. Kelly P. Conlin, President of International Data Group. Kelly Conlin is the President of the world's leading IT media, research and exposition company. IDG's operations include 275 publications, 43 IDG research centers, and more than 90 expositions and conferences. Conlin joined the group in 1989 as Director of Business Development and now oversees operations in 75 countries.

 

Establishing Media Brands and New Media Brands
Where Do We Go From Here?

 

Now if I told you, that as you left this room today, you were responsible

in bringing those brands over to the web, what would you do?  What would

the first thing that you do be? What would your strategy be?  Well, I

think there's an easy way and a hard way.  Now I think the east way is

probably one of the most predominant that we see and that big companies

are fond of using, but I think is fundamentally flawed.  It's a strategy I

call checkbook branding.  It's the notion that the only way, or certainly

the quickest way to build a successful brand on the web today is to get

out your checkbook and write the biggest check you can, certainly one

bigger than your competitor's, and buy your way into the web, to buy your

way into success.  The latest example that of coarse being the deal

announced earlier this week, $70 million deal between Netscape and Excite.

Checkbook branding.  Now it is possible with a checkbook, to buy a lot of

brand awareness, in this media, or in any other media.  But what you can't

buy with a checkbook is brand loyalty; is satisfied customers; and brands

that have profit.  And I want to specifically emphasize that last point of

profitability, because this is still known as a not-for-profit industry.

 

And if you look out two years from now, put yourself in the shoes of a

web-site manager, where would you rather be: Would you rather be managing

the site that has the most traffic and is still loosing money, or would

you rather have a site that has enough traffic to have a loyal audience

and is actually making money, actually providing a return.  Well it's

those of you that choose the later option That I want to address this

morning.  And tell you specifically about three sites that are in fact

profitable today.  And tell you why I think they're profitable.  But of

coarse the question is why aren't more sites profitable?  

 

Well I think inthis rush to get out our checkbooks, to get bigger quickly, we havecreated an environment by which the evaluation of our success is the press

release citing how big we are, not how successful we've made our

customers.  And it makes for some pretty impressive headlines, but

increasingly ugly PNL's.  And I think that checkbook branding has really

obscured some of the lessons that we could impart from the media that has

preceded the web.  Now one of the media types that is most familiar to us

at IDG is the publishing world, and the key principles that drive the

business model for publishing, you see, are not unfamiliar to any of you,

pretty simple principles that are the bedrock of the business model of

publishing.  And if we parch these into sort of three key areas, the

product, the circulation of who we're reaching, and the revenue, together

if we work those successfully we build a profitable model.  And I think

one of the reasons that we are still a non-for-profit industry is that

model is not yet refined; it isn't yet mature.  And I think part of it is

that we really haven't focused on it holistically in any general sense.

 

To sort of start this morning by talking about these three things, and the

product to begin with, the question I'd like to ask is how satisfied are

your customers with your website?  Do you know how satisfied they are?

What do you use to measure that satisfaction beyond just knowing the

top-line log files of how much traffic you're getting? Do you want to know

that information? Is that important for you to know what drives your

customer? What makes them loyal? What do like and don't like?  How can you

optimize your site to drive that satisfaction?  Now if you look at this on

a general basis, across the web, the results in fact aren't very

encouraging.  In a recent find, in an SVP survey, about a third of the

users who have gone on the web, said they saw no reason to go back.  In

consumer marketing that called the conversion rate. You get someone to

sample your product, and then you rigorously test to see if you can

convert them to a loyal customer.  The attrition right here, in this

particular survey, was one third.  Not a very healthy rate. 

Anothersurvey done by Intelliquest of actual active web users, found similar

fashion, one third of those regular users of the web, said they found the

content on the web to be very good or excellent.  Of course what that

means is that two-thirds of regular web users find the content wanting.

And that's not a particularly good sign. 

 

Our own research, in hundreds ofhours of focus groups that we've done over the last year, we found that ina vast majority of the cases we asked the user to find some informationabout a particular topic.

They had a very difficult time finding that

information.  In 90% of the cases, they gave up.  They got frustrated.

They were dissatisfied with the experience.  So if you look at these

statistics and compare them to your own, if you have them, of your own

satisfaction of your customers, I think it's fair to conclude as we look

at this today that we've got a very good job as an industry of building a

lot of fascination about what we do, but not necessarily building a lot of

satisfaction for what we do.  You know you all have your own experiences

with this, I did a quick experiment earlier this week, I went to first the

Excite site, and I looked for information about Ad-Tech.  And I thought

given the peculiar spelling of Ad-Tech, and the way their brand is

spelled, It would pretty easy to get information about the conference. How

many links do you think I got when I typed in Ad-Tech on Excite?  600,000

links, and not one of them as I paroused had anything to do with this

conference.  And yet think of how many other things in the world you think

are related to that spelling of the word Ad-Tech. 

I went to Infoseek.  Ityped in Microsoft. How many links do you think I got?  1.6 million linkson Infoseek. That's a tough slog for someone.  Washington Post site. Thereare three different search engines on the front page, the home page of the

Washington Post site. And it's not clear which search engine you use for

what.  If they're all comprehensive across the site or one is specific to

a particular content. Especially to the novice user, it is a very

confusing orientation to how do I get information beyond this home page.

And finally at the other end of the spectrum, C-NET. Did you know that on

C-NET's home page there is no search engine? There's no way when you go to

C-NET and you see this site, for you to search this site, or the network

of sites.  Now why is that?  Are they thinking first about the customer,

and try to optimize their experience and get to the content they want

quickest?  Or are we dealing with a situation where they're in a position

of needing to optimize page views, so they want to make sure the user at

least slogs through a few pages before they get to the content because

that increases their page views, increases their advertising availability.

What's interesting about this is even with the expanse of what you get

back, imperfect as it may be from these searches, when you look at the

coverage of the web from these portals, in fact recent research by NEC

Science laboratory, found that at most, the search engines are using

one-third of the content on the web when they go out and do their search.

So you combine all this together and you don't necessarily come up with an

easy way to satisfy customers.  Or a model that seems to be going in that

direction.  And yet, there is this fascination for the portal race. I

mean, I think the beginning of 1998 will clearly be known in this industry

as the great portal war.  Every one seems to be rushing into this

headlong, into this notion that bigger is better.  This headline from a

recent ad, extolling advertisers to pay attention to my site cause we're

the biggest. How relevant do you think it is to the customer how big you

are?  If I told you for example, that Modern Maturity is the largest

circulation publication in the United States, does that change your

relationship to Modern Maturity? Does that make you want to get Modern

Maturity? Does that change the value proposition for you for that

publication?  I just don't understand this arms race.  To me it's a kin to

know how many people see my publication on the newsstand as they walk by

in the airport, or on the street.  That's an interesting number, perhaps

maybe adds to my brand impressions. 

But what's more interesting to me, asa business model, is how many people obviously read that publication; how

many people go over and buy it.  Or regular habituated users depend on it.

Who have an editorial relationship with that publication.  Who ultimately

are satisfied customers.  We have to remember that audiences that are easy

to get are also easy to loose.  And so we really have to think of, when we

look at the product and how we're satisfying customers, perhaps alittle

differently than we have in the past, the way we look at it is in fact

different, I think, than most main-stream web sites today, at least at our

company.  Here's a typical way we measure "how good are you, how

successful are you, what is your press releases going to say this month

about your page views", across a range of sites that you see there, this

is in millions of page views.

We think a more relevant measure is not how

many page views you have, but how intrigued and engaged your customer is

with that site.  And the best proxy we have today for that is how much

time they spend with your content.  It's like if you get a half-hour of

someone's time on a Thursday night, you know on NBC, that's a very

valuable franchise.  If you get someone to read your publication for an

hour that's what you're selling. That's the value proposition. If you've

engaged someone's time, the most valuable thing they have to offer, if

you're doing that you're building a brand.  And so we're pleased, when we

look at this particular measure, that the one site that's not a PCG site

is in fact the one that gets people engaged more.

I think it's partly, Ihope it's due, to the fact that this is the metric we're focused on.Building an engaged community of readers.  Not passers-by to our news

stand.  And so look at this from the customer's perspective.  330 million

and plus growing pages out there on the web today. So the customer comes

on the web and they've got this mountain of information.  Now are they

interested in this mountain?  I think they were maybe a year ago when the

web sort of burst into the scene, and people were fascinated with browsing

and linking, and they could go from here to there very easily and

effortlessly. And that was kind of fun.  But ultimately we're getting to a

point again were customers focus on their time, and the web is a tool that

ultimately helps save people time. Not waste their time.  Getting to a

point where we're delivering products which help them make, give them

specific information, or decision making tools. 

And on the consumer side

this could be the particular chat room or infinity group that they're

interested in.  In our business, the business to business world, this is

helping them make a decision.  Getting to that information as quickly and

efficiently as possible.  And looking at this from the publishers

perspective, the same sort of metrics apply here.  I'm not interested as a

publisher about 30 million or 40 million users on the web; I'm interested

in the folks I can put a fence around, and build a relationship with

infinity with.  You know, I bet I could build a better business model for

10,000 people if those people have the right characteristics. 

Let's saythey're CIO's of fortune 500 companies. The senior executives, responsiblefor buying all sorts of technology for their large company.  Small

audience. But I bet that has a better business model than someone chasing

5 million or 10 million. The great race to have the biggest numbers out

there.  And so these approaches of aggregation, of sticking as much as you

can into that single URL or being all things to all people. I think it's

like ransom note publishing.  It's like sticking all your brands into one

web site, as some publishers are doing, creating a corporate web site,

that's ransom note publishing.  Who's the audience?  How many media

properties can you identify that don't know who their audience is with a

lot of precision?  I can't name very many, if I can name any.  And so I

want to turn to the examples I eluded to earlier. 

This is an IDG site,

and I'm going to refer to these sites because I can talk in confidence

about the numbers behind them, and obviously I'm most familiar with them.

All the sites I'm talking to you about today are profitable; in fact, this

particular site's profit margins exceeds 20%.  Now why is that?  Well,

first, Network World, to give you alittle background, is a classic

business to business publication.  It's got 150,000 print circulation in

the analog world.  It's franchise is really build on the quality of it's

audience; it's controlled circulation, and you know what that means: you

fill out that long card that says what kind of person you are, what

environment you are in, what you're going to buy next year, so that

Network World only brings on to their subscriber file those that qualify,

that meet their hurdles.  That's a pretty typical controlled circulation

publication. 

Now as they brought their brand over to the web, what do you

think their strategy should be?  Well the conventional wisdom would have

you believe that there's no way to really take a controlled model and

bring it over to the web because what happens when you bring up a

registration screen?  Or God forbid have a 30-questionnaire form that

people have to fill out before people can get to your content.  What

happens? People won't do it.  That's the conventional wisdom that anything

you do to intrude on them getting to that getting to that content quickly

will suppress your page views.  And that is considered a bad business

decision.  Well in Network World's case, they taking our model and taking

our approach say, "we can't be schytzofrenic. We can't be one thing in

print and different on the web."  What we sell in our franchise both at a

troilene and a sales environment is the quality of that audience.  So we

want to control the quality.  And so they did what they do in print.  They

forced the subscriber to fill out, initially an eight page, became then a

five-page form, with all sorts of detail about who they were.  And what

happened, is that they got 150,000 qualified, registered users.  And that

drives a very powerful and profitable business model, for two reasons.

One, on the editorial and content side, they know exactly who they're

writing for.  They can optimize their site for that audience.  They know

everything about them.  Who they are, what kind of companies they're in,

what technical environments they have, what they plan to buy, what their

issues are. 

And so at IDG, we don't make a distinction between new media

and old media, we make a distinction on the audience we're trying to

reach.  And then make sure we're reaching that audience in any media

that's appropriate for them.  Whether it be on-line or print, or other

forms of media.  Events, everything that we can do to surround that

audience with information products that build that franchise.  On the

advertising side, of course you can instantly see the implications of

this.  I can track someone's behavior through the site, and say they're

interested in multiplexing, and they go into that particular area and they

look for a white paper on multiplexing.  Perhaps it's a sponsored white

paper.  Well, I can track that behavior, and then I can match that

person's interest, with their demographic profile, not just their name,

and I can send out what they call a hyper lead, to the advertiser, that

tells them that John Doe was on the site today. He expressed an interest

in multiplexing, here's everything you need to know about him.  That's a

very powerful tool for a vendor who's looking for information and looking

for leads, qualified leads, to help them sell product.  And ultimately

that's what we're trying to do, is connect buyers and sellers together in

an effective and sophisticated way.  This hyperlead program is a reason,

not only that we are profitable I think, but the CPM's that are commanded

here are three and four times the average CPM.  And if you're trying to

drive success, and move out of the ghetto of not-for-profit, you're going

to have to drive the top line effectively and by qualifying your audience

is one technique that we found very effective. 

Putting this fence around

an audience, delivering it effectively, optimizing for it, and doing it

across a spectrum of media.  Another example of a profitable site, again

20% plus profit margins, is an IDG site called Java World.  Now this

doesn't exist in print.  This is only on the web. It is a web zine.  It

was conceived as a web product.  Now we have a circulation director at

Java World who came to us about six months after the product was launched,

and she came from another site.  And she said her job at the site she came

from, as circulation director, or whatever the title was, was do as many

deals as possible.  Link us everywhere.  We want to be the most

promiscuous brand on the web because links and deals which help us get

customers are the Holy Grail for us.  So that's her job.  That was how

circulation was defined at that site.  What it meant was, there was no

circulation database there.  It was only just a drawer full of log files.

There was no effort to capture the email address at the site she came

from.  There was no time stamp on the data she was receiving.  And there

was no effort to capture the postal address of this person.  There was no

question that was asked if the person was interested in receiving more

information on a particular topic.  There was no effort at the notion of

renewals, how you build loyalty, how you get people to come back.  There

were no loyalty programs of efforts to increase traffic based on loyal

users.  There was no status plug on the data file to tell you when people

came on or off the file.  It was none of these things that are circulation

101 in the print world.  This is basic stuff you do.  None of that.  It

was just "link me everywhere."  Well, Java World takes that whole list of

things I've just described, this circulation 101, they're maniacal about

it.  They manage their list as if it were the gold mine that it is.  These

are people who are interested in Java technology.  Over 100,000 people

have registered for this site.  That's an incredibly powerful group.  Lots

of infinity between them in terms of what they can talk to each other

about, lots of content editors can provide of great relevance to them.

That's very powerful.  And so circulation, as traditionally defined in the

print world, is as rich, if not richer in the web world; yet we're still

in an age where "link me everywhere" is as sophisticated as the

circulation strategy gets.  And that's not going to lead us to profitable

opportunities.  In this particular case, Java World, they have months

where their circulation related revenue listed, postals, and e-mail

exceeds 40% of their revenue, because they manage it in this sophisticated

way.  Now I suppose one question you might have is this approach is, does

it really lead you to the fringes of the web. You know, I want to be

mainstream.  I want to compete in the great arms race.  Am I talking about

the ghetto of the web with Java World, and Network World, these sort of

nitch oriented publications.  Well, I don't necessarily think so.  Look at

this revenue comparison from last months Simba report.  It shows, ranks

all the sites, and you see that IDG is listed there with $2 million in

revenue in the top ten, but we don't really pay attention to this number.

Our sites are not really linked as IDG. We have an IDG.net which links

them together for readers to have easy access in the gateway for the

sites, but we optimize and manage our sites as we've just described.  Java

World reaches a specific audience.  And Network World reaches a specific

audience.  And PC World.  But that approach leads when you actually add

them up together, it not the fringes at all.  What's actually interesting

about this, two things.  One is, this only includes about 20 US sites.  We

have 210sites in 50 countries.  So if you actually added the full network

together, you'd be much, much higher on this list.  The other thing I

think is probably most important, it is what drives the profitability, not

necessarily the top line, but the profitability is the CPM you can

command.  And by homogenizing all the content together, as many of these

sites do, and try to aggregate everything together, they are forced into a

CPM war.  AS you know, the statistics today are that CPM's are being

driven down.  They're in the $30 or even $40 CPM range.  What's the

highest CPM of any of the companies listed here?  What's the highest CPM

that any of these companies get?  Well none of them, save one, break $100,

and the one that does break it happens to be IDG.  WE are close to $200

CPMs on some of our sites.  And so when you compare and contrast that,

because of the specificity of the approach we've taken, you can drive

profitability.  I think sometimes that distinction is lost.  When you look

at the sources of revenue on-line, WE clearly are in an era where we've

gone beyond print or banner advertising, into these rich revenue streams.

I mentioned we have 210 sites now in 50 countries.  There's a perfect

correlation between the number of revenue sources that a particular site

is able to tap because of their approach and their profitability.  Whether

they're on their way to being profitable. 

The most profitable sites we

have are the ones that have the broadest spectrum of revenue sources.

Perfect correlation.  And so we look at, when we try to optimize our

models, we look at this as really the best and most sophisticated model we

think we have today in driving overall revenue opportunities.  Of course

this starts with advertising revenues.  They're still the bulk of revenue

today.  But we try to take every visit that a customer has to one of our

sites and think of ways that we can drive all of those other revenue

strains.  From getting people to sign-up for newsletters that will not

only prompt them to come back   but can have all sorts of other messages

and interactive opportunities, to have premium content areas to drive

circulation revenue, to have certain areas that are registered and

therefore drive higher CPMs, and ultimately to get to commerce, to helping

people drive transactions.  You saw on the video there Web Shopper, which

is a site which helps people drive product purchasing.  And so we look at

this, and the track record we've had in doing this, and let me give you

one example from PC World.  If we make some assumptions about one visitor

is about five page views per visit, PC World, by following this strategy,

is able to optimize the amount of transactional revenue they get per

customer.  That's what they're focused on.  Remember that time spent per

site per visitor, that I showed you earlier, this is where it manifests on

an economic basis.  Publishing revenue, advertising revenue, about .2

cents per visitor.  When we get them to sign up for e-mail newsletters, we

get great lists.  Those lists are rentable.  That drives another revenue

stream.  Paid Circ revenue.  Still a very small number, but growing.  And

we're very pleased with the progress we have here.  But it's a

contribution.  And product sales again, these lower two numbers are not

very significant in absolute dollars here.  But as we directionally move

them forward, they can perhaps, we believe, over-take those top two over

time.  So what does that add up to? . 2360 pe3r visit.  And every month,

we look at that number.  Are we moving it ahead?  Are we incrementally

improving that?  Are we doing a better job of optimizing their visit,

optimizing the transactional revenue we can drive from that visit, and

driving the profitability of our sites?  Let's compare that to a general

site, a portal site, in Excite.  And these are rough approximations from

their public information.  Excite has about 40 million page views a day.

They have about 8 million revenue per month.  So that adds up to about 7.6

million in revenue and about 1.2 billion in page views per month.  So

that's .007 per page view and .03 per visit of 5 pages on a total basis.

How does that compare to the number you saw for PC World?  Well PC Worlds

number is about six and half times larger.  I mean, you're talking about

millions of page views, millions of visitors, These numbers add up over

time, and again, they drive us not just to think about the big line, the

top line, the number that everyone puts in their press release, but the

bottom line, the number that will ultimately build a successful industry

and a successful business for all of us.  I think if you look at these

models that I've tried to describe, we all understand that the web is

going to change everything.  You know, many speakers at his conference

have described all the different ways that the web is going to change

everything.  But we also have to realize that the web changes nothing.  It

doesn't defy the laws of gravity, it doesn't change the laws of economics

or capitalism, it doesn't unseat the primacy of driving customer

satisfaction as a business model that we all have to be focused on.  And

the way out here, I was reading a book that we published in June by

someone you may know by the name of Michael Wolf, who's publishing a book

called Burn Rate, which is a chronicle of the Internet from last year.

And he's the author of a book that you may know as Net Guide.  He wrote in

his book, " optimism has been our bank account, fantasy is our product,

and press releases are our good name."  And I think that as we look back,

and look at the healthy on days the excitement and enthusiasm, and as we

turn now to sort of drive in the business models, a lot of the examples

and business model approaches I've taken I think are going to become more

important.  It requires creativity and ingenuity as much as it does common

sense and execution.  And I don't think it can be driven by the checkbook

alone.