Monday, February 21, 2011

On SIIA Digital Discourse - Online Subscription Models: Will New Apple and Google Plans Woo Publishers?

In my first guest post for the Software and Information Industry Association blog, I weigh the pluses and minuses of the new Apple and Google subscription plans. Clearly Google's offers better terms, more plan flexibility and deployment on any platform as pluses, but on the other side of the equation is Apple's tried and true iTunes ecommerce. In spite of Apple's crude handling of its plan announcement, it's likely that you'll see publishers embracing both in the short term. In the long term, well, let's just say that fortune favors the cross-platform-capable publishers.

Read more on the SIIA Digital Discourse Blog

Tuesday, February 15, 2011

Bring in the Free Agent: Arianna Huffington Gets a Shot at Being the Anti-Murdoch

In professional baseball these days it's not unusual for the best players in the game to be signed to $250-plus million dollar, multi-year contracts, a bet that they will produce great returns over the long run for their franchises. It would seem that this penchant for betting on superstars has spread to the online media world, given AOL's decision to purchase Arianna Huffington's The Huffington Post for $315 million, most of which is cash that will go into her pocket, apparently. The Huffington Post started out in 2005 as a blend of blogs from high-profile newsmakers and headline links to news stories culled from around the Web. Today it is a profitable enterprise raking in about $31 million last year - a pretty hefty multiple for an online publication, but not out of the range of many media deals in recent years and pretty decent given its 25 million-plus regular viewers.

In her post on HuffPost announcing the merger, Huffington touts the deal as "a merger of visions." which is true enough when you think of how both AOL and HuffPost are focused on developing topical content that can attract high-value display advertising. If any formula is going to work to support destination mass-market content on the Web profitably, it's likely to be along the lines of the most attuned efforts of these two online publishers. Both AOL and HuffPost optimize their content to appeal to search engines, building out topic-oriented pages that flow with hot items in searches as well as more evergreen howt-to and content in AOL's Seed portal. Of equal importance, though, is the ability of both properties to build up media brands effectively. Like HuffPost, AOL's most successful properties are a string of sometimes opinionated blogs, which have diversified to offer their own blend of topical content such as product reviews, company profiles and interactive features.

Most importantly, none of these publications owe anything to "old world" print brands. They are all digital native products, each in their own way pushing the frontiers of online publishing. The old cost structures of AOL's legacy dialin clients are evaporating rapidly, which tend to make their numbers look kind of funky in the short run, but on the whole they are positioning themselves for lean, mean, topical content delivery via blogs, topic sites and keeping on top of breaking news in national and hyperlocal markets. None of this may look appealing to traditional media companies used to plump print margins, but that's the way that content producers make ends meet online these days. There is room in online markets for titles like Time Inc.'s Sports Illustrated to launch premium cross-platform digital subscription services, but for portals like AOL and HuffPost that don't have such decades-old franchises, it's lean online content all the way.

Does the AOL/HuffPost deal make sense? In a broad financial sense, this is not strictly a "by the numbers" deal. The Huffington Post will doubtless do better than hold its own in market share - it attracts an estimated 25 million unique visitors a month, with an estimated $1 in revenues per visitor. - so it's possible that this is a break-even deal on the top line in five or so years, optimistically. More realistically, though, this deal leverages heavily the acquisition of Arianna Huffington as an outspoken free agent executive who rubs elbows effectively at elite conferences and summits as well as social media mavens and who can thus attract trendy people to AOL's stable more effectively than the polished but somewhat bland Tim Armstrong. Huffington brings strong online horse sense for breaking news and hot topics to AOL, along with a technology and content production team that has helped her to tune the HuffPost formula in five years from an upstart headline aggregator to a major buzzport on the Web.

You might say that this is Arianna Huffington's chance to have a larger vehicle for her ambitions that will position her as an anti-Murdoch of sorts, reveling in the scrappy publishing techniques that used to be part and parcel of what was at the core of the news business before media companies got bright ideas that newspapers were reliable cash cows in the digital era. While The New York Times' David Carr would label such entrepreneurial efforts as content coming from "a nation of serfs" at companies like AOL and The Huffington Post, well, there was a time when your average newspaper reporter didn't have a chalet in Aspen to complement their Lake Como retreat. Most publishers of all kinds live on the edge, making the best of the lowest-cost technologies possible to carve out a living. The era of tall glass buildings housing glitzy names in news is an anomaly in many ways in the broader history of news.

And that's not to say that better margins may not come AOL's way. They are focusing heavily on techniques that make display advertising perform very well in online environments, while the HuffPost has its own glitzy approaches to content delivery via Web and tablet apps that is attracting more and more premium advertisers. Blending a sense of what compels visual, video-inspired online audiences with social media and a good sense of what's fun in online media, the tabloid-like appeal of The Huffington Post is likely to accelerate AOL's ability to challenge portals like Yahoo for advertising market share. While its core news operations are perhaps the weakest element of its strategy (not necessarily a disadvantage for managing margins) and its Patch hyperlocal news service is at best a work in progress, AOL offers a lot of promise for redeeming itself in the hands of Huffington as a compelling portfolio of online media brands and cost-effective content.