MEDIA, TECH, BUSINESS MODELS

Two French journalists come to me with a question: which business model for their new project? They are about to resuscitate a fairly well-know trade journalism brand, planning to go mostly online -- and marginally on dead trees.
As an answer to their new investor’s questions, they first considered the “tried and true” formula: free website + advertising support + hope for the best.
I cut them short: No.Forget about the typical website: Go mobile first.
With an smartphone app, or a mobile website, you'll have room to maneuver. Unless you are concocting a clicks machine targeted at a huge audience, there no longer is money to be made in classical web advertising. And your specific project adds two challenges. First, living outside English-speaking markets. Second, targeting a niche market: a business audience.

Audience-wise, a paid-for, mobile-based service is the best vector for business people who want permanent access to news relevant to them, especially as they are constantly on the move. For such a target group, speed is key. People love the feeling of being “first to know”, or of getting “exclusive content”. All of the above feeds the compulsive need to glance at one’s Blackberry. And not being elsewhere on the web reinforces this "I’m special" feeling.

In such a context, having people pay for content becomes feasible. For one, chances are the mobile phone subscription is picked-up by the employer. That's why business papers such as the Wall Street Journal or the Financial Times are thriving on the paid internet. (25 years ago in France, this difference between user and paymaster led to the Minitel’s immense success.)

Start with two products. On the mobile device, it has to be straightforward. Compact, exclusive, proprietary, preferably on top of the news cycle. A significant portion of the content is pushed to the user, with carefully designed default settings, and options to select the type of news and the timing of delivery.
The paper product would be fairly compact as well. Something like a 24 pages weekly, 60% editorial, 40% advertising, built around a small number of value-added stories, mostly long-form, written and edited by well-paid freelancers. No newsstand sales. The magazine has to find a way to be free: ad volume, average revenue per page, printing costs. No mass-market distribution either: the mag is actually subscription-based and it is designed to complement the mobile-subscription for which it will be the most potent incentive.

As many mobile platforms as needed. To be decided using the latest market research (to get an idea, see this interesting map provided by ReadWriteMobile (click to enlarge).

The ideal triptych being Android, iPhone/iPad and Blackberry. A significant number of business people have two phones: an iPhone for fun and a Blackberry for serious communication. IT goes without saying the UI should be consistent across all devices.

The business model. In a nutshell: pay-per-view for new and occasional readers, but leading to a subscription model (I've addressed the issue in a previous Monday Note).

At the beginning, for a relatively small publication, the best way is to go along with the Apple system for both pay-per-view and subscription. 30% fee but no hassles and quick set up. Of course, do not expect to get customer data (Apple's policy is definitely quite discouraging in that matter -- unless you give an incentive to provide personal data, which is precisely what your ingenious paper mag name/address subscription does). As soon as possible, try to switch to an HTML5 based mobile site. It might be a while for reliable development tools to be available. But once it will be, even small publishers will have access to inexpensive transactions platforms and all customer data they need.

Pricing. It depends upon the scope of the product. Let's try a back-of-the-envelope calculation for the specialized publication mentioned above. It could be manned by a staff of 25, including techies and administrative. Expect $100k per head, all included, that is $2.5m a year. Add another 20% for additional expenses. You end up with a mobile operation costing about $3m a year. Add another million per year for the magazine. Total is 4m a year. (Again, the print run for the magazine will be fairly small since it is adjusted to the number of subscribers to the mobile service).

Magazine:- number of issues per year: 45
- number of equivalent full pages per issue: 11
- average yield per page: $5,000 (rack price at $10,000; expect a 50% discount; could be seen as expensive, but this is a high-value target group)
- number of pages sold per year: 495
=> Net revenue for the magazine: $2.475m
=> Net revenue for Mobile + Print: $4.225m. Again, for an estimated cost of operation of about $4m.

This will need fine-tuning. Reaching break-even will take a while; subscriber acquisition costs can be high, and the expenses related to the print will vary. On the more positive side, high CPM ads can work on mobile contents and ancillary revenues such as e-books publishing or conferences can come into the formula.

This admittedly crude example is meant to highlight three things:

The traditional web is not likely to offer the best approach for niche products.

A "mobile-first" system is a good way to reach a valuable and captive audience generating a strong ARPU.

The hybrid formula, digital + print, is important as well. In our case, being able to offer a magazine, compact but with a significant editorial value, acts as a booster to attract subscribers -- and advertisers.

Overall, it shows the print model can retain some business sense -- if managed in a different way: no kiosk sales, only in bundle with a digital product and designed to complement it.