As we come out of the recession, or at least reach the bottom, media companies across the industry are avidly seeking a business model that makes sense. I'm not talking about anything complicated here. Publishers are simply looking for a plan with a reasonable prospect of generating revenues that exceed expenses by a comfortable margin, a business model that is sufficiently scale-able to grow, and to provide a return on investment. So, there is lots of conversation about how to harness video or social media or widgets. Panels are discussing what to do about pay walls, and iPhone apps and Kindle. Seminar leaders will talk about best practices in content management, and optimizing ad targeting and whether to send content production work to Asia. But none of these topics will lead to a competitive advantage, because they are open to your competitors.
As I consider how to advise my clients about where to invest for the future, I find myself asking a much harder question. Not "to Twitter or not to Twitter?" I ask where will my clients, consumer and business-to-business companies, find a competitive advantage. How can they build their business so that they are not operating a commodity business but one that has -- as Warren Buffett likes to say -- a moat protecting them from direct apples-to-apples price competition. Only with a competitive advantage of some sort can any business earn more than a minimum return on capital, perhaps none at all. Well, I'm pretty sure no business finds competitive advantage by doing the same things their competitors do.
In the past, media companies found their competitive advantage in a variety of ways. The networks capitalized on their position on the dial, secured by their FCC license. Since licenses were scarce the big three, then four, could operate as an oligopoly. Even now their profits show it. Other media companies focus on the superior quality of their content, worshipping top editors or producers. Still others build on their ownership of newsstand positioning to the point of "owning" pockets at the grocery store checkout: a position that made it very hard for new competitors to enter the market.
Competitive advantage comes in many forms. It often starts with a first mover advantage that, if exploited, can be built into an insurmountable lead. And being the leader in any business can be important. Sports Illustrated built on its first movers advantage to reach a scale and respect that would never be touched by an independent publisher, hence Sport and Inside Sports could never achieve the scale to become profitable. Only an enormous company like Disney could challenge SI, and only because it owned a business in another arena that it could leverage; ESPN. Good Housekeeping, not the first women's magazine, found a way to build a unique advantage with the Good Housekeeping Institute and its Seal of Approval.
Where will online publishers find their competitive advantage? If your online property is distributed through the same wires, reporting on the same events, and displayed on the same screens as your competitors, I would suggest you'll never achieve that advantage. Twittering won't do it for you, nor a Facebook fan page, nor an iPhone app.
One question to ask about any possible strategy is if it is hard. True competitive advantage requires something difficult to execute, a big investment, a tough slog, overcoming resistance. The point is that if it is easy, your competitor will do it. Don't get me wrong. You may need to create a Facebook fan page, or have an editor Twittering. But with your competitor doing it you'll achieve no competitive advantage.
I suggest two avenues to achieve that advantage::
First, invest in the relationship with your readers. It is not easy to get readers online to tell you about themselves, or even get them to give you their contact information. But if they do, an email address allows you to reach them again and again, and a terrestrial address allows you to know them even better. The more you know about your readers the better you can serve them. And serving readers better will make them more loyal to you than your competition who hasn't made that investment.
Second, invest in the relationship with your major revenue source: your advertisers. Earn the respect of your advertisers, so they will make time to learn from you, and so you know enough about them and their businesses to deliver the custom marketing solutions that they need and for which they will pay more than commodity prices. At best, most publishers have commodity research, research that is available to all their competitors. And you should be investing in your salespeople who might build those relationships, equipping them to provide a valuable service to their advertising prospects.
So while you are sitting in the audience at a conference, gather all the information you can about the market, what your competitors are doing, and how technology is evolving. But don't expect to find what you need most. Perhaps the best use of that time would be some serious soul searching, and brainstorming on how or where you can invest in something unique that will build your relationship with your customers: your readers or your advertisers. That is where you will find your competitive advantage.