How Jeff Bezos Will Revolutionize Publishing
The media business, in many ways, is much like the restaurant business. Everyone is a consumer and therefore everyone is a potential expert. From the outside looking in, it often looks like a lot of excitement and fun. Nobody ever sees the drudgery behind the scenes.
That’s why, when people become wealthy, media and restaurants are attractive vanity projects. After all, who wouldn’t like to hang out with celebrities and go to fancy awards dinners? Edgar Bronfman Jr. squandered much of his family fortune this way.
So when Jeff Bezos bought The Washington Post for $250 million (which, in relative terms, is about the same as a prosperous dentist buying into a restaurant), many were skeptical. However, now that Bezos has shared his first public thoughts on his plans for the paper, it appears that he will not only be a boon for WaPo, but for media too.
A Personal Story
In the early fall of 2004, I was asked to take over Korrespondent, a newsmagazine in Ukraine that had a great product, but a struggling business. In November of that year, the Orange Revolution broke out, greatly increasing circulation, but also attracting stiff competition (previously, Korrespondent had been the only major independent news brand).
In the years that followed, Korrespondent became a money machine, in print and on the Web, rapidly increasing revenue per reader even given the greater circulation. Its success led us to a $100 million public valuation (an enormous amount of money in Ukraine).
These were my three guiding principles:
Put the product first: Before I took over, a lot of our journalistic energy was spent trying to please advertisers rather than readers. A typical strategy was to put out special issues in lucrative areas, such as the automotive sector. This wasted valuable journalistic resources and did nothing for the brand.
Instead, we invested in investigative journalism and broke some major stories. While we didn’t see an immediate profit from exposing corruption scandals, we increased circulation and enhanced the brand. Advertisers lined up to buy as we increased our rates and made a handsome profit on every issue.
Cut out special deals: When I first arrived, salespeople spent most of their time negotiating rates to fill the issue. Advertisers knew that if they didn’t like the price this week, they could get a better one next week. In effect, our sales people were negotiating with themselves.
We cut out special deals and went to a flat ad rate (except for about a half dozen truly special clients who got low annual rates). Our advertising partners whined a bit, but when pressed they admitted they preferred the transparency of the new scheme. Everyone knew that they were getting a fair price and would not be undercut.
Create satellite brands on the Web: Because we also owned the top web portal in Ukraine, we had a major advantage in digital (we had something like a 40% market share). We leveraged this advantage by creating small, but lucrative satellite brands in areas like personal finance and sports.
This allowed us to create communities around areas that Korrespondent reported on, but were not a major focus. While some might see this as merely recycling content, in truth it made it possible for us to invest more heavily in important areas and improve the overall product.
Bezos’s Plan For WaPo
The challenge facing Jeff Bezos is similar to the one I faced in Ukraine—a fantastic product and a great brand that does not make money. In the interview, he offered three principles for turning it around.
Focus on the reader: One of the most disheartening things about the media business in recent years is that executives often seem like they would rather be working on Wall Street or in Silicon Valley. The editorial product is often referred to, somewhat derisively, as “content.”
Bezos thrived in the commodity business of selling books because he cared about more than just mere transactions. He created great experiences around selling books. Some of the best things I’ve ever read I discovered because Amazon recommended them to me.
Invent: The biggest problem with the media business today is that managers are often fixated on old, outdated business models. While new brands like Huffington Post and Bleacher Report thrive, legacy brands with great heritage often struggle to turn a profit.
Bezos, it should go without saying, is a world class innovator and has proven adept at creating new business models. In this area, at the very least, he is a godsend to both WaPo and to journalism as a whole.
Be patient: Bezos has demonstrated that he’s a long term thinker. While I’ve criticized him in the past for not being profit oriented enough, his stated intention of giving WaPo “runway” is a very positive sign. The newspaper business has been in deep decline for over a decade and it’s not going to get fixed overnight.
3 Areas To Watch
While the interview is Bezos’s first public statement about his intentions for WaPo, his long track record also offers some clues about what he’s likely to focus on.
E-Commerce: Clearly, Bezos’s primary business is e-commerce. What is less well known is that he’s also been helping publishers monetize their products through the Amazon Associates affiliate program. This is a great way to supplement, or even replace, ad revenues while not sacrificing product quality.
His purchase of a newspaper gives him a great opportunity to not only improve the media business, but Amazon’s as well. He can now experiment and optimize on the publisher side to both increase revenues from content and sell more products on Amazon. As I’ve argued before, this was likely a primary motivation for buying WaPo.
Video: Amazon has been investing heavily into video and newspapers need to do so as well. After years of complaining about the massive ad dollars that go to TV, online video gives publishers a chance to go after the same budgets. We can expect Bezos to ensure that WaPo pursues this area aggressively.
Communities Around Content: An often overlooked aspect of Amazon’s business is that it owns a variety of top online verticals, such as Zappos, Shopbop and Diapers.com, in addition to its flagship brand. While Bezos can offer the same products on Amazon (and often does), the focus of a vertical has both operational and revenue benefits.
So we can expect that he will buy or build satellite brands at WaPo in the same way I did at Korrespondent. The newspaper has a ton of valuable content in potentially lucrative areas, such as sports, business and books that can build the foundation for strong, community driven niche brands. Doing so will help maintain editorial quality in those areas as well.
Why He’ll Succeed
As I noted above, we should always be skeptical when a wealthy person buys a media outlet. All too often, the motivation is vanity more than anything else. That’s why probably the most important thing Bezos said in the interview was this:
“I had to convince myself that I could bring something to the table,” he said. “I discussed this at great length with Don. I thought I could, because I could offer runway and some skill in technology and the Internet and a point of view about long-term thinking, reader focus and the willingness to experiment.”
Clearly, Bezos’s primary motivation is that he wants to make a contribution—to both WaPo and to publishing—and motivation is the best indicator of strategy. The Washington Post is already a great product with a historic legacy. With Bezos’s help, it might just become a great business again too.
As I’ve written before, there is no greater threat to quality journalism than running a media business poorly. Jeff Bezos, with his impressive track record of innovation and creating superior customer experiences might be its greatest hope.