The model of the new media model

Leo Laporte, creator of This Week in Tech and the TWiT network of podcasts, spoke before the Online News Association this week and presented the very model of the new media company: small, highly targeted, serving a highly engaged public, and profitable. (Full disclosure: I am a panelist on TWiT’s This Week in Google show.)

Laporte said he charges $70 CPMs for ads. Some questioned the $12 CPM we included in our New Business Models for News, though we went with a conservative middle-ground based on the experience of existing local businesses. If we had – as we will – instead forecast a new kind of local news business – highly targeted with a highly engaged public, like TWiT’s – the CPMs and bottom lines would have been exponentially higher. The companies are still small but they are profitable. Laporte said he has costs of $350,000 a year with seven employees now but revenue of $1.5 million and that revenue is doubling annually. It will increase more as he announces new means of distribution (to the TV; he believes that podcasting is too hard for the audience).

Rather than nickel-and-diming current business assumptions, we need to have the ambition of a Laporte and build the new and better media enterprise.

(I can’t figure out how to turn the Livestream auto-play off, so the video is after this link…)

(Note: Our models were funded by he Knight Foundation.)

  • Jeff, they only get U$70 CPM because it is in audio/video format, which gets more attention than plain pages. 70CPM for radio shows are not unusual — I believe the big ones like Limbaugh get 100/110 cpm.

  • Geographically based communities can be highly engaged, and in the locosphere that engagement leads to an in-demand advertising product (which I think I’ve proven), there’s two issues I see with the $70 vs. $12 CPM approach to thinking about advertising.

    The main issue is price pressure. When dealing locally grown businesses (what I call “hyperlocal advertising” to fit the misnomer of a term “hyperlocal news”), you’re often dealing with people who “get” that the Web is important, but they don’t necessarily get the Web. They’re not convinced it will work for them, even while they know they need to participate in it. This puts a break on high-CPMs. At this stage, you’re still asking people to experiment, especially if you’re an unproven start-up. The other downward pressure on pricing is just the shear lowish margins many SMBOs operate under, which is why many of them are not now newspaper advertisers and they resent Yellow Pages.

    I don’t sell by the CPM and I’ve never done the math to figure out what I get, but I’ve arrived at a monthly price model through trial and error. It’s working, but I imagine at significantly less than $12.

    But we are profitable.

    National sites and larger regional sites can improve CPMs because they have a bigger pool to draw from. Tech sites on a national scale are more often dealing with companies that have bigger revenue budgets and marketers who are thoroughly convinced of digital advertising. So there’s no comparison between what TWiT can get an a local news site.

    • Yes, I think we have to get away from CPM think for many reasons, including not counting our neighbors by the thousands. We used it as the lingua franca of media for our models. But we need utterly new ways to serve merchants and the public. And when we do and when we are targeted and relevant and helping an engaged public, I believe we will deliver and realize much greater value. Nevermind the old measurements.

      • Jeff, unpack what you mean by “new ways to serve merchants” ? What does that mean?

        Does that mean coming up with some radical new model of connecting buyers and sellers? That might be a good thing in the long run, but how do you get the SMBO to buy into it?

        We all know Google AdWords is very effective, but a relatively small percentage o SMBOs use it. Why? Because it takes time to understand and they don’t see how it will be of sufficient benefit to their businesses to make the time to learn and manage it worthwhile balanced against the other million and one tasks on their minds.

        When online marketers talk about the need for new models, I suspect they’re more caught up in the revolution rather than thinking about, what will the SMBO actually buy.

        You can come up with the most sure-fire idea in the world, but if SMBOs don’t immediately grasp it, see the immediate benefit, and have it be as hassle free as possible, they’re not going to buy it (in aggregate. they’re always experimenters and early adopters).

        That’s why we have a very simple ad model with The Batavian. No CPMs. No rotating ads. It’s more like a PennySaver than even a newspaper. And it seems to be working. We’re making money, selling ads, getting results for advertisers.

        What would Google do? Keep it simple.

        • Yes, but Google is too complicated for some SMBOs and so making it simple is one new way to serve merchants.

  • I have to agree with Howard, and this applies to ‘hyperlocal” cable advertising as well. The CPM is almost irrelevant. Pricing becomes very touchy feely stuff.

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  • Jeff, how is this the model of a new business model? It’s been going on decades if not longer. Highly specialized media that has a large enough target base can be very profitable. Look at all the trade industry mags that we have.

    We need a business model that can support a general media publication such as the New York Times, or local newspapers. Specialized media is not new.

    • Local is a form of specialization. So will national be in the case of the Times. A general-interest San Francisco paper? Not so.

      • I note that you haven’t answered Tom’s question: How is this a new business model?

        It’s not, of course. What TWiT is doing is exactly the model that gave us (say) Macworld, or Practical Woodworker, or Military Modelling, or thousands of other trade publications in print. Moving it to a new medium doesn’t make it a new business model.

        Focusing on a niche always delivers better CPM (or in old media, cost per page), particularly if you can show high annual spend per reader/user.

        • Except that the cost structure is way lower for production and for marketing (being viral). That’s how it’s a new model.
          Tom was asking for a model for general interest and I think Bob answered him well.

    • Tom Foremski wrote: “We need a business model that can support a general media publication such as the New York Times, or local newspapers.”

      While this is an interesting claim, I’m compelled to ask: “Why do we need to support ‘general media publications’?” Perhaps, “general media publications” are the problem that needs to be addressed — not the ad models. Today, we have “general media publications” trying to compete with Leo Laporte, with TechCrunch, etc. In general, the general media folk tend not to invest as much in specialized areas as their more focused competitors do. The result is inevitable. Rather than having general media sites that do a little bit of everything but not much that is really good, it would make vastly more sense for them to partner with content and community specialists for coverage of the specialized areas.

      Consider what the Wall Street Journal is doing with Walt Mossberg and others… those folk are building AllThingsDigital (a highly specialized site) and they are exploring a wide range of revenue generating opportunities while at the same time they contribute to the WSJ itself. This is the way ALL sections of ALL papers should be staffed. In this model, a “general media publication” wouldn’t actually employ any writers — only editors. The content would all be produced by highly focused organizations like the ones that Mossberg and Laporte are building.

      The problem isn’t the ads — it’s that we’ve still got people trying to keep alive “general media publications” whose day has passed.

      bob wyman

      • Agree.

      • Because people require breadth as well as depth. That doesn’t mean general publications will look the same as they do now, but there’s still a massive market for people who want to be “generally well-informed” about a wide range of topics.

  • There’s not much genius to this model or his success — he married an audience to his platform and that in turn enables him to make money. Not traffic but real audience. It’s a no brainer, but media industry is a year at least away from figuring out that’s what everybody should really be talking about. It’s the only solution to the industry’s “problem” with the internet, next to the fact that it and everybody else made the mistake of not charging people for online access ten years ago and basically further disrupting their own market (though it’ll recover from that).

    Tech shows rarely sell well on regular TV. Can you think of any? Not really — there’s a reason for that.

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  • Clap Clap for Leo and his team. Key for his success is his creativity and focus. He has no outside influence in terms of investors. Now with cash flow coming in that can support financing expansion the sky’s the limit for Leo.

    Key is internally financing his growth and not taking in any outside money til he has the business operations scaling.

    Congrats to Leo and team.

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  • BTW: Hate autoplay on the video.

    • agree

      • Hi Jeff,

        Thanks for embedding the clip. To turn off autoplay, which unfortunately is the default:

        – Hit the “Embed” button in the player
        – In the side bar that opens, uncheck “On”

  • Tom Davidson

    “New ways to serve merchants” may not be new – but certainly major media haven’t offered these in a meaningful way:

    – Pay per action: Mr. Restrateur, pay me $10 per reservation. But *only* if my reader makes (and keeps) a reservation.
    – Ms. Realtor: How ’bout a $75 bounty if someone from my site finds you and actually lists their house for sale?
    – Deals and foot traffic. is a potentially interesting example.

    In other words, Howard, new models really boil down to “results,” not just “vague promises that maybe we’ll generate some results.”

    • What he says.

    • If economic theory is correct “Pay per action” or “Cost Per Action (CPA)” shouldn’t actually deliver results that are any different from CPM. That is, if there is a competitive market for ad space and prices are determined by auction (which, in a sense, all prices are.) All other things being equal, prices will be determined by ROI to the advertiser. The difference between CPA (cost per action) and CPM appears only when you consider who bears the risk of bad advertising…

      In a CPM based system, the publisher is paid for providing impressions to some audience — independent of the success of ads. A good ad will generate great leads for the advertiser and a bad ad won’t — but the publisher need not care. Thus, the risk associated with ad quality is born only by the advertiser.
      If you use a CPA model, then publisher’s revenues become linked to advertiser’s results. Publishers benefit from high yielding ads, but assume the risk associated with low-yield ads.
      In a CPM based system, the publisher can be blind to the business results of any specific advertiser. In a CPA based system, the publisher’s success or failure depends not on providing audience, space, slots, etc. but rather on the success of failure of each individual advertiser. That is not a good thing.

      CPA is not a magic bullet. Having supposedly independent publishers assume risk from advertisers doesn’t do anything magical to solve industry revenue problems — at least not in the long term.

      If you’re going to look at CPA in addition to CPM, you should consider a hybrid system. (I sold ads like this back in 1995…) Have publishers sell CPM but with a CPA limit. In other words, publisher charges CPM but the ad only runs while some specified CPA is achieved. In such a system, “bad” ads are rapidly flushed from the system and ad inventory is freed up for those who provide better ads. Such a hybrid system ensures that risk is born by the advertiser (as it should be) but has the benefit of limiting the potential monetary cost of any failure. By limiting the risk of bad ads (but not transferring that risk to the publisher) a hybrid system should encourage advertisers to be more adventurous in trying new advertising venues. This would benefit all concerned.

      bob wyman

    • The problem with this, and with most “new models” is that they focus on immediate returns. That leaves out the significant value of branding and cumulative exposure. If those things didn’t have value, TV advertisers would have gone under long ago.

      Leo is a strong brand, and advertisers are clearly paying some premium over their trackable ROI to be associated with his show. I’ve worked with a variety of content models and there are very few that can support their cost of production with only CPA advertising. (And many of those depend on other content producers.)

  • Thanks for sharing this Jeff .

    Not only is Leo an Online Video leader he is the Energizer bunny. If you watch Leo work he just keeps going and going both on-air and when he’s offline.

    I feel we are all very lucky to have Leo blazing trails for us.

  • I really love what he is doing and it’s great seeing something successful as this. But I do not believe in live. Live is for stuff with a score. Live is for stuff where you are making sure you meet nobody before you have seen the game as a recording because you know they will tell you. I will also not watch TWiT live from Germany simply because the time difference.

    The problem is that he does not have the power to advance podcasting faster than it will. I am not a podcaster at all, but once we all have easy ways to get this stuff into our cars then I will listen to nothing else than podcasts, which I already mostly do through the iPhone. and it wil get easier but it just takes time.

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  • The advantage Leo has is that he had a pre-built audience. But as we have found at the Tech Podcast Network is that shows that have been producing content less than 3-4 years are easily capable of making 6 figures a year.

    I know this because I write the checks to those very podcasters. The key we have found is so long as you can get a number of independent content creators to work together you can build huge audience numbers.

    The Tech Podcast Network as a collective is reaching close to 20 million listeners a month. We have power in numbers. This one of the reasons we continue to work with category leaders in Launching verticals like Travel, Medical on our Rawvoice Generator Platform which allows us to roll out a vertical in a couple of days.

    Leo has attracted some great talent but for the lesser known content creators we have been able to harness the power of networks to there financial benefit.

    Todd Cochrane
    CEO RawVoice

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  • An interesting dialogue from Leo. There are certain points that he makes that are so right. One that is not really laboured is that the future media environment will be developed and commercialised by those that have grown up with digital. A post on who will win out:

    The media futurist Jeffrey Cole suggested that a key challenge is the reliance on traditional advertising models, “The problem I see is that these people often believe that there is enough life left in the ‘old advertising model”. Cole went on to say “I really believe we are still waiting for ‘indigenous’ advertising techniques. I think the big breakthroughs will be digital advertising developed by those who grew up their entire life with digital media – hence the word indigenous.”

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  • Lisa

    Jeff — do you and your CUNY group think news and revenue models will be split as follows:

    1) Highly specialized/niche news = mostly ad supported (e.g., Leopart)

    2) General news = mostly subsidized by philanthropy (e.g., public media)

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  • Tom, I’m not sure what definition of “new media” TWiT fails to satisfy.

    I started TWiT when I found that the mainstream media didn’t understand how to cover technology and lacked the willingness to serve a large and growing audience of tech enthusiasts. And fired my ass.

    I am a completely independent producer of podcasts. All the revenue comes from advertising we have sold (with great difficulty at first) on shows distributed using RSS on the Internet or via a Flash player on a web page.

    I started with one show produced in my little studio and grew as demand grew – adding shows one by one without taking any investments.

    We use all the tools of new media including Skype, chat rooms, social media, forums, web sites, teleconferencing, voice mail, broadband and so on.

    We’re new media precisely because I am an individual using off-the-shelf digital hardware and software to create, and the Internet to distribute, programming to suit myself and our growing community.

    I’ve worked in the old media – radio, TV, magazines, and newspapers – for decades. Today I work for myself doing exactly what I want to do and no massive media corporation skims the bulk of my proceeds. I reap the fruits of my own labor 100%.

    This ain’t your grandpa’s media.

    • Leo, many obviously haven’t actually “consumed” your product, yet they comment freely on the theory. The fact is, you are an experienced and talented broadcaster who saw how to convert to a community model early on. The whole advantage of tech subjects like those that Mac or TWIT or TWIG cover is that that audience is already online and thirsty for information sourced by trust agents. Soon, that imitation will disappear.

      Few podcasters, very few, have the width and breadth of your culture and knowledge plus the chops to be simultaneously manipulating all the technologies (chat, searches, audio, video) that make what you do amazing. Then comes the monetization: you believed in the possibilities and didn’t give up. Audible was a stroke of genius and I know from experience with Talkshoe that they were hesitant at first. They must be pleased now to be such an important feature of your shows. The Audible segments are infomercial meets trust agents in social media.

      We spend much of our time trying to tell sponsors and customers that this (“new media”) will someday be the *main* vector in reaching and satisfying customers. For some segments, it already is. If it takes the death of NY Times and others to convince them, then we’ll just have to wait.

  • New media does not equal general interest. It serves whatever special interests exist.

    New media is personal – designed around the interests of the journalist and her community. Doesn’t mean those interests have to be parochial. Is HuffPo new media? Sure.

    My advertisers prefer speaking to an engaged audience of people who are actually interested in their products. General media isn’t very efficient in delivering that – that’s why I get a premium for advertising. More and more advertisers are fleeing mass media for special interest new media.

    General Interest media was designed for advertisers who wanted sheer numbers. No one else wants it. Even advertisers are less and less interested.

    • Everyone please repeat until the idea is taken up in your DNA:

      “New media does not equal general interest….New media is personal….people who are genuinely interested in their products.”

      The future of useful journalism (to whit: informing for self-governance) depends on infusing every digital bone of every digital body with those simple precepts. IMHO

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  • Really enjoyed that, thanks for sharing.

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  • Welcome to capitalism!

  • Shannon

    Let`s see, ‘The Walt Disney Company’, a modern media company, grosses $37.8 billion a year and Leo grosses $1.5 million a year. I know we are not comparing apples to apples here, but come on, the world exists beyond your network of watered down tech news.

    • So I guess you make a few billion a year yourself? What’s your point?

  • geoff

    I guess I needed to learn how to bullshite’ better to make that kind of cash. Geez what a world we live in – get paid 1.5M to do nothing but gossip and talk about crap that 95% of the world could care less about. god help us all.

    • Stephen Dart

      Your comment gave me a real big smile. It essentially proves Leos point. You are engaged enough in this blog (a new media example) to add your view, even if it is religious. Your view is compatible with the process. And in one respect you are right, 95% of the world does not care. We, the participating audience, must be getting something, because we are still here.

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  • Yeah but how does the average person get ads placed on all kinds of sites i notice that alot of tech shows have the same ad types or go with the same company but I am interested in how they get the marketer to them ..

  • Greg Martin

    I love the Twit network and regularly listen to 4 shows. If I could only get him to talk Enterprise IT, Perhaps in a format like FLOSS Weekly, I’d be all set.
    Leo – you’re gonna have to start paying those hosts, soon!


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  • Distracted

    I couldn’t pay attention because of the tie he’s wearing. Is that thing made from Fruit Roll-ups? I wish I had something more to contribute.

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  • “One of the best incentive CPA networks I found was CPALead you should check them out

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