DEEP DIVE

The 7 Deadly Sins of Digital Media, Part II

Last week, I shared Part I of The 7 Deadly Sins of Digital Media. The first 4 sins included: Dependence on feeds and algos, no self-organization, misaligned incentives for talent and audience, and not knowing the consequences of your business model. 

Based on feedback, the ~best sin~ was “No self-organization”. You can read Part I here.

Now, let’s dive into Part II.

Note: As I stated last week, these deadly sins shouldn’t be interpreted as things that will kill your business tomorrow. Instead, they’re simply things you need to pay attention to and solve for if you want to build a sustainable and scalable media business.

#5 Failing to understand your unit economics

“How much does it cost you to make? What price do you sell it at?” asks every shark on Shark Tank.

For most operators in CPG and retail, understanding your unit economics is table stakes to run a business. For SaaS operators, understanding unit economics isn’t as needed early on, because it’s well understood that the product at scale can achieve 80%+ margins. 

But what about media? 

Margins aren’t so high that you can somewhat ignore costs like SaaS businesses, but unit economics aren’t as clear as making a candy bar for X and selling it for X + desired profit. 

This is one of the traps too many media companies fall into. Most operators fail to understand the unit economics of their business.  

How do you value a video on TikTok? What are you willing to pay for the attention of your audience? What is the lifetime value of that attention?

This is why subscription businesses tend to be more acceptable to investors — not because the business model is scalable or produces better margins, but because subscription economics are more easily understood than advertising. 

The same can be said of newsletter businesses, even free ones. It’s an easier model to predict than page view businesses, hence the sprint towards newsletter-driven revenue models.

So what happens if you don’t know your unit economics? You may get away with it for a long time — ad dollars roll in and it’s all gravy. 

But one day, you’ll wake up and not know what type of content is driving the best ROI. Or which content creators are the most successful. Or if you have loss-leading content that benefits the business.

Not knowing your unit economics will slowly put you in the media cemetery.

#6 Not knowing your audience

Lots of you are going to scroll through this deadly sin because you’re thinking, “Yeah, that’s obvious. I know my audience.”

But do you really?

“No, I do! It’s men 24-35 years old who live in urban areas. HENRYs!” 🚩🚩🚩🚩🚩

Saying your audience is “24-35-year-old males who live in major metropolitan areas” does not mean you know your audience.

If you create content for everyone, you’re creating it for no one. 

The media companies that fizzle out fail to create content for a specific audience. Thus, their content is never loved or needed because it has no true direction. 

My cheat code for this? Identify one real person who represents your audience. Create for them and only them. Identify why they are your audience. It should be their demographics, psychographics, behavioral interests, professional experience, and everything in between.

For me, I write this newsletter for Mike Kerns (hey Mike!). Mike is a Co-Founder and Partner at TCG. He’s a 30+ year media vet, a lifelong student of media, and is always looking for new opportunities in the industry. 

Mike also knows his shit. I don’t need to explain LTV, CAC, or other industry terms because I know he knows what they mean. 

I choose how I deliver my content based on what I believe would be best for him to consume. 

Does that make some people not enjoy how and what I write? Yes. 

That’s the point of knowing who your audience is.

#7 Building a Branded House

The last of the deadly sins I believe will be a bit of a controversial one, but here goes nothing… 

If you’re building a homogeneous branded media company, often referred to as a Branded House, you will struggle to sustain and scale your media business. 

Why? Two key reasons:

1.  Audience expansion 
2.  Intertwining talent and brand

Most great media companies that are a Branded House have perfected their audience relationship. They have a devoted group of people who love the brand and the content they create for it.

Barstool Sports is a great example of this —

Portnoy started Barstool in 2003 as a print publication for fantasy sports predictions, with an emphasis on Boston sports. Over time, they expanded coverage. 

Today, Barstool covers just about every sports topic imaginable and has its stool logo all over the podcasts, newsletters, and shows that are produced under the umbrella brand — including a recent acquisition of a business newsletter called The Water Coolest.

The reason why Barstool expanded is to identify new potential audiences in similar categories (going wider) or to create more touchpoints with their current audience (going deeper). 

For a Branded House to have success, they have to go wider and deeper — and they must utilize the strength of the brand to find success faster (like putting their recognizable logo on everything). 

Morning Brew has used a similar playbook, launching additional newsletters like Retail Brew, Marketing Brew, etc. 

Audience expansion isn’t a bad thing, but there’s a trend happening that is leading to major issues for Branded House businesses: 

The shift of embracing individuals and media personalities over institutions. 

Portnoy is a great example of this, but other examples could be Sean Hannity on Fox News or Katie Gatti with Morning Brew. 

In all these examples, the Branded House is embracing the personalities and individuality of its talent while still intertwining their connection to the Branded House. 

And that strategy works… for a while. 

But what happens when an individual becomes so wildly successful that their brand starts to be blurred with that of the Branded House? What happens when that individual starts to have beliefs that are averse to the Branded House’s values? 

In Barstool’s case, they can’t shake the Portnoy reputation. The same can be said about Fox News and Hannity.

The impact?

Shepherd Smith, one of the best journalists in the world, left Fox News after 23 years because he didn’t want to be associated with the reputation that Hannity’s success created for the Branded House of Fox News. 

Why doesn’t Fox News force Hannity to stay aligned to their brand values? Because he makes the most money. 

“Well, if an individual talent never gets THAT big, then it won’t be a problem.” Good luck recruiting talent with that pitch. 

Sooner or later, a Branded House strategy will struggle with maintaining a consistent brand reputation, attracting a wider pool of talent, and ultimately, will face the graduation of great talent — all signals that a media company will struggle in the long run. 

Wondering how you avoid this?

Don’t build a Branded House, build a House of Brands.

IN A MEME

PERPETUAL’S PERSPECTIVE

Twitter adds Elon

TLDR: Elon bought a 9.2% stake in Twitter. Soon after, it was announced that he will join Twitter’s Board of Directors. The news caused the bird app’s stock price to jump 25%, valuing Elon’s stake at $3.3B+. 

Perpetual’s Perspective: Elon might be the craziest man on the planet. If he can dream it, he will try to do it. Interestingly enough, his stake in Twitter only represents 1.5% of his net worth — AKA it’s kind of like a middle class family splurging on a nice minivan. Elon didn’t do this for the money. He did it to make an impact and to make sure Twitter continues to give the opportunity to others that it afforded to him. If the world can learn anything from the richest man in the world, it’s that owning a narrative can create tremendous value. Twitter has enabled Elon to build a car company and not spend a dollar on marketing. It’s enabled him to show the world that we need electric vehicles. It’s allowed him to have fun while being CEO of 4 companies. Twitter is how Elon owns the narrative and this move is simply a way to ensure that it always will.

iHeartMedia builds NFT network for podcasts

TLDR: iHeartMedia is buying hundreds of thousands of dollars worth of NFTs. The NFT collections they are targeting are blue chip collections like Bored Ape Yacht Club, World of Women, and CryptoPunks. They plan on using the IP and characters to create a network of shows on “the Non-Fun Podcast Network”. The podcasts will be hosted by voices that portray the various NFT characters.

Perpetual’s Perspective: I read this headline and was like, damn, iHeart continues to make dumb decisions. Then I dug in on what they want to do and how they’ll do it… and now I think it’s actually a really smart move. Owning the IP of these characters will allow them to go deep into storytelling around each character. They also can intertwine the various projects into one show, which creates a network effect for those who have beloved characters. In a time period where talent is hard to come by and keep, this strategy allows them to have IP that is fairly easy to turn liquid if it goes bottoms up and not worry too much about paying the voices behind the characters. Think about the Simpsons. iHeart’s new collection might be the next big anime / audio show. The only question I have: Who’s going to be writing the story?

NYT Exec Editor says journalists should tweet less

TLDR: New York Times executive editor Dean Baquet says he wants reporters to spend less time on Twitter, claiming it’s harmful for journalists to live in its echo chamber. He also urged journalists to reflect the values of the NYT and editorial standards. To ensure the rules are followed, the editors and deptartment heads will be paying close attention to how all Times journalists use social media. This comes after a few leading names have left the organization due to personal branding issues or writers choosing to defy the editorial standards set. 

Perpetual’s Perspective: Do I think people should be able to embrace who they are no matter their beliefs? Yes. Do I understand how it’s impossible to not be seen as biased if everyone knows your beliefs? Yes. But bias exists, even if we don’t know about it, and asking your staff to muffle their own beliefs and voices is archaic. People lose trust in institutions that try to hide who they actually are. Media companies are no different. If the NYT wants great journalism, they should embrace their journalists’ personalities — it won’t take away from their journalistic integrity, it will increase it. The only thing in the statement from Baquet I appreciated was that he announced an initiative to support journalists who experience online threats or harassment. It’s a real issue, particularly for women, and I wish more organizations recognized it and helped to solve for it.