Discerning patterns in uncertainty

yinyang.jpg

In the yin-yang of online business strategy, it's often difficult to figure out what to do to get where you want to go.

In the newspaper business, ask a publisher if they want top line revenue growth or increased profitability and the answer is invariably "both." Or ask if the No. 1 priority is to increase audience share or revenue or profitability and the answer is "Yes, all of those."

But an executive summary from an unpublished doctoral thesis by J. Sonia Huang warns that there are trade-offs effects to pursuing multiple strategies:

It is like you pour some water into a glass but then you spill some out because of other forces.

Huang is at the j-school at the University of Texas at Austin and the thesis is called Market performance analysis of the online news industry.

Her research is based in part on surveys that were completed this spring by 208 media sites.

She divides strategies into five patterns and rates them as having positive, negative or neutral impacts on revenue, profitability and competitiveness (See table below).

For revenue growth patterns 1, 4, and 5 work best. One, 2, and 3 are the best routes to profitability. For competitiveness, the best patterns are 1, 2, and 4.

Now for the yin-yang, put 2 and 5 together or 3 and 4, and you may actually weaken the effect of each on market performance, according to Huang.

One note: Huang says yes, a site can't choose to have a corporate parent or to be publicly owned, but those factors result from multi-level strategies at the local and corporate level that result in the site's overall strategies.

Take a look at the table and see if it makes sense to you.

Table 1. Summary from Hypotheses Testing

Pattern

 

Revenue growth

Profitability

Competitiveness

1

Public ownership

+

+

+

Corporate parent

+

+

+

Brand name use

+

+

+

R&D intensity

+

+

+

2

Num. of employees

-

+

+

Num. of awards

-

+

+

Convergence

-

+

+

3

Traffic elasticity

-

+

-

Age of a site

-

+

-

Market size

0

+

-

4

Diversification

+

-

+

Discrete properties

+

0

+

5

Traffic growth

+

-

-


I had a bit of trouble understanding how increasing the number of employees, awards and convergence would lead to increased profitability. Why would that be?

In an email, she says that surprised her as well and says one possible explanation is:

The number of employees, number of awards, and degree of convergence all stand for knowledge-based resources, i.e., the more employees working full-time for a news site, the more awards won by the news site, or the more contribution from the site's traditional media create the quality of the site. However, the quality may not be transformed into a big jump of revenue growth because it requires efforts from other parties such as ad sale people, but the quality is more likely to increase the profit margins and competitiveness. In other words, those knowledge-based resources are able to widen the gap between revenue and cost and then to enhance performance relative to competitors.

Fascinating stuff. And it's an insightful way of looking at the often competing aims of media Web sites.