publishers paradox: increased buys lead to lower profits
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Publisher's Paradox: Increased Buys Lead to Lower Profits THE PARADOX: Marketers are buying more, while our profits decline. A Plethora of Media Options In the ‘old’ days our sales staff had it ‘easy.’ We offered a limited set of opportunities that fit into a few simple buckets that made the media buyer or chief marketing officer’s decision simple. Essentially, a marketer could buy access to our audience through advertising (in print or online,) maybe they could also tack on an event sponsorship, or even a display ad in our e-mail newsletter. Today, we present our media buyers and marketing executives with a plethora of options. Sure, you can still buy a print ad or a display opportunity, but we also offer video ads, placement in our podcast, social media inclusion, promotional campaigns, contests, native advertising, lead-gen campaigns… the list goes on and on. With every new opportunity to spend money with our media brand we create a confusing landscape that doesn’t necessarily drive new revenue, it just splits the pie more ways. The Sales Call Here’s how the sales call plays out: “I have a $100K budget to spend with your magazine brand this year and I’m excited about it,” says the CMO. “That’s great,” says the sales person. “In the past you’ve spent that $100K on ads, which we really appreciate, but I’d like to share with you some new opportunities to reach your audience that we think would make a big impact with your target audience,” she continues. “Wow, I’d love to hear them,” says the CMO. “Perfect, for an additional $10K we have a great podcast you can sponsor. We also have a new video series, at $20K, where you’ll be the title sponsor on YouTube. Finally, I’d like to offer you an opportunity to get more ‘engaged’ with your audience on social media. If you give us some prizes each month, we’ll run a Facebook contest for an additional $10K where you’ll get a mention with our 10,000 fans each week! How does that sound, Ms. CMO?” Now, the sales person is looking at this as an upsell. They’re all smiles believing that the CMO is now considering a total of $140K spend with the magazine. ($100K in print ads, plus $40K in new ‘stuff.’) Here’s the hitch: “That sounds great, sales person. I’d like to do all of those things. But remember, I only have a $100K budget, so what can I get in the print magazine for $60K if I also do the podcast, the Facebook contest and the YouTube videos?” says the CMO. Do you see what just happened there? Now we have to produce a bunch of videos, a podcast, and a Facebook contest for the exact same revenue we would have generated if we’d sold the CMO the same stuff as last year. More media. Less Profit. The result of this kind of sales and operations strategy is an increase in costs - now we have to produce all this stuff - while we maintain the same (or less) revenue. Obviously, this isn’t a sustainable model. Something has to give.TRANSCRIPT
Andrew M. Davis - @TPLDrew AKAdrewDavis.com
Increased Buys Lead to Lower Profits
Publishers Paradox
Andrew M. Davis - @TPLDrew AKAdrewDavis.com
The ParadoxMarketers are buying more,
while our profits decline.
Andrew M. Davis - @TPLDrew AKAdrewDavis.com
Old Revenue Streams
Subscriptions
Events
Digital Ads
Print Ads
Hypothetical
Andrew M. Davis - @TPLDrew AKAdrewDavis.com
NEW Revenue Streams
SubscribersPromotions
Native Advertising
Info Products
Podcast
Social Media
Video Ads
EmailEvents
Creative
Digital Ads
Print Ads
Hypothetical
Andrew M. Davis - @TPLDrew AKAdrewDavis.com
The Sales Call
THE CMO: $100K Budget
Last Year’s Spend = $100K
Digital Ads
Print Ads
Andrew M. Davis - @TPLDrew AKAdrewDavis.com
The Sales CallTHE SALES PERSON: NEW Opportunities: - $100K in ads (like last year) - NEW Podcast = $10K - NEW Videos = $20K - NEW Facebook Contest = $10K Total Spend this year = $140K !
Andrew M. Davis - @TPLDrew AKAdrewDavis.com
The Sales Call
THE CMO: $100K Budget
THIS Year’s Spend = $100K
FB Contest
Videos
Podcast
Digital Ads
Print Ads“I love all the new stuff. But I still only have $100K. What can I get in the print magazine for $60K? !
Andrew M. Davis - @TPLDrew AKAdrewDavis.com
The Sales CallTHE RESULT: Increased costs (Facebook contests, podcast and videos.) Same net revenue. !
Andrew M. Davis - @TPLDrew AKAdrewDavis.com
The Illusion
When we sell this way, it appears that we have tremendous growth in these new revenue streams and that print revenues are declining, when, in fact, gross revenues remain the same.
Andrew M. Davis - @TPLDrew AKAdrewDavis.com
The Challenge
Stop cannibalizing existing revenue streams.
Consider new revenue models.
Eliminate opportunities and simplify offering