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Ken Sonenclar
It’s no secret that consumer media, no matter how competitive it seems on the newsstand, is infinitely more cluttered on the Web. Whether we’re talking baseball, jazz, gardening, cars, weddings, home theatre or travel, the dense racks at Barnes & Noble are just the tip of the iceberg, the remaining 90% below Internet level.
And as if things weren’t tough enough for Web publishers, new data suggest that the crushing competition online is growing even more noxious. The implications are potentially ominous for today’s market leaders.
Early last year I took a close look at celebrity media, not so much because I needed a Gosselin fix or cared who Jen was dating, but because celebrity is a pretty good proxy for consumer media overall. Celebrity media features a cohort of magazines struggling with declining circulation alongside a depressed and shifting ad market; a handful of gossipy half-hour TV shows reaching a stagnant audience; and an astounding array of kiss-and-you’d-better-believe-we’re-gonna-tell Web sites. And maybe I do care who Jen is dating. So what?
More than a thousand sites fall under the celebrity umbrella. Hundreds play to insignificant audiences, racking up few page views or visits. Many can hardly even be termed lifestyle businesses, since it’s hard to see how they put food on anyone’s table. Call them hobbies. Meanwhile, the names atop the leaderboard are familiar: a mix of Internet originals (such as Yahoo’s traffic monster OMG! and the seductive Perez Hilton), digital variations of the celeb broadcasts (Access Hollywood, for instance) and offshoots from the leading print brands, most notably People and US magazines.
Between this aristocracy and the lumpenproletariat, though, are scores of sites that are gaining audience share from the top. Although somewhat more inclusive than the roster of celebrity sites I regularly track, comScore’s Entertainment News list is similar enough and offers standardized monthly data. The category’s performance over 2009 shows a bumpy but steady decline of share held by the leading sites. And the falloff holds across the board for unique visitors, page views and time on site.
This phenomenon—an anti-consolidation—counters life on the newsstand, where impossibly higher costs and related barriers to entry have left a diminished universe of nine competitors. And even as the entire pie shrank last year—extending 2008’s decline—market leader People grabbed a larger slice. Time Inc.’s downturn-defying title won 31% of all ad pages (up from 29% in 2008), and accounted for 26.6% of all celeb magazines sold at year-end, up from 24.5% the prior December. In fact, it’s likely that People grosses nearly half the category’s roughly $3 billion in revenues.
But back in the digital world, businesses that would have folded long ago in print—assuming they would ever have been launched—flourish on the Web merely by keeping costs low (which often means disregarding photo rights issues) and relying on countless ad networks to sell any space at any price.
What does it mean? It of course reinforces the harsh facts of Web life that Internet economics—the economics of abundance—create a frighteningly level playing field, eliminate most barriers to entry and encourage endless competition. And even if only a handful of players command the bulk of the audience, the hundreds of aggressive secondary sites and their bottomless advertising inventory depress rates and revenue for the entire category.
The long-term prognosis for today’s top sites may indeed be death by a thousand cuts. But this bloody end can be fended off—or at least postponed. Understanding that the goal is to find and expand the right audience while boosting revenues, here are some key steps:
- Open supplemental revenue streams: e-commerce and lead-gen, not pay walls
- Control your own inventory
- Promote audience quality, not just numbers
- Hire as many creative marketers as editors
- Differentiate look and feel and content
- Find a distinct and winning editorial voice
- Keep costs in check
Of course, there’s little to stop the other thousand sites from following this path as well.
Minsider columnist Ken Sonenclar is a Managing Director at DeSilva + Phillips, the boutique media investment bank. He works with both traditional and digital media companies, and has managed M&A engagements in the U.S. and Europe. He can be reached at sonenclar@mediabankers.com.
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