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Condé Naste (US) targets 28% Ad revenue drop in radical 5 year plan

5 core growth areas identified

  • Video
  • Creative services
  • Consumer revenue
  • Data licensing
  • Events

In a major sign of the times, Condé Naste has announced plans to diversify its legacy magazines’ revenues away from print advertising in a bold move to drive profitability. CEO Bob Sauerberg has his work cut out for him: in his plans, approved by the Condé Nast board and unveiled to staffers in early August, the company will be steered to a position where advertising represents 50% of total revenue, down from 70% currently.

Some titles to be sold?

This dramatic shift requires a mix of cutting and spending on new growth areas. Condé said it expects to add 150 new roles in the next two years as it pursues the five new areas of revenue above. But there will also be layoffs this autumn and three Condé titles — W, Brides and Golf Digest – have been put up for a strategic review. One former executive said that a larger number of Condé titles might be available, for the right price.

The plans will pit Condé against an entirely new kind of competitor. While Google and Facebook dominate the digital advertising market, Condé will have to battle with holding companies, consulting firms and media and entertainment conglomerates if it wants to grow its agency, services and events business.

Video led

The crux of Condé’s plan is a continued push into video. Condé now has more than 300 full-time employees working on video content, and Sauerberg sees short-form video becoming the dominant content format for Condé’s brands, a notion that unnerved several former executives. It has announced plans for three ad-supported OTT offerings, and there are at least two more planned for launch in 2019.

This shift makes sense given the growth forecast in that sector: US digital video Ad spend is expected to exceed $22 billion by 2021 with over 17 percent of digital ad spending overall, according to eMarketer. But observers are more skeptical about the publisher’s chances competing for original content budgets from platforms such as Netflix and Amazon, particularly in the near term as the publisher hunts for a replacement for Dawn Ostroff, who left Condé Nast Entertainment for Spotify in late June.

Creative over-stretch?

Observers also remain skeptical that Condé can become a major player in the creative services department. Since acquiring Pop2Life last year and consolidating all the creative services teams together, that group totals around 100 people, according to one former executive. Condé has grown its number of experiential clients 35 percent since then, the publisher said. To deliver the kind of revenue that Condé is projecting, it is believed that the group will have to roughly double in size.

The benefit of investing in experiential or consulting services as a publisher is that it forges direct relationships with brands directly, rather than putting the publisher at the mercy of an advertiser’s agency. But it also puts them up against a new crop of competitors.

TMS12 view

Not surprisingly the publishing giant remains cautiously optimistic about its ability to grow its consumer revenue. As the second-largest source of revenue, it has grown a small set of consumer revenue products, such as the paywalls it’s built for Wired and The New Yorker and the beauty box businesses it runs for Allure and GQ. But by taking a brand-by-brand approach to building consumer revenue, it minimizes the ability to fully leverage the portfolio of brands it currently has.

US outlook: While the growth revenue channels begin to build, the key to success will be disciplined and close adherence to the plan’s 5 year target. Nerves will be stretched, particularly in view of the formidable competitive forces at large.

UK outlook: As the ripples from across the pond increase, dramatic changes in Condé Naste’s UK offering will be firmly on the cards.

Richard Huglin

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