Publishers spinning off tech product has a checkered history
Reminder: If you’re going to CES, consider coming by the Aria on Thursday, Jan. 5, at 11:30am. We’ll have lunch, followed by a discussion with GroupM chief innovation officer Krystal Olivieri and David Kostman, Outbrain's co-chief executive, about how advertisers have a critical role to play in supporting independent journalism. Thanks to Outbrain for supporting this important conversation. Hope to see some of you there.
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Selling the CMS dream
There was an unfortunate time in 2014-2016 when the term “platisher” gained currency. (It was a mercifully short period in time.) This was during headier times for digital media, when publishers were sure they were on a glide path to displacing the doddering legacy players with their torpid adoption of digital tools and technology. Now, not coincidentally, this was also the time when Silicon Valley, for reasons still unclear to me, believed that publishing was a good venture investment. Like the journalists they love to loathe, VCs love a good story. The preferred story of VCs was that, no, this publishing company is really a tech company at heart.
When AOL ponied up $315 million for Huffington Post in 2011, the rationale rested in large part of HuffPost’s savvy content management system. Around this time, I started to notice publishers would give their CMS fun names that sometimes veered into Greek mythology. There was Scoop at The New York Times, Say Media’s Tempest, Hearst had MediaOS, Viking at Business Insider, and Gawker had Kinja.
Of course, developing proprietary tech is the normal course of many businesses. When you come up with problems somewhat unique to your business and without any easy off-the-shelf solution, you build it yourself. The problem comes when this goes from being a tool use to further the core business and leadership gets SaaS margin dreams. Software businesses are valued far higher than content businesses, especially those reliant on the ups and downs of advertising.
That led plenty of publishers down the primrose path of spinning up SaaS arms for their homegrown CMS. New York magazine attempted to license its CMS, called Clay. Vox Media has licensed its CMS, Chorus. Minute Media used its CMS licensing business as a key part of its $40 million funding round in 2020. It’s unsurprising that following Jeff Bezos’ acquisition of The Washington Post in 2011 that he sought to inject a tech mindset into the company. One results: Arc, a homegrown CMS product the Post would license to other publishers, like the Boston Globe and Slate. As recently as 2019, in a headline I very well might have written, Digiday detailed a “CMS war between Vox Media and The Washington Post.” Now, the Post is at a crossroads withArc, which has grown to be a 225-person group with $50 million in revenue. The wrinkle: It still loses money. The Post is throwing in the towel on licensing its ad tech tools, Zeus.
As Dotdash CEO Neil Vogel told me during a podcast discussion earlier this year, “Any publisher talks about being a tech company, run for the hills.” The reason for that point of view is these are different businesses, and have different staffing needs, not to mention onerous client service requirements. I remember asking one publisher hawking a CMS who was selling it. The COO stammered, “Well, me mostly.” That’s not going to do it. Enterprise technology sales are different than the churn-and-burn of media sales. The cycles are longer and more technical. As Lucas Quagliata said in The Rebooting’s Chat, “It’s just hard to balance different businesses when it isn’t core to their offering.”
I saw this when covering agencies for years. They would regularly cook up ideas for getting out of doing client work and instead building their own tech products. Made sense on paper, nearly always failed. The exception was aQuantive, which managed to build out an ad server called Atlas from its agency business. That ended up an amazing bet, with aQuantive getting bought by Microsoft in 2007 for $6.3 billion, a purchase that was mostly, if not entirely, driven by Google’s purchase of DoubleClick. In the end, Microsoft ended up writing off most of the value of the assets.
Internally, few publishers are going to staff like tech companies. Even attracting the needed engineers is a chore. As noted in the WSJ story, WaPo chief information officer Shailesh Prakash, who resigned from the company in September, wanted to spin out Arc in part so he could recruit better with the offer of equity in a growth company. For publishers to make these tech businesses work requires operating them nearly separately. I have admiration for how dogged Vox has been with its Chorus and Concert products. They’re core to the company’s strategy, not a skunkworks effort that might someday become something, we’ll see.
The dogged investment required to build these businesses is also hard in a volatile publishing business. The Post is going through a rough period, with its ad business in decline and its subscriptions business losing 500,000 subscribers this year. This is a long way off from crowing about catching up with The New York Times in Comscore numbers in the heady years after Bezos bought the newspaper in 2013.
The proprietary CMS strategy is likely a bad fit for where publishing is going. The travails of BuzzFeed are both unique to BuzzFeed but also an indictment of a flawed playbook for building the next generation of digital media companies. Proprietary tech will become less of an advantage, and often a liability. Many of the most valuable media brands will build moats around their connection to specific communities versus their fancy CMS they proudly named Thor.
Recession watch: It’s BuzzFeed’s turn to cut back, with a 12% staff reduction that’s improbably being pinned on young people shifting to vertical video. I don’t think BuzzFeed’s struggles are a format issue. BuzzFeed caught lightning in a bottle during a particular time in culture. It’s perfectly normal for times to change and brand not to be able to adapt; different generations have different preferences. That’s why I have doubts that it can lead a consolidation of digital media brands. The SPAC was a bet on this by giving BuzzFeed the firepower to embark on an acquisition spree. When BuzzFeed went public, Jonah set the aspiration as “Being the pioneering company in digital media that will be the comp for others in the space and rshow that digital media can be a strong business.” That is not happening with a stock price that’s near penny stock territory. It is now valued less than the money it raised. BuzzFeed was an important and trailblazing company in the Web 2.0 era, but it’s hard to see it continuing as playing in a similar role in whatever comes next.
My bet on whatever comes next is that your chances of success go up the more focused you are. I’m with Jacob Donnelly on his pessimism about the general news category. The economics are difficult to make work, as BuzzFeed learned with building a news operation from scratch that it could never make sustainable. Grid News replacing its CEO with one “more focused on monetization” is a bad sign for a startup heading into a rough time for advertising. (Also, if it’s not apparent already, springing for fancy offices is never a great idea for new publishers. If things go wrong, you’re just supply an easy anecdotal lede for the autopsy to show a lack of discipline in spending.) I’m rooting for Semafor, and I applaud the ambition, but the category pulls brands into trying to be all things to all people. The Recount is an example of just how hard it is to pull off. The digital era continues to show that it struggles to create enduring publishing brands.
An under-the-radar development in the news landscape is the efforts to mimic Australia’s news bargaining code. The Journalism Competition and Preservation Act is portrayed as an effort to “create a lifeline for struggling local news companies.” Sounds good on paper. But the reality of who gets money and who doesn’t quickly becomes messy – and inevitably unfair and subject to politics. Facebook is alarmed enough to threaten a divorce from news altogether and spring its lobbying operation into action. Plenty of future-of-journalism types will harrumph this is a good thing, but reality is different. Facebook still plays a vital role in the business models of many news companies, not just in rich markets but in places like Ukraine.
The streaming wars are entering a new, more interesting era. Boom times are exciting but dull, mostly because the focus tends to be on who can pile up big numbers, however they’re gotten, not who is building a sustainable business. Cycles end. Ex-WarnerMedia CEO Jason Kilar lays out a picture of the “dramatic changes” in store for entertainment companies as it enters an inevitable consolidation phase that sees the weakest gobbled up and a few winners emerge.
Publishers shied away from charging for access to content for a long for many reasons, but chief among them was the idea people wouldn’t pay because there is so much other content that’s free. That’s partially true, as a Toolkits research with the National Research Company shows that 73% of people don’t subscribe to any digital publications. But of those that do, 75% are satisfied. News is like many businesses that make a big chunk of their money from a relatively concentrated set of customers.
Semafor is pushing back on the claims by its former climate editor that he quit because of Chevron’s sponsorship. A company rep texted me to say the company decided to “part ways” with the editor over “issues unrelated to any advertising partnerships.” Startups are messy and hard.
If you’re going to be at CES, please come by the Aria on Thursday for lunch and a great conversation on the advertiser role of supporting sustainable journalism. We have even secured The Rebooting-branded chopsticks. Big thanks to Outbrain for underwriting this. Register here.
Charlotte Henry invited me onto her podcast, The Addition, to discuss 2023 trends. I tried to avoid many predictions, but I think we’re in for a rough first half of the year that will test the resiliency of many. Listen here.
Check out the podcast I did earlier this week with The Mill’s Joshi Herrmann. We discussed a lot of issues around local news, but also his decision to build off Substack. Big advantage: You can just put off entirely thinking a minute about the tech. Check it out on Apple or Spotify.
Be sure to check out Marketecture, where you can get smart on ad tech through snappy video interviews with ad tech company executives. Check out the free weekly newsletter or sign up with a 20% discount using REBOOTING as a code.*
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