The development of new revenue streams was a consistent narrative at the INMA World Congress in Washington, D.C., earlier this month. Some of these new revenue streams are familiar, such as events and digital marketing services. But many were new types of businesses not previously offered by news media companies.
For example, Stuff in New Zealand has invested in electricity generation and Internet services, and Fairfax Australia has a business unit advertising cars for sale.
The striking variety of alternative revenue streams suggests more research is needed in this area. The traditional two-sided business model of news media companies — collecting an audience with content and then selling advertising against that audience — is still compelling. What other revenue streams are complementary to this model? Is there a process for identifying and evaluating potential revenue streams for publishers?
In fact, there is.
The field of new product development was formalised in the 1980s with the “stage-gate” process by the consulting firm Booz-Allen Hamilton. Lately, Design Thinking, pioneered by the D school at Stanford, has further evolved the field of new product development.
This is an important topic for news media companies to consider as they are faced with two new product development challenges: redesigning their value proposition to best fit the digital distribution platform and creating new revenue streams leveraging their assets, namely their audience and brand.
These product development processes have common themes. Viewing your product from the customer’s perspective is important. How does your product serve the customer? What problem does it solve? What value does it create? How does this value proposition vary by customer segment?
The two approaches to new product development both formalise failure recognition, which is vital since many new ideas will fail and resources are scarce. Recognising the metrics determining success in advance is critical to avoid the natural tendency to keep investing in bad ideas. The sunk cost fallacy is an economic concept widely known outside the field.
Nonetheless, companies often find themselves unwilling to stop investing in failing initiatives. Steve Jobs said, “Deciding what not to do is as important as deciding what to do.”
Coming out of several sessions during the World Congress, I found myself impressed by the entrepreneurial initiative demonstrated by the presenters, hoping they find long-term success. In many cases, it seemed their new business models would be hard for other publishers to replicate. In this sense, the industry may become less homogenous than in years past, but that is a feature and not a bug, as they say.
Digital product innovation is still an area where the industry needs focus. Several companies are investing in understanding the economics of content. Maribel Wadsworth Perez of Gannett shared that her company’s research found 50% of its content only generated about 5% of its pageviews, and this company is not alone. Our work with other publishers has found large percentages of content had little discernible economic value, either through advertising or audience revenue streams.
Other industries have found ways to quantify their value creation using innovative analytical approaches. Billy Beane used new metrics to understand which players were under-valued for their productivity on the baseball diamond. Environmental restoration advocates use ecosystem-services valuation to measure the economic impact of viable natural environments, such as the Everglades in Florida.
Digital platforms change the competitive landscape in dramatic ways. News media companies are no longer defined by geographical footprints. Rather, they are now known for subject matter expertise, quality journalism, political viewpoints, local topic relevance, or design. Brand differentiation is now important. Where news media companies used to compete on breaking news, they now compete on many fronts. What is their unique value to their audience segments?
This World Congress continued the trend of INMA conferences of late. It showcased innovation, success, and constructive failure. Where conferences over the past 10 years often focused on successfully sustaining traditional practices of print advertising and product distribution, which are still incredibly important to the success of the industry, this event was remarkable in the diversity of new ideas and case studies.
Our industry is showing that adversity is the mother of invention. Let’s take a moment to recognise how far we’ve come. Now, let’s get back to work.