Although paper and pulp is not a high glamour
industry, it is a massive one, grossing about $350 billion per year in sales. Despite initial fears, the Internet revolution did not hurt sales one bit because so many people print out what they see on the screen. In fact, office paper-typesales have grown precipitously.
Trade publisher Miller Freeman's Pulp & Paper division operated a classic range of top-ranked advertising and subscription information products for the industry, including directories, controlled circulation monthly magazines (US and international), paid subscription newsletters (US and international), printed high-price data and research reports, and a range of trade shows
that brought in both exhibitors and ticket sales.
About 50% of sales were from subscriptions and paid products, and 50% were from advertising and exhibitor sales -- a healthy mix.
Then in 1999, this quietly healthy division suddenly became extraordinarily glamorous. The general business press had begun hyping business-to-business (B2B) ecommerce as being the future of everything, and the massive paper and pulp industry seemed to be every VC's top target.
Matt Graves, Internet Marketing Director, says, "You had all these people doing ROI calculations based on the size of the industry, thinking they could make a lot of money. Everybody was going to be the ecommerce solution for commodities and processes industries like paper and pulp. There were literally 20 paper and pulp sites launched in 1999-2000. They were everywhere. It was amazing."
The first obvious benefit was to sales team who sold these new sites a whole lot of advertising. However, as Internet speculation mounted, Miller Freeman executives began to wonder, should they take a stab at Internet riches?CAMPAIGN
Both the Company's internal Internet Task Force and
outside consultants agreed -- the estimated potential of a
serious Internet play was too great to be ignored.
The wisdom of the time said that Web launches could not succeed when bound by traditional corporate culture. Miller Freeman then entered into a joint venture agreement with value equity firm Pegasus Group to create a separate new co-owned company -- Paperloop. Miller Freeman contributed it's paper and pulp division assets, while Pegasus put up a significant amount of funding.
Paperloop would continue it's traditional print and trade show lines of business, while expanding exponentially on the Web. The new site Paperloop.com launched in March 2000. It quickly grew to include three different revenue streams:
1. Ecommerce Potential
Although Paperloop's initial goal was to offer eprocurement and ecommerce services to the industry, and then take a small fraction of all transactions as it's income, that business model fell out of favor fairly quickly. In fact as Graves says, "Everyone else in this space basically went out of business."
"We didn't give up," continues Graves. "We started to manage expectations and be more realistic about not taking over the whole world, but how we can provide a service and still make money, and still have the potential to be considered as an ecommerce solution."
The solution lay in offering a simpler ground-level service that the marketplace really wanted -- creating a searchable online buyer's guide with basic online storefronts and RFP capabilities. Graves explains, "It's like getting a really good enhanced listing in a traditional print directory. If you search online for a product, the companies with storefronts get put on the top
of the results."
These storefronts are sold by the online ad sales team. Instead of paying a percent of transactions, clients pay $500-$1000 per month, plus enjoy saving money by not having to build the same capabilities into their own Web sites.
2. Online Advertising Sales
Despite Paperloop's snazzy new name, the Company decided to keep three sets of ad sales teams. The first two pursues the Company's classic business -- space ads in magazines and exhibit spots at trade shows. The third team specializes in Web ads, online storefronts and email newsletter sponsorships.
Graves admits this is a challenging situation because it is
important to coordinate between sales reps to make sure that folks on the client-side do not get confused about who sells what. However, as many other formerly traditional
print publishers have found, it is very difficult get much online sales traction when your reps are primarily focused offline. Plus, the skill sets required are different for each of the three different sales. For now at least, Paperloop will continue with three teams.
Unlike other sites that sell banners as a per-thousand commodity, Paperloop has turned the online ad sale into much more of a consultative process. Reps solve clients' marketing problems with wide variety of tools, most sold by the month (rather than the CPM) including ads on the following free-access content:
- "Premiere" home page sponsorship
- Email newsletter sponsorships
- 13 different Technology Center sponsorships
They also offer an innovative online ad unit -- "Expert Q&A" sponsorship. In this case clients pay, again by the month, to have one of their own executives featured as the Q&A expert on a particular Paperloop topical channel.
Graves explains, "Only the guy who pays can see who the questions came from. You can spend your marketing budget on logoed coffee mugs, or spend it on learning what your targets have as problems and then turn around and offer a solution for them." In an industry where an average sale can be a $400 million machine, that kind of prospect insight is invaluable.
However, since inquiring names aside, the rest of the Q&A content is posted publicly on the site, Paperloop's editorial team keep an eye on answers to make sure experts don't lapse into sales pitches. "We monitor so they don't just send a sales brochure instead of answering questions."
3. Paid subscriptions
Paperloop had a two-pronged challenge when deciding what content would be available online and appear there paid vs. free, because the Company did not want to cannibalize controlled circ magazine readership, or paid sales to it's print newsletters and research and data reports. In the end, the various publications within Paperloop came to the following agreement:
- Free content on the site is either low-effort newsy (such as industry-related articles from Reuters newswire) or repurposed "lite" versions of content from controlled circ magazines and the directory. The amount of additional free content that staff create specifically for the site is kept to a minimum.
- Paid content on the site is either created specifically for the site, or it is a "lite" version of paid print products with super-valuable content stripped out. (For example, articles from the paid subscription print newsletters may appear on the paid part of the site, but the print newsletter's must-have pricing charts do not.)
Miller Freeman had been experimenting in a limited fashion with an online subscription offering, featuring "lite" versions of paid print content, called PPOnline.com since 1998. This site, initially run and marketed by a sole staffer Rebecca Page, had been fairly successful from the very start. Graves says, "She actually had about 1,500 subscribers paying $329 a year!"
In early 2001, PPOnline was merged into the main Paperloop Web site and renamed "Gold Access." At $339 a year or $29.95 per month, the price remained about the same, but Graves revved up his marketing machine to get as many visitors as possible to sign up for free 60-day trials, and then to convert these into paying subscribers. He says proudly, "It's a killer trial series."
Paid online subscriptions were successful enough that Paperloop launched a second subscription service last summer. The new service, named "Premium Research", allows users full access to 100% of Paperloop's content, including previously editor-only proprietary databases of historic pricing trends data and electronic versions of all paid print products.
Premium Research is sold by sales reps on a site license basis to major information clients. The deal often includes a certain limited number of "seats" for the premium content, a greater number of seats for Gold Access content, and sometimes a personalized Intranet portal built to the client's specifications.
Despite the fact that all significant online-only
competitors have gone under (taking their ad budgets with them), Paperloop's Internet division is "now absolutely right at break even."
As a piece of the overall pie, about 10% of Company-wide revenues are derived from the Internet. Graves notes this percent would be higher except, "We make so much darn money off the trade shows!"
Sales within the Internet division break down to very roughly 50% subscription sales to Gold Access and Premium Research, and 50% online ad sales including Marketplace storefronts, (in comparison to initial launch estimates of 90% of revenues, back when the world was different), and other online ad sales including Expert Q&As.
Graves is pleased to note that paid Gold Access subscribers have grown by 187% in the past 13 months, and that PPOnline's initial staffer Rebecca Page is still on board now as Director of Paperloop's Site Production.
In addition, the Company's fears of online cannibalizing print have not been borne out by reality as yet. Graves says, "We've done some analysis of people on both files, and the amount
migrated is very small actually. So there's been a very small amount of cannibalization, but it's low, less than 5%."
Buoyed by these successes, he is busy planning and launching additional services including a paid subscription email newsletter and an online bookstore. He says, "The information business is booming!"
Note: Graves is flying over from Belgium to share the specific tactics (including the "killer trial series" he uses to convert free site trials into paying subscribers) with attendees at our "Selling Subscriptions to Internet Content" summit on May 21st.
If you'd like to hear his details and ask questions, get your
ticket at: http://sherpastore.com/page.cfm/1950?a=cb