“Print is not going away. Print is the necessary part of this business because that’s where the lion’s share of revenues comes from, but the big guys who are the innovators in the printing industry; they understand that the publishers want to make money and they need to make money. And I think that we have a model that’s flexible enough for them to really test and figure out what will work in their market.”Larry Genkin
A publishing company that’s determined to set digital content on its ear with its innovative business model software and a plethora of partnered online platforms that are as diverse as the celebrities and people who are joined at the hip with them.
It’s an intriguing concept that Larry Genkin, founder and CEO of the company Of Eleven Media, is exceptionally excited about. The reinvention of the digital realms of magazine media is something that has had publishers thwarted from the beginning. How do you make money from your digital content? The answer so far hasn’t been banner ads or native advertising, but Larry believes strongly that he and his team at Of Eleven Media have found the solution to this profoundly ongoing problem with the software they’ve invented called Ad Einstein. The program is for the advertising dilemma publisher’s face when it comes to making money on their digital ads.
And from a publishing standpoint with the 19 different digital platforms they’ve launched so far with some partners, the company’s other originally designed program called MagTitan, gives digital readers an amazingly astute innovation that is more readable and enjoyable than anything out there today.
I spoke with Larry recently and he demonstrated the software for Mr. Magazine™ through an interactive portal where I could visually see and experience the magnitude of MagTitan’s reader capabilities. It was truly an undeniably pleasant and entertaining foray into the world of digital content. I was suitably impressed and informed.
The interview with Larry was thorough; the demonstration interesting, and the concept totally innovative and creative, but for the record, Larry uses the tagline Reinventing Magazines but I do not. To me, he is reinventing digital and reinventing content on different digital platforms. Remember, a magazine in Mr. Magazine’s™ book must be ink on paper, pure and simple.
So, I hope you will enjoy this lengthy conversation about MagTitan and Ad Einstein with Larry Genkin, Founder & CEO, Of Eleven Media.
But first, the sound-bites:
On the genesis of his company Of Eleven Media: We’ve been in the publishing business for a while. We love print because it’s readable, it’s portable and it’s a wonderful technology, but the digital stuff in this time period was doing none of that. So, we said OK, there wasn’t a lot of money and we were very limited in what we could do. How could we play in the digital world? Our vision at that point was to be the leading digital magazine publisher in the world and we wanted to launch 100 magazines in all these different niches in three years. We asked ourselves then were there any software programs out there that we could purchase to launch our magazines that would do what we wanted it to do, what we envisioned the technology could do? And when we looked, there was nothing out there. We were publishers, but we needed to be able to build the technology because it didn’t exist in nature.
On how Of Eleven Media’s software, Ad Einstein, makes money for his company and other publishers: With Ad Einstein what we’ve done is we say to the advertisers, you’re only going to pay when we can verify that somebody has actually read your ad, because that’s our job as publishers; to get a prospect who is interested in your product or service, to look at your ad. The rest is really up to you.
On how he is achieving that scale that other, more established media companies have not: Here’s what I can tell you from the hundreds of thousands of visitors that we’ve had for our magazines in aggregate so far over these few months. Readers spend good time with our publications. Our content is really good, but I don’t think it’s because of anything more than it’s very readable, even on the smallest devices. From a circulation standpoint; what we do is start by partnering with someone who has a data base. We come to these people and they become our equity partners in a publication and they can distribute the magazines through their email lists and their social media followings.
On how they’re making money if the subscriptions are free and readers are using the ad block apps: I think you know this as well as I do, there is a lot of experimentation going on with ad block. What I can tell you, and I don’t want to stir up a hornet’s nest here; we’ve figured out a way to have our ads displayed. And what I suspect will happen over time is it’s going to be this cat and mouse game where publishers figure out how to beat the ad blockers; the ad blockers will come back and it’ll be this back and forth gaming.On his business model, which is still based on free content to the reader, with the advertisers singularly footing the bill: I think the business model that’s going to win and be successful in today’s world is going to be a hybrid model? Money is made off of print; we all know that publishers aren’t abandoning print, because they all know the lion’s share of their revenues and profits are coming from print. I think in this new model you keep all of that; you don’t change it. To abandon that as a publisher would be a silly mistake. What you have to do is then generate add-on revenue from digital. I think what you see publishers doing today are going through all of these gyrations to try and generate needed revenue and that comes from getting into events or doing things that are far-removed from their core content in creating what should be an experience that a reader must read every time that issue is put out. And they’re doing it out of necessity to pay the electric bill.
On why he thinks the titans of the magazine media world haven’t already figured out how to do what he believes his business-model software can do, make money from digital: Well, I think it comes down to a pure question of economics. If you look at economics and you look at the big Titans of this industry, all of the companies that you mentioned, they realize that they have all sorts of financials showing that their print revenues are declining, their print readership is declining; it’s not entirely going away, I don’t think that will ever happen, but it is in decline. The amount that they can get from a per-page basis is declining and digital is increasing. So, they say, Holy Crap, what do we do?
On how he plans to compete with companies like Google, Facebook and Twitter that are basically already using the business model he is proposing for magazines: If we as publishers give away all of our content to these players, we’re in trouble. I think a publisher needs to be self-sufficient. You can be lured by the traffic numbers. People are using Facebook, so if I put it out there I can get traffic. Well, you know what, they might read your stuff, and that’s OK, but if you can’t monetize that how are you going to pay your staff; how’re you going to pay your printer or your electric bill? I’m very, very concerned about it. So what I come back to as a publisher is this model; you leverage Facebook. And this is a model that I think is a way to leverage what social media can do for us instead of giving them your content.On what happens if Facebook ever becomes self-contained and providing a link to an online magazine will not open up to the article onsite: I think every publisher has to look at it this way, let’s start with making our business successful with what we’ve got. And what we’ve got is some sort of database and we’ve got some sort of content-creation expertise. And we also hope we have some sort of ad constituency that wants to reach our readers. We’ve got to make money off of that core proposition through print and digital. Now, if we can test and do things with these other platform providers and it proves to be a smart business move, then by all means do it. But I think to sit on your hands and wait for the day that they’re going to come to your rescue…you know, hope is not a business plan.
On whether his business model beliefs have fallen on deaf ears or does magazines and magazine media see him as the knight in shining armor who can save the digital content world: I don’t call myself a knight in shining armor; if you look at this realistically, we have a ragtag group of people; we’re a virtual company; I have people working literally all over the globe who are banded together by the Internet and we’re all working for a cause. And the reality of it is, I wouldn’t be here doing what I’m doing if we hadn’t lost everything once before. But what I think happens when you come out of a place of desperation and you’re forced to think in a different way, is that’s how innovation comes about. It’s cliché, but innovation happens in garages. You’re freer to think in different ways if you don’t have to make payroll; if you have to answer to shareholders, you’re not necessarily in a position to think. So, I think that we, just by accident, stumbled across some things that work and what I can tell you is that you can’t get a client like USA Today by accident. They’ve looked at what we’ve produced and they see the wisdom in it. And for us, that’s a great validation. We have a lot of work left to do, there’s no doubt about that.
On anything else he’d like to add: What we did with the first issue of USA Today with our technology is put it in one-page design as opposed to a two-page spread, because a two-page spread is great for print, but it doesn’t exist in digital. So, why do that? We also reimagined the cover for them using animations and storytelling. The way that the software works is you go left and right between stories and up and down to read them. That way we don’t force you to flip 15 pages past stories you’re not interested in. Most importantly, the content is very readable without zooming, pinching or squinting.
On what keeps him up at night: What keeps me up at night is I don’t want to be Xerox PARC. I think that we’ve developed a number of technologies: MagTitan, Ad Einstein, Infinite Pages; all of these things in and of themselves, any one of them would be great, but if you learn the lesson of Xerox PARC, they had all of these brilliant minds creating transformative technologies and it wasn’t them that ended up being able to bring it to market.
And now the lightly edited transcript of the Mr. Magazine™ interview with Larry Genkin, Founder & CEO, Of Eleven Media.
Samir Husni: Tell me a little about Of Eleven Media.
Larry Genkin: We’ve been in the publishing business for a while. I started back in trade publishing, working as an ad sale rep at a company called Phillips Business Information and I ended up starting my own publishing business and doing everything that publishers do, not exclusively with magazines, but everything from trade shows to books.
Eventually, having a couple of different businesses, we started a company called GSG Media and there were a handful of us that launched magazines for this big up and coming thing called social media. And we had magazines on “Facebook in Business,” “Twitter in Business,” LinkedIn in Business” and one on “Google in Business” and it was exciting because it was at a time when social media was really picking up steam and we had the publications and some marketing partners on it.
Long story short, and this was back in 2008/2009, I lost my shirt. I lost everything. You look back in hindsight and you understand that the global economy was going through a horrible time. But when you come out of an experience where you lose everything, and I myself ended up having to go through personal bankruptcy, it’s a very difficult time.
When you go through something like that, at least for me; I started to reflect with the team, a core group of us who were all involved in GSG Media and those social media publications, reflected and thought: what did we do wrong? What could we have done different? We were trying to take something positive from the experience.
And it wasn’t until a little bit later when I worked for a guy from Oklahoma who was formerly the 25th wealthiest person in the U.S. named Bill Bartmann, who is really a brilliant businessman, that I learned a valuable lesson, which I think he sort of meant as a joke, but the team and I really took it to heart. He said in business he believed that it was imperative that you become the market leader. That’s the real path to success. And he said it’s not as hard to be the market leader as people think; all you need to do is figure out where the herds are running to and then just go get out in front of them.
So, I started to really think about what he said and the wisdom of it. I looked at the publishing business through a different lens after that. And one thing that I saw at that time was, and you know all the statistics better than I do, readership was migrating to online media. And advertising was also going through a reflection point where advertising in online media was really taking off. So, we said OK – if this is where readership is going; if this is where advertising dollars are being spent, how do we go get out in front of them? Also, part of it was how do we do it with no money?
All of us at that point in time were working other jobs and yet reinventing magazines became our mantra. Our tagline was sort of: what would magazines be like if they were invented today? If we could forget everything that we’ve learned in the publishing business and we knew about the power, for example, of these digital devices and what they can do; what would we do; and it became obvious.
You talk a lot about innovation and I love that about your work. To us, we thought that what was being done with digital editions of magazines was the equivalent of the early days of television. If you go back to the early days of television, the first shows were the popular radio shows. It wasn’t a digital medium. You had people who would stand on a stage and do vaudeville kinds of things or comedy; really just very static. It wasn’t until a little while later when people like Ernie Kovacs came in and really took advantage of what this new medium of television could offer.
And we kind of looked at magazines and digital in the same way. We said you know what; the only innovation that’s happening with digital publications is Page-Flipper. They’re taking a replica of a magazine that was designed to be beautiful in print and they’re squishing it down for a computer screen and it’s very difficult to read. Then when you get to the tablet, they’re squishing it down even further and now it’s next to impossible to read without zooming or pinching, scrolling or squinting. And then to make it worse, the biggest readership growth is on the Smartphones or mobile devices and you’re taking something that was 8½x11 and squishing it down to fit an iPhone. I mean, forget about it. It’s a terrible, terrible reading experience and it’s static.
We love print because it’s readable, it’s portable and it’s a wonderful technology, but the digital stuff in this time period was doing none of that. So, we said OK, there wasn’t a lot of money and we were very limited in what we could do. How could we play in the digital world? Our vision at that point was to be the leading digital magazine publisher in the world and we wanted to launch 100 magazines in all these different niches in three years.
We asked ourselves then were there any software programs out there that we could purchase to launch our magazines that would do what we wanted it to do, what we envisioned the technology could do? And when we looked, there was nothing out there. We were publishers, but we needed to be able to build the technology because it didn’t exist in nature. So, me being naïve like I was, I figured it would take us maybe three or four months to build our version of the technology.
Well, two years later (Laughs) I finally finished Version 1 of; it was this hard, hard process and what we figured out was a number of really important things. As publishers, what we figured out was how to make digital magazines come alive and be a really great reader experience. We figured out how to make them readable on the biggest devices, such as a 27-inch monitor, to the smallest Smartphones. And we also figured out how to give publishers a business model where they can not only make money in print, but they can actually turn digital into a profit center as well, because what we know today is that most publishers are giving away digital. They’re making all their money on print because all that they can do is replicate issues today, saying to the advertisers, oh yes, Mr. Advertiser, we have a digital edition and if you buy the print, then you get the digital for free.
Publishers are dying the death of a thousand cuts and you see all of these layoffs happening; you can’t give away a product and not expect a day of reckoning later on. So, what we figured out was how to make the technology actually have a viable business model where publishers can now make money from digital as well as print. The technologies are called MagTitan and Ad Einstein.
And one last part of the story just to bring you up to the current day; while we were building the technology, something again that we thought would only take three or four months, I had a small editorial team and we decided to go ahead and launch a magazine so that it would be ready when the software was.
But what happened was we finished the magazine, but the software wasn’t ready. So, we said let’s build another magazine until it’s ready. When we finally finished the software about five or six months ago, we realized that we have 19 magazines that we rolled out on all sorts of different topics; some of them are in partnership with readers and celebrities, for example, we have one called Sharkpreneur Magazine and it’s done with Kevin Harrington of Shark Tank; the famous sports agent, Lee Steinberg, who was the real-life Jerry Maguire; he’s our partner on Game Changer Magazine.
So, we had all of these publications and as we started to release these out to the world; I would get calls on average every other week, and a publisher would say, I just saw your magazine, Small Business Edge, and your technology is really interesting; how much would it cost for me to use it with my magazine? I would have to tell them at that point in time that we were publishers, just like them, and the software was intended for use with our publications only.
Now, I may be slow, but I’m not dumb. You get a number of those types of calls and suddenly you wake up and realize that other publishers see the value in your product and we might have a good business for ourselves in being a software provider to the publishing industry as well as a publisher.
About three months ago we made a major pivot as a company and decided to allow our software to be licensed. But being in that business is a completely different one than publishing and our technology on the backend wasn’t designed for other people to use. It wasn’t user-friendly; it was really designed only for us because we knew how to use it.
So, we had to rebuild some modules of the software to allow for licensing of other people and all of that. We just recently, within the last few weeks, got our first marquee client, USA Today, the magazine group. And we’ve gotten two other publishers who have signed on and now we’re in talks with lots and lots of people, showing and doing what you do out in the world, being an evangelist for magazines and in particular this technology in the business model.
Samir Husni: A lot of the major publishers have moved away from the replicas and they’re doing other things with their apps and still they can’t find a way to make money. If a magazine is making money from digital, it’s doing so maybe from native advertising. And now with the coming of ad block technologies or IOS 9, which will have ad block built in and all of these other ways to avoid ads; are you making money from anyone who is just looking at your digital platforms?
Larry Genkin: Well, there are a couple of different things. Let’s first talk about the business model. We developed this technology called Ad Einstein and the reason we call it Ad Einstein is because it’s brilliant. I say that tongue-in-cheek, but it really is absolutely brilliant for publishers.
To describe the business model, think about it this way, if you’re an advertiser and to make money in advertising right now, if you’re an ad sale rep selling media, it is a very, very hard time. There is lots of competition; the price is being pushed downward toward zero, especially in digital.
We looked at the biggest advertising successes of our lifetimes and figured out how we could bring that to the magazine business, because frankly, we wanted to make it easy for us to sell ads and now easy for our publishers to sell ads. So, what we did was look at Google. I found different research, but with Google approximately one out of every 12 ad dollars on the planet are spent with Google. And part of the reason that they’ve been such a runaway success in my estimation is for two reasons; they pioneered and made popular pay-per-performance advertising and you cannot argue with the fact that advertisers love that they only pay when their little text ad gets clicked on with Google. That’s something that has proven to be successful.
The other thing that Google has done that was a game changer is to allow advertisers to set their own budgets. One of the challenges that every magazine on the planet has and I don’t care if it’s a circulation of 5,000 or a million-five is that we always price people out because we have thresholds of what our fractional ads are or full-page ads and some people can’t afford it. They don’t have the budget. Well in Google, if you can afford $1 you can run $1 worth of ads and when that is used up, they’ll pull you out and put someone else in.
So, with Ad Einstein what we’ve done is we say to the advertisers, you’re only going to pay when we can verify that somebody has actually read your ad, because that’s our job as publishers; to get a prospect who is interested in your product or service, to look at your ad. The rest is really up to you.
It’s up to your ad, your company’s reputation and all of those kinds of things. What we say is if somebody flips past your ad and doesn’t spend much time on it, you shouldn’t have to pay. And we don’t charge those clients. But conversely, if they do one of two things which are: either clicking on the ad, and that could be a link or a video or to buy a product; we actually have technology that allows people to securely buy products with a credit card right within the advertiser’s ad without ever leaving the magazine, then we charge them. Or if the customer spends ten seconds or more on that ad, since we only display full-page ads and since we only display one page at a time, if they spend ten seconds or more on that ad, then they’re either reading it or they’ve fallen asleep. It has to be one of the two.
For our magazines we call it the “verified view” and we’ve set the price at $1. An advertiser can come into our Ad Einstein platform, create or upload their ad, set their budget between $1 and whatever their credit limit is and start or stop whenever they want and only be charged when somebody clicks or views their ad.
So, when you start to look at that model, it’s something that’s easy to sell to an advertiser, and to a publisher the business model is profound. Let’s say you have 25,000 readers for the July issue of your magazine and that reader goes through your digital issue and maybe they flip past 10 ads while they’re reading, but they trigger one. By our metrics, 10 seconds for viewing for clicking.
Well then, that publisher would make $25,000 if they were charging $1 per view, with our software they can set the price, so if they want $5 per view or .20 cents per view, they can do whatever they want. The difference for publishers is that they can actually make real money. Maybe the reader will trigger four ads or ten ads; you can make real money from this and your goal as a publisher becomes creating great content and displaying it in a way that can really be read, not squinting, so that readers will spend time with your publication and they’ll trigger ads as they go through.
The other part of this is as a publisher your job is to keep bringing in more readers to your publication and producing great content so that they’ll stay with you. With our publications we let anybody in who wants to see it, so we don’t put up any barriers. I could go into why I think apps are a foolish mistake for publishers for so many reasons; I’m not surprised in the least that they haven’t been successful, because you’re putting barriers in front of the content. All of our software which is designed to have the performance and look great like an app does, but it’s completely browser-based. So if someone sees a magazine or an article on social media, they can click right from Facebook or Twitter and open up that magazine. Then they’re in and they’re triggering ads and the publishers are immediately making money.
Samir Husni: From all of the titles that you already have on MagTitan now; what’s the largest circulation or viewership that you’ve achieved? How are you getting that scale that established magazine brands have achieved over the years?
Larry Genkin: There are a couple of ways, but keep in mind that right now we are pivoting as a company. We never planned on becoming a software company too, so all the data and things that I have for this are early.
But here’s what I can tell you from the hundreds of thousands of visitors that we’ve had for our magazines in aggregate so far over these few months. Readers spend good time with our publications. Our content is really good, but I don’t think it’s because of anything more than it’s very readable, even on the smallest devices.
From a circulation standpoint; what we do is start by partnering with someone who has a data base. We come to these people and they become our equity partners in a publication and they can distribute the magazines through their email lists and their social media followings.
We actually just formed a joint venture company that’s going to be a big part of our circulation strategy and our client’s; it’s called Digital Direct. Digital Direct is a partnership with a data firm that has a data base of 110 million records. And we can sort those records by over 300 different demographic, psychographic and geographic criteria.
Let’s say we have a publication or a client of ours has a publication; they can come in and they can specify who their target reader is and that could be everything from title to SIC (Standard Industrial Classification) codes, to household income; all the things that are publicly available through the Experian databases and things like that. And then we’ll go out and we’ll offer those targeted people subscriptions to our publications, in our case, for free. When they opt in they get immediate access to the publications.
Samir Husni: But if they get the subscription for free and at the same time they get ad block; how are you making money? That’s the problem that most of the media industry are facing; every time we figure out a new way to make money on digital, our audience is finding a way to get the information for free.
Larry Genkin: Well, and I think you know this as well as I do, there is a lot of experimentation going on with ad block. What I can tell you, and I don’t want to stir up a hornet’s nest here; we’ve figured out a way to have our ads displayed. And what I suspect will happen over time is it’s going to be this cat and mouse game where publishers figure out how to beat the ad blockers; the ad blockers will come back and it’ll be this back and forth gaming.
Just like what The Washington Post is doing; it’s very easy if someone is using ad block, you can have the approach where you say, we’re not going to let you see the content until you turn off ad block or at least consider it because of this. And I think there will be all sorts of experimentation on this.
I kind of look at it this way; Nordstrom’s, unlike many department stores, doesn’t have a limit as to how many clothing items you can bring into your dressing room. I read a book called “The Nordstrom Way” and I was fascinated by this and one of the Nordstrom family members said in response to the question, don’t you know that you’re going to make it a lot easier for people to steal from you? And he said, of course we know that and that’s factored into our business model, but we don’t believe in punishing the 99.9% of the people and inconveniencing them for the small fraction of people who are going to take advantage of us.
I know that the economics of ad blocks are going to take away business from publishers; it’s going to happen. But the real question becomes can you get enough people in to make the model still work? And you have to just deal with that reality.
Samir Husni: What amazes me is every time that we try to come up with a business model that will compete with the print business model; we are finding all of these challenges dealing with making our customers pay for digital content. And it’s been that way from the beginning. For years I’ve been preaching that we’re in the business of selling content and changing content to become an experience. Do you really think on the future run that we’ll be able to survive in an environment I like to call “The Welfare Information Society,” that all content is free and we have to depend on someone else to foot the bill? That’s what your model is based on; I will get you the eyes; I will get you the content, but you have to pay $1 to me per click or pay for a 10 second view of the ad?
Larry Genkin: From the advertiser; the reader doesn’t pay anything.
Samir Husni: Yes, that’s what I’m saying; it’s still free content to the reader. We’re still creating a business model that’s exactly like the business model of the magazine industry. For years we’ve been in the business of counting customers, rather than in customers who count.
Larry Genkin: I think the business model that’s going to win and be successful in today’s world is going to be a hybrid model. Money is made off of print; we all know that publishers aren’t abandoning print, because they all know the lion’s share of their revenues and profits are coming from print.
Let’s say you have a circulation of 3,000, an ad rate of $5,000 and the publisher is lucky enough to have 30 print ads, which gives them $150,000 per issue, approximately a profit margin of 20. They have $30,000 net profit per issue, with $360,000 per year.
I think in this new model you keep all of that; you don’t change it. To abandon that as a publisher would be a silly mistake. What you have to do is then generate add-on revenue from digital. I think what you see publishers doing today are going through all of these gyrations to try and generate needed revenue and that comes from getting into events or doing things that are far-removed from their core content in creating what should be an experience that a reader must read every time that issue is put out. And they’re doing it out of necessity to pay the electric bill. But if you could take your core product and then generate incremental dollars from it in digital, then you have a winning model.
So, if you look at this model; you keep all of the print revenue and then we know that you can generate more readers than whatever the controlled circulation would be, say if you had 90,000 readers and two ads were triggered, that gives digital revenue $180,000 per issue, physical profit margins are higher, they would be at least 40% and in that particular scenario, they would have a profit of $72,000. So, the publisher basically had a 250% increase in their profits by having the hybrid model. It’s really just a factor of bringing in readers and being able to charge for digital.
And when you see the technology behind it, you can see how it’s compelling for advertisers and how we’ve really created an experience. When you look at the USA Today issue, you’ll see that even in the early stages, this is something that’s, to your point, an experience for readers, much more so than these static, boring replicas.
Samir Husni: And I agree with that, and please forgive the Doubting Thomas in me, but if the possibility of making all of that increase and profit from digital advertising is there; why do you think, and no pun intended, the titans of the magazine media world haven’t already figured it out?
Larry Genkin: Well, I think it comes down to a pure question of economics. If you look at economics and you look at the big Titans of this industry, all of the companies that you mentioned, they realize that they have all sorts of financials showing that their print revenues are declining, their print readership is declining; it’s not entirely going away, I don’t think that will ever happen, but it is in decline. The amount that they can get from a per-page basis is declining and digital is increasing. So, they say, Holy Crap, what do we do?
Imagine if they said instead; let’s just create a superior digital edition. We’re going to make just the most amazing digital software out there. And let’s say that they did it, that they created something that was far better than print. Well, look at the prices that you can get for digital. I’m talking dollars here for this kind of stuff; if you wanted to advertise in any of the Titans’ publications, you better be able to write a check for a $100,000 or you can’t play.
So, what happens if they create that experience and then suddenly their advertisers say I’d much rather spend $10,000 and get into your digital product than $100,000 to be in your print product? If they did that and made a switch, they’re out of business in a nanosecond because of their overhead. They have office buildings, multi-million dollar lease payments due, all of these middle managers getting $200,000 per year, including the top guys who don’t want to jeopardize their salaries. What happens is instead they’re not motivated to innovate like they should. They test around the edges and while this happens they start to die a death of 1,000 cuts.
I don’t think it’s any great secret in my mind why Meredith decided to sell. Meredith has some of the most respected publications in the world. If they truly believed in that, why would they do it? They’re taking the money and they understand that this is going to be a big problem and there is going to be a day of reckoning. You can’t just stay in a state of decline. You have to innovate and I think that’s the main reason that they haven’t experimented as aggressively as they could have because they’re holding onto what they have and they have shareholders to report to and they want to slow the decline as much as they can.
Samir Husni: But on the other side of the coin; Meredith being sold for $2.4 billion is nothing to sneeze at. Media General must have seen there was a value for all of these products, all of the brands that Meredith had, to pay that amount of money.
Larry Genkin: I wouldn’t sneeze at that either. If someone wanted to write me a check for that amount of money, I’d take it. But from what I’ve read about this particular acquisition, from what I understand the premium that they got over the current valuation was a very modest sum, somewhere around 10% is what I heard. And also Media General is going to sell off all the print publications; what they were interested in were the TV assets. But whether that’s true or not, who knows, the rumor mill keeps going.
But be that as it may, what we know is that we have to innovate and I think that you look at digital advertising; you look at how well Facebook and Google are doing and you understand that you can make a business off of digital advertising, with ad blocks and all of those kinds of things.
The key thing is I believe that there are two big mistakes that publishers make today and that’s apps and banner ads.
Let’s take apps first; apps are a replica. You put all of these barriers in front of your content. Somebody has to go to the app store where there are millions and millions of apps. Unless you’re The New Yorker, The New York Times or Time magazine, nobody is going to find your trade publication by accident in the app store. The only way that they’re going to find you is if you are directing them there. You have to do all the marketing to get them there.
Then once you get them there, they have to go in the app store and find your app. They have to download it, typing in a password. And all of us have limited storage on our phones and we’re maxing out all of the time; so now I have to be willing to download hundreds of megabytes or gigabytes onto my phone and take up that storage and I have to download the edition itself once I get the extra storage.
And let’s say I go and do all of that stuff, I’ve given away all of the customer data to the platform providers, so I don’t even know who my customers are anymore, I can’t market to them. And even if they went through and went into the publication; how am I going to get them back to the next issue? I don’t have any mechanisms, other than hoping that they remember me, to do it.
By the way, it’s still a replica. No publishers are inserting new ads and getting new ad dollars from their tablets. And you have to make money off of this stuff; you can’t give it away and expect success. So to me that’s a loser model.
The other big loser model is banner advertising. You think about what publishers are doing; I hear this all of the time, we’re not getting great readership from our digital editions. Well, the reason for that isn’t necessarily because readers don’t like digital editions; they spend hours on Facebook or Flipboard and all of these things. It’s not that they don’t like digital content; it’s that you’re displaying it in a way that’s boring and impossible to read without zooming all in.
And then publishers hope they’ll pull up their websites. And then they use programmatic. I can’t imagine how publishers are not seeing the disaster that’s coming with this, because they’ve commoditized their ad space. If you look at most ads that publishers are running through programmatic, where they’re not selling it themselves, they’re getting less than a $1 per thousands. And it’s because banner ads don’t work; it’s because there is a massive amount of inventory, so that the pressure on banner advertising is not going to change.
If you look at the money that you can make in print, and you’ve now given your audience away and said, well, you can actually get my audience, but that was only through our print product, now you can also get it online for .98 cents per thousands.
If you don’t have Huffington Post, Time Inc. kind of traffic, and you’re a pay publication and you get 100,000 people to your website each month, even if it’s filled to the brim with ads, you can’t make enough to buy dinner for your staff with that. It baffles me. So, I think that’s a loser model.
What publishers have to do is take all of the barriers off of print and they have to turn digital into a premium profit setter and I think that’s where the technology side of what we’re doing with USA Today, for example, and what we’ve developed really gives publishers the opportunity to do that.
Samir Husni: Let me bring a quote from Bob Garfield into this discussion, whom I recently interviewed. “The new media companies in our world today are Google, Facebook and Twitter that are out there.” How are you going to compete with this set of new media companies that are technically doing exactly what you propose to do with magazines, but with a very specific content?
Larry Genkin: I think publishers need to go into working with these platform providers with their eyes wide-opened. We’re going to experience what the newspaper industry experienced with Craig’s List taking away their classifieds and these niche sites taking away car ads and things like that. These guys, in my estimation, are wolves in sheep clothing, because what their motivation is to keep eyeballs on their platforms. And they understand clearly that they need to have great content to get the eyeballs on their content, so that they serve up ads and make all of this money.
If we as publishers give away all of our content to these players, we’re in trouble. I think a publisher needs to be self-sufficient. You can be lured by the traffic numbers. People are using Facebook, so if I put it out there I can get traffic. Well, you know what, they might read your stuff, and that’s OK, but if you can’t monetize that how are you going to pay your staff; how’re you going to pay your printer or your electric bill? I’m very, very concerned about it. So what I come back to as a publisher is this model; you leverage Facebook. And this is a model that I think is a way to leverage what social media can do for us instead of giving them your content.
From our magazine Crushing It, we shared a story on our Facebook page. When a reader, somebody who is getting that feed, clicks on it, they’re not staying on Facebook anymore. The link opens up the magazine and because I shared a specific story, it opens up to that particular page and now I’m in the magazine and I can go and read the story. What happens then is the readers sees ads while they’re in there and we’ve made money from that reader. So instead of giving your content to Facebook, you use Facebook to drive people to your content as a way of making money.
What you don’t want to do is use banner ads because banner ads aren’t going to yield you the revenue. You have to have a better model where you can make more money than that.
Samir Husni: Before I call you the knight in shining armor that has come to save the magazine industry… (Laughs)
Larry Genkin: (Laughs too).
Samir Husni: What will happen if Facebook carries out its threat to have everything on Facebook become self-contained within the site and then you wouldn’t be able to go from a link to an article?
Larry Genkin: As a publisher who makes a living being able to sell to my advertiser base and my client base, I have to control my own destiny. If you are a CEO of a publishing company, to give up your control to Facebook or any other entity, hoping that they’re going to be altruistic and worry about your interests; I wouldn’t trust that. Maybe it’ll be great and they’ll give you a large amount of money, I don’t know; when that happens then I’ll migrate there.
I think every publisher has to look at it this way, let’s start with making our business successful with what we’ve got. And what we’ve got is some sort of database and we’ve got some sort of content-creation expertise. And we also hope we have some sort of ad constituency that wants to reach our readers. We’ve got to make money off of that core proposition through print and digital.
Now, if we can test and do things with these other platform providers and it proves to be a smart business move, then by all means do it. But I think to sit on your hands and wait for the day that they’re going to come to your rescue…you know, hope is not a business plan.
Samir Husni: So, let me ask you the million dollar question; is Larry’s preaching, the knight in shining armor that’s hoping to reinvent digital within the magazine industry; is his preaching falling on deaf ears or does he see victory at the end of the tournament field?
Larry Genkin: I don’t call myself a knight in shining armor; if you look at this realistically, we have a ragtag group of people; we’re a virtual company; I have people working literally all over the globe who are banded together by the Internet and we’re all working for a cause. And the reality of it is, I wouldn’t be here doing what I’m doing if we hadn’t lost everything once before. I felt the pain; I’ve lost my house and had to move. Our staff has taken reduced pay or simply gone without a paycheck; we’ve financed this all ourselves, between my father and me and a couple of angels, with literally just hundreds of thousands of dollars. We haven’t even gotten over a million.
But what I think happens when you come out of a place of desperation and you’re forced to think in a different way, is that’s how innovation comes about. It’s cliché, but innovation happens in garages. You’re freer to think in different ways if you don’t have to make payroll; if you have to answer to shareholders, you’re not necessarily in a position to think.
So, I think that we, just by accident, stumbled across some things that work and what I can tell you is that you can’t get a client like USA Today by accident. They’ve looked at what we’ve produced and they see the wisdom in it. And for us, that’s a great validation. We have a lot of work left to do, there’s no doubt about that.
But the other thing that I can tell you is we are negotiating with a couple of very large printing firms and printing firms are in the position where their revenues and profits are decreasing because the folio sizes are going down, so they need to find a way to serve their client and continue to enhance their bottom line. And the reaction has been very positive from these people. So there’s a distinct possibility in the not too distant future that we can talk again and we’ll have an announcement where some printers are going to bring this technology to their publishers.
Print is not going away. Print is the necessary part of this business because that’s where the lion’s share of revenues comes from, but the big guys who are the innovators in the printing industry; they understand that the publishers want to make money and they need to make money. And I think that we have a model that’s flexible enough for them to really test and figure out what will work in their market.
Samir Husni: Anything else that you’d like to add?
Larry Genkin: What we did with the first issue of USA Today (special edition magazine) with our technology is put it in one-page design as opposed to a two-page spread, because a two-page spread is great for print, but it doesn’t exist in digital. So, why do that? We also reimagined the cover for them using animations and storytelling. The way that the software works is you go left and right between stories and up and down to read them. That way we don’t force you to flip 15 pages past stories you’re not interested in.
Most importantly, the content is very readable without zooming, pinching or squinting. What’s happening behind the scenes is our software is figuring out what device someone is on and serving up one of 318 sizes that are ideal for that particular device. It’s readable and that’s the key takeaway here. The technology is great and it’s getting better every day.
Samir Husni: My typical last question; what keeps you up at night?
Larry Genkin: What keeps me up at night is I don’t want to be Xerox PARC. I think that we’ve developed a number of technologies: MagTitan, Ad Einstein, Infinite Pages; all of these things in and of themselves, any one of them would be great, but if you learn the lesson of Xerox PARC, they had all of these brilliant minds creating transformative technologies and it wasn’t them that ended up being able to bring it to market.
What I and my dedicated team have to do is execute and that means we have to be out there and we have to educate and when publishers say I want an app, we have to explain why that’s not the right way to go. When publishers say they’re really bumping up their websites and they’re basing their model off of banner ads, pennies on the dollar; we have to explain why that’s not a wise approach.
There’s a statement that I love and I’m sure I’m about to butcher it, but it goes something like: all great truths pass through three stages. At first they’re ignored, second, they’re violently opposed and third, they’re regarded as self-evident.
It doesn’t happen automatically. And we have to go out there and tell our story and that’s what keeps me up at night, not being Xerox PARC.
Samir Husni: Thank you.
Mr. Magazine 