Next up in the Five Questions for... series is Russell Perkins, Founder and Managing Director of the InfoCommerce Group. Russell has more than twenty years experience in all facets of the database publishing industry. He has worked with numerous directory and data publishers in advertising and premium content businesses.
Content Matters: 2009 will certainly have its share of challenges. What do you see for the Content industry in 2009?
Russell Perkins:
We’ve spent the last six months watching the newspaper industry implode before our eyes. Hot on its heels is the yellow pages industry, which is crumbling rapidly. The consumer magazine industry just reported a huge drop in advertising pages, and we all know what’s happening with B2B magazines. Recent reports on some “household name” blogs with huge traffic suggest that even these new media players are struggling from a revenue perspective. On the surface, content doesn’t seem like a great place to be these days. But look for commonality among all these different media, however, and you see one thing: high dependence on advertising revenue. What we’ll see in 2009 is the beginning of a profound re-examination, particularly by advertising-based publishers, of their revenue models. The problem lies not with our content, but with our monetization.
CM: So how do you see this re-examination playing out?
RP: As an industry, we’ve pushed ourselves into a tight corner. We’ve trained the marketplace not to want to pay for content at the same time we’ve let advertisers dictate the terms of their relationship with us. You can argue whether or not we needed to do either or both of these things, but the fact remains, we did them. If you can’t sell subscriptions and you can’t sell advertising, something has got to give. My belief is that publishers are going to have to draw the line and re-define their relationship with their customers (advertisers and users) in a way that lets them make money. It will be ugly for a while, but those publishers who are truly delivering value will find they can charge for it.
CM: You have written about changes in the lead generation space, shifting more risk to the publishers. What might we expect to see in that area in 2009?
RP: Lead generation is a hot area right now. Some are even calling it salvation for some advertising-based publishers. Yet the trends in lead generation are anything but positive, and support my previous contention: as an industry we are being pushed by advertisers to assume more risk and do more work, all for less reward. Pay-per-click is rapidly becoming a fond memory as advertisers are now starting to push for “pay-per-sale.” I contend than publishers can’t allow themselves to be commission sales reps for their advertisers, even if the commission is a percentage of the sale amount. With this kind of arrangement, publishers take all the risk and have no control. Necessary checks and balances cease to exist.
CM: Who’s doing it well? Can you share an example or two of data publishers succeeding in this market?
RP: We’re constantly surveying the industry, and while there are no shortage of glitzy and exciting companies with interesting new business and monetization models, one company I would hold out as having gotten things right in so many ways is Lexis-Nexis Martindale Hubbell. Here’s an example of a 100-year old B2B print directory that not only moved online in innovative ways, but also spawned a B2C sister website that leverages the same database. It’s a gutsy but intelligent ground-up re-positioning of the product as a client development service for lawyers. In every respect it’s sophisticated, elegant and powerful and a great place to look for fresh ideas and best practices.
CM: Historically, the period coming out of recession is often one of transformation and change. Where might the opportunities lie for publishers when this economy recovers?
RP: I think this recession is likely to bring one key benefit that came out of the dot com bust: a clearing out of silly, trendy and inherently flawed products and companies that will yield added importance and strength for those that survive. The last few years looked to me like a quiet replay of the dot com era: a profusion of venture-backed start-ups with unpronounceable names, impenetrable business models, and an emphasis on giving away free content and services to quickly build a user base or audience. One of the most succinct quotes I ever heard on this subject was, “free is not a business model.” A stable and prosperous online content industry – whether advertising or subscription-based – demands that we stop doing business in a fearful and reactive manner, and start charging fairly for the value we deliver. Interestingly, I think subscription-based publishers have figured this out. Advertising-based publishers still have a way to go.
