Stuff New Zealand has become a disruptor, not the disrupted. The news media company is converting its audiences into not only customers but higher paying customers with a portfolio of product offerings outside media that leverage Stuff content. Content, communities. and commerce have transformed Stuff.
Sinead Boucher, CEO of Stuff, shared a detailed look at how Stuff has transformed itself through revenue diversification in these various businesses in an INMA Webinar on Wednesday.
Formerly Fairfax Media, Stuff has been in New Zealand for 160 years in some capacity and today has 80 newspapers around the country, from national to hyper-local, numerous news Web sites, and a portfolio of other businesses.
“We have come to the realisation that traditional advertising revenues, even in digital, are not going to sustain us in the future and we can’t rely on them to,” Boucher said.
While Stuff still has a profitable print subscription model, the market has forced the company to look at its future digital business in a different way.
In the past four years, Stuff has undergone a radical makeover, moving from a fight for survival to becoming an energetic new business. Stuff grew from a Web site, to a platform, to a flagship brand reaching three million people per month — in a country with a population of only 4.5 million.
“That scale gives us the freedom to act as much more than a publisher. We can also act as a platform and become a place for others to publish their content,” Boucher said. Stuff is using that to sell new kinds of products, and to acquire new customers, as a more sustainable business model.
“We just don’t see how we can make a business based around paid content models. We really sought to leverage off our scale and the trust we’ve built over 160 years, and build a new ecosystem of digital businesses that will bring us increased value from that audience.”
A new model
Stuff’s new model is based on Average Revenue Per User, or ARPU. At the base of the pyramid are the two foundations of monetising the audience, both mass and authenticated, in traditional ways. At the higher level, Stuff wants to convert that audience to premium services such as e-commerce transactions, joining its content to products that people want to buy, from furniture to vacations.
At the top of the pyramid are the paying subscription customers, print and digital.
Stuff has what Boucher called a galaxy of companies, all revolving around Stuff. Some are companies that leverage the brand, such as Neighbourly and Homed, while others leverage the audience, such as Popshop and TruBid.
“Some of these give us reach into new communities that we haven’t always been great at reaching ourselves,” Boucher said. For example, a huge Indian radio station which has moved its platform onto Stuff, enabling them to reach the Indian population of New Zealand.
“I think the real game changers for us have been the businesses we’ve gotten into that have not been around traditional content and have been able to grow and be successful purely because of that mass audience, and the trust we have built.”
Case study: Neighbourly
Neighbourly is Stuff’s homegrown, local social network with 600,000 subscribers that sign up to see what is happening in their neighbourhood. The platform allows them to buy, sell, trade, and consume community news. This has allowed Stuff to reclaim a lot of local classified advertising through Neighbourly postings.
“It’s giving us a chance to re-imagine what community journalism looks like, in a native way,” Boucher said. “The scale that Neighbourly has already got to is helping us with data, as well as another platform to reach people and connect the dots.”
Case study: Stuff Fibre
New Zealand’s sole fibre-only broadband provider, Stuff Fibre was Stuff’s first significant joint venture. It’s an example of how Stuff partnered with providers who were experts in their particular field — in this case, fibre broadband Internet — and connected it with reach to mass audiences.
“Our challenge really was to do it better than the incumbents,” Boucher said. “We don’t need to be No. 1; No. 3 or No. 4 would provide significant revenues.”
Boucher said that the experience taught them a lot. Their expertise in certain areas did not automatically translate to others, for one thing: “It’s different selling fibre than selling print newspaper subscription. There was a real learning curve around that. We also learned that our own advertising really works. We’ve gotten really good at using our own digital ads to drive sign-ups.”
It’s a great model because it’s a recurring monthly subscription model, she said. Stuff Fibre is winning 7% of new fibre market connections — a higher number than expected — and is expected to turn a profit within the next few months.
Case study: energyclubnz
Based on the success of fibre, Stuff moved on to electricity, partnering with energyclubnz to provide cheaper energy to Kiwis. It’s a disruptive model, where members pay a weekly fee to belong to the club and then get their electricity at cost. Billing is transparent, and customers do not get stung if they use more power.
“Having had the experience of launching Stuff Fibre, we’re learning every time from launching a start-up. We’re learning what we’re good at and what our partners are good at,” Boucher said.
A natural fit for energyclubnz was Neighbourly, which Stuff piggyback on to market to potential customers. These utility business models have also allowed Stuff to have a direct physical presence in its customer’s homes. Stuff is now looking at what other products and services it can provide that will give the company a direct reach into customers’ homes.
Other Stuff businesses include an affordable health insurance product called done, as well as the movies-on-demand Stuff Pix, which was just launched. In its first week, Stuff Pix smashed expectations.
“Not only can we use our advertising power to drive awareness of the brand, but it’s a really nice fit with our entertainment content, such as movie reviews and celebrity news,” Boucher said.
In all of these, Stuff used its rich data on their customers for outreach and advertising these products. These are also important steps in Stuff becoming a data-heavy company and in acquiring new members.
The various models play off each other as well. For example, a Stuff Fibre customer will get a free Stuff Pix movie. “Now we’re thinking more about how we can bundle things together. It’s all to provide more value for New Zealanders and provide products that fit with our core mission as a journalism-based organisation,” Boucher said.
What has the ROI been?
Digital revenue has grown 35% YOY in the first half of the financial year, driven by the revenues of these new digital businesses, Boucher said. Stuff is seeing good advertising growth, as well, especially in premium advertising. Using its own media to drive these businesses is a huge value, costing Stuff nothing.
“It’s been really encouraging for us,” Boucher said. “We are really looking at what we can bring our expertise to, and what expertise others can bring, and putting those together where we can be most effective.
The successes of these early investments have encouraged Stuff to continue to pursue a diversification strategy. It all goes back to the purpose of the company: helping Kiwis connect and thrive in their communities by connecting them with Stuff that matters, Stuff they love, and Stuff that brings us together.
Boucher admitted the journey has been hard in many ways. “The challenges of turning around a big media organisation, with a big print legacy behind it, into a new business has been a big mind-shift change for people here. We are determined to keep taking advantage of the digital disruption that’s happening in other industries, and go in and be the disrupter, instead of being the victim and wringing our hands all the time.”
Boucher shared the five top insights that Stuff learned during this revenue diversification journey:
- Be less corporate and more of an entrepreneur. Make decisions and get things done more quickly.
- Play to your strengths. Be clear about what you bring to the table and what others do.
- Make it a holistic change: drill to the core. You need to be transparent about why you’re making this change to build support in the culture from the ground up.
- Take time to smell the roses. Check in with people to make sure they feel good about it, understand why you’re doing something, and celebrate successes.
- Simply go faster.
“We never have regretted just leaping into something and learning as we go along,” Boucher said.
One big question that has come up a lot within the company is: What kind of company is Stuff now? Is it a media company or something else? Boucher said that yes, Stuff is still a media company — but it is much more than that now.
“We’re not quite at the end state where we could describe ourselves in a different way. How are we going to identify and describe ourselves in the future is something we haven’t quite figured out.”
INMA: Let’s talk about the “are we a media company” question. How do you deal with that internally?
Boucher: Connection is what we talk about really strongly. It’s different in the different departments; in the editorial department, they feel a bit uneasy that we’re moving away from strict journalism. We talk about becoming a company that isn’t relying on media revenues but will have many other revenues as part of the mix. We haven’t really landed on a clear way of how to talk about ourselves yet, but a connection brand is where we’re going with it.
INMA: Why the change from Fairfax New Zealand to Stuff?
Boucher: Fairfax Australia is a huge legacy brand that we’re owned by; but here in New Zealand, Stuff is the destination that we’ve gone to every day. And we wanted to make sure we are known as a Kiwi business, and not just a Kiwi arm of an Australian business.
INMA: Strategically, are these small but stable revenue streams? Or are you placing your bets on different horses to see which one will be a big hit?
Boucher: I think it’s a mixture because within our stable there is another domain. None of them provide really significant revenues at the moment, but there is a lot of upward growth. Some of them are testing environments, and some of them may not work.
INMA: How big of a team do you have that are looking at revenue diversification resources?
Boucher: Maybe two or three people. Because we’re so lean, our executive team is very lean and we want to keep it that way. The more we tell our story about what kind of business we have transformed into, the more people are seeking us out.