Recently, I’ve been thinking a lot about the difference between content and commerce companies and how those businesses grow. This is mainly because my media company, Thrillist.com, last year purchased the e-commerce site JackThreads.com, and recently launched Thrillist Rewards, a weekly e-mail service that features customized and exclusive experiences at local businesses.
Over the years, we’ve built Thrillist’s e-mail audience organically, which has been very rewarding. But what we learned is that just because the audience may have grown twice the size, that doesn’t mean we’re going to bring in twice the revenue or anything close to that. That’s because the way advertisers spend is so much about getting comfortable with a medium and brand; for content companies, it takes a really long time to get an advertising brand or agency to trust you and understand how to buy with you to get results. But once you drive results, it’s really hard to lose that trust. When you get a few really good partners in advertising, they are usually partners for years. And their business with you either gradually grows or slowly shrinks over the years, but whatever it does, it almost always happens slowly.
As a result, you can staff up, or down, properly around it. And once you build a foundation and have the audience in place, you can increase sales without the size of the audience growing, just by fostering a better relationship with advertisers and having a more seasoned sales team. That baseline is a really, really valuable thing. The tradeoff, of course, is that as a content company, you can’t be an overnight sensation with hundreds of millions in sales.
In commerce, it’s the exact opposite: you can truly explode overnight. But you can get yourself into more trouble more quickly, and get out over your skis by carrying too much inventory or building a team too quickly. But if you do it right and find the right model in commerce, you can pretty quickly define the value of each user, which is different than the online ad model where there’s the nebulous idea of the value of an impression.
So as I saw Gilt Groupe and Groupon starting to build themselves up, I thought we really missed an opportunity. If you look at those guys, they spent so much money on marketing and all that money resulted in huge revenue gains. What I wasn’t thinking about at the time was that that opportunity really isn’t there if you have a straight content business. Whether or not we had grown our Thrillist e-mail subscription base to X or Y size, big advertisers weren’t just going to start pouring money into our growth because advertisers move slowly.
Just look at print publications. You have to ask why the print business has been able to withstand the shift to digital for so long. Yes, the shift is inevitable. But the change is happening more slowly than I, and many people, thought it would, because big traditional advertisers just don’t abandon what they’ve been doing all at once.
In commerce, however, big changes happen really, really quickly. Groupon and Gilt built impressively high-volume brands in a short time by leaning into arbitrage opportunities and spending against that. This is something that just doesn’t exist in the content business.
And that’s what gets me really excited about our moves with Thrillist Rewards and JackThreads, because there’s the opportunity to monetize audience growth based on a per user basis that never existed for us previously as a straight content business. Whether it’s by spending on marketing, or partnerships, or social media, we have real, added financial incentives to grow our audience now.
So what you get with commerce is more risk with more potential reward. What you get with content is a little less risk and less reward. What I love with the combined content-and-commerce model, then, is that you can package a predictable, high-margin business, with a slightly more unpredictable, high-upside business. When you combine them, you have a business that is better prepared to weather storms, grow really fast and -- I think, if you do it right -- have the best of both worlds: huge upside with reduced downside.
In the future, the smartest content companies are going to find ways to leverage their big audience to make money in commerce. Conde Nast is a perfect example of a company that’s built on incredibly high-quality content with advertising. What those guys would be well-served to think about is how best to otherwise monetize the audience they have, and I don’t think selling content on the iPad is the answer. I think they have to work directly with the consumer base they’ve built.
I think companies that are doing commerce the best are going to look into this combined model as well. Groupon is a commerce company, but they’ve gotten all that press and buzz for fostering a community of writers, proving they’re a content company as well. Gilt Groupe, a commerce company, is dipping its foot into the content waters with MANual, as a way to make its commerce stickier.
At Thrillist, we’re trying to benefit from the best of both worlds, too. We started as a successful content company, and have now brought in commerce as well. Along the way, it’s been really fascinating to evaluate the two business models and analyze the pros and cons of each. And as you get deeper into it, you realize that by creating a brand-new business model that combines content and commerce, the combination just works.
Follow Ben on Twitter: @BenJLerer
Image credit: Don Hankins