Conde Nast: Vision, Leadership, Danger and Risk as Company Moves Beyond the Magazine

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In the eight years from 2000 to 2008, consumer magazine advertising investments grew at an average annual rate of 4.3% compared to total equalized advertising industry growth during that period of 3.1%. Between 2007 and 2009, magazines advertising declined 30.4% while the advertising industry suffered 19.8% losses. Among major media categories, only newspaper advertising declined more precipitously (34.6%).

It's against this economic backdrop that Condé Nast last week announced "a new strategic course as a consumer-centric media and entertainment company." Charles H. Townsend, Condé Nast CEO, claims "The company will be realigned to better embrace and harness developing technology; broaden consumer touch points; and create contemporary value propositions for advertisers." Condé Nast's future success will be dependent on management's ability to "move the company to a new business model focused around digital connectivity, technology development, and consumer insight." "We need to move beyond the magazine," said Mr. Townsend. Condé Nast needs to engineer Condé Nast Media Group into a "seamless, multi-media, multi-platform sales and marketing services facility," integrating the "company's print, digital, social, e-commerce, consumer insight and other assets to create comprehensive marketing solutions" and "deliver maximum value to consumers, advertisers and employees."

Condé Nast's shifts, and the management changes accompanying them, are bold if they are implemented as announced. And they come at a time when magazine advertising is having a mini-resurgence. I'm unconvinced that the culture of Condé Nast – a culture that has put editorial content and management perks above all else – can actually adapt to Townsend's vision. But I also believe that even with all the difficulties Townsend is likely to face, no media company today has better assets, history, foundation, management fortitude and financial resources to make the changes Townsend is recommending and to make success possible.

Townsend's goals are grand, noble and relevant. They are also not new. The company has consistently taken the lead in delivering "value-added" components to deliver greater marketing value to their advertisers. In fact, they invented the term more than two decades ago when General Motors insisted on deep rate card discounts from magazine publishers, resulting in a tectonic shift in magazine ad pricing. Among all major publishers, only Condé Nast refused, instead focusing on delivering value added marketing resources. A visit to http://www.condenastdigital.com/customsolutions/ offers background details on 85 custom value-added programs developed by Condé Nast publishers for advertisers. But these programs have traditional media buys at their foundation. What Townsend appears to be suggesting is a model that would put the relationship and marketing initiatives first, building off the brand equity of Condé Nast's media properties, and make traditional media buys secondary.

In a company that has always been hierarchical, with each publication and its Internet unit operating independently, it will be challenging to achieve the organizational shifts Townsend's moves will require. Significant investments will be required in human resources, account management, technology and marketing capabilities.

However difficult the challenge, I applaud the effort. When Condé Nast closed four publications, including Gourmet, last October, I wrote "While there has been some restructuring at the company's online ventures, the individual publications remain in the last century in the development of mobile applications, social networking initiatives, user generated content models, virtual and 3-D gaming development, video content expansion, event marketing, brand tie-ins with promotional outreach programs, cause related initiatives, and other business models that are the hallmarks of visionary media industry leadership today." Townsend's moves are visionary, but loaded with costs and risk.

Moving beyond the magazine will be the most important and the most difficult challenge faced by Mr. Townsend and his management team. Magazines continue to be a valuable advertising tool, with Jack MyersMedia Business Report forecasting ad revenue growth of 1.2% in 2010 and 2.5% in 2011. Total magazine rate-card-reported advertising revenue for the first half of 2010 rose 1.2%, compared to the first half of 2009. In order to successfully transition to a cross-platform marketing partnership model, publishers will need to confront traditional obstacles such as the three-month ad placement lead time still required by monthly publications. They will need to radically restructure their organizations to invest in direct marketing capabilities, similar to those implemented by Meredith Publishing several years ago. But even Meredith has struggled to integrate those capabilities into the day-to-day operations of their magazines.

Condé Nast's interactive unit was built with a model that differentiated the company's digital properties from its magazines, with the magazines' websites focusing primarily on promotion and subscription solicitation. The company will require a total management realignment to effectively integrate digital investments and offerings into the organizations of each publication.

Most difficult for Condé Nast will be the staid and traditional industry in which it operates. Measurement tools on which the vast majority of magazine advertising is valued will be mostly irrelevant in Condé Nast's visionary model. Pricing models remain locked in the outdated cost-efficiency structure that General Motors and agencies imposed decades ago. Agencies, for the most part, don't have the organizational resources or compensation incentives to embrace Condé Nast's proposed capabilities and marketers have limited resources to respond in kind to the opportunities being introduced.

But this is the cost of leadership. In 1993, I wrote in my book Adbashing: Surviving the Attacks on Advertising, "Media companies, in the future, will be more valued when they are marketing partners involved with the advertiser's objectives and goals." I also asked if "media companies are prepared to innovate –to react to the explosion of technological advances, the expanding universe of media opportunities and the impact of interactivity?" 1993. And here we are nearly two decades later with the most prestigious, high quality and brand-centric magazine publishing company finally taking action.

For the long-term health of the total media and advertising business, we should all hope that Condé Nast and Townsend succeed.