Innovation is disintermediating newspapers, according to Philippe Colliat

I recently had a conversation with Philippe Colliat and we talked about innovation in the media. Many things are going on.

I/ Philippe Colliat’s bio

Philippe is a seasoned and passionate General Manager of the French e-commerce and web industry. He also has a strong proven track record in the communication and media world. He has worked with :

• Bayard (5th French press & publishing group),
• TF1 (the French leader in free-to-air TV market)

In 2005 he launched www.surinvitation.com, a pioneer in online private sales. After its acquisition in 2007, he is named General Manager of 1001listes in 2009 (a web company dedicated to gifts and wedding business through its own social ecosystem). He achieved, within 3 years its recovery and sale to a new shareholder (Galeries Lafayette).

 

II/ The media has experienced profound change in its business model

To put things into context, the media is dealing with profound change. About 15 to 20 years ago, we used to go out to a news stand and buy our daily newspaper. But then, with the advent of the Internet, we started flocking to the Internet to get our news. We started consuming news for free online. And this resulted in significant losses for newspapers. But, they were able to find some revenue in online ads. At this point, online newspapers would market their online traffic. But, this has also changed.

 

III/ Innovation is disintermediating newspapers : Real-Time Bidding is disintermediating media companies from their orginal buyer

Today, real-time bidding is opening the door to new opportunities. Real-time bidding (RTB) is a new method of selling and buying online display advertising in real time one ad impression at a time. When companies bid for an add, it isn’t the ad per se that they’re buying. They are buying time to engage with a specific kind of consumer. For example a sports car company may want to engage with consumers who are predominantly :

• male
• have high purchasing power
• have expressed an interest sports cars
• are located geographically in a specific area
• are aged between 40 and 60 years old

So real-time bidding companies are offering their customers the ability to target a very specific consumer segments. When they find one, they sell the ad to be displayed on the online newspaper in front their target’s computer screen. In other words what Real-time Bidding companies are selling is

• Online ad space
• Time with a target consumer

The problem is that newspapers are being desintermediated. While they use to enjoy a direct relationship with their clients, they are now in a position where they are in an indirect relationship with their clients. Real-time bidding companies, trading desks and other technological platform suppliers are taking the direct client relationship. And this creates a situation where they may lose  the real control of their revenue because:

• they depend on paying IT systems they don’t really undersand
• they abandon the content “mojo” (whatever your content quality will be, you will only sell “standard” profiles)

 

During my follow-up conversation with Philippe, we talked about three different strategies online newspapers could pursue in order to

• Fend off disintermediation
• Improve their competitive position in their value chain

 

Further readings 

• For a take on how Google is helping French newspaper companies in their online activities, please refer here
• For a description of what the French government is doing to help media companies, please refer here