Real media

The media business is running out of rackets

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The end of the media racket

Downturns are always clarifying moments. Difficult decisions that were put off during flush times can no longer be ignored. The pandemic bubble economies that sprang up, most notably in tech, are being corrected, with cascading effects on the publishing industry.

On the latest episode of the People vs Algorithms podcast, we did a session of winners and losers, during which Troy Young made an interesting observation: We’re seeing the end of many media rackets. I like the term racket for a lot of the media business since it has long been a convoluted market with misaligned incentives. Racket feels right.

The most successful business models in digital media have been closer to protection rackets. Covering Google in the early days, the debate was whether Google could sell trademarked keyword terms. After all, if someone is searching “best buy flat screen tv,” it doesn’t take much artificial intelligence to disambiguate what they’re after. But the business model of search was more akin to a toll booth than the type of demand-generation advertising done in traditional media. I met with an ad tech exec last week who marveled that Pro Publica’s in-depth investigation into Google’s stranglehold on the digital ad business is greeted with shrugs. Facebook picked up on this racket by convincing companies to set up pages on their platform and advertise to their customers to like them there. Soon enough, Facebook pulled the plug on organic traffic to those pages and told these brands to pay up. Everyone needs to wet their beaks.

It’s hard to think of an original-content publisher of much size that can survive on display advertising. Publishers have scrambled to find new ways to make money. Media businesses have historically been difficult to operate. A big part of that is conflicting incentives. I often thought of how much simpler it would be to operate a restaurant, a business with an even higher failure rate, since you just needed to get diners, make them dinner and get paid for it. In the publishing business, your business is often different than what you claim it is. Advertising made the audience the product rather than the customer, with inevitably adversarial business models emerging. When you’re left hoping for a bailout from a “benevolent” billionaire, your business models are failing. I don’t know many billionaires, but I don’t believe benevolence is a lead trait in amassing billions. Side note: I give Semafor a lot of credit for covering Davos by not ignoring the ridiculousness of the entire racket where people pay astounding sums for proximity to power.

Many publishers are left with a core business that makes little money and has little value. Whatever valuation Vice gets is mostly coming from its studio production and agency business lines. The publishing parts of these businesses – making content and getting paid for access to it or to run advertising next to it – are in terminal decline. In its place has arisen a hodgepodge of various schemes that are closer to brand arbitrage rackets. Many brands are front operations for SEO chop shops, or in B2B the polite storefront to a hosted-buyer meetings. The Forbes 30 Under 30 List is going from case study on how to effectively monetize an aging brand to a cautionary tale of too much mayonnaise on the sandwich. It’s become something of a joke that seemingly every business charlatan is a 30u30 alum. Maybe we should take a break from trying to convince young people they’re supposed to have their careers figured out in their 20s. Then again, I didn’t have a resume until I was 27. I can understand the genius of these franchises and the many imitators, playing into a culture of accolades that millennials famously grew to expect in childhood. We all need applause from time to time, but it doesn’t need to be all the time.

Subscriptions are a step forward in aligning incentives. The most solid publishers have recurring revenue streams. Publishers have put in the hard work to amass, in many cases, sizable numbers of subscriptions. Subscriptions themselves can fall into a racket, with decoy pricing, intro offers that balloon in cost and my personal bête noire: call to cancel. Forcing people to run the saves team gauntlet disqualifies any company from trotting out an executive to sit on a panel and sermonize about being “customer-obsessed.” This is a tried-and-true formula borrowed from the magazine industry, where rate bases were manipulated and passalong stats stretched to the limits of credulity.

Publishers followed along with other companies in pushing the hustle racket on employees. Free food and happy hours were long used to distract workers from agitating for greater job security and less gaping inequality among the ranks. Work was going to be fun. Those open office plans weren’t to pack more people in, they were about collaboration. Same for Slack and all the other “productivity tools” that are optimizing ourselves into hopeless distraction. Any time a company says they’re like a family – or they “work hard, play hard” – run, don’t walk. That was all nonsense, and young people, when given enough time, are savvy about seeing bullshit for what it is, even if the CEOs feign ignorance at Davos. It’s no surprise the unionization swept large swathes of the industry, a development the most progressive tweeting execs privately hate. The unions themselves are the ultimate subscriptions racket, taking in dues to play the role of protector. That hasn’t worked out so hot at publishers with job cuts. The Vox union was left tweeting it was “furious” about how the cuts were communicated.

The layoffs sweeping media will not be confined to Vox, or just yesterday my alma mater Adweek. More publishers will follow suit, either because of the “uncertain economic conditions” or because they see others doing the same and have cover to adjust underperforming parts of their businesses. The bosses are dutifully taking responsibility, yet they’re still going to do just fine and aren’t the ones being sent packing. The Boss Class grouse about “disloyal” employees but that loyalty they pine for isn’t apparently a two-way street.  The only refuge from this boom and bust is ownership.

Troy made his point on the rackets with a hopeful note: This turbulent period would end rackets and shift the balance toward “real” media. Color me a bit more skeptical than that. New rackets emerge. I do think we will see the emergence of a crop of smaller but more real publishers that do the basics of optimization without putting the sizzle in front of the steak. Growth hacking hasn’t led to better products, just better case studies that convince others, particularly young people, that success is an overnight phenomenon. No thread is going to tell you how to build a durable brand. The only secret is a willingness to take a different path than others and the persistence to keep showing up, or as Matt Yglesias put it, “I will write again the next day.”

In truth, the only progress most of us make is halting, frustrating and nonlinear. I had a coffee with a fellow newsletterer this morning, and he accidentally walked into a glass door when leaving. I told him I’d use it as an anecdotal lede for the state of the solo content entrepreneur. I appreciate the more real version of building in public that is open with the rough patches and difficulties in building something new. The only sensible advice: Expect everything to be hard and for nobody to care that it’s hard.

The emergence of real media is an inevitable reaction to the media rackets that have made people very cynical. I’ve mentioned this before, but one of the most noteworthy aspects of doing The Rebooting for two years and change is how often I hear from people. (You can email me by hitting reply.) I appreciate people writing in with their own experiences and whether my ideas of making this business more sane resonate in some way.

That’s because the newsletter is not just a delivery vehicle for content but a format itself. Letter writing has a long history as a human media format. It’s become something of a lost art in a world of text messages and video chat. Believe it or not, we would regularly write letters. I lived abroad for several years during the early-to mid-1990s, and letters were the main way I communicated with family and friends back home. Long distance calls were prohibitively expensive, but stamps were cheap, both abroad and at home. I’m convinced a large part of the appeal of newsletters is this aspect.

If there’s one good thing to come out of the downturn it’s more media products that are real by throwing out all the typical rackets – there will never be The Rebooting CMOs to Watch list, I promise – and using that very sensible business choice to differentiate from legacy players stuck with business models dependent on rackets.

A head of product at a major publisher told me the other day they have an education process internally in getting their bosses to understand what it means to be truly customer-centric. I asked Matt Cronin, founding partner of House of Kaizen, which acts as an extension of subscription revenue growth teams, about how publishers can adopt this mindset.

“The primary playing field for a subscription product is set by customer experiences and expectations, and it’s often defined by other companies who aren't even in your space. There’s loads of examples of successful consumer-experience experimentation from the likes of The New York Times, Amazon or Netflix setting the standards for what a customer expects from other subscription products. The trouble is, this is a quick-moving target. So in a world of quickly changing customer expectations, the constant needs to be your effort to understand your customers. It’s like the sails of your ship in a storm – it’s no longer about riding the prevailing winds, it’s aptly trimming the sails with an experienced hand that keeps the ship sailing forward. Thankfully customer insight is faster and cheaper to acquire than ever before, it should be a part of any growth performance dashboard alongside the latest numbers.”

I strongly believe that 36 hours is the perfect amount of time in Las Vegas. That was my strategy with CES, where I hosted “The Sustainable Journalism Imperative” with my partners at Outbrain. The event was a first for The Rebooting, and capped off a great partnership with Outbrain that provided financial support for a podcast series focused on sustainable local journalism. At the event, I had a conversation with Krystal Olivieri, global chief innovation officer at GroupM, about whether advertisers would conveniently forget all those promises they made during flush times to support local news. The takeaway: Advertisers will cut here and there, and that’s outside of the control of publishers, but news publishers can help themselves by having better ways of showing the value they’re creating for advertisers. Check out the full conversation on this week’s episode of The Rebooting Show, followed by a discussion of the year ahead with Outbrain co-CEO David Kostman. Thanks again to Outbrain for the support. Appreciate it. Listen on Apple and Spotify.


Trends has a great primer on how to make money from newsletters. Worth a read.

The laptop class usually cheers for new tech advances that benefit them with cheap access to new amenities, higher productivity leading and higher wages. Automation usually disproportionately hurts blue-collar workers. AI could put the shoe on the other foot, which you can be sure will mean far more political attention will get placed on it because the displaced have more societal power.

No surprise then that journalists are coming for ChatGPT for its accuracy. The tech is clearly not ready to replace human reporters, even for SEO churnalism, as highlighted by CNET’s now-scrapped foray into using AI for content creation.

Good to see The Webby Awards recognize newsletters. The “Oscars of the internet” has categories for the best newsletter in business, news and technology; best newsletter by an independent publisher; and more. Last year’s winners included Scott Galloway for No Mercy/No Malice and Garbage Day by Ryan Broderick. Enter by the extended entry deadline on Friday, Feb 10. (Sponsored)

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