A solution for the broken advertising model in media?

BabyworldI really enjoyed SIPA‘s Online Marketing conference yesterday. We had sessions covering social media, developing online stores, best practice e-mail marketing, monetising online communities, mobile, video & podcasting. Thanks very much to the speakers from Electric Word, AI Digital, E-Consultancy, Nature, Magicalia, Incisive Media, Communicator, Euromoney & Babyworld.

While all the presentations were great the one session which got me thinking most was from Chris Blake, the Chairman of babyworld.co.uk. Chris highlighted some of the history of Babyworld from a launch in 1998 with £750K of seed capital to the sale one year later to Freeserve for £3.7m and the subsequent re-purchase in 2004 for £1. It was a great story.

The site is a direct rival of other parenting publications like Mother & Baby (published by Bauer). Mother & Baby has a circulation of just over 50,000 print copies & 166,000 unique users. By contrast Babyworld is generating nearly 560,000 uniques per month.

While Babyworld is operating like many other specialist media sites – publishing guides, news, reviews & forums for new parents – the really interesting thing that they are doing is operating as a full retail outlet. Not just acting as an affiliate but taking orders, stocking and despatching goods.

From their base in Oxfordshire Chris and his team run a warehouse and shop with stocks of buggies, car seats, clothing etc. They take advertising as well but from the figures shared it looked like they were generating over 70% of their revenue from the direct sale of goods.

Now this is interesting on a load of different levels. It harks back to a previous post I made about the commercial future for newspapers that were successful in driving a lot of traffic but were not able to monetise that traffic effectively. Maybe publishers need to start looking at their business from a very different perspective and, if we believe that the advertising model is broken, consider retail?

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6 Comments

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6 responses to “A solution for the broken advertising model in media?

  1. G’Day Rory,

    I’ve long believed that the time has been right for manufaturers/advertisers/clients to become retailers in their own right, either complimenting or replacing existing retailing practices.

    Easier said than done, and especially so if you are a giant multinational like P&G/Unilever/Reckitts etc. where there is a heavy reliance on major international and national chains to achieve sales targets.

    However, with current global economic pressures facing everyone at present the squeeze is on for greater cost efficiencies which relates to all manner of cost cutting measures. There is no doubt that large retailers are becoming far more selective about which brands (outside of their own) make it onto their shelves, restricting trade terms, manufacturer margins and even in-store communication. This has the effect of reducing consumer choice on shelf, causing the manufactures/advertisers to make difficult business choices longer-term (and what to do with their other brands).

    While I don’t believe the current advertising model is broken, I do believe the opportunity and the timing is right to make some significant changes to the way manufacturers/advertisers connect with their consumers. At the end of the day, brands have two fundamental jobs – build themselves as much loved icons over time, with a loyal and large following, and flog themselves with high turnover overnight.

    Retailing is a critical element of the 2nd job and being constantly on promotion or value-add mode undermines the first job of brand building. hence if current retailing practices are not beneficial or worse, directly impacting on profitability and consumer choice, then isn’t it time to make a change.

    I’m not necessarily advocating wholesale movement away from current practices (although this is certainly an opportunity), but I am definitely suggesting that there is room for alternative forms of retail practice.

    I absolutely buy into what Chis has done with Baby World and think this makes sound business and financial practice. In the era of ‘consumer is king’ and product information is so readily available (not just advertising, but editorial, expert and current/previous user experience), why not give direct-to-consumer a go – even for the FMCG giants out there. I know P&G has put a toe in the water and continues to experiment, so why not take the brave but likely, and increasingly, more viable route such as Baby World. Surely there’s never been a better time.

  2. Rory Brown

    G’day to you too…

    The point I was trying to make in this post was that media owners need to start thinking more broadly about what they are and how they can build sustainable business models.

    I believe that the latest ABC’s for newspaper traffic will be published at lunchtime today and I am sure they will show continuing growth. And yet it seems that every newspaper is cutting editorial staff and suffering dramatic declines in paid readership and advertising (especially classified).

    The problem I have written about before is in monetising that traffic in a period of rapidly falling CPMs.

    Now what if the Daily Telegraph, Times etc. started to think about their business in a very different way? Instead of only trying to sustain good quality editorial with advertising revenue they started to produce or sell branded goods to their growing audience?

    I was interested to hear the Babyworld example but have also seen people like Monocle magazine trying this by opening up a retail store in London.

  3. Hi Rory – I found Chris’s speech interesting too, especially as we’re thinking along the same lines with MyChild, our own parenting site at Electric Word.

    We’re trying to put together an internal conference at EW where we bring together a few e-commerce experts (like BabyWorld) to talk about how publishers can do it better. For us, it’s not just about whether e-commerce works as an alternative to advertising, but how we can be as good at e-commerce as we are at selling content and information.

  4. Rory Brown

    Thanks for dropping by Mark & good to see you at the event.

    It was interesting when Chris was talking about the changes that they had to go through as an organisation to start thinking like retailers rather than publishers.

    I’m sure it’s not easy to make this transition.

  5. Pingback: Information wants to be free, err expensive, err…oh, never mind | New Media Hub

  6. Forgive my english make sure you, I will test to say many thanks for using the time to discuss this, i sense strongly about it and adore understanding much more on this matter. if feasible, since you acquire expertise, would you thoughts updating your website with much more facts? its really beneficial for me.

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