Seven Secrets of Highly Successful Online Publishers

In this article, I’m going to look at leveraging the internet to transform a special-interest magazine, newsletter, newspaper or website into a multiplatform media empire. Let's start with a little bit of myth debunking.

A membership website — a website where only paying members have access to all the content and services — is often the first thing a print publisher does online. It should be the last.

Since 1994, our team has been researching how publishers make money online. We have done in-depth research on more than 200 media websites and documented 51 media organisations that make money online. We search for publishers who are growing their revenues by 10% or more per year — and generating at least 10% of their revenue online. Many surpassed these basic benchmarks.

Our key finding is that successful publishers generate online revenue by selling advertising or physical information products — books, magazines, newsletters, live events, DVDs, CDs, etc. Many do both. With a few notable exceptions, membership websites are not a significant source of online revenue for the publishers we studied.

Using the internet, Agora’s Bill Bonner was able to take a $25 million print newsletter operation and turn it into a $200 million niche media empire with hundreds of books, newsletters, services and events.

Forbes.com generated an estimated $75 million online in 2005 with revenues climbing rapidly. Soon it will surpass the magazine from which its brand was borrowed.

Each of the 51 case studies we’ve done has had similar results: high growth, an increasing percentage of online revenue and strong profits. This article spells out the seven management best practices we found that were shared by the 51 media organisations we studied. From a behavioural science perspective, we have no conclusive proof that each of the seven habits is causal. However, they are each highly correlated to successful online publishing — and our team believes they are, indeed, causal. Read on and decide for yourself.

1. Purpose, goal setting and strategic management
Peter Drucker has been writing about strategic management since the 1950s — yet it is not widely practiced inside the publishing and media industry.

Strategic management facilitates rapid change. Organisational mission and values govern the system. The system is driven by the desire to serve the changing needs of its audience. In Built to Last, Jim Collins sums up the process of strategic management this way: "Protect the core and stimulate progress."

An example of a publishing company that has successfully protected its core and stimulated progress is Chris Kimball’s America’s Test Kitchen (ATK), publishers of Cook’s Illustrated, Cook’s Country, numerous cookbooks and the popular PBS show of the same name.

ATK is all about "recipes that work". This simple phrase is the guiding purpose behind every action the organisation undertakes and the key to its growth from $15 million to $46 million in annual revenues in just five years. Says visionary CEO Chris Kimball, "It feels like I discover a new way to distribute our content every day."

2. Build a Mequoda Media Pyramid
The media pyramid represents multiplatform publishing and the commitment to being media and platform agnostic. As a disciple of the media pyramid, you no longer gather data to be distributed through one medium. You gather content to be distributed in many ways on many media platforms. The folks at Consumer Reports talk bout gathering content Legos™. The folks at BLR (Business & Legal Reports) call them MIUs — Minimum Information Units. Both organisations are talking about the same thing. This is a massive paradigm shift. We're separating basic research, or gathering data, from packaging and distributing data to the market place.

Each level of the pyramid represents a media platform used to distribute the same information in a different format. Our team has documented media pyramids with as many as 10 levels of media platforms — all distributing variations of the same basic content:

* The base of the pyramid represents all the external media (free and paid) that are used to expose prospects to your content and your brand.
* The first level represents the free email and website information you use to create and maintain audience relationships. The first level of content is always free which removes the biggest barrier to building the largest possible audience and customer database.
* The higher levels of the media pyramid represent the advertising and products you will deliver to monetise your relationship with your audience.

3. Using the Seven Media Website Archetypes to Build a Successful Mequoda Website Network
Before you build your website, you must choose the right website archetypes that support your business goals. Understanding the seven archetypes is the first step.

To get to the right answer, let’s start with some basic facts:

* The internet is the only medium (other than the telephone) that is online 24/7, 365 days a year and fully interactive.
* The internet can be used to create original media products like email newsletters, searchable archives, blogs, forums and other interactive communities.
* The internet can also be used to create websites that can be companions for traditional media products like magazines, newspapers, books and TV shows.

After reviewing more than 2,000 successful and unsuccessful media websites, we’ve concluded that the internet currently supports just seven media website archetypes that can be connected to form a website network. A successful website network will include websites that are unique to the internet and that are designed as companions to offline media products.

The seven Mequoda website archetypes are:

* Internet Hub Archetype. This is a unique online media product whose purpose is to attract new prospects, convert them to free information users (most often as subscribers to a free email newsletter or newsletters) and then, via the website and email, refer them to other websites in the website network. Example: Johns Hopkins Health Alerts (www.JohnsHopkinsHealthAlerts.com) with 13 free best practice email newsletters.
* Retail Website Archetypes. These are companion websites whose primary purpose is to sell media products that will be delivered offline. We have identified three variations: catalogue marketing websites (example: Amazon - www.Amazon.com), subscription marketing websites (example: First Class Flyer - www.FirstClassFlyer.com)and product marketing websites (example: Baby Modeling Secrets - www.Baby-Modeling.com).
* Membership Website Archetypes. This is a unique online media product whose purpose is to provide users with comprehensive answers, reference information and community interaction centred on a specific topic or cluster of topics. Example: Consumer Reports - www.ConsumerReports.org
* Brand Website Archetypes. These websites are companion websites that are designed to increase loyalty and usage for an offline product. The offline products run the gamut from soda pop to rock stars and apparel to TV shows. Example: Pepsi.com - www.Pepsi.com
* Lead Generation Website Archetypes. These are companion websites that are designed to attract and capture leads for offline products, services and activities. Example: Lending Tree - www.LendingTree.com
* Classified Website Archetypes. These websites can be companions for an existing print classified operation or unique online brands with no print companion. These websites have the purpose of bringing buyers and sellers together to initiate and sometimes facilitate transactions that most often culminate offline with the shipping of a product or products. Examples include general-interest websites like eBay (www.eBay.com) and special interest websites like Monster (www.Monster.com).
* Hybrid Website Archetypes. These websites combine the functionality of one or more of the six basic archetypes into a single user interface — instead of a website network. While designing a user-friendly hybrid website is more difficult and expensive, it is possible. WSJ.com (www.WSJ.com) is a good example of a hub-membership-subscription hybrid that generates an estimated $150 million in annual online revenue.

4. Organise Activities Around the Content
How do you staff and organise a multiplatform publishing business?

While there is no one organisational structure and set of perfect job descriptions that answer the above question — we do see organisational patterns that can be described as "organising activities around the content".

Stuart Jordan, COO of University Health Publishing, started his organisational redesign by doing an exhaustive inventory of all the editorial and marketing content that would be produced by his organisation to create and market the 40 plus products published under the Johns Hopkins brand. His analysis resulted in the identification of more than 50 new discreet tasks to support his online publishing initiative. He sorted those tasks into three clusters, created three new positions to run his online marketing system, and made modifications to the job descriptions of existing business and editorial team members to interface new team members with the existing staff. The resulting organisation is efficient, fast-moving, goal seeking and totally audience driven. Their resulting performance metrics (conversion rates, retention rates, revenue per M, etc…) are among the highest we have ever seen.

5. Create User Friendly Websites and Information Products
"User friendly" is code in software engineering circles for "usable". A website is a collection of software functionality that will empower the untrained user to accomplish five to 10 user tasks and support the business goals of the publisher.

This is hard to do and most media websites suffer from poor usability. Usability testing that we’ve conducted on hybrid media websites typically results in task completion scores of 40 to 65%. This means the average user can only complete their desired task about one time in two. For a well-designed website that conforms to one of the six archetypes, the task completion rate soars to 85 to 95% - depending mostly on the target user group and type of website.

6. Use External Media to Build Email Circulation; Use Database Marketing to Maximise Customer Lifetime Value
Many of the organisations we studied sell advertising and their own products to generate online revenue. For example, the Motley Fool (www.Fool.com) generated an estimated $40 million in revenue last year. Ten million came from selling advertising on their website and in their email newsletters. The other $30 million came from selling their own information products — with the majority coming from their six highly successful print newsletters. Forbes.com (www.Forbes.com) generated most of its estimated $75 million in 2005 revenues from advertising with no more than $10 million coming from the sale of information products — including more than 125,000 print subscriptions to Forbes.

What both organisations and all best practice online publishers share in common is a two-step marketing model. Step one is building a huge opt-in email newsletter circulation. Step two is publishing free high frequency email newsletters that generate, directly or indirectly, 30 to 90 percent of all online impressions. The organisation can then, at its discretion, choose to use that massive inventory to generate advertising revenue, product sales or both.

7. Use simple metrics to drive organisational performance
"What can be measured, can be managed", said Peter Drucker.

For most successful online publishers, two simple metrics are the key to driving online growth and profits: active email subscribers and revenue per email subscriber per year.

For most of the publishers we’ve interviewed, 60 to 80 percent of their online revenues can be calculated by multiplying these two key metrics.

The Daily Reckoning’s (www.DailyReckoning.com) 500,000 free email subscribers spent, by our estimate, $35 million on Agora books, newsletters and events in 2005. This makes each subscriber to the Daily Reckoning worth about $70 each ($35,000,000 divided by 500,000). Agora ecommerce director Andrew Palmer and his audience development team thus can easily set a "bogie" for how much they are willing to spend to acquire a new Daily Reckoning subscriber. Hence, they can decide to acquire as many new subscribers as possible for $30 each — without waiting to see if every new source of subscribers actually spends $70 during their first 12 months as a Daily Reckoning subscriber. This "bogie" is a simple metric, easily understood by all — which allows free email subscriber acquisition programmes to be run quickly and efficiently by every member of the team.

There are, of course, other secondary key metrics like retention rate, contact frequency and revenue per M emails sent. A complete set of basic online publishing metrics is used in the Mequoda Internet Marketing Model (www.MequodaModel.com) - which is a free Excel-based budgeting and forecasting model.

Clear Strategies for Success

After spending billions in search of a business process for leveraging the power of the internet, a handful of savvy and lucky publishers have discovered a method for success. These seven online publishing secrets, when used to create an online nexus for a multiplatform publishing enterprise will yield success - when properly executed.

The system is flexible and can be built quickly and inexpensively — when viewed in the context of the revenues and profits others are generating online. Back are the days for publishing profit margins that exceed 20, 30 and even 40 percent.

Perhaps most enchanting for those who love content and the positive change that content can make in the lives of others, are the values inherent in the system. To succeed, the publisher must provide quality content that users want and the publisher and audience must build long-term relationships. These factors bring out the best in publishers and we’re all better for that fact.