The New York Times Restarts Its New Product Model, In Spanish

| About: New York (NYT)

If your image of Mexico comes only from election rhetoric, you might think of it as a land of drug-pushing, crime-committing illegals aiming to upset all Americans hold dear. Well, it turns out Mexico is a market, not only for American goods of many kinds, but also for journalism. This election season, it is refreshing to see Mexico, and Latin America, in the news as something more than a piñata for ill-tempered politicians (Net immigration is now back to Mexico from the U.S., says Pew Research).

Today, The New York Times (NYSE:NYT) does that news-making, launching an effort, a year in the making. Simply titled The New York Times en Español - based in Mexico City and reaching out to all of Spanish-speaking Latin America - the Times' initial effort is a modest one, but one intended both to be built out and to be used as a model for the Times in other parts of the world. It's NYT's intention to launch a second region in 2016 as well. So, as the year begins, we can see the Times is clearly back in the new product game, with international expansion just part of the game plan - the rest TBA.

The potential audience is a big one - estimated by the Times at 80 million, including those who combine certain education and income levels with digital savvy. That's out of about 500 million Spanish speakers worldwide, primarily in Latin America and Spain. While English is the de facto lingua franca worldwide, with 1 billion able to understand it, Spanish is not far behind.

NYT's immediate goal: get a little piece of that market to pay for a digital subscription. But it launches as a free product - no meter, no paywall, just ads from four launch sponsors.

"I want to stress that ultimately this is about a subscription model," Stephen Dunbar-Johnson, the Times' international president, told me Friday. That's consistent with what CEO Mark Thompson laid out in his five-year plan. Reader revenue - now running at 53 percent of total revenue - is the lead dog going forward. Readers like you and me are far more loyal to the Times than are advertisers, as the worlds of advertising continue to experience one upheaval after another (Just one example from last week's Times' Q4 financial report: Its print revenue month by month in that quarter was -9 percent, 0 percent and +7 percent).

Further, the Times is still on a digital subscription roll. It can claim almost 1.1 million digital-only subscribers, up 20 percent year over year and a net gain of 53,000 subscribers in the last quarter. Thompson said Thursday that the Times believes it will hit 1.25 million by the end of 2016.

Of that number, perhaps NYT en Español will contribute somewhere in the five figures - at some point. The Times now has sold more than 100,000 digital-only subscriptions (12-13 percent of its overall total) to those living outside the U.S. The Times won't break out that geography, but we can safely assume the great bulk are subscribers in Europe and Canada. Whatever the Times can eke out of its new market in 2017 - if it launches any metered paywall system by then - will be just a down payment on 2018-20 plans.

"We do not plan on having a pay system in 2016," says Dunbar-Johnson.

"We have a lot to learn from our Latin American readers, and we need to understand their needs and preferences. As we do, and over time, we will find the solutions to best engage them and, in turn, develop a subscription relationship. All to say, this is a long-term audience development road...In markets where we have yet to achieve significant penetration, we are focusing first on audience growth supported by advertising."

The Times hopes to cook up a new audience. Says Dunbar-Johnson:

"We want to take a bet on exposing larger numbers of people in this market in Spanish to New York Times journalism. Have them marinate in the brand."

Learning from the 2014 Times' paid experiments

In his comments, you can hear the lessons of 2014 at the Times. That spring, it announced plans for three subscription paid products. The millennial-oriented, lower-priced NYT Now launched, but couldn't land more than 20,000 subscribers; it remains today as a free product and a good learning lab for the Times. NYT Opinion launched, but it became immediately apparent that it, too, wouldn't find much of an additional paying market; it was closed within six months. NYT Cooking lives on, popular with readers but relying only on ads, the Times having decided against putting in a metered pay system, given what it had learned. Those echoes of product testing informed much of the Times' new product development work of 2015. So, with the new products - and NYT en Español will be only the first to launch this year, details to come - the model is develop the audience first, charge later.

The relative modesty of today's launch is a contrast to earlier efforts. Those 2014 launches were costly, as has been its foray in China. In this case, we see a total cost of probably $2 million or so to build out the first in-language regional product. Given, though, the newly built-out central team - which will lead development in the other non-U.S. regions - the marginal cost of new regions should come at less than $1 million each. That incremental cost will be driven by the size and experience of editorial staff needed to create a winning product.

We can see another reason for the Times' caution here: Expanding outside a publisher's home market is anything but easy.

"We're introducing the Times to a new group of people," says Paul Walborsky, the business head of the Times' new international product efforts and of NYT en Español. Walborsky, who serves as a strategic consultant to the Times, brings unusual experience to the company. He is an entrepreneur steeped in publishing, with broad and fundamental knowledge of Latin America. He was born and raised in Mexico City, leaving at age 19, but has kept up connections in the region. He brings to the Times a long background in both startups (selling the financial CRM World Street Corp. to Thomson Financial in 2002), and in finance and tech. In the digital news business, he's known as the guy who built Gigaom for seven years, leaving as its CEO 18 months ago, some nine months before the site collapsed.

Lydia Polgreen matches Walborsky's passion for the region. A highly regarded international correspondent, with wide-ranging experience in South Africa, South Asia and West Africa, her 14-year Times career has led to the development of NYT en Español ("I'm still working on my Spanish." How's it coming? "Muy bien," she laughs).

As part of her duties as deputy international editor, she will direct a team of six journalists, based in Mexico City and headed by Times editor (and native Venezuelan) Eli Lopez. Importantly, the first staff has broad geographic roots, including representation from Spain, Venezuela, and Colombia. They will produce original stories, aided by a half-dozen current Times correspondents in the region. In addition, the product will feature 10-15 daily Times stories (of the 150 produced daily in English) translated into Spanish. While based in Mexico City, the world's largest Spanish-speaking city, the intention is to serve everyone in Latin America (save those Portuguese-speaking Brazilians, who actually slightly outnumber all the continent's Spanish speakers).

Reader research showed a high interest in a Times-curated news product. That research has been multi-faceted, including street intercepts of would-be readers, use of Facebook as a platform, and even sending out test newsletter products. Importantly, the Times' initial product team includes one data scientist and one person dedicating to user design research, testimony to how important the new research and analytics are to contemporary product development.

It's a new circle of knowledge, as Walborsky describes it: "market research, user design research, and then we validate with data science."

He uses the word narrowcasting.

"By using fairly advanced data science, we can actually get to the right audience and get them engaged. At the end of the day, you can't just spend money, because you can't translate everything, and you cannot produce 500 pieces. You really need to narrowcast, or narrow-target, your content to the right audience."

Engagement is the key

Now it's out of the data and into the marketplace. Importantly, in this case, it isn't the top of the proverbial audience funnel that's most important. It's the middle - those that can be regularly engaged in Times content.

Says Polgreen:

"Our goal is to skip the mass audience step. If we get 50 million people coming to this website, that will be great, but I think our real target is to try and go out there to find who are the most engaged users who we think are going to want to come to use a couple of times a week, or every day, and really have a deeply engaged relationship with The New York Times."

Consequently, how many stories people read is one test here. I'd believe that paying subscribers would one day expect many more, but that's a decision for down the road.

In offering a once-a-week newsletter, Boletin, at launch, the Times applies a lesson from the mothership. Email newsletters, briefings, and alerts all increase engagement, and the Times is engaging more resources to work each format. By spring, Boletin is planned to go to five days a week.

NYT en Español is browser-only; no app is planned at this point. It looks much like the rest of the Times' site. Ultimately, the desired engagement may depend as much on the intangible of product feel, as its content. That's a question of la voz, the voice of this product that the Times hopes to make a friendly and comfortable daily companion of the most engaged (and eventually paying) readers.

The half-dozen editorial staffers are matched up with an equal number of those directing and aiding the product, including product manager, data scientist, user design researcher, and developer.

We can expect the Times to launch a variety of marketing programs over the year. I asked whether it has been able to secure any launch help from one of its major investors, Carlos Slim, who owns 16.8 percent of the Times after making a major investment in the depths of the Great Recession. Slim, edged out by $2 billion by Bill Gates for the No. 1 spot on Forbes' wealth list, owns América Móvil (NYSE:AMX), the largest mobile carrier in Latin America. I wondered if Slim could help the Times with product placement or preferences in ways similar to those that Samsung (OTC:SSNLF) has done with Axel Springer, as the German media company launches its mobile news aggregator product, Upday.

"No," says Polgreen. "As you know, Carlos Slim is an investor in the Times, just like any other. He's not involved in the project in any way."

Four launch sponsors defray the investment

While subscription may be the longer-term goal here, for now it's advertising that will help defray the cost of the 12-person investment the Times is making.

The New York Times en Español launches with four initial, three-month sponsors, a good representation. Interestingly, they're a mix of U.S. advertisers wanting to reach a broader market and Latin American-based corporations.

"If you look at Latin America, you certainly have a pool of potential advertisers of those that are pan-Latin," says Dunbar-Johnson. "These are companies that are multinationals that have significant interest in Latin America; there are a reasonable number of those." Those sponsors include a financial giant, Mexico's Banamex, Formula 1 Gran Premio de Mexico 2016, and Acciona (OTC:ACXIY), a large Spanish renewable energy company.

The Times begins this initiative with no staffed advertising sales offices in the region (it has long had New York Times Syndicate sales staff there), but it does have an agent in Mexico City, and plans to build out its own sales staff as the audience grows.

Will the Times' T Brand Studio, its big digital-ad growth engine, be spinning out branded content ads in the new product? Not yet, but its talent could kick in as the audience grows to scale.

As it enters the new marketplace, there's lot of competition. Primary, of course, is the contest for readers' time. Then, there are other publishers.

Latin American media revived itself after the dark years of dictatorship and censorship that marked much of the '80s and '90s. Mostly family-owned, the in-country press has more lately suffered from the same kinds of digital disruption that have affected North America and Europe. Their depth of non-national reporting varies, and only a few have any original global staffing. We'd also have to consider El País, the Madrid-based daily with extensive operations in Latin America, BBC Mundo, CNN en Español and The Wall Street Journal as competition.

Both the Times ("The newsonomics of The New York Times' expanding global strategy") and the Journal have had their share of stumbles abroad; the Times abandoned a Brazil edition when it ran into headwinds three years ago. Even as The Guardian, Quartz, BuzzFeed, and The Huffington Post build and plan sites far afield, it's clear not all of them will succeed. As both Bloomberg and the Financial Times, both more highly experienced in global publishing, have found, it's a long slog of building ad relationships, relevance, and readership. The Times' investment here, then, can be seen as a relatively small one that can be sustained and allowed time to find traction. That's the hope, anyway, for a new product that stands as one of the first of 2016.