I’m about to tell you about a guy who sells darts on the Internet. But first here’s a sentence about CEO Marissa Mayer from The New York Timesstory on the Yahoo asset sale that essentially folds it into Verizon:
“Despite her acclaim, Ms. Mayer failed to resolve Yahoo’s central problem: a lack of focus.”
Ouch. That would be utterly withering, if it were, you know, true. Yahoo’s central problem had nothing to do with management focus. It had to do with the commodities market. Yahoo trafficked in a commodity called “traffic.”
And traffic isn’t worth diddly. And if you think it is, well, I’ve got an Internet I’d like to sell you.
While Microsoft (finally) built up its cloud business and Google took over the world with search, Yahoo stood pat on content. Lots and lots of content viewed by lots and lots of people creating lots and lots of ad inventory that got less and less valuable with every passing minute.
Reach is all well and good, but you’d better be damned sure you can sell it once you reach it.
The Yahoo board cashiered Terry Semel 9 years ago for failing to understand that Yahoo couldn’t create “hits” and monetize the audience, but they failed to realize that they can’t monetize the audience, period. And who can, really, in an ad-based media-business model?
Which brings me to my friend Mark Lewyn. He’s an old USA Today colleague who left journalism to be an entrepreneur, and he’s had a sort of feast and famine career doing so. He’s not Ralph Kramden, but he’s also not Sergey Brin. He has an excellent eye for value. His particular specialty is squeezing that value out of stuff that he doesn’t have to pay much to acquire: Internet error traffic, government data and so on.
His latest venture is sort of an import-export business using Amazon as most of his front and back ends. Using data readily available from Amazon itself, he identifies product categories that have relatively high velocity, relatively high margins and relatively little competition. He then contracts to have the product manufactured offshore and distributes through Amazon.com. The risk is low because he warehouses very little and achieves something close to just-in-time delivery.
And using that formula, he’s selling just a shit ton of darts, crib bumpers and glow-in-the-dark ceiling appliques. But I stray from my point: Mark is always ruminating about hidden value, and he’s always calling me to tell me about his thoughts. The other day, he caught my attention with this:
“I think I may have come up with a way to monetize content.”
Oh, have you, Mark? Marissa Mayer couldn’t do that, and she’s walking away with north of $300 million.
His idea is, essentially, to put the cart in front of the horse. For 300 years, content has existed to sell eyeballs around. His thought is to find consumer bases and build content around it.
It’s not exactly a novel thought. Red Bull creates content about the adventure life, in order to stimulate its customer base of people who need to be stimulated. The New York Times sells all sorts of merchandise, from archived front pages to antique clocks. Wirecutter, the brainchild of Brian Lam, does extensive product reviews and makes its money from affiliate links (mainly to Amazon.) And, as previously reported in this space, Podcast One’s Adam Carolla makes money while he sleeps through such links, and his own line of products, from movies to wine.
Mark’s Exhibit A is actually adult coloring books, which cultivate adult colorers in order to sell them pencils, sketch pads and more coloring books. I find this to be a poor example, because a coloring book is a book like a root beer is a beer.
But what he suggests seems like something the magazine business should deeply consider. Or, at least, shallowly consider. Because if there’s anything to this concept, it can exist only in a highly vertical world. Sure, sell ads for whatever they can fetch, but sell product, too. Who should publish golf magazines? Golf retailers. Who should publish pet magazines? Pet supply retailers. Who should publish business news? Bloomberg. (Oh, wait. They’re onto this idea already. Bloomberg News is a loss leader for the data-terminal business.)
The obvious objection to this model is an ethical one. “How can we trust the editorial content of a magazine with such a direct link to the business side?” It’s an excellent question, to which I have a ready reply:
“Hahahahahahahaha! When could you ever?”