Conferences are not the kind of three-way you’ve been hoping for

Like a magazine, a conference is typically a three-way relationship between content, participants, and advertisers, with the producer/organizer in the middle of the triangle.

(Imagine a diagram here)

As the producer, you might choose to have no sponsors (or, on the other hand, not charge your attendees anything), but most conferences derive revenue from both attendees and sponsors, and so if you’re like most, you serve two masters. With both attendees and sponsors, you have two sets of customers, with totally different, and in some ways conflicting goals.

Don’t have any sponsors or advertising

Having two types of customers at odds with — and yet dependent on one another — makes your life very complicated. My first piece of advice is therefore: don’t have any sponsors at all! How? Easy: just make your attendees pay the full, fair price, without any subsidy from sponsors.

Easier said than done, but not impossible. Some speciality magazines have little or no advertising, and while the issue price is high, there’s no advertising to distract the reader. Many podcasts are going with a no-sponsors model as well (although most have sponsors/advertising). There are plenty of conferences without sponsors as well. The advantage is that without advertisers, the business is far less complicated. And I mean WAY LESS COMPLICATED. Those sponsor dollars may seem like easy money; not at all. To earn and sell sponsorship, you need to

  1. define what your sponsorship products are, and how they are to be priced — and doing this takes time and energy away from your primary product, which is serving your audience.
  2. employ marketing and sales staff to find sponsors and sell sponsorships — which inherently detracts from serving your audience.
  3. do all the legal, accounting and other work to contact, keep track of, and collect on sponsorship deals — all of which inherently detracts from serving your audience.
  4. and of course, you have to actually fulfill your obligations to sponsors — which necessarily detracts from serving your audience, often quite directly, by devoting precious time and physical space to sponsors.

Most conference producers overestimate sponsorship revenue and underestimate the costs of selling sponsorships and servicing sponsors. For these reasons, most producers would be better off to simply not sell sponsorships at all. So — if you are considering selling sponsorship — be sure to consider the alternative to selling sponsorship: raise your prices. 

The full and fair price

You can have a very successful conference business without any sponsors or advertisers, if you can successfully get participants to pay the full and fair price (FFP). What is the FFP? Simply: the FFP is what you would need to charge each participant to make back your costs, plus enough margin so that you end up with a 20% net profit. (I won’t go into the details here, but 20% is an excellent general target for net profitability; if you’re making any less than this, you’re not likely to be in business — or want to be in business — for very long).

Keep in mind that you’re not going to end up with a 20% net profit by simply adding 20% to your own per-person cost (PPC). Using one of my own three-day conferences as an example, let’s say that our cost of hosting each participant is about $1800/person. This is the cost of producing the individual conference (COGS) + a proportional share of our ongoing overhead (SG&A), divided by the number of participants. The FFP would therefore have been in the range of $1800+20%+X, where X is enough to cover not just taxes but also the fact that of course some events were less successful, etc. Realistically our FFP would have to have been something like double our PPC, i.e. about $3500.

So, if we were able to get participants to pay $3500 per person, we could have offered the conference without sponsorship. And we tried, but in our case it just didn’t work. The audience that we were serving was relatively cost-sensitive mid-level staff, not senior management, and they just couldn’t stomach the FFP.

In this situation, you have two further choices: 1) don’t offer the product, or 2) find a way to subsidize the price for participants. For conferences, #2 usually leads directly to sponsorship — although there are other lines of business that can bring in revenue (membership, research, sponsored content, consulting, training, job boards/recruiting, etc). Leaving those aside for now, let’s talk about sponsorship.

How to keep everyone from hating you

Again using my own business as an example, we set our full price registration at about the PPC: $1800. After taking into account free passes, discounts and the like, our average registration revenue was about $1000/person. Given that we needed something like $3500/pp to make a real business, that leaves $2500/pp to make up. This is real money: for a 100-person conference, the revenue gap is $250,000. That also shows pretty clearly that our revenue was skewed heavily towards sponsors: in that example of a 100 person conference, we would have collected $100K from participants and $250K from sponsors.

Given that the reason that any conference exists is to serve the audience, the fact that most conferences end up making most of their money from sponsors is a real problem. It’s way too easy to play fast and loose with what you’re offering to sponsors, and end up with everyone up to their eyeballs in advertising, which will suck real bad. Everyone will hate you, go home and tell everyone how much your conference sucked, and (hopefully) not come back. Bad conferences don’t deserve to exist!

That said, it’s not impossible to do sponsorship well, just difficult. I’ll leave the details of how to do sponsorship well for another post; for now, just remember that advertising is a terrible way to fund anything good and real, and that how you earn the right to be in business is how you serve your audience, not your sponsors. Don’t fall into the trap of finding more ways to sell your customers’ time, burying sponsor pitches in the agenda as “content”, and plastering logos on everything. Sooner or later, you will pollute the well, and once the water is tainted, it’s very difficult to lose that taste. More likely, someone else will find a way to sell clean water to your audience.

Advertising is Obsolete

(This post also appears on here on Medium)

I’ve been saying this for quite a while, and now it’s become painfully obvious: advertising is obsolete.

Advertising is no longer needed for discovery

Advertising originated as a way to spread the word to potential buyers about things for sale. Without a sign with an arrow pointing to that drugstore around the corner, some people with a legitimate need for something sold at that store would not know of its existence. This is economically additive and a good thing.

This evolved into mass-market advertising a way to try to sell more stuff, mostly stuff that wasn’t needed, but might be wanted. This sort of advertising is a big part of the fuel of the consumer economy; it increases GDP but creates nothing, and is not economically additive.

Since the invention of comprehensively useful search engines, we can easily find whatever we might actually need, wherever it happens to be. Advertising is no longer needed to find things that we need. The fact that most search engines happen to be themselves funded by advertising is a historic artifact; there’s no reason that they must be funded by advertising simply because they currently are.

Media does not require advertising

The widely-accepted idea that advertising is an intrinsic part of the media business model is false. Just because advertising is part of most media businesses doesn’t mean that it must be. As Ev Williams outlines in his piece on The Rationalization of Publishing, other forms of media (TV, music, books) do not depend on advertising, and yet we’ve continued to operate under the assumption that for some reason news is different. He sets up three strawman arguments as to why news might be — and isn’t — different. I mostly agree with those points, but I believe that there are two additional (and equally misguided) reasons that we’ve believed that news is somehow different from other types of media.

Software was supposed to be magic

Big ideas have a long legacy. Riding along with the early meme that “information wants to be free” was the technocratic fantasy that software would make online advertising work so well that it would again become an economic benefit — a way for people to discover things that they need (or really want), and that they would have otherwise not been aware of. While this does happen to some small extent, we have treated the personal data that is required to make this possible as a zero-cost externality. If we factor in the real value (any value, really) of this data, the net economic value of the discovery of a product by way of highly targeted internet advertising becomes negative. Many companies and countries are now taking steps that take this negative impact into account, making such advertising much more difficult, impossible, or illegal.

In addition to the hidden cost to individuals of sharing all this data, the cost of processing all of this data was vastly underestimated. For most online publishers, the complexity and cost of building and operating software to ‘serve’ advertising to their readers is more than the return on that investment. Online advertising never has been that profitable for smaller publishers, and it will prove not to be profitable even for the largest (Facebook, Google).

It’s true that in those early days of the ‘net it didn’t seem possible to simply charge people for what they wanted to read. Serving ads seemed like an easy alternative, and once we started down that road, we kept at it, even though it turned out to be much harder than we originally thought. And because of our love of software and of problem-solving and our stubbornness and our reluctance to abandon sunk costs, we kept trying to make online advertising work long after we should have simply reallocated all that effort to finding effective ways to charge readers directly.

As we now know, it’s not at all impossible to charge readers directly, but because we had put so much effort into trying to make online advertising work as the sole form of economic support for online journalism, we back-formed the idea that online advertising is the “only rational model” that can support online journalism. Bullshit. Advertising seemed like an easy way to support online journalism, it wasn’t, it’s not, and it’s time to move on.

News was supposed to be free

The “free press” is a nice idea but somehow along the way we confused free speech with free, as in beer. Again, because of the roots of the internet we became enamored with cheap, or even free news. Ev Williams said it well in the same piece I referenced above:

There is — and probably always will be — a surplus of free content. But that’s like saying there’s a surplus of free food in the dumpster behind the alley.

We’ve been dumpster-diving for news for long enough, and, needless to say, the effects are showing. Don’t think that we’ve seen the bottom either — it’s likely to get worse before it gets better.

Advertising adds no net value to the world

We need to discard the misguided assumption that news is somehow better if it’s free. As with any other product, we will pay for information that we actually need, want, and use. Advertising came to be part of the media business model as a way to support the creation of media not that readers wanted, but that advertisers wanted. Real companies make products that people pay for. News is no different.

Anything one needs to market heavily is necessarily either an inferior product or an evil one. (Nassim Nicholas Taleb, Antifragile)

All of what is spent on advertising could be used to make better things — or not spent at all. Nobody would shed a tear if we turned advertising off, and nor would it harm the economy. I include advertising in my list of things that we’ll look back on as 20th-century ideas whose time came… and went.

Advertising is obsolete.

(This post also appears on here on Medium)