Posted by: structureofnews | February 6, 2011

By The Numbers

This could be either hilarious or terrifying.  Or both.  But mostly it’s an illustration of why numbers matter – but picking the right numbers matters even more.

Business Insider says it has a leaked copy of AOL’s master plan for editorial content – grandly titled, The AOL Way.  It’s ambitious: Increasing story counts by two-thirds by April, page views per story to spike by more than four times in that time, all while costs per article fall by 15%.  Good luck with that.

But who knows?  Maybe they’ll meet those targets.  The AOL Way is nothing if not a detailed plan that lays out in excruciating detail (including lots of flow charts) how to get there.

Here’s an example:

Use editorial judgment & insight to determine production. Ex: “Macaulay Culkin” & “Mila Kunis” are trending because they broke up = write story about Macaulay Culkin and Mila Kunis.

And in deciding what topics to cover, editors should focus on: Traffic potential, revenue and profit, turnaround time, and editorial integrity.  The bit on revenue and profit spells it out pretty clearly too:

  • What CPM will this content earn?
  • What can we do to boost CPM? Will the increase in CPM outweigh any additional costs?
  • How much will this content cost to produce?
  • Who should we use to produce it? How much should we pay them?

There’s more, but you get the idea.  Still, there are lessons here.

First, some caveats.  Any business plan, especially one for a large organization that needs to spell out things in detail, is going to be pretty funny reading.  You can’t dismiss it just because of that.  Secondly, metrics are important.  You should know who’s reading what on your site – what works, and what doesn’t.  Preferably why, as well.  The old days when grizzled newspaper editors decided by the seat of their pants what their readers would read – well, it’s not like that was a golden age, either.  And third: Well, you do have to make money.  So thinking about revenue is important.

And you have to give it to AOL for at least trying to come up with a detailed plan – “vision” doesn’t seem like the right word here – across a huge company in a fast-changing business.  The Guardian had a nice piece noting how this approach – a hard numbers way of doing business contrasted with Rupert Murdoch’s glitzy launch of his new iPad app, the Daily.

The problem is in which hard numbers AOL is focusing on.  Sure, traffic and CPMs matter, especially when your main business is advertising.  But blinding chasing numbers – on every piece of content – isn’t a way to build a business; it’s a recipe for churning out sausages.  And when there aren’t any barriers to entry for sausage makers, it’s a tough line to be in.

Alright, that analogy may have been stretched a tad too far.  Try this:  Imagine if you ran a restaurant and had a copy of the AOL Way as your guide.  You’d only serve dishes that had a high profit margin; you wouldn’t care about making sure you had a balanced menu, or that it all fit into the ambience or identity of your eatery.   Or if you ran a retail store, and had to figure out the profitability per square foot – you’d get rid of the shop display window, since that doesn’t directly contribute to revenue.

Yes, it’s important to know what the numbers are, and to crunch them relentlessly.  And it’s also true that the age of internal cross-subsidies within parts of a newspaper is fading, so increasingly pieces have to stand on their own.  It’s all part of how the business is being atomized.

But chasing profits per atom is hard, especially when you’re a large company.   You’re always up against competitors who can potentially produce the same thing at lower cost, and you’re not really taking advantage of the scale you have.

Not that I have compelling alternatives for a company based around online ad revenues.  But chasing numbers down a rabbit hole doesn’t seem like a good way to come up with the next great idea.


Responses

  1. […] This post was mentioned on Twitter by Jeremy Wagstaff, reg chua. reg chua said: The AOL Way – terrifying and hilarious, and an example of how you can take metrics – while important – way too far. http://bit.ly/gfcjFs […]


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