The media industry has gone through many changes since banner advertising first appeared on the Internet. Legacy constraints on traditional media outlets have hampered their ability to respond. Startups have sought to capitalize on these constraints; not all of them have survived. In this article, Mike Caruso and James Katchadurian draw on CR3 Partners’ experience with media organizations of all kinds to bring light to why this is happening and what solutions are available.
The Continued Evolution of Digital Media
Media has undergone tremendous change since banner advertising first appeared on the Internet in 1994, which unfortunately was also the first spam email campaign. 
Traditional media’s response, though immediate, was hampered by legacy constraints including:
- Companies carrying significant debt incurred through acquisitions, capital expenditures or stock buybacks;
- A need to protect current cash flows to sustain stock prices and/or ensure compliance with debt covenants;
- An ecosystem of vendors, customers, partners and affiliates that were dependent on the current business model.
Online-exclusive start-ups quickly materialized to take advantage of these constraints. Unburdened by existing business models or relationships and fueled by venture capital financing, these start-ups endured booms and busts, with many not surviving.
Fast forward to today and the winners have emerged. Digital advertising is expected to yield greater results than all traditional media formats combined. Facebook and Google dominate digital advertising with a combined 60% market share while Amazon and Apple are also on the rise. 
As a result, an increasing volume of distressed media companies, both traditional and digital, are burdened by debt they can no longer support and find themselves under increasing competitive pressure. There are a number of operational responses to these continued trends aimed at focusing your business plan and maximizing your companies place in the market.
- Digital is no longer supplemental; it is CORE: Traditional media’s initial response was to establish separate digital media operations. You still see a “V.P. of Digital” or “Chief Digital Officer” on many media company’s mastheads. This is a mistake – digital marketing and advertising should be a core component of every company’s business model. All senior managers must understand the digital marketplace and integrate it into strategy and tactics.
- Absolute focus on a target audience: Google and Facebook are not content providers. Although they control key components of the distribution channels and generate huge volumes or user-created material, professionally produced and curated content is still in high demand. Understanding and delivering to your core audience seems obvious, but few companies have the focus, discipline, and capabilities to optimize processes. Too many companies identify by product (i.e. we are a digital media/newspaper/events company) instead of by market.
- Stratify your product offerings: All consumers are not created equal and demand for content is going to vary. Offering all content for free does not maximize return from die-hard followers, while hiding behind a paywall limits the return from less committed consumers. A mix of free, “freemium” (i.e. content provided in return for user data) and paid content will allow optimization of the product mix. Many newspaper web sites allow a certain number of free articles before requiring a paid subscription, but there are multiple alternatives to such a black and white offering. For example, the paper could offer a lower price subscription to a specific section (i.e. sports or business) or require registration for a section that has a robust lead generation market (technology or education).
- Monetize your audience through every means possible: Developing valuable content and building an audience is only the beginning. Learning information about your audience which can be further leveraged enables growth. “Data value grows exponentially with the means to extract value, not the quantity of data.”  Multiple channels including websites, events, education, data, video, lead generation, and e-commerce can be used to maximize the return from your content, audience, and brand.
- Technology, technology, technology: All of the above hinge on the development of new technology. Even though digital advertising is a quarter-century old, technology continues to drive innovation. For example, programmatic advertising has grown from 10% of the market in 2010 to 65% in 2019.
All the above may seem easier said than done. Not only do entrenched competitors and financial constraints limit a company’s options, but some of the solutions are self-contradicting. Keeping up with technological innovations and broadening product offerings requires scale and significant financial investment. However, this is contrary to the need to focus on a target audience (few of which are of sufficient size to obtain the needed scale). Consolidation of multiple independent editorial/sales operations under one technologically advanced infrastructure is one answer, but the tension between those two approaches can prove difficult.
One thing is clear – media independent of the large platform companies are here to stay and innovation continues at a breakneck pace. CR3 Partners has experience not only across the capital markets, but within the media landscape, and is positioned to assist in managing the transition.
CR3 Partners, LLC is a national turnaround and performance improvement firm that assists, guides and collaborates with management teams and their constituents facing any sort of transition, stress or distress. Michael Caruso is a Director in CR3’s Boston office and James Katchadurian is a Partner in CR3’s New York office.
 “Hobbes’ Internet Timeline – the definitive ARPAnet & Internet history”. Zakon.org.
 US Digital Ad Spending Will Surpass Traditional in 2019, Article by eMarketer Editors, Feb 19, 2019
 1st-Party Data Is Overrated, Misunderstood, Ted McConnell, Media Insider July 11, 2019
 Bond Internet Trends 2019, Mary Meeker, June 11, 2019