How digital technology and social media are creating new opportunities for independent South American media companies
Independent publishers in South America face a host of problems that their counterparts in the northern hemisphere generally don’t have to worry about.
Seemingly never-ending economic turbulence and the impact 0f very close ties between some media organisations and the state have created tricky market conditions for the indies. And if that wasn’t enough of a challenge, publishers are also having to deal with the digital transformation of their assets as well as the impact of social media.
Yet in spite of this multitude of issues there are media companies which are embracing the new publishing world and continuing to thrive. Among them is Editorial Perfil, a key media player in both Argentina and Brazil.
Here, Perfil’s Chief Digital Officer Agustino Fontevecchia, who will be speaking at DIS 2017 to give insight into digital transformation in South American markets, details how the company has managed to develop and execute a successful digital strategy. He also offers a glimpse into the way that media companies on the continent are dealing with issues such as ad blocking and native advertising.
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Could you give some background about Perfil and its role in both Argentina and Brazil? How did the family get involved in publishing, and are they still a key part of its day to day operation?
Editorial Perfil evolved from an old printing shop, FOBERA, ran by my grandfather, Alberto Fontevecchia, where he started editing sports magazines tied to Argentina's major football teams. He then partnered with my father, Jorge Fontevecchia, to launch a magazine publishing company in 1976 which has grown to become Argentina's largest magazine group.
Today we publish over 15 titles, with our marquee publications being Noticias (a weekly newsmagazine that is similar to Der Spiegel) and Caras (weekly celebrity title). We've also broken into the world of newspapers with Diario Perfil, a bi-weekly newspaper that is very influential because of its investigations and "watchdog" journalism style.
Alberto, at 87, is still running several monthly titles including Weekend (the company's oldest publication), Parabrisas and SuperCAMPO. Jorge is the president and CEO, and juggles journalist duties (he interviews major political players and writes two weekly columns) with business duties, as we have recently been awarded two open-air TV channels which we plan to develop into full-stack media operations. I am executive director of the company and the person in charge of digital (we have 8M unique visitors generating 90M pageviews a month).
Brazil is the other part of this story, where we launched Caras alongside Editora Abril over 20 years ago. Caras is by and large the most successful celebrity title in Brazil and has grown to Portugal and Angola. It has left a strong cultural mark on Brazilian culture. Editora Caras has recently expanded to absorb 17 other titles across the board, from sports to female and architecture to history, and is currently generating over 22M unique visitors from its digital operations. Recently, we took full ownership of our Brazil operation which will now be called Perfil Brazil.
What are the main issues facing publishers in your part of South America?
Before touching on the obvious problems of the transition to digital, we've faced two major difficulties that are unique to South America. First, the wave of populist governments from Argentina to Brazil, Bolivia, Ecuador, and much of the continent came coupled with an aggressive economic battle led by the government and against the media. In Argentina, three successive Kirchner administrations used the state to finance its friends and punish its detractors, creating a host of artificial media organisations living off the government. At the same time, ballooning government advertising budgets have made all publishers dependent, in some way or another, on the government, which is of course negative when it comes to editorial independence.
Another issue facing South America today, particularly Argentina and Brazil, is a continued period of economic turbulence. In Argentina, the change from Kirchner to Macri has been followed by a deepening of a multi-year recession as the government attempts to correct the economic path, while in Brazil, a political battle against corruption has been coupled with a strong downfall in economic output which shows no signs of abating.
Finally, I would add, there's an overpopulation of media outfits today, making competition quite intense.
When do you start your digital transformation? You say you invested quite a lot of money for little return initially. Why was this the case?
Perfil launched its digital operations ten years ago with a newsroom of about 40 and some of our best talent in charge of the product. The market wasn't there at that time, which led to us slowly downsizing and losing capacity to create the best content. Through the years, there's been several attempts, but beyond generating traffic, it was impossible to create a sustainable operation.
In the past 18 months, everything has changed. We restructured our teams, yet again, and finally began to see results. From the monetisation standpoint, we created a focused team for direct sales and hired people to focus on campaign optimisation and special products (branded content), this has been very successful. From a content standpoint, we decided to give power to each of our brands, instead of focusing on our major title, generating several niches that all feed the news site.
What was the lightbulb moment that caused you to change your approach?
It started in Brazil, where another family member (Alan, my brother) decided to take charge of the digital operation. His vision was one of multiple solutions rather than a silver bullet, so he focused on creating an editorial team that was separate from print (and paid constant attention to metrics and social), and a sales team that offered tailored solutions to clients. After years of generating losses, his unit turned a profit for the first time, leading us to adapt his strategy in Argentina. We doubled revenue in 2016 and expect to do the same in 2017.
How central now is social media to the growth of publishing in South America and especially your two key territories?
Social media is a double-edged sword. It is probably the easiest way to grow audiences very fast, and we have seen this especially with our celebrity coverage. We understand that we must grow our social audiences in order to deliver traffic and be where our readers are.
But social media, and particularly Facebook, is a major competitor for advertising dollars. They are very fast and ruthless and therefore we must be careful when we use their "free" products, as they can lead us into a dependence that may be troubling. This is true of Facebook and Google.
What was the drive behind creating your own CMS and how has its implementation been transformative for your business?
We understood that our structures need to be lean for us to be economically successful, but that we need to have the capacity to support massive amounts of traffic. This wasn't happening with our previous CMS, which would crash in key moments (like elections), and which would come with a cost, particularly for any adaptations.
Instead, we built a CMS from scratch focusing on having the basics covered. Now, we can take massive amounts of traffic and have the capacity to implement whatever we want across all our titles. There are lots of problems as we now have to develop our own products, which means we have cause things to break constantly, but we have embraced this philosophy. Once our tech is really where we think it should be, I think we will have nothing to envy from any other provider in the market. But we aren't fully there yet.
What are now your main revenue sources? Is native advertising becoming more important in your markets?
Print remains the major revenue source by far today. But digital is catching up, and will probably end up being the third largest business unit in Argentina in 2016, and I believe it will become biggest generator of revenue by 2018. In terms of our digital revenues, we are still generating the lion's share of them from our direct sales teams. We are increasingly beefing these up with added offerings from our special products team, where we build custom solutions that include specialised sections and sites with journalistic content, and events of course. We have grown our programmatic and network unit as well, which we think could represent 25% of digital revenues next year.
When it comes to native, I always like to be careful because it can be interpreted to mean different things. Our vision of that is what we call special products. Our marketing manager works side by side with our sales execs and clients to create packages that add value to clients, with things like sponsored sections or full microsites, events, social media, and specialised coverage. We also try to combine these with our print offerings. For us, this has been hugely successful. Other competitors have worked with sponsored sections to great success as well.
Do you have any issue with ad blockers in Brazil and Argentina?
Ad blocking isn't a major issue yet, but we can tell that it's going to be. I couldn't find good statistics for ad blocking in Argentina, but it's reached more than 20% in Brazil, which is a problem. Ad blocking is a consequence of the digital advertising market created by major players, including Google and Facebook. By pursuing a long-tail model and forcing everyone to accept that digital advertising is cheap, they have opened the flood doors for crappy display ads that have inundated the market. Publishers were forced to believe that content was free and try to play the big audience game, thinking they could compete, but that's not a game for premium content creators, it's a game for aggregators.
If we continue to rely on traditional display ads to save our business we are doomed. I don't want to say the same cliche things about focusing on branded content and delivering a differential product, but that's definitely part of it. I also feel that Facebook and Google, with Instant Articles and AMP, are looking to circumvent ad blockers from a technical standpoint. I like that, but then they will continue to control the ad market while we still have to face the cost of creating good content, so that scares me.
What lessons do you think you could teach publishers in North America and Europe on how to implement digital transformation?
I struggled a bit with this one. In South America, smartphone penetration started later but occurs at a much faster pace than in "rich" countries like the US or EU nations. At the same time, these smartphones work on slower connections (2G even) and are much cheaper, so their processing power is substantially lower. This forces us to rethink things such as responsive design, for example, which would pack a heavy site onto a mobile phone that is very far from being the latest iPhone, and thus create a negative user experience.
In South America people are often inefficiently productive, in that they have been forced by circumstance to learn many different skills, but they don't have the focus and the work protocols that we see in the Northern Hemisphere. I think we are forced to be innovative from a different place, not from a standpoint of technological invention, but from how we use stuff that is developed in the US, Europe, and Asia.
And are there any key lessons that you have learned from the major global publishers?
Too many to mention! We are constantly looking at other publishers to see what we can take. I believe it was Banksy that said something like "good artists copy, great artists steal".
Many of the themes Agostino discusses in this article will feature prominently at the 2017 Digital Innovators’ Summit in Berlin. For more information and a pre-agenda booking rate that can save delegates 600 Euros, click here. Remember, this offer ends on 30 November.