Publishers and the Smiling Curve: The Future of Traditional Publishing

Publishers and the Smiling Curve: The Future of Traditional Publishing

In the world of IT-related manufacturing, there is a phenomenon known as the smiling curve. This curve illustrates the value-adding potentials of different components of the value chain. Interestingly, in the personal computer industry, both ends of the value chain command higher values added to the product than the middle part of the value chain. This curve appears like a "smile" when graphically represented with a Y-axis for value-added and an X-axis for the stage of production.

Acer, a prominent company in the PC industry, finds itself at the bottom of this smiling curve. They put PCs together, but it is the critical component makers like Intel and Windows that capture most of the value on the left side of the curve. On the right side, systems integrators and value-added resellers like IBM or Accenture capture the rest of the value. Acer and its OEMs compete themselves to single-digit margins, leading to stagnant growth. This observation highlights the lack of profitability in the undifferentiated middle.

The same phenomenon can be seen in the publishing industry. The traditional publishers, like Acer, find themselves stuck in the middle. As the digital landscape evolves, the value is shifting to the ends, just like it did in the IT manufacturing industry. For traditional publishers, the home page may soon become akin to the print edition – nice to have, but not the primary attraction.

The rise of mobile devices has played a significant role in this shift. More than half of the visitors to reputable publishers like The New York Times now come via mobile. This percentage continues to increase, indicating a change in consumer behavior. When people follow a link on social media or any other platform, their affinity is not with the hosting publication. They are more likely to ascribe positive feelings to the author and may explore their archives or social media feeds.

This cycle repeats itself, and as people grow accustomed to getting most of their news from social media or search engines, value moves to the ends. Traditional publishers, however, are left in the middle. The New York Times, despite being one of the most esteemed publishers, is worth a mere $2.03 billion. This financial paradox is a result of the free distribution provided by the internet, which is available to every other publisher as well.

Publishers no longer have an exclusive on anything. The internet has removed the need for intermediaries, and value now flows to the edges. This shift in value distribution presents challenges and opportunities for publishers. To thrive in this changing landscape, publishers must adapt their strategies and focus on providing unique value to their writers and readers.

One lesson that can be learned from the world of gamification is the importance of intrinsic value. Foursquare, a popular location-based social networking platform, faced challenges with their mayorship program. Users lost interest in the program because there was no underlying value to reinforce the activity. It was merely a novelty that wore off over time. To create a successful gamification program, there must be intrinsic value that extends beyond the initial excitement.

Similarly, publishers must offer more than just unnecessary customer visits. They need to focus on building meaningful relationships with their readers and providing valuable content. By doing what they do best and accruing outsized value relative to publishers that are rapidly shifting from platform to obstacle, publishers can differentiate themselves in this evolving landscape.

In conclusion, the future of traditional publishing lies in understanding and adapting to the smiling curve phenomenon. Publishers must recognize the shift in value distribution and position themselves at the edges rather than the undifferentiated middle. By providing unique value to their writers and readers, publishers can thrive in the digital age. Here are three actionable pieces of advice for publishers:

1. Embrace mobile: As the majority of users access content through mobile devices, publishers must optimize their platforms for mobile and deliver a seamless user experience.

2. Focus on differentiation: To stand out in a crowded market, publishers must identify their unique strengths and leverage them to provide valuable content that resonates with their target audience.

3. Foster meaningful relationships: Building strong connections with readers is crucial. Publishers should engage with their audience through various channels, such as social media and email newsletters, to foster loyalty and increase affinity.

By implementing these strategies, publishers can navigate the changing landscape and secure their position in the future of publishing.