Measuring "Digital Escape Velocity:" When Digital Revenues Offset Traditional Media Losses

"Technology is the greatest change agent that humanity has ever seen." There can be little argument that for the last generation technology has accelerated the rate of change beyond recognition. Despite this, cognitively we remain hardwired to envision The Present as a range that includes not beyond the past three years to perhaps one year out from today. At least that's the meme espoused by John Girard, CEO and founder of Clickability, a San Francisco-based on-demand Web Content Management (WCM) solution.

In an exclusive interview with JackMyers Media Business Report, Girard uses this concept to explore why transformation is difficult to recognize, much less embrace. Clickability has been a front-row passenger to the explosion of online publishing and the emergence of Software As A Solution (SaaS). As such, this perspective has challenged Girard and his team to consider the broader implications of how technology has re-shaped us and how our best practices must evolve.

This February the company closed a second round of investment funds, raising $8M from Shasta Ventures and Convergence Partners, which led its initial round. To date Clickability has raised $15.6M and reports that, with over 140 blue chip clients, including CNN, the Wall Street Journal, Smithsonian, TIME and - full disclosure - Myers Publishing, it's currently in the black.

Girard offers online video as a not-so-textbook example of an innovation that upends this sense of "The Present." "It's hard to remember this far back," says Girard, "but YouTube was actually founded three years ago this past February. Within eighteen months they were purchased by Google. Prior to YouTube, video was kind of an afterthought for most Web publishers; now it's essential."

It is Girard's contention that we are overtaken by change because we don't ask the right questions. Girard cites the recording industry: No one still asks "Did you get the new Rolling Stones album?" Buying a physical object, distinguishing between an album and a single, have all become largely obsolete. Leapfrogging over to television, Girard mentions a test he gave his staff: name the network, channel, and time slot of Lost. No one was able to get all three answers right.

These examples encouraged Girard to mine a concept that has relevance to his core competency, Web Content Management. Girard explains, "Digital Escape Velocity describes the point in the future when digital media revenues offset losses in traditional, offline media." Girard argues that we have to be willing to look at a long enough time scale: "Look at what happens if the average offline losses are five to seven percent a year, and the average online gains are fifteen to twenty percent a year. Now, depending on what the numbers are, how fast online is growing and how fast offline is dropping, that point may be significantly lower from a total revenue stand point, from where those businesses are today. It may not be a pretty picture, but there is a point on horizon where this escape velocity actually happens and losses turn around."

"While the recording industry has not responded well to replacing traditional revenue with digital revenue streams, that's not actually not the case with traditional media," offers Girard. "Newspapers have actually been developing pretty sophisticated and robust digital strategies. What people overlook is that for most organizations, the contribution to digital is still pretty small, but the other thing that gets missed is that the operating margins are so much higher on digital, that the contribution to operating income can actually be much more dramatic, many, many times higher, largely because the operating margins on the print side, have always been very, very slim."

As Google continues to roll-out its cloud computing applications, Amazon offers its storage solution S3, and even Microsoft is toeing the water with Mesh, Clickability looks visionary for having married its focus on Web Content Management with Software As A Service. "From a philosophical standpoint," agrees Girard, "SaaS, utility computing and cloud computing, are kind of cut from the same cloth. Our business is essentially infrastructure-intensive, and we serve on behalf of our customers around 280 million and 300 million page views a month."

One of the prevailing myths around SaaS is a loss of control. Argues Girard, "The reality is that the customers tend to have more control when they move into this kind of environment. If you look at what people experience when they have installed content management software on premise, their uptimes are typically around ninety-five percent, while ours is typically around ninety-nine percent."

Just as online video galvanized the Web, Girard envisions that "SaaS is going to replace the traditional enterprise installed applications. We are seeing just the beginning of what will be a feature change in the industry. Nobody will buy and install enterprise software in a decade, and five years out will be the tipping point."

For those considering a WCM solution, Girard asks: "What is your core business? If it generates strategic value from innovating technologically on your own, you have a case for making it or building it in-house. But if you believe that your core business is creating exceptional content and connecting an audience with advertisers, then outsourcing the technology component deserves some real thought."

Girard adds, "even in a time of slowdown, there is a pressure to make the right choices over which of those technologies to embrace, how to embrace them, and how to monetize them. It's essentially an opportunity to invest and grab market share."

Clickability employs a proprietary methodology for product development, one that enables them to release a feature a day and four substantive releases a year. During his presentation Clickability CTO Jeff Freund offered, "five years from now I truly believe that we won't be remembered as a content management solution, but as a re-definition of what it means to be an agile enterprise."