Good morning!
The Medium delivers in-depth analyses of the media marketplace’s transformation as creators, tech companies and 10 million emerging advertisers revolutionize the business models for “premium content”.
There is the argument that the future of the media business—and the changes in this (weird) market moment in media—was best captured in this recent lede from AdWeek’s Mark Stenberg: “Thanks to his background in theoretical physics, [Dotdash Meredith’s chief innovation officer] Jonathan Roberts may be one of the few people alive who can credibly claim to understand ad tech.” Theoretical physics is a branch of physics that “employs mathematical models and abstractions of physical objects and systems to rationalize, explain and predict natural phenomena.” Roberts oversees “research, data science and open-market revenue operations.”
Physics has long been a cornerstone of the media business—the broadcast, linear and internet businesses all live and die by the principles of electromagnetism and the special theory of relativity—but it is rarely if ever the focus of broader media coverage and investor questions about the digital futures of publishers and cable companies. The media coverage gravitates more towards the big C-Suite personalities, the major announcements, achievements of subscriber growth or, lately, profitability. Even if the technological architecture of a digital media business ultimately may make or break how and whether these businesses ultimately will or will not be able to evolve from wholesale to retail models, the topic is more often to be found in smaller blogs and newsletters than in trades.
The theoretical physics skill set of Dotdash Meredith’s chief innovation officer, above, seems unusual when compared to other media companies. For example, Disney has put Rita Ferro, its president of advertising sales, at the forefront of its Fall 2023 publicity tour for the technology underlying its new advertising video-on-demand capabilities. It is also a more esoteric skill set than the test for companies proposed by venture capitalist Marc Andreessen: “A good test for how seriously an incumbent is taking software is the percent of the top 100 executives and managers with computer science degrees.”
The distinction captures how Dotdash Meredith offers a story for investors that is as science-based as it is creative. It offers the rare story of revenue and EBITDA growth in digital media while others are struggling to do the same. It has generally promoted its in-house technology solutions—like page load time and intent-based targeted advertising—front and center to investors and advertisers. Elsewhere, those solutions tend to be buried in bullet points in investor presentations from legacy media companies, if they are discussed by management at all.
Does the success of a consumer-first, retail-first media business in the 2020s require the skillset of a theoretical physicist? It is certainly directionally helpful.
Key Takeaway
It would be overly simplistic to conclude that any of media company’s fortunes will change if they hire a theoretical physicist in the role of chief innovation officer. But, it does reflect how we no longer may evaluate media businesses through the lenses of financial and traditional distribution models, only.
Total words: 1,300
Total time reading: 5 minutes
Cornerstones
I previously highlighted Dotdash Meredith—a subsidiary of IAC—as a paradigm in digital media business models. Four years ago it emerged out of the merger of Dotdash—the reorganized and rebranded heir to About.com—and Meredith Corporation’s National Media Group and its corporate operations. Newer internet-native media brands from Dotdash’s portfolio—like Simply Recipes (Food), Verywell (Health) and The Spruce (home)—merged with longtime weekly magazine staples like People, InStyle and Better Homes & Gardens. They now total 39 owned and operated sites of which 19 have the most significant traffic sessions (in terms of investment).
I wrote in 2021’s “The Metaverse, Dotdash, & Serving User Intent that “Understanding user intent has been the difference between success and extraordinary success in legacy media and streaming”. Dotdash Meredith management has since built a business that has expanded to 39 titles from 5 verticals in 2017, and with over $1.7 billion dollars in revenue in 2023, up 13x from $131 million in 2018. The business generated $223 million in Adjusted EBITDA in 2023, up from $34 million in 2021.
The cornerstones of Dotdash’s success story are arguably best summarized in a completely unrelated tweet about “how much one needs to know to get current with crypto”. The tweet lists five topics, and excluding cryptography, four are helpful for our purposes:
Finance
Game theory (or, the study of mathematical models of strategic interactions with rational consumers)
Programming (or, designing and implementing algorithms and step-by-step specifications of procedures by writing code in one or more programming languages); and,
Distributed systems (or, a collection of computer programs that utilize computational resources across multiple, separate computation nodes to achieve a common, shared goal)
A theoretical physicist has the skillset to model out all four. There is a fifth captured in something CEO Neil Vogel told Fast Company in January 2020: “Our job is to make great content that loads quickly with relevant non-intrusive advertising.” So, the Dotdash Meredith success story ends up being a mix of:
Finance (engineering EBITDA-positive growth)
Game theory (mapping content and advertising to consumer intent)
Programming (solving for page load time)
Distributed systems (the internal systems to serve intent-based advertising and work with Google’s search engine, which is its own distributed system)
Creative (expert-driven “great content” that is engineered to be friendly to search engines, first).
Looking Beyond Dotdash
Dotdash’s revenues are 9% of Disney’s direct-to-consumer (DTC) business ($21.9 billion in 2023), but unlike Disney it is profitable. It is 16% of Warner Bros. Discovery’s DTC business ($10.1 billion), 25% of Paramount Global’s DTC business ($6.7 billion) and 62% of AMC Networks’ annual revenues ($2.7 billion). So, from a financial perspective, the argument that Dotdash’s digital-centric growth model has solved problems that other legacy media businesses have not is both accurate—all have struggling digital businesses—and also limited in its comparability.
So, it would be overly simplistic to conclude that any of these company’s fortunes will change if they hire a theoretical physicist in the role of chief innovation officer. Dotdash Meredith emerged from the historical context of search emerging as the dominant source of traffic to publishers, while those companies still rely heavily on the linear medium reaching over 70 million households in the U.S., alone.
But, its model also highlights why the checklist, above, offers a helpful lens for identifying businesses whose fortunes are likely to change for the better in the consumer-first, retail-first medium of the internet. There is an interplay between the science of distribution and the creative where the understanding of the former dictates the optimal output of the latter. This is what Marshall McLuhan argued in “The medium is the message”: By having a theoretical physicist in the C-suite, Dotdash’s operational model treats the technological architecture of the internet as “active processes which are invisible” and therefore necessary to be understood for the business to survive.
CEO Neil Vogel said as much in a recent appearance in the People vs. Algorithms podcast:
“We've built amazing things on top of technology. That's our sweet spot…The product expertise, the engineering expertise, it's just super different. But understanding and using these technologies is critical.”
Understanding the Technologies is “Critical”
The point is not that every media company needs to have a physicist in the C-Suite to succeed (though Netflix Co-CEO Greg Peters does hold a B.S. in physics and astronomy from Yale University). But, the business and technology of distributing and monetizing content over the internet is now infinitely less predictable than the business and technology of sending light signals via miles and miles and miles of fiber optic cable to a finite number of homes and businesses (over 100 million homes in the early 2010s and now 76 million).
It is also less predictable than the business of selling newspapers and magazines to a finite number of subscriptions and newspaper stands. Consumers have no fixed identity across the internet. The consumer relationship may be fleeting when relying on third parties like Google and Instagram for 50% or more of traffic.
There is an argument to be made that the checklist, above, offers means of identifying what a predictable digital business model looks like. Both the list and the three guidelines to understand this "weird" market moment in media seem to be better starting points for asking more of the right questions about what a media business should be focused on in 2024 and beyond. Because it is becoming increasingly clear we no longer may evaluate media businesses through the lenses of finance and traditional distribution models, only. There are more and newer scientific factors that need to be understood by management teams.