Twilight of the brands

The economic value of brands is eroding

Twilight of the brands

I’m returning to the topic of AI through the lens of what it means for the function of brands. But first, a message from House of Kaizen, which helps publishers take a systematized approach to subscriptions growth by aligning with audience needs. Seems sensible.

What does good growth look like?

We’re all in pursuit of strong and consistent growth to make our media brands lasting businesses amidst shifting audience consumption behaviors, turbulence in the market, and the push and pull of revenue requirements. Finding a sustainable footing has been hard for the largest of the old guard just as it has been for the newest digital natives among us. So what does good growth look like in this era of media and publishing? House of Kaizen has a Growth Diagnostic used by publishers (and other recurring revenue products) to identify and drive sustainable growth with audience-first experience optimization. Through their decades of working with the world’s best subscription products, they know what creates sustainable net-growth and will help you to find better alignment between your audience expectations and the product experience.

Twilight of the brands

The internet has mostly been a disaster for publishers. The promise of the internet was that, freed from artificial constraints, publishers would amass far larger audiences than ever possible in a world of printing presses. Yet the elimination of scarcity eroded much of the economic power of publishers, suddenly in competition for finite attention with everyone and everything on the planet. Meanwhile, performance marketing ate the ad industry, eroding the brand building function many publishers relied on. In a direct marketing world, the most data wins. Publishers were bringing a butter knife to a gun fight.

But there was always brand, the somewhat squishy concept that in a complicated and messy world – and the internet is all those things and more, needless to say – people would use brands as a guidepost. The key role of brands has long been a shortcut for people who don’t want to play Columbo for every decision they make over the course of the day.

There’s math involved, but let’s be real, anytime ad people are talking “lovemarks” and whatnot, there’s a heavy dose of magic (and snake oil). Last night, I jokingly posted a screenshot of the “Brickin’ for Chicken” promotion at the Sixers games, where the crowd gets free Chick fil-A if an opposing player misses two free throws in the second half, noting that it deserved a Cannes Lion. One longtime creative director DM’d me: “It’s probably more effective than 90% of winning work at Cannes.” John Wannamker probably overestimated the 50% effectiveness.

That brand premium has continued to erode, as society overall is more skeptical of institutions of all kinds. I’d argue this accelerated even more as many brands willingly or were pushed into taking social stands that put them smack dab in the middle of our running guerrilla culture battles. It’s gotten to where companies are expected to weigh in on every global issue, even if it has nothing to do with them, since even shutting up isn’t an option. In many ways, they brought this on themselves, either out of conviction or expediency. Walking that back is going to be tough.

Storied publishing brands are on the ropes.

  • Condé Nast is mired in conflict and strategic drift. It made a sensible bet on using its brand heft to supply streamers with a steady supply of programming at a time when “IP” was the buzzword au moment. The problem is that voracious appetite for programming was artificial demand of the ZIRP era. Now, it’s onto commerce and subscriptions. Both of those will be a challenge. Commerce is an SEO strategy at a time when SEO is undergoing wholesale change, and we have all gotten the $1 offers for Condé publications on Instagram; I don’t see how the math works on those when subscription fatigue erodes the ability to jack up rates sustainably. There’s some rewriting of history that magazine companies had true dual revenue streams. These were always advertising businesses.
  • At The Washington Post, new CEO WIll Lewis is charming staffers. He’s fortunate, because as a boss, you always want to enter a turnaround situation to set the expectations bar appropriately. The headline number is alarming enough – the Post will lose $100 million this year a decade under the ownership of one of the foremost innovators of recent times – but the previous regime clearly lost the room. “We have an editor who doesn’t know what she’s doing, a publisher who didn’t know what he was doing, and an owner who took his eye off the ball,” one staffer told Vanity Fair. Say what you want about journalists, they have finely tuned bullshit radars.
  • The New York Times is one of the few success cases for a large news organization that has modernized its business model. To do so, it needed to dispense with the “paper of record” brand promise and instead has embraced being a “truth teller.” The truth can be messy. Just look at how it is under fire for its coverage of the Israel-Hamas war. Its hard pivot to be anti-Trump was savvy in the short term, serving to accelerate its direct revenue model from the aggrieved and outraged, but it also shrank its TAM. You can’t really be the paper of record if 40% of the market sees you as a “woke madressa,” whatever that means. At some point in the not-too-distant future, the “other” line of the Times’ revenue breakout that includes its gaming business line will surpass advertising.
  • In a world where NYT wants to be CNN, CNN wants to be the NYT. The transition to a DTC business will test just how strong the CNN brand is. As we saw during the post-ZIRP reckoning in DTC, many of these brands were mispriced on the basis of cheap distribution and low-cost of capital. The same is likely the happen here. The two-bites-of-the-apple cable model mispriced the value of these brands.

Publishers have long complained about the power platforms hold over their businesses. The loss of control of distribution has doomed many to be vassals of tech companies, embarrassingly pivoting to whatever is the latest project of a Palo Alto product manager. Be careful what you wish for, because the biggest tech companies are divorcing the publishing industry overall but the news sector in particular. The experience in Canada is something of a warning. Publishers will need to pay for distribution just like brands got a rude awakening from Facebook and Google that organic reach never lasts. Publishers need tech more than vice versa.

The 10 blue links era of search is coming to a close. Publishers have already seen far less traffic distributed to them from Google. When the dictionary is talking up short-form video, you know things are bad for text publishing. Many “brands” in a search environment are what I consider “minimally plausible.” They don’t really exist in any other environment. It’s like how Mr. Beast the brand can only exist in the over-optimized world of YouTube. In search, many publishing brands are not designed to be lovemarks or to be worn on t-shirts, they’re just good URLs whose authority is with algorithms, not the real world. Reddit can threaten exit; publishers cannot.

It’s no surprise that many ailing legacy brands have been dispatched to the SEO glue factory. Better to compete with the random minimally plausible brands of SEO when their real world utility has mostly evaporated. You can slap a legacy magazine brand on a “activation” all you want, but that’s for brand managers. These brands have to outsource the culture clout to influencers. These are not long-term strategies.

AI will scramble this picture more. OpenAI’s demo of new GPT tools showed the progress it is making to bring AI to “the real world.” The creation of “agents” to accomplish tasks is potentially profound. “GPTs will continue to get more useful and smarter, and you’ll eventually be able to let them take on real tasks in the real world,” OpenAI promises.

That will erode a big function of brands, and as people outsource more decisions to agents, the competitive advantage from building a brand will erode. Publishers are downstream of that, and it will be another blow. I can’t wait to tell the AI agent to get me home insurance. I don’t think the AI agents will be influenced by the lizard commercials. Knowing tech, they’ll offer an API for brands to pump their messages into LLM models. Pretty soon ad agencies will be deploying creative director agents – you know WPP’s will be called David after David Ogilvy – to advertise to other bots.

I was struck by Sam Altman’s example of creating a custom GPT. He chose to create one that dispensed his advice to startup founders. I found it telling that he created this agent for Sam Altman not YCombinator. That human premium will endure far longer than institutional brands that, to be fair, are mostly coasting on value created long ago. Brands have long been like airplanes. Even if you cut the engines, they stay in the air for a long time before the rude awakening of meeting the earth.

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