No silver bullets

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Lewis DVorkin performed a miracle with Forbes … almost. He almost rescued a dying brand, almost helped get it sold to a new owner, and almost rescued the Forbes family and its no-doubt-regretful investor Elevation Partners. I respect Lewis’ inventiveness and innovation. He has done the best he could with the brand he had.

But there’s only so much that can be done urgently with old media on the descent. As Steve Forbes himself said announcing the sale of a majority stake in his company to a group of Asian private-equity investors and cataloguing how his business used to be run: “The web has made this way of doing things obsolete.”

The Times, quoting unnamed sources, says the deal values Forbes at $475 million, but the Financial Times’ John Gapper properly asks:

Axel Springer, a leading European magazine publisher and digital company, was supposed to be interested in Forbes. But it and other media buyers dropped out early. Forbes had reportedly been hoping to sell the entire company for more than $400 million. That didn’t happen. Whatever the real valuation, given the buy-out of Elevation Partners — which had invested in Forbes in 2006 getting a reported 40% for $250-300 million, valuing the company then at under $750 million — and given the large chunk that Forbes is left with, I’d guess the family got something in the borderline nine figures. [I should add that as one commenter elsewhere points out, I’m not even trying to make a guess at such things as liquidation preferences for Elevation.] Not a deliriously happy ending for the Capitalist Tool, but — as people told me this week when I complained about turning 60 — it beats the alternative.

When DVorkin returned to Forbes in 2010, where he had been executive editor a decade before, with the purchase of his startup True/Slant, he brought with him what looked like a solution for a dying brand: He used that brand as candy to draw more than a thousand contributors to write mostly for free — the top few traffic attractors can make a decent buck — adding onto the work of a few score Forbes staff journalists. Thus he simultaneously exploded the quantity of content Forbes could serve while reducing the total cost of content to nearly nil. Now I’m all for media opening up to more voices, but let us acknowledge that not only the price but also the overall quality of Forbes content declined.

At the same time, the business side, headed by Mike Perlis, used that dying Forbes brand as candy for advertisers: Come appear on with your own pieces labeled “Brand Voice.”
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I’ve long said that if you have to put a link next to a label saying “what’s this?” then the label clearly isn’t clear enough. This was a pioneering entry into the the so-called native advertising that is now overtaking media everywhere. Just as it was supposed to be the salvation of Forbes it is now supposed to save legacy media.

Beware the silver bullet. It can backfire.

The problem in the end for Forbes, I believe, is that the brand became even more devalued. I illustrate this very simply: Now, when I see a link to Forbes on Twitter, I don’t know whether it is going to take me to (1) the good work of a Forbes journalists, (2) the good work of a Forbes contributor, (3) the bad work of one of many Forbes contributors, or (4) the paid and wordy shilling of a Forbes advertiser, e.g.:

Thus, I hesitate three beats before clicking on a Forbes link. That is the definition of a devalued media brand. And that is precisely what other media companies should fear as they more and more try to fool their readers into thinking that what we used to call advertising is now something else that can comfortably live under brands, enigmatically labeled.

The real lesson of Forbes is that there are no easy answers and quick solutions for transforming legacy media companies. DVorkin became a key tourist attraction for media executives touring New York. I know because I took many of them to meet Lewis. He generously shared his means and methods. But I also told these executives that the path was not without the peril I just described.

Media executives are looking for quick fixes still.

Tablets were going to save them, returning to them the control of user experience and business model the link had taken from them. Hearst Magazines has had some success with tablets. But salvation does not this way lie.

Pay walls were going to save them, finally recognizing the value of their content online. But as Gannett has learned, after grabbing cash flow the first year, growth stops. No Moshiach there.

Ad marketplaces were going to save them — or at least let them compete with Google. But programmatic advertising — those ads that follow you all around the web telling you to buy that kayak you looked at once on Amazon — commodify media. They value direct data about a customer over the context media provides — that is, it’s better to show a kayak ad to a kayak buyer than to buy an ad next to a kayak story. This is why I argue in the start of a white paper I’m finishing now that we must shift to a business based on known relationships with people as individuals and communities rather than as a mass.

Shifting to a relationship and service strategy over a pure content strategy will take not only urgency but also time, with much experimentation and failure and a need for patient capital — likely not the Hong-Kong-based private-equity investors Forbes now has, not the hedge funds that Digital First Media has, not the public owners that Gannett and Time Inc. have. This won’t be easy.

I’m not saying that DVorkin and Perlis ever thought that what they were doing was easy. But others did. They hoped that Forbes would show the way to a solution for all their problems. Well, so much for that. That way lies the skin of your teeth.

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  • Forbes heritage was gambled away for a handful of beans at best, and there is no beanstalk leading to a goose laying golden eggs. New York Times’ management is taking risks, too, especially on “native advertising.”

    (BTW, why stick that advert at the top of your post? It confuses the eye and it is ugly. Spare a thought for your readers :)

  • Jeff, I am a long time Forbes magazine and .com reader. The native advertisements are not a turn off for me. The guest contributors are.

    For example, Forbes contributor Eric T. Wagner “reported” that copywriter Jeff Walker is responsible for $400 million in sales, but his only source is Walker himself. Now Walker references Forbes to back up his own claim!

    I hope that Forbes continues publishing clearly labeled native ads, and I hope other publications follow suit.

    Look at this native ad from Oracle. It’s sharply written and even has some attitude:

    If this replaces the banner ad, I’m fine with that.

    • paulmwatson

      Unfortunately it doesn’t just replace the banner ad, it also replaces done independently written articles.

  • I’ve worked with both Perlis and Dvorkin and they are great – and deserve a lot of applause and credit for making the best out of a declining asset. But you are right – I think the most important job in media (although I don’t think it exists today) is Chief Audience Officer. Who, in today’s modern media organization, is responsible for curating and growing the relationship between brand and fan?

    I’m looking forward to hearing more about your “relationship and service strategy”. And happy birthday!

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  • I’ve long warned about the value of branding. Author makes very valid points, but in this case it could well be that the Forbes brand could have had far more value in a completely different industry and model with much more appealing fundamentals. Even sharp thinkers tend to underestimate the power of why something is known and what it is known for. Yes, disruptions can occasionally be navigated well, mitigated, or even avoided with brilliant and lucky pivots, but often is the case that it’s best to get out early. A great many folks are publishing because that’s what they have always done rather than any kind of sound logic, evidence, or demand. Rarely if ever in the history of any species have we observed a supply and demand dynamic so out of whack or economic models so distorted. Agree it will take more time to sort out, new models and technology need to fill the void–& no doubt many fortunes will be won and lost in the process, but in the interim Forbes could also have been perhaps making a fortune and more fun doing something else entirely.

  • Possibly Forbes could have taken a less dramatic course and preserved some value, but on the other hand, it might also look like a brilliant exit. It was certainly a well orchestrated plan.
    I have been thinking about the journalism/premium services model for a while. Just as National Geographic sells premium travel, the NYT could sell any number of premium experiences enhanced by their content. But at the end of the day, the problem with services and relationship based revenue is that it is all going to be about the very rich. Will be interesting to see if your white paper goes that way.

  • jkings

    I want Forbes to label both native ads and contributors more clearly. I’m not opposed to different types of content. But I hate having to play detective to understand the source.

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