Made in NYC: New business models for new media

Tattoos, tight jeans and three-day beards are “in,” while meaningless page clicks, paywalls and backfill banner ads are “out.” 

That's the state of the art among the hustling, bustling start-up companies who are innovating the new business models for digital publishing in New York. 

In a two-day tour that I organized last week for 50 senior global media executives on behalf of the International News Media Association, we visited with the leaders of B2C start-ups as varied as Vice and Food52, as well up-and-coming B2B ventures like Business Insider and Skift. We also met with the founders of five ventures aiming to put serious journalism, writing and ideas on the web: Atavist, Gothamist, Longform, Upworthy and Roads and Kingdoms. We also stopped by Complex Media, which has built a network of more than 100 owned and affiliated sites targeting twenty-something males.  

The offices of each of these young companies was literally hot as they are, as an early taste of summer settled over New York. That's because they operate in tight, B-grade spaces with generally minimal access to such amenities as air conditioning or enough chairs to accommodate four-dozen visitors. But tight, spartan quarters evidently are the ideal environment to incubate fresh ideas that can be rapidly prototyped, launched, analyzed and refined – and then fed or killed, as the marketplace dictates. 

Each of the companies is pursuing a different audience and a different business model. Although Vice has raised more than $500 million and has stated it will achieve close to $1 billion in sales this year, the rest of the ventures are small to middling at this point.  

Not all of them necessarily will cross the chasm, but each is helping to write the new rules for new media, which are distinctly different from the rules followed by most of the old media companies.  Old media companies would be well advised to pay attention to the newcomers. So, dudes, listen up: 

Rule 1.  Chose a large, well-defined and underserved vertical, whether it is the travel industry (Skift), sharing recipes among home cooks (Food 52) or the Millennial generation (Vice and Complex Media). 

Rule 2. Develop quality content with an authentic voice. You may not like everything you see on Vice, but you have to admit it is authentic. And here are three words of advice as to the content you should endeavor to generate: Video, video and video. 

Rule 3. Create community through active inter-activity.  Upworthy was founded to find emotionally and intellectually compelling material and then make it as viral as possible through the use of clever headlines, clever copy and extra emphasis – you may have heard this one before – on video. Longform does roughly the same thing by curating and sharing links to well reported, well written and, yes, long articles. Taking community-building to another level, Food 52 actually was started to crowdsource recipes for a cookbook. After the book was published, the community kept growing organically and its founders  –  two women who head a staff composed almost entirely of fellow female foodies – wisely decided to go along for the ride. 

Rule 4. Build quality traffic. As important as growing traffic is to proving the strength and viability of a nascent site, several entrepreneurs stressed that they are more concerned with the quality than the quantity of the page views they attract. To measure quality traffic, they monitor the types of stories their users select, the time they spend on site and the ways that they share content with others. Several publishers explicitly avoid running stories that could be construed as clickbait in favor of articles appealing to the readers they aim to attract.  “This doesn't mean we won't run stories about Mark Zuckerberg's dog,” said Henry Blodgett, the founder and chief executive of Business Insider. “It turns out that people who are interested in his dog are interested in serious business stories, too.”      

Rule 5. Diversify your revenue streams, as follows: 

Sponsored content. Most of the sites are doing sponsored content, paid advertising or whatever you want to call it.  Roads and Kingdoms, a site that melds travel tips and serious  journalism, is hired by brands to produce what they call “off-site” sponsored content that doesn’t usually run on its own site. 

Technology tools.  Atavist built a content-management system to create the great-looking longform articles it wanted to feature in its eMagazine. Now, platform licenses are a major revenue stream for the company.  

Content syndication. Vice has a video deal with HBO and is about to launch a new 24-hour cable channel with the Arts and Entertainment Network.  Meanwhile, Atavist in some months generates the largest proportion of its revenues by selling the movie rights to the original stories it runs. 

Memberships.  Because most sites are intent on growing traffic, they tend to avoid the paywalls so popular among legacy publishers. The start-ups see paywalls not as revenue opportunities but, instead, as barriers to acquiring new subscribers. However, they implement paid services when they feel they can deliver sufficient value to make them desirable. Skift is generating a third of its sales by selling access to specially produced monthly reports that provide deep insights to industry leaders. Other publishers are thinking about ways to create premium access opportunities but aren't in a hurry to do anything that might constrain their growth.  

Merchandising.  This opportunity runs the gamut from generating commissions on the sale of iTunes playlists to merchandise orders placed at Amazon.Com. A third of revenues at Food 52 comes from the sale of kitchen gear, including products like the handmade, wooden biscuit cutters that are available exclusively on its site.

Physical media.  A subset of merchandising is the sale of books, videos and other media produced by the digital site. The cookbook published by Food 52 is an example of this. Vice Magazine, the cornerstone of the global hip-hop empire, continues to be available in print, too. 

Events.  Companies like Skift and Business Insider conduct annual events to not only build revenues and community but also to position themselves as thought leaders in the verticals they hope to dominate.  “It is better to do one big event well than to try to do a lot of small ones,” advises Rafat Ali, the founder and CEO of Skift.   

Advertising.  Although some sites depend on advertising more than others, most of the new media entrepreneurs agree that banner advertising supplied by networks represents what one called “a race to the bottom” in terms of quality and yields.  The most successful sites – like Business Insider and Vice – sell most of their advertising directly at respectable, double-digit CPMs, as opposed to filling their inventory with network-generated advertising that yields low rates while often delivering spots that detract from the editorial environment they are seeking to maintain.  When sites do use network advertising, they exercise close controls on the quality of the ads and often insist on guaranteed minimums from network partners. 

Taken together, the diversity of the start-ups in this sampling demonstrates that there is no one-size-fits-all approach to levitating a new digital publishing venture. All of the entrepreneurs will tell you that it takes a lot of trial and error to find what works. But first and foremost, they say, you have to be willing to try.