The best media business model

Publishers need to align their business models with their product mission

Welcome to this week’s issue of The Rebooting. If you were forwarded this or aren’t yet a subscriber, please sign up to get The Rebooting every Wednesday morning. If you’re enjoying this, please forward to a colleague who would find it valuable. OK, enough with the light growth hacking, let’s talk about the big challenge for the next phase of media: aligning business and product models. First, a message from our presenting sponsor: Hashtag Labs.

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The best media business model

Our discourse tends to gravitate to extremes. You’re either Following the Science or My Body, My Choice. You’re either a socialist or libertarian. You believe Substack is the Future of Media or you see conflict porn. In truth, most things fall in between, some of this and some of that.

The same is true for media business models. For all the talk of subscriptions vs ads, this isn’t the right debate. The scale era didn’t fail because advertising is a shitty business model. The scale era of media came up short because economic incentives underpinning advertising models were not aligned with product quality. This is exacerbated by an indirect business model where your customers (advertisers) have different objectives than your audience (the product). This has long been thought to be simply the way it has to be: pay with your money for access or with your attention and data.

My hope is the new era of media isn’t so much a swing to lots of paywalls -- that’s untenable -- but a better alignment of monetization models and the product. Too often these are disconnected. You build a product -- a website, a conference, a newsletter, a podcast, etc -- and then you search for a business model. When I started covering Web 2.0 companies, I heard often that worrying about a business model early on was pointless because the only thing that mattered was getting to scale. Without scale, there’s no business -- at least that’s the way the VC thinking went -- so why get distracted? After all, once at scale, a company could “turn on the revenue spigot” of ads.

There was, of course, precedence for this. Google ignored its business model for years. At the time, search results pages were the backwater of digital media. They were some of the least valued pages, alongside “chat.” Google changed that with an ad system, heavily borrowed from Overture, that in theory made the product better. Google made more money the more relevant the ads were.

Google turned out to be the exception. (You can argue Instagram has pulled this off too.)

Instead, many social networks and publishers ended up grafting a business model that works against the goals of the product. In this situation, every dollar of extra revenue makes the product incrementally worse. The dynamics of the ad market were such that publishers were constantly playing  a game of how much could they pull over on their audiences before they had enough. Look no further than the bottom of many news sites’ pages, where you’ll find a rogue’s gallery of atrocities that no serious brand is proud to carry. And in truth, they don’t need to run them. They can easily tell Taboola or Outbrain to show higher quality ads at the expense of revenue. Few make that choice. There’s a reason ad blockers were created.

Of course, ads can still be a very effective part of most publishing business models.  And the best way to make money for digital publishers is lots of ways. This is true for most. The addendum I’d add is business models need to align with the mission of the brand. If you change the business model, you will inevitably change the mission. Take The New York Times. The shift to subscriptions has been a boon to the publisher. Last week, it reported nearing 8 million print and digital subscriptions, although the rate of growth is slowing from the Trump Bump days. That’s a remarkable achievement. The tradeoff has been that the Times can’t credibly continue to claim its mission to be “the paper of record.” Inevitably, the publisher’s product has shifted to align more with the aggressively progressive views of its subscribers -- and is now branching out in ancillary directions with a focus on gaming, food and other non-news products as it hits the wall of people who will pay significant money for the news product.

Time and again, publishers have found their business models in conflict with their stated mission. Think of Mic. It started life as PolicyMic, an earnest attempt to make sense of important political questions. After a few rounds of financing and becoming simply Mic, the brand was doing Game of Thrones recap posts to try to get some SEO traffic. The business model was dictating the mission.

What’s interesting is how well gaming has done relative to the overall media industry. I’m not a gamer, although I’m coming around to the idea that to truly understand WTF is going on now in business, you probably should be. Fortnite and Roblox have built business models that don’t make the kinds of tradeoffs thought inevitable in traditional digital media: pay for access or endure a punishing user experience. Instead, they’ve been able to take the best of the internet (free access) and adopt a business model (a virtual currency to enable in-game transactions for avatars and other doodads) to have the best of both worlds.

My hope is we see new publishers emerge that align their business models with their mission as brands.

Crypto media’s laser eyes problem

For the last month, I’ve tried to learn more about the crypto movement. I say “movement” because there are so many aspects to crypto that are far beyond the price fluctuations of Dogecoin. In fact, my assumption is the Bitcoin craziness obscures fundamental shifts that are underway as the infrastructure is built that *could* unleash decentralization beyond currency and finance.

That’s why I noted crypto media as a promising growth area for a new crop of publishers. Sara Fischer of Axios highlighted a couple of the newcomers, The Block and Blockworks. There are others focused on the area, including Decrypt, Coindesk and Forkast News (disclosure: I advise them). Crypto will be a larger part of the coverage of legacy financial and business news sources too. This is a space big enough for many players.

My bet is the tools of success now are not necessarily those that will be needed long term. Right now, the action in crypto is around price. That’s why every site prominently features the latest price of Bitcoin. It’s a story of retail investors, and anyone over 40 is getting flashbacks to the dot-com craziness that, well, didn’t end well. Just as then, my guess is the likely inevitable crash of the Dogecoin “hustle” will cause many traditionalists to dismiss crypto as another tulip mania, just like the internet was dismissed in the aftermath of the dot-com bloodbath. The Nasdaq price was the short term signal that obscured the long term signal of broadband penetration. If you’re avowedly anti-crypto, I suggest checking out this simple presentation to understand the promise (not yet tangibly realized).

To my mind, too many crypto publications get swept up in the crypto hype. I am not assured of level headed analysis from someone moved to change their avatar to laser eyes. These are advocates, not publishers -- and to be fair, that’s fine, big space and no license needed to publish. But my inclination is that the lasting brands built in this space will not be cheerleaders or focused on viral memes, but instead serve as translators between this seemingly crazy New World and the Old World of institutions and, yes, governments.

Other things to check out…

Bloomberg BusinessWeek is holding its festival virtually next week, adopting a trend across publishers to use their virtual events to support their subscriptions programs. In-person events will retain their pricing power since the networking aspect is so valuable, but to my mind most virtual events are best suited as value-adds to subscriptions. Businessweek’s pricing reflects that with a “premium” ticket going for just $150 but coming with three months of access to Bloomberg’s subscription.

The ultimate publishing superpower is predicting churn risks. An obvious indicator: Someone who isn’t using the product they’re paying for. In that situation, a publisher can cross their fingers and hope the “sleeper” doesn’t wake up to the renewal charge or try to engage them. Piano has research showing how critical it is to get sleepers active in the first 60 days. That’s another reason newsletters are so popular.

The latest Not Boring resonated with me: This shit is all a game, so might as well play it as such -- and realize most games are rigged so you’ll end up losing in the long run.

Airmail wants to raise $15 million and be profitable before 2025. We might be at nearing Peak Newsletter.

Andrew Bosworth, aka Boz, has a good reminder that building complex systems to solve for small failures is a losing proposition in the long run. Focus instead on the big failures. Many times the small changes needed to protect against small failures end up producing bigger vulnerabilities as complexity compounds.

Be back next week. As always, feel free to get in touch at