Whenever we meet with a traditional media company, I count the number of times “content” is mentioned relative to the word “audience.” (Yes I’m still paying attention, but I’m playing my counting game anyway). Without fail, you hear ‘content’ more often.

Why? Most media companies are still in an old fashioned mindset: content is where the value is, and the audience simply follows content assets. The mindset is not surprising – content development and production probably are the company’s biggest expenses.

But there is an alternative to content development: audience management. Audience management describes focusing on customer satisfaction, managing user entry and exits and Tearing Down the Garden Walls in order to feature external content. This strategic approach may leave the media company with more satisfied customers and more pageviews than content enrichment can deliver alone – but it exposes their user base to content from competitive sites and effectively transforms what was once a content site, into a portal. As Joe Lichtman mentioned in his last post, several major media sites see audience management as worth the risk, and they are beginning to adopt this portal strategy. But why?

Simply, media companies are finding audience management superior to additional content development. This is true for a couple reasons. First, tracking the direct revenue impact of content development is challenging: What sort of content investment could measurably drive an additional 10 million page views? How could a content owner make the content 20 percent better? By contrast, projects that leverage search technologies and UI improvements have highly measurable ROI.

More concretely, we’ve seen that making the switch to a portal approach is simply more profitable for established sites. Here’s an example: Let’s say in order to satisfy its customers from a content perspective, a major site must deliver one thousand new content pages per year. These new content pages would be enough to attract about $2million in new revenue for a big site. Strong revenue growth to be sure, but this content-centric approach would require paying at least ten new authors. This approach might drive a gross profit of $1m (see below).

(click to enlarge) Assumptions: $100k annual writer salary, $500k software cost amortized over four years; $2000 in revenue generated per content page

But if a site takes an audience management or portal-like approach, yielding two million new pageviews doesn’t require ten new content authors. In this approach, site managers use search technology for three purposes: 1) to enhance the level of personalization on the site 2) to aggregate content from multiple sources across the web 3) to present links to external content of interest. All of these purposes provide the opportunity to delight and satisfy readers without requiring new editorial content. Looked at a different way, an audience management approach uses a technology investment to replace human capital and (some) editorial effort. As we’ve shown in the simplistic model above, a forward thinking media company could yield twice the profit from the same number of content pages with an audience management approach. And so far this calculation ignores benefits from some complimentary tactics like topic based communities and social search.

There is risk here, however – without proper management users can more easily churn to other sites. Moreover, it requires a mindset that is very different than that of the traditional media company. Yet we believe that audience management, and the higher margins it delivers, is what will save the newspapers going forward. Interested? In the next post, we’ll talk about how to get it done.

Media sites have traditionally worked to keep their content collections proprietary while preventing user churn to other sites. Now, as search engines gain more power, and users become more fickle, it might be time to make it easier for consumers to discover content on other sites – effectively tearing down site “garden walls.” We’ll get to the bottom of this choice in a three part series.

Search Portals – The Other Side of the Wall

During the web’s adolescence, the relationship between content producers and content consumers was direct, and web content promotion efforts were limited to internal site factors – UI, navigation and basic site search. If a site’s content was in demand, it developed a loyal user base and became the trusted authority for that type of content.

Today, search portals like Google, Yahoo! and MSN disrupt the relationship between sites and audiences, offering unfettered access to highly specific content from across the web. As a result, customers can freely churn to competitive sites. Such liquid content discovery and consumption erodes your site’s competitive advantage and position as the trusted content authority.

The Media Site Response – Tear Down Your Walls?

How should content owners react to the more competitive marketplace resulting from search portals’ influence on the value chain? The most obvious answer is to improve content quality – but this is often too expensive. Instead, some sites are expanding content offerings by including content from other sites. Others are offering discovery of other external web content through search. But these tactics present a tradeoff: they build engagement and pageviews while making it easier for users to be lured by external sites.

This is the core of the choice between maintaining a ‘walled garden’ content site and tearing down the walls. A walled garden site ignores the broader needs of users while aggressively promoting proprietary content. The hope is that users will focus on what’s in front of them, remain engaged, and drive revenue accordingly. Yet without incorporating external content, users will inevitably explore elsewhere. And a site without walls encourages consumers to use the site as a portal. On sites like these users can discover and access proprietary and broader web content alike, and generating the associated page views. Boston.com has recently adopted this tactic, with some early success. So what’s to be done – build walls and keep users focused on your content alone, or tear them down in the hopes that engagement and pageviews will improve?

For many sites, pageviews and user loyalty will go up when the walls come down. Yet, the choice of opening is not for everyone. As we’ll discuss in the next installment, the answer to the walled garden question depends on whether you believe own content, or customers.

Next week: What’s your biggest asset, content or customers?