Chris Lee, President, DDM | @cleepost | January 2, 2015
In response to forces of disruption roiling the media landscape, Deseret Digital Media was formed five years ago as a fully separate business, distinct from our affiliated print and broadcast organizations. After just those five years, DDM is now larger in revenue and profit than our TV and radio properties, and is inching closer to our print business. As we kick off our sixth year, I’d like to share our top six priorities for 2015 at Deseret Digital Media.
1. Expand the mobile-ready business model
Just as the print-to-digital migration was the genesis of DDM and the theme of its first five years, the migration of audience from desktop to mobile will likely shape its next five. The percentage of our audience interacting with us on mobile devices has grown to between 40 percent and 70 percent, depending on the product. This evolution changes the dynamics of the revenue we derive from display advertising.
Let me describe this in simplified numbers. If every desktop page view holds 4 ad impressions, and if every desktop impression generates an average of $5.00 CPM, 100 million page views produce $2 million in display revenue ((100M/1000)*4*$5.00)).
Those same page views, when accessed on a mobile device, generate less display revenue. How much less? Assume 1 ad impression per page and $2.00 average CPM rate, which turns those 100 million page views into just $200,000 in display revenue ((100M/1000)*1*$2.00)). As you can see, it’s potentially an order of magnitude-sized problem.
So how are we addressing this mobile disruption? We have diversified our business model away from display revenue to other sources of digital revenue not dependent on desktop page views. This “Mobile Ready Revenue” includes listings and automated feeds, native advertising, deals and coupons, travel bookings, and other consumer paid transactions. These sources now represent nearly 60% of our total revenues. The following chart shows the mix of revenue sources over the past five years. Even as display revenues have grown, mobile-ready sources have grown even faster.
We need to continue this progress as mobile audiences continue to grow. DDM’s entire marketplace team is focused on these sources of revenue, and we are asking our content product teams to work closely with ad sales to come up with new mobile-only formats for display. Thanks to those teams, more mobile-ready innovations are in the works for 2015.
2. Improve audience insights
The problem of mobile display can be solved in only two ways: more impressions or higher CPM rate. We are working on both sides of that equation. Impressions come from better user experiences, including more relevant content. Higher CPMs come from serving the right ad to the right user at the right time. Both of these outcomes require effective use of data to better understand users in all aspects of their engagement with us.
Every digital media business is awash in “first-party” data. From Google Analytics to Adobe to ChartBeat to Salesforce to SurveyMonkey to home-grown systems in various corners of the business, we have a wealth of data that should be a significant asset to us. Whether we always use that data effectively to produce better outcomes for users and advertisers is another question. We’ll be radically improving our use of data in 2015 to have better insights about our audiences for both engagement and monetization.
3. Price and manage inventory dynamically
"Dynamic pricing" has long been a term of art in marketing for all kinds of products, particularly those businesses with expiring inventory like airline tickets, hotel reservations, and media. In digital media, the advent of real-time bidding through ad exchanges makes pricing more transparent and flexible than ever before. Algorithms that account for seasonal demand variations, transaction value and the general competitive environment may be used to lower ad prices and thereby increase sell-through or raise ad prices to improve profitability.
Of course, just the mention of mathematical pricing models can cause heads to spin, and organizations to get stuck on analysis. DDM is fortunate to have some incredibly talented quantitative analysts working on these questions, and it’s their time to shine. Digital media average CPM rates are under pressure from the explosion in inventory, particularly in mobile. Building audience and increasing inventory only to throw that untargeted inventory to exchanges is not a winning strategy.
Our goals for 2015 here are simple but ambitious: improve direct sell-through percentage and average CPM rate, even as inventory shifts to mobile.
4. Operate and invest with discipline
As DDM has grown over the past five years, its business has become more complex. With more than 200 employees working on dozens of different products, each with its own business model, target customer, and key performance indicators, the roles of our managers – particularly our financial and technology leaders – take on greater impact in the organization. Our businesses in every category compete with multiple larger competitors, primarily from outside our home market. Growing an already-profitable business into a sustained success will require careful execution and tough decision-making.
That work is already part of our heritage. While we’ve had great successes with most of our products, some of our investments simply don’t deliver as planned. For example, last fall, profitability analysis of our digital agency services business caused us to restructure those product offerings and sales teams. We recognized that we shouldn’t be reselling products when we do not control the customer experience and cannot realize reasonable profit margins. Going forward, we will continue to offer some third-party services to clients, but we will choose those services carefully and motivate our digital sales teams with products on which they can make commissions.
Meanwhile, because of our commitment to disciplined investing, the cost reductions we make in some areas allow us to continue to add resources to our more profitable and promising businesses. As we foster discipline in our approach to innovation, we will have the resources needed to address the opportunities that lie ahead.
5. Grow our national and global reach
DDM’s primary products serve audiences and advertisers in the vibrant and rapidly growing Utah region. As we have focused on content areas to serve these audiences more effectively, we have developed expertise and brand recognition around topics associated with family. We have begun to leverage this expertise to grow audience outside our core market. Our National Edition of Deseret News, with its editorial focus on families, continues to grow rapidly. In June 2013, DDM launched FamilyShare Network, with a focus on practical solutions for relationships and parenting. The site along with its Spanish and Portuguese versions now reach more than 15 million unique visitors and have more than 70 million social followers.
In addition, DDM launched a Publisher Solutions division that serves media businesses across the US and Latin America. DDM Publisher Solutions offers training along with content and services syndication, and now serves more than 400 local media organizations.
This audience and client expansion to new geographic markets allows us to build revenue opportunities outside our local market and to project growth for many years to come.
6. Preserve the DDM culture of learning
Members of the DeseretNews.com team during an editorial planning meeting.
DDM owes much of its success to the culture of the organization. DDM has established a strong mission statement that embodies its values and vision for the future. Its ambition is "to be trusted voices of light and truth reaching hundreds of millions of people worldwide."
Such a lofty objective coming from a media business in a mid-sized local market requires a lot of creativity in products and processes. I like to describe our environment as a “learning culture,” where we put particular emphasis on innovation, testing, and training. The solutions to the challenges of media evolution will come only from maintaining a culture willing to invest in new products and services, test them carefully, and train people to work together to repeat this process consistently.
If we continue to build this learning culture, DDM’s next five years can be even brighter than its first five.