The New York Times is winning at digital

The NYT just released a blockbuster earnings report attributable heavily to their digital transformation. Insiders share the five key secrets to their surprising success.

new york times building
James Cridland (Creative Commons BY or BY-SA)

Most of today’s media “success stories” are about digitally “native” companies like Google and Facebook. Meanwhile, many of the great brands of the pre-digital era seem to be struggling for mere survival in the face of digital disruption. And it’s hard to think of a media segment more threatened by digital than newspapers.  As advertisers have shifted more of their budget to web and mobile,  almost 70% of all newspaper advertising dollars have evaporated over the last 15 years.

Yet something astonishing is happening at the company that President Trump regularly demeans as “the failing New York Times.” NYT stock is up nearly 60% in the last six months to a nine-year high, and in May, the company issued its quarterly earnings report which reflected the profound impact of their efforts at digital transformation. 

According to the report, digital subscription revenue increased 40% year-over-year.  Furthermore, among The Times’ three million subscribers - a threshold it crossed earlier this year - 2.2 million are paying digital subscribers, representing almost 70% of their total subscriber base.  Although print advertising in The Times declined around 18% year-over-year, those losses were more than offset by increases in digital subscriptions and digital advertising, resulting in year-over-year increases in both revenue and profitability.  As CEO Mark Thompson said in the Q1 2017 earnings report , “These results show the current strength and future potential of our digital strategy…to deliver substantial revenue.”

So how did they do it in an era where so many great pre-digital brands, both media and otherwise, are failing to compete effectively with digital disruptors?  I sat down with two senior executives who are helping lead The Times’ digital transformation.   In order to understand the key principles behind their recent digital turnaround, I met with Kinsey Wilson, EVP, Product and Technology, and Editor for Innovation & Strategy; and with Tristan Boutros, SVP & COO for Digital Product, Strategy and Design.  In our far-ranging discussion, five key themes emerged that form the basis of the approach The Times has pursued, and which, has thus far, exceeded their forecasts and expectations.

These five themes are not unique to newspaper or media companies, but can be applied to most, if not all, companies looking for the path to successful digital transformation.

1. Leveraging Customer Data to Increase Subscriptions

While many newspapers have declining print subscriptions and are challenged to get customers to pay for digital content. Boutros and Wilson attribute the recent boom in subscriptions to efforts to better leverage customer data across marketing. Wilson explained, “They've…professionalized the way in which they manage the funnel, essentially how we get people to the point where they subscribe. [As a result], year-over-year, we doubled the number of quarterly net new [subscriptions].”

According to Wilson, “It's been a combination of two things. It's been really modernizing our data environment, and just our sophistication around analytics, and understanding how the audience arrives at a point where it's willing to subscribe.”  He added, “Where we were a year ago was essentially a fairly crude mechanical mechanism where you see ten pages; you hit the wall; you subscribe, or you don't. It was fairly binary. Now, we understand, depending on how often you come, how engaged you are with The Times, what your particular profile is, what's the next action we can take to make it a more meaningful experience to get you back more often, to drive you closer to subscribing.”

“We have become a very data-driven company,” Boutros described. “We've built what I think is a very productive partnership between data, technology and our partners in consumer revenue to actually put more control in their hands as well. We're trying to integrate tools, so at various points in the customer journey [marketing] can feed the messaging required to engage customers in a way that resonates, and so it actually gives a lot more autonomy and control to our marketing partners.”

This type of personalized data-driven sales funnel is par for the course for digital leaders such as Google and Amazon, but is typically far less sophisticated at pre-digital media companies. The benefits The Times have delivered via this approach are instructive to those hesitating to make the investment to become world class in this area.

2. A New Mindset of Agile Product Experimentation

But more effective marketing processes is only part of the formula. Wilson and Boutros described the mindset shift that has led to far more experimentation around product development, including their new Cooking and Crossword apps that have significantly contributed to new subscriptions. These fresh products emerged from an internal incubator group, named Beta, which has been charged with bringing to market a variety of new products.

Wilson explained, “Beta in many ways was the example of how we wanted the rest of the organization to work…where product, design, process, technology and data came together, in Silicon Valley style. Two-week sprints starting with discovery. Trying to understand the market opportunity, what particular competitive advantage we possess, and once you've defined a series of hypotheses, then beginning to test them quickly with MVP releases.”

There were some natural challenges to this sort of experimental approach within the culture of The Times. Boutros described, “Encouraging our teams to be more fail-fast oriented has been a big cultural hurdle…this is an organization whose very identity is built around excellence.”

Wilson described how that cultural shift was aided by the leadership of Dean Baquet, Pulitzer Prize-winning journalist and executive editor of The Times since 2014. “Dean has been quite clear in saying we need to understand how to take prudent risks. He approved an arrangement with Facebook to do Facebook Live in a matter of weeks, and clearly, we were ramping up as we were doing it, finding our way. We can look at what was produced and find tremendous bright spots, and other places where we stumbled a bit.”

Wilson described the new willingness at The Times to experiment with different formats, “You can be seen as experimenting with the medium, and finding your voice, and finding new forms of expression without perfecting right out of the gate.  We've done that with 360 video. We've done that with VR. We just launched on SnapChat Discover. We launched an audio product called The Daily, a news podcast, a brand new format for The Times [that’s] been enormously successful--more than 40 million downloads and streams in its first three months, which is just off the charts in podcasting terms. It has received both in the audience that is listening to it as well as from professionals from across the industry, all kinds of accolades.”

However some experiments have failed, which Wilson readily acknowledged is part of a healthy process: “I don't think we've killed quite as many things as we've built, but [for example] we launched an opinion app as a standalone app that simply just failed to get audience revenue, and I think what that illustrated to us is our power in the market is really in the bundle, not necessarily in carving off distinct elements of our report and selling them at a lower price point as a standalone.”

One of The Times’ bigger new product launches has been their standalone subscription-based Cooking app, which gives access to decades of recipes from their database. Wilson clarified the distinction:  “Cooking is different. Cooking addresses a different kind of use case and has the potential to attract a much wider audience, a portion of which may never have any interest in The Times' entire report, but Opinion was so tightly coupled with our core news identity that we discovered that it really didn't work as a standalone.”

Another product that did not achieve its original goals was an app called NYT Now, which provided a subset of NYT stories for a reduced price. Wilson said, “Essentially of the 200 plus stories a day that we publish, we would publish about 30 into NYT Now. There was no desktop version of it. It was intended to be purely a mobile application, and was designed to appeal to an audience who was willing to sign on at a lower price point than the $15 a month standard subscription. It was absolutely a knockout editorial success, and a complete failure from a business standpoint.”

But such business failures can lead to innovations that have applications elsewhere. Although no longer available, NYT Now “pioneered a form of mobile presentation that was probably industry-leading,” according to Wilson, and the successful aspects of how it presented news articles have now been folded into the main New York Times app. Wilson highlighted that this is another way to extract value from experimental products even if they don’t become revenue-generators in their own right.

The Times is somewhat cautious about making changes to the user interface or editorial presentation of their main app. As he explained, “the core app itself, in a way, had become a legacy product that had a very substantial paying audience that was wedded to the way it was, and so to experiment quickly with changing the layout, changing the format, changing the composition of that felt risky, and so it was easier to create something off to the side as a standalone.

“As it turned out, in retrospect, we look at it, and recognize that the business modeling that went into [NYT Now] was relatively unsophisticated. The product development effort that went into it was actually quite sophisticated, and I think there's broad consensus that it was one of the best things we built. We ultimately said, ‘Okay. It didn't succeed in business terms. We don't need two apps out there creating market confusion, so we'll take the very best things that we learned from it, and pull it back into the core.’"

One of the challenges of any transformation is engrained thinking. Wilson believes one of the challenges in pushing forward into new terrain is being ready to see what aspects of past behavior can be abandoned because technology has moved on.  Wilson theorizes that “human beings don't easily recognize the impact that a particular technology has had on the way we work and the way we think. Newspaper stories, the traditional newspaper story has the shape and form that it does in part because at one point in time, the composing room needed to be able to take a razor blade to the bottom of the story, and sort of paste it up in the right column, and it would fit, and these are habits that become ingrained.

“So we're all conditioned in one way or another by the technology that has defined the profession we're in, and as it begins to change as rapidly as it's changing, it's difficult to separate pure technological change from the habits, and habits of mind that we've formed around that, and so I think that's part of the reason the cultural change is so difficult.”

3. Intense Leadership Focus on Digital

Today, many companies find themselves in a situation similar to The Times in that, while digital appears to be the future, the vast majority of revenue is still coming from legacy products and distribution channels.  This leads to the question of how much focus an organization should put on the declining but still sizable legacy business and how much focus to put on digital businesses which, while future-oriented, might not yet be near the scale of the traditional business. Further complicating the decision is the fact that new digital channels might deliver less revenue per transaction, as Jeff Zucker, head of NBC Universal, bemoaned almost a decade ago when he feared NBC was trading “analog dollars for digital pennies.” In fact this is clearly playing out at The Times where although almost 70% of their subscribers are digital, almost 70% of their revenue comes from print.

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