Things I’ve learned running an online news media business [Guest Post]

[Note: Last month, Medianama, a website for news and analysis on the digital ecosystem in India turned 7 years old. Nikhil, who runs the company wrote an insightful post on the things he has learned. I asked him if we could re-post it here for those who’d like to do a media startup of their own and he agreed. It’s a long post but worth reading in full if you are running/ planning to run a media startup in India. So here goes]

MediaNama turns seven today, and our seventh year has possibly been the most important in our history: the work we have done over the six years that preceded our seventh, and our approach towards reportage – of linking stories together and identifying common themes, of building a “body of work” instead of just a story, has allowed us to inform and educate on issues that are of critical importance to the digital domain. We intend to continue to take stands we believe are correct, and benefits the domain in the longer term, while at the same time, always open to debate and being corrected.

Over the past couple of years, particularly from a policy perspective, the issue has been one of ensuring that the Internet remains open, fair and competitive, and our work over the years has been an important resource on policy issues such as Intermediary Liability, Blocking, Net NeutralitySurveillance, among several others, and we’re now beginning to connect the dots on online versus offline. We intend to continue identifying  issues of importance and focusing on them, to inform you, our readers, better.

Our purpose remains the same as it was seven years ago: to help build an open, fair and competitive digital ecosystem in India. Not Internet or mobile or startups or telecom or ecommerce or digital media, but digital. All of these and more. Along with depth, breadth matters, and I’m painfully aware that we’re not even covering half of what we’d like to. We intend to keep expanding our scope of coverage, growing it as our domain grows.

We intend to, but can’t necessarily promise to take up every issue or cover every domain, because of the vagaries of the online news media space. We’ve seen a number of recent upstarts in our domain, and I’ll take the liberty of pointing out a few things about the online news media business in India, in the hope that it makes life a little easier for the upstarts from a business perspective, especially for those making a switch from the offline world. Also, please remember that many of these points can be proven wrong since they’re based entirely on my experience:

1. It’s still a news business: There is a tendency, when you’re starting up, to think that you’re primarily an online business. The focus is on the site design, the app, the CMS. Just because distribution is no longer a concern, platforms are available off the shelf, and social media gives you virality, doesn’t mean it’ll grow and sustain. Build for what you can sustain doing, because the news and analysis business is a treadmill: your product is the story, and you’re building multiple new products every single day. Focus on processes and making sure they’re followed. Try new tech and new models only if they’ll make your life easier: save you time and/or effort, and/or make you money immediately. This is why I’m not very keen video, and we haven’t launched apps yet.

2. Big versus small: There are only two types of businesses to be built in the online news media space: if you’re a generic news business, you need scale (tens of millions of uniques a month), for which you need bucketloads of money. You’re competing with the larger publishers with bigger budgets and reach and the ability to lose a lot of money. You’re likely to be a topline focused businesses and will need funding. However, with no large, standalone online news media play that is profitable, it’s unlikely that such businesses will sustain. In that case, you’re building to sell, and you need to define a strong positioning, to attract the right investor, audience and buyer.

If you’re a vertical (like us), then scale is a secondary issue. A large audience base (in the tens of millions of uniques a month) is next to impossible, as are investors, who have easier bets elsewhere. Even if you get investors, given the time it takes to build such businesses, their patience will run out. You’ll be under pressure to do the things they want you to do, in order to make it possible for them to sell their stake. You could be a bottomline focused business (we are), and focus on profitability in order to survive. Scale gradually while keeping an eye on the bottomline. We’ve now been profitable for six of our seven years, but chosen to grow our bottomline, not our topline.

3. Dealing with small teams and bottlenecks: The moment you go beyond two people in editorial, the editor becomes the bottleneck. There’s also the challenge of people doing a half-hearted job, and leaving it to the editor to fix. This is an issue in any type of an organization, but it’s particularly tricky with editorial. The editor is more like a product manager, with a different product being created all day. We addressed this by borrowing a concept from academia: by introducing a peer-review system. This helps accelerate learning for journalists, because you’re also learning from evaluating. It also ensures that there’s shared accountability, and snafus are limited. Vikas SN is the best editor we’ve had, and was painfully particular about how things are done.

4. Templatise: It’s not easy, and there are no set rules, but we try and templatise how we approach certain types of stories. Remember that you’re creating a new product multiple times a day, and no two products are the same. We’ve approached this by creating certain base templates, and a list of things that needs to be done. Our style guide (called #NAMAstyleguide) defines different types of stories, the way they can be structured, and acts as a reference for journalists. In a sense, it is a minimum viable product. This allows for speed when something needs to be pushed quickly (though I get the sense we’re not as quick as we once were), and there are questions each type of stories should try and answer for readers, in case someone wants to do more. I’ve gone through many style guides, and invariably, they tend to focus on format, and lack a reader-centric approach, in terms of what questions need to be answered for readers. I guess ours isn’t exactly a style guide then. We haven’t updated our style guide for three years now, but I guess it’s time I did that.

On to business:

5. AMJ sucks: September is usually the month I dread. Twice over the last seven years, in September, I’ve had to decide whether I want to shut MediaNama down or not. Why does this happen? April, May and June (AMJ) are the worst months for advertising in India. Advertisers conserve cash in the first quarter of the financial year, and our billings during this period (including in the current year) are typically weak. While billings improve in July, by the time money from AMJ and July comes in, it is end of August. Money from July it’s already September. Over the last couple of years, we’ve conserved cash keeping this seasonality in mind, and pushing harder on sales and collections starting March.

6. Billings aren’t collections, profit isn’t cash: Working capital is all that counts, and no matter how impressive your billings might be, it isn’t necessary that you’re going to be paid. We’ve had payments come in after anything between five to eight months after the campaign has ended, and though this hasn’t happened to us, we’re aware that it sometimes takes additional discounts or bribes for payments to come through. Nothing beats pre-payment, and we offer discounts to advertisers who pre-pay.

7. Choosing direct advertisers over agencies: Advertising agencies are powerful, and unless you’re one of the publishers with tens of millions of users, of you’re Google, you’re a tiny part of their campaign spend. Therefore, you’re not a priority for releasing payments, just as you’re not a priority for advertising on. If you’re vertical, you’re also not a committed spend, and they tend to use advertising rates on mass media sites to try and bring your prices down. They add an additional layer of bureaucracy to the payment cycle, and either have thousands of excuses ready for not paying, or allow advertisers to delay making payments.

8. Long term deals: You also have to keep an eye on cost of sales, and getting new advertisers, or monthly or weekly renewals of advertisements is expensive, not just in terms of having to hire more people in sales, but also in terms of time and effort. The best advice I ever got was from Mahesh Murthy in 2009, who said we should try and do annual deals because it brings predictability to the business. Spice Digital, before they left earlier this year, advertised with us for four years straight, and this didn’t just have a positive impact in terms of sustainability. In each of the two Septembers mentioned earlier, (irrational as it sounds) one of the reasons we kept going because we had committed to serve their advertisements till February. By the time it was November, things were fine.

Importantly, long term deals should be accounted as monthly income. If you account it all together, instead of deferred sales, it can lead to hubris, followed by excessive expenditure, which can be catastrophic.

9. Start early with sales: A few hours after we went live, I got a call from a company interested in advertising with us from the get-go. I declined, because my idea was that it’s better to first build an audience, and then seek advertisers. It’s difficult to increase rates, and we wouldn’t have gotten much money with 19,000 pageviews and 5000 users in our first month (1467 pageviews and 465 users on our first day). It is possible to increase rates. It isn’t easy, but it is possible.

Mahesh’s other suggestion then is something I regret not doing even more: hire someone in sales and even if that person only breaks even in the first year, it’s worth it. It’s something we never did. To grow faster, you need sales to be someones full-time job, and it’s usually the founders job. In my case,  it’s tricky when the founder is also a journalist, as it is in my case. In fact, we’re still trying to hire in sales.

10. Dealing with editorial and sales: If you don’t have a co-founder who does biz-dev, things can be tricky. Sreekant Khandekar, the founder of Afaqs, is immensely lucky to have Prasanna Singh on board. I do sales for MediaNama, though I’m not particularly adept at it yet. Strangely, I’m able to compartmentalize my roles as a journalist and as a founder who does sales. Some of this is process based: I refuse to discuss editorial matters in a sales meeting or call, as well as discussing sales in an editorial call or meeting. When a conversation veers towards editorial in a sales related discussion, I inform the advertiser they’ll have to discuss editorial with someone in the editorial team, independently. When we do events or partner with events, editorial coverage is never guaranteed.

11. Product/Platform startups are immensely more scalable: the problem for them is gaining traction and retaining users, but their ability to scale is much greater since the same unit effectively being bought by many. A research report once products can be bought by many. A classifieds platform can be used by many.A news business? well, new stories have to be created throughout the day. From a revenue standpoint, the opportunity in a news business is one of margins, while in a platform or product business, is in multiples.

12. Paywalls are tricky beasts: While there are multiple types of paywalls, assume that there’s only one type: where access to content is being restricted by a payment page. Paywalls work if you’re either niche and specialists in the domain you cover, or you’re mass and the best at what you do. Invariably, people will only pay for what they can’t get elsewhere, or if you can get it to them quicker than anyone else, in domains where speed is money. The tricky part here is in trying to get people to renew their subscription, and what you create has to be compelling enough to be habit forming. Your costs are front-loaded, and with a paying public, expectations are set. It’s important here to not let your costs escalate, and keep expectations sane: when subscribers don’t renew, there is a chance that your costs might become higher than your revenues. The deferred sales approach here: of accounting for annual subscription on a month-wise basis helps.

The other decision is a more philosophical one: we want to be read by more and more people, even though there are those willing to pay us if we go behind a paywall. It’s the last of our options.

13. Paid News is eating your lunch: The growth of Native Advertising, especially with the state of ethics in online publishing and advertising in India is creating a situation where agencies are now pushing to buy editorial. For everyone who denies them, there are alternatives who don’t. This needs to be addressed, standards for native advertising defined, and penalties for paid news created, for ethical businesses to grow.

13. Building other revenue streams is like building new businesses: The problem for media businesses is that typically you’re not selling what you’re creating, assuming you’ve chosen advertising over paywalls. How do you monetize? News media businesses are audience businesses, and monetization has to come via events, research, database products and classifieds products. There are also video and audio (podcast) businesses, for whom, competencies are different from that for text based sites. Each of these is a separate business, has it’s own unique complexities and demands on time. The problem is that each of these is also done by those companies for whom it is their sole focus.

14. Aggregators are your Frenemies, but mostly just enemies: Large internet businesses are built on a simple idea: create fragmentation, and monetize aggregation. If you look at Google (Search, YouTube and Android), Facebook, Twitter, ebay or Apple (with the app store and the iTunes store), their approach is one of typically trying to aggregate as many specialists as possible, and then monetize that fragmentation.

As they become more valuable, they send you more traffic or views, and as fragmentation increases, you’re forced to spend money to retain that traffic. Aggregators first facilitate and then take control of a part of your distribution. It is bait and switch. Some, like Twitter, are yet to figure that switch out, while others, like Facebook, have executed this ruthlessly, first by reducing reach for pages, and then by trying to get publishers to share revenue and audience with Instant Articles. The only solution is for publishers to develop their own channels (newsletter) and operate with caution when it comes to such platforms: don’t let any single channel dominate.

The most dangerous bait-and-switch you face is with the institutionalization of Zero Rating (a Net Neutrality issue), especially if more and more telecom operators adopt it. There won’t be alternative channels available.

It’s also important to keep control of your syndication feeds, preferably kept as excerpts or summaries than full text. Solutions need to be found for apps like Twitter mobile which effectively show your stories by stripping away advertising – I see that as stealing.

15. Business metrics: I remember Ashish Gupta of Helion Ventures saying at a Headstart event many years ago that all businesses measure something, and keep evolving measurements as they go along. Apart from traffic (I don’t think there’s an analytics tool that quite cuts it from a journalists or publishers point of view, btw), I’ve only recently started defining business metrics for MediaNama, which I did for the purpose of preparing an annual letter to (imaginary) shareholders, as an exercise for evaluating state of the business.

Some of these metrics, per month, quarter, half year and per year: Cash in bank, month covered by cash in bank, billings, payments, short term vs long term billings, new versus repeat advertiser billings, number of ad units sold, revenue yield per ad. Not all of this is useful, but the exercise of preparing this is very helpful.

In case there are other metrics that we should consider, please do leave a comment or email/call: nikhil@medianama.com/+91-98103-10053.

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I realize that this post is now over five times the length of an average MediaNama article (just kidding), but I might add more points in case I remember any. Feel free to leave comments with ideas, or tell me where I’m wrong. The bit I haven’t gone into, is about the personal journey, which this is not the space for.

If you’ve ever advertised with us, thank you for helping us get this far. If you’ve been reading, thank you for reading. To all those friends, well wishers, advisors and especially those who criticise us or tell us what we’re not doing right, thank you for your support.

Unless I do something really stupid now, we’ll safely get to year eight. It’s been a good year so far.

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