Today AOL paid more than $40 million for a WordPress blog.
My intention here isn’t to denigrate TechCrunch or take anything away from what their team has achieved. Michael Arrington has built an incredible business and I count myself as a long-term daily reader. But when you strip everything away, AOL ultimately paid $40 million for a WordPress blog. If you work in the newspaper industry, this story should be of particular interest to you – and here’s why.
Firstly, let’s look at the numbers and what exactly AOL will be getting for its investment. In terms of reach, TechCrunch attracts between 7-9 million unique visitors each month and about 30 million page views. This audience is very loyal and targeted – consisting of technology execs, entrepreneurs, Silicon Alley big-shots and a host of angel investors and VCs.
Secondly – and although as a privately held company TechCrunch doesn’t release financial information – the state of the business seems healthy. TechCrunch claims to be generating about $10 million in annual revenue and employs a fairly lean staff of just over 30 which likely keeps overhead to a palatable level.
Thirdly, TechCrunch has developed a flourishing conference business that – love them or hate them (and this is a subject for a future blog post) – seems to be growing again at a steady clip.
So why is this relevant to the newspaper industry? Because all of the points above represent what newspapers do NOT have, and thus why they’re struggling for survival.
Let’s start with the audience. Some newspapers attract huge traffic and high audiences but struggle to monetize these eyeballs effectively. This is partly due to the fact that newspapers tend to attract a fairly transient audience who selectively digest individual pieces of content – often linked-to from third party sites – and then disappear for weeks or months. What newspapers are lacking is the strong, die-hard army of brand loyalists who make visiting their sites an integral part of their digital day.
The reasons for why this is the case could be debated for hours on end, but it ultimately comes down to audience connection. TechCrunch writers post original, real-time content in a highly distinct voice and then continue engaging with their audience AFTER the story is published. It’s not uncommon to see TechCrunch writers directly responding to comments about their post and this adds a personalized element to the user experience. This is a concept lost on many newspaper journalists and simply maintaining a Twitter feed doesn’t constitute actively getting to know your readers.
Then there’s the revenue. Unless you’ve been living under a rock for the last two years you’d have been exposed to the slew of bad news that has been afflicting the newspaper industry. Revenues down, profits down, lay-offs up…..it’s hard to find a ray of light in all this doom and gloom.
A huge part of this problem is cost structure. Without having access to the TechCrunch org chart much of this commentary is speculation, but employing 30 people to run a $10 million, 9 million monthly unique visitor web site is on the lean side. This type of structure is alien to many in the newspaper industry, where bloated, expensive newsrooms are the norm.
Finally, there’s the conference business. What TechCrunch has done is to build an ancillary business that allows it to offer a product and experience to its core customers that is highly useful. This is something that newspapers have always struggled with and once again illustrates the challenge they have in finding new, profitable ways to connect with their customers on a deeper level.
So back to the $40 million WordPress blog. There’s no reason why a newspaper – or a magazine – couldn’t have started TechCrunch. It just took one guy with an idea and an open source blogging platform as his tool. TechCrunch doesn’t include any elaborate or fanciful features. There are no personality quizzes, or polls, or location based apps. Their success has come from offering focused, timely, relevant content in a relatively no frills package.
Over the last year newspapers executives have been telling us that paywalls are the answer to their problems. Content simply shouldn’t be free. Not only that, but newspapers should be entitled to get paid for their content.
And that’s exactly why the road to success for the print world will be long and hard. TechCrunch – and other blogs like it – illustrate that with some creativity it IS possible to build a strong digital business based on producing and delivering free digital content. Rather than feeling like it’s their God given right to be paid for their product, blogs and bloggers are instead focusing on ways to build strong connections with their customers to open up new avenues of monetization while keeping costs low and the end product simple, and highly focused. Until newspapers are able to fully understand this concept, their digital futures will continue to be uncertain.