What is the secret to building a billion-dollar digital media business? Despite the proliferation of low-cost digital publishing tools, growing online advertising budgets and potential to reach millions of consumers online, the media industry has yet to figure out how to make the big bucks with digital content.
So why does Thrillist founder and CEO Ben Lerer think believe “it is literally the best time ever” to start a digital media business? In his talk called “Content and Commerce: The Digital Cronut” at the 2014 SXSW conference, Lerer said “the answer isn’t just advertising.”
The power of scalable social media platforms combined with low-cost publishing and web tools allows companies to build incredible brand recognition and audiences in just a few years. But what’s missing from this recipe is one key ingredient: commerce.
If a media brand has truly earned the trust of its consumers and knows what they want, something Lerer says Thrillist has done, “you’ve got to actually physically sell something to that consumer” to have a chance at that billion-dollar goal.
Most online media companies, Lerer said, still rely on revenue streams from the traditional world: advertising, subscription, events and licensing. While all of these options do bring in money, “there’s limitations with how big a media organization can get” on these revenue streams alone.
In online advertising, Lerer said that the supply of inventory is nearly unlimited. While demand is also growing, it’s not growing fast enough to keep online ad rates high enough to generate huge profits for publishers.
Subscription, licensing and events are also options that many media companies have tried, but so far, none have managed to generate enough money with these strategies to see significant growth. These options are simply not scalable enough, said Lerer.
This is where commerce comes in. Thrillist, a men’s lifestyle media brand, found an opportunity to jump into commerce when one of their advertisers, JackThreads (an ecommerce site that sells men’s clothing and accessories), said that Thrillist consistently delivered high-value customers. The two companies found that their missions, brand identities, and consumers were closely aligned, and Thrillist bought JackThreads in 2010.
The acquisition has allowed Thrillist to develop into a platform that “can enable in-stream” sales of clothing, accessories and other products. If Thrillist has an article on about making better cocktails, readers can immediately buy the bar tools they need to follow the article’s advice.
Lerer said that they expect to ship more than 2 million packages to customers in 2014 and to exceed $100 million in sales of goods through JackThreads. With over 7 million logged-in users, Lerer said that they are learning more about their readers than ever, and can create the kinds of experiences consumers want.
And while this business strategy isn’t a wholly new idea, the way that Thrillist and JackThreads work together is what has made the venture a success. The two entities had similar goals, and the seamlessness of combining Thrillist’s editorial content with JackThread’s product offering empowered both brands.
Lerer said that focusing on the “what” and “how” of integrating commerce into a media business is a big mistake. This kind of thinking prevents companies from “going all in.” Media companies, he said, usually try to mitigate risk by handing over the commerce aspect to third parties to handle inventory and distribution. Without 100% commitment to building the content and commerce together, Lerer believes the initiative has less chance to succeed.
The model is compelling. “If we can crack the code of how to make a reader into a buyer and a buyer into a reader,” then a media business can “own the entire consumer cycle,” Lerer concluded.