Getting fitter

2023 is going

If you’re heading to Las Vegas for CES, come to a lunch event I’m doing with Outbrain focused on the need for advertisers to support the development of independent journalism. The lunch is at the Aria hotel on Thursday, Jan. 5, and will feature a discussion with industry leaders. Register here. 

I’m kicking off a legally required end-of-the-year series that will be light on predictions — I once said “the next MySpace will look a lot like Second Life,” so no thanks — to instead look at broader themes. Today, I’m looking at why next year will see the shift from growth to efficiency.

First up, a message from The Rebooting supporter Omeda.

The dirty secret of email is that while it’s a direct connection to your audience, you still have to rely on tech platforms to get your messages to your subscribers. The fight against spam can often ensnare innocent publishers. The best way to protect yourself is to focus on email deliverability best practices, from engaging your subscribers early and often to practicing good list hygiene. Omeda, the marketing automation platform, delivered over 4.7 billion emails last year. It has put together a guide to the essential best practices to boost email deliverability.

The thing about boom times is everyone gets a bit lax. You can be a bit out of shape, maybe not as diligent and you can avoid sticky problems by simply avoiding dealing with them. That all changes when the mood music darkens.

Across the publishing industry and the broader economy, we’re seeing companies start on early resolutions for the new year. That means getting their own operations in order first and foremost. I was speaking with a publishing CEO the other week in New York and asked the inevitable question about what they were seeing in the broader economy. This executive explained that the broader economy would serve as a catalyst for making changes that had to be made anyway.

In 2023, we’ll see more companies follow suit and focus internally, using the forced discipline of an economic downturn as cover to make tough calls and get fitter. Many companies overhired and got overextended during a time of easy money, cheap debt and a market that rewarded future growth over immediate returns. That can lead to strategic drift. This correction will sometimes veer into a messy, unpleasant process that reveals underlying structural weaknesses, as evidenced in the chaotic cost-cutting underway at the Washington Post. Downturns reveal weaknesses. There’s a reason for the Buffet cliche: “When the tide goes out, you see who has been swimming naked.”

Whatever you think of Elon Musk, he’s got the attention not just of the alt-right masses but of business operators. I’ve heard more than a few express admiration at what he’s trying to pull off with his playbook to create an existential crisis that wipes away years of bloat and strategic drift. I have no idea if it will work in the end – this entire thing strikes me as a political project, not a business venture – but it will give cover to other bosses to take somewhat less drastic steps.

Viant is cutting 13% of staff as it expects up to a 20% shortfall in Q4 from the same period in 2021. Too many publishers read the wrong signals during the pandemic bubble economy and expanded too much, too fast. Morning Brew’s pullback is a reminder of that. Worse is the situation at publishers who didn’t thrive during the pandemic. Layoffs are coming to The Washington Post, which has struggled after a period of swagger following Jeff Bezos buying the company in 2103. It piled up early wins in subscriptions only to get trapped in a churn spiral that’s seen it go backward in subscriptions as digital ad revenue shrank 15% in the first half of the year. The company billed the cuts as more of a reorientation by noting that the newsroom would stay the same size, as new people are hired in higher growth areas. 

In tough times, unprofitable and side ventures get mothballed, vague strategy roles are deprioritized, and middle managers are a liability. The decisions to cut a product or brand that’s stagnating get easier when there is not much good money around to throw after bad. It’s no surprise that Vox Media, right after I gave it grudging credit for sticking with its outsourced CMS product, would then move to kill it. Chorus only had six customers. During a time when everyone has to do more with less, you end up examining a lot more closely whether the outputs are worth the inputs. In the ideal scenario, organizations become more fit. You can be sure, the vibes will shift from celebrating debt-fueled growth to scrappy bootstrapping.

Companies always try to cut discretionary spending first, whether that’s in travel and entertainment, employee perks and hard-to-measure marketing spending.I remember hearing that you knew layoffs are coming down the pike when the snacks get curtailed. In a hybrid work world, it could be when companies cut off Slack.

The real test for companies overall, and publishers in particular, is how smart they are in cutting with an eye to emerging in better shape for the inevitable upswing to the economy. Downturns never last, and they are a good time to focus on what you’re best at. Those best positioned will have efficient cost structures and built-in flexibility. The first half of the year, in particular, will be a good time to get creative with clients to provide less risky and more efficient options. 

Recommendations

Digital media has often uneasily balanced the concepts of transparency and performance. More often than not, performance wins. An interesting test will be Google’s new Performance Max tool that serves as a black box marketers often rail against on conference stages, taking ad spending and directing it to the Google-owned properties where it best performs. Sounds fishy, yet it also turns out this automated approach works better, even if there isn’t much visibility into where ads appear among many other basic data points.

Similarly, publishers often uneasily balance the concepts of audience choice and simplicity in subscription programs. As Netflix CEO Reed Hastings has said, the simplicity in pricing and product in subscriptions is a tremendous advantage, yet people want options. Publisher subscriptions will often get more complicated with various options to either bundle the entire product together, like the New York Times is pushing, or sample different parts of the product, as the Financial Times is doing with a new offshoot that allows non-subscribers to pay about a third of the price of its hefty digital subscription for an individual columnist newsletter, much like Substack operates. 

Don’t count out the humans just yet. The advances in artificial intelligence will inevitably change many forms of work. We are hard-wired to go to dystopian scenarios, but a reassurance has to lie in how AI still requires the judgment of humans. My guess is we’ll see a lot of hand-wringing about the future of AI, but the initial products will serve to augment humans to be both more effective and efficient. The thorny issues will remain, but AI is probably one of the best hopes around at boosting productivity. 

Maybe he’s building a media company. Let’s hope in 2023 Musk Mania dies down. I have my doubts. Attention is a drug, and he’s clearly hooked. Kara Swisher is floating an interesting theory that Musk’s actions that seem contrary to his overall interests can be explained by his wanting to build a new kind of media company. Maybe. It’s hard to see how what is going on is not some mix of ideology, messianic impulses and, of course, the grubby pursuit of political power. 

RIP Revue. Less than two years ago,  Twitter bought newsletter service Revue and set in motion the inevitable “Substack killer” hot takes. Twitter has officially said it will mothball Revue in the new year. This of course sucks for the writers who banked on the strategic logic of tying the distribution power of Twitter to their newsletter since Twitter is the biggest source of initial signups for many newsletters. I never bought this argument because time and again we’ve seen how companies treat these kinds of projects as side hustles and experiments. There was very little chance Musk wouldn’t kill Revue. Overall, this is a Twitter story, but also part of the maturation of newsletters. It should benefit players like Beehiiv, the first and only investment out of TRB Capital.

Newsletter Recommendations

From time to time, I’ll suggest newsletters to check out. Some of them are part of newsletter swaps, but I read and like all of them. 

I’m biased to like Sounds Profitable because it was started by the second person I hired at Digiday: Bryan Barletta. Sounds Profitable goes very deep on the business of podcasting, an area Bryan has long worked in. Sign up here. 

Gossamer is an interesting lifestyle brand that uses cannabis as a lens, but not the stereotypical stoner culture of yesteryear. The design is great, as are the as-told-to features. Check it out. 

C.J. Gustafson at Mostly Metrics writes about the financial side of business models in a way that appeals to someone like me who has never taken an accounting class. Sign up. 

Send me a note with your feedback: bmorrissey@gmail.com

I’m now working with Paul Turcotte on sorting out the business side. We have some good programs planned for 2023. Get in touch about sponsorship opportunities: pauljturcotte@gmail.com