Strategy Case Study: Can Medium become the king of digital publishing?
Recently, I had the opportunity to attend Professor Scott Galloway’s strategy sprint focused on breaking down the set of strategies that define top firms in today’s economy — more widely known as, the T-algorithm.
As part of the course, I chose to analyse the company, Medium. And what better medium (pun intended ;P) to use than on Medium’s publishing site itself.
The Medium story
Medium describes itself as an online publishing platform that is open to all and home to a diverse array of stories, ideas, and perspectives. Founded in 2012, it’s the brainchild of Evan Williams who previously co-founded Blogger and Twitter.
Medium competitors
On one side of the spectrum in the digital publishing platform arena, exists traditional companies like Wordpress and their peers (e.g. Wix) who tend to play a ‘behind the scenes’ role where the writer takes centre stage and owns their website design, content and monetisation model.
On the other side of the spectrum, we have Medium and Twitter who have stronger or equal brand presence over the writer themselves. The platform takes centre stage and the writer is one of the content items on the app (think Spotify, Netflix). Writers are able to tap into the network effects of the platform to gain fast followership, but are limited in their choice of customisation or monetisation preferences.
In the middle we have companies like Substack and Patreon who provide some level of discoverability though not as strong as Twitter or Medium, but allows writers to set their desired price for their content via direct subscriptions.
Understanding Medium’s competitive advantage and shortcomings
T-Algorithm Framework
Biggest competitive advantage: The Spotify-esque discoverability for writers (Benjamin Button — think network effects)
It is clear that Medium’s readership is growing — and they’re growing FAST.
Readers can’t help but find a Medium article when searching for a topic because their SEO is just that good.
Writers are attracted to Medium’s ability to help them gain large followers because of the platform’s network effects, recommendation engine and curated platform of content creators.
Medium’s smart plays: Owning more of the value chain within the content creation space (Vertical Integration)
Medium’s core capabilities is in allowing writers to easily create and publish content on the Medium platform which then gets curated and distributed to readers based on a recommendation engine.
Although Medium states itself as a platform first, the company has started to make investments into purchasing various publications over the years. It currently has 12 publications it owns and partnerships with around 40 publications. This will help Medium reduce full dependency on independent writers and increase margins.
Spotify did a great example of this by making exclusive Joe Rogan podcasts for Spotify.
Biggest shortcoming: A business model that has yet to provide returns for both Medium and their writers (Growth x Margin, Rundle)
Currently, Medium has one revenue model targeting readers— a flat subscription of $5 monthly or $50 yearly fee. This gives readers access to all of Medium’s content.
On the flip side, writers can join the Medium Paid Partnership Program where Medium pays writers a portion of reader subscription fee based on time spent on content.
Medium has shown strong growth in subscription and readership over the years.
However, even with the high growth, they have publicly indicated the company is not yet profitable with $137m funding to date.
(As Medium is a private company, getting hold of their financials for further analysis was near impossible)
There are three types of writers on Medium
- I dabble in writing every once in awhile
- I write consistently and use it for building my personal brand / establishing myself as an expert in a topic area
- I’m a professional writer or publisher using my writing / publication as a key income stream
Their inability to generate sufficient revenue trickles down to writers inability to earn a steady income stream, of which they have received large criticisms for.
To date, Medium has had a bad rep with writers. If 5.7% of active writers earn over $100 in a month, we can assume that the remainder 94.3% of writers are earning under that, which is MASSIVE. This, amongst other factors has led to Medium losing publications (e.g. The Establishment) and independent writers over the years. Competitors like Substack saw the opportunity to move in on the pie and have done competitively well in gaining market share from allowing direct subscriptions.
So where should Medium invest in to increase value and returns?
Applying the Differentiation Grid
Recommendations
#1 : Improve margins by moving to a tiered subscription model for readers
Strategic focus: Growth x margin, Rundle (Recurring revenue bundle)
To date, Medium’s focus has largely been around readers value for money. Even so, at start of 2020, Medium reportedly has between 200,000 to 400,000 subscribers with 100 million monthly readers. That’s a conversion of 0.02–0.04%. Not great. This comes at the cost of providing reasonable returns for both Medium and their professional writers / publishers (category 3).
Arguably, category 3 — professional writers / publishers are Medium’s most valuable writers as they are typically well-known subject matter experts in a specific topic area and Medium needs to grow / retain them.
Medium should move the free tier from all free articles to 5 articles per month. Additionally, introducing optional add-on subscriptions to premium publications gives the opportunity for more serious publications (in category 3) to make a steady income on their own. This business model has proven to be successful for Substack. This would be entirely optional for a publication so there is flexibility of choice.
Critical tactic to succeed: Communicating the subscription model well to readers will be crucial to ensuring that readers understand the fee structure and value proposition well. A good example of this can be modelled from SaaS products with base price and feature add-ons.
#2: Enhance the writer / publication value proposition through rundles (recurring revenue bundle)— providing so much value that they can’t resist!
Strategic focus: Growth x margin, Rundle
Currently, all writers and publications can write on Medium for free.
Medium has the opportunity to increase their value proposition to writers and subsequently their followers, by providing more capabilities within the value chain as add on bundles.
For example, for an additional $5 per month (example, further analysis required on optimal pricing), writers could access:
- Ability to create community groups within their followers for further engagement
- Ability to create newsletter subscriptions
- Conversion of written form to audio form for podcasts
- Managing distribution of content from Medium to other outlets (e.g. Twitter, personal / company websites)
With no need to manage and pay for multiple platforms, save time and effort through centralised content management in one place— what’s not to love?
Note: Some of these benefits are already under way by Medium. Bundling it into an attractive package as a Rundle would generate another source of income for Medium whilst increasing the stickiness to Medium product for writers.
Challenge to mitigate: A potential strategy risk would be publications / writers may perceive this as a cheap shot for some money when Medium is stating it’s efforts to increase writer / publication income — why charge more? Arguably, the return on value for publications and writers for $5 is bang for buck. Not only would publications and writers make that $5 back really quickly with the introduction of direct subscriptions (see recommendation 1), they would also not have to spend money on other platforms that they currently use (e.g. newsletter management or podcast creation) as Medium will handle it all for them.
#3: To tie it all together, a compelling articulation of the envisioned world of writers and readers x Medium that brings Medium’s story to life
Strategic focus: Visionary storytelling
The current ‘About’ page is very lengthy with their core vision getting lost within the words. Trawling through several media reports on Medium also highlights Medium has been slightly confused about it’s key message.
With a core part of Medium’s DNA being an ad-free publishing world, Medium should focus on using this to their advantage and selling the vision of how an ad-free world would like that can still be highly beneficial for both readers and writers. This ties in following Recommendation 1 and 2 to give confidence to writers and readers and importantly, that Medium offers flexibility to suit your unqiue reading and writing needs… from broad to deep reading, casual to serious writers — Medium caters to all.
