Forbes can not survive with only cheap Internet ads, publisher Rich Karlgaard admits
How long can Forbes magazine survive?
Last year, the cash-strapped company chopped 40% of its staff (about 100 employees) in an effort to stay profitable.
And just last month, it sold off its 125,000-square foot Greenwich Village headquarters to NYU for $65 million.
In total, in the past 6 years, Forbes raised over $600 million to save its far-flung empire.
At yesterday’s Churchill Club event, Forbes publisher and Club co-founder Rich Karlgaard provided a candid assessment of the media group’s struggle to survive in the new digital economy dominated by Google’s cheap performance-based advertising.
Forbes is over 90-years old. It’s the third generation family-owned company. It’s – like a lot of traditional media companies – at the wrong end of the innovator’s dilemma: we’ve been there and we’ve been moving as quickly as we can to get on the right side.
It’s just hard to let go some things that you thought you could do.
There’s a wonderful phrase that Clayton Christensen has about margin retreat and that is, when suddenly you are facing with all these new competitors with much lower cost of operations, who are charging much lower fees.
The average Internet ad is down to $1 or $2 per thousand. And we can’t live on $1 or $2 – maybe Arianna [Huffington] can live on that because her model is new and set-up that way. We need to be at least 10X over that or we don’t live.
For awhile, we were caught in a margin retreat but the good thing is – as a family-owned company – we were able to invest a lot of money when it was very painful in the early 2000s, and we are doing relatively better than our competitors have. But it’s a tough one.
When the Innovator’s Dilemma came out in the 90s, it’s one thing to read it and say “I can see this industry that’s going to get wallop and this one and this one and this one,” and then all of a sudden, like a Pacman doll, the Google algorithmic model of advertising starts coming bearing down on you: you run, you face it, you draw your sword, it’s tough.
The one other thing I’d said is that we had over the last 2-years at Forbes about 40% attrition, and it’s been very painful. But where we’ve added and had a net gain is in IT people. We simply have to have the kind of interface between advertising technology that delivers advertisers what they want, which is performance metrics.
Just one more quick story. If you read Ken Auletta’s Googled… there’s this wonderful story where Mel Karmazin, the president of CBS visits Google and it’s after the ad model has been invented but before they went public (around 2002), and Karmazin thinks he’s going to “big foot” these little punks and he got quite an earful from them (Mel you’re toast, advertisers aren’t going to spend money on image alone and you’ve got to have performance metrics and we know how to do it) and he stares at these guys and he said “don’t F*** with the magic.” And they F*** with the magic. It’s like going from the middle ages to the Enlightenment, and they’ve dragged us kicking and screaming there!
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