By Corinne Jurney
Historically committed to a spirit of entrepreneurial capitalism, Forbes Media is taking a page out of its own book–or more aptly now, from its own website. And it’s paying off in a big way.
Forbes Media published its first magazine 98 years ago, and was under the control of the Forbes family for nearly a century. The reign of the Forbes family ended with the sale of a majority stake in the company to a group of Asian investors.
A reported sum of $475 million, bought Hong Kong-based Integrated Whale Media Investments (IWM) majority ownership of the business media giant last July. Anchored by Integrated Asset Management, an investment firm that specializes in technology and telecommunications investments, the major investors are Tak Cheung Yam and Wayne Hsieh. The sale fortified Forbes’ brand in China, where it sells its other flagship magazine, Forbes Asia and has a Chinese language website. The Forbes family retained an estimated 20-percent stake in the media company during the sale.
Forbes has largely been spared many of the revenue problems crippling the traditional media industry due to Chief Product Officer Lewis D’Vorkin’s innovative vision and leadership. D’Vorkin embodies the entrepreneurial spirit Forbes is known for lauding, by developing and implementing new business models for advertising, content-creation and labor. D’Vorkin pioneered a new advertising frontier and is credited with inventing the term “native advertising,” formerly known as content marketing.
Traditionally, a chief product officer is not the person charged with determining the direction of a media company, but D’Vorkin’s position at Forbes is an exception.
“As far as my title and role, I’m the only one that I’m aware of who has the kind of title and role in the world of traditional media,” said D’Vorkin. “It’s definitely unusual. What it does for our company, and has for last five years, is really stress the fact that journalism is placed in context of products.”
D’Vorkin said journalists have been hesitant to adopt the mindset that the product that a story is placed in is just as important as the story itself. But, the product is what advertisers spend money to be in, he said.
“Continuous new product development has changed the makeup of staff, the culture of the organization and has set us apart from our traditional competitors in business category,” said D’Vorkin.
The magazine industry fits the definition of perfect competition, said Penny Abernathy, Knight Chair in Journalism and Media Economics. She said the business and finance segment is very attractive, which means it could attract new entrants, which are totally digital.
“In that state, the only barrier to entry into a market is the loyalty of your customers,” she said.
As of September 2014, Forbes’ online operations made up 65 percent of total advertising revenue and digital revenue was growing at 20 percent.
Advertisers in the front seat
Through Forbes’ integrated advertising platform, BrandVoice, businesses have joined the content-creating party, both in print and online. Launched in 2010, BrandVoice allows businesses to publish content under the same format used by staff writers and contributors. This model makes the transition between reading editorial and sponsored content, nearly seamless and makes the ad experience less disruptive. In print, companies can purchase space next to contextually-relevant editorial content, positioned to appear as an extension of the article or story. On the website, advertisers receive their own home pages, where they can publish columns, articles and stories of interest to their target audiences.
Native advertising is D’Vorkin’s solution to the declining number of advertising dollars being spent in magazines. D’Vorkin defines the term in an April editorial as “advertisers telling stories related to what they do without slavishly resorting to sales speak.” The CPO has continually used his editorial space in print and on his digital home page to defend Forbes’ integration of native advertising and laud its value.
“Marketers have insights and understand their business and have things to say and want to connect with an audience,” said D’Vorkin.
Some of Forbes’ reporters and editors were skeptical when the company launched BrandVoice, but D’Vorkin said he assured them then that their jobs wouldn’t change and this has proven true.
“You’re going to report, make phone calls, write, investigate–you’re going to do what you’ve been doing. Online and in the magazine, we’ll have space for advertisers to kind of do the same and it will be clearly labeled that it’s by you or that it’s by marketers,” he said
D’Vorkin said BrandVoice has allowed Forbes to expand its staff, which is unusual in today’s media business. D’Vorkin oversees about 130 people in the editorial and product departments.
Winning with native
Cashing in as 30 percent of Forbes’ advertising revenue, BrandVoice has been a staggering success for the company’s bottom line. The platform has continued to evolve. It launched home pages for companies to publish on, last year. This year, it introduced Pulse, an interactive visual program advertisers can utilize to further engage audiences. Toyota, which also has a BrandVoice home page, is the first adopter of Pulse.
Other publications have taken notice of Forbes success and have followed suit. Both the Wall Street Journal and The Washington Post, recently hired former Forbes standouts to learn the D’Vorkin way. Forbes’ main competitors, Bloomberg Businessweek and Fortune, have also begun investing in native advertising. Business Insider Intelligence estimates spending on native ads this year will reach $7.9 billion and will grow to $21 billion by 2018.
Since overhauling Forbes’ advertising and content platforms, unique visitors to the site’s business channel increased 393 percent, from 2.9 million to 14.3 million, Dvorkin told a conference audience in 2014.
Online, more than 6,000 BrandVoice posts have been published. BrandVoice has garnered more traction in certain industries, including Business and Technology, where between 20 percent and 25 percent of the main landing pages are sponsored, respectively. Notable companies utilizing the homepage feature include SunGard Availability Services, CenturyLink and NetApp. The Lifestyle and Leadership sections each have only one sponsored home page.
“The way I see it, there are two levers, hot and cold, in a bathtub: content and advertising,” said Brad Thomas, editor of Forbes Real Estate Investor. “The most successful companies have the right combination coming out of the spigot. And I think Forbes has that.”
Pay to play
Pennsylvania-based SunGardAS is an information services company that utilizes Forbes’ BrandVoice and the home page feature.
Joe Clancy, digital marketing manager at SunGard, said BrandVoice gives his company the opportunity to focus on delivering a consistent message to a wide audience. The only drawback lies in having to sacrifice design and creativity, which advertisers have traditionally relied on.
“Forbes is incredibly powerful,” Clancy said in an e-mail. He said Forbes’ 5 million Twitter followers and the BrandVoice platform allows SunGard’s content to gain page rank traction with targeted keywords.
“For example, if we wanted to write a piece around Disaster Recovery Planning, once it was launched on Forbes BV it would immediately show up on Google’s News Tab (on page one),” said Clancy.
Clancy said SunGard’s strategy with native advertising is to tell readers what the company does without coming off as too ‘sales-centric.’ Clancy said SunGard also wants readers to know “that we are keenly aware of current events and issues that are largely unrelated to our business,” including lifestyle and general workplace commentary. He the company has not yet pinpointed a way to quantify its results with BrandVoice.
“We have witnessed a great deal of page views and exposure for our business,” said Clancy. “We are still struggling with how best to measure it from an ROI perspective, but there is no question the tool puts our brand out in front of more people every day.”
Surprises abound in print
D’Vorkin said his initial vision for BrandVoice was primarily digital, but demand for space in print has surged. Forbes has run 50 two-column BrandVoice stories in print, “all clearly labeled,” according to D’Vorkin in an April editorial.
Forbes’ February issue might have baffled readers, who opened the front cover to find yet another cover. The second cover was sponsored wholly by AT&T, which also sponsored a two-page story in the popular “Top 30 Under 30” issue. D’Vorkin said the company received no pushback from readers in response to the dual cover. The magazine’s list issues are particularly attractive to advertisers and are an area for growth, he said.
With the increasing popularity of BrandVoice among advertisers, Forbes is faced with maintaining the journalistic prestige of its masthead.
Lucia Moses of DigiDay wrote that “by letting advertisers post content produced for them by other publishers, there’s the possibility that they’ll dilute their message to the Forbes readership. The ecumenical approach to native also points to just how blurry the lines between advertiser, publisher and ad content creator have become.”
Thomas, also a Forbes contributor, said he does not think publishing his content alongside native advertising diminishes his, or Forbes’ brand. He said Forbes’ content has consistently remained high-quality throughout the changes in the company.
“I keep looking for signs that the quality could diminish, but I think it starts at the top with Lewis,” said Thomas. “When you have someone at the top with the same aspirations for quality, it trickles down.”
Speaking for yourself
The social journalism platform boasts an army of more than 1,000 contributors who publish articles on the website, covering a vast array of topics. One-third of these authors are freelance journalists, but the remaining contributors are experts, entrepreneurs, business professionals, academics and authors. Allowing these people to publish under Forbes’ brand gives them credibility and space to demonstrate their knowledge.
Inevitably, conflicts of interest pervade this model. Similar to journalists promoting their intangible brands, these contributors often use Forbes’ platform to advertise tangible brands, including, financial services, books and trusts. Forbes’ niche newsletters are written by professionals, who share insights with readers, demonstrating their prowess in their respective industries and thus promoting their own funds or companies. The contributors are meticulously vetted, said Thomas, who went through a two-year process to be approved as a Forbes contributor.
Thomas, who writes Forbes’ biannual commercial real estate investment newsletter, is an investor in this sector and is planning to launch or co-invest in an ETF. He is also writing a book about Donald Trump’s empire. Thomas’ newsletter dispenses advice for investing in REIT and an investor looking to enter this market, would be likely to consider investing with a fund or trust Thomas is affiliated with. His role also gives him a channel through which to promote his book when it’s published.
Define the line
The American Society of Magazine Editors released new guidelines for native advertising in 2015:
ASME also recommends that native advertising on websites and in social media should be clearly labeled as advertising by the use of terms such as “Sponsor Content” or “Paid Post” and visually distinguished from editorial content and that collections of sponsored links should be clearly labeled as advertising and visually separated from editorial content.
On websites populated by multiple sources of content, including user-generated content, aggregated content and marketer-provided content, editors and publishers must take special care to distinguish between editorial content and advertising.
D’Vorkin’s outlined vision jibes with these guidelines and emphasizes that all native advertising in Forbes is indicated as such.
“The key is that it needs to be clearly labeled and very transparent to the audience that the content comes from an advertiser or marketer,” said D’Vorkin.
However, based on these guidelines, ASME might not look favorably upon Forbes’ decision to sell a sponsored second cover, labeled with an inconspicuous “BrandVoice by AT&T” banner. To understand this is sponsored content, readers have to be familiar with BrandVoice and what it means. This sponsorship might not be immediately clear to the average reader, who would require a more blatant “Sponsor Content” or “Paid Post” citation.
Readers must be vigilant in reading the magazine and website, scanning each byline for a sponsorship tag.
A 2012 study by Contently found that two-thirds of survey respondents said they felt deceived when they realized an article was sponsored.
Robby Wiggins, a senior in UNC’s Kenan-Flagler Business School regularly visits Forbes’ website and said he’s often unsure whose opinions he’s reading.
“I think allowing companies to publish on the site is a slippery slope and greatly risks confusing and alienating readers,“ said Wiggins. “When I read sponsored content, regardless of however much the sponsoring agency takes liberty with changing a certain angle, I immediately doubt the credibility of the source.”
Forbes continues to explore new frontiers of native advertising and anticipates interest among advertisers in the Pulse platform. D’Vorkin said he expects to see native advertising grow both at Forbes and in the larger media industry.
“Companies are increasingly starting their own corporate newsrooms to publish content,” said D’Vorkin. “The traditional newsroom as we know it, is showing up everywhere and we’re going to see more as years unfold.”
Thomas said he thinks Forbes has a sustainable model due to its balance of editorial and advertising, and the fact that its content has not diminished at the expense of increased native advertising.
“Forbes is a survivor,” said Thomas.
Corinne Jurney is a senior at the UNC-Chapel Hill School of Journalism and Mass Communication.
By Jake Barach
Three investing experts’ opinions, a 74.8 percent climb, a 62.7 percent drop, multiple double-digit percentage intraday swings, several hundred PowerPoint slides and two and a half years, and Herbalife Ltd.’s shares currently trade less than 1 percent below their price two weeks before Bill Ackman began his public assault on the nutritional supplement company in 2012.
On Dec. 20, 2012, Ackman, a hedge fund manager at Pershing Square Capital Management LP, made public the details of his massive short on shares of Herbalife, sending prices down 9.7 percent on the day and 30.2 percent across four trading sessions. Within two months, Dan Loeb, founder of Third Point LLC, and Carl Icahn, founder of Icahn Enterprises LP, staked their bets on the long side of Herbalife shares. Since then, the three have written investor letters and made countless media appearances in order to defend their stance on the issue. Ackman’s failure to provide the “smoking gun” for Herbalife’s impropriety during his second, three-hour, widely-covered broadcast led to an 18 percent rise in the stock’s share price as he spoke July 22, 2014.
Though the average investor may not be sure who’s right in this situation, the swings in share prices indicate that they are clearly paying attention. The words and dollars of these three men have yet to bring to light the truth behind the company’s structural integrity and financial viability. Still, the media eye rests firmly upon them and their fellow elite investors in an effort to provide its audience with the coverage it desires, but not necessarily the coverage it needs.
“People shouldn’t be looking for reasonable financial advice for free on the Internet or their television. It’s simply kind of a ludicrous expectation,” said Jeff Macke, the founder of Macke Asset Management LLC. “But, selling ice cream is always going to be a better business than selling kale.”
The Herbalife case may be the sweetest ice cream to go on sale in recent years. In 2013, 13.8 percent of families held stocks among their assets and 94.5 percent held some form of financial asset, according to a Federal Reserve Board bulletin from September 2014. The average investor with a stake in equities and fixed-income mutual funds has earned a 1.9 percent annualized return during the past 30 years, writes Sean Hanlon of Forbes.
For this reason, it should be no surprise that investment “gurus” like Icahn, Loeb, Ackman, Leon Cooperman and Warren Buffett, who have amassed immense wealth through their shrewd and calculated stock picks, garner investor admiration. To see three of these titans go after one another, with hundreds of millions of dollars on the line, is as entertaining of an active management story as the media is going to get. There’s a highlight reel-esque New York Times timeline to prove it. But, boiling down investing into an easily digestible, “me versus you” scenario can undervalue the process that goes into assigning value to a stock.
Supply vs. Demand
Given the money at stake in, and the complexity of, the financial markets, people crave information, particularly seemingly lucrative information. Supply is valuable among this massive demand, but it is also a highly competitive space, said Macke. As with any business in search of financial success, outlets such as Bloomberg News, the Wall Street Journal, Fox Business Network and CNBC seek to provide customers with what they want. In a world dominated by financial jargon and massive institutions, recognizable, successful names often fit viewers’ tastes, and outlets are quick to comply and place these investors on a pedestal. This, however, may do more harm than good for the consumer.
Among this obsession with active management, it can become easy for the average investor to be convinced that they can and should be picking their own stocks, said Barry Ritholtz, (right) the founder of Ritholtz Wealth Management and a Bloomberg View columnist. This assumption comes despite the fact that the S&P 500 climbed 11.39 percent in 2014, and only 30 of the funds named on Bloomberg’s list of 100 top-performing large hedge funds generated a greater return on the year. Ackman’s Pershing Square International, which generated a 32.8 percent return, stands atop the list.
“Even if the investor can mimic what the pros are doing, so what?” said Ritholtz. “The guy who buys an index and puts it away is ultimately going to have lower cost, lower taxes and better performance. The only thing is, they have less to talk about at a barbeque or a cocktail party.”
Though outlets benefit financially from providing viewers access to the stars of the investing world, the relationship between the two is far from one sided. Stock picks, no matter how insightful, don’t pay off successfully unless other investors agree with the your position. As a result, most people with large stakes in the market want their voice heard, said Josh Brown, CEO of Ritholtz Wealth Management and author of “Clash of the Financial Pundits: How the Media Influences Your Investment Decisions for Better or Worse.” In the age of constant news cycles, this can cause confusion for the everyday investor.
“There’s a tremendous amount of noise and very little signal,” said Ritholtz. “You have to sift through all that noise to get through to the signal underneath.”
While the typical fund manager with an unrecognized name may court media attention and get a quote placed every so often, the outlets are clamoring for quotes from people like Icahn and Ackman, said Macke. This, in turn, provides these investors with a megaphone through which to convey their opinions.
What may, in fact, just be a particularly loud “noise” can easily be attributed as signal even in the face of limited evidence. In August 2013, for example, Icahn tweeted about his position in Apple Inc. and the notion that it was particularly undervalued. In 140 characters or less, and with the aid of a wealth of media coverage, Icahn helped shares of Apple stock rise in value by nearly 5 percent on the day.
Given his access to executives, his experience on company boards and his investing pedigree, it wouldn’t be shocking if Icahn’s statement was correct. Yet, whereas an everyday, skilled investor might see Apple as undervalued, purchase shares and then reap rewards as future investors come to a similar conclusion later on, Icahn is able to skip this process thanks to the coverage he receives and the attention he commands. He can generate profit nearly instantaneously. This influence on the markets is concerning, particularly when considering certain aspects of human nature that come into play in investing.
“There are a lot of examples throughout history where the public wants to believe that somebody can give them certainty about the future,” said Brown. “We put the guy who was just right about something on the pedestal just about every time. We almost never learn.”
The subscription to this hot-hand fallacy means that someone such as Icahn, who is often “right” simply as a consequence of having his past and his ideas becoming highly visible, is unlikely to relinquish his influence. Viewer confidence in his ability to pick stocks perpetuates the need to cover him among outlets. This coverage sways investor sentiment, generates profit for Icahn, has investors clinging to his every word and keeps the cycle going.
Despite the criticisms, the business world possesses a massive influence on our everyday lives. Forbes’ 2014 list of billionaires included the names of 1,645 people that have the rare, and enviable, honor of requiring at least 10 digits to describe their wealth. At Forbes, the coverage of individuals is largely limited to their impressive number and a short blurb about how it grew so large. At Bloomberg Billionaires, Peter Newcomb, an editor on the desk, and his team work to piece together the math and the stories behind the fortunes of the world’s wealthiest people.
“The way we look at it, by covering these guys, you’re covering the ultimate movers and shakers of the global economy. These guys have their hands on every aspect of the economy, whether it’s the international markets, the clothes you wear or the food you eat,” said Newcomb. “It’s hard to leave your house and go about your day without half a dozen billionaires’ fortunes getting in your way.”
The value in Bloomberg Billionaires differs significantly for those that pay upwards of $20,000 a year for a Bloomberg terminal and those who peruse the website for free, said Newcomb. The terminal users, who tend to be deeply engaged with the financial markets, turn to the desk’s work to understand how the world’s wealthiest are deploying their capital and steering their investments, he said. On the site, however, the interest is much more on par with financial porn, as readers seek an inside look at the lifestyles of the fabulously wealthy.
Some, like David Geffen, who embarked on his path to riches as the co-founder of Asylum Records, will happily speak on background and provide guidance as to how they’re investing, said Newcomb. Donald Trump, on the other hand, is Newcomb’s go-to example for someone who has a tendency to be too helpful and embellish his holdings. Still, the issue of self-promotion on the part of the billionaires resonates. Despite the range of cooperation, there is one consistency that invokes similar concerns as those regarding investment “gurus.”
“Most don’t really want to cooperate on reporting their wealth because they’re not that interested in that,” said Newcomb. “They are interested in their deal making. So, if you’re really covering their business, that’s something they’re more inclined to cooperate with.”
Ultimately, it’s difficult to tell how big of an impact the financial media and its coverage of investment gurus has on the ways in which its consumers invest. A general and costly misconception about the analyst reports, stories and charts that investors “research,” however, is that they can help someone vet which stocks are worth buying, said Ritholtz. The semi-strong form of the efficient-market hypothesis suggests that share prices incorporate and reflect all relevant, publicly available information.
“Unless you’re getting market moving news before everyone else, what is the advantage of reading something that’s in Barron’s, the Wall Street Journal or the New York Times if the rest of the investing world is acting on it?” said Ritholtz. “Whatever strategic benefit there is to gain from this information is lost in the fact that everyone has access to it.”
Even if investors attempt to consume financial media as a means of gauging the economic environment, rather than handpicking stocks, the impact of the recency effect, or the tendency to focus only on the most recent data points, on writers and financial media consumers can be detrimental to this effort. Markets need to be understood across time, thus analysis of a stream of data points, not a singular mark, is necessary to come to meaningful conclusions, said Ritholtz.
“A couple of years ago, CNBC used to have a clock countdown to non-farm payrolls. I don’t remember if it was tenths of a second or hundredths of a second, but it was just absurd,” said Ritholtz. “It isn’t Usain Bolt. It’s non-farm payroll, and it’s going to be adjusted next month anyway.”
This disdain for the sound bite genre led Ritholtz to create “Masters of Business,” a podcast in which he sits down for an hour with players across various industries. Instead of discussing stock picks, however, the discussions tend toward the guests’ varied expertise. Brad Katsuyama, the CEO of the IEX dark pool and protagonist of Michael Lewis’ “Flash Boys,” discussed dark pools and high frequency trading. Bobby Flay spoke on the business of the Food Network. Even here, there is some self-promotion, though it may come with a more educational tilt. This format is synchronous with Ritholtz’s belief that an investor must have a diversified set of expertise in order to be effective, but, for better or for worse, it is not conducive with the direction media is going in, said Macke.
“If you have the luxury of having a longer cycle and viewers that want to pay attention to you for 60 minutes, and you’re happy with that niche, that’s fine,” said Macke. “For the people that are craving an audience, we’re going to a three minute sound bite type of future, and you better embrace it and figure out how to be relevant in that genre.”
Though there may be flaws in financial media and the ways in which people consume it, there is no denying that it adheres to supply and demand economics, said Macke. The average investor is putting his or her money at substantial risk in an environment that is hard to fully comprehend and even harder to predict. The constant stream of speculation, data and coverage may not be worthy for investment advice, but it certainly plays a major role in comforting investors and enabling them to understand the ins and outs of the corporate and financial worlds. The business media outlets capitalize on this need, and the glut of competition has demanded that they continue to adapt the way in which they do so.
Big time investors may command more control and attention within the markets than they should as a result of the way business media’s relationship with its consumers has developed, but it’s only natural. If you’re a competitor, and everyone invested in the stock markets is to some extent, you pay attention to those that compete best.
Jake Barach is a junior at UNC-Chapel Hill studying business journalism. He interned at Bloomberg News in the summer of 2013.