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Join Our Research Team at DMA 2014
Jan 05, 2001
How To

Online Content Industry Growth Predictions for 2001: Books, Magazines, Newsletters and Newspapers

SUMMARY: No summary available.
Content was the very first industry to jump on the commercial possibilities of the Web back in 1994. That said, after six entire years you might expect the industry to have stabilized. Nope. Not at all. Almost every aspect of the content business from book sales to syndication saw profound changes in 2000.

We've summarized the most interesting of these changes below, along with our ironclad guaranteed predictions for 2001 ... which you can feel free to disagree with.

As always, we mostly covered what we know best -- text-based content products from mainly offline sources. The adult industry, email discussion group industry, gaming, audio and video businesses are not included. Maybe next year.

By the way, if you're reading a forwarded copy of this issue, please enjoy it. And then take ten seconds to show your appreciation by going to our site and signing up for your own free subscription. It's at http://www.marketingsherpa.com. Thanks.

And now, onto the changes and predictions:

Newspapers

Newspaper publishers started 2000 knowing the Web was the key to their future. Everyone of note already had a substantial Web presence. This year they scrambled to make traffic and content alliances with wireless, video and audio platforms and providers such as AvantGo and local TV stations. Expect to see this trend continuing for 2001 in a big way.

Papers have been fighting the print cannibalization battle longer and harder than anyone else. As you've heard elsewhere, offline circulation is falling slightly for the industry as a whole. However, as the Christian Science Monitor found, your online circulation can actually blow your offline circ out of the water. In their case, the online edition has eight times more readers than the print!

The big opportunity now is finding more ways to make money from those online readers. As we reported in December, the Atlanta Journal Constitution is a great example of a newspaper that creatively tests revenue ideas online by selling passes to archived content, electronic reprint permissions, posters, books and even mugs and t-shirts from its online photo store.

Trade & Special Interest Magazines

Compared to papers, trade and special interest magazines have been moving achingly slowly online. Sure, most had a token Web site up by 1998-99 featuring the latest issue's cover story, on online subscription form and ad sales contact info. But at that point most mags' new media initiatives stalled.

Management didn't trust potential online revenue streams to be worth further online investments; editorial found that constantly refreshing the site's content was too much for their staff to handle; and, print sales reps balked at repping online media. You know the drill.

However 2000 was the cracking point for all of this. May 2000 saw the industry's leading association change its name from American Business Press to American Business Media signaling that its membership was finally ready to take the plunge into the digital age.

Next content syndication companies such as ScreamingMedia started making sales to content sites that would have never considered 3rd party content before. Editors had begun to realize syndicated content can the cheapest and easiest way to serve up fresh news daily on their sites.

Finally in the wake of its early November acquisition of Web giant About, Inc, print giant Primedia told its 1,600 print sales reps their top priority was to persuade offline advertisers to buy online media as well. Where Primedia leads, others will follow.

Print Newsletters

In 1999, the Newsletter Publishers Association changed its name to Newsletter and Electronic Publishers Association (NEPA). However with a few notable exceptions, its members were still focused on old-media business models, mainly using direct mail campaigns to sell print products. NEPA research showed that by mid-2000 its average member had invested less than $20,000 in a Web site.

Sure, many publishers, used to licensing content for use in corporate enterprises, extended these activities to include some Web syndication sales. A few tested selling print subscriptions via email marketing or third party online stores such as Investools. But that was about it.

However, we predict substantial changes in the upcoming year (albeit in a tightly budgeted, cautious fashion) simply because the industry's sales are getting socked so hard by online competition. For the past five years, its direct mail and renewal results have seen a continuous downward spiral. The "information-hound" demographic who used to purchase newsletters have turned to the Web's free information sources instead. It will be interesting to see where the industry goes next.

Email Newsletters

In contrast, the email newsletter industry hit critical mass in 2000. This was due to three factors: large numbers of advertisers began to realize email newsletters can produce powerful response rates; the management teams at major ezine publishers such as BetterGolf.net, Backwire.com and internet.com learned how to publish more profitably; and the do-it-yourself publishing community exploded as services including eGroups, List-Universe and BigStep gave everyone with a PC an easy way to become a publisher at zero cost.

The industry's challenges moving forward are:

a) Stabilizing ad revenue income (which is all over the map month-to-month for many publishers now) while educating advertisers on how to effectively use the medium.

b) Avoiding the anti-spam movements afoot at ISPs and major email providers. Opt-in newsletters are increasingly in danger of being automatically dumped in with commercial messages and spam folders by AOL, Yahoo and others simply because they are by nature broadcast messages.

c) Creating new, non-advertising, revenue streams. For-fee content, ancillary sales, contextual commerce, snail mail list rentals and affiliate programs are all being tested.

Expect this new industry to continue growing substantially in 2001; and possibly to launch its own trade association.

High-Priced Research Products

2000 saw the dawn of reality in terms of selling research reports and studies online. Early in the year DeepCanyon's publisher reps impressed just about every reputable research publisher in the States with their Hewlett Packard connections and smooth patter. By Fall 2000, DeepCanyon closed its doors.

Competitors such as MindBranch and MarketResearch.com are still afloat, but both have a direct mail client base established prior to the Web's existence. MarketingsSherpa will bring you interviews with these companies' leaders soon. In the meantime, we predict the winner will be the company that gives up the expensive goal to be a destination site, and instead offers private-labeled research stores at name-brand sites the target demographic already frequents for news. Partnerships and alliances will make the difference in this field.

The big winners in selling research reports on the Web in 2000 were online media companies, such as eMarketer and TheStandard.com that marketed for-fee products to their free newsletters' opt-in subscribers. Second biggest winners were publishers such as Byte Level Research that focused marketing efforts on planting news stories within the online and email newsletter media. Expect to see email marketing and PR growing in 2001.

Subscription-Based Sites

Generally in 2000, only sites with major pre-Web name brands tend to succeed at the site subscription sales business. WSJ.com, ConsumerReports.org, etc.

The jury's still out on whether these sites are among the few winners because they are trusted name brands consumers like buying content from already ... or if their management teams' prior experience in offline direct response subscription sales is helping online. Probably a little of both. Our prediction: despite Jupiter's projections of rapid gains for this industry, we are feeling only cautiously optimistic.

eBooks

The number of content industry executives (not including those who work for eBook-related companies) who truly, madly, deeply believe that eBooks are the wave of the future are a small group indeed. Sales in 2000 didn't do much to swell their ranks.

Frankly we at MarketingSherpa feel about eBooks pretty much the way we feel about HDTV. Sure there was a lot of hype at one point and a few early adopters embraced it, but it's not a killer application. Next....

Digitally Downloadable Documents & For-Fee Articles

In all the eBook press and excitement, digitally downloadable documents (DDDs) and for-fee articles got lost a bit. Perhaps the reporters of 2000 didn't think this lower-tech story was as interesting to cover. Sales also weren't what you might call overwhelming, mainly because most players were still learning how to price and market this stuff.

However, we predict that this category may very well be a big winner towards the latter half of 2001, once more players get their feet wet. Online publishers searching for non-advertising revenue streams are highly interested for-fee content sales. Expect to see many more of them testing new offerings by using a variety of marketing techniques, especially contextual commerce. However, just as with subscription-based sites, famous name-brand content will be a heck of a lot easier to sell.

We also predict Internet pure-play destination sites such as MightyWords and Contentville will start offering co-branded or private labeled stores for more established destination sites fairly soon. And by this we mean something a bit more complex than just a standard affiliate program.

Content Distributors & Syndicators

When MarketingSherpa launched in February 2000, our readers' biggest questions were "How can I make money syndicating my content online?" Over the next few months, many learned they could indeed make money working with companies such as iSyndicate, ScreamingMedia and YellowBrix. The thing is, it wasn't a lot of money. Folks got a steady dribble instead of the river they were hoping for.

Were their expectations unrealistic to begin with? Probably. Is content underpriced by syndicators because that's the only way lots of Web sites will buy it? Certainly. The "value" of content sold via syndication in 2000 didn't come close to matching the costs inherent in producing it. Even content owners, such as RedHerring.com, who aggressively went after syndication deals on their own directly with other sites, told us the value they got from the deal was often more in branding than in cold cash.

For 2001, expect to see third party syndicators' business models look more alike. For example, iSyndicate recently told us they will be getting into single article sales arena. Also, expect sales to rise as these companies sales teams (many of whom were hired in the last six months) really get into the swing of things. Last, but not least, watch for new competition in the traditional corporate enterprise information sales marketplace as Factiva, ScreamingMedia, MoreOver and many others converge on this still-juicy plum.

By the latter half of 2001, you can also expect to see audio and streamed video content syndication sales begin to boom.

Print Book Sales Online

Print books are still the number one category of content sold online. 2000 saw BN.com and Amazon's paths continue to diverge, with the former focusing investments in content, content, content while the latter began to sell patio furniture and practically anything else you can name. bol.com stacked up an impressive number of site launches in countries around the world (now 16 total), but some industry experts feel they won't be a strong player until the company uses a single brand name in the US and overseas. (Currently bol.com owns 40% of BN.com.)

For 2001, we expect all three of the major players to begin addressing the one facet of database marketing they have hitherto apparently ignored -- marketing to their most profitable customers, avid-book-buyers who spend thousands a year, in a different fashion than they market to the other 80% of the public.

Independent bookstores such as Powells.com proved there is a home for smaller booksellers to flourish on the Web. We predict further success for small, carefully managed, online booksellers that strongly appeal to niche demographics.

Used and rare book dealers throughout the world have made a percent of their sales through third parties such as Amazon or directly through sites such as abebooks.com since 1999. 2000 saw their online sales grow. When eBay acquired Half.com in July 2000, dealers saw another leap in income. It's entirely possible now for a used book dealer to support himself or herself 100% through online sales at these sites. You won't ever make a six-figure income, but it's not a bad life if you really, really love books and you've got a cheap mortgage.

Mass Magazines on the Web

Industry leaders eNews and Synapse Group's Magazine Outlet.com continued rapid growth throughout 2000, while several of their less-well funded competitors took a nose dive. MarketingSherpa will feature an exclusive interview with the CEO of eNews within the next few weeks.

Mass magazine publishers now depend on the Web as an integral part of their print circulation strategy. Many, such as People Magazine, tested email marketing, hoping this cheaper media could begin to supplant their dependence on direct mail. We expect this trend to continue now that postage rates are moving higher and opt-in email lists are increasingly targetable.

In terms of most magazine's Web sites, let's just say the jury's still out. Many are awkwardly designed and simply not as appealing as their counterparts in the pure-play world. Some, such as People.com, just look like extended ads to hey buy the hard copy! The fact that pure-plays are having such a hard time selling banner space at reasonable prices, will probably mean magazine's Web sites won't change anytime soon. Why should they invest more online if it's not a proven gold mine?

Conclusion

2000 was a year when many of the aggressive, early-movers in the online content business saw their dreams take a hard hit. Executives who had left traditional media boardrooms in frustration to try their luck in dot-com-land, now watched as the turtle began to overtake the hare.

The few dot-com dreamers who succeeded in becoming profitable companies were those, like Nerve.com, who hoarded their investor's cash to grow more carefully and surely than many of their peers, or they were in the email newsletter industry.

We're looking forward to continuing to track the fascinating content industry on your behalf in the coming year. Thanks for your support!

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