Software companies are media companies.
Software companies are media companies.
Episode 81
It has never been easier to build a software company. It has never been harder to grow a software company.
AI & no-code has democratized building and distribution of software.
Design & UI is now a commodity. Every product looks like every other product. The barrier to entry has never been lower and switching costs are no longer the moat they once used to be.
Since 2010, customer acquisition costs have been rising, as companies fight over the two most precious commodities of our time - attention & data.
In a world of finite attention & public data, every software company is a media company. Software is eating the world with content as its teeth.
Stripe, Hubspot and Zapier are all media companies.
But what makes a software company a media company? What can software companies learn from successful media companies when it comes to building an audience around their brand?
This essay is brought to you by MarketCurve.
MarketCurve exists to turn software companies into media companies. We have worked with companies from YC, 20VC and are opening the waitlist for the next batch of users. You can learn more here.
Media has been around for as long as human civilization. It has been used to inform, educate, agitate & entertain. This is as true for the Roman Empire as it is for us.
What is it that makes media so powerful? Successful media has 3 main qualities.
It is distributed to the right people.
It trades attention in exchange for engagement.
It leverages network effects to grow.
These 3 elements hold true for both traditional media as well as our internet-age software companies engaged in marketing.
Marketing evolves along two lines, media and message. Over the past 30 years, media has moved from mass to niche, and more disruptively, from linear to on-demand. Naturally, message follows media - Source.
Media does not exist without distribution.
Media cannot exist in a vacuum. Without distribution, there is no media.
Earlier, distribution used to be a spot on the remote, or a newspaper piece. Then, the internet democratized content distribution, turning everyone into a media operator.
Including software companies.
Now, everyone is a creator and everyone is a distributor.
Digital media now has 3 kinds of distributors:
Infrastructure Distributors - These are the most stable. They are hard to dethrone and carry heavy moats. Hardware, operating systems, telecom operators, search engines fall under this domain. This is the highest tier of distributors.
Network Distributors - Next in line are the aggregators of media formats. These are the channels through which media passes. Social media is an obvious example. So are newsletter & online communities.
Participant distributors - These are the people participating in the network who act as individual distribution nodes in the network. They dont extract the value of their distribution efforts since they are at the lowest tier of this economic ladder. Means of production / distribution are owned by Infrastructure and Network players.
Without participant distributors, network & infra distributors cease to exist. At the same time, participants cannot consume & engage with media without network and infra distributors.
The point of distribution is not just to communicate the media but also build habits around it to make people come back. Infra & network distributors unlock the most value out of this. This is why digitally native companies invest so much into owning their distribution
Right now there are 2 ways companies use to create media & engage with their audience.
Rented Audience: Here the company creates the content but the ownership of both the content and its distribution is dependent on the platform it is in. If X goes down tomorrow, there is no media to be distributed. Examples include:
Company short-form text (X, Linkedin)
Company short-form video (TikTok, YT Shorts, IG)
Exec/founder short-form text
Company YouTube
Exec/founder YouTube
Exec/founder short-form video
Company blog/articles
Advertorials
Owned Audience: Here the ownership begins to be skewed more in favor for the companies.
Company newsletter
Exec/founder newsletter
Company podcast
Customer case studies
Virtual/IRL events
User-generated content / Community
In the internet/social media age, distribution is equated with the Algorithm. There is an endless line of media distributed by the algorithmic conveyor belt.
This algorithm is governed by a set of rules that shows people what they want to see (based on behavioral and action triggers).
As a software media company, if you want to get your ideas to people, you need to understand each environment intimately and shape what you make accordingly.
Attention is the currency & engagement is the value.
Attention is the currency of any media. Movies, TVs, sports, songs - they all exist to interact with our attention and keep it engaged.
Participation, therefore, is the most fundamental engagement construct in modern media.
The goal for any successful media company is to start an authentic conversation & draw the audience into an experience.
The most successful TV shows are those that have “cult followings.” Think Game of Thrones, Lord of the Rings, Peaky Blinders. Their audience has been pulled into an experience not just on screen but also across platforms via AMAs, conferences, merchandise and much more.
Any successful media company starts by defining what experience they want their audience to be a part of. The next step is to decide what medium this experience will be conveyed in. And finally, create the object of experience for the audience.
The last piece of the puzzle is the hook - something to draw attention from another media to yours.
The brands of yesterday gained success by pushing content to as much audience at scale. The brands of today are gaining success by building a community around their business.
An engaged community is a result of co-creation of content via a two-way conversation between the audience & the creators/brands.
Successful media companies win at distribution by (a) pulling attention from the feed and (b) reinforcing connection and identity.
These 2 things are done by:
Creating Authentic, Entertaining & Relevant content.
Differentiation via niche content for niche audiences.
Focusing on Quality over quantity.
Successful Content = Authentic + Entertaining + Relevant.
It starts by saying a big FU to the algorithm. Why? Because the media is not experienced by the algorithm. It is experienced by the human on the other side.
By optimizing for engagement, the successful media company aligns incentives with the algorithm aka sharing more of what is popular.
So what makes media popular? Popular media is (a) Authentic (b) entertaining and (c) relevant.
Authenticity is nothing but originality of thoughts and opinions. It can be sensational, controversial, silly, goofy or informative. It can be anything as long as it feels authentic to the audience.
Authenticity can start from something as simple as innovating on format or narrative. Or just an idea. This essay is authentic too because it is conveying an authentic idea - software companies are media companies.
Authenticity also includes your values, your voice and your opinions. The more authentic your media is, the more it will stand out.
Popular media is also entertaining.
Entertainment has qualitative value & as well as descriptive value. It is not only valuable in of itself, but is also valuable as a medium of information exchange.
Social media has made everyone a performer where engaging content is also entertaining in nature.
Informative content like the Ad Professor is entertaining in of itself to the people who find the subject matter itself to be entertaining.
Content can also be delivered in an entertaining way giving it a descriptive value. In this scenario, there is no one size fits all for entertainment - a person climbing on Mt Everest qualifies as entertainment and so does the ice-bucket challenge.
Entertainment also fits into the buckets of content formats - entertainment for video is different than entertainment via memes.
Relevant content is powerful because it can be both entertaining as well as be presented in an entertaining way.
For example, TLDV - a meeting recording tool is extremely popular on Instagram because of its hilarious takes on job roles inside a startup.
Relevance can be broad or general. It can either be relevant to humans at large or relevant to a particular niche. Relevance reflects the existing cultural zeitgeist and what is trendy.
Differentiate via niche content for niche audiences.
Successful media companies leverage differentiation & is closely tied to authenticity and authority.
An authentic piece of content, created by someone of authority,catered to a particular niche that is entertaining & engaging is the winning formula for successful media.
Differentiation is easiest to achieve by choosing a niche. NotBoring is catered to VCs and founders in the tech space. Morning Brew is for busy professionals who want snackable news. Hustle is for busy founders. My First Million is for hustlers who want to learn how to make their first million dollars.
Long lasting media brands exist because of their voice, not their readers/viewers/users. Look at 37 signals or CoinDesk.
This niching down creates a moat around your brand.
Niching down helps brands create a unique & dominant position against a topic, mindset, audience segment or position.
No one can control what the platforms are going to do. But one can control the way one interacts with their audience.
Which brings us to the next point.
Focus on Quality over quantity.
High-value creators / brands will increase the value of authority & relevance in a world of mediocrity, reaping the rewards for creating such high-value work. Brands who optimize for quality, will thrive.
90% of all companies today optimize for quantity. This is partly because it is hard to create quality work. The short term instinct to ´ship stuff´ often trumps the promise of longer term brand value and loyalty.
There is therefore a case to be made for creating humanizing content.
Humanistic media rejects the proposition that successful content is that which creates the biggest scale and profits possible.
It takes a human-centric approach to marketing. It treats the people who create the product with the dignity they deserve. And it also treats the audience as humans who appreciate the product. It recognizes that brand loyalty will inevitably lead to higher revenue and higher valuations.
Stripe Press is as good an example as any.
Network effects
Successful media companies leverage network effects for maximum impact. The impact of network effects is directly proportional to the engagement and popularity of media.
And the key to create positive network effects is relevance. Optimize for shares and replies. Not likes.
Successful media companies also create rules around voice, distribution strategy, and core customer to maximize the impact of positive network effects.
Media companies struggle to create positive network effects as they scale. Network effects grow positively until they hit inflection point, post which, the law of diminishing returns kick in leading to negative network effects.
For example, Buzzfeed grew rapidly using their personality quizzes, which leveraged network effects. To keep BuzzFeed relevant, they pumped out even more quizzes to grow their audience. But with more quizzes, came less relevance. This created content pollution which led to loss of users.
Software companies can take a leaf out of BuzzFeed to avoid negative network effects.
There are 3 truths to avoid negative network effects.
Less is more: Less content, humanized media built for long-term engagement leads to more relevance and, ultimately, more success.
One channel - Successful companies start by building a strategy around one channel & and own that better than anyone else. When growth has stalled (as it will), only then consider a new distribution channel.
Make for few, distribute to more - The fewer ICPs a company has, the more successful it will become.
Distribution strategy matters - Distribution is as important as content. Successful media companies leverage a strong distribution strategy to create positive network effects.
Successful companies tend to use wider distribution to build up brand credibility (TOFU) but use narrow channels to bring value to their core ICP.
The content to commerce loop
With attention a precious commodity and one that is easily lost, the lines between content & commerce is blurred with commerce one of the touch-points on the surface area that is content.
Commercial transactions are now a single node in the content/information surface area. Digital media instantly connects attention to transactions.
We have seen this with shopping functionality on Instagram, TikTok, YouTube and Snap. Soon it will become a feature of every video interface, including platforms like Netflix, Amazon etc.
Where there is media, commerce will inevitably follow. This is because commerce needs the merchandising power of content to contextualize products. At the highest level, content and product merge to create a singular experience.
If the products are tied into a unique media experience, then the perceived value of the product increases. As a result, buying a product is only part of the experience — it is just an entry point into the overall brand.
Marketers say that content is a product but the truth is that product is another form of content.
The most successful product managers believe that the user journey starts when the user is exposed to the content / brand for the first time.
There is therefore, formed what is called the content-commerce loop. Users engage with the content, enter into a commercial transaction, is engaged and nurtured with more content to build brand loyalty/retention leading to more commercial transactions.
Media creation for software companies in the AI world
Historically, media has been a slow-growth industry. It isnt like software where a lot of the activities can be automated with machines. Media is a human & labor intensive industry that grows slowly.
But automation, offshoring and AI will completely change the output & economics of these businesses.
For one, the playing field will be leveled, with everyone having access to the same technology.
AI will steer the onus from mass producing content for the sake of growing search traffic to actually serving users with information they need. Companies that do this well, will build a successful brand.
Moving forward, AI will definitely be a part of the stack that companies use to create content. And the best companies will use AI as a starting point, enabling their production team to become multi-faceted creators.
Successful companies building/leveraging media have learned that the content is not the business. The content is an enabler - enabling the customer to relate, engage and build upon that relationship with the creator.
For software companies of the future, it’s worth keeping in mind that its not about building a business on content. Rather, it is about building a business on the feeling customers get from the content.
After all, that is what media/art sells - emotions.
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See you next week!