The online media industry’s 20-year history has been a story of successfully innovating past lumbering traditional media, only to then be fiercely challenged by an even stronger innovator on the other side: the technology industry. This year will determine if digital publishing continues to be the fast-experimenting growth industry it has been until now or a maturing industry that gives way to technology’s progress. Here are the three most important challenges online media’s leaders will confront in 2016.
Traditional media had a strong history of controlling its specialized distribution channels. Witness newspapers and their trucks, magazines and their print shops, radio and its stations, television and its channels. Technology democratized information distribution and, as a result, power accrued to its largest players, the platforms. The platforms in turn quietly wrested control of distribution and audience relationships away from publishers (and most everyone else) and are now turning back to set the “tolls” for usage of their powerful distribution channels.
In 2016, Facebook Instant Articles, Facebook Video, Snapchat Discover, and likely more will force a deal between publishers and platforms. Some publishers will be defensive, some will be collaborative, but most will have to partner. In 2016, the power plays in these looming distribution partnerships will be a fascinating study for all as they mete out the balance of opportunity between publishers and platforms.
While the online advertising market continues to grow healthily (early reports signal more than 20 percent over last year), most of that growth is driven by platforms. As competition for advertising dollars becomes heated for smaller publisher players, new business models will strengthen.
We’ll see onsite business strategies continue to diversify (e-commerce, subscription, services, events, video, podcasting) and renewed platform business strategies emerge (revenue sharing with, licensing to, creating content for, and otherwise partnering with platforms to jointly monetize within their channels). With the adblocking conversation at maximum volume, user experience best practices will forcefully sculpt publishers’ monetization products. In 2016, publishers can shine by creatively and thoughtfully monetizing audiences outside of and into partner distribution channels.
Venture capital funds ultimately must deliver returns, and several of the companies in the digital native cohort may be nearing the middle or end of their investors’ funds’ lifetimes. Competing successfully with platforms in an industry headed toward maturity also means bulking up. Result? Consolidation nears and the entry gates close. In 2016, we may see some of the digital natives consolidate among themselves (as foreshadowed by Vox Media’s acquisitions of Recode and Curbed Network) or tuck themselves into larger media houses in order to shore up the future of those larger organizations (foreshadowed by Business Insider’s sale to Axel Springer). The first will be opportunistic plays for power seats in the future of media and the second will be defensive moves by incumbents to protect market share.
The entities that emerge most nimble, innovative, and powerful as a result of those likely consolidations will determine the pace of growth of our entire industry. As the market tightens, new entrants will be headed off by increasing barriers to entry, but not before recent upstarts like Mic and Bustle cement themselves as firm members of this class of significant digital natives. Finally, we will all continue to watch as Bezos Expeditions’ acquisition of The Washington Post unfolds as a realtime experiment in the important marriage of media and technology.
While the online publishing industry contemplates its position going into 2016, it would do well to remember that this year need not be the end of its impressive growth run. The strategic choices that company leaders make now will determine the expanse of opportunity they preserve ahead. One thing is known: Technology is a larger and better-capitalized challenger. Coming to the table as equals to negotiate a fair split requires more resources, audience, and assets than many publishers currently have. Key technology companies are valued in the hundreds of billions, while even the largest and most acclaimed news publishing companies strain to crest just 1 percent of that value.
How successfully will online publishing harness its vision, talents, and assets to respond to technology’s significant challenge? We will see in 2016, the year of reckoning.
Erin Pettigrew was most recently chief strategy officer of Gawker Media.
