News and Updates on Quantum Partners and Projects

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• AOL CEO Says Give the People What They Want

July 26, 2010:  Tim Armstrong, CEO of AOL, has a shockingly simple philosophy regarding content distribution. “Get people the content as quickly as you can, and don’t force people to do things they don’t want to do,” he said at a recent event at the Harvard Business Club. He maintains that instead, a website should be adding value every second.

The June 15 event, organized by Quantum principals, boasted a packed room, all in attendance to hear Armstrong speak about AOL, Patch.com, and what he thinks will be important to the Internet of the future.

Armstrong started Patch.com to fill the gap in local news coverage. Armstrong said he told newspapers, “I think there’s a better way to cover hyperlocal,” and when they didn’t respond he created Patch to fill that gap. Armstrong said that Patch “allows you to cover much more information than a newspaper can do, for a fraction of the cost.” The way Patch does this is by having a small group of reporters and editors writing local news, but also having community members contribute information about local events, issues, even classifieds and the like.

Armstrong acknowledged that Patch will further dent already struggling newspapers, but said that several papers and blogs are choosing to work with Patch, rather than fighting it. Armstrong hopes to keep getting towns up on Patch, with the goal of having more than 500 local Patches by the end of this year.

While understanding that media companies need revenue, Armstrong also realizes that companies “can’t just stand up and say ‘I want to be paid for my content’” - they need to have content that people value enough to pay for. In other words, if you want to be paid for your content, you “have to have really good content.” It seems simple, but sometime the common sense answer is the right one.

Armstrong thinks that virtual commerce could be a big help in providing media companies with revenue streams other than advertising alone. He said he thinks a paid services system “could be applied to virtual commerce.” He added that virtual commerce models have worked very well culturally, and that he hopes this sort of currencies take off in the United States.

One thing Armstrong has done to increase content value at AOL is to change the way they think about development. He’s adopted a mobile first approach, in which new products are created first for mobile devices, and then adopted for other platforms. He believes this is vital because it focuses on where the customers want to be, rather than trying to change their behavior. Armstrong said he thinks a company’s first duty is “to help other people” - and that means giving them what they want, not what you want them to want.

• Internet Subscription Sales Continue to Rise, MPA Survey Reports

July 14, 2010: Nearly 25% of all magazine subscriptions will be generated online, according to the recently released Magazine Publisher’s of America (MPA) survey, which Quantum Media principal Jean Hellering helped produce.

The survey found that 93% of internet new subscription orders really are from brand new subscribers, showing that internet subscription sales continue to be a source of circulation growth. This is supported by data from the survey’s previous three years, which shows that this percentage has remained high since 2006, and has grown each year.

Internet subscription sales increased 78% from 2006 to 2009, according to data from past surveys. Almost nine out of ten of those internet subscriptions are sold directly by the publishers themselves, according to the 2009 survey. This includes subscriptions sold on editorial websites; both internal and external e-mail lists; cross-selling; internal upsells; and offline to online.

In 2009, 43% of new subscription orders on the internet were placed mainly on publishers’ own websites, reports the survey. It also stated that search engine advertising accounted for less than 5% of new subscription Internet sales.

The survey reported that internet renewals are growing as a percentage of overall internet activity. Information from the past three surveys shows that e-mail has overtaken editorial websites as the main source of internet renewals; that editorial websites have been and still are the largest source of new subscriptions placed on the internet; and that overall internet payment has steadily improved.

Hellering assisted MPA in varying ways, including participating in writing the survey questions; compiling the responses; and preparing all of the analyses—both one version regarding only this year’s results and another version, a trend analysis, including only magazines that responded to all three surveys considered. Hellering also prepared the survey result documents posted on MPA’s website, with assistance from Ken Godshall of the MPA.

• The Future of the Freemium

July 14, 2010: Quantum Media principal Carla Graubard recently attended the “Future of Publishing” event organized by the Wharton School of the University of Pennsylvania. At the event there was much discussion on the best way for media companies to get paid for their online content.

While much of the publishing world continues to scramble to figure out how to make money with online content, Gordon Crovitz, a former publisher of The Wall Street Journal and executive vice president of Dow Jones, and current co-founder of Journalism Online, has a plan.

At the recent event Crovitz contended that it’s not a question of if one should charge for online content, but of how. According to a November 2009 study by Boston Consulting Group (BCG), 48% of Americans said they would pay for online content, though few do so now. 

Crovitz favors a freemium model, under which much content remains free, but consumers can opt to pay for additional content, or certain articles. He claimed that the most engaged users will be willing to pay for full access, while the less avid readers will be satisfied with the free content. Crovitz suggested that if publishers could convert just 10% of their most avid readers to paying customers, they would have a profitable model - and a great way to restore the value of original content.

In order for the freemium model to work, it needs to be easy for consumers to use. Crovitz suggested the simple solution of placing a small icon next to content that readers have to pay for, so with a few clicks the deed is done.

Crovitz stressed that the core relationship is between the reader and the brand - not the medium or device. The time to start charging for online content is now, said Crovitz, not only for the added revenue stream, but for the future value proposition of the print model.

Crovitz concluded his presentation with a warning about “What’s at Stake,” - the need to develop a sustainable business model for creators of original content who can no longer rely on advertisers alone to cover the costs of creating valuable content.

*All slides displayed in this article were taken directly from Crovitz’s Wharton presentation. Credit and thanks to Press + 's Crovitz.

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