Don't try to beat Google or Amazon, go vertical - four lessons from digital publishers

In my digibyte, Publishers quit ducking Amazon, build their own verticals instead, I did a quick run down of how publishers at Digital Book World 2015 were in this midst of a surprising shift: instead of running for cover and/or considering lawsuits against Amazon, they are in pursuit of vertical audiences.

Without the lovely experience of Amazon exerting enormous price and business model pressures, publishers may not have considered selling directly to their own customers. But now that these new models are underway, publishers are discovering that there are some pretty nifty advantages with going direct - not the least of which is compiling meaningful data on the constituents you purport to serve.

But there's nothing simple about a vertical business model transition. Even if you go the HarperCollins route and acquire vertical companies like Harlequin (romance) and Thomas Nelson (Christian book publishing), the acquired companies are still figuring out the digital transition also.

Throwing up an e-commerce web site and waiting for "kaching" isn't going to get it done either. Audiences are attracted to value, not to a shopping cart. But building on opt-in community around content is not something publishers historically know much about.

During an afternoon panel, Case Studies: Building a Vertical from the Ground Up, I was able to get deeper into the stories of publishers who are further along the vertical path than many of their peers. The panel, moderated by Edward Nawotka of Publishing Perspectives, included Mary Ann Naples of Rodale, Phil Sexton of Writer's Digest,  Eric Shanfelt of HarperCollins Christian Publishing, and Adrian Norman of Simon & Schuster. I'll boil down their four biggest lessons.

Change the business model, change the relationship - four lessons

1. Verticals are an e-commerce fail without community. Community is the sticky stuff that builds an audience and confirms that a market demand for particular titles actually exists. Naples' team at Rodale decided to push beyond branded web sites into a community-based approach:

What we haven't done so well in recent years is create a direct relationship with customers that is more in line with how people want to buy things today and the relationships they want to have with retailers today.

Rodale changed that by building out Rodale Wellness, a new community-based platform.

2. Done correctly, community and e-commerce mix better in business than having them as separate sites. Rodale Wellness combines free opt-in content with at attractive marketplace and editor's picks. With the vision of "Tools, support, information, training and products for your inspired journey," Rodale Wellness is raising the bar on prior e-commerce efforts by tapping directly into the passion of readers for creating change in their own lives.

To achieve this next level of interaction, Naples' team posed a series of challenges to themselves. Here are a few crucial questions they posed, followed by their action response:

• "What if our front door were more inviting?" Action: A better and more welcoming web destination.
• "What if we talked to customers in a different voice?" Action: Opt-in email list building.
• "What if we offer them valuable free content?" Action: Naples' team created a "wellness journal" where people can track and share their own goals. 15,000 readers have downloaded it to date, with Naples and other team members actively participating themselves. They are getting traction on their Facebook page - not an easy thing to do these days - enough to generate passionate "thank you" letters from readers.
• "What if ask them how to serve them best? What if we ask them to give us feedback and act on that feedback?" Action: feedback is encouraged and acted upon is given via Facebook and email interactions.

3. Even publishers have to re-learn the content game - books are just the table stakes now. You'd think publishers would be awesome at content, but to succeed, they have to build a content marketing and/or publishing team within their own publishing house. This also changes the author relationship.  As Phil Sexton of Writer's Digest explained, though his company had a vertical orientation from day one (way back in December 1920), the digital market sparked a radical change in their philosophy of acquisition:

No matter how good our bookstore might be, people might want the same information, but not necessarily in the same format... Now when we acquire a book, we don't think of it as a book, we think of it as content. When I talk to an author now, I say, "I want to acquire this content from you, and a book is going to be one iteration of that. In tandem with that book, I want you to create some magazine articles, I want you to create an online course, I want you to create a webinar, and I also want you to speak at our conference. We end up marketing all those to the consumer as a suite of products.

So far, the model is working - the Writers' Digest vertical community sells far more of the digital product offerings than they do books alone. Content also provides the foundation for potent social media engagement. Writer's Digest crossed 550,000 Twitter followers last month, up from 300,000 the year prior. And the role of free content is fundamental to this engagement:

Every book we produce, every magazine we produce, has something free to entice them to sign up to get more information from us. At the same time, everything that's free has an upsell for a paid product they might want at a discount.

4. Communities are fundamentally opt-in, and email is still the killer opt-in app. HarperCollins Eric Shanfelt has learned this via their consumer-facing website Faith Gateway, which was launched 18 months ago and has proven instrumental in cementing their relationships with Christian book readers.

Shanfelt outlines four keys to making a vertical market work: attract, register, retain, and convert. Easier said than done. To pull it off, publishers must change:

The key behind the vertical is you've got to give to get. Those publishers who have made this transition understand content relationships with consumers: "I"m going to give you content that you find valuable, whether or not you buy anything from me."

Shanfelt sees email as a key to driving the content and achieving measurable results, not just from direct sales but from retail channels:

When we do an email to the Faith Gateway list, which is now at 3 million subscribers after 18 months - that discoverability drives sales and retail. Some people will buy from us, but the real value is we see lift in retail of 20,30, 40, 50 percent. Every book we sell directly via email sells 5 to 10 books via retail.

Naples went further, saying "Email is by far the most powerful driver of purchasing I've seen in my entire career. It's not about unique visitors; it's email links." Shanfelt added: "I will take one email name over ten Facebook followers over a hundred Twitter followers over a thousand page views."

ROI and skills issues not to be taken lightly

All the audience questions came back to the challenge of measuring results - and how to staff these new content initiatives. Staffing is not just a budget question, but a question of skills. Shanfelt talked about the need to break down silos to make these initiatives work (e.g. between marketing and sales), and to foster communication with the retail and product marketing teams.

New skills might be the toughest part, from teaching editors how to write for the web (including search engine optimization), to hiring new talent that isn't stuck in outdated marketing concepts.

Naples spoke of the need to experiment - basically fail fast and build on wins (In the case of Rodale, they have been able to fund their "startup" content team based on programmatic ad revenue from their web ventures).

Though the panelists generally cited a need for a "lean" or "startup" mentality, most - if not all - of the panelists considered themselves far enough along to cite a significant level of investment and executive buy-in. Example: Writer's Digest now operates a full 50 percent of their business as direct-to-consumer.

In an email to me following the show, Shanfelt said that "If our marketing teams were to purchase the amount of online advertising that FaithGateway provides, it would cost us approximately $750K per month. That does NOT mean that we’ve reduced our marketing spend by that amount. FaithGateway has added to our marketing capabilities."

Final thoughts

There's more to cover than I have room for, including how these publishers are using customer data to expand their sales and validate their book audiences before investing in authors. No brainer:  the panelists are also involved in mobile initiatives and responsive design.

These publishers are far ahead of most of their peers, but there's more crossroads ahead, such as the possibility that book publishing will become a subscription business. Amazon continues to impose its will, forcing publishers to deliver best-in-class user experiences or risk losing purchases to Amazon's frictionless checkout.

It's not cheap to build these communities, nor is it easy to prove the ROI. And as Shanfelt alluded to, there are bigger changes afoot: ultimately, publishers will need to spread their "digital DNA", as he put it, throughout the company. But there is plenty to learn from what these vertical publishers have accomplished to date - and their lessons extend well beyond publishing companies.

Image credit: The horizon © olly - Fotolia.com

Disclosure: Digital Book World provided me with a complimentary press pass for my one day attendance at the show. Diginomica covered by lodging expenses in New York City. Diginomica has no financial ties to any of the publishers cited in this article.