Sam Jones, CEO of Formation Media, is ignoring the death notices. While other publishers turn their weary eyes toward tablets, or construct walls around content no one wants to buy, Jones believes a complete embrace of the web’s strengths is the key to reinvigorating media brands (or, as he puts it, “I buy dead magazines“).
In the following interview, Jones discusses his recipe for online content success: It has to be free, it has to be widely available, and publishers must operate at a web-appropriate scale.
Why did you found Formation Media?
Sam Jones: I was working at Demand Media in corporate development and I noticed there was some major disruption happening in the media space, specifically in the magazine space. A significant number of very powerful brands were dying off. These were brands with strong audiences, passionate users, and great content, but the incumbent models just couldn’t support them. I saw a clear opportunity to really change the game and make some of these great brands thrive. Formation Media was born in 2008 to take advantage of that opportunity.
From there, we looked over the 3,000 magazines that have died over the past 18 months to decide which we should go after. While we were building things out, we purchased Car Audio and Electronics Magazine. It’s a smaller publication that has a passionate following, but in 2008 it was transitioned to online-only because it couldn’t survive as a print magazine in a tumultuous market. We took the archival content and that powerful brand and added that to our model, which allows us to inexpensively create massive amounts of high-quality text, video and pictorial content.
What are the components of your model?
Sam Jones: We combine brand, editorial content, and social media to create engagement. Then we syndicate that content out and allow others to take it wherever they want it, for free. There’s absolutely no way to subscribe. There’s absolutely no way to pay for an “issue” or a PDF. We want people to consume the content when and how they want to consume it.
Up to 80 percent of our traffic is from syndication partners and search, where brand, content quality, and the opinion of others you trust matter. Users come back to our site engaged and looking for richer content and community interactions.
It’s also clear that people like free. That’s a bad word in the incumbent model because free works against the traditional value proposition. But on the digital side, if you have faith in the brand, the quality of the content, and the user experience, all sorts of wonderful magic happens for the business. Depending on the year, between 70 and 90 percent of our available inventory is from double-digit branded advertisers, and 95 percent of our costs are taken out. Monetization follows when you focus on doing the right things for your users.
How many full-time staffers do you have on your editorial teams?
Sam Jones: We want dedicated stewardship over a voice, we want to create engaged communities, and we want to deliver high-quality content. We’re not trying to create a farm or an engine or any of that stuff. That’s why I’m hiring the best possible editors to run the vertical markets that we go into, and each vertical will have their own dedicated editorial team.
But staffing will be appropriate for the profitability that we need and expect. For Car Audio and Electronics Magazine, which had 85 people that ran that publication, we now have two. That’s what works for that brand. If we were to buy into the shelter space, which has larger brands and different content needs, we would require more than two people to maintain a strong editorial voice. That said, it’s still not like we’ll have 20 full-time employees for a shelter publication.
Has the media industry put too much emphasis on the potential of tablets, and the iPad in particular?
Sam Jones: The fastest growing product in Apple’s history is the iPad, and they’ve got 10 million installed units, which is huge. But what I’d rather do is instead of looking at that 10 million installed base, let’s look at the 1.6 billion Internet-enabled devices.
Frankly, the most important app on the iPad is Safari. It’s on every iPad and iPhone and it has a consistent and proven user experience. When we make it easy for people to get what they want for free, engagement and brand can be monetized through advertising and e-commerce throughout the published and syndicated environment that we manage. The users win, our syndication partners split revenues, and we reach several times more people.
Does that mean your mobile strategy is primarily web based?
Sam Jones: We’ll create apps, but our primary strategy is always going to be the native experience through the browser. If somebody wants our content, you can get it in any way that you can possibly ask for it. If you have two tin cans and a string with an Internet connection, our goal is to get it to you.
Has online advertising failed?
Sam Jones: There’s three aspects to this. One, if you look at online advertising as a monolith, it’s been really bad for a whole bunch of folks. But brands and deep engagement have done very well. As I noted earlier, 70 to 90 percent of our available inventory — depending on the time of year and other factors — is double-digit CPMs.
Two, advertising to support a business entity has to be scaled. At one of the magazines we looked at, they had six people on their dining staff. That magazine failed. You have to be mindful of the context and the economics of your situation.
Finally, we need to stop thinking in terms of standard ad units. The user experience should come first and that engagement should drive monetization. If you have a platform that allows for richer integrations, or actually provides value by weaving that monetization solution into the user experience, then you start to see significant margins.
What’s your take on paywalls?
Sam Jones: Paywalls are like asking my two sons to work really hard so they can be Michael Jordan. Only a few people could come close to being MJ under perfect circumstances. Similarly, only a few companies and brands could make paywalls work.
If you extend this thinking to newspapers, there’s only a few companies that have the brand, the audience, and the monetization hierarchy that would allow for a paywall to work. There’s the Wall Street Journal. There’s potentially Bloomberg, which is an interesting combination with BusinessWeek. And maybe if you stretch it, there’s the New York Times. Beyond those unique brands, paywalls simply get in the way of the user experience.
Paywalls are an example of companies holding on to the pillars of incumbency instead of seizing the disruptive opportunity. I believe in the face of unprecedented disruption, there’s no place for incrementalism. There’s just not. We have to be bold in our actions in order to not just survive, but to thrive.
Note: Sam Jones discusses his “radical point of view” for magazines in the following presentation:
This interview was edited and condensed.