RonAmok!

This morning, Chris Brogan published a blog post where he revealed that his new joint venture, Third Tribe Marketing has added 2000 subscribers since its launch last month. At $47 per month per subscriber, that’s an annualized revenue stream of $1.128 million.

As an executive, think about this for a minute. Here is a brand new venture that flipped a switch and opened a revenue stream of $1.128 million–instantly. Add the fact that it did so without spending a dime on traditional marketing or advertising and we have an interesting case study for our theory that Audience is an Asset.

Over the past five years, Chris has built an audience that consists of 47,000 blog subscribers, 125,00 Twitter followers, TBD Web visitors, and TBD email newsletter subscribers.  By asking it to participate in Third Tribe Marketing, this aggregated audience responded by producing 2000 subscribers paying $47 per month.

Put another way, Chris has built a financial asset that can distribute a $1.128 million annual dividend. Therefore, if we use a multiple of 10 times earnings, can we assume his audience is worth $11.28 million? Not even close. It’s worth much more because this audience pays more than one dividend.

Consider Trust Agents, the book that he co-authored with Julien Smith, that rumbled its way to the New York Times Best Seller List simply because he asked his audience to buy it? Or what about the business and speaking revenue his asset generates for his company New Marketing Labs? By adding up all of these revenue sources and multiplying the result by whatever multiple you’re comfortable with, we can calculate a real and tangible financial value for an online audience.

The value of your social media investments is calculated through the dividends your audience asset can distribute to you.

And for those fixated on ROI justifications:

Assuming that Chris worked 80 hours per week for five years creating valuable content (a number that I believe is conservative), he invested 20,000 Brogan hours into building this asset. Does the investment justify the return? I think so.

Photo Credit: C.C. Chapman

For the past few months, I’ve been seeking alternative ways to quantify the value of Social Media through studying the financial statements of publicly traded media companies. I found something interesting while looking at the FY2009 balance sheet of  Media General, Inc. One of its line items,  FCC licenses and other intangibles – net, lost 66% of its value in just two years! That’s $426 million! Gone! But where did it go?

Here’s how the item is described in the report:

FCC broadcast licenses are granted for maximum terms of eight years and are subject to renewal upon application to the FCC. The terms of several of the Company’s FCC licenses have expired, however the licenses remain in effect until action on the renewal applications has been completed. The Company filed all of its applications for renewal in a timely manner prior to the applicable expiration dates and expects its applications will be approved as the FCC works through its backlog. The Company’s network affiliation agreement intangible assets are due for renewal in a weighted-average period of three years. The Company currently expects that it will renew each network affiliation agreement prior to its expiration date. Costs associated with renewing or extending intangible assets are insignificant and are expensed as incurred.

Let’s think about this for a minute. Media General is a company that owns 18 television stations, 21 daily newspapers, and publishes over 200 specialty publications. It’s broadcast business unit is required to purchase licenses from the Federal Communications Commission in order to transmit programming. FCC licenses are scarce resources, meaning that if Media General owns one, its competitors can’t, creating a competitive advantage that Media General has assigned a real financial value to through its balance sheet.

Compare and contrast Media General’s broadcast business with those of us who publish content online. We have no such restrictions. We don’t need to purchase FCC licenses and therefore are not subject to their trappings, such language restrictions, geographic limitations, public service announcements, and bidding wars that translate into hefty operating costs. Add the cost of broadcast equipment and radio towers, and we, the digital content producers, have a huge competitive advantage over traditional broadcast companies just by comparing our respective distribution costs.

Historically, traditional media companies have made their money by investing in two things: building their audiences and owning the distribution channels to those audiences. In the past, the combined value of these pieces was large enough to sustain a profit through renting access to them through advertising. Unfortunately, the value of today’s broadcast assets may have dropped to a point where the rent (advertising) won’t cover the mortgage (distribution costs) anymore.

And lastly, let’s revisit the question asked earlier: “Where did that $426 million go?” Did it just vaporize into thin air? Maybe not. I contend that its value was absorbed into the digital distribution channel, where it sits, waiting for smart companies to take advantage of it…companies that believe that Audience is an Asset.

Tags:Audience is an Asset Ron Ploof ronamok FCC licenses

The biggest struggle that C-Suites have with social media is trying to figure out how it fits within their organizations. For example, if you’re a specialist in marketing, they understand what you do. If you’re an expert in PR, they can tell you where your desk is located. But if you’re skilled in the art of social media, C-Suites scratch their heads while determining where to pencil your name onto an org chart. Do you belong in sales? Customer support? Information Technology? Product development? HR? Accounting? Legal? Since social media cuts across all of these organizations, the answer is frequently the subject of debate.

I don’t blame them for their confusion. It seems that whenever they ask about social media, the explanation involves unfamiliar terms (blogging, podcasting, twittering, Facebook wall entries) rather than the long term objectives that these activities support. C-Suites want to invest time and money into social media, but won’t until someone can explain the business case using terms that are more than ten years old.

Recently, I’ve been searching for a tall thin concept that helps C-Suites understand the role that social media plays within their organizations. If I’m successful, it will answer all of the lingering questions, including those such as ROI, objective, strategy, goals, and tactics.

My research has oriented me toward Audience is an Asset–a concept that an audience built through social media channels is a corporate asset with real financial value.

Over the next few posts I’ll be sharing with you some of the insights that I’ve been gathering while studying the balance sheets of traditional media companies.

In the mean time, I’d love your thoughts.

Photo Credit: a r b o

Tags: audience is an asset audience as an asset ron ploof executive executives c-suite financial balance sheet