The New York Times’ two-year-old sponsored content initiative is an apparent success: T Brand Studio posted more than $30 million in revenue in 2015, double what it did in 2014.
That $30 million was just a slice of the $197 million in digital revenue the company recorded last year. Much of the rest is what Meredith Kopit Levien, EVP and chief revenue officer, terms the “desktop display adjacency business.” It’s a business she says will steadily give way to mobile and native ad formats.
When Kopit Levien started at the Times two and a half years ago, the company had suffered declines not just in its print ad business, but in digital. Her job was to “restore digital advertising to growth,” a mandate that took all of 2014 to complete.
Kopit Levien leads not only the Times’ advertising sales, but also its subscription business. That dual remit requires her to reconcile the needs of advertisers and users on matters like ad blocking, pay-for-content models and interruptive ad experiences.
“The fact that we had this strong digital subscription business seemed material to how we should go to market in the ad business,” she reflected.
Kopit Levien talked with AdExchanger about how the Times is positioning itself as the industry shifts away from banner ads, and what it makes of its competitive set.
AdExchanger: What changes are you seeing in the media landscape?
KOPIT LEVIEN: We are absolutely feeling the shift from the desktop display adjacency business to a business that’s much more about mobile and video and native ad formats. Our white-hot branded content business is about wanting to lead in that space, and seeing an enormous amount of demand.
What are you focusing on with T Brand Studio?
We are helping marketers not only create great content, but distribute it in ways that help the brand achieve their KPIs. We launched new on-site distribution vehicles in September, and improved our performance dramatically.
As far as off-site goes, we hired a team of people who are good at building reach and getting content amplified. And we have experimented seeding content to influencers and using data science to understand if a particular type of user is interested in one type of content, they’ll be interested in another.
We got a lot of credit early for strong creative work. We are now also beginning to get credit for being a shop where the creative isn’t just great, but the programs actually work. We are getting engagement from the right kind and number of people.
The rise of Netflix and the ad-blocking trend suggest more people are opting for experiences without advertising. What does that mean for the Times, given that you have both a paywall and an ad business?
The idea of a paid subscription service for quality content is more with the wind than it’s been in my lifetime in this business. We’re executing better, but our results show there’s generally more willingness to pay. It’s not lost on us that this coincides with the rise of ad blocking, which feels to me like a consumer revolt against intrusive advertising.
What’s the competitive advantage of having a subscription business?
We make something for an audience that’s worth paying for. If I had to be completely reductive, the reason why marketers should distribute programming with us is because we make something worth paying for. We have a deeply engaged audience, know more about them and can target content to them in ways that others can’t. Because we have more than a million paying digital subscribers, we have economic runway some of our digital native competitors or legacy competitors don’t have. The business model is more stable because we have two revenue streams.
Last year we saw a lot of investment in digital media publishers, from Series A rounds to billion-dollar valuations. What will it take for these upstarts to succeed?
If I were investing in media companies, I would invest in ones that had proven or would be able to prove they could get someone to pay for the content: either a consumer directly, or a distributor. Most big content-based businesses with ambitions of being influential are going to need to have someone pay them for content. It doesn’t have to be a consumer. It might be a distributor, but someone will have to pay them.
The Wall Street Journal is now on Snapchat Discover, and the Times is part of Facebook Instant Articles. What are your thoughts on those two platforms?
We were among the first publishers on Instant Articles, and we are generally obsessed with tilting toward innovation. Being part of something early and getting learnings from it early is a big reason why we chose to participate in Instant Articles. We think there is going to be a business there as a potential place to put our co-creations, like T Brand Studio.
We’re not a Snapchat participant yet. I think the platform is awesome, with a different demo than the Times – though we already have strong reach among millennials 18-34. The way they have gone to market with Discover is what I’m getting at when I say media companies are going to need to learn to have a business model as a programmer on other people’s platforms.
What’s your take on The Washington Post, which has taken you on in terms of web traffic?
They are definitely pursuing a reach strategy aggressively, and we’re pursuing an engagement strategy aggressively. We generate the vast majority of revenue from our most deeply engaged users, so our strategy is to create much deeper engagement with the very large audience that we have.
Companies like The Washington Post, BuzzFeed and Vox are in growth mode. They’re spending money and not doing quarterly earnings calls. What’s it like to go head to head with that?
While the Times is not in high-growth mode as a business overall, we are a nicely profitable company. That affords us economic runway to invest in high-growth areas. We spend a lot of time thinking about the new digitally native competitive set. Yes, those three companies have a lot of runway for reasons like VC money or a particular kind of ownership structure, but we have it through a sustainable business, which, in a free market, really matters too. With T Brand Studio, we staffed up from zero to 60 people making and distributing content for brands. We can invest in building the supply chain around marketer programming because of that profitability.
The Times launched a few spinoff apps – NYTNow, Cooking and Opinion – in 2014, and two of those are still standing. What’s going on with mobile?
Our CEO Mark Thompson tilted the whole organization toward mobile 18-24 months ago. You see it and feel it. We don’t really talk about “mobile,” because everything we do assumes the vast majority of consumption will happen on the phone, and the business model needs to follow that.
Of the three apps we launched in 2014, we shuttered the Opinion app pretty quickly. NYTNow is a cult hit. It’s not been a commercial success in the sense that it drove a new kind of subscription revenue – it’s now free – but it has been successful in that we proved we could appeal to new and younger audiences, and that curation from the Times was highly desirable. Our Cooking app was in many senses a big success and had 7.8 million uniques in January. It’s now a center point of our company’s strategy to reimagine what it means to be a daily habit in a world where more consumption occurs on the phone.
How does the Times use data across the organization, including subscriber data?
In the building, there is interesting work going on using data science to understand users’ interest, and the differences between paying and registered, and even non-paying and non-registered users. We are in relatively early days of using data to make our advertising perform, both for branded content and traditional advertising. Because we are a paid consumer business, we are obsessed with privacy.
Where does programmatic fit into your strategy?
I’ve come to believe that programmatic is no more than process automation for things that can be automated. One thing I love to show my colleagues is how many luxury marketers who pay us a high CPM are buying us programmatically simply as a means of process automation, not because they’re buying on the open market.
How do you structure your sales organization, when you have T Brand Studio, print, standard display and programmatic to sell?
We are 70% of the way to what I think is the model ad organization. We have over 300 people that work in advertising. We have fewer people managing people that sell things, and, on balance, fewer people that sell things. Thirty-six percent sell or manage people who sell, and 63% [of those 300] support the sales process. That ratio has changed pretty dramatically.
The Times integrated long before I was a twinkle in anyone’s eye. One initiative I oversaw was to free people from having to sell a certain number of pages or print vs. digital. They have no platform targets, no bias to sell one platform over another. It’s sell more of everything you have to sell.
How does that sales organization go to market?
It’s far less about getting an RFP and sending it to someone to answer it and much more about a team of people around a seller who sits with the client or agency and works through an idea. Marketers have many more mouths to feed in terms of content to put in front or people or ways to engage with people. The transactional nature of the business has changed completely, and we are changing every part of the ad organization to reflect that.
This is part of an interview series with media leaders about the future of digital advertising. Check out previous interviews with The Atlantic, Mic, Forbes, The Washington Post and Ziff Davis – and more to come.
