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How The Guardian is hacking its business model for the digital age | Business


The media industry has been one of the most negatively impacted by advent of the internet and The Guardian, a 200-year-old publication, has sustained bruises in the shift online, peaking with a £57 million annual loss a mere three years ago. Yet somehow it has emerged stronger – how? And how is its business model continuing to develop in the digital age? 

The Guardian chief executive David Pemsel was interviewed by CNN’s media and business reporter Hadas Gold during Advertising Week London last month, where he was asked if, as he had vowed three years ago, The Guardian was breaking even yet. He skirted the question but implied that they were on track to get there soon.

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However, the changeable nature of the industry makes it hard to be certain. “What we have taught ourselves in the last three to four years is that one cannot be complacent. You need to have a built-in corporate paranoia about things you can’t quite see coming around the corner,” says Pemsel. “I’ve talked publicly about my inability to forecast a year, such is the disruption and potential opportunity.”

The new media

Pemsel posits that it is that complacency which has damaged the companies once hailed as the stars of new media, such as Buzzfeed and Vice.

“In these businesses, backed by private equity, there’s a huge amount of rhetoric associated with them: ‘it is these new entrants who are going to be more agile’ – all these cliches – ‘more nimble’, ‘they understand data’, ‘they understand the millennial consumer’, and as a result, this perfect proposition is somehow going to survive.” 

Both companies have made headlines in the previous year for massive rounds of layoffs. “A lot of the companies that have faced problems in the last six months, perhaps started to believe their own hype – some of these valuations were billions and billions of pounds.”

These are the conditions that can lead to complacency, Pemsel says, suggesting that perhaps the tone of their output no longer quite chimes with the times. It seems that what defines the conditions of virality can be as changeable as the internet’s favourite meme. 

It’s not a trap Pemsel wishes to fall prey to: “I’m always looking for the downside, always.”

Pemsel notes that The Guardian’s status as an independent, not-for-profit organisation means that it’s not similarly beholden to shareholders. However, three years ago, Pemsel said the situation was desperate. The company vowed to cut its cost base by 20%, equating to £50 million, with around 500 roles being axed. 

How does this compare to the situation now? Pemsel is cautious about being overly optimistic, yet will assert that the paper is “out of danger”.

How did they get here? 

He says three years ago the only pieces of advice he received were ‘cut costs’ and ‘put up a paywall’. But while he’ll never say never, they haven’t needed to go there yet. Following an ongoing campaign of soliciting subscriptions from readers, the newspaper now counts around 650,000 monthly paying readers.

“People are paying for something that is actually free, how profound is that? That people are so committed to The Guardian that they’re paying for something that is actually accessible to all,” marvels Pemsel.

But how will they continue to monetise their readers in future? Pemsel says a large part is focusing on perfecting the reader journey. “We’ve got a huge amount of sophistication, in how we manage our data, all of those insights are informing us to be able to create new value for our readers,” he says.

Ear over eye

Two other potential sources of revenue are newsletters and podcasts. Speaking about the latter, Pemsel says he is wary of hype in the industry, but notes that the current trend for ‘ear over eye’ may have something to it. “Some of the multiples now that you’ve see in podcast, well, are actually beginning to look really interesting compared to video, which I think was over cooked in terms of price.”

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Take The Guardian’s daily Today in Focus podcast. Instead of cramming in news bulletins, it takes the form of a deep dive discussion on a certain topic. 

“I think screen fatigue and the relentlessness of breaking news and always been sort of on the forefront of what’s happening within the second, has actually [led to] consumers and readers to sort of back off and say ‘I can’t possibly deal with the second by second updates’,” says Pemsel. Today in Focus is regularly in the top five most listened to podcasts in the country, he says. 

Newsletters too, are proving important. “Email in general is an incredibly powerful tool, the open rates on our emails, particularly from our journalists, are phenomenal,” says Pemsel. In future, they will look at how to monetise these better, and convert readers to subscribers.

What about advertising?

Of course it may sound like something vital is missing in this equation. “Advertising is critically important to the business models today,” says Pemsel. “And going forward, it will always, always have a main and critical part of our business model going forward.”

However, the waters are muddied by the involvement of big tech in this revenue stream. He says the company’s relationship with Facebook is complicated due to the vastly different business models and ideologies of the two companies. 

“You put those two pieces of paper next to each other, and then you have a meeting where you’re trying to work out where is the opportunity for collaboration, and based on those two premises – what we both do – it’s very, very hard to find commonality.”

And while he says the industry doesn’t need the government to fret over the news business model, he agrees with the calls of the Cairncross Review’s recommendation for the Competition and Markets Authority to review how advertising is traded. 

“What Cairncross was saying was, if this duopoly continues to take that much share, if the advertising trading mechanisms don’t allow the money to go to the content producers, there is a danger that within the next five to 20 years, there won’t be a news ecosystem,” he says.

Is he intimated by the dabbling of tech giants, like Apple, in the news business? “There have been attempts to pull all of those aggregate content streams together, but then you get the Apple tax,” says Pemsel, hinting at Apple’s cut on subscription fees for using the service, which can be as much as 30%.

“It’s amazing when you deal with those platforms. They come in and say, ‘We’ve got the answer!’ whether it be Instant Articles, Apple News or an initiative from Google, and we always sit there and say, ‘Okay, let’s just play this out’. And today, it’s never gone beyond anything that I would describe as material.”





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