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Condé Nast has unveiled its future — and it means nothing less than a total rebalancing of the company’s business, aiming eventually for a 50-50 split between advertising and consumer-derived profits. On Friday (a summer Friday no less) chief executive officer Charles H. Townsend announced a new structure of top management, which bumped consumer marketing group president Robert A. Sauerberg up to the title of president of Condé Nast (which had been one of Townsend’s roles); gave chief operating officer John Bellando the additional title of chief financial officer, and made Louis Cona, formerly executive vice president of Condé Nast Media Group, an enhanced role as the company’s chief marketing officer. All three report to Townsend.
Beyond presumably bigger paychecks for the three executives, the promotions speak to a larger strategic shift, one cooked up over the last six months with the help of McKinsey & Company (which, one may recall, has been earning a hefty fee by helping Condé Nast with a bunch of restructuring moves over the last 18 months). In a nutshell, the publishing company now wants to wring “as much out of our consumer margin generation potential” as possible, Townsend told WWD. That means lessening the company’s reliance on just selling more advertising, which Townsend sees growing “modestly” in years ahead as brands move more and more of their dollars into other media. He said his goal is for the company to achieve parity between advertising revenue and consumer-derived revenue in the next five years. Advertising currently represents roughly 70 percent of the company’s net profit margin, according to the ceo.
This story first appeared in the July 26, 2010 issue of WWD. Subscribe Today.
The significant consumer part of the equation now falls to Sauerberg. “I’m charging him with leading the company in the creation of a new [business] model, which is technology-enabled, consumer-centric and [concerned with] the monetization of that [consumer] relationship,” said Townsend, who emphasized magazine circulation “is in an incredibly strong moment.” He emphasized the importance of digital initiatives in this model — whether in the form of pay-for-play mobile and e-reader apps (e.g. Gourmet Live) and digitized magazines, or subscriptions generated through branded Web sites such as vogue.com. “What I still don’t know how to do is to monetize the relationship with the consumer like the cable-distribution companies have been able to do,” Townsend ruminated. “Why will consumers pay 180 bucks a month for TV programming they never watch, don’t know the brands of, have no interest in, and will [only] pay a dollar a month for a magazine subscription to Glamour? There’s gold in those hills somewhere,” Townsend said. “How do I mine it?”
As for the timing of the appointments, Townsend dismissed any notion the moves were related to the recent exits of top brass, including David Carey, who left to become president of rival Hearst Magazines in late June. “This is a long and tedious, cathartic process that we’ve gone through to recognize the necessity to shift directions,” the ceo said. He also brushed aside questions about whether Sauerberg’s appointment presages his own retirement. “I have no plans to depart, whether it’s leaving the face of the earth or leaving this office,” he said. “But I am setting in place a management structure that will survive any calamity this company might face.”
And as Sauerberg goes about finding more ways into consumers’ wallets, Townsend said he will increase his focus on clients. “I’m actually going to deepen my involvement with our key advertising clients [and] become more involved in ensuring that we bring the right value proposition to them,” he said (watch out publishers). “The historical priorities that have served our company so well — great content, best-in-class magazines, key client relationships — remain the cornerstone of what we do, but we need to move beyond magazines. The set of strategic course changes being put in motion today will reorient our organization to thrive in this new world of opportunity, assuring the brightest future for Condé Nast.”