Diversification

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August 16th was the last day for Pacific Standard’s operations after its lone benefactor, Sage Publications, decided to pull funding. This came as a shock to basically everyone because for all intents and purposes, Pacific Standard was doing just fine.

In an interview with The New York Times, Pacific Standard’s editor in chief, Nicholas Jackson, expressed confusion about what had occurred.

“We’ve been operating with the understanding that we’re delivering on everything they’ve asked of us and, in fact, overperforming,” Mr. Jackson said, referring to the site’s readership of a few million a month.

Clive Parry, a Sage executive, said in an emailed statement that the magazine might have survived if it had been “self-sustaining.” But Mr. Jackson and his predecessor as editor in chief, Maria Streshinsky, said the magazine’s business model did not include a plan to raise millions in annual revenue. “There was talk about fund-raising, but that wasn’t the way Sara seemed to want to go,” Ms. Streshinsky said, referring to Ms. Miller McCune.

There’s so much to unpack in those two paragraphs. But what sadly jumps out to me is that Ms. Miller McCune promised the team a specific amount of support that, when the going got tough, she could no longer offer. The New York Times even says “she [Miller McCune] founded Pacific Standard in the middle of the recession but stepped away from it after it had burned through millions of dollars.”

Benefactors are great when they are giving you money, but the whims of people can change. And when that happens, it can be rather abrupt. I should caveat with one point: if you have a benefactor, that isn’t a bad thing. And none of this is a lesson in not having a benefactor.

Instead, this is a lesson in something far more paramount to media: diversification.

In the case of Pacific Standard, there was very little. Sage provided money and the team operated. There were some programmatic ads, but the reality is, programmatic advertising only really works if you’ve got some serious scale.

According to SimilarWeb, Pacific Standard had 1.451mm visits a month with 1.26 PV/visit. That comes out to 1.8mm total pageviews. Let’s assume a $10 RPM (which is likely bullish) with programmatic ads. That’s $18,000 a month. According to The New York Times, the yearly budget was $3.2 million. That means the ads were providing 6.5% of the revenue.

The real sign that Pacific Standard wasn’t taking revenue generation seriously is that there doesn’t appear to be a single person on the team responsible for revenue or business development. And honestly, there needs to be a revenue person at every media company. It doesn’t matter if you’re non-profit and funded by a benefactor, every media company needs someone thinking about how to bring in new, diversified funds.

The American Journalism Project recently released a report called Revenue Roles in Local News: Case Studies from Exemplary Civic News Organizations. And although Pacific Standard is not a local news company, it’s structured like a civic news organization and therefore could have benefited from the findings.

In our research, the most common staff roles dedicated to revenue relate to seven principal revenue streams: foundation grants, major gifts, membership, advertising/underwriting sales, and to a lesser extent, sponsorship sales (closely related to advertising/underwriting, but with an emphasis on event sponsorships and sponsored content) and event production. We also note that while audience development roles aren’t necessarily dedicated to revenue, they can be part of revenue teams, especially when tied to membership programs.

Below the executive level, some organizations have one role that focuses on two or more of these seven revenue streams, although having staffers able to dedicate themselves to one revenue stream was commonly cited as a factor contributing to success. Other organizations had one person for each revenue stream working together on a team.

Of the 16 organizations that they talked to, they all had at least part of someone’s time dedicated to foundation grants. But then every other company had at least one other person spending part of their time across a few different revenue sources.

Source: AJP

It’s worth digging into the report, but when I look at this, I can imagine a structure that would have made sense for Pacific Standard.

How to do it differently

Each publisher has different opportunities to generate revenue. And hindsight is always 20/20. But if anyone were to take the mantle and bring Pacific Standard back, here are the three things I would do.

Membership Product:

I would wholeheartedly launch a membership product and really dig into this. And this needs to be the biggest message that a user sees when they come to the site.

Although Pacific Standard did say that people could support independent journalism with a donation, the treatment was underwhelming and appears to have been an afterthought. Remind users just how important the mission is and they will support you.

Instead, a considerable amount of real estate is given to programmatic ads when they’re likely not generating enough revenue versus what a membership CTA should generate. Frankly, I would yank the ads to find out if I could get more revenue from memberships.

Management might be uncomfortable taking ads off without knowing what they’re going to get in return, so do a short test to prove the case.

Go ad free for a month and just put membership CTAs. Track how each position on the site does from a revenue perspective relative to the number of impressions delivered. This should give you an eCPM for each unit.

For example: let’s say a particular unit generates $20,000 in monthly revenue and it had 1,000,000 impressions. That comes out to a $20 eCPM for that unit, a strong rate for a standard IAB ad. You can then set floors on your programmatic ads that says anything under $20 will serve the membership house ad and anything over $20 will serve a programmatic ad. That’s how you maximize revenue.

Now you would have to take it one step farther and understand the lifetime value of a user in your membership product, but step one is understanding the monthly revenue of a specific unit. You can then start to get more advanced.

Once you understand how much a particular unit is worth, you need to create a very powerful message. “Support independent journalism” is simply not powerful enough. Tell me why I should give you money.

Two publishers that do a good job with this are The Guardian and Mother Jones.

Both of these are clear-cut examples on how to get users excited. The Guardian makes it seem like a civic duty to support free journalism. Said another way, “if you can support this journalism, please do so that others who can’t still have the chance to have it for free.”

And Mother Jones is similar. They’re saying that the only way to hold a big corporation’s feet to the fire is to have journalists seriously investigating. And the only way to fund that is for readers to take a stand and contribute.

But it’s not just getting people to sign up. The subscription—or payment—is just step one. It’s about keeping them. You want them to become a part of the community. That would mean hiring someone to focus on user engagement.

That engagement person is constantly experimenting with new ways to keep people excited about contributing to the mission. A few weeks ago, a memo from the LA Times was obtained by Poynter where they talked about their difficulties in growing the subscriber base. The memo said:

Our future depends on rapid and substantial subscription revenue growth. We had hoped to double digital subscriptions this year, to 300,000. (Doubling them again would get us close to covering editorial costs.)  Performance for the first half of the year, however, has been disappointing. While we added 52,000 digital subscriptions, significant cancellations during the same stretch left us with a net increase of only 13,000.

They convinced 52,000 people to sign up, but then lost 39,000 in the same period of time. It’s hard to grow when you’re hemorrhaging people. This new head of engagement would be responsible for taking the new contributors on some sort of a journey to keep them excited to be a part of the community. The hardest part about the subscription comes after you get the dollar.

Get better at ads & underwriting:

Pacific Standard used Say Media’s Tempest product, which was effectively a publishing/advertising system all in one. It made it possible for Pacific Standard to only need one product person, whereas other media companies have quite a few more.

The problem is this gave Say Media serious control over the advertising on Pacific Standard. Having worked with a few different “outsourced” programmatic ad teams, I would partner with a different team to handle the programmatic ads.

With that out of the way, I would then think about finding someone to underwrite either sections of the site, specific content initiatives, or new content projects (which I’ll expand on below).

You want to hire a business development person and have them go out and find social conscious institutions that can blend their business needs of promotion with supporting good work. There are certainly enough of those out there. They would want to be associated with the brand.

Think about PBS. They’re a non-profit, but they still try to sell the audience that they have. That’s what should be done here too. You’re looking to connect the desire to support great work with the desire to support one’s business.

And you’re not selling these on a CPM basis. That’s a race to the bottom. Instead, this is a sponsorship. The editorial team still completely controls the content on the site, but the brand gets all promotion around it.

Podcast:

Other than being close to reaching peak newsletter, I think we’re also about to reach peak podcast. There are so many damn podcasts. But Pacific Standard had an audience that, theoretically, would eat up a podcast.

While investigating this, I saw that they tried to do a podcast. But they only published 16 episodes between November 2017 and January 2019. There needs to be some consistency to really get this off the ground. And, more importantly, it needs a regular host that listeners can build a relationship with.

You could then sell sponsorship against the podcast. That same business development person you hired for underwriting can then add this product into the mix of goods to sell. You want to make it so the podcast is at least covering the costs and, honestly, it should do more than that.

But that’s only the beginning for the podcast. You then want to make it feel like there’s some exclusivity to the members who have reached a certain threshold of contribution to the publication.

So, you take the podcast on the road. You host the podcasts in various cities and invite the members to come to the live taping of the podcast. There are two approaches here.

  1. Get a sponsor for the event and invite your members for free

  2. The membership gets you invited, but then you need to buy a ticket to the event

The approach here isn’t so much to profit off the event—though that would be nice—but to cover the costs of the event. This event is all about retention of your paying members.

If you want to make it even more interactive, members can submit questions once they’ve registered for the event. Your editorial team can decide whether to ask the questions or not, but at the very least, the members feel part of it.

After, those same members get to have some drinks with other members, get to know them, build friendships with all of this further cementing the community behind the publisher.

All three require investment

Here’s the thing… All three of these initiatives require an investment in people. You’re talking about adding an engagement/audience development individual to help with membership and then you’re talking about hiring at least a business development/sponsorship sales individual. Depending on how many events you do, it’s probable that you’ll want to have someone to help manage the events as well.

People cost money. But because these people are focused on generating revenue, they should more than cover themselves. According to the AJP report:

The expected ROI of revenue generating roles in this research study had a wide range: from about 2x to 20x an individual’s annual salary. The specific numbers depend on the context of the organization, especially an organization’s overall budget and whether its main revenue channels are more individual efforts or based on a larger team’s work.

And in the report, there are clear case studies of this working. At the VTDigger, which gets 350,000 monthly visitors, they’ve turned underwriting into a pretty thriving business.

Woodrow [sales person] earns a base salary of $38,000 and a 10% commission on his underwriting sales, which is a traditional salary structure for salespeople. Woodrow has been in his role for less than a year, and he’s on track to either meet or succeed the yearly revenue goal for 2019. In 2018, VTDigger earned $411,000 in revenue from underwriting. The stretch goal for 2019 is $650,000, with a minimum goal of $550,000. Woodrow states that he’s on track to hit the $300,000 mark by the end of June 2019.

That’s on 350,000 monthly visitors. Expand that to the 1.4mm visitors for Pacific Standard and extrapolate out the minimum goal and you’re now at $2.2 million. I’m not saying that this is an easy, overnight thing to do. But when you’re touching on social justice and focusing in on businesses that care about that, there could be a real business there.

But it requires investment. And it requires a commitment to try and diversify revenue, which is hard when you’re being given so much by a benefactor.

To be clear, this isn’t a slam on non-profits. There are for-profit media brands that aren’t diversified either. The Information, for example, is an amazing subscription business. But now they’re finding that they need to diversify revenue. Back in June, they were hiring for a Head of Event and Ad Sales. And BuzzFeed, which was all about sponsored content, finally rolled out programmatic ads on the site.

All media companies—for-profit and non-profit—need to have at least one person on the team who is thinking about bringing dollars into the bank account. A benefactor today could easily be gone tomorrow. It’s sad to see Pacific Standard go away, but it would be nice to see other media brands not go through the same problems.


Thanks for reading. It’s never fun to write about a failed media company, but part of being an operator is thinking about the revenue side of things. Those of us on the “business” side of a publication think about diversification on a daily basis.

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