A while back on Twitter, I shared my central thesis on building digital media companies:

I’ve been in this space for over 15 years. That’s almost as long as digital media as we know it has been around.

In that time, I’ve seen every trend and growth hack come and go. Blog networks. RSS. SEO. Content farms. Google News. Digg. Social engineering. Email newsletters. Reader apps. Clickbait headlines. Text-on-screen video. Reddit. Instant articles. Snap Discover. Influencers. Pivots to video. Apple News. Podcasts. Pivots to subscription. Email newsletters, again.

Through it all, I have observed one universal truth of media again and again:

It doesn't matter what trend you chase, growth hack you engineer, or platform you build on. Digital media companies can only win if they own the customer relationship and monetization on their own platform. They must be direct-to-consumer first companies.

This does not mean they can’t use the “retail” channels described above to reach new audiences. Any new consumer business needs an on-ramp. That could be SEO. It could be a great PR or social strategy. It could be the following of a well-known celebrity or journalist who anchors the brand.

But many media publishers fall into a common trap. They discover a new audience source. They learn how to exploit it better than others. They then become addicted to the distribution. They assume the easy traffic will always be there. They convince themselves that a borrowed audience is really their own. They believe that if they grow big enough off that free-flowing traffic, they’ll find a way to monetize and become profitable.

Distribution is sexy. There are few feelings better than filling the top of your funnel with eager new users. Feeling the dopamine hit of your Google Analytics or Chartbeat dashboard popping off.

But distribution without conversion is just a growth hack. You must have a strategy to convert the audience from the on-ramp into an owned audience on your platform. And that strategy must place conversion as the highest priority metric for your business.

Without conversion, you are spinning on a hamster wheel of growth. The bigger you grow, the more you need to spend to keep growing. Each time profitability appears achievable, your spending requirements for growth intensify.  You spin the wheel even harder. But that just pushes it further away. At some point, the wheel spins out of control. Your business fails.

Once you achieve conversion, everything is different. You have the ability to grow without increasing spending. You're not borrowing your audience anymore. You own it.

This opens up new revenue opportunities. Margins increase. Ad performance metrics improve. You can sell subscriptions or memberships. You can sell products. You no longer rely on retail channels.

There's another very underrated thing that happens. If you can harness it, it's a gamechanger for the business. Your user metrics grow exponentially in value. Instead of looking at random data points from fly-by users, you develop a data set comprised of your most engaged followers. You can follow reader journeys. You can listen to your audience.

The audience and data feedback loop that develops can become the most valuable asset in your business.  You can use it to scale your audience. Glean insights to improve your product offerings. And develop the formula to increase your revenue and profits. You are a direct to consumer media company.

In future posts in this series, I’ll describe my own experience building digital media startups. I'll share what I’ve observed across the industry for the past decade plus. And I'll put forth some of my predictions for the future.

The next chapter will focus on the early days of building Bleacher Report. I'll share how we started as an SEO-driven play, dependent on retail distribution. I'll explain how we recognized and fixed our “Leaky Bucket” audience problem, transforming into a DTC brand and riding the path to victory.

Read Chapter Two: The leaky bucket >>

To make sure you get the next chapter in the series, follow me on Twitter and subscribe below.