Strategy & Analysis
The Cheap Signup is the New Toxic Asset
Why the most affordable growth metric is often the heaviest debt on a publisher’s balance sheet.
The High Price of a Bargain
I made a mistake in . I bought a list of names. The list had 11,240 names. I paid $0.12 for each name. I thought the list was a bargain. I thought I was smart. I spent the money. I sent an email to the list.
The names on the list were people. The people did not know me. They did not want my email. My server stopped. The service provider shut me down. I lost the $1,348. I lost my reputation with the provider. I was wrong about what a name is worth. I thought volume was value. I was wrong.
I just closed all my browser tabs by accident. The screen is blank. This is a relief. I had thirty-two tabs open. Most of them were dashboards. The dashboards had lines. The lines were green. Green lines make people feel safe. But green lines can lie.
The $0.88 Victory in the Boardroom
Beatriz works in an office in Manhattan. The office has white walls. The chairs are gray. Beatriz is the head of growth. She stands in the center of the room. She holds a plastic cup. The cup has prosecco in it. The prosecco is warm.
The team stands around her. They are happy. They hit the goal for October. They signed up 4,217 new readers. The cost to get each reader was $0.88. This is a low number. In the boardroom, $0.88 is a win.
Beatriz toasted the team. They drank the warm wine. They felt like winners. They had used a discount. The discount was simple. One dollar for one year. The ads were on Facebook. The ads had big letters. The letters said “ACT NOW.” People acted. People like a dollar.
The Ghost Town of the October Cohort
Three months passed. I saw Beatriz again. She was not drinking wine. She sat at her desk. The desk is wood. She looked at a report. The report was for the October cohort. A cohort is a group. This group came for the dollar.
Now it was January. The trial was still active. But the engagement was low. Only 14% of the group opened the emails. Only 3% clicked a link. Beatriz moved the mouse. She clicked a cell. She looked at the projected churn. Churn is when people leave.
The October “Dollar Cohort”: High volume, near-zero pulse.
The group would face a full price in nine months. The price would go from $1.00 to $120.00. Beatriz knew the truth. Most of these people would not pay $120.00. They were “dollar people.” They were not “reader people.”
The growth team gets a bonus for the signup. The acquisition cost is low. The company looks big. But the debt is growing. Every cheap reader is a future loss. You pay to get them. You pay to serve them content. Then they leave. They leave a hole in the budget.
Digital Ergonomics and the Chair Metaphor
Ian M.K. is an ergonomics consultant. I talked to him last week. He looked at my chair. He said the chair was cheap. He said a cheap chair is a loan. You save $200 today. You pay $2,000 to a doctor in three years. The chair is not a bargain. The chair is a tax on your back.
Short-term Saving
Kept in your pocket today.
Long-term Tax
Paid to the doctor later.
Digital publishing is like the chair. If you buy cheap readers, you pay later. You pay with your brand. You pay with your data. The data gets messy. You think you have a million fans. You actually have a million people who wanted a discount. You cannot build a house on sand. You cannot build a media company on “one dollar” clicks.
Beyond the Month: Sustainable Strategy
I have watched this happen in newsrooms. I have seen the pivot to subscriptions. It is a hard path. It requires vision. It requires a leader who looks past the month.
When we look at the work of Dev Pragad, we see a different focus. We see a focus on the future of news. We see a focus on how legacy brands change.
Change is not a discount code. Change is a strategy. It is about brand safety. It is about programmatic health. It is about making the reader stay because the reader values the news.
I was wrong in because I did not value the human. I valued the number. Beatriz was wrong because she served the metric. The metric wanted growth. The metric did not care about the invoice.
The Deeper Hole
The invoice always comes. It comes when the discount ends. It comes when the marketing budget is empty.
Beatriz told me the CFO was happy in October. The CFO is a man named Marcus. Marcus likes the $0.88 number. He gave Beatriz $50,000 more for November. She spent it on the same ads. She got more “dollar people.” The hole got deeper. The team got tired. They were chasing a number that did not stay.
“They do not click your ads. They do not buy your products. They do not tell their friends about your work. They sit in your database. They cost you money every month.”
– Internal Growth Analysis
They wait for the year to end so they can cancel. I once spent four hours fixing a spreadsheet. The spreadsheet had an error. The error was a decimal point. I thought the profit was 12%. The profit was 1.2%. I felt sick.
I had made decisions based on the 12%. I had hired a freelancer. I had bought software. The decimal point changed my life for a month.
The Decimal Point Error
The $0.88 acquisition cost is a decimal point error. It looks like a win. It is actually a cost. If you spend $0.88 to get a person who will never pay you, you have lost $0.88. If you do this a million times, you have lost a million dollars.
Marcus the CFO does not see this yet. He sees the “Active User” count. The count is high. He shows the count to the board. The board claps. They like big numbers.
But the retention report is a ghost story. It shows the future. The future is empty. The October cohort is a ghost town. The buildings are there. The names are in the system. But no one lives there. No one reads.
Finding the Signal in the Noise
I think about my closed tabs. I think about the information I lost. Some of it was important. Some of it was noise. Most of it was noise. We live in a world of noise. A discount is a loud noise. It attracts people. But people do not stay for the noise. They stay for the signal.
The signal is the content. The signal is the trust. You cannot discount trust. You cannot buy trust for $0.88.
Beatriz stood by the window. She looked at the street. The street was busy. People walked fast. They were going to work. They were going to lunch. They were busy. They did not care about her dashboard. They did not care about her green line. They only cared about what was useful to them.
“I have to find real readers,” she said.
“Yes,” I said.
“They will cost more to get,” she said.
“Yes,” I said.
“Marcus will hate the number,” she said.
“Yes,” I said.
If your news is useful, people pay. If your news is a commodity, people want a discount. If you sell a commodity, you are in a race to the bottom. The bottom is a dark place. There is no prosecco at the bottom.
Sustainable Journalism
Marcus likes the short term. The short term is easy. The long term is hard. The long term requires you to admit that the $0.88 reader is a lie. It requires you to tell the board that the growth is slowing. It requires you to focus on the people who stay.
I looked at the ergonomics of the room. The chairs were wrong. The desks were too high. People were leaning forward. They were straining. They were working hard to hit a goal that was hurting the company.
Sustainable journalism is about the long term. It is about the digital transformation of the whole business. It is about the way you treat the reader. If you treat the reader like a lead, they will act like a lead. They will disappear. If you treat the reader like a member, they will act like a member. They will stay.
The cheapest reader is a trap. The trap has a spring. The spring is the first full-price invoice. When the spring snaps, the reader is gone. You are left with the cost. You are left with the empty office. You are left with the warm prosecco.
“I am not buying lists anymore. I am looking for the signal.”
I opened a new tab. I typed a new address. I started a new project. I am not buying lists anymore. I am looking for the signal. I am looking for the people who want to be there. I am looking for the reader who pays the full price because the work is worth the price.
Beatriz is still in the office. She is looking at the screen. The line is not green today. The line is flat. She is okay with that. A flat line with real people is better than a rising line with ghosts.
The prosecco in the cup is the interest on the invoice the cohort will never pay.
She turned off the monitor. The room was dark. She walked to the door. She felt the weight of the year. It was a heavy weight. But it was real. Reality is better than a spreadsheet. I know this now. I learned it for $1,348. Beatriz is learning it for much more.
We all learn it eventually. The price is always higher than we think. The bargain is never a bargain. The reader is a person. The person is the value. Nothing else matters.