I wrote about information inequality for The Tyee this week, looking at what's happening as traditional news media fade to black and new business models emerge based on providing high-value information to people and organizations that can pay high prices.
You can read it here.
As part of the research I went through Postmedia's financial report on the last fiscal year, released last week.
It was grim, which is unsurprising given Postmedia's five years of failure to find a solution to the collapse of its business. Revenue down, no positive news and a strategy based on "aggressive and accelerated cost-cutting" and transforming the business model from "selling audience to selling performance marketing solutions and outcomes."
Which could apply to thousands of businesses, from one-person marketing firms to giant media companies, in all sorts of fields.
Postmedia's deal this year with Mogo Finance Technology represents an early attempt to sell "outcomes." In January, Postmedia announced it would provide $50 million worth of "media value" to Mogo over three years — $15 million this year. That's a big boost for a company that spent less than $11 million on marketing last year, but has dreams of becoming the Uber of consumer loans and personal finance.
If the ads and marketing works, Postmedia hopes to benefit from a revenue-sharing deal and a chance to buy Mogo shares at a fixed price.
But the revenue sharing, based on the information available, is likely to provide about $3.5 million to Postmedia this year — less than one-quarter of the value of the services it's providing to Mogo.
And any chance to cash in on an increase in the value of Mogo shares looks remote. Postmedia negotiated a deal that gave it the right to purchase 1.2 million Mogo shares at a price of $2.96, their value at the time of the deal.
Since then, Mogo's share price has fallen by more than 50 per cent, to $1.36. Postmedia's share options are worthless.
On one hand, at least Postmedia is trying something new.
But it is a little puzzling that a company that couldn't figure out its own business has decided it has the expertise to pick winners in entirely unrelated fields.
And while there is no cash at risk, Postmedia's commitment of $50 million in ads and services does involve both real costs and its reputation.
Combine Mogo's ad budget and the contribution from Postmedia and the small company has a marketing budget equal to BC Lotteries, which spent $26 million on advertising and marketing last year. That was enough to encourage British Columbians to lose $2.4 billion - $6.6 million a day - gambling.
If Postmedia's giant marketing contribution doesn't produce results — if you haven't heard of Mogo by now, for example — that undermines the corporation's claims of effectiveness.
Postmedia has already been slashing print advertising rates, down 16 per cent in the last two years, reflecting both its falling circulation and fierce competition from giants like Facebook and Google. If the $50-million boost for Mogo doesn't produce real results, it will be even harder to convince other companies Postmedia should be part of their marketing budget.
But what do I know? Postmedia's board extended CEO Paul Godfrey's contract Tuesday. It was to expire in 2018; now he's to stay on to the end of 2020. Despite five years of decline, an inability to deliver on plans to revitalize the business and massive losses in shareholder value, somebody thinks Godfrey remains the person to lead Postmedia into what is likely its brief future.