Month: August 2020

Longtime local news business analyst Ken Doctor, who also serves as the president of his consultancy Newsonomics, set out at the end of last year to find a way to not only help nourish a local news desert in his hometown of Santa Cruz, Calif., but to also revive an advertising downturn that had formed in that area as well.

This fall he’s getting ready to launch his new business, Lookout Local, with the help of a reporting team of eight and a total staff of 15. But launching a new business — especially a digital media company that’s looking to take over the position that local newspapers once held — is a tricky undertaking, even without a global pandemic and the ensuing recession. 

“This is not your father’s or grandfather’s Patch,” said Doctor, referring to the hyperlocal digital news platform in over 1,000 towns and counties. Santa Cruz also still has its newspaper, the Santa Cruz Sentinel, that it will be up against.

Doctor and the company’s chief revenue officer Jed Williams are optimistic about their business model, which will start out as a 50-50 split between memberships and direct advertising, with the gradual reliance on memberships.

“We’re starting with the business model as much as we’re starting with an audience and content model. This isn’t a ‘Field of Dreams’” situation, Williams said.

In the latest episode of Digiday’s weekly show, The New Normal, Doctor and Williams discuss how they’re looking to drive contributions and deeper connections with readers, as well as the advantages they have starting as a public benefit corporation.

Public benefit company

As a public benefit company — a for-profit company that prioritizes doing good rather than maximizing shareholder value — the business is still aimed at serving a mission. In this case, the mission is to provide news and information needs to a community.

When creating the company’s business model, Williams said they knew that philanthropy would be a part of the mix, but both were concerned that an over reliance on donations would not allow them to have control over the business in the way they needed to make it successful.

Therefore, having the for-profit flexibility gave Lookout Local the ability to get revenue from several other sources and have a business model that they were able to better steer, he said.

“It let’s us be a for-profit company, which I’ve always liked the idea of,” said Doctor. “And the two can go hand-in hand if you strengthen the newsroom with the profits that you [make].”

There are also certain things that a non-profit certification would prevent them from doing, including endorsing political candidates.

What they need from readers

Santa Cruz has a total population of about 275,000 and Doctor and Williams have pinpointed the total buying community (those that would either buy a membership or shop from the site’s advertisers) is about 230,000. 

From a one-to-one membership play, Doctor said they would need between 5,000 to 7,000 members, however, he and Williams are planning to also offer group memberships to companies and schools as added revenue. 

“It is still very cheap to do a digital product, so at less than $2 million a year, we can map a full service news company that has two to three times the reporting strength in quantity of a daily newspaper,” said Doctor.

The membership model was chosen over a subscription model because they see subscription as a more transactional relationship with readers than a community building relationship. The membership is aimed at growing a community around the publication that will hopefully evangelize for the brand down the road. Williams said that they are working on a way to make members feel like they are more connected to their community as a whole.

“If we create membership around the notion of you as someone who … wants to be a more vibrant member of the community and solve problems, giving you the ability to contribute to that directly through a membership, we think there is something potentially special about that,” said Williams. 

Tapping community advertising

Advertising is not seen as just an instant revenue ploy, Williams said.

“The business community is part of the model along with readers and members for the long haul,” he said. Lookout Local is looking to also give Santa Cruz’s local businesses a new place to reach immediate potential new customers.

“There is more money in advertising than we thought going into this,” said Doctor. 

Partnering with a major news publisher

To gain more awareness and scale, Lookout Local will be testing a bundle with the Los Angeles Times that will offer a discounted membership to Lookout and a subscription to the Times. The added bonuses of the Times’ national scale is what’s crucial for Doctor.

“The main focus has got to be intensely local [reporting] and use these national resources in a way that makes sense to readers,” he said. Lookout Local “needs to feel like it’s authentically about Santa Cruz county” in order for it to be successful.

Some of those national resources include using the LA Times’ Graphene custom content management system.

“Either you outsource technology or you insource it. We don’t want to have an IT staff. We don’t want to develop things on our own,” said Doctor. Graphene had the best mix of a good visual experience that was particularly appealing to younger readers and had the easiest workflow for the editorial staff, he said.

“We want people to look at [Lookout Local] and say, ‘Wow, that doesn’t look like a traditional newspaper,’” said Williams.

What saved BDG from the dire projections that Wagenheim had at the start of the pandemic was the company’s affiliate business, which was up 84% year over year in the second quarter, and offset the decline in advertising. Overall, the company’s overall revenue was down only 25% that quarter, he said.

“Q3 is doing gangbusters for us,” said Wagenheim, adding that he expects that this quarter will be less than 10% down, if not flat over last year. The company’s virtual events business and its commerce programs in the works have been “a driving factor for the success that we’re having in Q3,” he said.

Group Nine’s Thrillist brand is also seeing a boom in its affiliate business, with 50% month-over-month growth from June to July, according to the company. New York Magazine’s shopping site, The Strategist, saw an 85% year-over-year increase in revenue during the second quarter. And Gear Patrol has seen a 50% increase in commerce revenue for the the first half 2020 versus 2019 and it is pacing to be 30% of the company’s revenue this year.

And now that these publishers have adjusted to the new normal, they are looking for ways to extend out their commerce businesses and put physical products in their audiences’ hands in order to add more fuel to the fire of more lucrative brand deals, more revenue from affiliate sales and even larger charitable contributions.

Bustle Digital Group’s new commerce play is tied to its virtual events strategy, where it has started giving away product kits ahead of some of its sponsored events. These kits include items like yoga mats and lip glosses that are tied to the event in order to make for a more immersive experience, but also to get attendees more engaged with the sponsoring brands.

So far, BDG has created these event kits for its virtual yoga retreat in May that was produced for advertiser Nature’s Way, and for its Self-Care Saturday event this past Saturday that was built with advertiser lip filler brand Restylane Kysse. The event kits were complementary for the first 150 attendees to RSVP.

Wagenheim said this strategy is not much different from the in-person events that include gift bags or giveaways.

“It’s important to get products into consumers’ hands,” he said, adding that this will enable them to promote via word of mouth and social media, turning attendees into micro-influencers for brand sponsors. 

The Nature’s Way Yoga Retreat, for example, had a 53% higher Instagram Story video completion rate than its benchmark and a 250% higher Instagram post click through rate than expected.

A significant selling point for these sponsored events — which fetch anywhere from the low-to-mid six-figure range to $1 million — is getting social impressions from both attendees and their social media followers, Wagenheim said.

“Our theory on this is if 500 people come through and every single one of them has an average of 500 followers, 500 times 500 is 250,000. We’re never going to reach that many people, but that’s the potential universe for us to get people [sharing for] the brands that we’re doing this for,” said Wagenheim.

Gear Patrol, which bills itself as the definitive buying guide for men, is taking similar steps to increase engagement on its social media channels, primarily on Instagram, in order to introduce audiences to products that it covers on its website.

Since moving remote, GP’s edit team created a couple of new video franchises on its Instagram Stories. “WFH Setup” allows editors to showcase the brands and products that they use in their homes and viewers can swipe up and go to the article of the product on GP’s site, or go straight to the manufacturer’s page. Some of the products are linked to with affiliate links so if the viewer makes a purchase, GP gets a commission off of that sale. And “Testing” previews items that will be reviewed by the edit team in coming weeks and allows audiences provide their feedback on those products ahead of time.

“Two-way communication has been a struggle” for Gear Patrol, said chief content office Ben Bowers. Since the beginning of April through the end of July, the publisher posted 47% more Stories and saw a 66% increase in replies and a 52% increase in impressions on those Stories. This has increased the top of the funnel awareness building for the products featured on its site that GP earns commissions off of.

GP’s Instagram account has 134,000 followers at the time of publication, which Bowers said is a much smaller scale compared to the average 4.5 million unique visitors it’s had to its site each month since January. Instagram has never been a significant driver of traffic to its site or to sales, he said, so these franchises have been focused on increasing engagement with audiences and ultimately highlighting products it will be selling on its site.

Meanwhile, other publishers like Thrillist and The Strategist have been looking for new ways to extend their already growing affiliate businesses.

Thrillist, which covers food and experiences around the world, needed to figure out how to still deliver content that would connect its readers with their favorite restaurants, said the brand’s chief content officer Meghan Kirsch.

To do this, the site began running a series of articles about restaurants in 11 different cities that people could order from anywhere in the country using a food delivery services like Goldbelly. Those articles incorporated affiliate links from the services and had a higher than average conversion rate of between 4% and 5%, Kirsch said. 

Seeing how well consumers resonated with the ability to order from restaurants outside the range of local delivery, Kirsch said her team expanded the affiliate partnership with Goldbelly into a season-long deal for its show, “Send Foodz.” Each episode of the season features food from several restaurants in different cities around the country. Those restaurants’ profiles on Goldbelly are then linked to in the description box of the video and Thrillist makes a commission off of any transactions.

The Strategist took a similar approach to adapting one of its content series, What I Can’t Live Without — which features celebrities’ favorite products that readers purchase through affiliate links — to incorporate a different type of shoppable integration. 

A special edition of the series, called What I Can Live Without, was repurposed to auctioning off celebrities’ favorite, or more notable, belongings on eBay. The proceeds from the 23 items that are in the 10-day long auction will be matched by the program sponsor eBay and donated to the NAACP’s Legal Defense and Educational Fund. 

“There is more urgency to get our audience to transact with brands … because people can’t go shopping,” said Wagenheim. “But the formula for success for [in-person] is still the same for virtual. It’s just the platform that’s changed.”

Two-thirds of survey respondents described themselves as white, while 11% said they were Asian and another 11% said they were Black. Just 4% said they were Hispanic and 9% described themselves as another minority race.”

If you ask marketers why the looming threat of a TikTok ban has brought up an old gripe, you’ll hear about how they’ve been trying to diversify their media channels away from just Facebook and Google and that TikTok was a viable option. It’s one that many had newly tested. During the Facebook boycott last month, many marketers tried out advertising on TikTok — it’s unclear how much media budget was redirected to the platform at the time — which just last month opened up its self-service advertising platform to marketers globally.

That’s certainly been the case for Hero Cosmetics. “From a growth perspective, we rely really heavily on Google and Facebook,” said Hero Cosmetics co-founder and CEO Ju Rhyu. “We recently started using TikTok for media and saw strong ROAs. We thought TikTok would be our third platform. We were like, this is great because it helps us diversify away from only Google and Facebook. But now there’s the possibility of the ban.” 

Of course, TikTok is not the only other option for marketers, but it’s a newer channel with cheaper CPMs and a desirable demographic for many brands, especially ecommerce brands, that made the upstart platform more attractive. And recently, amid the Facebook boycott, many marketers had started to truly test the waters with TikTok and found promising results. But now, faced with the possibility that once again they’ll have to continue to rely on the duoply, there’s a collective sigh of annoyance from the marketing community. 

“It almost feels like we had a lot of great momentum going and now it might get killed altogether,” said Savannah Sanchez, freelance media buyer and founder of The Social Savannah, adding for smaller brands that reliance on Facebook in particular during the fourth quarter can be problematic as Black Friday and other holiday sales drive up CPM costs. 

CPMs aren’t the only reason brands need to diversify. Younger audiences, especially Gen-Z, are less likely to be on Facebook and TikTok has been a great way to reach those consumers, according to media buyers. Should TikTok be banned, buyers say that they’ll likely move those media dollars back to Facebook and Google because those are proven channels but that they worry about losing out on the burgeoning Gen-Z audience. The service also has 800 million active users globally, so messaging scale is a factor as well.

Working with the platform’s influencers — many of whom haven’t had profiles on competing apps like Triller or Instagram — has also helped buoy brands in need of Gen-Z’s attention. Marketers say the content created by those influencers using TikTok’s creator tools has generally been more successful than professionally created ads on the platform.

No matter what happens with TikTok, marketers don’t want to be so dependent on the duopoly anymore. 

“The more that a real advertising threat enters the mix it helps advertisers gain more leverage against Google or Facebook,” said Rhyu. “It’s not a great thing to be too beholden or dependent on them.”