The newest must-have for diversifying publishers: product labs

Smaller publishers are in on the consumer product wave, too. Less than a year after selling $15 million worth of blankets, Futurism has built a standalone consumer products business, Gravity Products, which has expanded its product line to six and already sold out of all its inventory for 2018. Clique Brands, which raised $15 million last year to build a consumer brands division, has helped develop product lines for brands ranging from Target to Tacori, and it hopes revenue from its consumer brands can eventually exceed revenue from advertising.

In theory, publishers possess many of the raw materials needed to develop a successful product, including access to a large base of potential customers, sophisticated marketing and advertising capabilities and a wealth of editorial insights and expertise.

But affiliate commerce is one thing. Physical product development is more expensive, more involved and more removed from a publisher’s core capabilities than anything else they’ve tried in order to diversify revenue. It can mean renting warehouse space and maintaining complex supply chain relationships, and it requires building new relationships with manufacturers located on different continents.

It also risks compromising publishers’ editorial integrity. If any of these operations start putting dozens of products into the market, readers may start asking why their favorite magazine is recommending one.

“What [editors] don’t want to be are product shills,” said Corbin de Rubertis, head of innovation at Meredith, who oversees the publisher’s nascent Brand Labs operation. (He added that most of the editors at Meredith have been receptive to the lab’s work.)

Helping brands
Publishers have begun exploring this uncertain terrain because the digital advertising market has become brutal with a majority of dollars going to Google and Facebook. But advertiser interest also nudged some publishers in this direction. Meredith, for example, started developing its first product because a client asked for help developing something it could sell directly to consumers, de Rubertis said.

For now, that advertiser interest is what’s driving Meredith’s product labs business. In exchange for a substantial media spend commitment — the price tag starts in the seven figures, though de Rubertis would not get more specific — Meredith’s team will do the work of developing a product that the advertiser could sell directly, outside of the retail channels they normally use.

That work is extensive. After combing through clickstream and engagement data from Meredith content, a separate team conducts market research by tapping into segments of a 150,000-woman panel. Meredith’s team will also run focus groups, depending on who the target market is: A product aimed at midwestern moms might get tested at Meredith’s headquarters in Des Moines, Iowa, while a product aimed at millennial women might get tested in Chicago or New York. For design and branding, it relies on the Foundry, the branded content studio it acquired when it bought Time Inc.

Though just a small handful of people work on the brand lab full time, “dozens” of people contribute to the finished products developed for clients, de Rubertis said.

In BuzzFeed’s case, it’s willing to help brands with as much or as little of the development process as they want. Through its sprints — usually week-long efforts to design and conceptualize a product — BuzzFeed’s Partner Innovation Lab has helped develop standalone consumer products such as the Glamspin for Maybelline. But it’s helped brands figure out smaller details, too. It helped one brand design a supply chain for a new direct-to-consumer product, for example, and it’s overhauled the user experience of a product’s website, said Jake Bronstein, the head of Partner Innovation Lab.

Because the scope of work varies, the price does too. But even on the low end, working with the Partner Innovation Lab requires a six-figure investment, Bronstein said.

Those price tags line up with the ones a brand might encounter if it tapped a product consulting firm. According to Jace Grebski, the managing partner of product consultancy Swarm, the price of developing a minimum viable product of a digital product can run anywhere from $150,000 to $300,000.

More skin in the game
Not every product lab is driven by advertising. Hearst Magazines sells the products it develops directly to its readers. Commerce has been a big priority for the publisher for the past couple years, but its limited experience with things like procurement and fulfillment kept it focused on things like affiliate commerce, which were a more natural fit with its expertise in digital publishing.

That changed when Hearst acquired Rodale back in January. The lifestyle publisher, which has its own warehouse and runs a full-fledged direct-to-consumer business developing and selling things like books and DVDs, “looked like the infrastructure of something we could continue using,” said Sheel Shah, Hearst Magazines’ head of consumer products. Acquiring those resources and expertise gave them the confidence to try developing their own consumer products, Shah said.

Low-tech
For the most part, the products that most publishers have developed are low-tech, based on raw materials or goods that can be sourced from many different locations. While coming up with the perfect color for a line of flatware isn’t easy, it’s a lot easier than developing a new kind of technology, which can easily cost hundreds of thousands of dollars in research and development, according to Mike Grillo, the head of Gravity Products.

“We stick to goods that are high on science, but low on tech,” Grillo said.

In cases where there is a lot of technology involved, it helps to find partners who can have done the work already: BuzzFeed’s Tasty One Top, for example, was built in collaboration with FirstBuild, a product incubator run by General Electric, which had developed a similar product, the Paragon, already.

Editorial input
Editorial staffers can also leave their fingerprints on products. While several publishers involved in this work stress that the consumer products and brands being developed are separate from editorial, editors are still closely involved in the process. An editor could be brought in to offer thoughts on why a product converted well on affiliate commerce, or how much staying power a new kind of product might have among consumers. They can also provide feedback during the design process.

“We have to make sure [the product] matters,” said Shah. “We’ll only know by having continuous dialogue with [editorial].”

Editors also provide the crucial seals of approval that make it easier to sell the products. When Shah’s team had gotten its yoga mat ready, it gathered representatives from almost every Hearst Magazines’ brands for a product demo and pitch session, hoping to sell them on why the mat might be relevant to their readers.

Publishers like this kind of work because competition for it is still light, especially compared to the knock-down, drag-out fight for branded content or display inventory. Plus, this is another way for publishers to work with advertisers directly. And while agencies including Anomaly and Big Spaceship have had success developing products for brands such as Hasbro, for the most part, neither agencies nor platforms loom as potential competitors.

“I think it’s really hard for agencies to compete,” Neal Arthur, a managing director at Wieden + Kennedy, said this spring on the Digiday podcast “Making Marketing.” “Agencies aren’t built to have the follow-through on those things.”

Established product development firms see publishers as formidable competitors that still have plenty to learn — as well as a couple that might be missing crucial pieces, too.

“This is definitely the direction the industry is going to move into, so they’re doing the right thing,” Swarm’s Grebski said. “But management looks at a product like a car: you buy it, it drives off the lot, and you’re done. But you have to constantly keep putting money behind it.”