the brand had in the quality of their own work. You can count on one hand that the companies and brands have done it really elegantly and successfully.”

On raising $10 million in a rough funding climate

“We actually probably benefited on some level from the macroeconomic picture. There were not a lot of exciting opportunities in media in the last year. And we were really thrilled with the progress we made as a company. When we went to market to price a round and consider a new partner to lead the series B, we could do so from a position of strength.”

On scarcity

“I can't imagine a world ever in which Puck would endeavor to have the scale required of programmatic. In a world of too much,  scarcity matters. We spend so much time crafting the work that's published by Puck. We want to be just as thoughtful about the advertising partners that we work with. We do that because we're having a daily conversation across multiple touch points with the most elite audience in the culture.”

On the pendulum shift from institutions to individuals

“One of the challenges of the post-2008 era was that it created this fog of depression in the industry where people were told to feel grateful for whatever jobs they could get. And now we have a lot of tools – some are technological, some are more based in distribution or format innovations – that allow journalists to have more impact than ever before. “

On starting small

“There is an impulse that any creator feels: Why start small? Let's just go for it. Let's just hire hundreds of people, build a newsroom, start publishing and own the waterfront.  I don't think that makes sense. What if something doesn't work the way you expected it to? How much harder have you made it for yourself to undo those mistakes? Wouldn't it be a lot better to begin with something, iterate on it until it's really successful, and then use that as a position of strength to build on top of it?. That's also the most organic way to create enjoyable, powerful bundles, which is the goal that we're all searching for here.”

Check out the full episode on Apple, Spotify or other podcast services.

A disclaimer: I did a small ad deal with Puck that will begin tomorrow, although it wasn’t related to this conversation. I’ve waited to talk to Jon until after Puck wrapped up its funding round.

Thanks to Permutive for sponsoring this newsletter. Check out their case study of their work with Penske.

Send me a note with feedback by hitting reply or sending me a note: bmorrissey@therebooting.com.