CEO Tales, 20th March: Evolving Digital Business Models. What happened?
March 21, 2013 by
Here’s a summary (our not very verbatim notes) of the Q&A from last night’s CEO Tales. Our thanks to all in our panel (Adam Baker, Blottr, Patrick Dowling, Telegraph Media Group, Juan Lopez-Valcarcel, Pearson Group and Matteo Berlucchi, Anobi, Vini Italiani, who did a brilliant job stepping in at the last minute to replace Facebook’s Karla Geci) and also to our supporters: Taylor Wessing, Rackspace and Erevena Executive Search.
Will Chief Digital Officers be extinct in 10 years time?
JLV believes that after an initial set of challenges around getting computers into the workplace and using digital to alter supply changes, the role the CDO now faces is one of integrating best practice from agile tech businesses into the workforce. These will be particularly needed as the workforce becomes more dominated by millennial/digital workforce.
MB There is an equally important role for the CDO as an agent of change in older companies, making sure that they do not carry on business as usual as they run up against the ‘cliff’ of changes in consumer behaviour that have come with digital. Once the change that is needed is achieved, and is embedded in the workforce, he will cease to exist
‘we will all become chief digital officers. There will be a CDO within every employee’
PD sees CDOs having operational and strategic role. Telegraph have subscription business, advertising business and commerce business. Don’t want to silo digital strategy into each business so the preference is for CEO to have strategic overview.
AB: can be very difficult to deal with cliff, if you have significant physical assets (like retail stores)
Do social media platforms represent a long term threat to your businesses?
Our panel (Adam Baker, Patrick Dowling, Juan Lopez Valcarcel) Not pictured: Matteo Berlucchi
PD: a yes and a no. They have changed advertising landscape enormously for Telegraph and have taken a massive stake in the advertising market, but has allowed consumers to engage with content in ways that they have never dreamed of, so has thrown up great opportunities to drive brand to market.
AB: social media is brilliant for building a community and building a brand, but he is increasingly sceptical about the ROI it generates. How to monetise your 500,000 followers on Twitter, is the question. Without doing that, there is no perceptible ROI. Personally wouldn’t spend money on Facebook advertising.
JLV: But that’s true of everything in advertising, old forms – print and TV, are also seeing declining ROI. New digital formats are continually improving, such as the adverts in the status stream on FB (lot of debate about that in the panel)
Social media is brilliant at driving consumers towards action, but there’s also the question of who owns identity online and who owns transactions. What happens after that? Take the example of Spotify requiring you to have a Facebook account before accessing Spotify – is the next step that it becomes your payment mechanism.
MB: it’s risk, its a shift of power, before it was Sky owning the customer, now its these other guys. Social networks are more than a pond where you go and fish for customers, they’re platforms and you can develop entirely new applications upon, for example Enobi allowed people to make social recommendations about books that people should read – sharing their library.
So people can build applications on these platforms, and should do as a better way to engage customers.
How do start ups work with big businesses?
MB: big challenge. Large corporate have inbuilt resilience to change. Start ups have no legacy which is a huge luxury. Secondly large corporate are not structured to deal with start ups – even if they want to give a startup £500K they find it very hard to find the right channels and processes to do it.
PD: its particularly tough, I’ve started meeting with start-ups, will always meet with start-ups if I think there’s anything there. And we’ll have a very honest conversation and if I think there’s anything there we’ll work together for a month during which we can work out KPIs look at performance against those, and assess how we might use the assets of the business
JLV: The whole relationship is very difficult Pearson have a company motto ‘always learning’ which we try to live up to, so we’ve set up a partnership scheme, and we practically look out for co-working spaces. That works, so now we’re trying to duplicate it with Pearson Catalyst, where we identify businesses we want to work with and we bring them onboard into a partnership. Which is not so much about the money – a lot of these businesses will already have funding in place – it’s more about trying to identify the best applications for these ideas in a set time. Time boxed.
From the audience:
Which large corporate get engagement with start-ups right? Some nominations include ‘none’, ‘some’ and ‘BBC connect’
In London the model of accelerators helps oil the relationship between large corporates and start-ups. Variable quality and in Europe we lack the model that is prevalent in the US where the very large digital corporates (Amazon etc) are hoovering up stakes in start ups and helping them with their corporate relationships.
Another question: How can you monetize crowd sourced content?
AB: we struggle – how do you monetise any content? We spent two and a half years building a destination site, did it well and struggled really hard to monetise it. Tried a lot of things, nothing worked and now we’ve realised that our biggest asset is the content we’re getting so we’re selling that.
PD: A lot of it comes down to are they coming to you as a destination site…
AB: we got up to 11 million monthly page impressions and we were making £14K a month
JVL: CPM on crowd sourced community is so low you can’t justify it. For us the big challenge is not how to monetise crowd sourced content but the impact it has on our business model. We’re going from a professor or educator researching something and using the results of the research to sell books to his students to crowd sourced educational content, which is undermining the funding model.
Where we’re starting to see traction is in sharing of materials, so a teacher teaching a class in Alabama may develop course materials that would be useful to a teacher thinking about the same class in Detroit. A lot of our business model has shifted from content to services, like teacher training, assessment.
AB: There’s definitely options for monetising community and the crowd, it’s the content that’s broken.
PD: we’re not going to become an e-commerce business, but we believe the future for media businesses is in becoming a trusted brand and getting close enough to our customers to be able to offer commerce solutions, selling holidays, selling financial products. The big change for us over the past two years has been that we had a big audience but we didn’t know who they were and what they believed in. So what we want to do now is forge that relationship more and more
MB: Newspapers have a big challenge. We thought people were buying content but they were actually buying a service, which is a way to package content. Most content is not premium. Cory Doctorow said: content is not king it’s just something people talk about. So content is not king, conversation is king.
It’s another example of the service economy, so you have content which is fuel, and you build a clever service around it. So I have a physical unit, which sounds a bit crazy these days, but I use it as a base to meet people and provide a service.
Diana, BSKyB, who has been nominated as a good example of a corporate partner for startups, raises the point that there are barriers also on startup side. Come with two challenges: can’t explain proposition, also sometimes defensive about sharing their idea. So a top tip for start ups: know exactly what you’re offering and be transparent and open to different ways of working together.
What was your digital business model like 5 years ago? What is it about today? What will it be like in five years time?
PD: five years ago it was about mass audience and advertising, now we believe in maintaining reach but we’re not interested in becoming number 1 online. It’s about depth, getting to know the regular core audience, we want to get to know them a lot more.
JLV: five years ago I imagine the company was focussed on driving people to the website and selling CD Roms, now we’re using digital to deliver a vision of personalised learning at scale using a platform where students teachers, parents, school administrators can make progress and track their progress.
AB: BMGT. Five years ago, publishers and media types were trying to broaden audience, now we understand how to use different platforms like a tablet, phone or web to enrich the experience. We understand better how to leverage the difference between these different platforms.
MB: the biggest difference is the time companies have to change. Big companies are very concerned because disruption is hitting companies at a pace where they have no time to response. It took two years to get the iPhone up to sales of 1 million, now we’re at the point where a company can take six months to go from zero to 100 million users. Which can completely annihilate your business.
How important are mobile and tablets and that whole change in patterns of consumption?
MB: it’s bringing to the surface the whole issue of how people interact with digital content. Ideas such as second screen for TV content or reading in bed. A lot of consumption on different devices creates a problem for advertisers because they have to come up with lots of different ideas for different formats, they have to make sure content is relevant to the time of day and the device. Huge opportunity though because the numbers are phenomenally large.
PD: 32% of all the internet, but only around 8/9% of our revenues. Poses problems (good ones) for us. Mobile is so vast that we have to engage with it but it produces a big charge on our business for the small relative revenue. On the positive side, it has re-engaged customers with the concept of paying for content, which they moved away from when papers moved from newsprint to desktop. So subscriber revenues and the ability to charge for content have risen.
In emerging markets, byod is the only way to grow education quickly. There is a shortage of teachers, so in Brazil, for example the mobile is transforming the way education is delivered.
Which digital business model do you most admire?
MB: the ability to charge for virtual products in games, they’re making so much money. So the game is free but people will pay for their extra weapons. And it shows you you can always innovate
JLV: I’m a big fan of the business model a lot of start ups have, which is: I don’t have business models. Which is fascinating, it puts the passion into innovation, you’re doing things because you can
PD: I’m a massive fan of the aggregator idea. We’re all working hard to create great content which they’re using.
AB: ebay. They did it so early, it’s peer to peer. I also love shazam. The best technology anyone has ever built and not only can I find out any piece of music I hear anywhere I can buy on iTunes and they get a bit of the revenue.