New media companies should emphasize 'media'

AdAge has a good article today about how AOL has been attacking Web publishing where it notes:

In the heady days of early 2000, the mega-merger of AOL and Time Warner heralded the Web-based future of publishing. It would create a digital platform for Time Inc., the biggest, most-prestigious magazine group in the world.

Needless to say, that didn’t pan out, and here’s where it gets ironic. Just as Time Warner is unwinding that mistake, AOL is figuring out the future of magazine publishing on the web. And it’s doing so without Time Warner’s content assets.

The model goes something like this: Find a vertical with an audience attractive to advertisers, brand it (Daily Finance, Asylum, Lemondrop, Politics Daily), hire five to seven people to run it and plug in AOL’s traffic fire hose. Repeat.

This reminded me a little bit of the continual tension in media companies caused by serving two  constituents  – readers and advertisers. AOL has clearly discovered one path to repeatable success, which is to start with the needs of advertisers. This is emphasizing the “media” part of new media.

The new media companies that are doing the best in this recession have taken a similar approach. Companies like CafeMom, Flixster (a Lightspeed portfolio company) and Glam have focused on creating highly valuable inventory for endemic advertisers, and on building excellence in sales execution.

In contrast, some other startups have focused on the “new” part of new media. They have often created incredible compelling experiences for users, and have generated impressive traffic. But their monetization ability has lagged; sometimes due to creating inventory that is hard to sell,  sometimes because the startu’ps culture is not inimical to ad sales.

Here in Silicon Value there can be a tendency to overemphasize product and technology and underemphasize ad sales.  Advertising revenue often scales with ad sales people. Yet I have seen some startups that have been disappointed with their revenue growth but have >10%  of their employees focused on revenue.

Like AOL, new media companies should remember that they are also media companies, and organize themselves appropriately. This can include doing things like:

- Building traffic with a consideration for your ability to package and sell it to advertisers

- Placing significant company and senior management attention on revenue. This can mean up to 30-50% of employees working on revenue generating activities

- Adding advertising sales expertise and contacts to the management team

- Being flexible about tradeoffs between advertiser needs and user needs

Many new media companies based outside of Silicon Valley (especially those in New York) grasp this innately.

(For more from Jeremy, visit his blog)

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