The line between creating partnerships and divesting capabilities can be very fine, indeed

One of the reasons I find myself no longer a publisher is that I have a very, very strong commitment to sales and driving revenue. Maybe I’m weird, but I like working with ad sales people. Like Lincoln’s quote about General Grant — “I can’t spare this man; he fights” — sales people are indispensable (“we can’t spare these people; they sell”).

But this is becoming a minority opinion, I admit, as companies downsize not only their editorial teams, but their sales teams, as well.  I’ve had more than my share of run-ins with media owners who think ad sales people are an expense completely separated from the revenue they bring in so they downsize their sales teams or outsource them.

A few years back I was hired by RBI, then Cahners, to turn around a couple of trade magazines.  It was a great job: magazine doctor. One of the magazines had been, at one time, producing $9 million in revenue. Back during these days the magazine had nine sales people.  Looking at the financials one could see that the revenue levels matched sales levels exactly: seven reps equals $7 million in revenue, six reps equals $6 million, and so on. It was also interesting to see that the decline in the number of reps didn’t always occur after revenue had declined, but sometimes before. In other words, the surest way to decrease revenue on this magazine was to decrease the number of reps.  It was also the surest way to guarantee no growth.

When I joined the magazine it was doing around $2.5 million and had just eliminated a sales position and now only had two reps. Job number one: bring in another rep — one way or another.  I found that the easiest way to get a rep was to find one that used to rep two magazines but had had one sold out from under them. Now, only repping one book, they might leave the company unless we would give them more territory. I would find the publisher for that book at say “listen, you might lose your rep unless you can give them more to sell, why not let them rep my book?” Amazingly, it worked.

Many publishers and many publishing executives no longer have a feel for the ROI of their sales teams. Ten years ago it was common for a publisher to have to do a cost analysis for their teams: add salaries, commission, travel expenses and the like and divide that sum by revenue. A rep making $75K in salary, $25K in commissions, and $25K in benefits and expenses would need to bring in $625,000 to reach the 20% mark — the amount usually paid to independent contractors.  That means, though, that a rep bringing in $1 million, and with their commission raised to $40K because of the added volume, now has a margin of 14%.  In other words, those last $350,000 in sales was the difference between a marginal position and a wildly profitable one.

That brings me to this story about ABC News and their agreement with Healthline Networks. Depending on your prospective, this is either the story of a news network that is partnering with another company to bring both news and advertising sales power to ABC, or a deal by one company that is shedding both editorial and advertising power, trying to maintain editorial quality while realizing that Heathline’s sales efforts stand a better chance than their own.

My first impression of a deal like this is to wryly smile and shake my head: they are giving away the ship over there at ABC News, are they not?  But I’m not sure I wouldn’t do the same thing in their position.

Here’s why: There are many forms of aggregation. Sometimes aggregation is just gathering stories and providing curation. But this form of aggregation is more like the old model for portals. AOL used to do this all the time when they first started out. They would want to introduce a new area for their members and they might farm it out to an outside firm.  You want business news?  Why not have it supplied by a business news organization. You want sports? Let Sports Illustrated, or ESPN do it.   Of course, this model collapsed quickly once these outside partners started to launch their own web sites — why drive traffic and dollars to AOL when we can have web users come directly to us?

But it no longer 1993, and ABC News is no longer the fully staffed media giant it once was. So partnership deals — for both content and sales — might make sense. What ABC News provides in the deal is traffic. What Healthline Networks provides is content and sales. What difference does it make where the traffic resides?

A few months ago I wrote about bloggers and mentioned my confusion as to why newspapers didn’t embrace these guys. Not all bloggers write about politics and the media, you know. The soccer bloggers I mentioned here would make a wonder addition to a Minnesota daily’s sports pages, online and in print. If the newspaper can’t cover a topic in depth find someone who does and partner with them. The same, of course, could go for advertising.

American papers, for example, do an admittedly lousy job of covering soccer. Their excuse is either that soccer is not as popular as baseball, for instance, or that their resources are so limited they have to make choices. Nonsense. How long will newspapers think this way? The small amount of online readers for soccer multiplies every time that newspaper finds another online partner — either from blogs or from other papers. Add a few partners and suddenly one has a mini network attractive to advertisers.

All one needs to the team to sell this networked content.

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