November 7, 2006: Focus on Technology...And Resource Allocation

This month--and probably for most of the rest of the year--there's a big focus on technology infrastructure. We're replacing our web analytics vendor. It's time to start considering options for renewing the contract with the company that powers our community. And we want to create a master user database in-house, moving away from the current reliance on a third party. Increasingly, our five-person technology team is a bottleneck constraining growth plans for the web business. This isn't the CTO's fault; it's because print and online media have vastly different requirements for resource allocation, risk structure, and profitability.

Look at the big, fully online media companies--Google and Yahoo, for example--and you'll see what I mean. They have huge technology teams with hundreds of developers. By far the biggest slice of the resource pie is allocated to creating proprietary software and infrastructure. Compare that to a typical print media business, where content creation is king. One of the core differences between print and online media is that print has high variable costs but low fixed costs. Online, on the other hand, requires a significant fixed investment in technology, but variable costs for distribution are negligible. Therefore the print business model favors finding high-value opportunities to market to a select and limited audience, whereas online is all about openness and scale that spreads the fixed costs across the largest audience base possible.

The risk structure is different as well. With print you can take a series of small risks, but online you have to roll the dice for a bigger stake. Spend all your capital building the wrong software platform and you're out of business. The alternative is what we do currently--rely on outside technology partners. However, in that model technology isn't the competitive differentiator you need to come out on top. Just as the New York Times doesn't rely on AP or Reuters for news coverage, so an online media business can't fully break out of the pack without a proprietary technology platform that confers unique advantages and functionality on its audience.

Part of the challenge of transitioning an existing media business from print to online is biting the bullet to make these enormous resource shifts. Another hurdle is staffing up the new structure with people who have the right skillset and risk orientation to help you move forward quickly. In some cases existing staff can be repurposed; in others you have to bring in new people and create an environment that attracts the best. Status quo is not an option!